AGREEMENT AND PLAN OF MERGER
among
BATTERIES BATTERIES, INC.
BATCEL CORP.
ADVANCED FOX ANTENNA, INC.
(AFA)
and
XXXXXXX XXXX
(Stockholder)
Dated December 4, 1995
TABLE OF CONTENTS
Page
ARTICLE I.....................................................................2
THE MERGER....................................................................2
1.1 The Merger..................................................2
1.2 Filing......................................................2
1.3 Effective Date of the Merger................................3
1.4 Articles of Incorporation and ByLaws........................3
1.5 Directors and Officers......................................3
ARTICLE II....................................................................4
CONVERSION OF AND SURRENDER AND
PAYMENT FOR COMMON STOCK...................................................4
2.1 Conversion..................................................4
2.2 Closing of Transfer Books...................................7
2.3 Surrender of Certificates...................................8
2.4 Closing.....................................................8
ARTICLE III..................................................................10
CERTAIN EFFECTS OF MERGER....................................................10
3.1 Effect of Merger...........................................10
3.2 Further Assurances.........................................11
ARTICLE IV...................................................................12
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER AND .......................12
4.1 Organization and Qualification of .........................12
4.2 Capitalization.............................................13
4.3 Authorization of Agreements................................14
4.4 No Violations..............................................15
4.5 Financial Statements.......................................16
4.6 Tangible Assets............................................17
4.7 Intangible Assets..........................................17
4.8 Books and Records..........................................19
4.9 Accounts Receivable........................................19
4.10 Contracts and Commitments..................................20
4.11 Leases.....................................................25
4.12 Liabilities................................................26
4.13 Litigation.................................................27
4.14 Permits, Licenses, Etc.....................................27
4.15 Taxes......................................................28
4.16 Absence of Certain Changes or Events.......................30
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4.17 Employee Benefit Plans; ERISA..............................32
4.18 Insurance..................................................34
4.19 Compliance with Applicable Law.............................35
4.20 Investment.................................................36
4.21 No Consents................................................37
4.22 Full Disclosure............................................37
ARTICLE V....................................................................38
REPRESENTATIONS AND WARRANTIES OF ACQUIROR...................................38
5.1 Organization and Qualification.............................38
5.2 Authorization of Agreements................................38
5.3 Financial Statements.......................................39
5.4 Authority..................................................40
5.5 No Consents................................................40
5.6 No Violation...............................................40
5.7 Litigation.................................................41
5.8 Capitalization.............................................42
5.9 The Stock Consideration....................................42
5.10 Full Disclosure............................................43
ARTICLE VI...................................................................43
CERTAIN ADDITIONAL AGREEMENTS................................................43
6.1 Further Covenants of the Stockholder and ..................43
6.2 Employment Agreement.......................................47
6.3 Payment of Outstanding Obligations.........................47
6.4 Full Access................................................48
6.5 Confidentiality............................................48
6.6 Approval of Merger.........................................50
6.7 Section 368 Reorganization.................................50
6.8 Repayment of Debt to Stockholder...........................50
ARTICLE VII..................................................................51
INITIAL PUBLIC OFFERING......................................................51
7.1 Initial Public Offering....................................51
7.2 Cooperation................................................52
7.3 Indemnification............................................53
ARTICLE VIII.................................................................55
NONCOMPETITION...............................................................55
8.1 NonCompetition.............................................55
8.2 Injunctive Relief..........................................56
ARTICLE IX...................................................................57
CONDITIONS TO OBLIGATIONS OF ACQUIROR AND NEWCO..............................57
9.1 Representations, Warranties and
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Covenants of AFA and the Stockholder.......................57
9.2 Absence of Proceedings.....................................58
9.3 Net Worth; No Material Adverse Change......................58
9.4 Consents and Approvals.....................................59
9.5 Documents..................................................59
9.6 Employment Agreement.......................................60
9.7 Initial Public Offering....................................60
9.8 Certificates...............................................60
9.9 Opinion of AFA's and Stockholder's Counsel.................60
ARTICLE X....................................................................60
CONDITIONS TO OBLIGATIONS OF THE STOCKHOLDER AND AFA.........................60
10.1 Representations and Warranties
of Acquiror and Newco to be True...........................60
10.2 Absence of Proceedings.....................................61
10.3 Documents..................................................62
10.4 Employment Agreement.......................................62
10.5 Registration Agreement.....................................62
10.6 Consents and Approval......................................62
10.7 Initial Offering...........................................63
10.8 Director...................................................63
10.9 Certificates...............................................63
10.10 Opinion of Acquiror and Newco..............................63
ARTICLE XI...................................................................63
REMEDIES.....................................................................63
11.1 Survival of Representations and Warranties.................63
11.2 Indemnification by the Stockholder.........................64
11.3 Indemnification by Acquiror................................65
11.4 Claims for Indemnification.................................65
11.5 Right to Defend, Etc.......................................67
11.6 Litigation; Remedies Cumulative............................68
ARTICLE XII..................................................................68
DEFAULTS, TERMINATION AND ABANDONMENT........................................68
12.1 Time of Essence............................................68
12.2 Termination................................................69
12.3 Procedure Upon Termination.................................69
ARTICLE XIII.................................................................71
MISCELLANEOUS................................................................71
13.1 Expenses...................................................71
13.2 Further Actions............................................71
13.3 Commissions and Finders' Fees..............................71
13.4 Injunctive Relief..........................................73
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13.5 Further Assurances.........................................73
13.6 Reformation and Severability...............................73
13.7 Entire Agreement; Modification.............................74
13.8 Notices....................................................74
13.9 Waiver.....................................................76
13.10 Binding Effect; Assignment.................................77
13.11 No ThirdParty Beneficiaries................................77
13.12 Headings...................................................77
13.13 Counterparts...............................................78
13.14 Governing Law..............................................78
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AGREEMENT AND PLAN OF MERGER
AGREEMENT, dated December 4, 1995, by and among BATTERIES
BATTERIES, INC., a Delaware corporation, c/o Founders Equity Inc., 000 Xxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Acquiror"), BATCEL CORP., a Delaware
corporation and wholly-owned subsidiary of the Acquiror and of the same
address ("Newco"), ADVANCED FOX ANTENNA, INC., a Pennsylvania Corporation,
0000 Xxxxxxx Xxxx Xxxx, Xxxxxxxxxx Xxxxxx, XX 00000 ("AFA") and XXXXXXX XXXX,
residing at Xxxxxx Xxxxx, Xxxxxxxxxx Xxxxxx, Xxxxxxxxxxxx 00000 (the
"Stockholder").
WHEREAS, the Boards of Directors of AFA, the Acquiror and
AFA deemed advisable and in the best interests of their respective
stockholders the merger of Newco with and into AFA (the "Merger") upon the
terms and conditions set forth herein and in accordance with the corporation
laws of the Commonwealth of Pennsylvania (the "PACL") and of the State of
Delaware ("Del GCL"). AFA and Newco are hereinafter sometimes referred to as
the "Constituent Corporations" and AFA, following the effectiveness of the
Merger, is hereinafter sometimes referred to as the "Surviving Corporation";
and
WHEREAS, the Boards of Directors of the Acquiror, Newco and
AFA have approved the Merger upon the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants, agreements and conditions of
the Merger and the mode of carrying the same into effect, the parties hereby
agree as follows:
ARTICLE I
THE MERGER
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1.1 The Merger. Upon the terms and conditions
hereinafter set forth and in accordance with the PACL and DelGCL, at the
Effective Date (as defined in Section 1.3), AFA shall be merged with and into
Newco and thereupon the separate existence of AFA shall cease, and Newco, as
the Surviving Corporation, shall continue to exist under and be governed by
the Del GCL.
1.2 Filing. Upon the satisfaction or waiver of the
conditions set forth in Articles IX and X hereof (other than the condition as
set forth in Sections 9.2 or 10.2 which may not be waived), Newco and AFA will
cause a Certificate of Merger, in substantially the form of Exhibit A attached
hereto (the "Certificate of Merger"), to be executed and filed with the
Secretary of State of the Commonwealth of Pennsylvania as provided in Section
1927 of the PACL and the Secretary of the State of Delaware as provided in
Section 252 of the DelGCL.
1.3 Effective Date of the Merger. The Merger shall
become effective immediately upon the filing, in accordance with Section 1928
of the PACL and Section 252 of the DelGCL, of the Articles of Merger with the
Secretaries or Department of State of Pennsylvania and of Delaware in
accordance therewith. The filing shall be made at the time of the closing of
the Initial Public Offering described in Article VII. The date and time of
such filings is herein sometimes referred as the "Effective Date."
1.4 Articles of Incorporation and By-Laws. Upon
the effectiveness of the Merger, the Articles of Incorporation of Newco shall
be the certificates of incorporation of the Surviving Corporation and the
By-Laws of Newco shall be the By-Laws of the Surviving Corporation, except
that the certificate of incorporation of the Surviving Corporation shall be
amended to state as follows:
"First. The name of the corporation is Advanced Fox Antenna
Inc."
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1.5 Directors and Officers. The officers of AFA
plus any officers of Newco designated by Newco) shall, after the Effective
Date and in accordance with the Articles of Merger, serve as the officers of
the Surviving Corporation and the directors of the Surviving Corporation shall
be Xxxxxx X. Xxxxx, Xxxx X. Xxxxxx, Xxxxxx X. Xxxx and Xxxxxxx Xxxx, in each
case such directors and officers to serve until their successors have been
duly elected and qualified in accordance with the Certificate of Incorporation
and By-Laws of the Surviving Corporation.
ARTICLE II
CONVERSION OF AND SURRENDER AND
PAYMENT FOR COMMON STOCK
2.1 Conversion. At the Effective Date, by virtue of
the Merger and without any action on the part of the holders thereof:
(a) the outstanding shares of the Common Stock, no par value, of AFA
("Common Stock"), other than shares of Common Stock held in the treasury of
AFA, shall be automatically converted into (i) cash in an amount equal to Two
Million, One Hundred and Seventy-Five Thousand Dollars ($2,175,000) (the "Cash
Consideration"), ii) such number of shares of Common Stock of the Acquiror
equal to the quotient obtained by dividing Three Million, Seven Hundred
Thousand Dollars ($3,700,000) by the price per share of Common Stock being
offered by the underwriters to the public set forth on the cover page of the
Prospectus included in the Registration Statement as described in Section 7.1
(such price hereinafter referred to as the "Initial Public Offering Price" and
the shares to be issued by the
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Acquiror are hereinafter referred to as the "Stock Consideration,") and (iii)
a Contingent Right, to receive additional consideration of up to $600,000. The
additional consideration shall equal the amount by which the earnings of the
Surviving Corporation before extraordinary items and before provision for
federal and state income taxes, all as determined in accordance with generally
accepted accounting principles applied consistently with prior periods (the
"PTE") for the Year ended December 31, 1996 (the "1996 Year"), the Year ended
December 31, 1997 (the "1997 Year") or the year ended December 31, 1998 (the
"1998 Year") exceeds the "Threshold" hereinafter described. The additional
consideration shall not exceed $200,000 for any of the 1996 Year, the 1997
Year, and the 1998 Year, nor $600,000 in the aggregate for the three years.
The Threshold for the 1996 Year shall be $1,100,000. The Threshold for the
1997 Year shall be the sum of (i) $1,300,000 plus (ii) the amount, if any, by
which the PTE for the 1996 Year was below $1,100,000. The Threshhold for the
1998 Year shall be the sum of (i) $1,500,000 plus (ii) the amount, if any, by
which the sum of the PTE for the 1996 Year plus the PTE for the 1997 Year was
below $2,400,000. Payment of the additional consideration shall, at the option
of the Acquiror, be made in cash or shares of Common Stock of the Acquiror or
a combination of cash or shares. The value of each share shall equal the
average for the "Value Period" of the closing sales prices of the Common Stock
of the Acquiror on the New York Stock Exchange or, if not listed thereon, on
the
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national stock exchange on which such shares are listed, or if not listed on
any exchange, on the National Market System ("NMS") of the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") or, if
not listed on an exchange or the NMS, on the Nasdaq Smallcap Stock Market. If
the Common Stock is not listed on any exchange, NIAS or the Nasdaq Smallcap
Stock Market, the average of the high bid and low asked prices to on the
over-the-counter market as quoted by the market quotation service authorized
by the NASD shall be substituted for the closing sales prices in the foregoing
in the determination of the per share value.
The Value Period shall be the ten business days immediately following
the publication of the audited results of the consolidated operations of the
Acquiror and its subsidiaries for the Year for which the determination is
being made. Payment of the additional consideration shall be made within
thirty days following such publication. The expenses of the Surviving
Corporation for each of the 1996 Year, the 1997 Year and the 1998 Year shall
include the compensation of the Stockholder under his employment agreement
provided for in Section 6.2 and of a Chief Financial Officer of the Surviving
Corporation designated by the Acquiror and who is to be employed immediately
following the Effective Date but shall not include any management fee payable
to Acquiror. The Cash Consideration, Stock Consideration and Contingent
Consideration are hereinafter collectively referred to as the "Merger
Consideration".
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The stock certificates evidencing the Stock Consideration and Contingent
Consideration shall bear the following legend:
"The shares evidenced by this certificate
have not been registered under the
Securities Act of 1933, as amended, and no
transfer, disposition or hypothecation may
be effected of the shares unless
registered under the Act or, in the
opinion of counsel to the issuer, such
transaction is exempt from registration
thereunder."
(b) Each issued and outstanding share of the Common Stock of
Newco shall be converted into one validly issued, fully paid and
nonassessable share of common stock, $.001 par value (the "New Common
Stock"), of the Surviving Corporation.
(c) All shares of Common Stock which are held by AFA as
treasury shares shall be cancelled and retired and cease to exist,
without any conversion thereof or payment with respect thereto.
2.2 Closing of Transfer Books. At the Effective
Date, the stock transfer books of AFA shall be closed, and no transfer of
shares of Common Stock of AFA shall thereafter be made. If, after the
Effective Date, certificates previously representing shares of Common Stock
are presented to the Surviving Corporation, they shall be cancelled and
exchanged for the Merger Consideration as provided in Section 2.1(a).
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2.3 Surrender of Certificates.
(a) The Stockholders shall upon surrender to the
Surviving Corporation of certificates representing the outstanding
capital stock of AFA receive the Merger Consideration.
(b) Newco. Acquiror, as the sole stockholder of Newco,
shall, upon surrender to the Surviving Corporation of certificates
representing the common stock, $.01 par value, of Newco, receive a
certificate representing the number of shares of New Common Stock of
the Surviving Corporation into which the capital stock of Newco shall
have been converted pursuant to Section 2.1(c).
2.4 Closing. The effectiveness of the Merger and
conversion of shares referred to in Section 2.1 hereof (the "Closing") shall
take place at the time and at the offices at which the closing of the Initial
Public Offering described in Article VII occurs. The date on which the Closing
actually occurs is herein referred to as the "Closing Date."
(1) Deliveries by the Stockholder. At the Closing,
there shall be delivered to Acquiror by the Stockholder or AFA as hereinafter
provided (unless delivered previously) the following:
(a) the Articles of Merger as executed by AFA;
(b) the Employment Agreement in the form of
Exhibit C hereto, as executed by the Stockholder;
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(c) the written consents of third persons
required pursuant to Section 6.1(a)(iv);
(d) the Registration Agreement as executed by
the Stockholder referred to in Section 6.10 in the form of Exhibit D;
(e) the officers' certificates referred to in
Section 9.1 hereof;
(f) the opinion of counsel referred to in
Section 9.9 hereof; and
(g) all other previously undelivered documents,
instruments and writings required to be delivered by the Acquiror at or prior
to the Closing pursuant to this Agreement or otherwise required in connection
herewith.
(2) Deliveries by Acquiror. At the Closing, there
shall be delivered by Acquiror to or on behalf of AFA or the Stockholder
(unless delivered previously) the following:
(a) the Articles of Merger as executed by Newco;
(b) a stock certificate for the shares
constituting the Stock Consideration requested in the name of the Stockholder;
(c) the Employment Agreement in the form of
Exhibit C hereto executed by the Acquiror;
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(d) the Registration Agreement in the form of
Exhibit D executed by the Acquiror;
(e) the officer's certificate referred to in
Section 10.1 hereof;
(f) the opinion of counsel referred to in
Section 10.6 hereof; and
(g) all other previously undelivered documents,
instruments and writings required to be delivered to AFA or the Stockholder at
or prior to the Closing pursuant to this Agreement or otherwise required in
connection herewith.
ARTICLE III
CERTAIN EFFECTS OF MERGER
3.1 Effect of Merger. On and after the Effective
Date, the Surviving Corporation shall possess all the rights, privileges,
powers and franchises of a public as well as of a private nature, and be
subject to all the restrictions, disabilities and duties of each of the
Constituent Corporations; and all and singular rights, privileges, powers and
franchises of each of the Constituent Corporations, and all property, real,
personal and mixed, and all debts due to either of the Constituent
Corporations on whatever account, as well for stock subscriptions as all other
things in action or belonging to each of the Constituent Corporations, shall
be vested in the Surviving Corporation; and all property, rights, privileges,
powers and franchises, and all and every other interest shall be thereafter as
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effectually the property of the Surviving Corporation as they were of the
Constituent Corporations, and the title to any real estate vested by deed or
otherwise, in either of the Constituent Corporations shall not revert or be in
any way impaired; but all rights of creditors and all liens upon any property
of either of the Constituent Corporations shall be preserved unimpaired, and
all debts, liabilities and duties of the Constituent Corporations shall
thenceforth attach to the Surviving Corporation and may be enforced against it
to the same extent as if said debts, liabilities and duties had been incurred
or contracted by it.
3.2 Further Assurances. If at any time after the
Effective Date the Surviving Corporation shall consider or be advised that any
further deeds, assignments or assurances in law or any other acts are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation, the title to any property or right of
the Constituent Corporations acquired or to be acquired by reason of, or as a
result of, the Merger, or (b) otherwise to carry out the purposes of this
Agreement, the Constituent Corporations agree that the Surviving Corporation
and its proper officers and directors shall and will execute and deliver all
such deeds, assignments and assurances in law and do all acts necessary,
desirable or property to vest, perfect or confirm title to such property or
right in the Surviving Corporation and otherwise to carry out the purposes of
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this Agreement, and that the proper officers and directors of the Constituent
Corporations and the proper officers and directors of the Surviving
Corporation are fully authorized in the name of the Constituent Corporations
or otherwise to take any and all such action.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER AND AFA
To induce Acquiror to enter into this Agreement and
consummate the transactions contemplated hereby, the Stockholder and AFA
jointly and severally represent and warrant to Acquiror as follows:
4.1 Organization and Qualification of AFA. AFA is a
corporation duly organized and validly existing under the laws of the
Commonwealth of Pennsylvania, has the corporate power to own its assets and to
conduct its business as it is presently being conducted, and is qualified as a
foreign corporation in each jurisdiction other than Pennsylvania in which it
owns or leases property or transacts business and other than those
jurisdictions where the failure to qualify in the aggregate failure to qualify
in the aggregate will not have a material adverse affect on the business or
financial condition of AFA; each of such jurisdiction is set forth in Schedule
4.1. Copies of the Certificate of Incorporation and the By-Laws, each as
amended to date, of AFA have been previously delivered to Acquiror and are
correct and complete. AFA does not own any equity interest in any other
corporation.
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4.2 Capitalization. The authorized capital stock of
AFA consists of 10,000 shares of Common Stock, no par value of which 100
shares are issued and outstanding; there are no shares held in the treasury of
AFA. The outstanding shares, all of which are owned of record and beneficially
by Stockholder,are validly issued, fully paid and nonassessable. Neither AFA
nor the Stockholder has executed or granted any, and there is no outstanding,
option, warrant or other right or any agreement (other than this Agreement) of
any kind providing for the purchase, or the right to purchase, issuance, sale
or other disposition of any shares of capital stock of AFA or security
convertible into or exchangeable for such shares.
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4.3 Authorization of Agreements. AFA has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated on its part hereby. The execution and
delivery by AFA of this Agreement and consummation of the transactions
contemplated on its part hereby have been duly authorized by its Board of
Directors and its stockholders and no other corporate proceeding on the part
of AFA or its stockholders are necessary to authorize the execution and
delivery of this Agreement by AFA or the consummation of the transactions
contemplated on its part hereby. This Agreement has been, and the instruments
and agreements contemplated herein, including, but not limited to, the
Employment Agreement (collectively, the "Related Instruments") and other
agreements and documents to be executed in connection with the closing of the
transaction contemplated hereby (the "Closing Documents") will have been, at
the Closing, duly executed and delivered by AFA and the Stockholder or, where
so provided, by only AFA or the Stockholder, and constitute the valid and
binding obligations of AFA and the Stockholder; and the Agreement is, and each
of the Related Instruments and Closing Documents at the Closing will be,
enforce able in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganiza tion, moratorium
or similar laws affecting the enforcement of creditors' rights generally and
except to the extent that the
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remedy of specific enforcement or injunctive relief is subject to the
discretion of the court before which any proceedings therefor may be brought.
4.4 No Violations. The execution and delivery and
performance of this Agreement, the Related Instruments and the Closing
Documents will not, with or without the giving of notice and/or the passage of
time, violate any provisions of law appli cable to AFA or its stockholders or
conflict with, result in the breach or termination of, any provision of,
constitute a default under, give any party other than the Stockholder or AFA
the right to accelerate any obligation, or result in the creation of any lien,
charge or encumbrance upon, any of the outstanding shares of capital stock of,
or any of the properties or assets of AFA pursuant to the corporate charter or
By-Laws of AFA, or any indenture, mortgage, deed of trust, lease or other
agreement or instrument to which AFA or the Stockholder is a party or by which
the Stockholder or AFA or any of its assets or properties is or may be bound,
except AFA's loan agreement with CoreStates Bank which requires the Bank to
consent to the Merger and which consent will be obtained prior to the Closing.
Neither such execution, delivery and performance nor compliance by AFA or the
Stockholder with the terms and provisions hereof will violate any provision of
the PACL or any other laws or, with or without the giving of notice and/or the
passage of time, conflict with or result in a breach of any
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judgment, order, injunction, decree, regulation or ruling of any court or
other governmental authority to which AFA or the Stockholder is subject or by
which any of the assets of AFA or its outstanding shares may be bound.
4.5 Financial Statements. The Stockholder has
caused AFA to deliver to Acquiror: (i) the Balance Sheets of AFA as of
September 30, 1995 and December 31, 1994 and its statements of income, cash
flows and stockholder's equity for the nine-months ended September 30, 1995,
ten months ended December 31, 1994 and the year ended February 28, 1994
accompanied by the unqualified report of Deloitte & Touche, LLP, independent
public accountants (collectively, the "Audited Financial Statements"); and
(ii) the unaudited statements of income and cash flows of AFA for the
nine-months ended September 30, 1994 (the "Interim Period" and the "Interim
Period Financial Statements"). All the foregoing financial statements have
been prepared in conformity with generally accepted accounting principles
("GAAP") except as set forth in Schedule 4.5 with respect to the Interim
Period Financial Statements and fairly present the financial position of AFA
as of September 30, 1995 and December 31, 1994 and the results of operations
of AFA for nine months ended September 30, 1995, ten months ended December 31,
1994, the year ended February 28, 1994 and the Interim Period.
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4.6 Tangible Assets. AFA does not own any real
property. Schedule 4.6 hereto is a complete and correct list of all items of
tangible personal property and fixtures of AFA, all of which constitute the
property, plant and equipment accounts of AFA, all of which were included on
the September 30, 1995 Balance Sheet, except for those acquired subsequent to
September 30, 1995 and all of which are currently used or useable in the
conduct of the business of AFA. Such items of tangible personal property,
considered in the aggregate, have been operated, maintained and repaired in a
manner consistent with industry practice.
4.7 Intangible Assets.
(a) Schedule 4.7 identifies all patents, trade
marks, trade names, service marks, copyrights, registrations or applications
with respect to any of the foregoing, renewals or assignments, and all rights
in, to, or respecting such renewals and licenses or rights under the same
presently owned, being used, or presently intended to be acquired (identified
as such) by AFA (collectively referred to herein as the "Business Rights"). To
the extent indicated in Schedule 4.7, the same have been duly regis tered in
the offices indicated therein. There are no claims or proceedings have been
instituted, are pending, or, to the best knowledge of the Stockholder, are
threatened, which challenge, oppose or threaten interference, cancellation,
nullification or concurrent use with any of the Business Rights. To the best
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knowledge of the Stockholder, none of the Business Rights infringe on or
otherwise violate the rights of others or are being infringed on by others;
and none are subject to any outstanding order, decree, judgment or
stipulation. No licenses, sublicenses or agreements pertaining to any of the
Business Rights are in effect, other than as set forth in Schedule 4.7.
Neither AFA nor the Stockholder has been formally charged with infringement of
any adversely-held Business Right with respect to AFA or any Business Right
used in connection with the AFA business.
(b) AFA owns and possesses all Business Rights
necessary for, and being used in the conduct of, or in connection with, the
AFA Business as was conducted on December 31, 1994 and as is currently being
conducted; all are in full force and effect and have not been amended or
modified. Except as set forth in Schedule 4.7, AFA has not sold, assigned,
transferred, licensed, sublicensed or conveyed all or any interest in any of
the Business Rights to any person, and AFA has the right, title and interest
(free and clear of all security interests, liens and encumbrances of every
nature) in and to the Business Rights set forth on the Schedule.
4.8 Books and Records. The books and records of AFA
have been maintained in accordance with GAAP on a basis consistent with prior
years and accurately reflect the basis for amounts set forth on the Financial
Statements delivered pursuant to Section 4.5, except as set forth on Schedule
4.8
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4.9 Accounts Receivable. The accounts receivable of
AFA reflected on the December 31, 1994 Balance Sheet and on the September 30,
1995 Balance Sheet have arisen in the ordinary course of business, are not
subject to any defense or offset and, after deducting the applicable provision
for bad debts provided therein, have been or will be, to the best knowledge of
the Stockholder, fully collectible.
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4.10 Contracts and Commitments.
(a) Except as set forth in Schedule 4.10 or
Schedule 4.19:
(i) AFA is not a party to or bound by any
distribution agreement, sales representative agreement, dealer agreement, or
any other agreement, contract or commitment relating to its operation,
condition (financial or otherwise), liabilities, assets, earnings, working
capital or the prospects of the AFA Busi ness;
(ii) The enforceability of the agreements,
contracts, commitments and licenses referred to in Schedule 4.7 will not be
affected in any manner by the execution and delivery of this Agreement, the
Related Instruments or the consummation of the transactions contemplated
hereby, except for those consents set forth in Schedule 4.10, which consents
will be obtained prior to the Closing;
(iii) No outstanding purchase contract or
commitment of AFA relates to any business other than the business of AFA, is
materially in excess of the ordinary and usual require ments of the business
of AFA at the time entered into or, to the best of Stockholder's knowledge,
was entered into at any price materially in excess of the price available at
such time to companies similar in size to AFA and similarly situated;
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(iv) Neither AFA nor Stockholder is a party to
or bound by any outstanding agreements, arrangements or contracts relating to
AFA with any of AFA's officers, employees, agents, consultants, advisors or
salesmen that (A) is not cancelable by it on notice of not longer than 30 days
and without liability, penalty or premium, except for those agreements set
forth, along with their expiration dates, on Schedule 4.10, or (B) provides
for the payment of any bonus or commission based on sales or earnings, other
than the Plans listed on Schedule 4.17 and as permitted under Section 4.16;
(v) AFA is not a party to or bound by any
employment agreement, consulting agreement or any other agreement which
contains any severance or termination pay liabilities;
(vi) AFA is not in default under or in xxxxx
tion in a material respect of, nor, to the best knowledge of the Stockholder,
after due inquiry, is there any basis for any valid claim of default under or
violation of, any contract, agreement or commitment made or obligation of AFA
or relating to the AFA business, including, but not limited to, any
distribution agreement, sales representative agreement or dealer agreement;
(vii) AFA has no (A) indebtedness for borrowed
money or the deferred purchase price for property, including guarantees of, or
agreements to acquire, any such indebtedness of
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others, or (B) contract, commitment or arrangement for the borrowing of money
or for a line of credit;
(viii) None of the Stockholder, his affiliates,
AFA and any of the officers, directors, affiliates or associates of AFA is a
party to or bound by any agreement or arrangement for the sale of shares of
AFA or (other than in the ordinary course of business and consistent with past
practice) any of the assets or rights of AFA or for the grant of any
preferential rights to purchase any of the assets or rights of AFA; and
(ix) To the best knowledge of the Stockholder,
none of the distributors of AFA intend to exercise their right to terminate
the distribution arrangements with AFA and will not do so as a result of the
termination contemplated by this Agreement.
(b) With respect to each contract and agreement listed on Schedule
4.10 attached hereto, (A) it is valid, binding and in full force and effect
and is enforceable by AFA in accordance with its terms, subject to bankruptcy,
insolvency, reorganization and other laws and judicial decisions of general
applicability relating to or affecting creditors' rights and to general
principles of equity; (B) neither AFA nor, to the best knowledge of the
Stockholder after due inquiry, any other party is in breach of any material
provision thereof; and (C) there does not exist any material default under,
or, to the best knowledge of the Stockholder or AFA, any event or condition
which, with the giving of notice or passage of time or
-21-
both, would become a breach or default in any material respect under the terms
of such contract or agreement on the part of AFA or on the part of any other
party thereto. The foregoing assumes that the contracts and agreements have
been duly executed and delivered by the parties thereto. The foregoing assumes
that the contracts and agreements have been duly executed and delivered by the
partie's thereto other than AFA and the Sockholder.
(c) Except as set forth on Schedule 4.10 and the Employment Agreement
with the Stockholder in the form of Exhibit C hereto, AFA, on the Closing
Date, will not be a party to or bound by, nor will any of its assets or the
business of AFA be subject to:
(i) An employment agreement;
(ii) An agreement or purchase order for the purchase by AFA
of goods, materials, supplies, machinery or capital assets requiring an
expenditure of more than $100,000 or which is not to be completed within 30
days of the date of this Agreement;
(iii) An agreement with a labor union;
(iv) Except as set forth in Schedule 3.17, a profit sharing
or retirement or pension arrangement or agreement;
(v) A bonus plan or agreement;
(vi) An agreement guaranteeing the obligations or
liabilities of another;
(vii) An agreement for the borrowing or lending of money or
the assignment of accounts receivable; or
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(viii) An agreement for the construction or modification of
any building or structure;
(d) Since December 31, 1994, except for the Permitted Transactions
defined in Section 4.10(e), AFA has not written up the value of any inventory,
or written off as uncollectible any notes or accounts receivable or any
portion thereof, except for write-offs and write-ups in accordance with GAAP
consistently applied; waived any rights of substantial value; omitted to do
any act, or permitted any act or omission to act, which will cause a material
breach of any contract, commitment or obligation, or any breach of any
representation, warranty, covenant or agreement made by AFA herein; or failed
to promptly notify the Acquiror of any lawsuits, claims, proceedings or
investigations which are threatened or commenced against AFA or any employee
of AFA which may materially adversely affect AFA's Business.
(e) For the purposes of this Agreement, "Permitted Transactions"
shall mean distributions or dividends (including those declared but not paid
as of the Effective Date) to the Stockholder and write-downs or write-offs by
AFA of indebtedness owed by the Stockholder or his affiliates made on or prior
to the Effective Date if (i) as of December 31, 1995 the net worth of AFA is
not less than $1,700,000, and (ii) immediately prior to the Effective Date the
net worth of AFA shall be not less than the sum of $1,700,000 plus the income
of AFA for the period from January 1,
-23-
1996 to the Effective Date less the amount of federal, state and local income
taxes the Stockholder is required to pay with respect to the income of AFA
attributable to the Stockholder under Subchapter S of the Internal Revenue
Code and, if any, the state and local income taxes, for the period from
January 1, 1996 to the date immediately prior to the Effective Date.
4.11 Leases. Schedule 4.11 attached hereto
contains an accurate and complete list of all leases (including all amendments
thereof and modifications thereto, the "Leases") pursuant to which AFA leases
real or personal property for the use or benefit of AFA. None of the Leases
relate to any property or equipment owned or leased by Stockholder or an
Affiliate (meaning any person who directly or indirectly controls or is
controlled by Stockholder other than AFA), except for the lease of the
property located at 0000 Xxxxxxx Xxxx Xxxx, Xxxxxxxxxx Xxxxxx, Xxxxxxxxxxxx,
with the Stockholder as lessor (the "Stockholder Lease"). AFA is not in
default in any material respect with respect to any of the Leases which would
permit the lessor thereunder to terminate such Lease and no event or condition
has occurred which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute a default in any
material respect thereunder, which default would permit the lessor thereunder
to terminate such Lease, increase any of the lessee's obligations or reduce
the lessee's rights thereunder. The Stockholder Lease is,
-24-
and to the best knowledge of the Stockholder, the other leases are valid,
binding and enforceable in accordance with their respective terms, except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the enforcement of creditors' rights generally and are
in full force and effect, and, except for the consents of lessors set forth in
Schedule 4.11 which consents will be obtained prior to the Closing, the
execution and delivery of this Agreement and consummation of the transactions
contemplated hereby will not require AFA or Acquiror to procure the consent of
any lessor in order for the Surviving Corporation to continue as lessee
thereunder without any additional cost to AFA, Surviving Corporation or
Acquiror or diminution of AFA or the Surviving Corporation's rights
thereunder.
4.12 Liabilities. As of the Closing, to the best
knowledge of the Stockholder, AFA will not, except as set forth in Schedule
4.12, be subject to any liabilities other than (i) those included in the
September 30, 1995 Balance Sheet or the notes thereto; and (ii) accounts
payable and accrued expenses which have arisen in the ordinary course of the
AFA Business subsequent to September 30, 1995.
4.13 Litigation. Except as set forth on Schedule
4.13 attached hereto, there are no claims, actions, proceedings,
investigations or inquiries in progress, pending, or, to the best knowledge of
the Stockholder, threatened, against the Stockholder
-25-
or , that could affect AFA or its assets, the outstanding shares of capital
stock of AFA, or the transactions contemplated hereby; nor, to the best
knowledge of the Stockholder, is there any valid basis for any such claim,
action, suit, proceeding, inquiry or investigation. As a result of either the
lack of a valid basis for, or the availability of an appropriate defense to,
any claims, actions, suits, proceedings, inquiries or investigations set forth
in Schedule 4.13, none of such claims, actions, suits, proceedings, inquiries
or investigations will have a material adverse effect on the business,
operations, condition (financial or otherwise), liabilities, assets, earnings,
working capital or prospects of AFA. Neither the Stockholder nor AFA is
subject to any judgment, order or decree entered in any lawsuit or proceeding
which has had or may have a significant adverse effect on the business or
business practices of AFA or the Surviving Corporation.
4.14 Permits, Licenses, Etc. To the best knowledge
of the Stockholder, there are no permits, licenses, orders or approvals of
governmental or administrative authorities (collectively the "Permits")
required to permit AFA to carry on the business of AFA presently conducted
(including, without limitation, those required under federal, state or local
laws or regulations relating to pollution or protection of the environment)
other than the Permits which are described in Schedule 4.14. The conduct by
AFA of the business of AFA through the Effective Date has not and
-26-
will not, and the continuation of such business by the Surviving Corporation
under the control of Acquiror after the Effective Date in the same manner as
conducted on September 30, 1995 or currently conducted by AFA, will not
violate or infringe, and has not and will not cause a default in any material
respect under, any of the Permits, except for defaults which in the aggregate
have not and will not materially adversely affect the business, financial
condition or prospects of AFA or the Surviving Corporation, or will require
AFA to obtain any additional Permits, and neither the Stockholder nor AFA has
received any written notification of any threatened suspension or cancellation
of any of the Permits which might be reasonably expected to have a material
adverse effect on the business of AFA.
4.15 Taxes. AFA has (i) filed all returns required
to be filed by it with respect to all federal, state, local and foreign
income, payroll, withholding, excise, sales, use, real and personal property,
use and occupancy, business and occupation, mercantile, real estate, capital
stock and franchise or other tax (all the foregoing taxes, including interest
and penalties thereon and including estimated taxes thereof, are hereinafter
collectively referred to as "Taxes"),(ii) paid all Taxes required by law to be
paid, and (iii) paid all other Taxes for which a notice of assessment or
demand for payment has been received. Except with respect to local income
taxes for a current
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period, no reserve is or will be required of AFA with respect to any Taxes
relating to income of AFA through the Effective Date. AFA has been a
Subchapter S Corporation under the Internal Revenue Code since March 1, 1994.
No examination has been made of any of AFA's federal income tax returns by the
Internal Revenue Service. AFA has not agreed to extend the time of assessment
or collection of Taxes and is not a party to any action or proceeding by any
governmental authority for the determination, assessment or collection of any
Taxes. Except as set forth on Schedule 4.15, there is no examination pending
or, to the best knowledge of the Stockholder, threatened by taxing authorities
relating to the determination, assessment or collection of any Taxes from AFA.
4.16 Absence of Certain Changes or Events.
(a) Since December 31, 1994:
(i) AFA has not sold or suffered any
material adverse change or loss or termination of or breach or default of any
of the Business Rights set forth or referred to on the Schedules to this
Agreement and, there has been no material adverse change, or, to the best
knowledge of the Stockholder, is any material adverse change threatened or
anticipated, in the net sales, business, condition or prospects (financial or
otherwise) of from the amounts reflected on the September 30, 1995 AFA Balance
sheet and the Statement of Income for the year then ended and Stockholder
knows of no event which is or might reasonably be
-28-
expected to have a material adverse effect on such net sales, business,
condition or prospects, or result in a decrease of the net worth of AFA.
(ii) AFA has not permitted, allowed or
suffered any of its assets (tangible or intangible) to be subjected to any
mortgage, pledge, lien, encumbrance, restriction or charge of any kind.
(iii) Except for a Permitted Transaction,
AFA has not canceled any material indebtedness (individually or in the
aggregate) owing to it or waived any claims or rights of substantial value.
(iv) AFA has not sold, transferred or
otherwise disposed of any of its property or assets (tangible or intangible)
except in the ordinary course of business and consistent with past practice.
(v) has not paid, loaned or advanced any
amount to, or sold, transferred or leased any properties or assets (tangible
or intangible) to, or entered into any agreement or arrangement with, any of
the officers, directors or employees of AFA, or increased the compensation to
officers and employees whose compensation for the fiscal year ended December
31, 1994, exceeded a rate of $30,000 per annum, except for xxxx increases made
prior to June 30, 1995 which resulted in the employee's compensation
-29-
exceeding such rate and no further increases have been made with respect to
such employees.
(vi) AFA has not provided for any
distribution, loan or advance of any nature whatsoever to any stockholder of
AFA or an affiliate.
(vii) AFA has not experienced any material
labor dispute or difficulty.
(viii) AFA has not made capital expenditures
or commitments for additions to property, plant, equipment or for any other
purpose which are more than Twenty-Five Thousand Dollars ($25,000) in the
aggregate.
(ix) AFA has not suffered any casualty loss
with respect to its assets (whether or not insured against).
4.17 Employee Benefit Plans; ERISA. Except as set
forth on Schedule 4.17, AFA does not maintain, administer or otherwise
contribute to any Employee Benefit Plan, as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which
is subject to any provision of ERISA and covers any employee of AFA, whether
active or retired ("Employee Plans"). None of the Employee Plans set forth on
Schedule 4.17 is a "multi-employer plan," as defined in Section 3(37) of
ERISA, and AFA has not been obligated to make a contribution to any
multicompany Employee Plan within the past five years on behalf of any
employee. Except for those set forth on
-30-
Schedule 4.17, some of which as indicated on such schedule will be terminated
or cancelled on or prior to the Closing Date, AFA does not maintain any form
of current or deferred compensation (other than base salary and base wages),
bonus, incentive compensation, profit sharing, stock option, stock
appreciation right, separation pay, retirement, pension, salary continuation,
group or individual health, dental, medical, life insurance, survivor benefit
or similar plan, policy or arrangement for the benefit of any employee,
whether active or retired, of any class or classes of its employees ("Benefit
Arrangements"). AFA has provided to Acquiror (i) a copy of each Employee Plan
and Benefit Arrangement, and a copy of each of the documents (including trust
agreements and other funding arrangements and summary plan descriptions) under
which each such Employee Plan and Benefit Arrangement is operated; (ii) the
most recent annual report, if any, required to be filed with the government or
any agency thereof; (iii) with respect to any Employee Plans which are
intended to be qualified under Section 401(a) of the Code, a copy of the most
recent determination letter from the Internal Revenue Service on the plan's
qualified status and a copy of the application for such letter; and (iv) a
schedule showing either the annual cost or the current value of all benefits
of each Employee Plan and Benefit Arrangement. With respect to all Employee
Plans and Benefit Arrangements, AFA is in compliance in all material respects
with the terms of each such plan or
-31-
arrangement and, to the best knowledge of the Stockholder, with the
requirements prescribed by any and all Laws as defined in Section 4.20
currently in effect, including but not limited to ERISA and the Code,
applicable to such plans or arrangements. Since December 31, 1994, the
Employee Plans and Benefit Arrangements have not been amended nor, except
pursuant to their terms as in effect on December 31, 1994, have any payments
or contributions been made under such Plans or Arrangements. Since December
31, 1994, AFA has not failed to make any contribution to, or pay any amount
due and owing as required by applicable law or by the terms of, any Employee
Plan or Benefit Arrangement. The obligation of AFA with respect to any
Employee Plan and Benefit Arrangement is fully funded. There is no pending or,
to the knowledge of the Stockholder, threatened legal action, proceeding or
investigation against AFA or any Employee Plan or Benefit Arrangement with
respect to the employees of AFA, other than routine claims for benefits, which
could result in liability to such plans or AFA. The execution of this
Agreement and the consummation of the transactions contemplated hereby will
not result in any payment (whether of separation pay or otherwise) becoming
due from AFA for which AFA is, or the Surviving Corporation will become,
liable to any current or former consultant or employee of AFA or result in the
vesting, acceleration of payment or increase in the amount of
-32-
any benefit payable to or in respect of any such current or former
consultant or employee of AFA.
4.18 Insurance. AFA has had, for at least the
past five years, and now has, in full force and effect, insurance against
fire, liability, and other claims set forth in Schedule 4.18 hereto in amounts
and against such losses and risks as therein set forth. Valid policies for
such insurance, as is shown on such Schedule to be in effect on the date of
this Agreement, will be outstanding and in force on the Closing Date. Such
policies are sufficient for compliance with all requirements of law and of all
agreements with respect to the operation of AFA and the business of AFA and
are valid, outstanding and binding policies and the coverage provided thereby
with respect to any act or event occurring on or prior to the Closing Date
will not in any way be affected by or terminate or lapse by reason of the
transactions contemplated by this Agreement.
4.19 Compliance with Applicable Law. Except as set
forth in Schedule 4.19 attached hereto: (a) AFA has, and will, through the
Effective Date, have with respect to its operations, practices, real property,
plants, structures, machinery, equipment, vehicles and other property, and all
other aspects of its business, complied in all material respects with all
applicable laws (whether statutory or otherwise), rules, regulations, orders,
ordinances, judgments, decrees, orders, writs and injunctions of all
-33-
governmental authorities (federal, state, local, foreign or otherwise)
(collectively, "Laws"), including, but not limited to, all Laws relating to
the safe conduct of business, environmental protection and conservation,
antitrust, taxes, consumer protection, currency exchange, equal opportunity,
health, sanitation, fire, zoning, building, occupational safety, pension,
securities, trademark and copyright, except for failure to comply which
individually or in the aggregate have and will not materially adversely affect
the business, financial condition or prospects of AFA; and (b) neither AFA nor
Stockholder has received notification which is currently outstanding or
uncured of any asserted present or past failure to so comply. Except as
described in Schedule 4.19, there has never been any storage, generation,
manufacture, refinement, transportation, production, treatment or disposal of
solid wastes, toxic wastes or hazardous wastes or substances by AFA or at the
real properties leased or owned by AFA in violation of any applicable Law or
Permit or which would require significant remedial action under any applicable
Law or Permit. There has never been any spill, discharge, leak, emission,
injection, escape, dumping or any other release by AFA of any kind onto any
real property into the environment surrounding such real properties of any
solid wastes, toxic wastes or hazardous wastes or substances as such terms are
defined under any law.
-34-
4.20 Investment. The shares consisting of the
Stock Consideration and Contingent Consideration will be acquired by the
Stockholder for his own account and for investment purposes only and not with
the view to the distribution thereof except with respect to those shares
transferred by the Stockholder to the finder, Xxxxxxxxxx & Xxxx, referred to
in Section 13.3, who will as a condition of such transfer so represent to the
Acquiror as to such shares.
4.21 No Consents. No consent, authorization,
approval, order, license, certificate or permit of or from, or declaration or
filing with, any federal, state, local or other governmental authority or any
court or other tribunal, and no consent or waiver of any party to any
distribution agreement, sales representative agreement, dealer agreement, or
any other contract, agreement, instrument or lease to which AFA or Stockholder
is a party, is required for the execution, delivery or performance of this
Agreement or any of the Related Instruments, the Merger or other transactions
contemplated hereby or thereby, except for those written consents set forth on
Schedules 4.10 and 4.11, all of which shall have been obtained by AFA or the
Stockholder prior to the Closing.
4.22 Full Disclosure. No representation or warranty
of AFA or the Stockholder made in this Agreement, the Related Instruments or
any written statement furnished to the
-35-
Acquiror pursuant hereto or the Related Instruments or Closing Documents
contains or will contain any untrue statement of a material fact which
materially adversely affects or will materially adversely affect AFA or the
AFA Business or omits or will omit to state a material fact necessary to make
the statements or facts contained herein or therein not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND NEWCO
To induce AFA and the Stockholder to enter into this
Agreement and consummate the transactions contemplated hereby, Acquiror and
Newco jointly and severally represent and warrant to AFA and Stockholder as
follows:
5.1 Organization and Qualification. Each of
Acquiror and Newco is a corporation duly organized, validly existing and in
good standing under the laws of Delaware, has the corporate power to own its
business as it is presently being conducted, and is qualified as a foreign
corporation in each jurisdiction where the failure to so qualify would
individually or in the aggregate have a materially adverse affect on the
business, financial condition or prospects of the Acquiror. Copies of the
Certificate of Incorporation and By Laws of the Acquiror have been previously
delivered to the Stockholder and are accurate and complete.
-36-
5.2 Authorization of Agreements. This Agreement
has been, and the Closing Documents will have been at the Effective Date, duly
executed and delivered by Acquiror and Newco and constitute the valid and
binding obligation of Acquiror and Newco. This Agreement is, and the Closing
Documents will be at the Effective Date, enforceable against Acquiror and
Newco in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and,
except to the extent that the remedy of specific enforcement or injunctive
relief is subject to the discretion of the court before which any proceedings
therefor may be brought.
5.3 Financial Statements. The Acquiror has
delivered to Stockholder: (i) the Balance Sheets of its subsidiary, Specific
Energy Corp. ("Specific") as of January 31, 1995 and January 31, 1994 and the
statements of income, cash flows and stockholders' equity of Specific for the
years then ended, accompanied by the unqualified report of Xxxxxx & Xxxxxx
P.L.C., (ii) the consolidated statements of operations, stockholder equity and
cash flows of the Acquiror for the four months ended May 31, 1995 accompanied
by the unqualified report of Deloitte and Touche, LLP, independent public
accountants and (iii) the unaudited consolidated Balance Sheet of the Acquiror
as of October 31, 1995 and its consolidated statements of operations,
stockholders equity
-37-
and cash flows for the nine months ended October 31, 1995 and October 31,
1994. The foregoing financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP") and fairly present the
financial position of Specific as of January 31, 1995 and January 31, 1994,
and its results of operations, cash flows and stockholder's equity for each of
the years then ended and the consolidated financial position of the Acquiror
as of October 31, 1995 and results of operations, cash flows and stockholders
equity of the Acquiror for the nine-month periods ended October 31, 1995 and
October 31, 1994 and the four months ended May 31, 1995.
5.4 Authority. Each of Acquiror and Newco has all
requisite corporate power and authority (i) to execute, deliver and perform
this Agreement and the Closing Documents, and (ii) to carry out the Merger and
the other transactions contemplated hereby and thereby. All necessary
corporate proceedings of Acquiror and Newco have been duly taken to authorize
the execution and delivery of this Agreement by Acquiror and the performance
of the Merger and the transactions contemplated hereby.
5.5 No Consents. No consent, authorization,
approval, order, license, certificate or permit of or from, or declaration or
filing with, any federal, state, local or other governmental authority or any
court or other tribunal, and no consent or waiver of any party to any
agreement to which Acquiror is a party, is required for the execution,
delivery or performance by Acquiror of this Agreement, except with respect to
the Registration Statement of the Acquiror to be filed under the
-38-
Securities Act of 1933, as amended, with respect to the Initial Public
Offering.
5.6 No Violation. The execution and delivery and
performance of this Agreement and the Closing Documents will not, with or
without the giving of notice and/or the passage of time, violate any
provisions of law applicable to the Acquiror or conflict with, result in the
breach or termination of, any provision of, constitute a default under, or
give any party other than the Acquiror or Newco the right to accelerate any
obligation under, the Acquiror's or Newco's corporate charter or by-laws or
any indenture, mortgage, deed of trust, lease or other agreement or instrument
to which Acquiror or Newco is a party. The execution, delivery and performance
and compliance by the Acquiror and Newco with the terms and provisions hereof
will not violate any provision of the DelGCL or any other laws or, with or
without the giving of notice and/or the passage of time, conflict with or
result in a material breach of any judgment, order, injunction, decree,
regulation or ruling of any court or other governmental authority to which the
Acquiror or Newco is subject or by which any of the assets of the Acquiror may
be bound.
5.7 Litigation. There are no claims, actions,
proceedings, investigations or inquiries in progress, pending, or, to the best
knowledge of the Acquiror or Newco, threatened against the Acquiror or Newco,
that could affect Acquiror or Newco, or the
-39-
transactions contemplated hereby; nor, to the best knowledge of the Acquiror
or Newco, is there any valid basis for any such claim, action, suit,
proceeding, inquiry or investigation.
5.8 Capitalization. The authorized capitalization
of the Acquiror consists of 2,000,000 shares of Preferred Stock, par value
$.001 per share, of which 1,000,000 shares of Series A Preferred Stock are
outstanding; 1,050,000 shares of Class A Common Stock, par value $.001 per
share, of which 500,000 shares are outstanding; and 10,000,000 shares of
Common Stock, par value $.001 per share, of which 214,300 shares are
outstanding. Acquiror will not issue or reserve for issuance any additional
shares of Preferred Stock, Class A Common Stock or Common Stock prior to the
consummation of the Initial Public Offering except for the shares to be issued
(i) as part of the Initial Public Offering and the Stock Consideration, (ii)
upon consummation of the acquisitions of other battery distributors described
in the Registration Statement referred to in Article VII; (iii) upon
conversion of the outstanding shares of Class A Common Stock;(iv) upon
exercise of warrants to be issued to the underwriters of the Initial Public
Offering and options granted and to be granted under the Acquiror's Stock
Option Plan, and (v) pursuant to a recapitalization of the outstanding shares
of Class A Common Stock and Common Stock effected prior to the Initial Public
Offering.
-40-
5.9 The Stock Consideration. Acquiror has duly
reserved for issuance the shares of its Common Stock which will constitute the
Stock Consideration. Such shares when issued in accordance with the terms of
this Agreement, will be validly authorized, legally issued, and fully paid and
nonassessable.
5.10 Full Disclosure. No representation or warranty
of Acquiror or Newco made in this Agreement or any written statement furnished
by the Acquiror or Newco to AFA and the Stockholder pursuant hereto or the
Closing Documents contains or will contain any untrue statement of a material
fact which materially adversely affects or will materially adversely affect
Acquiror or Newco or omits or will omit to state a material fact necessary to
make the statements or facts contained herein or therein not misleading.
ARTICLE VI
CERTAIN ADDITIONAL AGREEMENTS
6.1 Further Covenants of the Stockholder and AFA.
(a) Between the date of this Agreement and the
Effective Date:
(i) Conduct of Business. AFA will, and the
Stockholder will cause AFA to, continue to operate and conduct the AFA
Business in the ordinary course;
(ii) Preservation of Business Relationships.
AFA and the Stockholder will use their best
-41-
efforts to preserve and maintain the present business relationships of AFA
with its suppliers and customers.
(iii) No Changes. Unless the prior written
consent of Acquiror is obtainedand except for Permitted Transactions as
described in Section 4.10(e), AFA will not, and the Stockholder will cause AFA
not to, make any change in its Certificate of Incorporation or By-Laws;
declare or pay any dividend or make any other distribution; issue, sell or
purchase, or issue rights or options to purchase or subscribe to, or make any
commitment to issue, sell or purchase, any shares of its capital stock or make
any other change in its capitalization; issue or contract to issue, or
otherwise become liable with respect to, any indebtedness for borrowed funds
except for trade payable arising in the ordinary course of business of AFA and
except pursuant to the line of credit under the current term agreement with
Core State Bank; incur any liabilities or obligations of any nature (whether
absolute, accrued, contingent or otherwise and whether due or to become due)
except nonmaterial items incurred in the ordinary course of business and
consistent with past practice; permit, allow or suffer any of its properties
or assets (tangible or intangible) to be subjected to any mortgage, pledge,
lien, encumbrance, restriction or charge of any kind; other than in the
ordinary course of its business, sell or otherwise dispose of any of its
property or assets; dispose of or permit to lapse any Business
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Right or disclose to any person (except as may be required by law) other than
representatives of Acquiror any trade secret, formula, process or know-how not
theretofore a matter of public knowledge; make any loans or advances to or
assume, guarantee, endorse or otherwise become liable with respect to the
obligations of any other person, firm, corporation or association; make any
capital expenditures or enter into, modify or terminate any commitment (other
than to enter into a commitment for the purchase or sale of materials or
products in the ordinary course of the business of AFA and which is not in
excess of the amount reasonably purchased from such vendor for the item which
is the subject of the commitment); fail to maintain insurance as specified in
Section 4.18; write down or write up the value of any inventory (including
write-downs by reason of shrinkage); determine as collectible any notes or
accounts receivable or any portion thereof which was previously considered
uncollectible, or write off as uncollectible any notes or accounts receivable
or any portion thereof, except for write-downs and write-ups in accordance
with GAAP, or cancel any debts owed to it or waive any claims or rights of
substantial value; increase the compensation of any of its officers or
employees, whose compensation for the year ended December 31, 1994 or for the
six months ended June 30, 1995 was in excess of a rate of $30,000 per annum;
omit to do any act, or permit any act or omission to act, which will cause a
material breach of any
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contract, commitment or obligation, or any breach of any represen tation,
warranty, covenant or agreement made by AFA or Stockholder herein; and fail to
promptly notify the Acquiror of any lawsuit, claim, proceeding or
investigation which is threatened or commenced against AFA or any officer or
employee of AFA between the date of this Agreement and the Effective Date and
of which Stockholder has knowledge which may materially affect AFA, its
business, prospects or assets.
(iv) The Stockholder will obtain and cause
AFA to obtain all those consents from lessors, distributors, sales
representatives and dealers, and other consents, authorizations, approvals,
permits and clearances required for AFA and the Stockholder to execute and
deliver this Agreement, the Related Instruments and the Closing Documents and
to consummate the Merger and other transactions contemplated hereby and
thereby (the consents from all the Principal Distributors to be obtained prior
to the filing of the Registration Statement), to permit the Surviving
Corporation to continue to conduct, on and after the Closing, the business of
AFA to the same extent and in the same manner as on September 30, 1995 and on
the date hereof without any amendment or modification of obligations of AFA or
the Surviving Corporation as successor to AFA under the agreements and
arrangements with respect to which such consents are required, such consents
to be secured without any payments therefor to be made by
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AFA or the Surviving Corporation. Such consents shall be in writing in a form
and substance reasonably satisfactory to Acquiror and Acquiror's counsel and
executed counterparts thereof shall be delivered to Acquiror promptly after
receipt thereof by AFA, but in no event later than the effectiveness of the
Merger. Acquiror agrees to assist and cooperate with AFA in obtaining such
consents, including, without limitation, by way of furnishing financial and
other information as may be reasonably requested by the person providing such
consent; the foregoing shall not, however, require the Acquiror to make any
payment or incur any financial obligation or expense other than that incurred
in furnishing the requisite information.
6.2 Employment Agreement. Stockholder shall execute
and deliver to Acquiror at the Closing the Employment Agreement in the form of
Exhibit C hereto.
6.3 Payment of Outstanding Obligations. The
Stockholder at the Closing will pay or cause to be paid in full to AFA,
without discount or reduction, all the amounts of advances, notes and accounts
receivable of AFA from him or his Affiliates, except if such discount or
reduction qualifies as a Permitted Transaction.
6.4 Full Access. Until such time as this Agreement
is terminated or abandoned in accordance with Article XII hereof and subject
to Section 6.5, AFA shall afford, and the Stockholder
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shall cause AFA to afford, to Acquiror, its counsel, accountants and other
representatives (including the underwriter of the Initial Public Offering, its
representatives and counsel) full access to the premises, employees, books and
records of AFA at such reason able times and places as Acquiror may request in
order that Acquiror and the underwriter may have full opportunity to make such
investigations as it shall desire to make of the affairs of AFA for due
diligence purposes and will cause the officers, attorneys and accountants of
AFA to furnish such additional financial and operating data and other
information as Acquiror or the underwriter shall from time to time reasonably
request.
6.5 Confidentiality.
(a) Each party hereto agrees to act and to cause
their respective employees and agents, and Acquiror shall also cause the
underwriter, to act, diligently and reasonably before the Closing to keep
confidential: (i) the terms and conditions of this Agreement; and (ii) any and
all information and data with respect to the other party which it has learned,
developed or received as a result of its dealings or negotiations in respect
hereof or any investigation made in connection with this Agreement or any
other agreement to be executed and delivered by it hereunder or in connection
herewith which would not otherwise be available to such party; provided,
however, that each party hereto shall be entitled to disclose such information
and data (a) to the
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extent reasonably necessary to enforce its rights under this Agreement or any
of the Related Instruments, (b) to enable the Acquiror to satisfy its
obligations under the Securities Act of 1933 with respect to the preparation
and filing of the Registration Statement and the distribution of the
Preliminary Prospectus and Prospectus included therein, and (c) as may
otherwise be required by law.
(b) None of the parties shall release any informa
tion before the Effective Date concerning the terms and conditions of this
Agreement or the transactions contemplated hereby which is intended for or may
result in public dissemination of such information without the prior written
consent of the other party, except as part of or in connection with (i) the
Registration Statement of the Acquiror to be filed under the Securities Act of
1933; or (ii) a capital investment in the Acquiror.
Each party agrees that the obligation of
confidentiality shall survive and all originals and copies of any Confidential
Information provided in writing or reduced in writing are to be properly
returned or transmitted to the party providing the same should the Agreement
be terminated and the Closing not effected. If so requested by the providing
party, all documents, memoranda, notes and other writings whatsoever prepared
by the party to whom such Confidential Information was provided or its
representatives or affiliates, based on the Confidential
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Information provided, shall be destroyed and the party to whom such
information had been provided shall certify to the providing party that such
destruction has been effected.
6.6 Approval of Merger. AFA and the Stockholder
agree to cause the approval of this Merger contemplated hereby so that there
will be no demand for any appraisal rights upon the effectiveness of the
Merger.
6.7 Section 368 Reorganization. Each party hereto
shall use its best efforts to have the Merger be deemed a reorganization
subject to the provisions of Section 368(c) of the Internal Revenue Code so
that no income or gain is to be recognized by the Stockholder upon receipt of
the Stock Consideration.
6.8 Repayment of Debt to Stockholder. The
outstanding indebtedness of AFA to the Stockholder in an amount not to exceed
$150,000 shall be repaid by the Surviving Corporation to the Stockholder
within 30 days following the Effective Date provided that after giving effect
to such debt the net worth of AFA was as of December 31, 1995 at least
$1,700,000 and as of the Effective Date was at least the amount specified as
of the Effective Date in Section 4.10(e).
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ARTICLE VII
INITIAL PUBLIC OFFERING
7.1 Initial Public Offering. (a) In part to fund
the payment of the Cash Consideration, the Acquiror intends to effect through
an underwriter or underwriters a public sale of shares of its Common Stock or
other equity securities (other than warrants or options) convertible into
shares of Common Stock at a gross selling price to the public prior to the
deduction of any underwriting commissions, discounts and expenses of not less
than Seven Million, Five Hundred Thousand Dollars ($7,500,000). The offer and
sale (the "Initial Public Offering") of such securities and the shares
issuable upon the conversion of any convertible securities included therein
will be registered by means of a filing with the Securities and Exchange
Commission (the "Commission") under Section 5 of the Securities Act of 1933
(the "Securities Act") of the Registration Statement of the Acquiror (the
"Registration Statement"). The Acquiror agrees to file the Registration
Statement on or prior to December 31, 1995 and, upon such filing, will use its
best efforts to cause the Registration Statement to be declared effective by
the Commissioner.
(b) Acquiror agrees to provide Stockholder with a
copy, and reasonable time to review and provide comments as to the
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initial material draft and of each materially revised draft of the
Registration Statement and of the Registration Statement to be filed and each
substantative amendment thereto five days prior to the filing thereof with the
Commission. The Stockholder agrees to review such draft or drafts,
particularly with respect to the disclosures contained therein as to AFA and
the Stockholder. Acquiror agrees to incorporate or effect such changes in the
Registration Statement prior to the filing thereof or the Stockholder may
request with respect to the disclosures therein or to the business,
management, financial condition and prospects of AFA in order to comply with
the requirements of the application form of Registration Statement required by
the rules of the Commission with respect to the Initial Public Offering.
7.2 Cooperation. Stockholder and AFA shall
cooperate with the Acquiror by providing such information to the Acquiror as
it may reasonably request with respect to the operations, management and
financial condition of AFA in order to (i) prepare and file with the
Commission the Registration Statement and have the Registration Statement
declared effective, and (ii) satisfy the due diligence responsibilities of the
Acquiror and the underwriters with respect to the Initial Public Offering. In
connection therewith, AFA shall provide the Acquiror, in addition to the
financial statements described in Section 4.5, such
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unaudited financial statements of AFA, prepared in accordance with GAAP,
required under Regulation S-X and Regulation S-K promulgated under the
Securities Act to be included in the Registration Statement.
7.3 Indemnification. (a) The Acquiror agrees to
indemnify and hold harmless the Stockholder, AFA and each person, if any, who
controls AFA within the meaning of Section 15 of the Securities Act against
any and all losses, claims, damages or liabilities (including any costs of
investigations, legal and other expenses reasonably incurred in connection
with and in the amount paid in settlement of any action, suit or proceeding or
any claim asserted) to which they or any of them may become subject under the
Securities Act or other statutory law or common law insofar as such losses,
claims, damages or liabilities arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus included therein or any amendment or
supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading; or arise out of any violation by the
Acquiror of any rule or regulation promulgated under the Securities Act
applicable to the Acquiror and related to action or inaction required of the
Acquiror in connection with the Registration
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Statement provided; however, that the Acquiror will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out
of or is based upon such untrue statement or omission or alleged untrue
statement or omission made in any of such documents in reliance upon and in
conformity with information furnished by Stockholder or AFA to the Acquiror
for use therein.
(b) Stockholder agrees to indemnify and hold
harmless the Acquiror and each person, if any, who controls the Acquiror
within the meaning of Section 15 of the Securities Act and each and all and
any of them to the same extent as the foregoing indemnity from the Acquiror to
Stockholder and AFA but only insofar as such losses, claims, damages or
liabilities arise out of or are based upon any untrue statement or omission or
alleged untrue statement or omission which was made in the Registration
Statement or the Prospectus or any amendment or supplement thereto in reliance
upon and in conformity with information furnished by the Stockholder or AFA to
the Acquiror for use therein.
(c) The procedures to effect indemnification
provided by Section 7.2(a) or (b) are set forth in Sections 11.4, 11.5 and
11.6.
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ARTICLE VIII
NON-COMPETITION
8.1 Non-Competition. The Stockholder agrees, in
consideration for the payment at the Closing by Acquiror to the Stockholder of
Twenty-Five Thousand Dollars ($25,000) in the form of a certified check or
wire transfer of federal funds, that Stockholder shall not, at any time during
a period ending the later of five years from the Effective Date or a date two
years following the last date of employment of the Stockholder by the Acquiror
or the Surviving Corporation, (i) compete, directly or indirectly, with
Acquiror or the Surviving Corporation in the conduct of the business of the
sale or distribution of batteries or battery- related products or cellular
products and component (the "AFA Business"), or (ii) except on behalf of the
Acquiror or the Surviving Corporation, directly or indirectly solicit for
employment by others any employees of the Surviving Corporation or Acquiror to
perform duties with respect to the AFA Business; provided, however, that
nothing contained in this Section 8.1 shall prevent Stockholder from (i)
continuing to own, along with his wife the equity of Advanced Cellular of
Philadelphia and Advanced Video Corp. (collectively the "Affiliated
Companies") provided that such companies do not compete in any manner with the
Acquiror or the Surviving Corporation (it being understood that such
restriction
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with respect to the immediate geographical area in which the Affiliated
Companies conduct their business as of the date hereof does not apply to any
expansion by the Acquiror or the Surviving Corporation after the Effective
Date of their respective businesses to include in such geographical area the
business presently conducted by either Affiliated Company) and the ownership
does not interfere or conflict with the performance of his duties as an
officer, employee or director of the Surviving Corporation or as a director of
the Acquiror; or (ii) purchasing as an investment less than 1% of the
outstanding securities of any corporation whose securities are regularly
traded on any national security exchange or in the over-the-counter market.
8.2 Injunctive Relief. The Stockholder hereby
expressly acknowledges that money damages might be difficult to calculate and
may not adequately compensate the Surviving Corporation or the Acquiror in
connection with an actual or threatened breach by Stockholder of the
provisions of Section 8.1 hereof. Accordingly, Stockholder hereby expressly
agrees that each of Acquiror and the Surviving Corporation shall be entitled
to enforce by injunction or other equitable relief the due and proper
performance and observance of the provisions of Section 8.1 hereof and, in
addition, each of Acquiror and the Surviving Corporation shall be entitled to
pursue any other available remedies at law or
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equity, including the recovery of money damages, in respect of the actual or
threatened breach of the provisions of said Section.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF ACQUIROR AND NEWCO
Each and every obligation of Acquiror and Newco under this
Agreement to be performed on or before the Closing shall be subject to the
satisfaction, on or before the Closing, of each of the following conditions,
unless waived in writing by Acquiror and Newco:
9.1 Representations, Warranties and Covenants of
AFA and the Stockholder. The representations and warranties of AFA and the
Stockholder herein and in any Schedule and Exhibit shall be true and complete
in all material respects on the Effective Date with the same effect as though
made at such time, except to the extent that a different time is specifically
stated in any such representation or warranty; AFA and the Stockholder shall
have performed and complied in all material respects with all covenants and
conditions required by this Agreement to be performed or complied with by AFA
or the Stockholder at or prior to the effectiveness of the Merger; and the
Stockholder shall deliver to Acquiror at the Closing a certificate dated the
Effective Date executed by the Stockholder, individually and as President of
AFA
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and by the Chief Financial Officer of AFA, certifying to the foregoing
effects.
9.2 Absence of Proceedings. (i) None of the
Acquiror, Newco, AFA and the Stockholder shall be subject to any restraining
order or injunction restraining or prohibiting the Merger or the consummation
of the other transactions contemplated hereby or by any of the Related
Instruments or the Closing Docu ments; (ii) no suit, action or proceeding
shall have been insti tuted and remain pending before a court or other
governmental body which would prohibit such transactions or the continued
operation or conduct of the AFA Business, or materially adversely affect the
title or interest of AFA in its assets; and (iii) there shall not be
threatened, instituted or pending any suit, action, investigation, inquiry or
other proceeding by or before any court or governmental or other regulatory or
administrative agency or commission requesting an order, judgment or decree
which (a) restrains or prohibits the consummation of the Merger or other
transactions contemplated hereby, or (b) if adversely decided, will have a
material adverse effect on the assets, business, operations, condition
(financial or otherwise), liabilities, assets, earnings or prospects of AFA.
9.3 Net Worth; No Material Adverse Change. The net
worth of AFA as of the earlier of the Effective Date or December
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31, 1995 as determined in accordance with GAAP shall be not less than
$1,700,000. Since September 30, 1995, whether or not in the ordinary course of
business, there shall not have occurred or arisen any event, condition or
state of facts which materially and adversely affects, the assets, operations,
business, financial condition, or prospects of AFA.
9.4 Consents and Approvals. All licenses, permits,
consents, approvals and authorizations of all third parties and governmental
bodies and agencies shall have been obtained which are necessary, in the
reasonable opinion of counsel to Acquiror and Newco, for AFA or Stockholder to
obtain in connection with (a) the execution and delivery by AFA and the
Stockholder of this Agreement or the Related Instruments and the consummation
of the Merger or the other transactions contemplated hereby or thereby, or (b)
the continued conduct by the Surviving Corporation of the AFA Business after
the Effective Date in the manner and to the extent conducted on September 30,
1995 and on the date hereof.
9.5 Documents. The Related Instruments and all
other documents to be delivered by the Stockholder and AFA to Acquiror on the
Effective Date, except as provided for in Exhibits hereto, shall be in form
and substance reasonably satisfactory to Acquiror.
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9.6 Employment Agreement. Stockholder shall have
executed and delivered to the Acquiror the Employment Agreement in the form of
Exhibit D hereto.
9.7 Initial Public Offering. The Registration
Statement shall have been declared effective by the Securities and Exchange
Commission and the closing of the Initial Public Offering has taken place.
9.8 Certificates. AFA shall have furnished Acquiror
with such other certificates as may be reasonably requested by Acquiror.
9.9 Opinion of AFA's and Stockholder's Counsel.
Acquiror shall have received an opinion of Xxxxxx & Xxxxxxx, counsel to AFA
and the Stockholder, dated the Closing Date, substantially in the form of
Exhibit E hereto.
ARTICLE X
CONDITIONS TO OBLIGATIONS OF THE STOCKHOLDER AND AFA
Each and every obligation of the Stockholder and AFA under
this Agreement to be performed on or before the Closing shall be subject to
the satisfaction, on or before the Closing, of each of the following
conditions, unless waived in writing by AFA and the Stockholder:
10.1 Representations and Warranties of Acquiror and
Newco to be True. The representations and warranties of Acquiror
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and Newco herein contained shall be true and complete on the Effective Date
with the same effect as though made at such time except to the extent that a
different time is specifically stated in any such representation or warranty;
Acquiror and Newco shall have performed and complied with all covenants and
conditions required by this Agreement to be performed or complied with by it
on or prior to the Effective Date; and each of Acquiror and Newco shall have
delivered to the Stockholder a certificate, dated the Effective Date and
signed by its President, to both such effects.
10.2 Absence of Proceedings. (i) None of AFA, the
Stockholder and the Acquiror and Newco shall be subject to any restraining
order or injunction restraining or prohibiting the consummation of the Merger
and the other transactions contemplated hereby, the Related Instruments or the
Closing Documents; (ii) no suit, action or proceeding shall have been
instituted and remain pending before a court or other governmental body which
would prohibit such transactions; and (iii) there shall not be threatened,
instituted or pending any suit, action, investigation, inquiry or other
proceeding by or before any court or governmental or other regulatory or
administrative agency or commission requesting an order, judgment or decree
which (a) restrains or prohibits the consummation of the Merger or the other
transactions contemplated hereby or by the Related Instruments, or (b) if
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adversely decided, will have a material adverse effect on the business,
operations, condition (financial or otherwise), liabili ties, assets, earnings
or prospects of the Surviving Corporation or Acquiror.
10.3 Documents. Except as otherwise provided, all
documents to be delivered by Acquiror or Newco to the Stockholder and AFA on
the Effective Date shall be in form and substance reasonably satisfactory to
AFA and the Stockholder.
10.4 Employment Agreement. The Acquiror shall have
executed and delivered to the Stockholder the Employment Agreement to the
Stockholder.
10.5 Registration Agreement. Acquiror shall have
executed and delivered to the Stockholder the Registration Rights Agreement in
the form of Exhibit D hereto to register under the Securities Act of 1933 the
Shares coonstituting the Stock Consideration.
10.6 Consents and Approvals. All licenses, permits,
consents, approvals and authorizations of all third parties and governmental
bodies and agencies shall have been obtained which are necessary, in the
reasonable opinion of counsel to the Stockholder and AFA, in connection with
the execution and delivery of AFA Acquiror and Newco of this Agreement or the
Related Instruments and
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the consummation of the Merger or the other transactions contemplated hereby
or thereby, and on the date hereof.
10.7 Initial Offering. The Registration Statement
shall have been declared effective by the Securities and Exchange Commission
and the closing of the Initial Public Offering has taken place.
10.8 Director. The Stockholder shall have been
elected a Director of the Acquiror to take office immediately following the
Effective Date.
10.9 Certificates. Acquiror and Newco shall have
furnished the Stockholder with such certificates of officers of Acquiror and
Newco as may reasonably be requested by counsel to AFA and the Stockholder.
10.10 Opinion of Acquiror and Newco. AFA and the
Stockholder shall have received from Acquiror and Newco an opinion of The
Xxxxx Law Group, LLC, counsel to the Acquiror and Newco, dated the Closing
Date, in the form of Exhibit F hereto.
ARTICLE XI
REMEDIES
11.1 Survival of Representations and Warranties.
All representations and warranties in this Agreement or pursuant hereto made
by any party shall survive the Effective Date for a period of three years from
that date and any investigation made at
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any time by or on behalf of any other party, except that those representations
and warranties with respect to taxes shall survive for the applicable statute
of limitations period.
11.2 Indemnification by the Stockholder. Subject to
Section 11.4(b) and in addition to his obligations under Section 7.3(b), the
Stockholder agrees to indemnify, defend and hold harmless Acquiror and its
controlling persons and controlled persons, including the Surviving
Corporation, successors and assigns (hereinafter in this Article XI
collectively referred to as Acquiror unless the context otherwise indicates)
from and against any and all claims, demands, losses, costs, obligations,
liabili ties, interest thereon, penalties and expenses, including reason able
attorneys' fees and expenses (all the foregoing being hereinafter sometimes
collectively referred to as "Article XI Damages") occasioned by, arising out
of or resulting from any breach or default of any of the representations and
warranties of the Stockholder or AFA or of the covenants of AFA or the
Stockholder in this Agreement, the Related Instruments or in any Exhibit or
Schedule to, or any certificate, agreement or other instrument furnished
pursuant to, this Agreement or the Related Instruments or any facts or
circumstances constituting such a breach or default.
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11.3 Indemnification by Acquiror. Subject to
Section 11.4(b), in addition to its obligation under Section 7.3(a), Acquiror
agrees to indemnify, defend and hold harmless the Stockholder and his
successors and assigns from and against any and all Article XI Damages
occasioned by, arising out of or resulting from any breach or default of any
of the representations, warran ties or covenants of Acquiror or Newco
contained in this Agreement or a Related Instrument or in any Exhibit or
Schedule to, or any certificate, agreement or other instrument furnished
pursuant to, this Agreement or a Related Instrument or any facts or
circumstances constituting such breach or default.
11.4 Claims for Indemnification.
(a) A party seeking indemnification for Article
XI Damages or for damages under Article VII or VIII (the "Indemnified Party"),
as a condition of asserting claims for indemnification, shall promptly after
becoming aware of such claim notify the other party (the "Indemnifying Party")
in writing of any event, or of any facts, which, in its opinion, entitle or
may entitle the Indemnified Party to indemnification under Article VI or this
Article XI. The notice from the Indemnified Party shall specify all facts then
known to it relating to its claim for indemnification and the amount or
estimated amount of the liability arising therefrom. The right of the
Indemnified Party to
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indemnification and the amount or the estimated amount thereof, as set forth
in the notice, shall be deemed agreed to by the Indemnifying Party unless,
within 30 days after the mailing of such notice, the Indemnifying Party
notifies the Indemnified Party in writing that it disputes the right of the
Indemnified Party to indemnification as set forth or estimated in the notice
or that the Indemnifying Party elects to defend, in the manner provided in
Section 11.5 hereof, the claim giving rise to such indemnification right. If
the Indemnified Party shall be duly notified that the Indemnifying Party
disputes such claim as aforesaid, the parties shall endeavor to settle and
compromise such dispute but no such settlement or compromise shall be effected
without the consent of both. If unable to do any of the foregoing, such
dispute as to indemnification shall be determined by appropriate litigation
(which shall mean when the claim has been finally determined by a court or
tribunal from which determination no appeal is or may be taken or when the
defense thereto has been abandoned); and any right of an Indemnified Party to
indemnification established by reason of such settlement, compromise, or
litigation shall be promptly thereafter paid and satisfied by the Indemnifying
Party.
(b) Neither the Stockholder nor the Acquiror, as
the case may be, will be obligated to indemnify, defend or hold the other
party harmless with respect to any Article XI Damages
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arising out of Section 11.1 or 11.2 with respect to any claims, unless and
until the principal amount of all Article XI Damages asserted by it shall, in
aggregate, exceed the sum of $50,000, and then indemnification shall be had to
the extent of all such Article XI Damages, including the first $50,000 of such
Article XI Damages. The Stockholder shall not be liable to Acquiror for
Article XI Damages in the aggregate in excess of the Merger Consideration.
11.5 Right to Defend, Etc. If the facts giving
rise to indemnification shall involve any actual or threatened claim or demand
by any other third party against an Indemnified Party or the Surviving
Corporation, the Indemnified Party may upon written request require the
Indemnifying Party, at the expense of the Indemnifying Party through counsel
of its own choosing, to defend or prosecute such claim or demand in the name
of the Indemnified Party or the Surviving Corporation, as the case may be,
(without prejudice to the right of the Indemnified Party or the Surviving
Corporation to participate through counsel of its own choosing). The
Indemnified Party shall cooperate in the defense or prosecution of said claim
or demand, including providing the Indemnifying Party with access to such
books and records of the Surviving Corporation or the Acquiror in the
possession of the Indemnifying Party, which shall be reasonably deemed by the
Indemnifying Party to relate to said claim or demand and shall be entitled to
be reimbursed, as
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provided in Sections 7.3, 11.2, 11.3 or 11.6, for all costs and expenses
incurred by it in connection therewith. No settlement shall be effected by an
Indemnified Party to which it may claim indemnification from an Indemnifying
Party without the consent of the Indemnifying Party but such consent shall not
be unreasonably withheld.
11.6 Litigation; Remedies Cumulative. In the
event of litigation to enforce this Agreement or any provision thereof, the
prevailing party, in addition to any other relief such party may be awarded,
shall be entitled to recover its reasonable attorneys' fees, including those
incurred with respect to any appellate proceeding. Except as herein expressly
provided, all remedies provided in this Agreement, including, but not limited
to, those pursuant to Sections 7.3 and 8.2 and Articles XI, XII and XIII and
shall be cumulative and shall not preclude assertion by any party hereto of
any other rights or the seeking of any other remedies against any other party
hereto.
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ARTICLE XII
DEFAULTS, TERMINATION AND ABANDONMENT
12.1 Time of Essence. Time is of the essence in
this Agreement.
12.2 Termination. The transactions contemplated
herein may be terminated and/or abandoned at any time, but not later than the
Closing:
(a) By mutual consent of the Stockholder, AFA and
Acquiror; or
(b) By Acquiror if the Effective Date shall have
been postponed and shall have not occurred on or prior to Februry 28, 1996
because one or more of the conditions provided for in Article IX of this
Agreement shall not have been met by AFA or the Stockholder or waived in
writing by Acquiror prior to such date; or
(c) By the Stockholder and AFA if the (i)
Registration Statement has not been filed on or prior to December 31, 1995, or
(ii) the Closing shall have been postponed and shall not have occurred on or
prior to Feburary 28, 1996, because one or more of the conditions provided for
in Article X of this Agreement shall not have been met by Acquiror or Newco or
waived in writing by the Stockholder prior to such date.
12.3 Procedure Upon Termination. In the event of
termination and abandonment by any of Acquiror, AFA and the
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Stockholder pursuant to Section 12.2 hereof, written notice thereof shall
forthwith be given to the other parties and the transactions contemplated by
this Agreement shall be terminated and/or abandoned, without further action by
Acquiror, or AFA and the Stockholder. If the transactions contemplated by this
Agreement are terminated and/or abandoned as provided herein:
(a) Each party will redeliver all documents, work
papers and other material of any other party relating to the transactions
contemplated hereby, whether obtained before or after the execution hereof, to
the party furnishing the same. All obligations of a party hereto regarding
confidentiality and nondisclosure of information and all remedies for breach
thereof shall survive termination or abandonment of this Agreement.
(b) A termination pursuant to Section 12.2(b) or
12.2(c) shall not in any way limit or restrict the rights and remedies of any
party hereto against any other party if such termination resulted from a
willful breach by the other party of any of the agreements or provisions of
this Agreement prior to the termination thereof.
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ARTICLE XIII
MISCELLANEOUS
13.1 Expenses. Each party hereto shall pay its own
expenses incidental to the negotiation, preparation and consumma tion of this
Agreement and all other agreements executed and delivered by it hereunder or
in connection herewith and the transactions provided for herein and therein,
including all fees and expenses of its or their respective counsel and
accountants, except that the fees of Deloitte & Touche for its services in
auditing the Audited Financial Statements shall have been borne by Acquiror
except that in the event the Audited Financial Statements disclose results
that are materially adversely different from the results disclosed in the
unaudited financial statements for the same periods previously provided by AFA
or the Stockholder to the Acquiror, AFA will bear the fees and disbursements
of the independent accounting firm.
13.2 Further Actions. At any time and from time to
time after the Closing, each party hereto agrees, at its own expense (except
as otherwise provided herein), to take such actions and to execute and deliver
such documents as may be reasonably necessary to effectuate the purposes of
this Agreement.
13.3 Commissions and Finders' Fees.
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Except for the fees of Founders Equity, Inc.
("Founders"), the fees of which shall be the sole responsibility of Acquiror,
and the fees of Xxxxxxxxxx & Xxxx ("E&K") which shall be the sole
responsibilities of the Stockholder, each of the parties represents that it
has not incurred any liability to any broker, finder or agent for any
brokerage fees, finder's fees or commis sions with respect to the transactions
contemplated by this Agreement, which may be directly or indirectly asserted
against the other parties. Acquiror agrees to be fully responsible to pay all
fees due to or claims of Founders and to indemnify and hold Stockholder
harmless from and against all liability, loss, cost, charge or expense,
including reasonable counsel fees, arising from claims of Founders for any fee
or commission with respect to the transactions contemplated by this Agreement
or pursuant to all outstanding agreements between Founders and Acquiror.
Stockholder agrees to be fully responsible to pay all fees due to or claims of
E&K and to indemnify and hold Acquiror and Newco harmless from and against all
liability, loss, cost, charge or expense, including reasonable counsel fees,
arising from claims of E&K for any fee or commission with respect to the
transactions contemplated by this Agreement or pursuant to all outstanding
agreements between E&K and Stockholder.
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13.4 Injunctive Relief. The Acquiror and the
Stockholder acknowledge and agree that in view of the uniqueness of the AFA
Business, damages at law would be insufficient for breach of any of their
respective covenants in this Agreement. Accordingly, the parties hereto agree
that in the event of a breach or threatened breach of any provisions of this
Agreement, the nondefaulting party shall be entitled to equitable relief in
the form of an injunction to prevent irreparable injury. Nothing herein shall
be construed as prohibiting any party hereto from pursuing any remedies,
including damages, for breach or threatened breach of this Agreement.
13.5 Further Assurances. Each party hereto shall,
from time to time after the Closing, at the request of any other party hereto
and without further consideration, execute and deliver such other instruments
of conveyance, assignments, transfer and assumption, and take such other
actions as such other party may reasonably request to more effectively
consummate the transactions contemplated by this Agreement.
13.6 Reformation and Severability. If any
provision of this Agreement is held to be illegal, invalid or unenforceable
under present or future laws effective during the term hereof:
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(a) in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as a part of this
Agreement a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and
enforceable; and
(b) the legality, validity and enforceability of
the remaining provisions hereof shall not in any way be affected or impaired
thereby.
13.7 Entire Agreement; Modification. This
Agreement, the Related Instruments and the Exhibits hereto set forth the
entire understanding of the parties with respect to the subject matter hereof,
supersede all existing agreements and understandings between them (and all
prior representations and warranties) concerning such subject matter and may
be modified only by a written instrument duly executed by each party hereto.
13.8 Notices. Any notice given pursuant to this
Agreement to any party hereto shall be deemed to have been duly given (i) when
mailed by registered or certified mail, return receipt requested, (ii) when
telecopied, provided a copy of the notice is mailed by registered or certified
mail, return receipt requested, within one business day following the date of
the telecopied transmission, or (iii) when hand delivered to the
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party to whom it is to be given at the address of such party set
forth below, as follows:
If to the Stockholder:
Xx. Xxxxxxx Xxxx
0000 Xxxxxx Xxxxx
Xxxxxxxxxx Xxxxxx, Xxxxxxxxxxxx 00000
FAX:
with a copy to:
Xxxxxx & Xxxxxxx
Xxx Xxxxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxx X. Xxxxx,Esq.
FAX: (000) 000-0000
If to Acquiror:
Batteries Batteries, Inc.
c/o Founders Equity, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx X. Xxxxx
Chairman of the Board
FAX: (000) 000-0000
with a copy to:
Xxx Xxxxxxxxxxx, Esq.
The Xxxxx Law Group
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
FAX: (000) 000-0000
If to AFA:
Advanced Fox Antenna, Inc.
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0000 Xxxxxxx Xxxx Xxxx
Xxxxxxxxxx Xxxxxx, XX 00000
FAX: (000) 000-0000
with a copy to:
(i) Prior to the Closing:
Xxxxxx & Xxxxxxx (at its above address)
(ii) After the Closing:
Xxx Xxxxxxxxxxx, Esq.
(at the above address
of Xx. Xxxxxxxxxxx)
or at such other address as a party shall from time to time designate by
written notice, in the manner provided herein, to the other parties hereto.
13.9 Waiver. Any waiver must be in writing, and
any waiver by any party of a breach of any provision of this Agreement shall
not operate as or be construed to be a waiver of any other breach of that
provision or of any breach of any other provision of this Agreement. The
failure of a party to insist upon strict adherence to any term of this
Agreement on one or more occasions will not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that
term or any other term of this Agreement.
13.10 Binding Effect; Assignment. The provisions
of this Agreement shall be binding upon and inure to the benefit of
AFA, the Stockholder, the Acquiror and Newco and their respective
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successors and permitted assigns. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party
hereto without the prior written consent of the other parties, and any
purported assignment without such consent shall be void, except that the
Acquiror may assign this Agreement to any corporation in which it owns 100% of
the outstanding shares of voting stock and has a net worth at the time of the
assignment at least equal to that of the Acquiror or the obligations of the
assignee is guaranteed by the Acquiror.
13.11 No Third-Party Beneficiaries. Except for
rights of Indemnified Parties under Article VII, X and XI hereof or the rights
of the parties under the Related Instruments, this Agreement does not create,
and shall not be construed as creating, any rights enforceable by any person
not a party to this Agreement.
13.12 Headings. The headings in this Agreement are
solely for convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
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13.13 Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
13.14 Governing Law. This Agreement and all
amendments thereof shall be governed by, and construed in accordance with, the
laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first written above.
BATTERIES BATTERIES, INC.
By /s/ Xxxx X. Xxxxxx
-------------------------------
Xxxx X. Xxxxxx
BATCEL CORP.
By /s/ Xxxx X. Xxxxxx
-------------------------------
Xxxx X. Xxxxxx
ADVANCED FOX ANTENNA, INC.
By /s/ Xxxxxxx Xxxx, President
-------------------------------
Xxxxxxx Xxxx, President
STOCKHOLDER:
Xxxxxxx Xxxx
-------------------------------
Xxxxxxx Xxxx
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EXHIBITS
A Certificate of Merger
B Certificate of Incorporation
C Employment Agreement
D Registration Agreement
E Opinion of Counsel to AFA and Stockholder
F Opinion of Acquiror's Counsel
SCHEDULES
Sections
4.6 Tangible Assets
4.7 Intangible Assets
4.8 Books and Records
4.10 Contracts and Commitments
4.11 Leases
4.12 Liabilities
4.13 Litigation
4.14 Permits, Licenses, Etc.
4.17 Employee Benefit Plans, ERISA
4.18 Insurance
4.19 Compliance with Applicable Law
-77-
EXHIBIT A
CERTIFICATE OF MERGER
OF
ADVANCED FOX ANTENNA, INC.
INTO
BATCEL CORP.
----------------------------------------------------------
Pursuant to Section 252(c) of the
General Corporation Laws of the State of Delaware
----------------------------------------------------------
BATCEL CORP., a corporation formed under the laws of the
State of Delaware, desiring to merge Advanced Fox Antenna Inc. into itself
pursuant to the provisions of Section 252(c) of the General Corporation Law of
the State of Delaware, DOES HEREBY CERTIFY as follows:
FIRST: That the names and states of incorporation of
each constituent corporation are:
NAME STATE OF INCORPORATION
BATCEL CORP. Delaware
ADVANCED FOX ANTENNA, INC. Pennsylvania
SECOND: That an Agreement and Plan of Merger has been
approved, adopted, certified, executed and acknowledged by each constituent
corporation in accordance with Section 252(c) of the General Corporation Law.
THIRD: That the name of the surviving corporation is
Advanced Fox Antenna, Inc.
-1-
FOURTH: That the Certificate of Incorporation of BBI
Acquisition Corp., one of the constituent corporations, shall be
the Certificate of Incorporation of the surviving corporation
except that Article First is hereby amended to state "First. The
name of the corporation is Advanced Fox Antenna, Inc."
FIFTH: That an executed copy of the Agreement and Plan of
Merger is on file at the principal place of business of Batcel Corp., c/o
Founders Equity Inc. 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, and that a
copy of such Agreement will be furnished by the surviving corporation, on
request and without cost, to any
stockholder of either constituent corporation.
IN WITNESS WHEREOF, said Batcel Corp., Inc. has caused this
Certificate of Merger to be executed by its officers thereunto duly authorized
this ____ day of ________________, 1996.
BATCEL CORP.
By:________________________
Name:________________
Title: President
ATTEST:
_________________________
Name:_______________
Title: Secretary
-2-
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
AGREEMENT, dated February __, 1996, by and among BATTERIES
BATTERIES, INC., a Delaware corporation, c/o Founders Equity Inc., 000 Xxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Acquiror"), BATCEL CORP., a Delaware
corporation and wholly-owned subsidiary of the Acquiror and of the same
address ("Newco"), ADVANCED FOX ANTENNA, INC., a Pennsylvania Corporation,
0000 Xxxxxxx Xxxx Xxxx, Xxxxxxxxxx Xxxxxx, XX 00000 ("AFA") and XXXXXXX XXXX,
residing at Xxxxxx Xxxxx, Xxxxxxxxxx Xxxxxx, Xxxxxxxxxxxx 00000 (the
"Stockholder").
WHEREAS, the parties hereto desire to amend the Agreement
and Plan of Merger dated December 4, 1995 among them (the "Merger Agreement")
in the following particulars only.
NOW, THEREFORE, it is hereby agreed as follows:
1. Subparagraph (a) of Section 2.1 of the Merger
Agreement is hereby amended to provide as follows:
"(a) the outstanding shares of the Common Stock, no par
value, of AFA ("Common Stock"), other than shares of Common Stock
held in the treasury of AFA, shall be automatically converted into
(i) cash in an amount equal to Two Million, Five Hundred and
Seventy-Five Thousand Dollars($2,575,000) (the "Cash Consideration"),
(ii) such number of shares of Common Stock of the Acquiror equal to
the quotient obtained by dividing Three Million, Three Hundred
Thousand Dollars($3,300,000) by the "Initial Public Offering Price,"
meaning the price per share of Common Stock being offered by the
underwriters to the public set forth on the cover page of the
Prospectus included in the Registration Statement as described in
Section
7.1 or the price per Unit if the public offering is of Units, each consisting
of one share of Common Stock and one Warrant to purchase an additional share
of Common Stock at a price not less than the price per Unit being offered by
the underwriters to the public set forth on such cover page (the shares of
Common Stock of the Acquiror to be issued to the Stockholder are hereinafter
referred to as the "Stock Consideration,") and (iii) a Contingent Right, to
receive additional consideration of up to $600,000. The additional
consideration shall equal the amount by which the earnings of the Surviving
Corporation before extraordinary items and before provision for federal and
state income taxes, all as determined in accordance with generally accepted
accounting principles applied consistently with prior periods (the "PTE") for
the period from the Effective Date through January 31, 1997 (the "1996
Period"), the Year ended January 31, 1998 (the "1997 Year") or the year ended
January 31, 1999 (the "1998 Year") exceeds the "Threshold" hereinafter
described. The additional consideration shall not exceed $200,000 for any of
the 1996 Period, the 1997 Year, and the 1998 Year, nor $600,000 in the
aggregate for the three periods. The Threshold for the 1996 Period shall be
the amount determined multiplying $1,100,000 by the fraction which has the
number of days in the 1996 Period as its numerator, and 365 as its
denominator. The Threshold for the 1997 Year shall be the sum of (i)
$1,300,000 plus (ii) the amount, if any, by which the PTE for the year ended
January 31, 1997 was below $1,100,000. The Threshold for the 1998 Year shall
be the sum of (i) $1,500,000 plus (ii) the amount, if any, by which the sum of
the amount by which PTE for the year ended January 31, 1997 was below
$1,100,000 plus the amount by which the PTE for the 1997 Year was below
$1,300,000. Payment of the additional consideration shall, at the option of
the Acquiror, be made in cash or shares of Common Stock of the Acquiror or a
combination of cash or shares of the Acquiror, be
- 2 -
made in cash or shares of Common Stock of the Acquiror or a combination of
cash or shares. The value of each share shall equal the average for the "Value
Period" of the closing sales prices of the Common Stock of the Acquiror on the
New York Stock Exchange or, if not listed thereon, on the national stock
exchange on which such shares are listed, or if not listed on any exchange, on
the National Market System ("NMS") of the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or, if not listed on an exchange
or the NMS, on the Nasdaq Smallcap Stock Market. If the Common Stock is not
listed on any exchange, NMS or the Nasdaq Smallcap Stock Market, the average
of the high bid and low asked prices to on the over-the-counter market as
quoted by the market quotation service authorized by the NASD shall be
substituted for the closing sales prices in the foregoing in the determination
of the per share value.
The Value Period shall be the ten business days immediately
following the publication of the audited results of the consolidated
operations of the Acquiror and its subsidiaries for the Year for
which the determination is being made. Payment of the additional
consideration shall be made within thirty days following such
publication. The expenses of the Surviving Corporation for each of
the 1996 Year, the 1997 Year and the 1998 Year shall include the
compensation of the Stockholder under his employment agreement
provided for in Section 6.2 and of a Chief Financial Officer of the
Surviving Corporation designated by the Acquiror and who is to be
employed immediately following the Effective Date but shall not
include any management fee payable to Acquiror. The Cash
Consideration, Stock Consideration and Contingent Consideration are
hereinafter collectively referred to as the "Merger Consideration".
The stock certificates evidencing the Stock Consideration and
Contingent Consideration shall bear the following legend:
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"The shares evidenced by this certificate have not
been registered under the Securities Act of 1933,
as amended, and no transfer, disposition or
hypothecation may be effected of the shares unless
registered under the Act or, in the opinion of
counsel to the issuer, such transaction is exempt
from registration thereunder."
2. Subparagraph (e) of Section 4.10 of this Merger Agreement
is hereby amended to provide as follows:
"(e) For the purposes of this Agreement, "Permitted
Transactions" shall mean distributions or dividends (including those
declared but not paid as of the Effective Date) to the Stockholder
and write-downs or write-offs by AFA of indebtedness owed by the
Stockholder or his affiliates made on or prior to the Effective Date
if as of December 31, 1995 and as of the Effective Date the net worth
of AFA is not less than $1,700,000; provided however that
distributions of net income of AFA for the period from January 1,1996
to the Effective Date (the "1996 Pre-Effective Period") shall be made
to the Stockholder or his assigns in accordance with the schedule set
forth in Section 6.8 as amended pursuant to this Agreement.
3. Section 6.8 of the Merger Agreement is hereby amended to
provide as follows:
"6.8 Payment of the Outstanding Debt and Permitted
Distributions to Stockholder. (a) The outstanding indebtedness of AFA
to the Stockholder in an amount not to exceed $150,000 shall be
repaid by the Surviving Corporation to the Stockholder within 30 days
following the Effective Date provided that after giving effect to
such debt the net worth of AFA was as of December 31, 1995 and as the
Effective Date at least $1,700,000.
- 4 -
"(b) The net income of AFA for the 1996 Pre-Effective Period
to the extent the amount would constitute a Permitted Transaction under
Section 4.10(e) of the Merger Agreement shall be distributed by the Surviving
Corporation to the Stockholder (the "Permitted 1996 Pre-Effective Income
Distribution"). The distribution shall be made preliminarily in four
installments, each equal to 25% of the amount to be distributed, within the
first installment to be made on the later of May 1, 1996 or the 45th day
following the Effective Date, the second installment on the later of June 1,
1996 or the 45th day following the Effective Date, the third installment on
July 1, 1996 and the last installment on August 1, 1996. The net income of AFA
for the 1996 Pre-Effective Period shall be determined in accordance with
generally accepted accounting principles, The determination shall
preliminarily be made by the Surviving Corporation within 45 days following
the Effective Date. The definitive amount shall be the amount set forth in the
statement of income of AFA for the 1996 Pre-Effective Period as audited by
Deloitte & Touche LLP and included in the Annual Report on Form 10-K of the
Acquiror for the year ended January 31, 1997 (the "Annual Report") filed by
the Acquiror under the Securities Exchange Act of 1934 (the "1934 Act"). A
copy of the Annual Report shall be transmitted to the Stockholder by the
Acquiror within two business days of the filing. To the extent the amount of
the net income for the 1996 Pre-Effective Period as definitively determined
and adjusted so as not to exceed the amount of Permitted 1996 Pre-Effective
Income Distribution is more than the amount of the net income previously
distributed to the Stockholder pursuant to this Section 6.8(b), the Surviving
Corporation shall distribute the amount of the excess to the Stockholder. To
the extent the amount of net income of AFA for the 1996 Pre-Effective Period
as definitively determined and adjusted so as not to exceed the amount of
Permitted 1996 Pre-Effective Income Distribution is less than
- 5 -
the amount previously distributed under this Section 6.8(b), the Stockholder
shall repay such deficiency to the Surviving Corporation. Payment of the
excess or deficiency, as the case may be, shall be made within ten business
days of the filing of the Annual Report by the Acquiror under the 1934 Act."
4. Subparagraphs (b) and (c) of Section 12.2 of the Merger
Agreement are hereby amended to provide as follows:
"(b) By Acquiror if the Effective Date shall have been
postponed and shall have not occurred on or prior to April 30, 1996
because one or more of the conditions provided for in Article IX of
this Agreement shall not have been met by AFA or the Stockholder or
waived in writing by Acquiror prior to such date; or
(c) By the Stockholder and AFA if the (i) Registration
Statement has not been filed on or prior to December 31, 1995, or
(ii) the Closing shall have been postponed and shall not have
occurred on or prior to April 30, 1996, because one or more of the
condi tions provided for in Article X of this Agreement shall not
have been met by Acquiror or Newco or waived in writing by the
Stockholder prior to such date.
5. References in Sections 10.10 and 13.8 to "the Xxxxx Law
Group" are hereby revised to "Brock, Fensterstock, Xxxxxxxxxxx, XxXxxxxxx &
Xxxx LLC".
6. The amount of base salary provided in Section 4 of the
Employment Agreement, Exhibit C, shall be amended to "$150,000 per annum" and
such Exhibit is amended accordingly.
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IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first written above.
BATTERIES BATTERIES, INC.
By /s/ Xxxx X. Xxxxxx
----------------------------------------
Xxxx X. Xxxxxx
BATCEL CORP.
By /s/ Xxxx X. Xxxxxx
----------------------------------------
Xxxx X. Xxxxxx
ADVANCED FOX ANTENNA, INC.
By /s/ Xxxxxxx Xxxx, President
----------------------------------------
Xxxxxxx Xxxx, President
STOCKHOLDER:
/s/ Xxxxxxx Xxxx
----------------------------------------
Xxxxxxx Xxxx
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