UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Date of Report: August 1, 1995
(Date of earliest event reported)
Allen Organ Company
(Exact name of registrant as specified in its charter)
Pennsylvania 0-275 23-1263194
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
150 Locust Street, P.O. Box 36, Macungie, Pennsylvania 18062-0036
(Address of principal executive offices) (Zip Code)
610-966-2200
(Registrants telephone number, including area code)
Item 1 Not Applicable
Item 2 Acquisition of Assets.
On August 1, 1995, Allen Organ Company and
Subsidiaries acquired the assets of VIR, Inc. and
two related companies for $7,653,234. The
purchase price was made up of 24,390 shares of
Allen Organ stock valued at approximately
$1,000,000, notes totaling $2,978,601 and
$3,674,633 in cash. The company previously
announced on June 7, 1995 that it had agreed in
principle to make this purchase.
In connection with the acquisition, Allen Organ
Company established three new subsidiary companies
to acquire the assets of the sellers. As
additional consideration the new subsidiaries
issued shares of their stock to minority employee
shareholders equivalent to their interest in the
selling companies. The minority interest in each
of the three new acquisition companies is 2.4% in
VIR, 8.38% in ERI and 17.25% in LSC.
Allen Organ is the worlds largest manufacturer of
digital electronic church organs which are sold to
the institutional and home markets. Allen Organ
Company also produces contract electronic
assemblies for commercial applications. The
company's 1994 annual sales were $28,842,789.
VIR, Inc. (VIR), Southampton, PA, is a fifteen-
year-old company which designs, develops and
manufactures proprietary products for the data
communications industry, primarily main frame
computer applications. The company's products are
considered technologically advanced for the
industry. The company's 1994 annual sales were
$3,774,724.
Eastern Research Inc. (ERI), Moorestown, NJ, began
its operations in January 1993. The company
designs, manufactures and markets data
communications hardware and software for local
(LAN) and wide area network (WAN) applications.
The company has introduced new products throughout
the past two and one half years and continues
additional product development. The company is
expanding marketing and distribution channels for
its products. The company's 1994 annual sales
were $1,423,029.
Linear Switch Corporation (LSC), Moorestown, NJ,
was founded in 1993. Since its inception the
company has worked on developing a small, high
speed data communications matrix switch capable of
operating in a local or wide area network
environment. Product development has recently
been completed. The company is presently
developing marketing and distribution channels for
its products.
Allen Organ Company believes that its state of the
art manufacturing and capital structure will prove
to be a compliment to these diverse high
technology companies.
Item 3-6 Not Applicable
Item 7 Financial Statements and Exhibits
(a) Financial Statements of Business's Acquired.
(1) Audited combined financial statements of
VIR, Inc. and Affiliates for the year ended
December 31, 1994.
(2) Unaudited interim combined financial
statements of VIR, Inc. and Affiliates for
the six months ended June 30, 1995.
(b) Pro Forma Financial Information.
(1) Allen Organ Company and Subsidiaries Pro
Forma Condensed Consolidated Balance Sheet
(unaudited) at June 30, 1995.
(2) Allen Organ Company and Subsidiaries Pro
Forma Condensed Consolidated Statements of
Income (unaudited) for the year ended
December 31, 1994 and the six months ended
June 30, 1995.
(3) Notes to Pro Forma Condensed Consolidated
Financial Statements (unaudited).
(c) Exhibits
(2)-1 Asset Purchase Agreement between VIR
Acquisition, Inc., ERI Acquisition, Inc.,
LSC Acquisition, Inc. (subsidiaries of
Allen Organ Company) and VIR, Inc., Eastern
Research, Inc., Linear Switch Corporation,
Alex and Luba Rabey.
(2)-2 Debentures
(2)-3 Employment Agreement
(2)-4 Agreement Not To Compete
(2)-5 Lease
(2)-6 Assignment And Assumption of Lease Agreement
(2)-7 Guaranty And Suretyship Agreement
(4)-1 Securities Restriction Agreement
Item 8 Not Applicable
Signatures
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly
authorized.
ALLEN ORGAN COMPANY
Date: August 15, 1995 STEVEN MARKOWITZ
Steven Markowitz, President and Chief
Executive Officer
Date: August 15, 1995 LEONARD W. HELFRICH
Leonard W. Helfrich, Treasurer and Chief
Accounting Officer
COMBINED FINANCIAL STATEMENTS
AND AUDITORS' REPORT
_______________
VIR, INC. AND AFFILIATES
DECEMBER 31, 1994
_______________
CONTENTS
Page(s)
Independent Auditors' Report 2
Combined Financial Statements
Combined Balance Sheet 3
Combined Statement of Income and Retained Earnings 4
Combined Statement of Cash Flows 5
Notes to Combined Financial Statements 6-7
Independent Auditors' Report on Supplementary Information 8
Combining Balance Sheet 9
Combining Statement of Income and Retained Earnings 10
Combining Statement of Cash Flows 11
CONCANNON, GALLAGHER, MILLER & COMPANY, P.C.
Michael J. Gallagher, CPA CERTIFIED PUBLIC ACCOUNTANTS
Michael R. Miller, CPA
William C. Mason, CPA
Dale E. Grate, CPA
E. Barry Hetzel, CPA
Edward J. Quigley, Jr., CPA
John G. Estock, CPA
Howard D. Gneiding, CPA
Robert A. Oster, CPA
Robert E. Vitale, CPA
John F. Sharkey, Jr., CPA
Victor J. Meyer, CPA
David C. Gehringer, CPA
Gerard D. Stanus, CPA
Robert M. Caster, CPA
INDEPENDENT AUDITORS' REPORT
Board of Directors
VIR, Inc. and Affiliates
We have audited the accompanying combined balance sheet of
VIR, Inc. and Affiliates as of December 31, 1994 and the related
combined statements of income and retained earnings and cash
flows for the year then ended. These combined financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these combined
financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the combined financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to
above, present fairly, in all material respects, the financial
position of VIR, Inc. and Affiliates as of December 31, 1994 and
the results of its combined operations and its cash flows for the
year then ended in conformity with generally accepted accounting
principles.
CONCANNON, GALLAGHER, MILLER AND COMPANY, P.C.
Allentown, PA
June 22, 1995
Member of AICPA Division for CPA Firms SEC and Private Companies
Practice Sections
-2-
VIR, INC. AND AFFILIATES
COMBINED BALANCE SHEET
DECEMBER 31, 1994
ASSETS
CURRENT ASSETS
Cash $ 8,582
Accounts receivable 1,168,773
Inventories 2,252,226
Prepaid expenses 1,293
Total Current Assets 3,430,874
PROPERTY, PLANT AND EQUIPMENT, AT COST,
LESS ACCUMULATED DEPRECIATION 187,382
OTHER ASSETS
Deposits 2,500
Total Assets $3,620,756
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $388,086
Other accrued liabilities 31,258
Accrued payroll taxes 3,900
Total Current Liabilities 423,244
NONCURRENT LIABILITIES
Due to officers 648,244
Total Liabilities 1,071,488
STOCKHOLDERS' EQUITY
Capital stock, no par value; 3,000,000 authorized;
2,837,500 issued and outstanding 3,000
Retained earnings 2,546,268
Total Stockholders' Equity 2,549,268
Total Liabilities and Stockholders' Equity $3,620,756
The accompanying notes are an integral part of the combined
financial statements.
-3-
VIR, INC. AND AFFILIATES
COMBINED STATEMENT OF INCOME AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1994
NET SALES $5,208,003
COST OF GOODS SOLD 2,920,157
GROSS PROFIT 2,287,846
OPERATING EXPENSES
Selling 334,091
General and administrative 317,684
Research and development 1,062,303
Total Operating Expenses 1,714,078
INCOME FROM OPERATIONS 573,768
OTHER INCOME (EXPENSE)
Interest expense (1,238)
Dividend income 11
Total Other Income (Expense) (1,227)
NET INCOME 572,541
RETAINED EARNINGS, JANUARY 1 1,973,727
RETAINED EARNINGS, DECEMBER 31 $2,546,268
The accompanying notes are an integral part of the combined
financial statements.
-4-
VIR, INC. AND AFFILIATES
COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $572,541
Adjustment to reconcile net income to net cash
used in operating activities
Depreciation 24,521
Changes in assets and liabilities
Accounts receivable (305,479)
Inventories (785,243)
Prepaid expenses (293)
Accounts payable 135,487
Accrued payroll taxes (283)
Other accrued expenses (3,904)
Net Cash Used in Operating Activities (362,653)
CASH FLOWS USED IN INVESTING ACTIVITIES
Cash paid for purchase of property, plant and equipment (28,651)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash payments on term debt (30,000)
Net proceeds from officer loan 353,689
Net Cash Provided by Financing Activities 323,689
NET DECREASE IN CASH (67,615)
CASH, JANUARY 1 76,197
CASH, DECEMBER 31 $ 8,582
CASH PAID DURING THE YEAR FOR INTEREST $ 1,238
The accompanying notes are an integral part of the combined
financial statements.
-5-
VIR INC. AND AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994
NOTE 1 Significant Accounting Policies
The combined financial statements include the
accounts of VIR, Inc., Eastern Research, Inc. and Linear
Switch Corporation. The Companies are separately
incorporated; however, they are under common ownership
and management. All significant intercompany accounts
and income and expense items have been eliminated from
the combined financial statements.
The Companies design and manufacture electronic
devices used in the data communications industry.
Credit sales are made to the Company's customers in
the ordinary course of business. Generally, these sales
are unsecured.
Inventories are valued at the lower of cost or
market. Cost is determined using the first-in, first-
out (FIFO) method for substantially all inventories.
Inventories consist primarily of raw materials.
Property, plant and equipment are stated at cost.
Depreciation is computed over estimated useful lives
using accelerated methods for both financial and income
tax reporting.
The Companies and their stockholders have elected "S"
status for federal and state income tax purposes. As a
result, the stockholders will include a proportionate
share of the income or loss on their personal income tax
returns.
NOTE 2 Property, Plant and Equipment
Leasehold improvements $206,493
Furniture and fixtures 159,495
Equipment 34,577
Vehicles 13,739
414,304
Less accumulated depreciation (226,922)
$187,382
NOTE 3 Employee Benefit And Profit Sharing Plan
The Company has established a 401(k) deferred
compensation and profit sharing plan for the benefit of
all eligible employees. The plan allows eligible
employees to defer a portion of their annual
compensation, pursuant to Section 401(k) of the Internal
Revenue Code. The Company will match 50% of the
employee's contribution up to a maximum deferral rate by
the employee of 6% of compensation. The Company may
provide additional contributions as determined annually.
Company contributions were $21,754 for the year ended
December 31, 1994.
-6-
VIR INC. AND AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1994
NOTE 4 Related Party Transactions
The Company leases facilities for VIR, Inc. from its
president and majority shareholder.
Lease payments were $110,500 for the year ended
December 31, 1994.
At December 31, 1994, the Company had $648,244 due to
its president and majority shareholder. No repayment
terms have been established.
NOTE 5 Operating Leases
The Company leases a facility for Eastern Research,
Inc. and Linear Switch Corporation under an operating
lease agreement effective November 1, 1994 through
October 31, 1997 with rent of $5,133 per month the first
two years of the lease and $6,067 the final year.
The lease agreement provides for one two-year renewal
option with the rental amount to be determined at the
time of renewal.
Future minimum lease payments are as follows:
1995 $ 61,600
1996 $ 63,467
1997 $ 60,667
NOTE 6 Note Payable to Bank
The Company has established a line of credit
arrangement with a bank which provides for borrowings up
to $200,000. Borrowings are collateralized by corporate
assets. There were no borrowings against the line at
December 31, 1994.
NOTE 7 Sales Concentration
During the year ended December 31, 1994, the
Companies recognized a substantial portion of its
revenues from the sale of products to one customer.
Total revenues from this customer were $629,212 (12.1%
of revenues).
NOTE 8 Export Sales
In 1994, net sales include export sales of
$1,469,387.
NOTE 9 Subsequent Events
The Companies have agreed in principle to sell their
assets to the Allen Organ Company, an unrelated entity.
The Companies expect to execute a definitive agreement
of sale and simultaneously complete the transaction in
July or August, 1995.
-7-
CONCANNON, GALLAGHER, MILLER & COMPANY, P.C.
Michael J. Gallagher, CPA CERTIFIED PUBLIC ACCOUNTANTS
Michael R. Miller, CPA
William C. Mason, CPA
Dale E. Grate, CPA
E. Barry Hetzel, CPA
Edward J. Quigley, Jr., CPA
John G. Estock, CPA
Howard D. Gneiding, CPA
Robert A. Oster, CPA
Robert E. Vitale, CPA
John F. Sharkey, Jr., CPA
Victor J. Meyer, CPA
David C. Gehringer, CPA
Gerard D. Stanus, CPA
Robert M. Caster, CPA
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY INFORMATION
Board of Directors
VIR, Inc. and Affiliates
Our audit was made for the purpose of forming an opinion on
the basic financial statements taken as a whole of VIR, Inc. and
Affiliates for the year ended December 31, 1994 which are
presented in the preceding section of this report. The
supplementary information presented hereinafter is presented for
purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected
to the audit procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated, in
all material respects, in relation to the basic statements taken
as a whole.
CONCANNON, GALLAGHER, MILLER AND COMPANY, P.C.
Allentown, PA
June 22, 1995
Member of AICPA Division for CPA Firms SEC and Private Companies
Practice Sections
-8-
VIR, INC. AND AFFILIATES
COMBINING BALANCE SHEET
DECEMBER 31, 1994
ELIMINA- COMBINED
VIR ERI LSC TIONS TOTAL
ASSETS
CURRENT ASSETS
Cash $7,267 $1,080 $235 $8,582
Accounts receivable 868,036 300,737 1,168,773
Inventories 2,252,226 2,252,226
Prepaid expenses 1,293 1,293
Total Current Assets 3,127,529 301,817 1,528 3,430,874
PROPERTY, PLANT AND EQUIPMENT,
AT COST LESS ACCUMULATED
DEPRECIATION 164,398 22,984 187,382
OTHER ASSETS
Due from affiliated companies 1,261,894 (1,261,894)
Deposits 2,500 2,500
Total Other Assets 1,264,394 (1,261,894) 2,500
Total Assets $4,556,321 $324,801 $1,528$(1,261,894) $3,620,756
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $388,086 $388,086
Other accrued liabilities 31,258 31,258
Accrued payroll taxes 3,900 3,900
Total Current Liabilities 423,244 423,244
NONCURRENT LIABILITIES
Due to affiliated companies 700,883 561,011 (1,261,894)
Due to officers 640,464 7,780 648,244
Total Noncurrent Liabilities 640,464 708,663 561,011 (1,261,894) 648,244
Total Liabilities 1,063,708 708,663 561,011 (1,261,894) 1,071,488
STOCKHOLDERS' EQUITY
Capital stock; no par value;
3,000,000 shares authorized;
2,837,500 shares issued and
outstanding 1,000 1,000 1,000 3,000
Retained earnings (deficit) 3,491,613 (384,862)(560,483) 2,546,268
Total Stockholders' Equity 3,492,613 (383,862)(559,483) 2,549,268
Total Liabilities and
Stockholders' Equity $4,556,321 $324,801 $1,528(1,261,894) $3,620,756
-9-
VIR, INC. AND AFFILIATES
COMBINING STATEMENT OF INCOME AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1994
ELIMINA- COMBINED
VIR ERI LSC TIONS TOTAL
NET SALES $3,774,724 $1,423,029 $10,250 $5,208,003
COST OF GOODS SOLD 2,445,011 474,685 461 2,920,157
GROSS PROFIT 1,329,713 948,344 9,789 2,287,846
OPERATING EXPENSES
Selling 178,114 155,664 313 334,091
General and administrative 269,200 45,136 3,348 317,684
Research and Development 656,909 405,394 1,062,303
Total Operating Expenses 447,314 857,709 409,055 1,714,078
INCOME (LOSS)
FROM OPERATIONS 882,399 90,635 (399,266) 573,768
OTHER INCOME (EXPENSE)
Interest expense (1,238) (1,238)
Dividend income 11 11
Total Other Inc. (Exp.) (1,227) (1,227)
NET INCOME (LOSS) 881,172 90,635 (399,266) 572,541
RETAINED EARNINGS
(DEFICIT), JANUARY 1 2,610,441 (475,497) (161,217) 1,973,727
RETAINED EARNINGS
(DEFICIT), DECEMBER 31 $3,491,613 $(384,862)$(560,483) $2,546,268
-10-
VIR, INC. AND AFFILIATES
COMBINING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1994
ELIMINA- COMBINED
VIR ERI LSC TIONS TOTAL
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss) $881,172 $90,635 $(399,266) $572,541
Adjustment to reconcile net
income (loss) to net cash
(used in) provided by
operating activities
Depreciation 10,108 14,413 24,521
Changes in assets and
liabilities
Accounts receivable (4,742) (300,737) (305,479)
Inventories (785,243) (785,243)
Prepaid expenses (293) (293)
Due from affiliated
companies (566,675) 566,675
Accounts payable 135,487 135,487
Accrued payroll taxes (153) (130) (283)
Other accrued liabilities (3,904) (3,904)
Due to affiliated
companies 166,881 399,794 (566,675)
Net Cash (Used In)
Provided By Operating
Activities (333,950) (28,938) 235 (362,653)
CASH FLOWS USED IN
INVESTING ACTIVITIES
Cash paid for purchase of
property, plant and
equipment (14,717) (13,934) (28,651)
CASH FLOWS FROM
FINANCING ACTIVITIES
Cash payments on term debt (30,000) (30,000)
Net proceeds from
officer loan 322,697 30,992 353,689
Net Cash provided By
Financing Activities 292,697 30,992 323,689
NET (DEC.) INC. IN CASH (55,970) (11,880) 235 (67,615)
CASH, JANUARY 1 63,237 12,960 0 76,197
CASH, DECEMBER 31 $7,267 $1,080 $235 $8,582
CASH PAID DURING THE
YEAR FOR INTEREST $1,238 $0 $0 $0 $1,238
-11-
VIR, INC. AND AFFILIATES
COMBINING BALANCE SHEETS
JUNE 30, 1995
(Unaudited)
ELIMINA- COMBINED
VIR ERI LSC TIONS TOTAL
ASSETS
CURRENT ASSETS
Cash $95,890 $14,740 $15 $110,645
Accounts receivable 1,054,748 635,412 1,690,160
Inventories 2,526,834 2,526,834
Prepaid expenses 1,293 1,293
Total Current Assets 3,677,472 650,152 1,308 4,328,932
PROPERTY, PLANT AND EQUIPMENT 371,445 47,158 418,603
Less accumulated
depreciation (212,047) (25,875) (237,922)
Total Property, Plant and
Equipment 159,398 21,283 180,681
OTHER ASSETS
Due from affiliated
companies 1,509,494 (1,509,494)
Deposits 2,500 2,500
Total Other Assets 1,511,994 (1,509,494) 2,500
Total Assets $5,348,864 $671,435 $1,308 $(1,509,494) $4,512,113
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES
Note payable - bank $50,000 $50,000
Accounts payable 663,248 663,248
Accrued expenses 59,672 59,672
Total Current Liabilities 772,920 772,920
NONCURRENT LIABILITIES
Due to affiliated companies 731,247 778,247 (1,509,494)
Due to officer 537,751 5,280 543,031
Total Noncurrent
Liabilities 537,751 736,527 778,247 (1,509,494) 543,031
Total Liabilities 1,310,671 736,527 778,247 (1,509,494) 1,315,951
STOCKHOLDERS' EQUITY
Common stock 1,000 1,000 1,000 3,000
Retained earnings
Balance, beginning 3,491,613 (384,862)(560,483) 2,546,268
Net income 545,580 318,770 (217,456) 646,894
Balance, end 4,037,193 (66,092)(777,939) 3,193,162
Total Stockholders'
Equity 4,038,193 (65,092)(776,939) 3,196,162
Total Liabilities and
Stockholders' Equity $5,348,864 $671,435 $1,308 $(1,509,494) $4,512,113
VIR, INC. AND AFFILIATES
COMBINING STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(Unaudited)
ELIMINA- COMBINED
VIR ERI LSC TIONS TOTAL
Net Sales $2,545,938 $1,731,146 $69,958 $4,347,042
Cost of sales 1,767,196 640,589 37,376 2,445,161
Gross Margin 778,742 1,090,557 32,582 1,901,881
Operating expenses
Selling 107,601 118,426 2,333 228,360
General and administrative 125,572 133,202 9,970 268,744
Research and Development 520,159 237,735 757,894
Total Costs and Expenses 233,173 771,787 250,038 1,254,998
Income from operations 545,569 318,770 (217,456) 646,883
Interest and other income 11 11
Net Income $545,580 $318,770 $(217,456) $646,894
VIR, INC. AND AFFILIATES
COMBINING STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(Unaudited)
ELIMINA- COMBINED
VIR ERI LSC TIONS TOTAL
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss) $545,580 $318,770 $(217,456) $646,894
Adjustment to reconcile net
income (loss) to net cash
provided by operating
activities
Depreciation 5,000 6,000 11,000
Changes in assets and
liabilities
Accounts receivable (186,712) (334,675) (521,387)
Inventories (274,608) (274,608)
Prepaid expenses
Due from affiliated
companies (247,600) 247,600
Accounts payable 275,162 275,162
Due to affiliated
companies 30,364 217,236 (247,600)
Accrued expenses 24,514 24,514
Net Cash Provided By
Operating Activities 141,336 20,459 (220) 161,575
CASH FLOWS FROM
INVESTING ACTIVITIES
Cash paid for purchase of
property, plant and
equipment (4,299) (4,299)
CASH FLOWS FROM
FINANCING ACTIVITIES
Net cash received under
revolving line of credit 50,000 50,000
Net proceeds from
officer loan (102,713) (2,500) (105,213)
Net Cash Provided by
(Used in) Financing
Activities (52,713) (2,500) (55,213)
NET INC. (DEC.) IN CASH 88,623 13,660 (220) 102,063
CASH, BEGINNING 7,267 1,080 235 8,582
CASH, ENDING $95,890 $14,740 $15 $110,645
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following pro forma summary financial information has
been prepared giving effect to the acquisition of VIR, Inc.
and Affiliates as if the transaction had taken place at June
30, 1995 for the pro forma condensed consolidated balance
sheet, January 1, 1994 for the pro forma condensed
consolidated income statement for the year ended December
31, 1994 and January 1, 1995 for the pro forma condensed
consolidated income statement for the six months ended June
30, 1995.
The acquisitions have been accounted for as purchases.
Assets and liabilities have been recorded at their
approximate fair market values. Final allocations of
purchase price will be made in the near future and any
adjustments are not expected to be material to the pro forma
financial information taken as a whole.
The pro forma financial information is not necessarily
indicative of the results of operations or the financial
position which would have been attained had the acquisitions
been consummated on any of the foregoing dates or which may
be attained in the future. The pro forma financial
information should be read in conjunction with the
historical financial statements of Allen Organ Company and
VIR, Inc. and Affiliates.
ALLEN ORGAN COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995
(Unaudited)
PRO PRO
ALLEN FORMA FORMA
ELIMINA- COMBINED ORGAN ADJUST- CONSOL.
VIR ERI LSC TIONS TOTAL COMPANY MENTS TOTALS
ASSETS
CURRENT ASSETS
Cash $95,890 $14,740 $15 $110,645 $1,449,357 $1,560,002
Investments including
accrued interest 37,077,193 (3,674,633)(A) 33,402,560
Accounts receivable 1,054,748 635,412 1,690,160 3,054,323 4,744,483
Inventories 2,526,834 2,526,834 9,549,169 166,767 (B) 12,242,770
Prepaid income taxes
Prepaid expenses 1,293 1,293 281,224 (100,000)(A) 182,517
Deferred income tax benefits
Total Current Assets 3,677,472 650,152 1,308 4,328,932 51,411,266 (3,607,866) 52,132,332
INVESTMENT IN VIR, INC. AND AFFILIATES 8,367,234 (A)
(8,367,234)(B)
PROPERTY, PLANT AND EQUIPMENT, NET 159,398 21,283 180,681 7,067,499 63,779 (B) 7,311,959
OTHER ASSETS
Inventory held for future service 1,138,394 1,138,394
Intangible pension asset 443,273 443,273
Due from affiliated companies 1,509,494 (1,509,494)
Intangible Assets 4,397,495 (B) 4,397,495
Deferred income tax benefits 43,116 43,116
Note Receivable 81,855 81,855
Cash value of life insurance 408,138 408,138
Other assets 2,500 2,500 2,500
Total Other Assets 1,511,994 (1,509,494) 2,500 2,114,776 4,397,495 6,514,771
Total Assets $5,348,864 $671,435 $ 1,308 $(1,509,494) $4,512,113 $60,593,541 $ 853,408 $65,959,062
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES
Note Payable - Bank $50,000 $50,000 $50,000
Current Portion of Long Term Debt 968,800 (A) 968,800
Accounts Payable 663,248 663,248 257,271 300,000 (A) 1,220,519
Customer Deposits 520,789 520,789
Accrued Taxes on Income 144,934 144,934
Accrued Expenses 59,672 59,672 572,157 631,829
Total Current Liabilities 772,920 772,920 1,495,151 1,268,800 3,536,871
NONCURRENT LIABILITIES
Deferred Liabilities 121,288 121,288
Due to affiliated companies 731,247 778,247 (1,509,494)
Accrued Pension Cost 1,439,734 1,439,734
Long Term Debt, net of current portion 2,009,801 (A) 2,009,801
Due to officer 537,751 5,280 543,031 (543,031)(B)
Total Noncurrent Liabilities 537,751 736,527 778,247 (1,509,494) 543,031 1,561,022 1,466,770 3,570,823
Total Liabilities 1,310,671 736,527 778,247 (1,509,494) 1,315,951 3,056,173 2,735,570 7,107,694
STOCKHOLDERS' EQUITY
Common Stock 1,000 1,000 1,000 3,000 1,537,993 (3,000)(B) 1,537,993
Capital in Excess of Par Value 12,610,377 148,232 (A) 12,758,609
Retained Earnings 4,037,193 (66,092)(777,939) 3,193,162 48,172,441 (3,193,162)(B) 48,172,441
Minority Interest 314,000 (A) 314,000
Pension Liability Adjustment (489,823) (489,823)
Unrealized Gain on Investments 67,112 67,112
Treasury Stock (4,360,732) 851,768 (B) (3,508,964)
Total Stockholders' Equity 4,038,193 (65,092)(776,939) 3,196,162 57,537,368 (1,882,162) 58,851,368
Total Liabilities and
Stockholders' Equity $5,348,864 $671,435 $ 1,308 $(1,509,494) $4,512,113 $60,593,541 $853,408 $65,959,062
ALLEN ORGAN COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(Unaudited)
PRO PRO
ALLEN FORMA FORMA
ELIMINA- COMBINED ORGAN ADJUST- CONSOL.
VIR ERI LSC TIONS TOTAL COMPANY MENTS TOTALS
NET SALES $3,774,724 $1,423,029 $10,250 $5,208,003 $28,842,789 $34,050,792
COST OF SALES 2,445,011 474,685 461 2,920,157 19,535,326 39,000 (C3) 22,494,483
GROSS MARGIN 1,329,713 948,344 9,789 2,287,846 9,307,463 (39,000) 11,556,309
OPERATING EXPENSES
Selling 178,114 155,664 313 334,091 2,008,884 2,342,975
General and administrative 269,200 45,136 3,348 317,684 2,049,174 146,000 (C4) 2,512,858
Research and Development 656,909 405,394 1,062,303 1,062,303
Total Costs and Expenses 447,314 857,709 409,055 1,714,078 4,058,058 146,000 5,918,136
INCOME FROM OPERATIONS 882,399 90,635 (399,266) 573,768 5,249,405 (185,000) 5,638,173
OTHER INCOME (EXPENSE)
Interest and other inc. (exp.) (1,227) (1,227) 1,701,298 (200,000)(C1) 1,500,071
Interest expense (103,000)(C2) (103,000)
Minority interests in net loss
of consolidated subsidiaries 39,000 (C6) 39,000
Total Other Income (Expense) (1,227) (1,227) 1,701,298 (264,000) 1,436,071
INCOME BEFORE TAXES ON INCOME 881,172 90,635 (399,266) 572,541 6,950,703 (449,000) 7,074,244
PROVISION FOR TAXES ON INCOME 2,501,000 85,000 (C5) 2,586,000
NET INCOME $881,172 $90,635$(399,266) $572,541 $4,449,703 $(534,000) $4,488,244
EARNINGS PER SHARE $3.25 $3.22
SHARES USED IN PER SHARE CALCULATION 1,370,486 24,390 (D) 1,394,876
ALLEN ORGAN COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(Unaudited)
PRO PRO
ALLEN FORMA FORMA
ELIMINA- COMBINED ORGAN ADJUST- CONSOL.
VIR ERI LSC TIONS TOTAL COMPANY MENTS TOTALS
NET SALES $2,545,938 $1,731,146 $69,958 $4,347,042 $13,983,100 $18,330,142
COST OF SALES 1,767,196 640,589 37,376 2,445,161 9,746,038 16,000 (C3) 12,207,199
GROSS MARGIN 778,742 1,090,557 32,582 1,901,881 4,237,062 (16,000) 6,122,943
OPERATING EXPENSES
Selling 107,601 118,426 2,333 228,360 1,035,656 1,264,016
General and administrative 125,572 133,202 9,970 268,744 1,064,392 73,000 (C4) 1,406,136
Research and Development 520,159 237,735 757,894 757,894
Total Costs and Expenses 233,173 771,787 250,038 1,254,998 2,100,048 73,000 3,428,046
INCOME FROM OPERATIONS 545,569 318,770 (217,456) 646,883 2,137,014 (89,000) 2,694,897
OTHER INCOME (EXPENSE)
Interest and other income 11 11 1,015,874 (100,000)(C1) 915,885
Interest expense (42,000)(C2) (42,000)
Minority interest in net loss
of consolidated subsidiaries 6,000 (C6) 6,000
Total Other Income (Expense) 11 11 1,015,874 (136,000) 879,885
INCOME BEFORE TAXES ON INCOME 545,580 318,770 (217,456) 646,894 3,152,888 (225,000) 3,574,782
PROVISION FOR TAXES ON INCOME 1,150,000 193,000 (C5) 1,343,000
NET INCOME $545,580 $318,770 $(217,456) $646,894 $2,002,888$(418,000) $2,231,782
EARNINGS PER SHARE $1.47 $1.61
SHARES USED IN PER SHARE CALCULATION 1,363,895 24,390 (D) 1,388,285
ALLEN ORGAN COMPANY AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(A) The following pro forma adjustments reflect Allen Organ Company and
Subsidiaries purchase of the assets of VIR, Inc., and Affiliates. Pro
forma adjustments include estimated direct costs of acquisitions
($400,000) and the value allocated to minority interests.
Cash/Investments $ 3,674,633
Current Portion - LT Debt 968,800
Long Term Debt, net of current portion 2,009,801
Prepaid expenses 100,000
Accounts payable 300,000
Treasury stock 851,768
Paid in capital from treasury stock 148,232
Minority interest 314,000
Total $ 8,367,234
(B) The following pro forma adjustments are made to reflect estimated fair
value adjustments, net of applicable future tax effects at June 30, 1995,
and to eliminate Allen Organ Company and Subsidiaries investment in
VIR, Inc. and Affiliates.
VIR, Inc. and Affiliates net assets reported
Common Stock $ 3,000
Retained Earnings 3,193,162
Due to Officer 543,031
Fair Value adjustments
Increase carrying amount of inventories 166,767
Increase carrying amount of plant equipment 63,779
Increase in other assets
Goodwill 3,997,495
Deferred organizational expenses 400,000
Total $ 8,367,234
ALLEN ORGAN COMPANY AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(C) The following pro forma adjustments are incorporated in the pro forma
condensed consolidated statements of income.
Six Months
Year Ended Ended
Increase (Decrease) Income December 31, 1994 June 30, 1995
1. Decrease in interest income
resulting from the reduction of
investments. (200,000) (100,000)
2. Increase in interest expense on
long term debt incurred in
conjunction with acquisition at
5.95% payable semi-annually. (103,000) (42,000)
3. Increase in depreciation resulting
from adjustment to carrying amount
of property and equipment. (39,000) (16,000)
4. Increase in amortization expense
resulting from adjustments to carrying
amount of intangible assets. (146,000) (73,000)
5. Increase in income taxes
associated with treatment of VIR and
ERI as "C" corporations rather than
"S" corporations, less effects of
items 1-4 above. (85,000) (193,000)
6. Record minority interest in net loss
of consolidated subsidiaries. 39,000 6,000
(D) In connection with the acquisition of VIR, Inc. and Affiliates the
Allen Organ Company issued 24,390 shares of its Class B non-voting
common stock.
ASSETS PURCHASE AGREEMENT
Among
VIR ACQUISITION, INC., ERI ACQUISITION, INC.,
AND LSC ACQUISITION, INC.
and
VIR, INC., EASTERN RESEARCH, INC.,
LINEAR SWITCH CORPORATION, ALEX RABEY and LUBA RABEY
DATED: AUGUST 1, 1995
TABLE OF CONTENTS
Page No.
RECITALS...............................................................1
1. DEFINITIONS........................................................2
2. PURCHASE AND SALE OF ASSETS; CLOSING...............................8
2.1 Acquired Assets..............................................8
2.2 Assumption of Liabilities....................................8
2.3 Purchase Price..............................................10
2.4 Inventory...................................................12
2.5 Closing Deliveries..........................................14
2.6 Closing.....................................................15
2.7 Allocation of the Purchase Price............................15
2.8 ERI Employees...............................................15
3. REPRESENTATIONS AND WARRANTIES OF SELLERS, ERI AND LSC............16
3.1 Organization and Good Standing..............................16
3.2 Authority; No Conflict......................................16
3.3 Financial Statements........................................17
3.4 Books and Records...........................................18
3.5 Title To Assets; Encumbrances...............................18
3.6 Condition and Sufficiency of Assets.........................19
3.7 Inventory; Products Manufactured............................19
3.8 No Undisclosed Liabilities..................................20
3.9 Taxes.......................................................20
3.10 No Adverse Change...........................................21
3.11 Employee Benefits...........................................21
3.12 Compliance With Legal Requirements; Governmental
Authorizations...........................................21
3.13 Legal Proceedings; Orders...................................23
3.14 Absence of Certain Changes and Events.......................23
3.15 Contracts; No Defaults......................................24
3.16 Insurance...................................................26
3.17 Environmental Matters.......................................27
3.18 Employees...................................................29
3.19 Labor Disputes; Compliance..................................29
3.20 Intellectual Property.......................................30
3.21 Disclosure..................................................32
3.22 Relationships With Related Persons..........................32
3.23 EBIT........................................................33
3.24 Brokers or Finders..........................................33
3.25 Merger......................................................33
4. REPRESENTATIONS AND WARRANTIES OF BUYERS..........................33
4.1 Organization and Good Standing..............................33
4.2 Authority; No Conflict......................................33
4.3 Certain Proceedings.........................................34
4.4 Securities Filings..........................................34
4.5 Legal Requirements..........................................34
4.6 Brokers or Finders..........................................34
5. COVENANTS OF SELLERS PRIOR TO AND FOLLOWING CLOSING DATE..........35
5.1 Access and Investigation....................................35
5.2 Operation of the Business of the Companies..................35
5.3 Negative Covenant...........................................35
5.4 Required Approvals..........................................35
5.5 Notification................................................36
5.6 No Negotiation..............................................36
5.7 Best Efforts................................................36
5.8 Labor Matters...............................................37
5.9 Merger......................................................37
6. COVENANTS OF BUYERS PRIOR TO CLOSING DATE.........................38
6.1 Approvals of Governmental Bodies............................38
6.2 Best Efforts................................................38
7. CONDITIONS PRECEDENT TO BUYERS' OBLIGATION TO CLOSE...............38
7.1 Accuracy of Representations.................................38
7.2 Sellers' Performance........................................38
7.3 Consents....................................................39
7.4 Additional Documents........................................39
7.5 No Proceedings..............................................39
7.6 No Prohibition..............................................39
7.7 Environmental Review........................................39
7.8 Earnings of VIR.............................................40
7.9 Buyers' Due Diligence.......................................40
7.10 Leases......................................................41
7.11 Merger......................................................41
7.12 Tax Escrow Account..........................................41
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE..............41
8.1 Accuracy of Representations.................................41
8.2 Buyers' Performance.........................................41
8.3 Consents....................................................42
8.4 Additional Documents........................................42
8.5 No Proceedings..............................................42
9. TERMINATION.......................................................42
9.1 Termination Events..........................................42
9.2 Effect of Termination.......................................43
10. INDEMNIFICATION; REMEDIES.........................................43
10.1 Survival....................................................43
10.2 Indemnification and Reimbursement by Sellers................44
10.3 Indemnification and Reimbursement by Buyers.................45
10.4 Procedure for Indemnification - Third Party Claims..........45
10.5 Limitation on Indemnification...............................46
11. GENERAL PROVISIONS................................................47
11.1 Expenses....................................................47
11.2 Public Announcements........................................47
11.3 Confidentiality.............................................47
11.4 Notices.....................................................47
11.5 Jurisdiction; Service of Process............................48
11.6 Further Assurances..........................................48
11.7 Waiver......................................................49
11.8 Entire Agreement and Modification...........................49
11.9 Schedules...................................................49
11.10 Assignments, Successors, and No Third-Party Rights..........49
11.11 Severability................................................50
11.12 Section Headings, Construction..............................50
11.13 Time of Essence.............................................50
11.14 Governing Law...............................................50
11.15 Counterparts................................................50
11.16 Use of Name.................................................50
11.17 Records Retention...........................................50
EXHIBITS
Exhibit A - ACQUIRED ASSETS
Exhibit A-1 - ASSIGNED CONTRACTS
Exhibit B-1 - VIR ACQ. ASSUMED LIABILITIES
Exhibit B-2 - ERI ACQ. ASSUMED LIABILITIES
Exhibit B-3 - LSC ACQ. ASSUMED LIABILITIES
Exhibit B-4 - PRODUCTS IN DEVELOPMENT
Exhibit C - DEBENTURES
Exhibit D - EXCLUDED ASSETS
Exhibit E - SECURITIES RESTRICTION AGREEMENT
Exhibit F - EMPLOYMENT AGREEMENT
Exhibit G - NON-COMPETITION AGREEMENTS
Exhibit H - SELLERS' CERTIFICATE
Exhibit I - ASSUMPTION OF LIABILITIES
Exhibit J - BUYERS' CERTIFICATE
Exhibit K - ALLOCATION OF PURCHASE PRICE
Exhibit L - OPINION OF MESIROV, GELMAN
Exhibit M - LEASE
Exhibit N - OPINION OF STEVENS & LEE
Exhibit O - GUARANTY
SCHEDULES
Schedule 2.4 (A) - INVENTORY (6/17/95)
Schedule 2.4 (B) - CLOSING INVENTORY AND REMAINING INVENTORY
Schedule 3.1 - SHAREHOLDERS, OFFICERS AND DIRECTORS
Schedule 3.2 - CONFLICTS; CONSENTS
Schedule 3.3 - FINANCIAL STATEMENTS
Schedule 3.5 - FACILITIES
Schedule 3.6 - CONDITION OF ASSETS
Schedule 3.7 - PRODUCT GUARANTEES AND WARRANTIES
Schedule 3.8 - UNDISCLOSED LIABILITIES
Schedule 3.9 - TAX ASSESSMENTS
Schedule 3.11 - EMPLOYEE BENEFIT PLANS
Schedule 3.12 - COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS
Schedule 3.13 - LEGAL PROCEEDINGS
Schedule 3.14 - CHANGES SINCE DECEMBER 31, 1994
Schedule 3.15 - CONTRACTS
Schedule 3.16 - INSURANCE
Schedule 3.17 - ENVIRONMENTAL MATTERS
Schedule 3.18 - EMPLOYEES
Schedule 3.19 - LABOR DISPUTES; COMPLIANCE
Schedule 3.20 - INTELLECTUAL PROPERTY
ASSETS PURCHASE AGREEMENT
THIS ASSETS PURCHASE AGREEMENT (the "Agreement") is made August 1, 1995
by and among VIR ACQUISITION, INC., ("VIR ACQ."), ERI ACQUISITION, INC.
("ERI ACQ."), LSC ACQUISITION, INC. ("LSC ACQ.") (VIR ACQ., ERI ACQ. and
LSC ACQ. are individually referred to herein as "Buyer" and collectively as
"Buyers"), ALEX RABEY (the "Shareholder"), LUBA RABEY ("L. Rabey"), VIR, INC.
("VIR"), EASTERN RESEARCH, INC. ("ERI") and LINEAR SWITCH CORPORATION ("LSC").
RECITALS
VIR is engaged in the business (the "VIR Business") of
designing, manufacturing, marketing and selling data
communications hardware and software. The Shareholder is the
majority shareholder of VIR.
ERI and LSC, which are affiliates of VIR, intend to
merge with and into VIR, with VIR being the surviving
corporation. ERI is engaged in the business of designing,
manufacturing, marketing and selling data communications hardware
and software (the "ERI Business"), and LSC is engaged in the
business of designing, manufacturing, marketing and selling data
communications equipment, including a proprietary matrix switch
(the "LSC Business").
VIR desires to effectuate the merger described in
Recital B above and then to sell, and Buyers desire to purchase,
substantially all of the assets of VIR (including the assets
owned by ERI and LSC prior to the merger described in Recital B
above) for the consideration and on the terms set forth in this
Agreement.
The parties intend to sign this Agreement immediately
prior to consummation of the merger described in Recital B above,
and then to consummate the transactions described herein
immediately following consummation of the merger, all on the same
date.
Buyers are not assuming any liabilities or obligations
of or relating to (i) VIR, ERI or LSC, or (ii) the VIR Business,
the ERI Business, or the LSC Business except as expressly
provided in this Agreement, and the parties do not intend in any
way to effectuate a merger or consolidation of any Buyer and VIR.
AGREEMENT
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties,
intending to be legally bound, agree as follows:
DEFINITIONS
For purposes of this Agreement and the Exhibits and
Schedules attached hereto, the following terms shall have the
meanings specified or referred to below in this Section 1:
"Acquired Assets" - As defined in Exhibit A.
"Assessment/Audit" - As defined in Section 7.7.
"Assigned Contract" - Any Contract which is designated
as an "Assigned Contract" in Exhibit A and assigned to a Buyer by
VIR.
"Assumed Liabilities" - As defined in Exhibits B-1
through B-3.
"Assumption of Liabilities" - As defined in Section
2.5(b)(iii).
"Breach" - A "Breach" of a representation, warranty,
covenant, obligation or other provision of this Agreement or any
Related Agreement will be deemed to have occurred if there is or
has been (a) any inaccuracy in or breach of, or any failure to
perform or comply with, such representation, warranty, covenant,
obligation or other provision, or (b) any claim or other
occurrence or circumstance that is or was inconsistent with such
representation, warranty, covenant, obligation or other
provision, and the term "Breach" means any such inaccuracy,
failure, claim, occurrence, or circumstance.
"Business" - The VIR Business, ERI Business and LSC
Business, as defined in the Recitals to this Agreement.
"Buyer" and "Buyers" - As defined in the first
paragraph of this Agreement.
"Buyer Indemnified Persons" - As defined in
Section 10.2.
"Closing" - As defined in Section 2.6.
"Closing Date" - The date and time as of which the
Closing actually takes place.
"Closing Financial Statements" - As defined in
Section 5.9.
"Closing Inventory" - As defined in Section 2.4.
"Code" - The Internal Revenue Code of 1986 or any
successor law, and any regulations issued by the IRS pursuant to
the Internal Revenue Code of 1986 or any successor law.
"Company" or "Companies" - Individually, any one of,
and collectively, all of VIR, ERI and LSC.
"Consent" - Any approval, consent, ratification,
waiver, or other authorization (including any Governmental
Authorization).
"Contemplated Transactions" - All of the transactions
contemplated by this Agreement and each of the Related
Agreements.
"Contract" - Any agreement, contract, obligation,
promise, or undertaking (whether written or oral and whether
express or implied) that is legally binding.
"Corrective Actions" - As defined in Section 7.7.
"Damages" - As defined in Section 10.2.
"Debentures" - The debentures to be issued to VIR
pursuant to Section 2.3(b), the form of which is attached hereto
as Exhibit C.
"Employee Benefit Plans" - All "Plans" (as defined in
ERISA Section 3(3)) of which any Company or any affiliate of any
Company is or was a "Plan Sponsor" or to which any Company or an
affiliate of any Company otherwise contributes or has contributed
or in which any Company or an affiliate of any Company otherwise
participates or has participated.
"Encumbrance" - Any charge, claim, community property
interest, condition, equitable interest, lien, option, pledge,
security interest, right of first refusal or restriction of any
kind.
"Environmental Consultant" - As defined in Section 7.7.
"Environmental, Health and Safety Liabilities" - Any
Damages, Liabilities, or other responsibility arising from or
under any Environmental Law or Occupational Safety and Health
Law.
"Environmental Law" - Legal Requirements designed to
minimize, prevent, punish, or remedy the consequences of actions
that damage or threaten the environment (including soil, land
surface or subsurface strata, surface waters, ground waters,
drinking water supply, stream sediments, ambient air, plant and
animal life, and any other environmental medium or natural
resource) or public health and safety.
"Environmental Report" - The report described in
Section 7.7.
"ERI" - Eastern Research, Inc., a Pennsylvania
corporation.
"ERISA" - The Employee Retirement Income Security Act
of 1974 or any successor law, and regulations and rules issued
pursuant thereto or to any successor law.
"Excluded Assets" - As defined in Exhibit D.
"Excluded Liabilities" - As defined in Section 2.2.
"Facilities" - Any real property, leaseholds, or other
interests currently or formerly owned or operated by any Company
(or any predecessor Person) and any buildings, plants, structures
or equipment currently or formerly owned, leased or operated by
any Company (or any predecessor Person) or which otherwise
comprise a part of the Business.
"Family" - An individual Person's spouse, parents,
siblings, children, and spouses of siblings and children.
"Financial Statements" - The 1994 Financial Statements
and the 1995 Financial Statements.
"GAAP" - Generally accepted accounting principles as in
effect in the United States as of the date hereof; provided,
however, that, if it is permissible to use more than one
principle with respect to a particular accounting matter and one
of such permissible principles is employed by VIR, "GAAP" shall
refer to the principle employed by VIR.
"Governmental Authorization" - Any Consent, license or
permit issued, granted or given by or under the authority of any
Governmental Body or pursuant to any Legal Requirement.
"Governmental Body" - Any federal, state, local,
municipal, foreign or other governmental or quasi-governmental
entity or authority of any nature.
"Guarantor" - Allen Organ Company, a Pennsylvania
corporation.
"Guaranty" - As defined in Section 8.4(d).
"Hazardous Materials" - Any substance that is at any
time defined or listed in, or otherwise classified pursuant to
any applicable Environmental Law or Legal Requirement or Order,
as a "hazardous substance," "hazardous material," "hazardous air
pollutant," "extremely hazardous substance," or "hazardous
waste," "toxic substance," "toxic pollutant," or any other
formulation intended to define, list or classify substances by
reason of their potentially deleterious properties such as
ignitability, flammability, corrosivity, reactivity,
combustibility, dispersability, volatility, carcinogenicity,
toxicity, reproductive toxicity, or "EP toxicity," including
without limitation, asbestos, polychlorinated biphenyls and also
including petroleum products, by-products and wastes or by-
products associated with the extraction, refining or use of
petroleum or petroleum products, whether or not listed or
classified in such laws or regulations.
"Intellectual Property Assets" - As defined in
Section 3.20.
"Knowledge" - An individual will be deemed to have
"Knowledge" of a particular fact or matter if:
(a) such individual is actually aware of such
fact or other matter; or
(b) a prudent individual could be expected to
discover or otherwise become aware of such fact or other
matter in the course of conducting a reasonably
comprehensive investigation concerning the existence of such
fact or other matter.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any
individual who is serving, or who has at any time within the past
three (3) years served, as a director or officer of such Person
(or in any similar capacity) has, or at any time had, Knowledge
of such fact or other matter.
"Lease" - As defined in Section 7.12.
"Legal Requirement" - Any federal, state, local,
municipal, foreign, international, multi-national, or other law,
ordinance, principle of common law, regulation, statute or
treaty.
"Liabilities" - Any debts, obligations, duties or
liabilities of any nature (including any unknown, undisclosed,
unmatured, unaccrued, unasserted, contingent, conditional,
implied, or secondary liability), regardless of whether such
debts, obligations, duties or liabilities would be required to be
disclosed on a balance sheet prepared in accordance with GAAP.
"LSC" - Linear Switch Corp., a Pennsylvania
corporation.
"Merger" - The merger of ERI and LSC with and into VIR,
pursuant to which VIR shall be the surviving corporation and the
successor to all of ERI's and LSC's assets, properties,
obligations and liabilities.
"1995 Balance Sheets" - As defined in Section 3.3.
"1994 Financial Statements" - As defined in
Section 3.3.
"1995 Financial Statements" - As defined in
Section 3.3.
"Occupational Safety and Health Law" - Any Legal
Requirement designed to provide safe and healthful working
conditions, and to reduce occupational safety and health hazards,
and any program, whether governmental or private, designed to
provide safe and healthful working conditions.
"Order" - Any award, decision, injunction, judgment,
order, ruling, subpoena, or verdict entered, issued, made, or
rendered by any court, administrative agency, or other
Governmental Body or by any arbitrator.
"Ordinary Course of Business" - An action taken by a
Person will be deemed to have been taken in the "Ordinary Course
of Business" only if:
(a) such action is consistent with the past
practices of such Person and is taken in the ordinary course
of the normal day-to-day operations of such Person;
(b) such action is not required to be authorized
by the board of directors of such Person (or by any person
or group of persons exercising similar authority), and does
not require any other separate or special authorization; and
(c) such action is similar in nature and
magnitude to actions customarily taken, without any separate
or special authorization, in the ordinary course of the day-
to-day operations of other Persons that are in the same line
of business as such Person.
"Person" - Any individual, corporation, general or
limited partnership, limited liability company, joint venture,
estate, trust, association, organization, or other entity or
Governmental Body.
"Proceeding" - Any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal,
administrative, investigative or informal) commenced, brought,
conducted, or heard by or before, or otherwise involving, any
Governmental Body or arbitrator.
"Related Agreements" - All agreements, documents,
certificates and instruments to be delivered pursuant to or in
connection with this Agreement or the Contemplated Transactions,
including without limitation the Shareholder Employment
Agreement, the Seller Non-Competition Agreements, the Guaranty,
the Lease, the Securities Restriction Agreement, and the
Assumption of Liabilities.
"Related Person" - With respect to a particular
individual shall mean:
(a) each other member of such individual's
Family;
(b) any Person that is directly or indirectly
controlled by any one or more members of such individual's
Family;
(c) any Person in which members of such
individual's Family hold (individually or in the
aggregate) a material interest; and
(d) any Person with respect to which one or more
members of such individual's Family serves as a director,
officer, partner, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual shall
mean:
(a) any Person that directly or indirectly
controls, is directly or indirectly controlled by, or is
directly or indirectly under common control with such
specified Person;
(b) any Person that holds a material interest in
such specified Person;
(c) each Person that serves as a director,
officer, partner, or trustee of such specified Person (or in
a similar capacity); and
(d) any Person in which specified Person holds a
material interest.
"Remaining Inventory" - As defined in Section 2.4.
"Remedial Measures" - As defined in Section 7.7.
"Representative" - With respect to a particular Person,
any director, officer, employee, agent, consultant, advisor, or
other representative of such Person, including legal counsel,
accountants and financial advisors.
"Sales Figures" - As defined in Section 3.3.
"Securities Restriction Agreement" - The agreement in
the form of Exhibit E hereto between VIR and the Guarantor.
"Seller Indemnified Persons" - As defined in
Section 10.3.
"Seller Non-Competition Agreements" - As defined in
Section 2.5(a)(ii).
"Sellers" - Collectively, VIR, the Shareholder, and
L. Rabey.
"Shareholder Employment Agreement" - As defined in
Section 2.5(a)(i).
"Tax" - Any tax, levy, assessment, tariff, duty,
deficiency or other fee, and any related charge or amount
imposed, assessed or collected by or under the authority of any
Governmental Body.
"Tax Return" - Any return, report, form or other
document or information filed with or submitted to, or required
to be filed with or submitted to, any Governmental Body in
connection with the determination, assessment, collection, or
payment of any Tax.
"Threatened" - A Proceeding, claim, dispute or other
matter will be deemed to have been "Threatened" if any demand or
statement has been made (orally or in writing) or any notice has
been given (orally or in writing), or if any other event has
occurred or any other circumstances exist, that would lead a
prudent Person to conclude that such a Proceeding, claim, dispute
or other matter is likely to be asserted, taken or otherwise
pursued in the future.
"Warranty Claims" - A claim, demand or request made by
a purchaser of products manufactured by any of the Companies for
the replacement or repair of, or refund of the consideration paid
for, any such products; provided that the replacement or repair
of, or refund of the consideration paid for, products currently
in development and provided to a purchaser for evaluation
purposes shall not be considered a "Warranty Claim." A list of
all such products currently in development and provided to
customers for evaluation purposes is attached as Exhibit B-4.
PURCHASE AND SALE OF ASSETS; CLOSING
Acquired Assets. On and subject to the terms
and conditions of this Agreement, Buyers agree to purchase from
VIR, and VIR agrees to sell, transfer, convey and deliver to the
respective Buyer as set forth in Exhibit A, all of the Acquired
Assets at the Closing for the consideration specified in
Section 2.3 and also in consideration of the covenants of Buyers
set forth herein (including the assumption of the Assumed
Liabilities pursuant to Section 2.2). VIR shall specifically
retain, and the Acquired Assets shall not include, any of the
Excluded Assets.
Assumption of Liabilities. On and subject to
the terms and conditions of this Agreement, Buyers agree to
assume and become responsible for all of the Assumed Liabilities
at the Closing. Notwithstanding anything in this Agreement or
any of the Exhibits or Schedules attached hereto to the contrary,
Buyers will not assume or have any responsibility for or with
respect to any Liabilities of any nature whatsoever
(collectively, the "Excluded Liabilities") which are not included
within the definition of "Assumed Liabilities." Without limiting
the generality of the foregoing, and except to the extent any of
the following are specifically listed as an Assumed Liability on
Exhibit B, Buyers will not assume, pay, discharge, perform when
due or be liable for any of the following Liabilities (all of
which shall be included, without limitation, within the term
Excluded Liabilities) and, notwithstanding any implication to the
contrary in this Agreement or any of the exhibits or schedules
attached hereto, none of the following Liabilities are Assumed
Liabilities for purposes of this Agreement:
any Liability of Sellers under or relating to
this Agreement or any of the Related Agreements;
any Liability of Sellers, ERI LSC or the
Business with respect to any Taxes which are incurred in or
attributable to any period ending on or before the Closing Date,
including any Taxes due or incurred in connection with the
Contemplated Transactions and Taxes attributable to ERI and LSC's
operations;
any Liability which relates to any of the
Excluded Assets;
any Liability relating in any way to any
claim or Proceeding which is pending or Threatened on or prior to
the Closing Date against or with respect to Sellers (or any of
them), ERI, LSC, the Business or any of the Acquired Assets, or
which arises out of or is related in any way to any acts or
omissions of Sellers, ERI, LSC or any of their respective Related
Parties (including the ownership by VIR of the Acquired Assets or
the conduct by Sellers of the Business);
any Liability of Sellers (or any of them),
ERI, LSC, or any of their respective Related Parties, or any
Employee Benefit Plan created by any of them, to any present or
former employees or other Representatives of Sellers, ERI or LSC
(including any Liability of VIR for salaries, wages, commissions,
severance pay, benefits or other compensation; provided that the
parties acknowledge that Liabilities of VIR for accrued vacation
and sick days are Assumed Liabilities);
any and all Environmental, Health and Safety
Liabilities that are incurred in or attributable to any period
ending on or before the Closing Date or that arise from or relate
to any event that shall have occurred or any condition or
circumstance that shall have existed on or prior to the Closing
Date, to the extent such Liabilities relate to the Acquired
Assets, the Facilities or to the Business or any other properties
or assets in which Sellers, ERI or LSC have had an interest that
may result in them being responsible as an owner or operator
under any environmental, health or safety Legal Requirement;
any Liability arising directly or indirectly
from any Breach by Sellers, ERI or LSC of any Contract or any
violation by Sellers, ERI or LSC of any Legal Requirement or
Order, or from any action or failure to act on the part of
Sellers, ERI or LSC which constitutes or may give rise to any
such Breach or violation;
any Liability under or relating to any
Assigned Contract to the extent that (i) the existence of such
Liability is not ascertainable solely by reference to the written
provisions of such Assigned Contract or, in the case of oral
Assigned Contracts, solely by reference to the descriptions of
such oral Assigned Contracts set forth in Schedule 3.15, or
(ii) any duty or obligation under an Assigned Contract was
required to be performed prior to the Closing Date;
any Liability arising out of or incurred in
connection with the Merger (other than Liabilities of ERI and LSC
to be assumed by VIR in connection with the Merger and which are
Assumed Liabilities); and
any other Liability arising out of or
relating to Sellers, ERI, or LSC or any of their Related Persons,
or to any of the Acquired Assets or the Business or any other
business or operations of Sellers, ERI, LSC, or any of their
Related Persons, to the extent not expressly assumed by Buyer
pursuant to this Section 2.2.
Purchase Price.
The purchase price for the Acquired Assets
shall be Five Million Seven Hundred Thirty-Five Thousand Dollars
($5,735,000), of which:
Two Million Nine Hundred Fifty Thousand
Dollars ($2,950,000) shall be paid to VIR by VIR ACQ. at the
Closing by means of wire transfer of immediately available
funds to an account or accounts designated by VIR;
Fifty Thousand Dollars ($50,000) shall be
paid to VIR by LSC ACQ. at the Closing by means of wire
transfer of immediately available funds to an account or
accounts designated by VIR;
One Million Seven Hundred Thirty-Five
Thousand Dollars ($1,735,000) shall be payable by ERI ACQ.
issuing to VIR (or a nominee thereof) Debentures in the
aggregate principal amount of One Million Seven Hundred
Thirty-Five Thousand Dollars ($1,735,000); and
One Million Dollars ($1,000,000) shall be
payable by VIR ACQ. delivering to VIR 24,390 shares of non-
voting common stock of the Guarantor.
As additional consideration for the Acquired
Assets, at or prior to Closing, Buyers shall deliver to VIR the
following number of shares of capital stock of each Buyer:
VIR ACQ. - 31,500
ERI ACQ. - 83,800
LSC ACQ. - 172,499
VIR shall, upon delivery of the foregoing shares of
capital stock of Buyers, cause such stock to be distributed, as
part of the consideration payable in connection with the Merger,
to the individuals and in the amounts listed on Schedule 3.1.
At Closing VIR ACQ. shall deliver to VIR or
its shareholder the sum of $100,883, which amount represents the
estimated tax due from VIR's shareholder in connection with VIR's
operations from January 1, 1995 through Closing.
In the event that a shareholder of VIR, ERI
or LSC exercises his or her dissenters rights under the
Pennsylvania Business Corporation Law of 1988, as amended, and
demands payment of fair value for the shares owned by such
shareholder in lieu of accepting the terms of the Merger, the
parties shall be responsible to pay and perform the following
obligations in connection with the exercise of any such
dissenters rights:
VIR ACQ., with respect to shareholders of
VIR, shall be responsible for paying Four Dollars and Ten
Cents ($4.10) per share to any dissenting shareholder, ERI
ACQ., with respect to shareholders of ERI, shall be
responsible for paying Two Dollars ($2.00) per share to any
dissenting shareholder, and LSC ACQ., with respect to
shareholders of LSC, shall be responsible for paying Five
Cents ($.05) per share to any dissenting shareholder; and
Sellers shall be responsible for (A) all
costs and expenses incurred in connection with the exercise
of dissenters rights, including court costs, fees and
expenses of counsel and appraisers, and any assessments or
awards made under Section 1580 of the Pennsylvania Business
Corporation Law, 15 Pa.C.S. 1580, and (B) payment of any
and all sums payable to a dissenting shareholder, whether by
settlement, court order or otherwise, in excess of the
amounts payable by the Buyers pursuant to Section 2.3(d)(i)
above.
Inventory.
Attached hereto as Schedule 2.4(A) is a
complete schedule of VIR's existing inventory as of June 17,
1995, listed by category or item, quantity, and cost. At
Closing, Buyers and Seller shall determine the inventory to be
included in and with the Acquired Assets and transferred to
Buyers at Closing (the "Closing Inventory"). Such Closing
Inventory shall be determined as follows:
all Closing Inventory shall be of a quality
usable and salable in the Ordinary Course of Business;
none of the Closing Inventory shall be
obsolete, damaged, shelf-worn or of below-standard quality;
the Closing Inventory shall be of a mix
suitable to meet Buyer's requirements following Closing as
described above; and
the Closing Inventory shall have a value
equal to $850,000, determined at cost on a first-in first-
out basis.
Buyers shall take possession of the Closing Inventory at Closing.
Schedule 2.4(B), to be prepared jointly by Buyer and VIR and
delivered at Closing, shall set forth the Closing Inventory,
listed by item or category, quantity and cost.
Buyers shall, for the price and on the
payment terms set forth in Sections 2.4(c) and 2.4(d), purchase
at the Closing all inventory of VIR other than the Closing
Inventory (the "Remaining Inventory"); provided, however, that
Buyers shall not be obligated to pay for any Remaining Inventory
(i) that is not usable and salable in the Ordinary Course of
Business, or (ii) that is obsolete, damaged, shelf-worn or of
below-standard quality.
The purchase price for the Remaining
Inventory shall be VIR's (or ERI or LSC's, as appropriate) total
cost for the Remaining Inventory (excluding any Remaining
Inventory described in Sections 2.4(b)(i) and (ii)), minus the
result of the following calculation: (VIR's (or ERI's or LSC's,
as appropriate) total cost for all Remaining Inventory minus
$600,000) times .10. At Closing, Buyer shall obtain title to,
and possession of, all Remaining Inventory, notwithstanding the
fact that a portion of the purchase price payable by Buyer is
deferred and payable over a two (2) year period in accordance
with Section 2.4(d).
The purchase price for the Remaining
Inventory shall be payable as follows:
$600,000 shall be paid in cash at Closing;
and
the balance of the purchase price for the
Remaining Inventory shall be paid in twenty-four (24) equal
consecutive monthly installments, without interest,
commencing September 1, 1995 and continuing on the first day
of each month thereafter through August 1, 1997. If any
monthly installment is not paid when due, VIR shall, after
giving the Buyers five (5) days notice and the opportunity
to cure such failure to pay, be entitled to accelerate the
payment of the remaining installments and demand payment in
full of any remaining purchase price for the Remaining
Inventory. In addition, VIR shall be entitled to accelerate
the payment of the remaining installments and demand payment
in full of any remaining purchase price for the Remaining
Inventory if ERI ACQ. has failed to make any payment when
due (subject to applicable notice rights and cure periods)
under the Debenture and the obligation to make any such
payment has not been disputed by ERI ACQ.
(i) The parties shall attempt to complete
and agree upon Schedule 2.4(B), setting forth the Closing
Inventory and the Remaining Inventory, on the Closing Date.
In the event the parties are unable to complete and agree
upon Schedule 2.4(B) on the Closing Date, the purchase price
for the Remaining Inventory shall be determined in
accordance with Section 2.4(e)(ii) below.
(A) Buyers will cause a final inventory
statement (the "Inventory Statement") to be prepared and
delivered to Sellers within twenty (20) days after the
Closing Date. The Inventory Statement shall be prepared
substantially in accordance with Schedule 2.4(A) and an
estimated Schedule 2.4(B) as delivered at Closing. Upon
delivery of the Inventory Statement, Sellers shall have the
right, for a period of ten (10) days from the date of
delivery, to review the Inventory Statement. If Sellers
wish to dispute the Inventory Statement, then Sellers shall,
within such ten day period, deliver a notice to such effect
to Buyers, which notice shall contain an explanation of
Sellers' proposed calculation and the reasons why such
calculation differs from Buyers' calculation reflected on
the Inventory Statement. Buyers and Sellers shall then
attempt, for a period of thirty (30) days after delivery of
such notice, to reach an agreement with respect to the
Inventory Statement. If Sellers and Buyers are unable to
determine the matter by mutual agreement within such thirty
(30) day period, then either party may cause such dispute to
be submitted to the office of any nationally recognized firm
of certified public accountants, for a determination which
shall be final, binding and conclusive upon the parties.
The parties shall be deemed to have agreed to the result of
such determination as of the date of its issuance. The cost
of such determination shall be paid by Sellers, if such
determination is closer (on a numerical basis) to Buyers'
calculations as set forth on the Inventory Statement, and
shall be paid by Buyers, if such determination is closer (on
a numerical basis) to the calculation set forth on Sellers'
notice to Buyers' disputing Buyers' calculation. If the
parties are disputing the purchase price for the Remaining
Inventory, Buyers shall nevertheless continue to make
monthly payments for the Remaining Inventory in accordance
with Section 2.4(d) above in amounts based on the
calculation reflected on the Inventory Statement pending the
resolution of such dispute. Upon the resolution of such
dispute, the balance of the purchase price for the Remaining
Inventory as finally determined shall be paid in equal
consecutive monthly installments through August 1, 1997.
Closing Deliveries. At the Closing:
Sellers will deliver to Buyers:
an employment agreement in the form of
Exhibit F, executed by the Shareholder (the "Shareholder
Employment Agreement");
non-competition agreements in the form of
Exhibit G hereto, executed by the Sellers (collectively, the
"Seller Non-Competition Agreements");
any other Related Agreements to which any
Seller is a party;
such assignments and other instruments of
sale, transfer, conveyance and assignment as Buyers and
their counsel may request;
a certificate executed by Sellers to the
effect that each of Sellers' representations and warranties
in this Agreement and in each Related Agreement to which
Sellers (or any of them) are parties was accurate in all
respects as of the date of this Agreement and is accurate in
all material respects as of the Closing Date as if made on
the Closing Date, which certificate shall be in the form of
Exhibit H hereto; and
all other certificates, instruments and
documents to be delivered by Sellers (or any of
them) pursuant to this Agreement or any of the Related
Agreements.
Buyers will deliver to Sellers:
the amount described in Section 2.3(a)(i),
payable in the manner described therein;
the Debentures described in
Section 2.3(b)(ii);
the stock described in
Sections 2.3(a)(iii) and 2.3(b);
an assumption of liabilities (the
"Assumption of Liabilities") in the form of Exhibit I
hereto;
the Shareholder Employment Agreement,
executed on behalf of the appropriate Buyer;
the Seller Non-Competition Agreements,
executed on behalf of the appropriate Buyer; and
a certificate executed by Buyers to the
effect that each of Buyers' representations and warranties
in this Agreement and in each Related Agreement to which any
Buyer is a party was accurate in all respects as of the date
of this Agreement and is accurate in all material respects
as of the Closing Date as if made on the Closing Date, which
certificate shall be in the form of Exhibit J hereto.
Closing. The purchase and sale (the
"Closing") provided for in this Agreement will take place at the
offices of Stevens & Lee in Reading, Pennsylvania at 10:00 a.m.
(local time) on August 1, 1995, or at such other earlier time and
place as the parties may mutually agree.
Allocation of the Purchase Price. The parties
agree to allocate the Purchase Price (and all other capitalizable
costs) among the Acquired Assets for all purposes (including
financial, accounting and tax purposes) in accordance with the
allocation schedule attached hereto as Exhibit K.
ERI Employees. Pursuant to letters dated
November 21, 1994, April 7, 1994, and December 1, 1994, from ERI
to Thomas Wallace, Michael Nicolazzo and Moshe Suberri,
respectively, ERI is obligated to issue to Messrs. Wallace,
Nicolazzo and Suberri shares of capital stock of ERI
representing, in the aggregate, three percent (3%) of the total
outstanding shares of capital stock of ERI. The issuance of such
shares to Messrs. Wallace, Nicolazzo and Suberri is conditioned
upon the occurrence of certain events, including continued
employment with ERI. ERI ACQ. shall assume the obligation to
issue up to ten thousand (10,000) shares of capital stock of ERI
ACQ. to each of the foregoing individuals, subject to the same
restrictions as set forth in the letter to each individual. The
Sellers shall pay ERI ACQ. fifty percent (50%) of the value of
the shares of ERI ACQ. to which Messrs. Wallace, Nicolazzo and
Suberri will be entitled upon satisfaction of the conditions
contained in such letters. Accordingly, at Closing the Sellers
shall pay to ERI ACQ. Twenty-Six Thousand Two Hundred and Fifty
Dollars ($26,250), which sum represents one-half of the value of
three percent (3%) of the shares of capital stock of ERI ACQ.
REPRESENTATIONS AND WARRANTIES OF SELLERS, ERI AND LSC
Sellers, ERI and LSC hereby jointly and severally
represent and warrant to Buyers as follows:
Organization and Good Standing.
VIR is a corporation duly organized, validly
subsisting, and in good standing under the laws of the
Commonwealth of Pennsylvania, with full corporate power and
authority to conduct its business as it is now being conducted,
to own or use the properties and assets that it purports to own
or use, and to perform all its obligations under all Assigned
Contracts. VIR is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state
or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification. Schedule 3.1 lists
the name of each shareholder of each Company, the shares of
capital stock of each Company owned by each shareholder, and the
directors and officers of each Company.
Authority; No Conflict.
This Agreement constitutes the legal, valid,
and binding obligation of Sellers, enforceable against Sellers in
accordance with its terms. Upon the execution and delivery by
Sellers of the Related Agreements to which Sellers (or any of
them) are parties, the Related Agreements will constitute the
legal, valid, and binding obligations of Sellers, enforceable
against Sellers in accordance with their respective terms.
Sellers have the absolute and unrestricted right, power,
authority, and capacity to execute and deliver this Agreement and
such Related Agreements and to perform their obligations under
this Agreement and such Related Agreements.
Except as set forth in Schedule 3.2, neither
the execution and delivery of this Agreement or the Related
Agreements to which Sellers (or any of them) are parties nor the
consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice
or lapse of time):
contravene, conflict with, or result in a
violation of any provision of the articles of incorporation,
bylaws or other organizational documents of any Company;
contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person
the right to challenge any of the Contemplated Transactions
or to exercise any remedy or obtain any relief under, any
Legal Requirement or any Order to which Sellers or any of
the Acquired Assets may be subject;
contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give
any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by any Company or that otherwise
relates to the Business or any of the Acquired Assets or the
Facilities;
cause any of the Acquired Assets to be
reassessed or revalued by any taxing authority or other
Governmental Body;
contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person
the right to declare a default or exercise any remedy under,
or to accelerate the maturity or performance of, or to
cancel, terminate, or modify, any Assigned Contract; or
result in the imposition or creation of any
Encumbrance upon or with respect to any of the Acquired
Assets.
Except as set forth in Schedule 3.2, Sellers are not, and will
not be, required to give any notice to or obtain any Consent from
any Person in connection with the execution and delivery of this
Agreement or any of the Related Agreements or the consummation or
performance of any of the Contemplated Transactions.
Financial Statements.
Schedule 3.3 includes the following:
total sales (net of discounts, returns and
allowances) of each of the Companies for the years 1992
through 1994 (the "Sales Figures");
the audited restated balance sheets of each
of the Companies as at December 31, 1994, and the related
audited restated combined statements of income, changes in
stockholders' equity, and cash flow for the fiscal year
ended December 31, 1994, together with the notes thereto and
the report thereon of Concannon, Gallagher, Miller & Company
(the "1994 Financial Statements"); and
balance sheets of each of the Companies as
at June 30, 1995, and the related internally prepared
statements of income, changes in stockholders' equity and
cash flow for the six (6) month period then ended (the "1995
Financial Statements").
Except as disclosed in Schedule 3.3, the
Financial Statements are true, complete and correct, and fairly
and accurately present the financial condition and the results of
operations, changes in stockholders' equity, and cash flow of the
Companies as at the respective dates of and for the periods
referred to in such Financial Statements, all in accordance with
GAAP, subject, in the case of interim financial statements, to
normal recurring year-end adjustments (the effect of which will
not, individually or in the aggregate, be materially adverse),
and the Financial Statements reflect the consistent application
of such accounting principles throughout the periods involved.
Except to the extent specifically provided otherwise in the
Financial Statements, (i) all inventories reflected in the
Financial Statements were valued at the lower of cost or market,
with cost determined using the first in, first out method,
(ii) adequate provision was made in the Financial Statements for
doubtful accounts or other receivables; (iii) sales were stated
in the Financial Statements net of discounts, returns and
allowances; and (iv) all taxes due or paid were timely reflected
in the Financial Statements and all taxes not yet due and payable
were accrued or otherwise provided for therein. At the
respective dates of each of the Financial Statements, the
Companies had no liability required to be reflected or disclosed
in the Financial Statements under GAAP which was not so reflected
or disclosed. The Companies had no liability (whether absolute,
contingent or otherwise) not required (under F.A.S. 5) to be
reflected or disclosed, and which in fact was not reflected or
disclosed, in the Financial Statements as of and for the period
covered by each Financial Statement. Any significant items of
income or expense which were unusual and of a nonrecurring nature
were separately disclosed in the Financial Statements. The Sales
Figures are true and correct, and fairly and accurately present
the total sales (net of discounts, returns and allowances) of the
Companies for the periods referred to therein.
Books and Records. The books of account, minute
books, stock record books, and other records of the Companies,
all of which have been made available to Buyers, are complete and
correct and have been maintained in the Ordinary Course of
Business.
Title To Assets; Encumbrances.
VIR, ERI and LSC have, and VIR will convey to
Buyer at the Closing, good and marketable title to, or a valid
leasehold interest in, all of the properties and assets (other
than the Excluded Assets) used by any of the Companies, located
on their premises, or shown on the most recent balance sheets of
VIR, ERI or LSC, or acquired after the dates thereof, free and
clear of all Encumbrances, except for properties and assets
disposed of in the Ordinary Course of Business since the date of
such balance sheets. Without limiting the generality of the
foregoing, VIR has good and marketable title to all of the
Acquired Assets owned by it, and will convey to Buyer at the
Closing, good and marketable title to all of the Acquired Assets,
including all of the properties and assets owned by ERI and LSC
prior to the Merger, free and clear of any Encumbrance or
restriction on transfer of any nature.
Schedule 3.5 contains a complete and accurate
list of all Facilities at which each Company currently conducts
its respective part of the Business. All Facilities currently
used by each Company lie wholly within the boundaries of the real
property leased by each Company and do not encroach upon the
property of, or otherwise conflict with the property rights of,
any other Person. The use and operation of such property and
interests are in compliance with all applicable Legal
Requirements, Orders, licenses, permits and authorizations.
There are no existing or pending, and Sellers, ERI and LSC have
no Knowledge of any Threatened, (i) requests, applications or
proceedings to alter or restrict the zoning or other use
restrictions applicable to any such property or interests,
(ii) condemnation proceedings that would affect any of such
properties or interests in any way, or (iii) public improvements
that would result in any charge being levied or assessed against,
or would result in the creation of any Encumbrance upon, any of
such properties or interests.
Condition and Sufficiency of Assets. Except as
set forth in Schedule 3.6, the machinery, equipment, tools,
supplies and other tangible personal property included in the
Acquired Assets are in good operating condition and repair,
subject to ordinary wear and tear, and are adequate for the uses
to which they are being put, and none of such machinery,
equipment, tools, supplies and other tangible personal property
included in the Acquired Assets is in need of maintenance or
repairs except for ordinary, routine maintenance and repairs that
are not material in nature or cost. Such machinery, equipment,
tools, supplies and other tangible personal property included in
the Acquired Assets are sufficient for the continued conduct of
the Business after the Closing in substantially the same manner
as conducted prior to the Closing.
Inventory; Products Manufactured.
All inventory of the Companies consists of a
quality usable and salable within two (2) years of the date of
this Agreement in the Ordinary Course of Business, except for
obsolete items and items of below-standard quality, all of which
have been written off or written down to net realizable value in
the Financial Statements. All inventories not written off have
been priced at the lower of cost or market on a first in, first
out basis. The Companies shall have no Liability to the Buyers
under Section 10 of this Agreement for a breach of the
representation in this Section 3.7(a) until inventory having a
cost value in excess of $280,000 shall have been determined not
to be usable and saleable within two (2) years of the date of
this Agreement in the Ordinary Course of Business, and any
Liability for a breach of the representation in this
Section 3.7(a) shall be limited to any Damages in excess of
$280,000.
Each product manufactured, sold, leased, or
delivered by each Company has been in conformity with, and all
products to be sold to Buyers in accordance with Section 2.4 will
conform with, all applicable Contract commitments, and the
Companies have no Liability (and the Companies have no Knowledge
of any basis for any present or future Proceeding against them
giving rise to any Liability) for replacement or repair thereof
or other damages in connection therewith (other than Warranty
Claims arising in the Ordinary Course of Business). Except as
set forth in Schedule 3.7, no product manufactured, sold, leased,
or delivered by each Company is subject to any guaranty,
warranty, or other indemnity. Schedule 3.7 includes copies of
the standard terms and conditions of sale or lease for each
Company. The aggregate Liability of the Companies for Warranty
Claims has never exceeded $40,000 in any of the past three (3)
years.
The Companies have no Liability (and the
Companies have no Knowledge of any basis for any present or
future Proceeding against any of them giving rise to any
Liability) arising out of any injury to individuals or property
as a result of the ownership, possession, or use of any product
manufactured, sold, leased, or delivered by any Company.
No Undisclosed Liabilities. Except as set forth
in Schedule 3.8, VIR, ERI and LSC have no Liabilities of any
nature except for the Assumed Liabilities, Liabilities required
to be set forth in the Financial Statements of the Companies, and
current Liabilities incurred in the Ordinary Course of Business.
Taxes.
Each Company has filed or caused to be filed
on a timely basis since 1992 all Tax Returns that are or were
required to be filed by or with respect to each Company, either
separately or as a member of a group of corporations, pursuant to
applicable Legal Requirements. Each Company has paid, or made
provision for the payment of, all Taxes that have or may have
become due pursuant to those Tax Returns or otherwise, or
pursuant to any assessment received by any Company, except such
Taxes, if any, as are listed in Schedule 3.9 and are being
contested in good faith and as to which adequate reserves
(determined in accordance with GAAP) have been provided in the
1995 Financial Statements.
The charges, accruals, and reserves with
respect to Taxes on the books of each Company are adequate
(determined in accordance with GAAP) and are at least equal to
each Company's liability for Taxes. There exists no proposed tax
assessment against any Company to Sellers, ERI or LSC's Knowledge
except as disclosed in Schedule 3.9. All Taxes that any Company
is or was required by Legal Requirements to withhold or collect
have been duly withheld or collected and, to the extent required,
have been paid to the proper Governmental Body or other Person.
No Adverse Change. Since the date of the 1994
Financial Statements, there has not been any material adverse
change in the operations, properties, assets, Liabilities or
financial condition of any Company, and no event, condition or
circumstance exists that may result in such material adverse
change. For purposes of this Section 3.10, any material decline
since such date in the earnings of any Company or in the
aggregate customer orders received by or placed with any Company,
or any material adverse change to any of the Assigned Contracts
of any Company, shall be deemed to be a "material adverse change"
in the operations, properties, assets, Liabilities or financial
condition of such Company.
Employee Benefits.
Schedule 3.11 lists each Employee Benefit
Plan that any Company maintains or to which any Company
contributes. All contributions (including all employer
contributions and employee salary reduction contributions) which
are due have been paid to each such Employee Benefit Plan and all
contributions for any period ending on or before the Closing Date
which are not yet due have been paid to each such Employee
Benefit Plan or accrued in accordance with the past custom and
practice of such Company.
None of the Companies contributes to, has
ever contributed to, and has ever been required to contribute to
any Multiemployer Plan (as defined in ERISA 3(37)(A)) or has
any Liability (including withdrawal Liability) under any
Multiemployer Plan.
Compliance With Legal Requirements; Governmental
Authorizations.
Except as set forth in Schedule 3.12:
Each Company is, and at all times since
December 31, 1994 has been, in full compliance with each
Legal Requirement that is or was applicable to it or to the
conduct or operation of its Business or the ownership or use
of any of the Acquired Assets or the Facilities;
no event has occurred or circumstance
exists that (with or without notice or lapse of
time) (A) may constitute or result in a violation by any
Company of, or a failure on the part of any Company to
comply with, any Legal Requirement, or (B) may give rise to
any obligation on the part of any Company to undertake, or
to bear all or any portion of the cost of, any remedial
action of any nature; and
None of the Companies has received, at any
time since December 31, 1994, any notice or other
communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any
actual, alleged, or potential violation of, or failure to
comply with, any Legal Requirement, or (B) any actual,
alleged, or potential obligation on the part of any Company
to undertake, or to bear all or any portion of the cost of,
any remedial action of any nature.
Schedule 3.12 contains a complete and
accurate list of each Governmental Authorization that is held by
any Company or that otherwise relates to the Business, or to any
of the Acquired Assets or the Facilities. Each Governmental
Authorization listed or required to be listed in Schedule 3.12 is
valid and in full force and effect. Except as set forth in
Schedule 3.12:
each Company is, and at all times has been,
in full compliance with all of the terms and requirements of
each Governmental Authorization identified or required to be
identified in Schedule 3.12; and
no event has occurred or circumstance
exists that may (with or without notice or lapse of
time) (A) constitute or result directly or indirectly in a
violation of or a failure to comply with any term or
requirement of any Governmental Authorizations listed or
required to be listed in Schedule 3.12, or (B) result
directly or indirectly in the revocation, withdrawal,
suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization listed or
required to be listed in Schedule 3.12.
The Governmental Authorizations listed in Schedule 3.12
collectively constitute all of the Governmental Authorizations
necessary to permit each Company to lawfully conduct and operate
the Business in the manner it currently conducts and operates
such Business and to permit each Company to own and use the
Acquired Assets and to use the Facilities in the manner in which
it currently owns and uses such assets.
Legal Proceedings; Orders.
Except as set forth in Schedule 3.13, there
is no pending Proceeding:
that has been commenced by or against any
Company or that otherwise relates to or may affect the
Business or any of the Acquired Assets or the Facilities; or
that challenges, or that may have the
effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated Transactions or
the Related Transactions.
To the Knowledge of Sellers, ERI and LSC, (1) no such Proceeding
has been Threatened, and (2) no event has occurred or
circumstance exists that may give rise to or serve as a basis for
the commencement of any such Proceeding. The Proceedings listed
in Schedule 3.13 will not have a material adverse effect on the
Business of any Company or the Acquired Assets or the Facilities.
Except as set forth in Schedule 3.13:
there is no Order to which any of the
Sellers, ERI or LSC, or any of the Acquired Assets or the
Facilities, is subject; and
Sellers, ERI and LSC are in full compliance
with all of the terms and requirements of each Order set
forth in Schedule 3.13.
Schedule 3.13 sets forth a complete and
accurate summary and current status of all pending and Threatened
workers' compensation claims by any current or former employees
of the Companies.
Absence of Certain Changes and Events. Except
as set forth in Schedule 3.14, since December 31, 1994, the
Companies have conducted the Business only in the Ordinary Course
of Business and there has not been any:
amendment to the certificate of
incorporation, bylaws or other organizational documents of any
Company;
payment or increase by any Company of any
bonuses, salaries, or other compensation to any director,
officer, or (except in the Ordinary Course of Business) employee
or entry into any employment, severance, or similar Contract with
any director, officer, or employee;
payment by any Company of the personal
expenses of any shareholder, director, officer or employee;
adoption of, or increase in the payments to
or benefits under, any Employee Benefit Plan for or with any
employees of any Company;
damage to or destruction or loss of any asset
or property of any Company, whether or not covered by insurance,
materially and adversely affecting the properties, assets,
Business or financial condition of any Company, taken as a whole;
entry into, termination of, or receipt of
notice of termination of (i) any license, distributorship, sales
representative, joint venture, credit, or similar agreement, or
(ii) any Contract or transaction involving a total remaining
commitment by any Company of more than $50,000.00;
sale (other than sales of inventory in the
Ordinary Course of Business), lease, or other disposition of any
asset or property of any Company or mortgage, pledge, or
imposition of any Encumbrance on any of the Acquired Assets,
including the sale, lease, or other disposition of any of the
Intellectual Property Assets;
cancellation or waiver of any claims or
rights with a value to any Company in excess of $5,000.00;
material change in the accounting methods
used by any Company; or
agreement, whether oral or written, by any
Company to do any of the foregoing.
Contracts; No Defaults.
Schedule 3.15 contains a complete and
accurate list, and the Companies have delivered to Buyer true and
complete copies, of:
each Contract that involves performance of
services or delivery of goods or materials by any Company of
an amount or value in excess of $50,000.00;
each Contract that involves performance of
services or delivery of goods or materials to any Company of
an amount or value in excess of $50,000;
each Contract that was not entered into in
the Ordinary Course of Business and that involves
expenditures or receipts of any Company in excess of
$50,000;
each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and
other Contract affecting the ownership of, leasing of, title
to, use of, or any leasehold or other interest in, any real
or personal property (except personal property leases and
installment and conditional sales agreements having
aggregate payments of less than $10,000 and with terms of
less than one year);
each licensing agreement or other Contract
with respect to any of the Intellectual Property Assets;
each collective bargaining agreement and
other Contract to or with any labor union or other employee
representative of a group of employees of any Company (or
any of them) relating to wages, hours, and other conditions
of employment;
each joint venture, partnership, and other
Contract (however named) involving a sharing of profits,
losses, costs, or liabilities by any Company with any other
Person;
each Contract containing covenants that in
any way purport to restrict any Company's business activity
or limit the freedom of any Company to engage in any line of
business or to compete with any Person;
each Contract entered into other than in the
Ordinary Course of Business that contains or provides for an
express undertaking by any Company to be responsible for
consequential damages;
each Contract for capital expenditures in
excess of $5,000;
each written warranty, guaranty, and or
other similar undertaking extended by any Company other than
in the Ordinary Course of Business; and
each amendment, supplement, and
modification (whether oral or written) in respect of any of
the foregoing.
Schedule 3.15 sets forth reasonably complete details concerning
such Contracts, including the parties to the Contracts and the
amount of the remaining commitment of each Company under the
Contracts.
Except as set forth in Schedule 3.15:
The Companies do not have and can not
become subject to any Liability under any Contract that
relates to the Business or any of the Acquired Assets (other
than Assumed Liabilities);
each Contract identified or required to be
identified in Schedule 3.15 is in full force and effect and
is valid and enforceable in accordance with its terms;
Each Company is, and at all times since
January 1, 1993 has been, in full compliance with all
applicable terms and requirements of each Contract under
which each Company has or had any Liability or by which each
Company or any of the Acquired Assets is or was bound;
to the Companies' knowledge, each other
Person that has or had any Liability under any Assigned
Contract under which any Company has or had any rights is,
and at all times since January 1, 1993 has been, in full
compliance with all applicable terms and requirements of
such Assigned Contract; and
no event has occurred or circumstance
exists that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or
breach of, or give any Company or, to the Companies'
knowledge, other Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any
Contract involving any Company or the Business or any of the
Acquired Assets.
The Contracts relating to the sale, design,
or manufacture of products by any Company have been entered into
in the Ordinary Course of Business and have been entered into
without the commission of any act alone or in concert with any
other Person, or any consideration having been paid or promised,
that is or would be in violation of any Legal Requirement.
Insurance.
The Companies have delivered to Buyers:
true and complete copies of all policies of
insurance to which each Company is a party or under which
each Company is or has been covered at any time within the
three (3) years preceding the date of this Agreement; and
true and complete copies of all pending
applications for policies of insurance.
Schedule 3.16 describes:
any self-insurance arrangement by or
affecting each Company, including any reserves established
thereunder;
any Contract or arrangement, other than a
policy of insurance, for the transfer or sharing of any risk
by each Company; and
all obligations of each Company to provide
insurance coverage to third parties (for example, under
leases or service agreements).
Except as set forth in Schedule 3.16:
All policies to which any Company is a
party or that provide insurance coverage to any Company:
are valid, outstanding, and
enforceable;
taken together, provide adequate
insurance coverage for the assets and the operations of
the Companies for all risks normally insured against by
a Person carrying on the same business or businesses as
any Company; and
are sufficient for compliance with all
Legal Requirements and Contracts to which any Company
is a party or by which any Company is bound.
Environmental Matters. Except as set forth in
Schedule 3.17:
Each Company is, and at all times prior to
the date hereof has been, in full compliance with, and has not
been and is not in violation of or liable under, any
Environmental Law. No Company has any basis to expect, nor has
any Company or any other Person for whose conduct any Company is
or may be held to be responsible received, any actual or
Threatened order, notice, or other communication from (i) any
Governmental Body or other Person, or (ii) the current or prior
owner or operator of any Facilities, of any actual or potential
violation or failure to comply with any Environmental Law, or of
any actual or Threatened obligation to undertake or bear the cost
of any Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any Acquired Assets, or with respect
to any property or Facility at or to which Hazardous Materials
were generated, manufactured, refined, transferred, imported,
used, or processed by any Company, or any other Person for whose
conduct any Company is or may be held responsible, or from which
Hazardous Materials have been transported, treated, stored,
handled, transferred, disposed, recycled, or received.
There are no pending or, to the Knowledge of
Sellers, Threatened claims, Encumbrances, or other restrictions
of any nature, resulting from any Environmental, Health, and
Safety Liabilities or arising under or pursuant to any
Environmental Law, with respect to or affecting any of the
Facilities or any Acquired Asset.
Sellers, ERI and LSC have no Knowledge of any
basis to expect, nor has any of them or, to their Knowledge, any
other Person for whose conduct they are or may be held
responsible received, any Order, notice, communication, inquiry,
warning, citation, summons, directive, or any other indication
that relates to hazardous activity, Hazardous Materials, or any
alleged, actual, or potential violation or failure to comply with
any Environmental Law, or of any alleged, actual, or potential
obligation to undertake or bear the cost of any Environmental,
Health, and Safety Liabilities with respect to any of the
Facilities or any of the Acquired Assets, or with respect to any
property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used, or processed
by any Company, or any other Person for whose conduct any Company
is or may be held responsible, have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
No Company, nor, to their Knowledge, any
other Person for whose conduct any Company is or may be held
responsible, has any Environmental, Health, and Safety
Liabilities with respect to the Facilities or, to the Knowledge
of Sellers, ERI or LSC, with respect to any of the Acquired
Assets, at any property geologically or hydrologically adjoining
the Facilities.
There are no Hazardous Materials present on
or in the Facilities or at any geologically or hydrologically
adjoining property, including any Hazardous Materials contained
in barrels, above or underground storage tanks, landfills, land
deposits, dumps, equipment (whether moveable or fixed) or other
containers, either temporary or permanent, and deposited or
located in land, water, sumps, or any other part of the
Facilities or such adjoining property, or incorporated into any
structure therein or thereon. No Company, nor any other Person
for whose conduct any Company is or may be held responsible, or
to the Knowledge of Sellers, ERI or LSC, any other Person, has
permitted or conducted, or is aware of, any hazardous activity
conducted with respect to the Facilities or any of the Acquired
Assets, except in full compliance with all applicable
Environmental Laws.
There has been no Release or, to the
Knowledge of Sellers, ERI or LSC, Threat of Release, of any
Hazardous Materials at or from the Facilities or at any other
locations where any Hazardous Materials were generated,
manufactured, refined, transferred, produced, imported, used, or
processed from or by the Facilities, or from or by any of the
Acquired Assets, or to the Knowledge of Sellers any geologically
or hydrologically adjoining property, whether by any Company or
any other Person.
The Companies have delivered to Buyers true
and complete copies and results of any reports, studies,
analyses, tests, or monitoring possessed or initiated by any
Company pertaining to Hazardous Materials or hazardous activities
in, on, or under the Facilities, or concerning compliance by the
Companies or any other Person for whose conduct any Company is or
may be held responsible with Environmental Laws.
Employees.
Schedule 3.18 contains a complete and
accurate list of the following information for each employee of
each Company, including each employee on leave of absence or
layoff status: employer; name; job title; current compensation
paid or payable and any change in compensation since the date of
the 1994 Financial Statements; vacation accrued; and service
credited for purposes of vesting and eligibility to participate
under any Employee Benefit Plan.
To Sellers, ERI and LSC's Knowledge, no
director, officer, or other key employee of any Seller intends to
terminate his or her employment with any Company prior to the
Closing.
Labor Disputes; Compliance. Except as disclosed
in Schedule 3.19, no Company is a party to any collective
bargaining or other labor Contract, and there has not been, there
is not presently pending or existing, and to Sellers, ERI and
LSC's Knowledge there is not Threatened any strike, slowdown,
picketing, work stoppage, labor arbitration or proceeding in
respect of the grievance of any employee, application or
complaint filed by an employee or union with the National Labor
Relations Board or any comparable Governmental Body,
organizational activity, or other labor dispute against or
affecting any Company, and no application for certification of a
collective bargaining agent is pending or to Sellers, ERI or
LSC's Knowledge is Threatened; to Sellers, ERI or LSC's
Knowledge, no event has occurred or circumstance exist that would
provide the basis for any work stoppage or other labor dispute.
Except as disclosed in Schedule 3.19, each Company has complied
in all respects with all Legal Requirements relating to
employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the
payment of social security and similar taxes, occupational safety
and health, and plant closing. No Company is liable for the
payment of any Taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal
Requirements.
Intellectual Property.
Intellectual Property Assets - The term
"Intellectual Property Assets" includes:
the name of each Company, all fictitious
business names, trade names, registered and unregistered
trademarks, service marks, and applications (collectively,
"Marks");
all patents and patent applications
(collectively, "Patents");
all copyrights in both published works and
unpublished works that are material to the Business
(collectively, "Copyrights"); and
all know-how, trade secrets, confidential
information, software, technical information, processes,
technology, plans, drawings, and blue prints (collectively,
"Trade Secrets");
owned or used by any Company, or licensed by any Company as
licensee or licensor.
Agreements - Schedule 3.20 contains a
complete and accurate list and summary description, including any
royalties paid or received by each Company, of all Contracts
relating to the Intellectual Property Assets to which any Company
is a party or by which any Company is bound. There are no
outstanding and, to Sellers, ERI and LSC's Knowledge, no
Threatened disputes or disagreements with respect to any such
Contract.
Know-How Necessary for the Business - The
Intellectual Property Assets are all those necessary for the
operation of the Business as currently conducted. One of the
Companies is the owner of all right, title, and interest in and
to each of the Intellectual Property Assets, free and clear of
all Encumbrances, and the Companies have the right to use without
payment to a third party all of the Intellectual Property Assets
(other than Intellectual Property Assets licensed by the
Companies, as set forth on Schedule 3.20).
Patents
Schedule 3.20 contains a complete and
accurate list and summary description of all Patents. One
of the Companies is the owner of all right, title, and
interest in and to each of the Patents, free and clear of
all Encumbrances.
Except as set forth on Schedule 3.20, all
of the Patents are currently in compliance with all Legal
Requirements and are valid and enforceable.
Except as set forth on Schedule 3.20, no
Patent has been or is now involved in any interference,
reissue, reexamination, or opposing proceeding. To Sellers,
ERI and LSC's Knowledge, there is no potentially interfering
patent or patent application of any third party.
Except as set forth on Schedule 3.20, no
Patent is infringed or, to Sellers, ERI and LSC's Knowledge,
has been challenged or threatened in any way. To Sellers,
ERI and LSC's Knowledge, none of the products manufactured
and sold, nor any process or know-how used, by any Company
infringes or is alleged to infringe any patent or other
proprietary right of any other Person.
Trademarks
Schedule 3.20 contains a complete and
accurate list and summary description of all Marks. One of
the Companies is the owner of all right, title, and interest
in and to each of the Marks, free and clear of all
Encumbrances.
All Marks are currently in compliance with
all Legal Requirements, and are valid and enforceable.
Except as set forth on Schedule 3.20, to
Sellers, ERI and LSC's Knowledge, there is no potentially
interfering trademark or trademark application of any
Person.
Except as set forth on Schedule 3.20, no
Mark is infringed or, to Sellers, ERI and LSC's Knowledge,
has been challenged or threatened in any way. To Sellers,
ERI and LSC's Knowledge, none of the Marks used by any
Company infringes or is alleged to infringe any trade name,
trademark, or service mark of any Person.
Copyrights
Schedule 3.20 contains a complete and
accurate list and summary description of all Copyrights
(including all Copyrights relating to drawings used in the
Business). One of the Companies is the owner of all rights,
title, and interest in and to each of the Copyrights, free
and clear of all Encumbrances.
All of the Copyrights have been registered
and are currently in compliance with formal legal
requirements and are valid and enforceable.
No Copyright is infringed or, to Sellers,
ERI and LSC's Knowledge, has been challenged or threatened
in any way. To Sellers, ERI and LSC's Knowledge, none of
the subject matter of any of the Copyrights infringes or is
alleged to infringe any copyright of any third party.
Trade Secrets
Each Company has taken all reasonable
precautions to protect the secrecy, confidentiality, and
value of its Trade Secrets.
Each Company has good title and an absolute
right to use its respective Trade Secrets. The Trade
Secrets are not part of the public knowledge or literature,
and, to Sellers, ERI and LSC's Knowledge, have not been
used, divulged, or appropriated either for the benefit of
any Person (other than the Companies) or to the detriment of
any Company. No Trade Secret is subject to any adverse
claim or to Sellers' Knowledge has been challenged or
Threatened.
Disclosure.
No representation or warranty of Sellers, ERI
and LSC in this Agreement or any Related Agreement and no
statement in the Disclosure Schedule omits to state a material
fact necessary to make the statements herein or therein, in light
of the circumstances in which they were made, not misleading.
There is no fact known to Sellers, ERI or LSC
that has specific application to Sellers, ERI or LSC (other than
general economic or industry conditions) and that materially
adversely affects or, as far as Sellers, ERI or LSC can
reasonably foresee, materially threatens, the Business or the
Acquired Assets, or the financial condition, or results of
operations of any Company that has not been set forth in this
Agreement or the Schedules to this Agreement.
Relationships With Related Persons. No Related
Person of any Company has any interest in the Business or any of
the Assigned Contracts or any of the other Acquired Assets.
Except as described in Schedule 3.22, no Related Person of any
Company owns of record or as a beneficial owner, an equity
interest or any other financial or profit interest in any Person
that has (i) had business dealings or a material financial
interest in any transaction with any Company, or (ii) engaged in
competition with any Company with respect to any line of the
products or services of any Company in any market presently
served by any Company. Except as set forth in Schedule 3.22, no
Related Person of any Company is a party to any Contract with, or
has any claim or right against, any Company.
EBIT. VIR has achieved earnings before
interest, taxes, intercompany items, and the Shareholder's
salary, bonuses, and other compensation of at least $750,000 in
each of VIR's last five fiscal years.
Brokers or Finders. Sellers have engaged Dictor
Capital Corporation as their broker with respect to the
Contemplated Transactions, and Sellers shall be solely
responsible for any compensation, fees, commissions, or expenses
due Dictor Capital Corporation as a result of the Contemplated
Transactions. Sellers, ERI and LSC and their agents have
incurred no obligation or Liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement or the
Contemplated Transactions for which Buyer will directly or
indirectly have any Liability.
Merger. The Merger can be, and will be prior to
Closing, consummated in accordance with all applicable Legal
Requirements and without violating any provision of any of the
Companies' articles or certificates of incorporation, bylaws, or
other organizational documents or any Contract by which any
Company may be bound. Other than dissenters rights against VIR,
ERI or LSC under applicable Pennsylvania law, no shareholder of
any of the Companies has or will obtain any rights against VIR,
ERI or LSC the Acquired Assets, or the Buyers in connection with
or as a result of the Merger.
REPRESENTATIONS AND WARRANTIES OF BUYERS
Buyers represent and warrant to Sellers as follows:
Organization and Good Standing. VIR ACQ. is a
corporation duly organized, validly subsisting, and in good
standing under the laws of the Commonwealth of Pennsylvania. ERI
ACQ. is a corporation duly organized, validly subsisting, and in
good standing under the laws of the State of New Jersey. LSC
ACQ. is a corporation duly organized, validly subsisting, and in
good standing under the laws of the State of New Jersey.
Authority; No Conflict.
This Agreement constitutes the legal, valid,
and binding obligation of Buyers, enforceable against Buyers in
accordance with its terms. Upon the execution and delivery by
Buyers of the Related Agreements to which each Buyer is a party,
the Related Agreements to which each Buyer is a party will
constitute the legal, valid, and binding obligations of each
Buyer, enforceable against each Buyer in accordance with their
respective terms. Buyers have the absolute and unrestricted
right, power, and authority to execute and deliver this Agreement
and the Related Agreements to which each Buyer is a party and to
perform their obligations under this Agreement and the Related
Agreements to which each Buyer is a party.
Neither the execution and delivery by Buyers
of this Agreement or the Related Agreements to which Buyer is a
party nor the consummation or performance of any of the
Contemplated Transactions by Buyers will give any Person the
right to prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to:
any provision of Buyers' certificates of
incorporation, bylaws or other organizational documents;
any Legal Requirement or order to which
Buyers may be subject; or
any Contract to which any Buyer is a party
or by which any Buyer may be bound.
Buyers are not and will not be required to obtain any Consent
from any Person in connection with the execution and delivery of
this Agreement or the Related Agreements to which any Buyer is a
party or the consummation or performance of any of the
Contemplated Transactions.
Certain Proceedings. There is no pending
Proceeding that has been commenced against any Buyer and that
challenges, or may have the effect of preventing, delaying,
making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyers' Knowledge, no such
Proceeding has been Threatened.
Securities Filings. Allen Organ Company has
filed all reports required to be filed under Section 13 of the
Securities Exchange Act of 1934, as amended.
Legal Requirements. All contracts to which any
Buyer is a party have been entered into in the Ordinary Course of
Business and have been entered into without the commission of any
act alone or in concert with any other Person, or any
consideration having been paid or promised, that is or would be
in violation of any Legal Requirement.
Brokers or Finders. Buyers have engaged
Meridian Capital Markets as their broker with respect to the
Contemplated Transactions, and Buyers shall be solely responsible
for any compensation, fees, commissions, or expenses due Meridian
Capital Markets as a result of the Contemplated Transactions.
Buyers and its officers and agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in
connection with this Agreement or any of the Contemplated
Transactions for which Sellers will have any Liability.
COVENANTS OF SELLERS PRIOR TO AND FOLLOWING CLOSING
DATE
Access and Investigation. Between the date
of this Agreement and the Closing Date, the Companies will, and
will cause their Representatives to, (a) afford Buyers and their
Representatives full and free access to each Company's personnel,
properties, contracts, books and records, and other documents and
data, (b) furnish Buyers and Buyers' Representatives with copies
of all such contracts, books and records, and other existing
documents and data as Buyer may reasonably request, and
(c) furnish Buyers and Buyers' Representatives with such
additional financial, operating, and other data and information
as Buyers may reasonably request.
Operation of the Business of the Companies.
Between the date of this Agreement and the Closing Date, unless
otherwise agreed in writing by Buyers, the Companies will:
conduct the Business only in the Ordinary
Course of Business;
use Best Efforts to preserve intact the
current business organization of each Company, keep
available the services of the current officers, employees,
and agents of each Company, and maintain the relations and
good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships
with each Company;
cooperate with Buyers on all transitional
matters, and in communications and dealings with third
parties be supportive of Buyers and the Contemplated
Transactions;
confer with Buyers concerning operational
matters of a material nature; and
otherwise report periodically to Buyers
concerning the status and operation of the Business.
Negative Covenant. Except as otherwise
expressly permitted by this Agreement, between the date of this
Agreement and the Closing Date, Sellers, ERI and LSC will not,
without the prior written consent of Buyers, take any affirmative
action, or fail to take any reasonable action within their
control, as a result of which any of the changes or events listed
in Section 3.14 is likely to occur.
Required Approvals. As promptly as practicable
after the date of this Agreement, Sellers, ERI and LSC will make
all filings required by Legal Requirements to be made by them in
order to consummate the Contemplated Transactions. Between the
date of this Agreement and the Closing Date, Sellers, ERI and LSC
will, and will cause each Related Person of Sellers to
(a) cooperate with Buyers with respect to all filings that Buyers
elect to make or are required by Legal Requirements to make in
connection with the Contemplated Transactions, and (b) cooperate
with Buyers in obtaining all Consents that may be required.
Notification. Between the date of this
Agreement and the Closing Date, Sellers, ERI and LSC will
promptly notify Buyers in writing if Sellers, ERI or LSC become
aware of any fact or condition that causes or constitutes a
Breach of any of Sellers, ERI or LSC's representations and
warranties as of the date of this Agreement, or if Sellers, ERI
or LSC become aware of the occurrence after the date of this
Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence
or discovery of such fact or condition. Should any fact or
condition require any change in the Schedules to this Agreement
if the Schedules were dated the date of the occurrence or
discovery of any such fact or condition, Sellers will promptly
deliver to Buyers a supplement to the appropriate Schedule
specifying such change. During the same period, Sellers, ERI and
LSC will promptly notify Buyers of the occurrence of any Breach
of any covenants of Sellers, ERI and LSC in this Agreement or of
the occurrence of any event that may make the satisfaction of the
conditions in Section 7 impossible or unlikely. Delivery of such
notification or supplement will not modify the condition set
forth in Section 7.1 in any respect; provided that, if Buyers
elect to consummate the Contemplated Transactions notwithstanding
such notification or supplement and the provisions of
Section 7.1, such representation or warranty shall be deemed
modified to comport with such notification or supplement.
No Negotiation. Until such time, if any, as
this Agreement is terminated pursuant to Section 9, Sellers, ERI
and LSC will not and will cause each of their Representatives not
to, directly or indirectly solicit, initiate, or encourage any
inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any
unsolicited inquiries or proposals from, any Person (other than
Buyers) relating to any transaction involving the sale of the
Business or the Acquired Assets, or any of the capital stock of
any Company, or any merger, consolidation, business combination,
or similar transaction involving any Company.
Best Efforts. Between the date of this
Agreement and the Closing Date, Sellers, ERI and LSC will use
their best efforts to cause the conditions in Sections 7 and 8 to
be satisfied.
Labor Matters.
The Company shall terminate all employees of
the Company prior to the Closing Date and shall take all actions
which are necessary or appropriate in connection therewith.
Without limiting the generality of the foregoing, the Company
shall provide appropriate and compliant advance notices of
termination pursuant to and in accordance with all applicable
provisions of all Legal Requirements. In this regard, the
Company will identify all such notification requirements to
Buyers and coordinate the content and timing of such notices with
Buyers.
Buyers currently intend to hire all of the
Companies' employees who (i) are willing to be employed by
Buyers, and (ii) meet Buyers' criteria for employment through
Buyers' hiring process. All employees of the Companies hired by
Buyers shall be given credit for service time with the Companies
for purposes of determining fringe benefits. VIR shall be
responsible for severance pay obligations, if any, to all of its
employees.
The Companies shall liquidate and pay or make
adequate provision for all Liabilities accrued through the
Closing Date for compensation, including salary, wages, bonuses,
and overtime premiums, with respect to employees of the
Companies. All employees of the Companies that are hired by the
Buyers shall be entitled to any accrued vacation and sick days as
reflected in the Financial Statements, and the Companies'
Liabilities with respect to such vacation and sick days shall be
Assumed Liabilities.
The Companies shall be responsible for the
extension and administration of COBRA benefits to employees
terminated by the Companies, and Buyers will cooperate with
Sellers in this regard (but at no out-of-pocket cost or expense
to Buyers).
Sellers, ERI and LSC shall use Best Efforts
to assist Buyers in evaluating the Companies' employees and in
ensuring that all employees of the Companies agree to be employed
by Buyers.
Merger. The Sellers, ERI and LSC shall cause
the Merger to be completed prior to the Closing in accordance
with all applicable Legal Requirements. All Taxes due in
connection with the Merger shall be paid prior to Closing or
provided for in a manner satisfactory to Buyers.
COVENANTS OF BUYERS PRIOR TO CLOSING DATE
Approvals of Governmental Bodies. As
promptly as practicable after the date of this Agreement, Buyers
will, and will cause each of their Related Persons to, make all
filings required by Legal Requirements to be made by them to
consummate the Contemplated Transactions. Between the date of
this Agreement and the Closing Date, Buyers will, and will cause
each Related Person of Buyers to, (a) cooperate with Sellers with
respect to all filings that Sellers are required by Legal
Requirements to make in connection with the Contemplated
Transactions, and (b) cooperate with Sellers in obtaining all
Consents identified in Schedule 3.2; provided that Buyers shall
in no event be required to dispose of or make any change in any
portion of its business or to incur any other significant burden
to obtain a Governmental Authorization.
Best Efforts. Except as set forth in the
proviso to Section 6.1, between the date of this Agreement and
the Closing Date, Buyers shall use their best efforts to cause
the conditions in Sections 7 and 8 to be satisfied.
CONDITIONS PRECEDENT TO BUYERS' OBLIGATION TO CLOSE
Buyers' obligation to purchase the Acquired Assets and
assume the Assumed Liabilities and to take the other actions
required to be taken by Buyers at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Buyers, in
whole or in part):
Accuracy of Representations. All of Sellers,
ERI and LSC's representations and warranties in this Agreement
and any Related Agreement (considered collectively), and each of
these representations and warranties (considered individually),
must have been accurate in all respects as of the date of this
Agreement, and must be accurate in all material respects as of
the Closing Date as if made on the Closing Date, without giving
effect to any supplement to any Schedule made after the date of
this Agreement.
Sellers' Performance.
All of the covenants and obligations that
Sellers, ERI and LSC are required to perform or to comply with
pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and
complied with in all material respects.
Sellers must have delivered, or caused to be
delivered, each of the documents required to be delivered
pursuant to Section 2.5 and each of the other covenants and
obligations in Sections 5.4, 5.6 and 5.7 must have been performed
and complied with in all material respects.
Consents. Each of the Consents identified in
Schedule 3.2 must have been obtained and must be in full force
and effect.
Additional Documents. Sellers shall have caused
the following documents to be delivered to Buyers:
an opinion of Mesirov, Gelman, Jaffe,
Cramer & Jamieson, dated the Closing Date, in the form of
Exhibit L hereto; and
such other documents as Buyers may reasonably
request for the purpose of (i) enabling its counsel to provide
the opinion referred to in Section 8.4(a), (ii) evidencing the
accuracy of any of Sellers, ERI and LSC's representations and
warranties, (iii) evidencing the performance by Sellers, ERI and
LSC of, or the compliance by Sellers, ERI and LSC with, any
covenant or obligation required to be performed or complied with
by Sellers, ERI and LSC, (iv) evidencing the satisfaction of any
condition referred to in this Section 7, or (v) otherwise
facilitating the consummation or performance of any of the
Contemplated Transactions.
No Proceedings. Since the date of this
Agreement, there must not have been commenced or Threatened
against any Buyer, or against any Person affiliated with any
Buyer, any Proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the
Contemplated Transactions, or (b) that may have the effect of
preventing, delaying, making illegal, or otherwise interfering
with the consummation of any of the Contemplated Transactions.
No Prohibition. Neither the consummation nor
the performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time),
materially contravene, or conflict with, or result in a material
violation of, or cause any Buyer or any Person affiliated with
any Buyer to suffer any material adverse consequence under, any
applicable Legal Requirement or Order.
Environmental Review. Buyers shall, if Buyers
so elect, have caused to be conducted by a qualified
environmental consultant selected by Buyers ("Environmental
Consultant") and in accordance with ASTM Standards, a Phase I (to
the extent the existing Phase I reports obtained by Sellers do
not conform to ASTM Standards) and, if necessary, Phase II
Environmental Site Assessment and Environmental Compliance Audit
("Assessment/Audit") of the Facilities, the cost of which shall
be shared by the parties. Buyers shall have obtained a report
(the "Environmental Report") (a copy of which shall be provided
to Sellers) setting forth the results of the Assessment/Audit,
which report shall set forth: (1) any corrective actions
identified by the Environmental Consultant as necessary to
achieve compliance with all applicable Environmental Laws
("Corrective Actions") and any remedial measures identified by
the Environmental Consultant as necessary to achieve minimum
decontamination levels established by all Governmental Bodies
having jurisdiction over the Facilities ("Remedial Measures");
(2) the estimated cost of any Corrective Actions; and (3) the
estimated cost of any Remedial Measures. Buyers shall own all
rights in and to the Environmental Report and Sellers, ERI and
LSC shall not disclose any information in the Environmental
Report without the written permission of Buyers. If the
Corrective Actions and Remedial Measures are estimated to cost
less than $1,000 in the aggregate, they shall be deemed
immaterial and need not be implemented by the Companies prior to
the Closing. However, the Companies shall at the Companies'
option either (i) implement and complete at the Companies'
expense and to the satisfaction of, and on a reasonable timetable
determined by, Buyers and their Environmental Consultant all
Corrective Actions and Remedial Measures identified that, in the
aggregate, are estimated to cost more than $1,000, or (ii) deduct
from the Purchase Price an amount equal to the Environmental
Consultant's estimated cost of such Corrective Actions and
Remedial Measures. If the Environmental Report identifies
Corrective Actions and Remedial Measures estimated to cost more
than $100,000 in the aggregate and if the Companies, in their
determination, are not willing to bear all such costs, Buyers
shall have the right to terminate this Agreement and not proceed
with the Contemplated Transactions on the terms set forth in this
Agreement or to proceed on such terms as the parties may mutually
agree to in writing. Buyers and the Companies agree to cooperate
to ensure that the cost of the Corrective Actions and Remedial
Measures described in this Section 7.7 do not exceed a normal and
reasonable "market" cost.
Earnings of VIR. VIR shall have achieved
earnings before interest, taxes, intercompany items, and the
Shareholder's salary, bonuses, and other compensation, of at
least $750,000 in each of VIR's last five fiscal years.
Buyers' Due Diligence. Buyers shall have
completed, to Buyers' sole satisfaction, their due diligence
investigation of the operations, assets, Contracts, rights, and
Liabilities of the Companies and the Business, including, without
limitation, financial, employee and employee benefit Liabilities,
legal, regulatory and environmental matters, and other matters
which have served as a basis for certain assumptions made by
Buyers in arriving at the Purchase Price. On or before August 1,
1995, Buyers shall notify Sellers in the event Buyers determine,
in Buyers' sole discretion, that the condition contained in this
Section 7.9 has not been satisfied and that Buyers have
determined not to waive such condition. Upon delivery of such
notice, this Agreement shall be deemed to have been terminated
pursuant to Section 9.1(b). In the event Buyers fail to deliver
such notice by said date, Buyers shall be deemed to have waived
the condition set forth in this Section 7.9 (but no others).
Leases.
VIR ACQ. shall have entered into a Lease in
the form of Exhibit M hereto for the use of the real property and
improvements currently used by VIR located at 105 James Way,
Southampton, Pennsylvania (the "Lease").
ERI ACQ. and LSC ACQ. shall have entered
into, or received an assignment of, leases for the facilities
currently used by ERI and LSC located at 225 Executive Drive,
Unit 5, Moorestown, New Jersey 08057, which leases (or
assignments) shall be satisfactory in form and substance to
Buyer.
Merger. The Merger shall have been consummated
in accordance with all applicable Legal Requirements.
Tax Escrow Account. Buyers shall have been
provided with satisfactory evidence, including an escrow
agreement in form and substance satisfactory to Buyers, that
Sellers have set up a separate tax escrow account into which
funds from the Closing (sufficient in amount to pay Sellers'
estimated tax obligations) are to be deposited and disbursed only
to pay outstanding tax obligations of the Sellers.
CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Acquired Assets and to
take the other actions required to be taken by Sellers at the
Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be
waived by Sellers, in whole or in part):
Accuracy of Representations. All of Buyers'
representations and warranties in this Agreement (considered
collectively), and each of those representations and warranties
(considered individually), must have been accurate in all
material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if
made on the Closing Date.
Buyers' Performance.
All of the covenants and obligations that
Buyers are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing (considered collectively),
and each of these covenants and obligations (considered
individually), must have been performed and complied with in all
material respects.
Buyers must have delivered each of the
documents required to be delivered by Buyers pursuant to Section
2.5 and must have made the cash payments required to be made by
Buyer pursuant to Section 2.3(a)(i) and delivered the Debentures
and stock required to be delivered pursuant to
Sections 2.3(a)(ii), 2.3(a)(iii), and 2.3(b).
Consents. Each of the Consents identified in
Schedule 3.2 must have been obtained and must be in full force
and effect.
Additional Documents. Buyers must have caused
the following documents to be delivered to Sellers:
an opinion of Stevens & Lee, dated the
Closing Date, in the form of Exhibit N;
a guaranty agreement in the form of Exhibit O
hereto, executed by the Guarantor (the "Guaranty"); and
such other documents as Sellers may
reasonably request for the purpose of (i) enabling their counsel
to provide the opinion referred to in Section 7.4(a),
(ii) evidencing the accuracy of any representation or warranty of
Buyers, (iii) evidencing the performance by Buyers of, or the
compliance by Buyers with, any covenant or obligation required to
be performed or complied with by Buyers, (iv) evidencing the
satisfaction of any condition referred to in this Section 8, or
(v) otherwise facilitating the consummation of any of the
Contemplated Transactions.
No Proceedings. Since the date of this
Agreement, there must not have been commenced or Threatened
against Sellers, or against any Person affiliated with Sellers,
any Proceeding (a) involving any challenge to, or seeking damages
or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with the
consummation of any of the Contemplated Transactions.
TERMINATION
Termination Events. This Agreement may, by
notice given prior to or at the Closing, be terminated:
by either Buyers or Sellers if a material
Breach of any provision of this Agreement has been committed by
the other party and such Breach has not been waived:
by Buyers if any of the conditions in Section
7 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other
than through the failure of Buyers to comply with their
obligations under this Agreement) and Buyers have not waived such
condition on or before the Closing Date;
by Sellers, if any of the conditions in
Section 8 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other
than through the failure of Sellers to comply with their
obligations under this Agreement) and Sellers have not waived
such condition on or before the Closing Date;
by mutual consent of Buyers and Sellers; or
by either Buyers or Sellers if the Closing
has not occurred (other than through the failure of any party
seeking to terminate this Agreement to comply fully with its
obligations under this Agreement) on or before August 1, 1995, or
such later date as the parties may agree upon.
Effect of Termination. Each party's right of
termination under Section 9.1 is in addition to any other rights
it may have under this Agreement or otherwise, and the exercise
of a right of termination will not be an election of remedies.
If this Agreement is terminated pursuant to Section 9.1, all
further obligations of the parties under this Agreement will
terminate, except that the obligations in Sections 11.1 and 11.3
will survive; provided, however, that if this Agreement is
terminated by a party because of the Breach of the Agreement by
the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not
satisfied as a result of the other party's failure to comply with
its obligations under this Agreement, the terminating party shall
have the right to proceed against the other party for the
expenses (but not lost profits or other consequential
damages) incurred by the terminating party in connection with the
Contemplated Transactions.
INDEMNIFICATION; REMEDIES
Survival. All representations, warranties,
covenants, and obligations in this Agreement, the Schedules to
this Agreement, and the Related Agreement will survive the
Closing. The right to indemnification, reimbursement, or other
remedy based on such representations, warranties, covenants, and
obligations will not be affected by any investigation conducted
with respect to, or any Knowledge acquired (or capable of being
acquired) about the accuracy or inaccuracy of or compliance with,
any such representation, warranty, covenant, or obligation. The
waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the
right to indemnification, reimbursement, or other remedy based on
such representations, warranties, covenants, and obligations.
Indemnification and Reimbursement by Sellers.
Sellers, jointly and severally, shall indemnify and hold harmless
Buyers and their Representatives, stockholders, controlling
persons, and affiliates (collectively, the "Buyer Indemnified
Persons"), and will reimburse the Buyer Indemnified Persons, for
any loss, Liability, claim, damage, expense (including costs of
investigation and defense and reasonable attorneys' fees) or
diminution of value, whether or not involving a third-party claim
(collectively, "Damages"), arising from or in connection with any
of the following:
any Breach of any representation or warranty
made by Sellers, ERI or LSC in this Agreement, the Schedules to
this Agreement, the certificate delivered pursuant to Section
2.5(a)(iv), or any other Related Agreements delivered by Sellers
pursuant to or in connection with this Agreement;
any Breach by any Seller, ERI or LSC of any
covenant or obligation of any Seller, ERI or LSC in this
Agreement or any Related Agreement;
except for the Assumed Liabilities, any
Liability of or relating to (i) Sellers (or any of them), ERI or
LSC or (ii) the Business, including without limitation any labor,
employment-related, and employee benefit-related Liabilities (and
specifically including those incurred by Buyers in connection
with the Companies' termination of their employees and the
Companies' termination of or failure to pay any employee
benefits);
any Environmental, Health and Safety Liabilities
arising out of or relating to (i) the ownership, operation or
condition at any time on or prior to the Closing Date of any of
the Facilities or any other properties or assets in which
Sellers, ERI LSC, or any of their Related Parties has or had an
interest; (ii) any Hazardous Materials or other contaminants that
were present at such Facilities or such other properties or
assets at any time on or prior to the Closing Date; (iii) any
Hazardous Materials or other contaminants, wherever located, that
were, or were allegedly, generated, transported, stored, treated,
released or otherwise handled or any hazardous activities that
were, or were allegedly, conducted by Sellers, ERI LSC or by any
other Person for whose conduct they are or may be held
responsible; and (iv) any bodily injury (including illness,
disability and death), personal injury, and property damage or
other damage of or to any Person, in any way arising from or
allegedly arising from any hazardous activity conducted or
allegedly conducted with respect to such Facilities or the
operations of the Companies prior to the Closing Date or from
Hazardous Material that was present on or before the Closing Date
on or at such Facilities or that was released or allegedly
released at any time on or prior to the Closing Date by any of
the Companies or their predecessors; or
any claim by any Person for brokerage or
finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by any such
Person with Sellers, ERI or LSC (or any Person acting on their
behalf) in connection with any of the Contemplated Transactions.
Indemnification and Reimbursement by Buyers.
Buyers, jointly and severally, shall indemnify and hold harmless
Sellers and their representatives, stockholders, controlling
persons, and affiliates (collectively, the "Seller Indemnified
Persons"), and will reimburse the Seller Indemnified Persons, for
any Damages arising from or in connection with any of the
following:
any Breach of any representation or warranty
made by Buyers in this Agreement, the certificate delivered
pursuant to Section 2.5(b)(vii), or in any Related Agreement
delivered by Buyers pursuant to or in connection with this
Agreement;
any Breach by Buyers of any covenant or
obligation of Buyers in this Agreement or any Related Agreement;
or
any claim by any Person for brokerage or
finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by such
Person with Buyers (or any Person acting on their behalf) in
connection with any of the Contemplated Transactions.
Procedure for Indemnification - Third Party
Claims.
Promptly after receipt by an indemnified
party under Section 10.2 or 10.3 of notice of the commencement of
any Proceeding against it, such indemnified party shall, if a
claim is to be made against an indemnifying party under such
Section, give notice to the indemnifying party of the
commencement of such Proceeding, but the failure to notify the
indemnifying party will not relieve the indemnifying party of any
liability that it may have to any indemnified party, except to
the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
If any Proceeding referred to in Section
10.4(a) is brought against an indemnified party and it gives
notice to the indemnifying party of the commencement of such
Proceeding, the indemnifying party shall be entitled to
participate in such Proceeding and, if the indemnifying party
acknowledges in writing, without qualification or limitation, its
obligation to indemnify the indemnified party for all Damages
arising from such Proceeding, the indemnifying party shall assume
the defense of such Proceeding with counsel reasonably
satisfactory to the indemnified party. If notice is given to an
indemnifying party of the commencement of any Proceeding and the
indemnifying party does not, within ten days after the
indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will be bound by any
determination made in such Proceeding or any compromise or
settlement effected by the indemnified party.
Notwithstanding the foregoing, if an
indemnified party determines in good faith that there is a
reasonable probability that a Proceeding may adversely affect it
or its Related Parties other than as a result of monetary damages
for which it would be entitled to indemnification under this
Agreement, or if an indemnified party reasonably believes that it
may not receive the indemnification to which it may be entitled
from the indemnifying party, the indemnified party may, by notice
to the indemnifying party, assume the exclusive right to defend,
compromise, or settle such Proceeding, but the indemnifying party
will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its
consent (which may not be unreasonably withheld).
Limitation on Indemnification.
No amount shall be due from the Sellers under
Section 10.2(a) of this Agreement unless and until the Damages
arising from or in connection with a Breach described in
Section 10.2(a) shall exceed One Hundred Thousand Dollars
($100,000) in the aggregate. In the event such Damages exceed
One Hundred Thousand Dollars ($100,000) in the aggregate, the
Sellers shall be liable only for those Damages in excess of One
Hundred Thousand Dollars ($100,000).
No amount shall be due from the Sellers under
Section 10.2(a) of this Agreement unless written notice of the
Breach upon which Buyer is basing its claim is given to Sellers
within three (3) years from the Closing Date; provided, however,
that any claim under Section 10.2(a) that is based upon a Breach
of any of the representations and warranties set forth in
Sections 3.3, 3.5, 3.9 and 3.17 may be asserted at any time
(subject to any applicable statute of limitation) and shall not
be subject to such three (3) year limitation.
The maximum amount recoverable by Buyers from
Sellers under this Section 10 shall be Six Million Dollars
($6,000,000).
GENERAL PROVISIONS
Expenses. Except as otherwise expressly
provided in this Agreement, each party to this Agreement will
bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the
Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants.
Public Announcements. Any public announcement
or similar publicity with respect to this Agreement or the
Contemplated Transactions will be issued, if at all, at such time
and in such manner as Buyers shall determine. Unless consented
to by Buyers in advance or required by Legal Requirements, prior
to the Closing Sellers shall keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to
any Person. Sellers and Buyers will consult with each other
concerning the means by which the Companies' employees,
customers, and suppliers and others having dealings with the
Companies will be informed of the Contemplated Transactions, and
Buyers will have the right to be present for any such
communication.
Confidentiality. Between the date of this
Agreement and the Closing Date, Buyers, Sellers, ERI and LSC will
maintain in confidence, and will cause the Related Persons and
Representatives of each of them to maintain in confidence any
confidential or proprietary written, oral, or other information
obtained from the other party or such parties' Related Persons or
Representatives in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already
known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available
through no fault of such party, (b) the use of such information
is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the
Contemplated Transactions, or (c) the furnishing or use of such
information is required by or necessary or appropriate in
connection with a Legal Requirement or Proceeding. If the
Contemplated Transaction is not consummated, each party will
return or destroy as much of such written information as the
other party may reasonably request.
Notices. All notices, consents, waivers, and
other communications under this Agreement must be in writing and
will be deemed to have been duly given when (a) delivered by hand
(with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is
also mailed to such party, or (c) when received by the addressee,
if sent by a nationally recognized overnight delivery service
(receipt requested) or by mailing, certified mail (return receipt
requested), in each case to the appropriate addresses and
telecopier numbers set forth below (or to such other addresses
and telecopier numbers as a party may designate by notice to the
other parties):
Sellers, ERI VIR, Inc.
and LSC: Eastern Research, Inc.
Linear Switch Corporation
105 James Way
Southampton,
Pennsylvania 18966
Attn: Alex Rabey
Telecopy No.:
(215) 364-0920
with a copy to: Mesirov, Gelman,
Jaffe, Cramer &
Jamieson
1735 Market Street
Philadelphia,
Pennsylvania 19103
Attn: Robert P. Krauss, Esquire
Telecopy No.:
(215) 994-1111
Buyers: VIR Acquisition, Inc.
ERI Acquisition, Inc.
LSC Acquisition, Inc.
c/o Allen Organ Company
P.O. Box 36
150 Locust Street
Macungie, Pennsylvania 18062-0036
Attn: Steven
Markowitz, President
Telecopy No.:
(610) 965-3098
with a copy to: Stevens & Lee
P.O. Box 679
111 North Sixth Street
Reading, Pennsylvania 19603
Attn: Ernest J. Choquette, Esquire
Telecopy No.: (610) 376-5610
Jurisdiction; Service of Process. Any action or
proceeding seeking to enforce any provision of, or based on any
right arising out of, this Agreement may be brought against any
of the parties in the courts of the Commonwealth of Pennsylvania,
County of Lehigh, or, if it has or can acquire jurisdiction, in
the United States District Court for the Eastern District of
Pennsylvania, and each of the parties consents to the
jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection
to venue laid therein.
Further Assurances. The parties agree (a) to
furnish upon request to each other such further information,
(b) to execute and deliver to each other such other documents,
and (c) to do such other acts and things, all as the other party
may reasonably request for the purpose of carrying out the intent
of this Agreement and the Related Agreements and the documents
referred to in this Agreement and the Related Agreements.
Without limiting the foregoing, Sellers shall assist Buyer in
obtaining all permits, licenses, approvals and other Governmental
Authorizations which may be necessary or appropriate in
connection with the Contemplated Transactions, and the parties
shall cooperate in the filing of Internal Revenue Service
Form 4954 with respect to the Contemplated Transactions.
Waiver. The rights and remedies of the parties
to this Agreement are cumulative and not alternative. Neither
the failure nor any delay by any party in exercising any right,
power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of
any such right, power, or privilege will preclude any other or
further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege.
Entire Agreement and Modification. This
Agreement supersedes all prior agreements between the parties
with respect to its subject matter (including the letter of
intent between Allen Organ Company and Sellers dated March 15,
1995) and constitutes (along with the Related Agreements) a
complete and exclusive statement of the terms of the agreement
between the parties with respect to its and their subject matter.
This Agreement may not be amended except by a written agreement
executed by the party to be charged with the amendment.
Schedules.
The disclosures in the Schedules to this
Agreement, and those in any supplements thereto, relate only to
the representations and warranties in the Section of the
Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement.
In the event of any inconsistency between the
statements in the body of this Agreement and those in the
Schedules (other than an exception expressly set forth in a
Schedule with respect to a specifically identified representation
or warranty), the statements in the body of this Agreement will
control.
Assignments, Successors, and No Third-Party Rights.
No party may assign any of its rights under this Agreement
without the prior consent of the other parties, except that
Buyers may assign any of their rights under this Agreement to any
affiliate of Buyers (but such assignment will not relieve Buyers
of any of its obligations under this Agreement), and Buyers shall
have the right to require Sellers to transfer and convey at the
Closing any of the Acquired Assets specified by Buyers to one or
more affiliates of Buyers. Subject to the preceding sentence,
this Agreement will apply to, be binding in all respects upon,
and inure to the benefit of the successors and permitted assigns
of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the
parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision
of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties
to this Agreement and their successors and assigns.
Severability. If any provision of this Agreement is
held invalid or unenforceable by any court of competent
jurisdiction, the other provisions of this Agreement will remain
in full force and effect. Any provision of this Agreement held
invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or
unenforceable.
Section Headings, Construction. The headings of
Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All
references to "Sections" refer to the corresponding Sections of
this Agreement. All words used in this Agreement and the
Exhibits, the Schedules and the Related Agreements will be
construed to be of such gender or number as the circumstances
require, and unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
Time of Essence. With regard to all dates and time
periods set forth or referred to in this Agreement, time is of
the essence.
Governing Law. This Agreement will be governed by
and construed under the laws of the Commonwealth of Pennsylvania
without regard to conflicts of laws principles.
Counterparts. This Agreement may be executed in one
or more counterparts, each of which will be deemed to be an
original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same
agreement.
Use of Name. Buyers will acquire all rights to the
names "VIR," Eastern Research and Linear Switch and any
variations and derivations thereof. Each Company will change its
name and cause all of its Related Persons which are not
individuals to change their names immediately after the Closing
to names that are not similar to the names VIR, Eastern Research,
or Linear Switch or any derivation thereof.
Records Retention. For a period of three (3) years
after the Closing Date, VIR shall afford Buyer access to, and VIR
shall retain and shall not destroy, all of its books, records,
Government Authorizations, reports, data, materials, and
documents which are not included in the Acquired Assets but which
relate to the Business as conducted prior to the Closing Date.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
Sellers:
VIR, INC.
By__ALEX RABEY______________________
Alex Rabey, President
__ALEX RABEY________________________
Alex Rabey
__LUBA RABEY________________________
Luba Rabey
Other Companies:
EASTERN RESEARCH, INC.
By__ALEX RABEY_____________________
Alex Rabey, President
LINEAR SWITCH CORPORATION
By__ALEX RABEY_____________________
Alex Rabey, President
Buyers:
VIR ACQUISITION, INC.
By__STEVEN MARKOWITZ_______________
Steven Markowitz,
Chief Executive Officer
ERI ACQUISITION, INC.
By__STEVEN MARKOWITZ_______________
Steven Markowitz,
Chief Executive Officer
LSC ACQUISITION, INC.
By__STEVEN MARKOWITZ________________
Steven Markowitz
Chief Executive Officer
Exhibit A
THE ACQUIRED ASSETS
The "Acquired Assets" to be purchased by Buyers and
sold, conveyed, assigned, transferred and delivered on the
Closing Date to Buyers by VIR shall include all right, title and
interest in and to all of the assets, rights, privileges, and
interests of VIR, of whatever nature and wherever located, other
than the "Excluded Assets", including without limitation all of
the following:
Cash and Cash Equivalents. All cash and cash
equivalents (including marketable equity securities and short
term investments) of VIR as of the Closing Date.
Tangible Personal Property. All items of
machinery, equipment, trade fixtures, furnishings, vehicles,
furniture, software, and other tangible personal property,
including such items as are referred to on the Financial
Statements (but with such additions thereto and deletions
therefrom in the Ordinary Course of Business as may be
contemplated or permitted by this Agreement).
Inventories. The Closing Inventory and the
Remaining Inventory.
Intellectual Property. All Intellectual Property
Assets and all good will associated therewith, including the
Marks, Patents, Copyrights, and other Intellectual Property
Assets referred to on Schedule 3.20, and all other inventions,
drawings, processes and know-how, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder,
remedies against infringement thereof, and rights to protection
of interests under the laws of all jurisdictions.
Assigned Contracts. All of VIR's rights and
interests as of the Closing Date under or relating to the
"Assigned Contracts" (as defined below).
Receivables, Claims, Prepayments, Deposits, Etc.
All receivables, claims, deposits, prepayments, prepaid expenses,
refunds, causes of action, chooses in action, rights of recovery,
rights of setoff and rights of recoupment.
Books and Records. All books, records, ledgers,
files, documents, correspondence, lists, plats, architectural
plans, drawings, specifications, studies, reports, computer
software, systems, procedures manuals, and related materials.
Advertising and Marketing. All advertising and
promotional materials, market research, business plans and
projections, artwork, masters, tapes, mats and other similar
items, and all telephone numbers including toll-free 800 lines.
Permits and Licenses. All transferable approvals,
permits, licenses, orders, registrations, certificates, variances
and other Governmental Authorizations.
The "Assigned Contracts" shall be comprised of the
agreements and other instruments identified on Exhibit A-1
hereto. Provided, however, that if the Consent of any Person is
required in order to permit the assignment to Buyer of any such
agreement or other instrument, and if such Consent is not
obtained on or before the Closing Date, then Buyer may elect, on
the Closing Date, either (i) to include such agreement or other
instrument among the "Assigned Contracts," or (ii) to exclude
such agreement or other instrument from the "Assigned Contracts."
All of the foregoing Acquired Assets that, immediately
prior to the Merger, were owned by ERI, shall be transferred by
VIR to ERI Acquisition, Inc. All of the foregoing Acquired
Assets that, immediately prior to the Merger, were owned by LSC,
shall be transferred by VIR to LSC Acquisition, Inc. All of the
foregoing Acquired Assets that, immediately prior to the Merger,
were owned by VIR, shall be transferred by VIR to VIR
Acquisition, Inc.
Exhibit A-1
The following contracts, but only if they were entered into
the Ordinary Course of Business:
1. The following contracts:
(a) Non-Exclusive License between LSC and the
United States of America.
(b) Lease between ERI and The Moorestown West
Partnership for property located at 225 Executive Drive,
Moorestown, New Jersey.
(c) Bilateral Technology Exchange Agreement
between ERI and Data Race, Inc.
(d) Support Services Agreement effective
September 1, 1994 between VIR and Concert.
(e) Purchase and Sale Agreement dated December 6,
1994, as amended March 24, 1995, between Verilink Corporation and
ERI.
2. All existing unfilled and uncompleted contracts
for the purchase or sale of goods. Sellers hereby represent and
warrant that, except as specifically set forth on any Schedule
attached hereto, each of such contracts is cancellable/terminable
at will by Buyer without cost, premium or penalty to Buyer.
3. Existing agreements with utility companies, all of
which are month-to-month and cancellable/terminable on such basis
by Buyer without cost, premium or penalty to Buyer.
4. Any contract for services entered into by any of
the Companies in the Ordinary Course of Business as and when, but
not before, Buyer accepts and receives the benefit of such
services.
5. Any other contract but only if (i) the term of
such contract does not extend beyond 24 months from the Closing
Date, (ii) the liability with respect to such contract is not
retained by Sellers or Companies pursuant to this Agreement,
(iii) the contract is for the benefit of any of the Companies and
does not constitute an employment or similar agreement or relate
to the stock ownership of or any equity interest in any of the
Companies, and (iv) the total Liability of the Companies with
respect to the contracts described in this Paragraph 5 shall not
exceed, and Buyer does not assume any Liability to the extent it
exceeds, $100,000 during the 12 month period ending on the first
anniversary of the Closing and $100,000 during the 12 month
period ending on the second anniversary of the Closing.
Exhibit B-1
ASSUMED LIABILITIES
The liabilities to be assumed by VIR ACQ. pursuant to
the Agreement or otherwise in connection with the transactions
described therein shall consist only of the following liabilities
(the "Assumed Liabilities") arising after the Closing in
connection with the operation of the Business:
Assigned Contracts. All obligations of VIR under
the Assigned Contracts originally entered into by VIR which are
to be performed after, and relate to the period after, the
Closing Date (to the extent that the existence of such
obligations is ascertainable solely by reference to the written
provisions of the Assigned Contracts as disclosed to VIR ACQ.
before the Closing Date or the descriptions of any oral Assigned
Contracts set forth in Schedule 3.15), but specifically excluding
any obligations to be performed prior to the Closing and any
obligations relating to breaches, defaults or non-performance
under any of the Assigned Contracts occurring prior to the
Closing Date.
Customer Deposits and Payments in Advance. All
obligations to return or credit deposits and payments in advance
received by VIR from customers prior to the Closing Date as a
result of customer orders in the Ordinary Course of Business of
VIR, but only to the extent such deposits and payments in
advance, together with the liabilities assumed by the other
Buyers for deposits and payments in advance received by the other
Companies, do not exceed the cash and cash equivalents
transferred to Buyers at Closing. A list of all such customer
deposits, by name and amount, is attached to this Exhibit B-1.
Accounts Payable. All accounts payable of VIR
that, prior to the Merger, were payables of VIR that arose in the
Ordinary Course of Business. A list of all such accounts payable
is attached to this Exhibit B-1.
Warranty Claims. Warranty Claims for products
manufactured by VIR in an amount up to $20,000 for the first
twelve (12) month period after Closing and up to $20,000 for the
second twelve (12) month period after Closing. Warranty Claims
in excess of the foregoing amounts shall be subject to the
"basket" of One Hundred Thousand Dollars ($100,000) as set forth
in Section 10.5(a).
Ordinary Course. Liabilities of VIR which
(a) were incurred and arose in the Ordinary Course of Business,
(b) payment for which is not overdue, (c) were incurred for goods
used or to be used, or services rendered or to be rendered, in
connection with, for the benefit of and in furtherance of the VIR
Business, (d) are not otherwise Assumed Liabilities pursuant to 1
through 4 above, and (e) do not in the aggregate exceed
$10,000.00.
FICA. Liabilities of VIR accrued and reflected on
the books of VIR for FICA taxes withheld from employees' pay.
401(k). Liabilities of VIR accrued and reflected
on the books of VIR for 1995 401(k) plan contributions.
Outstanding Checks. Liabilities of VIR for checks
issued in the Ordinary Course of Business that have not cleared
the appropriate financial institution.
Exhibit B-2
ASSUMED LIABILITIES
The liabilities to be assumed by ERI ACQ. pursuant to
the Agreement or otherwise in connection with the transactions
described therein shall consist only of the following liabilities
(the "Assumed Liabilities") arising after the Closing in
connection with the operation of the Business:
Assigned Contracts. All obligations of VIR under
the Assigned Contracts originally entered into by ERI which are
to be performed after, and relate to the period after, the
Closing Date (to the extent that the existence of such
obligations is ascertainable solely by reference to the written
provisions of the Assigned Contracts as disclosed to ERI ACQ.
before the Closing Date or the descriptions of any oral Assigned
Contracts set forth in Schedule 3.15), but specifically excluding
any obligations to be performed prior to the Closing and any
obligations relating to breaches, defaults or non-performance
under any of the Assigned Contracts occurring prior to the
Closing Date.
Customer Deposits and Payments in Advance. All
obligations to return or credit deposits and payments in advance
received by ERI from customers prior to the Closing Date as a
result of customer orders in the Ordinary Course of Business of
ERI, but only to the extent such deposits and payments in
advance, together with the liabilities assumed by the other
Buyers for deposits and payments in advance received by the other
Companies, do not exceed the cash and cash equivalents
transferred to Buyers at Closing. A list of all such customer
deposits, by name and amount, is attached to this Exhibit B-2.
Accounts Payable. All accounts payable of VIR
that, prior to the Merger, were payables of ERI that arose in the
Ordinary Course of Business. A list of all such accounts payable
is attached to this Exhibit B-2.
Warranty Claims. Warranty Claims for products
manufactured by ERI in an amount up to $20,000 for the first
twelve (12) month period after Closing and up to $20,000 for the
second twelve (12) month period after Closing. Warranty Claims
in excess of the foregoing amounts shall be subject to the
"basket" of One Hundred Thousand Dollars ($100,000) as set forth
in Section 10.5(a).
Ordinary Course. Liabilities of ERI which
(a) were incurred and arose in the Ordinary Course of Business,
(b) payment for which is not overdue, (c) were incurred for goods
used or to be used, or services rendered or to be rendered, in
connection with, for the benefit of and in furtherance of the ERI
Business, (d) are not otherwise Assumed Liabilities pursuant to 1
through 4 above, and (e) do not in the aggregate exceed
$10,000.00.
FICA. Liabilities of ERI accrued and reflected on
the books of ERI for FICA taxes withheld from employees' pay.
401(k). Liabilities of ERI accrued and reflected
on the books of ERI for 1995 401(k) plan contributions.
Outstanding Checks. Liabilities of ERI for checks
issued in the Ordinary Course of Business that have not cleared
the appropriate financial institution.
Exhibit B-3
ASSUMED LIABILITIES
The liabilities to be assumed by LSC ACQ. pursuant to
the Agreement or otherwise in connection with the transactions
described therein shall consist only of the following liabilities
(the "Assumed Liabilities") arising after the Closing in
connection with the operation of the Business:
Assigned Contracts. All obligations of VIR under
the Assigned Contracts originally entered into by LSC which are
to be performed after, and relate to the period after, the
Closing Date (to the extent that the existence of such
obligations is ascertainable solely by reference to the written
provisions of the Assigned Contracts as disclosed to LSC ACQ.
before the Closing Date or the descriptions of any oral Assigned
Contracts set forth in Schedule 3.15), but specifically excluding
any obligations to be performed prior to the Closing and any
obligations relating to breaches, defaults or non-performance
under any of the Assigned Contracts occurring prior to the
Closing Date.
Customer Deposits and Payments in Advance. All
obligations to return or credit deposits and payments in advance
received by LSC from customers prior to the Closing Date as a
result of customer orders in the Ordinary Course of Business of
LSC, but only to the extent such deposits and payments in
advance, together with the liabilities assumed by the other
Buyers for deposits and payments in advance received by the other
Companies, do not exceed the cash and cash equivalents
transferred to Buyers at Closing. A list of all such customer
deposits, by name and amount, is attached to this Exhibit B-3.
Accounts Payable. All accounts payable of VIR
that, prior to the Merger, were payables of LSC that arose in the
Ordinary Course of Business. A list of all such accounts payable
is attached to this Exhibit B-3.
Warranty Claims. Warranty Claims for products
manufactured by LSC in an amount up to $5,000 for the first
twelve (12) month period after Closing and up to $5,000 for the
second twelve (12) month period after Closing. Warranty Claims
in excess of the foregoing amounts shall be subject to the
"basket" of One Hundred Thousand Dollars ($100,000) as set forth
in Section 10.5(a).
Ordinary Course. Liabilities of LSC which
(a) were incurred and arose in the Ordinary Course of Business,
(b) payment for which is not overdue, (c) were incurred for goods
used or to be used, or services rendered or to be rendered, in
connection with, for the benefit of and in furtherance of the LSC
Business, (d) are not otherwise Assumed Liabilities pursuant to 1
through 4 above, and (e) do not in the aggregate exceed
$10,000.00.
FICA. Liabilities of LSC accrued and reflected on
the books of LSC for FICA taxes withheld from employees' pay.
401(k). Liabilities of LSC accrued and reflected
on the books of LSC for 1995 401(k) plan contributions.
Outstanding Checks. Liabilities of LSC for checks
issued in the Ordinary Course of Business that have not cleared
the appropriate financial institution.
Exhibit B-4
PRODUCTS CURRENTLY IN DEVELOPMENT AND
PROVIDED TO CUSTOMERS FOR EVALUATION
PURPOSES
Liabilities for the replacement or repair of, or refund
of the consideration paid for, the products set forth on this
Exhibit B-4 shall be Assumed Liabilities. Liabilities for the
replacement or repair of, or refund of the consideration paid
for, any other products currently or previously in development
shall not be Assumed Liabilities, provided that such Liabilities
shall be subject to the "basket" of One Hundred Thousand Dollars
($100,000) as set forth in Section 10.5(a).
Exhibit B-4
BETA Products:
VIR
1. X Switch (Navy) appx. $150,000 - Total
2 SPI & SDL - Concert products appx. $100,000
LSC
1. Cable MUX Matrix for PMS appx. $50,000 - Total
Cable MUX and Matrix have special design for DMS
ERI
1. DNS - 3600 - 6 port multiplexor appx. $10,000 - Total
Exhibit D
EXCLUDED ASSETS
The Acquired Assets shall not include, and VIR shall
specifically retain, all of the following (the "Excluded
Assets"):
Corporate Charters, Etc. The corporate charter,
qualifications to conduct business as foreign corporations,
arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals,
minute books, stock transfer books and other documents relating
to the organization, maintenance and existence of the Companies
as a corporation.
Rights Under This Agreement. All of the rights of
the Sellers under this Agreement or under any Related Agreement
between Sellers on the one hand and the Buyer on the other hand
entered into on or after the date of this Agreement.
Office Furniture. The office furniture located in
the Shareholder's office; provided that such office furniture
shall be included within the property leased to VIR ACQ. pursuant
to the Lease.
Tensile Testing Equipment. All tensile testing
equipment located at the premises subject to the Lease and all
rights and interests related to such equipment.
Tax Refunds. Tax refunds attributable to any
period ending on or prior to Closing.
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED
OF EXCEPT IN COMPLIANCE WITH THE REQUIREMENTS OF OR EXEMPTIONS
UNDER SUCH ACT AND LAWS AND, IN THE CASE OF ANY TRANSFER PURSUANT
TO SUCH EXEMPTIONS, UNTIL THE COMPANY SHALL HAVE RECEIVED THE
WRITTEN OPINION OF COUNSEL OF RECOGNIZED STANDING REASONABLY
ACCEPTABLE TO COUNSEL TO THE COMPANY TO THE EFFECT THAT SUCH
TRANSFER IS EXEMPT FROM REGISTRATION UNDER APPLICABLE FEDERAL AND
STATE SECURITIES LAWS.
THIS DEBENTURE IS SUBJECT TO RESTRICTIONS ON TRANSFER CONTAINED
IN SECTION 7 HEREIN.
THIS DEBENTURE IS SUBJECT TO A SETOFF PROVISION CONTAINED IN
SECTION 6 HEREIN.
5.95% SERIES A DEBENTURE DUE AUGUST 1, 2000
No.: 1 Macungie, Pennsylvania
August 1, 1995
ERI ACQUISITION, INC., a Pennsylvania corporation (the
"Company") for value received, hereby promises to pay to VIR,
Inc., or its registered permitted assigns, at 1040 Coates Road,
Meadowbrook, Pennsylvania 19046, the principal amount of ONE
MILLION SIX HUNDRED SEVENTY-SEVEN THOUSAND SIX HUNDRED FIFTY
DOLLARS ($1,677,650) (or as so much thereof as shall not have
been prepaid), payable at the times and in the amounts set forth
on Exhibit A attached hereto, with the final principal payment
due on August 1, 2000 (the "Maturity Date"), and to pay interest
(computed on the basis of a 365-day year) on the unpaid principal
amount hereof, from the date hereof, at the rate of 5.95% per
annum semi-annually on the 1st day of August and the 1st day of
February in each year, commencing on February 1, 1996, until such
principal amount shall have become due and paid in full and fully
discharged. Payments of principal and interest on this 5.95%
Debenture (this "Debenture") shall be made in such coin or
currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and
private debts. If the date on which any such payment is required
to be made pursuant to the provisions of this Debenture occurs on
a day other than a Business Day (as hereinafter defined), such
payment shall be due and payable on the next succeeding Business
Day.
Collectively, this Debenture and the other 5.95%
Series A Debentures in an original aggregate principal amount,
including this Debenture, of $1,735,000 (the "Series A
Debentures") issued pursuant to the Purchase Agreement (as
hereinafter defined), together with any debentures issued in
replacement hereof or thereof, constitute the Company's 5.95%
debentures due August 1, 2000 (hereinafter the "5.95%
Debentures").
DEFINED TERMS
As used herein the following terms shall have the
following meanings:
"Allen" shall mean Allen Organ Company, a Pennsylvania
corporation, and its current former and future employees,
stockholders, directors and officers.
"Assignment Form" shall mean the Assignment Form, in
the form of Annex 1 hereto, which the registered holder must
complete and surrender in order to transfer this Debenture
pursuant to Section 7.
"Business Day" shall mean a day other than Saturday,
Sunday or other day on which commercial banks in Philadelphia,
Pennsylvania, are authorized or required by law to close.
"ERI" shall mean Eastern Research, Inc., a Pennsylvania
corporation.
"ERI Acquisition" shall mean ERI Acquisition, Inc., a
New Jersey corporation.
"Event of Default" shall have the meaning set forth in
Section 3.
"Executive Office" shall mean the Company's principal
executive office c/o Allen Organ Company, 150 Locust Street,
P.O. Box 36, Macungie, Pennsylvania 18062-0036, which address is
subject to change upon notification to the Holders in accordance
with Section 10.
"Final Determination" shall mean the time when a claim
for indemnification under Section 10 the Purchase Agreement has
been (a) resolved by the parties to the claim by written mutual
agreement, or (b) adjudicated pursuant to a non-appealable final
order of a court of competent jurisdiction.
"Holder" shall mean the Person in whose name this
Debenture is registered on the Register maintained by the Company
pursuant to Section 5; and "Holders" shall mean the collective
reference to all such holders of the 5.95% Debentures.
"LSC" shall mean Linear Switch Corporation, a
Pennsylvania corporation.
"LSC Acquisition" shall mean LSC Acquisition, Inc., a
New Jersey corporation.
"L. Rabey" shall mean Luba Rabey.
"Non-Competition Agreements" shall mean the
non-competition agreements dated the date hereof among VIR
Acquisition, ERI Acquisition, and LSC Acquisition and the
following Persons: Alex Rabey, Luba Rabey and VIR.
"Person" shall mean an individual, a corporation, a
partnership, a limited liability company, an association, a trust
or any other entity or organization, including a government or
political subdivision or any agency or instrumentality thereof.
"Purchase Agreement" shall mean the Assets Purchase
Agreement dated August 1, 1995, among the Company, VIR
Acquisition, LSC Acquisition, VIR, ERI, LSC, Selling Shareholder
and L. Rabey.
"Register" shall have the meaning set forth in
Section 5.
"Related Agreements" shall mean the Purchase Agreement
and the Non-Competition Agreements.
"Securities Restriction Agreement" shall mean the
Securities Restriction Agreement dated August 1, 1995 among
Allen, VIR, and VIR Acquisition.
"Selling Shareholder" shall mean Alex Rabey.
"Transfer" shall mean any direct or indirect sale,
assignment, transfer, pledge, encumbrance or hypothecation of an
interest in this Debenture or the grant of a security interest in
this Debenture.
"VIR" shall mean VIR, Inc., a Pennsylvania corporation.
"VIR Acquisition" shall mean VIR Acquisition, Inc. a
Pennsylvania corporation.
REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to the
Holder that the following are true and as of the date of issue of
this Debenture:
Corporate Existence; Corporate Power;
Authorization. The Company (a) is duly organized, validly
existing and in good standing under the laws of the Commonwealth
of Pennsylvania, (b) has the corporate power and authority and
the legal right to make and deliver, and to perform its
obligations under, the 5.95% Debentures, and (c) has taken all
necessary corporate action to authorize such borrowing on the
terms and conditions of the 5.95% Debentures and to authorize the
execution and delivery of and performance by it of its
obligations under the 5.95% Debentures.
No Legal Bar. No consent of, authorization of,
filing with, or other act by or in respect of, any other Person
is required in connection with the execution ad delivery by the
Company of, or performance by the Company of its obligations
under, or the validity or enforceability against the Company of,
the 5.95% Debentures. The execution and delivery of and
performance by the Company of its obligations under the 5.95%
Debentures will not violate or conflict with or constitute a
default under the Company's certificate of incorporation or
bylaws, or any law, rule or regulation, or determination of an
arbitrator, or of a government or court or other governmental
agency, instrumentality or authority applicable to or binding
upon the Company or any security issued by the Company or any
agreement, instrument or undertaking to which the Company is a
party or by which the Company or any of its property is bound,
except violations which will not have a material adverse effect
on the business, financial condition, assets, liabilities, net
assets, properties or results of operations of the Company and
its subsidiaries taken as a whole or on its ability to perform
its obligations under the 5.95% Debentures.
Enforceable Obligations. This Debenture has been
duly authorized, executed and delivered on behalf of the Company
and constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms, except as may be limited by applicable bankruptcy,
insolvency, moratorium or other similar laws affecting creditors'
rights generally and by applicable principles of equity (whether
considered in a suit at law or in equity).
EVENTS OF DEFAULT
Upon the occurrence of any of the following events
(each, individually, an "Event of Default" and collectively,
"Events of Default"):
The Company shall (i) fail to pay any part of
the principal amount of any of the 5.95% Debentures
within five (5) days after the date when due in
accordance with the terms hereof, or (ii) fail to pay
any installment of interest on any of the 5.95%
Debentures within five (5) days after the date when due
in accordance with the terms hereof or thereof, and, in
either case, such default continues for a period of
five (5) days after written notice from the Holder
(provided that the Holder shall only be obligated,
prior to declaring an Event of Default hereunder, to
give such written notice twice during the term of this
5.95% Debenture);
The Buyers (as defined in the Purchase
Agreement) fail to make any payment when due (subject
to applicable notice rights and cure periods) under
Section 2.4 of the Purchase Agreement for the Remaining
Inventory (as defined in the Purchase Agreement) and
the obligation to make such payment has not been
disputed by the Buyers;
any representation or warranty made by the
Company herein shall be proven by Holder to have been
incorrect in any material respect on or as of the date
made;
(i) the Company or Allen shall commence any
case, proceeding or other action (A) under any existing
or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief
entered with respect to the Company or Allen, or
seeking to adjudicate either of them as bankrupt or
insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to either of
them or their respective debts, or (B) seeking
appointment of a receiver, trustee, custodian or other
similar official for either of them or for all or any
substantial part of their respective assets, or the
Company or Allen shall make a general assignment for
the benefit of their respective creditors; or
(ii) there shall be commenced against the Company or
Allen any case, proceeding or other action of a nature
referred to in clause (i) above which (A) results in
the entry of an order for relief or any such
adjudication or appointment, or (B) remains
undismissed, undischarged or unbonded for a period of
60 days; or (iii) there shall be commenced against the
Company or Allen any case, proceeding or other action
seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any
substantial part of the Company's or Allen's assets,
which results in the entry of any order for any such
relief which shall not have been vacated, discharged,
or stayed on bond pending appeal within 60 days from
the entry thereof; or (iv) the Company or Allen shall
take any corporate action in furtherance of, or
indicating its consent to, approval of, or acquiescence
in, any of the acts set forth in clauses (i), (ii) or
(iii) above; or (v) the Company or Allen shall admit in
writing its inability to pay its debts as they become
due; or
VIR Acquisition or Allen fail to perform or
observe any of their covenants or agreements set forth
in the Securities Restriction Agreement and such
failure continues for a period of thirty (30) days
after written notice from the Holder;
then, and in any such event, (A) upon the occurrence of any Event
of Default described in subclause (i) or (ii) of clause (c) of
this Section 3, the unpaid principal amount of and accrued
interest on and all other amounts owing under this Debenture
shall automatically, without any further action of any Person,
mature and become due and payable, and (B) upon the occurrence
and during the continuation of any other Event of Default, the
Holder may at any time (unless all Events of Default shall
theretofore have been remedied in full) at its option, by written
notice or notices to the Company, declare the 5.95% Debentures to
be due and payable,whereupon the unpaid principal amount of and
accrued interest on and all other amounts owing under the 5.95%
Debentures shall forthwith mature and become due and payable, all
without presentment, demand, protest or other notice, all of
which are hereby expressly waived except as expressly provided
above in this Section 3.
At any time after this Debenture is declared due and
payable, as provided in clause (B) above, the Holder by written
notice to the Company, may rescind and annul any such declaration
in respect of the 5.95% Debentures and its consequences if
(i) the Company has paid all overdue interest on the 5.95%
Debentures, (ii) all Events of Default, other than non-payment of
amounts which have become due solely by reason of such
declaration, have been cured or waived by the Holder and (iii) no
judgment or decree has been entered for the payment of any monies
due pursuant to this Debenture, but no such rescission and
annulment shall extend to or affect any subsequent Event of
Default or impair any right consequent thereon.
REMEDIES ON DEFAULT; NO WAIVER; ETC.
In case any one or more Events of Default shall occur
and be continuing, the Holder may proceed to protect and enforce
its rights by an action at law, suit in equity or other
appropriate proceeding. No course of dealing and no failure to
exercise or delay in exercising any right, power or remedy by or
on the part of any Holder shall operate as a waiver thereof or
otherwise prejudice any Holder's rights, powers or remedies nor
shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. No right, power or
remedy conferred by this Debenture upon any Holder shall be
exclusive of any other right, power or remedy referred to herein
or now or hereafter available by law, in equity or otherwise.
DEBENTURE REGISTER
The Company may deem and treat the Person in whose name
this Debenture is registered as the owner hereof, notwithstanding
any notations of ownership or writing hereon made by anyone other
than the Company for all purposes and shall not be affected by
any notice to the contrary, until presentation of this Debenture
for registration of transfer as provided in Section 7. The
Company shall maintain, at its Executive Office, a register for
the Debentures (the "Register"), in which the Company shall
record the name and address of the Person in whose name each of
the 5.95% Debentures has been issued, as well as the name and
address of each transferee and assignee and each prior owner of
such 5.95% Debentures.
SETOFF
In the event that the Company seeks
indemnification from the Selling Shareholder, L. Rabey or VIR on
account of any of their indemnity or other obligations owed to
the Company, Allen, VIR Acquisition or LSC Acquisition pursuant
to the Related Agreements, and there is an amount or amounts
owing by the Company under this Debenture, the Company shall have
the right, pending a Final Determination of the indemnification
claim, to deposit payments due under this Debenture into escrow
with an independent third party satisfactory to the Company and
the Holder (or into an escrow account controlled jointly by
counsel for the Company and counsel for the Holder), in an amount
which shall not exceed the amount of the claim, if such claim is
determinable, or the Company's good faith estimate of the amount
of the claim, if such claim is not determinable. The amount to
be paid into escrow by the Company shall be paid in accordance
with and at the time required under this Debenture, without
acceleration. Any deposit by the Company into escrow shall not
be a default or Event of Default under the terms of this
Debenture. The amount held in escrow plus interest thereon shall
be paid to the Company or the Holder pursuant to a Final
Determination of the claim, and if paid to the Company, shall be
deemed a reduction in the purchase price paid by the Company
under the Purchase Agreement, and if paid to the Holder, shall be
deemed timely payments of principal plus accrued interest under
this debenture to be applied in the order of maturity. The
Company shall give not less than ten (10) days prior written
notice to the Holder of any claim for which amounts are to be
paid into escrow.
TRANSFER AND REPLACEMENT
Transfer. Subject to the restrictions on Transfer
contained in Section 7.3, this Debenture and all rights hereunder
are transferable, on the Register, upon the delivery at the
Executive Office of (a) this Debenture, and (b) a duly completed
Assignment Form by the registered holder hereof in person or by a
duly authorized attorney. After all of such items shall be
delivered, a new debenture identical to the terms of this
Debenture (other than the name of the transferee) shall be made
and delivered by the Company, of the same tenor as this
Debenture, but registered in the name of the transferee. The
Company may condition the issuance of any new debenture in
connection with a transfer by any Person on the payment of a sum
to cover any stamp tax or other governmental charge imposed in
respect to such transfer.
Replacement. Upon receipt by the Company at its
Executive Office of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Debenture and, in
the case of loss, theft or destruction, of indemnity or security
satisfactory to the Company, and, if mutilated, upon surrender of
this Debenture at such office, the Company will make and deliver
a new debenture identical to the terms of the 5.95% Debentures of
like tenor in replacement of this Debenture. This Debenture
shall be promptly canceled by the Company upon the surrender
hereof in connection with any Transfer or replacement.
Restrictions on Transfer. The Holder shall not,
directly or indirectly, Transfer this Debenture or any of the
5.95% Debentures unless:
such Transfer is of not less than twenty-five
percent (25%) of the Holder's direct or beneficial
interest in the 5.95% Debentures;
such Transfer is made pursuant to an
effective registration statement under the Securities
Act of 1933, as amended, and any applicable securities
law of any state or pursuant to an exemption from
registration under said Act and laws (in which event
the Holder shall deliver to the Company an opinion of
counsel of recognized standing in securities law
(including in-house or special counsel), which opinion
and counsel shall be reasonably satisfactory to the
Company and obtained at the Holder's expense, to the
effect that the proposed Transfer is exempt from
registration under applicable federal and state
securities laws);
such Transfer does not otherwise violate any
law, statute, rule, regulation, order or decree of the
United States of America or any state thereof or any
governmental authority of any of the foregoing;
such Transfer is to (i) a spouse or any
lineal ancestor or descendant, or (ii) the trustee or
trustees of a trust or trusts at any time established
for the primary benefit of the Holder or the spouse or
any lineal ancestor or descendant of the Holder; and
the transferee expressly acknowledges in
writing to the Company that (i) the transferee's rights
to receive payment hereunder are subject to certain
setoff rights as provided in Section 6 and (ii) the
transferee agrees to be bound by, and to hold the
Debenture subject to, all of the provisions of this
Debenture.
Any Person to whom this Debenture is transferred pursuant to this
Section 7 is herein referred to as a "Permissible Transferee."
If this Debenture is transferred to a Permissible Transferee,
such Permissible Transferee shall take and hold this Debenture,
and this Debenture shall be, subject to the rights, obligations
and restrictions set forth herein with respect to the original
Holder of this Debenture, as if such Permissible Transferee were
such original Holder.
Transfer Otherwise Void. Any purported Transfer
of the Holder's interest in the 5.95% Debentures made other than
in accordance with this Section 7, shall be void and the Company
shall not be required to recognize any equitable or other claims
to such interest on the part of any purported transferee.
Restrictive Legend. This Debenture and each
debenture issued upon Transfer or replacement for this Debenture
pursuant to Sections 7.1 or 7.2 shall be stamped or otherwise
imprinted with a legend in substantially the following form:
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE REQUIREMENTS OF OR EXEMPTIONS UNDER
SUCH ACT AND LAWS AND, IN THE CASE OF ANY TRANSFER
PURSUANT TO SUCH EXEMPTIONS, UNTIL THE COMPANY SHALL
HAVE RECEIVED THE WRITTEN OPINION OF COUNSEL OF
RECOGNIZED STANDING IN SECURITIES LAW (INCLUDING IN-
HOUSE OR SPECIAL COUNSEL), WHICH OPINION AND COUNSEL
SHALL BE REASONABLY SATISFACTORY TO THE COMPANY AND
OBTAINED AT THE HOLDER'S EXPENSE, TO THE EFFECT THAT
SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER
APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
THIS DEBENTURE IS SUBJECT TO RESTRICTIONS ON
TRANSFER CONTAINED IN SECTION 7 HEREIN.
THIS DEBENTURE IS SUBJECT TO A SETOFF PROVISION
CONTAINED IN SECTION 6 HEREIN.
PREPAYMENT
The Company may prepay all or any part of the unpaid
principal amount of this Debenture, together with accrued
interest, at any time after the date hereof without premium,
penalty or other charge.
NOTICES, ETC.
All notices, waivers and other communications provided
for hereunder shall be in writing, and shall be deemed to be
given (a) when delivered, if delivered by hand (with written
confirmation of receipt) or by telecopier (as evidenced by
receipt of the correct answer back), (b) one day after sending,
if sent by nationally recognized overnight delivery specifying
next day delivery (with written confirmation of receipt), or
(c) three days after deposited in the mails, if sent by certified
mail, with return receipt requested. All such notices, waivers
and other communications shall be addressed, if to the Company,
c/o Allen Organ Company, 150 Locust Street, P.O. Box 36,
Macungie, Pennsylvania 18062-0036 with a copy to Stevens & Lee,
111 North Sixth Street, Reading, Pennsylvania 19603, Attention:
Ernest J. Choquette, Esquire, and if to the Holder, at its
address specified on the Register, with a copy to Mesirov,
Gelman, Jaffe, Cramer & Jamieson, 1735 Market Street, 38th Floor,
Philadelphia, Pennsylvania 19103, Attention: Robert P. Krauss,
Esquire, or, in each case, to such other addresses as shall be
specified by like notice.
GOVERNING LAW
THIS DEBENTURE SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA (WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF
LAWS).
MISCELLANEOUS
The provisions of this Debenture shall inure to the
benefit of and shall be binding upon the Company and the Holder
and their respective heirs, legal representatives, successors and
assigns.
Dated: August 1, 1995 ERI ACQUISITION, INC.
By__STEVEN MARKOWITZ______________
Steven Markowitz,
Chief Executive Officer
EXHIBIT A
PAYMENT SCHEDULE
Payment Date Principal Due
August 1, 1996 $335,530
August 1, 1997 $335,530
August 1, 1998 $335,530
August 1, 1999 $335,530
August 1, 2000 $335,530
ANNEX 1
ASSIGNMENT FORM
To Be Executed by the Registered Holder
Desiring to Transfer the Within 5.95% Debenture
FOR VALUE RECEIVED, the undersigned registered holder hereby
sells, assigns and transfers unto ____________________,
_____________ of the 5.95% Debenture dated _____________ and
registered in the name of the undersigned, and does hereby
irrevocably constitute and appoint ________________________,
Attorney to transfer such amount of such 5.95% Debenture on the
books of the Company (as defined in such 5.95% Debenture), with
full power of substitution.
Name of Registered Holder
__________________________________
Signature_________________________
Title_____________________________
Address___________________________
__________________________________
Dated: ______________, 19__
In the presence of
______________________________
NOTICE
The signature to the foregoing Assignment Form must
correspond to the name as written upon the face of the within
5.95% Debenture in every particular, without alteration or
enlargement or any change whatsoever.
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED
OF EXCEPT IN COMPLIANCE WITH THE REQUIREMENTS OF OR EXEMPTIONS
UNDER SUCH ACT AND LAWS AND, IN THE CASE OF ANY TRANSFER PURSUANT
TO SUCH EXEMPTIONS, UNTIL THE COMPANY SHALL HAVE RECEIVED THE
WRITTEN OPINION OF COUNSEL OF RECOGNIZED STANDING REASONABLY
ACCEPTABLE TO COUNSEL TO THE COMPANY TO THE EFFECT THAT SUCH
TRANSFER IS EXEMPT FROM REGISTRATION UNDER APPLICABLE FEDERAL AND
STATE SECURITIES LAWS.
THIS DEBENTURE IS SUBJECT TO RESTRICTIONS ON TRANSFER CONTAINED
IN SECTION 7 HEREIN.
THIS DEBENTURE IS SUBJECT TO A SETOFF PROVISION CONTAINED IN
SECTION 6 HEREIN.
5.95% SERIES A DEBENTURE DUE AUGUST 1, 2000
No.: 1 Macungie, Pennsylvania
August 1, 1995
ERI ACQUISITION, INC., a Pennsylvania corporation (the
"Company") for value received, hereby promises to pay to DICTOR
CAPITAL CORPORATION, at 1767 Sentry Parkway West, Suite 240, Blue
Bell, Pennsylvania 19422, the principal amount of FIFTY-SEVEN
THOUSAND THREE HUNDRED FIFTY DOLLARS ($57,350) (or as so much
thereof as shall not have been prepaid), payable at the times and
in the amounts set forth on Exhibit A attached hereto, with the
final principal payment due on August 1, 2000 (the "Maturity
Date"), and to pay interest (computed on the basis of a 365-day
year) on the unpaid principal amount hereof, from the date
hereof, at the rate of 5.95% per annum semi-annually on the 1st
day of August and the 1st day of February in each year,
commencing on February 1, 1996, until such principal amount shall
have become due and paid in full and fully discharged. Payments
of principal and interest on this 5.95% Debenture (this
"Debenture") shall be made in such coin or currency of the United
States of America as at the time of payment shall be legal tender
for the payment of public and private debts. If the date on
which any such payment is required to be made pursuant to the
provisions of this Debenture occurs on a day other than a
Business Day (as hereinafter defined), such payment shall be due
and payable on the next succeeding Business Day.
Collectively, this Debenture and the other 5.95%
Series A Debentures in an original aggregate principal amount,
including this Debenture, of $1,735,000 (the "Series A
Debentures") issued pursuant to the Purchase Agreement (as
hereinafter defined), together with any debentures issued in
replacement hereof or thereof, constitute the Company's 5.95%
debentures due August 1, 2000 (hereinafter the "5.95%
Debentures").
DEFINED TERMS
As used herein the following terms shall have the
following meanings:
"Allen" shall mean Allen Organ Company, a Pennsylvania
corporation, and its current former and future employees,
stockholders, directors and officers.
"Business Day" shall mean a day other than Saturday,
Sunday or other day on which commercial banks in Philadelphia,
Pennsylvania, are authorized or required by law to close.
"ERI" shall mean Eastern Research, Inc., a Pennsylvania
corporation.
"ERI Acquisition" shall mean ERI Acquisition, Inc., a
New Jersey corporation.
"Event of Default" shall have the meaning set forth in
Section 3.
"Executive Office" shall mean the Company's principal
executive office c/o Allen Organ Company, 150 Locust Street,
P.O. Box 36, Macungie, Pennsylvania 18062-0036, which address is
subject to change upon notification to the Holders in accordance
with Section 10.
"Final Determination" shall mean the time when a claim
for indemnification under Section 10 the Purchase Agreement has
been (a) resolved by the parties to the claim by written mutual
agreement, or (b) adjudicated pursuant to a non-appealable final
order of a court of competent jurisdiction.
"Holder" shall mean the Person in whose name this
Debenture is registered on the Register maintained by the Company
pursuant to Section 5; and "Holders" shall mean the collective
reference to all such holders of the 5.95% Debentures.
"LSC" shall mean Linear Switch Corporation, a
Pennsylvania corporation.
"LSC Acquisition" shall mean LSC Acquisition, Inc., a
New Jersey corporation.
"L. Rabey" shall mean Luba Rabey.
"Non-Competition Agreements" shall mean the
non-competition agreements dated the date hereof among VIR
Acquisition, ERI Acquisition, and LSC Acquisition and the
following Persons: Alex Rabey, Luba Rabey and VIR.
"Person" shall mean an individual, a corporation, a
partnership, a limited liability company, an association, a trust
or any other entity or organization, including a government or
political subdivision or any agency or instrumentality thereof.
"Purchase Agreement" shall mean the Assets Purchase
Agreement dated August 1, 1995, among the Company, VIR
Acquisition, LSC Acquisition, VIR, ERI, LSC, Selling Shareholder
and L. Rabey.
"Register" shall have the meaning set forth in
Section 5.
"Related Agreements" shall mean the Purchase Agreement
and the Non-Competition Agreements.
"Securities Restriction Agreement" shall mean the
Securities Restriction Agreement dated August 1, 1995 among
Allen, VIR, and VIR Acquisition.
"Selling Shareholder" shall mean Alex Rabey.
"Transfer" shall mean any direct or indirect sale,
assignment, transfer, pledge, encumbrance or hypothecation of an
interest in this Debenture or the grant of a security interest in
this Debenture.
"VIR" shall mean VIR, Inc., a Pennsylvania corporation.
"VIR Acquisition" shall mean VIR Acquisition, Inc. a
Pennsylvania corporation.
REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to the
Holder that the following are true and as of the date of issue of
this Debenture:
Corporate Existence; Corporate Power;
Authorization. The Company (a) is duly organized, validly
existing and in good standing under the laws of the Commonwealth
of Pennsylvania, (b) has the corporate power and authority and
the legal right to make and deliver, and to perform its
obligations under, the 5.95% Debentures, and (c) has taken all
necessary corporate action to authorize such borrowing on the
terms and conditions of the 5.95% Debentures and to authorize the
execution and delivery of and performance by it of its
obligations under the 5.95% Debentures.
No Legal Bar. No consent of, authorization of,
filing with, or other act by or in respect of, any other Person
is required in connection with the execution ad delivery by the
Company of, or performance by the Company of its obligations
under, or the validity or enforceability against the Company of,
the 5.95% Debentures. The execution and delivery of and
performance by the Company of its obligations under the 5.95%
Debentures will not violate or conflict with or constitute a
default under the Company's certificate of incorporation or
bylaws, or any law, rule or regulation, or determination of an
arbitrator, or of a government or court or other governmental
agency, instrumentality or authority applicable to or binding
upon the Company or any security issued by the Company or any
agreement, instrument or undertaking to which the Company is a
party or by which the Company or any of its property is bound,
except violations which will not have a material adverse effect
on the business, financial condition, assets, liabilities, net
assets, properties or results of operations of the Company and
its subsidiaries taken as a whole or on its ability to perform
its obligations under the 5.95% Debentures.
Enforceable Obligations. This Debenture has been
duly authorized, executed and delivered on behalf of the Company
and constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms, except as may be limited by applicable bankruptcy,
insolvency, moratorium or other similar laws affecting creditors'
rights generally and by applicable principles of equity (whether
considered in a suit at law or in equity).
EVENTS OF DEFAULT
Upon the occurrence of any of the following events
(each, individually, an "Event of Default" and collectively,
"Events of Default"):
The Company shall (i) fail to pay any part of
the principal amount of any of the 5.95% Debentures
within five (5) days after the date when due in
accordance with the terms hereof, or (ii) fail to pay
any installment of interest on any of the 5.95%
Debentures within five (5) days after the date when due
in accordance with the terms hereof or thereof, and, in
either case, such default continues for a period of
five (5) days after written notice from the Holder
(provided that the Holder shall only be obligated,
prior to declaring an Event of Default hereunder, to
give such written notice twice during the term of this
5.95% Debenture);
any representation or warranty made by the
Company herein shall be proven by Holder to have been
incorrect in any material respect on or as of the date
made; or
(i) the Company or Allen shall commence any
case, proceeding or other action (A) under any existing
or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief
entered with respect to the Company or Allen, or
seeking to adjudicate either of them as bankrupt or
insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to either of
them or their respective debts, or (B) seeking
appointment of a receiver, trustee, custodian or other
similar official for either of them or for all or any
substantial part of their respective assets, or the
Company or Allen shall make a general assignment for
the benefit of their respective creditors; or
(ii) there shall be commenced against the Company or
Allen any case, proceeding or other action of a nature
referred to in clause (i) above which (A) results in
the entry of an order for relief or any such
adjudication or appointment, or (B) remains
undismissed, undischarged or unbonded for a period of
60 days; or (iii) there shall be commenced against the
Company or Allen any case, proceeding or other action
seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any
substantial part of the Company's or Allen's assets,
which results in the entry of any order for any such
relief which shall not have been vacated, discharged,
or stayed on bond pending appeal within 60 days from
the entry thereof; or (iv) the Company or Allen shall
take any corporate action in furtherance of, or
indicating its consent to, approval of, or acquiescence
in, any of the acts set forth in clauses (i), (ii) or
(iii) above; or (v) the Company or Allen shall admit in
writing its inability to pay its debts as they become
due;
then, and in any such event, (A) upon the occurrence of any Event
of Default described in subclause (i) or (ii) of clause (c) of
this Section 3, the unpaid principal amount of and accrued
interest on and all other amounts owing under this Debenture
shall automatically, without any further action of any Person,
mature and become due and payable, and (B) upon the occurrence
and during the continuation of any other Event of Default, the
Holder may at any time (unless all Events of Default shall
theretofore have been remedied in full) at its option, by written
notice or notices to the Company, declare the 5.95% Debentures to
be due and payable,whereupon the unpaid principal amount of and
accrued interest on and all other amounts owing under the 5.95%
Debentures shall forthwith mature and become due and payable, all
without presentment, demand, protest or other notice, all of
which are hereby expressly waived except as expressly provided
above in this Section 3.
At any time after this Debenture is declared due and
payable, as provided in clause (B) above, the Holder by written
notice to the Company, may rescind and annul any such declaration
in respect of the 5.95% Debentures and its consequences if
(i) the Company has paid all overdue interest on the 5.95%
Debentures, (ii) all Events of Default, other than non-payment of
amounts which have become due solely by reason of such
declaration, have been cured or waived by the Holder and (iii) no
judgment or decree has been entered for the payment of any monies
due pursuant to this Debenture, but no such rescission and
annulment shall extend to or affect any subsequent Event of
Default or impair any right consequent thereon.
REMEDIES ON DEFAULT; NO WAIVER; ETC.
In case any one or more Events of Default shall occur
and be continuing, the Holder may proceed to protect and enforce
its rights by an action at law, suit in equity or other
appropriate proceeding. No course of dealing and no failure to
exercise or delay in exercising any right, power or remedy by or
on the part of any Holder shall operate as a waiver thereof or
otherwise prejudice any Holder's rights, powers or remedies nor
shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. No right, power or
remedy conferred by this Debenture upon any Holder shall be
exclusive of any other right, power or remedy referred to herein
or now or hereafter available by law, in equity or otherwise.
DEBENTURE REGISTER
The Company may deem and treat the Person in whose name
this Debenture is registered as the owner hereof, notwithstanding
any notations of ownership or writing hereon made by anyone other
than the Company for all purposes and shall not be affected by
any notice to the contrary, until presentation of this Debenture
for registration of transfer as provided in Section 7. The
Company shall maintain, at its Executive Office, a register for
the Debentures (the "Register"), in which the Company shall
record the name and address of the Person in whose name each of
the 5.95% Debentures has been issued, as well as the name and
address of each transferee and assignee and each prior owner of
such 5.95% Debentures.
SETOFF
In the event that the Company seeks
indemnification from the Selling Shareholder, L. Rabey or VIR on
account of any of their indemnity or other obligations owed to
the Company, Allen, VIR Acquisition or LSC Acquisition pursuant
to the Related Agreements, and there is an amount or amounts
owing by the Company under this Debenture, the Company shall have
the right, pending a Final Determination of the indemnification
claim, to deposit payments due under this Debenture into escrow
with an independent third party satisfactory to the Company and
the Holder (or into an escrow account controlled jointly by
counsel for the Company and counsel for the Holder), in an amount
which shall not exceed the amount of the claim, if such claim is
determinable, or the Company's good faith estimate of the amount
of the claim, if such claim is not determinable. The amount to
be paid into escrow by the Company shall be paid in accordance
with and at the time required under this Debenture, without
acceleration. Any deposit by the Company into escrow shall not
be a default or Event of Default under the terms of this
Debenture. The amount held in escrow plus interest thereon shall
be paid to the Company or the Holder pursuant to a Final
Determination of the claim, and if paid to the Company, shall be
deemed a reduction in the purchase price paid by the Company
under the Purchase Agreement, and if paid to the Holder, shall be
deemed timely payments of principal plus accrued interest under
this debenture to be applied in the order of maturity. The
Company shall give not less than ten (10) days prior written
notice to the Holder of any claim for which amounts are to be
paid into escrow. The Company agrees to exercise its right of
setoff first against any sums due under any other 5.95% Debenture
before exercising its right of setoff against sums due under this
Debenture.
REPLACEMENT AND TRANSFER
Replacement. Upon receipt by the Company at its
Executive Office of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Debenture and, in
the case of loss, theft or destruction, of indemnity or security
satisfactory to the Company, and, if mutilated, upon surrender of
this Debenture at such office, the Company will make and deliver
a new debenture identical to the terms of the 5.95% Debentures of
like tenor in replacement of this Debenture. This Debenture
shall be promptly canceled by the Company upon the surrender
hereof in connection with any replacement.
Restrictions on Transfer. The Holder shall not,
directly or indirectly, Transfer this Debenture.
Transfer Otherwise Void. Any purported Transfer
of the Holder's interest in the 5.95% Debenture shall be void and
the Company shall not be required to recognize any equitable or
other claims to such interest on the part of any purported
transferee.
Restrictive Legend. This Debenture and each
debenture issued upon replacement for this Debenture pursuant to
Section 7.1 shall be stamped or otherwise imprinted with a legend
in substantially the following form:
THIS DEBENTURE IS SUBJECT TO RESTRICTIONS ON
TRANSFER CONTAINED IN SECTION 7 HEREIN.
THIS DEBENTURE IS SUBJECT TO A SETOFF PROVISION
CONTAINED IN SECTION 6 HEREIN.
PREPAYMENT
The Company may prepay all or any part of the unpaid
principal amount of this Debenture, together with accrued
interest, at any time after the date hereof without premium,
penalty or other charge.
NOTICES, ETC.
All notices, waivers and other communications provided
for hereunder shall be in writing, and shall be deemed to be
given (a) when delivered, if delivered by hand (with written
confirmation of receipt) or by telecopier (as evidenced by
receipt of the correct answer back), (b) one day after sending,
if sent by nationally recognized overnight delivery specifying
next day delivery (with written confirmation of receipt), or
(c) three days after deposited in the mails, if sent by certified
mail, with return receipt requested. All such notices, waivers
and other communications shall be addressed, if to the Company,
c/o Allen Organ Company, 150 Locust Street, P.O. Box 36,
Macungie, Pennsylvania 18062-0036 with a copy to Stevens & Lee,
111 North Sixth Street, Reading, Pennsylvania 19603, Attention:
Ernest J. Choquette, Esquire, and if to the Holder, at its
address specified on the Register, with a copy to Mesirov,
Gelman, Jaffe, Cramer & Jamieson, 1735 Market Street, 38th Floor,
Philadelphia, Pennsylvania 19103, Attention: Robert P. Krauss,
Esquire, or, in each case, to such other addresses as shall be
specified by like notice.
GOVERNING LAW
THIS DEBENTURE SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA (WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF
LAWS).
MISCELLANEOUS
The provisions of this Debenture shall inure to the
benefit of and shall be binding upon the Company and the Holder
and their respective heirs, legal representatives, successors and
assigns.
Dated: August 1, 1995 ERI ACQUISITION, INC.
By__STEVEN MARKOWITZ_______________
Steven Markowitz,
Chief Executive Officer
EXHIBIT A
PAYMENT SCHEDULE
Payment Date Principal Due
August 1, 1996 $11,470
August 1, 1997 $11,470
August 1, 1998 $11,470
August 1, 1999 $11,470
August 1, 2000 $11,470
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated August 1, 1995, between ALEX
RABEY, an adult individual residing at 1040 Coates Road,
Meadowbrook, Pennsylvania 19046 (the "Employee"), and VIR
ACQUISITION, INC., a Pennsylvania corporation having offices at
c/o Allen Organ Company, 150 Locust Street, Macungie,
Pennsylvania 18062-0036 (the "Company").
BACKGROUND
The Employee has been the President and a
significant stockholder of VIR, Inc., a Pennsylvania corporation
(the "Seller"). The Company has agreed to acquire substantially
all of the assets of VIR pursuant to an Assets Purchase Agreement
dated August 1, 1995 (the "Purchase Agreement").
The Company desires to retain the services of the
Employee as an employee of the Company.
The Employee is willing and agrees to accept such
employment on the terms and conditions hereinafter stated.
In consideration of the premises, and to induce the
Company and the Employee to consummate the transaction above
described, the parties agree as follows:
AGREEMENT
Employment. The Company hereby employs the
Employee as its President, and the Employee hereby accepts such
employment, on the terms and conditions hereinafter set forth.
Duties During Employment Period. The Employee
shall well and faithfully perform and discharge such management
duties, as President of the Company, as may be assigned to him
from time to time by the Board of Directors of the Company (the
"Board"), or by such member of the Board as the Board may
designate. The Employee also shall perform management duties for
two affiliates of the Company, ERI Acquisition, Inc. ("ERI") and
LSC Acquisition, Inc. ("LSC"), as may be assigned to him from
time to time by the Board or its designee. Such duties shall
include assisting in assembling management teams at ERI and LSC.
If the Employee is elected as a director of the Company, or of
any subsidiary, parent corporation or other affiliate of the
Company (collectively, "Affiliates"), he will serve in such
capacity without additional compensation (unless the Employee is
elected a director of Allen Organ Company and other directors of
Allen Organ Company who also are employees of Allen Organ Company
receive compensation as directors, in which event the Employee
shall receive similar compensation as a director). The Employee
shall devote his full time, attention and energies to the
business of the Company and shall not be employed in any other
business activity during the Employment Period (as hereinafter
defined), whether or not such activity is pursued for gain,
profit or other pecuniary advantage. The Employee shall
nevertheless have the right to invest his personal assets in
businesses which do not compete with the Company or any Affiliate
where the form or manner of such investments will not require
services on the part of the Employee in the operation of the
affairs of the business in which such investments are made and in
which his participation is solely that of a passive investor.
Term of Employment. The employment under
Paragraph 2 of this Agreement shall be for a period commencing on
the date hereof and ending on July 31, 1997 (the "Employment
Period"). Notwithstanding the foregoing, the Employee's
employment may be sooner terminated in accordance with one of the
following alternatives:
Cause. The Company may terminate the
Employee's employment under Section 2 at any time for Cause (as
hereinafter defined) by action of the Board upon giving the
Employee notice of such termination at least thirty (30) days
prior to the date upon which termination shall take effect. As
used herein, the term "Cause" shall mean any of the following
events:
the Employee's conviction of or plea of
guilty or nolo contendere to a felony, a crime of falsehood
or a crime involving moral turpitude or the actual
incarceration of the Employee for a period of ten
(10) consecutive days;
the Employee's failure to follow the good
faith instructions, with respect to the Company or its
operations, of the Board or its designee (provided that the
Employee shall be given, once during each twelve (12) month
period following execution of this Agreement, thirty
(30) days following receipt of notice of such failure in
which to cure such failure); or
the Employee's (A) willful misconduct, or
(B) neglect of duties or failure to act with respect to
duties or actions previously communicated to the Employee by
the Board or its designee (provided that the Employee shall
be given, once during each twelve (12) month period
following execution of this Agreement, thirty (30) days
following receipt of written notice of such neglect or
failure in which to cure such neglect or failure).
If his employment is terminated under the provisions of this
Section 3(a), all rights of the Employee pursuant to Section 4
hereof shall cease as of the effective date of such termination
(other than the Employee's rights under Section 4(c) of this
Agreement, which shall survive termination of this Agreement).
Death. If the Employee dies, his employment
shall be deemed to cease as of the date of his death, and his
rights pursuant to Section 4 shall cease as of the last day of
the month in which his death occurs (other than the Employee's
rights under Section 4(c) of this Agreement, which shall survive
the Employee's death and termination of this Agreement).
Incapacity. If the Employee is so
incapacitated by accident, sickness or otherwise so as to render
him mentally or physically incapable of performing the services
required of him under Section 2 for an aggregate of ninety (90)
business days during any twelve (12) month period, upon the
expiration of such period or at any time thereafter, by action of
the Board, the Employee's employment may be terminated
immediately upon giving him notice to that effect. If the
Employee's employment under Section 2 is terminated pursuant to
the provisions of this Section 3(c), his rights pursuant to
Section 4 shall cease as of the last day of the month in which
such termination occurs (other than the Employee's right under
Section 4(c) of this Agreement, which shall survive termination
of this Agreement).
(i) The Employee may terminate this Agreement
at any time for Good Reason (as hereinafter defined) by giving
the Company not less than thirty (30) days notice of such
termination and the opportunity to remedy the circumstances that
gave the Employee Good Reason to terminate this Agreement. As
used herein, the term "Good Reason" shall mean any of the
following:
(A) any change in the Employee's title,
authorities or responsibilities (including reporting
responsibilities) which causes the Employee to no longer serve in
an executive capacity with the Company, except in connection with
the termination of employment for incapacity, death or Cause;
(B) a reduction by the Company in the
Employee's annual base salary as in effect on the date hereof;
(C) the relocation of the Employee's office
to a location more than fifty (50) miles from Meadowbrook,
Pennsylvania;
(D) the failure by the Company to continue
in effect any incentive, bonus or other compensation plans
provided for hereunder;
(E) any material breach by the Company of
any provisions of this Agreement; or
(F) the failure of the Company to obtain a
satisfactory agreement from any successor or assign of the
Company to assume and agree to perform this Agreement.
If the Employee sends notice of termination
for Good Reason and the Company fails to remedy the circumstances
that gave the Employee Good Reason to terminate this Agreement
within thirty (30) days of such notice, this Agreement shall
thereupon terminate but the Employee shall remain entitled to the
payments and benefits provided for under Sections 4(a), (c), and
(d) of this Agreement until July 31, 1997, with respect to
Sections 4(a) and (d), and July 31, 2000, with respect to
Section 4(c).
Employment Period Compensation.
Salary. For services rendered by the
Employee hereunder, the Company shall pay him a salary during the
Employment Period of One Hundred Thousand Dollars ($100,000) per
year, payable in accordance with the Company's standard payroll
practices as in effect from time to time.
(i) Bonus. The Employee shall be entitled to a
bonus (the "Bonus") based on the Company's Gross Sales and
Earnings Before Interest and Taxes ("EBIT") (as hereinafter
defined). The Bonus shall be calculated as follows:
Period EBIT Bonus
Through 12/31/95 EBIT => 15% of .005 times Gross Sales up
Gross Sales to $1,666,666, plus .01
times Gross Sales in
excess of $1,666,666
EBIT > 0 but .0025 times Gross Sales up
less than 15% to $1,666,666, plus .005
of Gross Sales times Gross Sales in
excess of $1,666,666
EBIT <= 0 No Bonus will be payable
1/1/96 - 12/31/96 EBIT => 15% of .005 times Gross Sales up
Gross Sales to $4,000,000, plus .01
times Gross Sales in
excess of $4,000,000
EBIT > 0 but .0025 times Gross Sales up
less than 15% to $4,000,000, plus .005
of Gross Sales times Gross Sales in
excess of $4,000,000
EBIT <= 0 No Bonus will be payable
1/1/97 - 7/31/97 EBIT => 15% of .005 times Gross Sales up
Gross Sales to $2,333,333, plus .01
times Gross Sales in
excess of $2,333,333
EBIT > 0 but .0025 times Gross Sales up
less than 15% to $2,333,333, plus .005
of Gross Sales times Gross Sales in
excess of $2,333,333
EBIT <= 0 No Bonus will be payable
"Gross Sales" as used in this Section 4(b)
shall mean the total revenues of the Company for the period in
question as determined by reference to the Company's
consolidating financial statements prepared in accordance with
generally accepted accounting principles consistently applied,
less sales to Affiliates, discounts, returns, allowances, and
uncollected receivables. "EBIT" as used in this Section 4(b)
shall mean the Company's earnings before interest and taxes for
the period in question, determined by reference to the Company's
consolidating financial statements prepared in accordance with
generally accepted accounting principles consistently applied.
Bonuses payable pursuant to this
Section 3(b) shall be paid ninety (90) days following the end of
the applicable period.
Incentive Compensation. During each calendar
year of the Employment Period (and pro-rated for any partial
calendar year), and for the three (3) year period following
expiration of the Employment Period (unless the Employment Period
is terminated prior to July 31, 1997 in accordance with
Section 3, in which event the provisions of Section 3 shall
apply), the Employee shall be entitled to receive incentive
compensation in an amount equal to four percent (4%) of the Gross
Sales (as hereinafter defined) of LSC. "Gross Sales" as used in
this Section 4(c) shall mean the total revenues of LSC for the
period in question as determined by reference to LSC's
consolidating financial statements prepared in accordance with
generally accepted accounting principles consistently applied,
less sales to Affiliates (including parent, subsidiary, sister or
other affiliated entities) of LSC, discounts, returns,
allowances, and uncollected receivables.
Other Benefits. The Company shall provide
the Employee with fringe benefits during the Employment Period as
are provided generally to senior management of the Company. The
Employee shall be entitled to three (3) weeks vacation per
calendar year, pro-rated for any partial calendar year of the
Employment Period. The Employee shall not be entitled to use of
a Company car.
Covenant Not to Compete. The Employee hereby
acknowledges and recognizes the highly competitive nature of the
Company's and the Affiliates' businesses and accordingly agrees
for the consideration stated above that, during and for the
period commencing with the date hereof and ending three (3) years
after the termination of the Employment Period (the "Restricted
Period"), the Employee will not directly or indirectly:
engage, anywhere in the world, in the design,
development, manufacture, sale or marketing of data
communications hardware or software or related products which at
any time during the Employment Period were designed, developed,
manufactured, sold or marketed by the Company or any Affiliate
(other than on behalf of the Company or an Affiliate), whether
such engagement is as an officer, director, proprietor, employee,
partner, investor (other than as a passive investor in less than
five percent (5%) of the outstanding capital stock of a publicly
traded corporation), consultant, advisor, agent or other
participant in another business, or as a supplier to any customer
with whom the Company or any Affiliate does business during the
Employment Period,
assist others in engaging in any business
activities prohibited to the Employee under clause (a) above, or
hire any employees of the Company or induce
employees of the Company or any Affiliate to engage in any
activities hereby prohibited to the Employee or to terminate
their employment.
The Restricted Period shall be extended by the length of time (if
any) in which the Employee is in violation of any of the terms of
this Agreement.
Disclosure of Confidential Information. The
Employee acknowledges that the Company's and its Affiliates'
trade secrets, private or secret processes as they may exist from
time to time and confidential information concerning their data
communications hardware and software and related products,
development, technical information, procurement and sales
activities and procedures, promotion and pricing techniques and
credit and financial data concerning customers are valuable,
special and unique assets of the Company and its Affiliates, as
the case may be, access to and knowledge of which are essential
to the performance of the Employee's duties hereunder. In light
of the highly competitive nature of the industry in which the
Company's and its Affiliates' businesses are conducted, the
Employee further agrees that all knowledge and information
described in the preceding sentence not in the public domain and
heretofore or in the future obtained by him as a result of his
employment by the Company or any Affiliate shall be considered
confidential information. In recognition of this fact, the
Employee agrees that he will not, during or after the Employment
Period, disclose any of such secrets, processes or information to
any person or other entity for any reason or purpose whatsoever,
except as necessary in the performance of his duties as an
employee of or consultant to the Company and its Affiliates, nor
shall the Employee make use of any such secrets, processes or
information (other than information in the public domain) for his
own purposes or for the benefit of any person or other entity
(except the Company and its Affiliates) under any circumstances
during or after the Employment Period.
Company Right to Inventions. The Employee shall
promptly disclose, grant and assign to the Company for its sole
use and benefit any and all inventions, improvements, technical
information and suggestions which the Employee has in the past
conceived, developed or acquired or may conceive, develop or
acquire during the Employment Period (whether or not during usual
working hours), together with all patent applications, letters
patent, copyrights and reissues thereof that may at any time be
granted for or upon any such invention, improvement or technical
information. Therefore, the Employee shall promptly at all times
during and after the Employment Period:
execute and deliver such applications,
assignments, descriptions and other instruments as may be
necessary or proper in the opinion of the Company to vest in the
Company title to such inventions, improvements, technical
information, patent applications and to enable it to obtain and
maintain the entire right and title thereto throughout the world;
and
render to the Company at its expense all such
assistance as it may require in the prosecution of applications
for said patents or reissues thereof, in the prosecution or
defense of interference which may be declared involving any such
application or patent, and in any litigation in which the Company
or its Affiliates may be involved relating to any such patent,
invention, improvement or technical information.
Remedies. The Employee acknowledges that the
Company's remedy at law for a threatened or actual breach of any
of the provisions of Sections 5, 6, or 7 would be inadequate.
Accordingly, in the event of a threatened or actual breach by the
Employee of any provision of Sections 5, 6 or 7, in addition to
its remedy at law, the Company shall be entitled to equitable
relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable
remedy then available, without the necessity for the Company to
post any bond. The Employee agrees not to oppose the Company's
request for such relief. In the event of any such threatened or
actual breach, at the election of the Company, all rights of the
Employee under Section 4 shall thereupon terminate. The Employee
acknowledges that the granting of a temporary injunction,
temporary restraining order or permanent injunction merely
prohibiting the use of trade secrets and like proprietary
information would not be an adequate remedy upon threatened or
actual breach, and consequently agrees upon any such threatened
or actual breach to the granting of injunctive relief prohibiting
the manufacture or sale of data communications hardware or
software or related products and providing of related services.
Nothing herein contained shall be construed as prohibiting the
Company from pursuing any other remedies available to it for such
threatened or actual breach.
Reformation. Although the Employee and the
Company consider the restrictions in Sections 5, 6, 7 and 8
reasonable for the purpose of preserving for the Company and its
Affiliates their good will and other proprietary rights, if a
final judicial determination is made by a court having
jurisdiction that the time or territory or any other restriction
contained in Sections 5, 6, 7 and 8 is an unreasonable or
otherwise unenforceable restriction against the Employee, the
provisions of Sections 5, 6, 7 and 8 shall not be rendered void
but shall be deemed amended to apply as to such maximum time and
territory and to such other extent as such court may judicially
determine or indicate to be reasonable.
Employee's Representations. Employee represents
that he has full power and authority to enter into this Agreement
and that the execution of this Agreement and the performance of
Employee's duties hereunder will not cause Employee to be in
violation of any other agreement, judgment, order, decree, former
employment relationship or other obligation to which Employee may
be subject. Employee shall indemnify and defend the Company and
its Affiliates against all liability, cost, damage, and expense
that they may incur as a result of any occurrence which is
related to the subject matter of this Section 10.
No Waiver. Failure by the Company at any time or
times hereafter to require strict performance by Employee of any
of the provisions, terms, and conditions contained in this
Agreement shall not diminish or otherwise affect any right of the
Company at any time or times thereafter to demand strict
performance thereof and of any other provisions, terms, and
conditions contained in this Agreement. Any waiver of such
provision, term, or condition shall not waive or affect any other
failure to perform a provision, term, or condition of this
Agreement, whether prior or subsequent thereto, and whether of
the same or a different type. None of the provisions, terms, or
conditions of this Agreement shall be deemed to have been waived
by any act or knowledge of the Company except by an instrument in
writing signed by that party and directed to Employee specifying
such waiver.
Termination of Restrictions. The Employee, by
written notice to the Company, may terminate the restrictions set
forth in Section 5 of this Agreement if (a) the Company, ERI
Acquisition, Inc. or LSC Acquisition, Inc. fail to make any
payment when due (subject to applicable notice rights and cure
periods) under (i) Section 2.4(d) of the Purchase Agreement, or
(ii) the Debenture dated the date hereof issued by ERI
Acquisition, Inc. to VIR, Inc. in the original principal amount
of $1,677,650, and (b) the obligation to make any such payment
has not been disputed by the Company, ERI Acquisition, Inc. or
LSC Acquisition, Inc.
Notices. Any notice required or permitted under
this Agreement shall be deemed properly given if in writing and
if mailed by registered or certified mail, postage prepaid with
return receipt requested, to his residence stated above, in the
case of notices to the Employee or to the principal office of the
Company, to the attention of its Chairman of the Board, in the
case of notice to the Company.
Severability. The invalidity or unenforceability
of any provision of this Agreement shall in no event affect the
validity or enforceability of any other provision.
Captions. The captions of the several sections
and subsections of this Agreement are inserted for convenience of
reference only. They constitute no part of this Agreement and
are not to be considered in the construction hereof.
Binding Effect and Benefit. The provisions of
this Agreement shall be binding upon and shall inure to the
benefit of the respective heirs, successors, and (subject to
Section 16) assigns of the Company and Employee.
Assignment. This Agreement shall not be
assignable by either party without the other party's prior
written consent, except this Agreement may be assigned by the
Company to any Affiliate, or to any successor in interest of the
Company's business or assets.
Entire Agreement. This Agreement contains the
entire agreement of the parties relating to the Employee's
employment, supersedes and replaces in its entirety any existing
employment or similar agreement of the Employee and may not be
waived, changed, extended or discharged except by an agreement in
writing, consented to in writing by Chairman of the Board and
signed by the party against whom enforcement of any such waiver,
change, extension or discharge is sought.
Survival. Any termination of the Employee's
employment or of this Agreement shall not affect the provisions
of Sections 5, 6, 7, 8 or 9 hereof, which shall each survive such
termination in accordance with its terms.
Applicable Law. This Agreement shall be governed
by and construed in accordance with the laws of the Commonwealth
of Pennsylvania, without regard to the law of conflicts of law.
Headings. The headings of the sections and
paragraphs hereof are for convenience only and shall not control
or affect the meaning or construction or limit the scope or
intent of any provision of this Agreement.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
VIR ACQUISITION, INC.
By__STEVEN MARKOWITZ__________________
Steven Markowitz,
Chief Executive Officer
Attest:__LEONARD W. HELFRICH__________
Title:
("Company")
__ALEX RABEY_________________(SEAL)
Alex Rabey
("Employee")
AGREEMENT NOT TO COMPETE
THIS AGREEMENT (the "Agreement") made this 1st day of
August, 1995, by and between ALEX RABEY, an adult individual (the
"Stockholder"), LUBA RABEY, an adult individual and wife of the
Stockholder ("L. Rabey") (Stockholder and L. Rabey are
collectively referred to herein as the "Restricted Parties"), VIR
ACQUISITION, INC. ("VIR Acquisition), a Pennsylvania corporation,
ERI ACQUISITION, INC. ("ERI Acquisition"), a New Jersey
corporation, and LSC Acquisition, Inc. ("LSC Acquisition"), a New
Jersey corporation (VIR Acquisition, ERI Acquisition and LSC
Acquisition are each hereinafter referred to as a "Buyer" and
collectively as the "Buyers").
BACKGROUND
The Restricted Parties are (or were immediately
prior to the merger described below) the owners of
(i) approximately 97% of the shares of the outstanding stock of
VIR, Inc. ("VIR"), (ii) approximately 92% of the shares of the
outstanding stock of Eastern Research, Inc. ("ERI") and
(iii) approximately 83% of the shares of the outstanding stock of
Linear Switch Corporation ("LSC") (VIR, ERI and LSC are each
hereinafter referred to as a "Company" and collectively as the
"Companies").
Each of the Companies is or was engaged in the
engineering, manufacturing, marketing and sale of data
communications hardware and software. (Such activities are
referred to herein as the "Business Activities".) Stockholder
has served as the President of each of the Companies.
Under an Assets Purchase Agreement dated the date
hereof (the "Purchase Agreement"), the Buyers propose to purchase
from VIR substantially all of the assets of VIR, including all of
the assets of VIR that prior to the merger of the Companies were
assets of ERI and LSC, as well as all customer lists, goodwill
and certain other intangible assets.
In light of the Restricted Parties' ownership of
the above-described shares of capital stock of the Companies,
Stockholder's position as the President of each of the Companies
and his major contributions in the past to the growth and
development of each of the Companies, one of the conditions to
the consummation by Buyers of the transactions contemplated in
the Purchase Agreement is that the Restricted Parties enter into
this Agreement Not to Compete for the purpose of preserving for
Buyers' benefit the goodwill and proprietary rights of VIR.
AGREEMENT
NOW, THEREFORE, for the purposes of inducing Buyers to
consummate the transactions contemplated in the Purchase
Agreements and to preserve the goodwill of VIR for Buyers, in
consideration of the mutual covenants contained herein and
intending to be legally bound hereby, the parties agree as
follows:
Non-Competition. The Restricted Parties hereby
acknowledge and recognize the highly competitive nature of the
Business Activities now and heretofore engaged in by the
Companies and accordingly agree that they will not, during and
for the period commencing with the date hereof and ending on the
fifth anniversary of the closing under the Purchase Agreement,
directly or indirectly:
engage in any of the Business Activities
anywhere in the world, whether such engagement is as an
officer, director, proprietor, employee (other than as an
employee of VIR Acquisition), partner, investor (other than
as a passive investor in less than five percent (5%) of the
outstanding capital stock of a publicly traded corporation),
consultant, advisor, agent, or other participant in another
business, or as a supplier to any customer with whom any of
the Companies has done any business;
assist others in engaging in any of the
Business Activities in the manner described in the foregoing
Paragraph 1(a); or
hire any employee of the Buyers or induce any
employee of any of the Buyers or any present or future
member of any consolidated group of corporations of which
any of the Buyers is now or may hereafter become a member to
terminate his or her employment.
The term of this Agreement shall be extended for a period of time
equal to any period of time during which the Restricted Parties
violate or fail to observe the provisions of this Agreement.
No Disclosure of Confidential Information. The
Restricted Parties acknowledge that the Buyers' trade secrets and
private processes, as they may exist from time to time, and
confidential information concerning the Buyers' data
communications hardware and software and related products,
development, technical information, procurement and sales
activities, procedures, promotion, and pricing techniques, and
credit and financial data concerning customers are valuable,
special, and unique assets of the Buyers. In light of the highly
competitive nature of the industry in which the business of the
Buyers is conducted, the Restricted Parties further agree that
all knowledge and information described in the preceding sentence
not in the public domain and heretofore or in the future obtained
by the Restricted Parties as a result of Stockholder's employment
with the Companies or with VIR Acquisition shall be considered
confidential information. In recognition of this fact, the
Restricted Parties agree that they will not, at any time,
disclose any of such secrets, processes, or information to any
person or other entity for any reason or purpose whatsoever
except as necessary in the performance of the Stockholder's
duties as an employee of the Buyers, nor shall the Restricted
Parties make use of any such secrets, processes, or information
for their own purposes or for the benefit of any person or other
entity (except the Buyers) under any circumstances at any time.
Equitable Relief. The Restricted Parties
acknowledge and agree that the Buyers' remedy at law for a breach
or threatened breach of any of the provisions of Sections 1 or 2
of this Agreement would be inadequate and, in recognition of that
fact, in the event of a breach or threatened breach by the
Restricted Parties of any provisions of this Agreement, it is
agreed that, in addition to its remedy at law, each of the Buyers
shall be entitled to equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent
injunction or any other equitable remedy which may then be
available. Nothing herein contained shall be construed as
prohibiting any Buyer from pursuing any other remedies available
to it for such breach or threatened breach. None of the Buyers
shall be required to post any bond in connection with any such
relief, and the Restricted Parties agree not to demand or request
the posting of any bond.
Reformation. Although the Restricted Parties and
Buyers consider the restrictions contained in Sections 1, 2 and 3
of this Agreement to be reasonable for the purpose of preserving
for Buyer the goodwill and proprietary rights of the Companies,
if a final judicial determination is made by a court having
jurisdiction that the time or territory or any other restriction
contained in Sections 1, 2 or 3 of this Agreement is an
unreasonable or otherwise unenforceable restriction against the
Restricted Parties, the provisions of Sections 1, 2 or 3 of this
Agreement shall not be rendered void, but shall be deemed amended
to apply as to such maximum time and territory and to such other
extent as such court may judicially determine or indicate to be
reasonable.
Waiver. The waiver by any Buyer of a breach of
any provision of this Agreement by the Restricted Parties shall
not operate or be construed as a waiver of any subsequent breach
by them.
Assignment. This Agreement shall not be
assignable by any party without the prior written consent of the
other parties, except that this Agreement and the benefits to the
Buyers hereunder may be assigned by Buyer to (a) any successor to
or transferee of the business or assets of any of the Buyers and
(b) any present or future member of the consolidated group of
corporations of which any Buyer is now or may hereafter become a
member.
Termination. The Restricted Parties, by written
notice to the Buyers, may terminate the covenants and
restrictions set forth in this Agreement if (a) the Buyers fail
to make any payment when due (subject to applicable notice rights
and cure periods) under (i) Section 2.4(d) of the Purchase
Agreement, or (ii) the Debentures dated the date hereof issued by
ERI Acquisition, Inc. to VIR in an aggregate original principal
amount of $1,735,000, and (b) the obligation to make any such
payment has not been disputed by any of the Buyers.
Entire Agreement. This Agreement contains the
entire understanding of the parties hereto and shall supersede
all prior verbal and written discussions respect to the subject
matter hereof. No modification shall be effective unless it is in
writing signed by the party against whom such modification is to
be enforced. Notwithstanding the foregoing, this Agreement shall
not supersede the Employment Agreement dated the date hereof
between VIR and Stockholder, which shall be deemed complementary
and not mutually exclusive unless expressly otherwise provided.
Governing Law. This Agreement shall be governed
by and construed in accordance with the domestic, internal law
(but not the law of conflict of laws) of the Commonwealth of
Pennsylvania.
Successors, Etc. The provisions of this Agreement
are for the benefit of each of the Buyers, and may be enforced by
any Buyer and its successors and assigns against the Restricted
Parties and their successors and assigns.
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound, have caused this Agreement to be executed the day
and year first written above.
__ALEX RABEY_________________(SEAL)
Alex Rabey
__LUBA RABEY_________________(SEAL)
Luba Rabey
VIR ACQUISITION, INC.
By__STEVEN MARKOWITZ_________________
Steven Markowitz,
Chief Executive Officer
Attest:__LEONARD W. HELFRICH_________
Leonard W. Helfrich,
Secretary
ERI ACQUISITION, INC.
By__STEVEN MARKOWITZ ____________
Steven Markowitz,
Chief Executive Officer
Attest:__LEONARD W. HELFRICH___________
Leonard W. Helfrich,
Secretary
LSC ACQUISITION, INC.
By__STEVEN MARKOWITZ______________
Steven Markowitz,
Chief Executive Officer
Attest:__LEONARD W. HELFRICH__________
Leonard W. Helfrich,
Secretary
LEASE - VIR FACILITY
THIS LEASE (this "Lease") made and entered into as of
the 1st day of August, 1995, by and between ALEX and LUBA RABEY,
Pennsylvania residents having an address of 1040 Coates Road,
Meadowbrook, Pennsylvania 19046 (hereinafter referred to as the
"Lessor"), and VIR ACQUISITION, INC., a Pennsylvania corporation
having an address c/o Allen Organ Company, P.O. Box 36, Macungie,
Pennsylvania 18062 (hereinafter referred to as the "Lessee").
INTENDING TO BE LEGALLY BOUND, the parties hereto agree
as follows:
Demise and Rental.
The Lessor, for and in consideration of the
covenants, conditions, agreements and stipulations of the Lessee
hereinafter expressed, does hereby demise and lease to the Lessee
the following described premises (the "Leased Premises"):
ALL THAT CERTAIN tract of land owned by
Lessor and known as 105 James Way, Southampton,
Pennsylvania, together with all improvements
thereon, as more particularly described in the
deed recorded on June 12, 1991 in Record Book 310,
page 229, Bucks County Records.
The Leased Premises also shall include all of the office
furniture currently located in Alex Rabey's office and owned
personally by Alex Rabey; provided that such items shall no
longer be subject to the Lease when Alex Rabey is no longer
employed by the Lessee.
The initial term of this Lease shall be five
(5) years, commencing on the date hereof. Lessee shall have the
option to extend the term of this Lease for three (3) additional
periods of five (5) years each (the "Option Periods"), upon the
same terms and conditions contained herein except for an increase
in rent as hereinafter provided, on the conditions that:
Lessee shall have given notice to Lessor of
Lessee's intention to exercise such option to extend, which
notice shall have been given by Lessee at least sixty (60)
days prior to the expiration of the initial term of this
Lease or the then current Option Period, as the case may be;
and
Lessee shall not be in default, on the date
of election or on the date of commencement of an Option
Period, of any of its obligations hereunder.
In the event Lessee exercises any of its options to extend the
term of this Lease as provided in Paragraph 1(b) hereof, the
annual minimum rent set forth in Paragraph 1(c) hereof shall be
increased (but not decreased) as herein provided. With respect
to each such Option Period, said annual minimum rent shall be
increased in that proportion which the CPI (as hereinafter
defined) for the month occurring three (3) months prior to the
commencement of such Option Period bears to the CPI for the month
occurring three (3) months prior to the commencement of the term
of this Lease. For purposes hereof, "CPI" shall mean the United
States Department of Labor's Bureau of Labor Statistics, Consumer
Price Index, All Urban Consumers ("CPI-U"), All Items,
Philadelphia, Pennsylvania (1982-84 = 100), or the successor of
such index.
In consideration of the demise and leasing of
the Leased Premises, the Lessee covenants, stipulates and agrees
to pay to the Lessor, as rental for the Leased Premises, for each
year of the five (5) year term of this Lease, annual rent of
Ninety-Two Thousand Four Hundred Dollars ($92,400), payable in
twelve (12) equal consecutive monthly installments of Seven
Thousand Seven Hundred Dollars ($7,700) each, in advance, due at
Lessor's offices at 1040 Coates Road, Meadowbrook, Pennsylvania
19046 on the first day of each month of the term of this Lease.
Rent shall be apportioned for any partial month, if the date of
this Lease is not the first day of a month.
Use of Leased Premises; Compliance with Law.
Lessee shall not use the Leased Premises for any purpose which is
unlawful or in violation of any statute, ordinance, rule or
regulation governing the use of the Leased Premises. Lessee may
use the Leased Premises for any lawful purpose. The Lessee shall
procure at its sole expense any permits or licenses required for
the transaction of its business in the Leased Premises and
otherwise comply with all applicable laws, ordinances, and
governmental regulations.
Utilities, Water, Sewer, Insurance, Maintenance
and Taxes. Lessee shall be responsible for utility charges
(including water rent, sewer rent, electricity, and gas), payment
(but not procurement) of insurance (including liability coverage
and fire and extended coverage), ordinary repairs and
maintenance, housekeeping and cleaning, security systems, real
estate taxes and other similar costs and expenses. A tax bill
submitted by Lessor to Lessee shall be sufficient evidence of the
amount of taxes assessed against the Leased Premises. If real
estate taxes for the Leased Premises are not assessed separately
from other parcels or buildings owned by Lessor, Lessee's share
shall be based on the square footage of the respective buildings
of the overall parcel.
Leased Premises to be Maintained and Kept in a
Clean and Sanitary Condition.
Lessee shall keep the Leased Premises in a
clean and sanitary condition. Lessee shall keep and maintain
said premises in as good condition as they may be at the
beginning of the term of this lease, ordinary wear excepted.
Lessee shall be responsible for routine and ordinary maintenance
of the Leased Premises, including the exterior walls,
foundations, doors, heating, ventilating, and air conditioning
systems, and all other building systems, subject to ordinary wear
and tear. Lessee also shall make all necessary repairs to the
Leased Premises, provided that Lessee shall be responsible only
for paying (i) up to $500 for any individual repair to any
building system or structural item, and (ii) up to $5,000 in any
twelve (12) month period for all repairs to building systems and
structural items. Lessor shall be responsible for paying all
sums in excess of such amounts. All repairs and maintenance
undertaken by Lessee shall be done in a workmanlike manner, and
shall not subject the Leased Premises to any lien for labor or
materials. Lessee shall quit and surrender up the Leased
Premises at the expiration or termination of this Lease in as
good condition as it may be at the beginning of the term of this
Lease, ordinary wear and tear excepted. If Lessee fails to
maintain the Leased Premises in accordance with this Section 4,
Lessor may perform the necessary maintenance and Lessee shall be
responsible for all costs incurred by Lessor with respect to such
maintenance. The terms of this Section 4 shall survive
termination or expiration of this Lease.
Lessee further covenants that Lessee:
will promptly replace at its own expense
with glass of like kind and quality any plate glass, door or
window glass of the Leased Premises which may become cracked
or broken;
will not cause or permit objectionable
odors to emanate or be dispelled from the Leased Premises;
will keep any walks, sidewalks, loading
platforms and driveways abutting the Leased Premises free of
ice and snow and be responsible for the cost of removal
thereof and that Lessee shall be solely liable for any
accidents occurring on said outside areas due or alleged to
be due to any accumulation of ice and snow;
will keep the Leased Premises at a
temperature sufficiently high so as to prevent the freezing
of water and pipes and fixtures;
will not use the plumbing facilities for
any other purpose than that for which they are constructed
and will not permit any foreign substance of any kind to be
thrown therein. The expense of repairing any breakage,
stoppage, seepage or damage, whether occurring on or off the
Leased Premises, resulting from a violation of this
provision by Lessee or Lessee's employees, agents or
invitees shall be borne by Lessee. All grease traps and
other plumbing traps shall be kept clean and operable by
Lessee at Lessee's own cost and expense;
will, notwithstanding anything in this
Lease to the contrary, be responsible for all repairs and
replacements to the Leased Premises necessitated by a
burglary or attempted burglary, or any illegal or forcible
entry into the Leased Premises;
will not burn any trash or garbage of any
kind within the Leased Premises;
will comply with all laws and ordinances
and all rules and regulations of governmental authorities
and all recommendations of the Association of Fire
Underwriters with respect to the use or occupancy of the
Leased Premises by Lessee.
Structural Components; Assessments; Liability.
Lessor, at its expense, shall make all
necessary replacements of the exterior walls, foundations, doors,
roof, heating, ventilating, and air conditioning systems, and all
other building systems and all components of such systems, and
Lessor also shall be responsible for all repairs to the Leased
Premises that cost in excess of the amounts for which Lessee is
responsible under Section 4 of this Lease. Lessor shall be
responsible for all special assessments and other extraordinary
charges of any kind or nature imposed or asserted against the
Leased Premises by any governmental authority.
Lessor shall not be liable to Lessee for the
failure to provide any utilities or services either required or
permitted to be supplied by Lessor under the terms of this Lease.
However, Lessor agrees in the event of any suspension or failure
of service to proceed with all due diligence to restore or cause
the restoration of such service as soon as is reasonably
practical under the circumstances.
Alterations, Changes, Additions and Improvements
Permitted. Lessor agrees to permit appropriate alterations,
changes, additions or other improvements to the Leased Premises,
provided that (a) such improvements shall not impair the value of
the Leased Premises, (b) no mechanics' liens shall attach as a
result of such improvements, (c) all such work shall be in
compliance with applicable laws, and (d) the plans for
alterations, changes, additions or improvements shall be
submitted to Lessor for approval prior to installation, which
approval shall not be unreasonably withheld or delayed. If a
mechanics' lien is filed against the Leased Premises in
connection with improvements to the Leased Premises made by
Lessee, Lessee shall cause such lien to be satisfied or removed
within ten (10) days at Lessee's cost. At the expiration or
termination of this Lease, all structural alterations, changes,
additions or improvements to the Leased Premises shall become the
property of the Lessor, and shall be surrendered with the Leased
Premises as a part thereof. Any fixtures and equipment installed
by Lessee, including signs, shall remain the property of Lessee
and shall be removed at the expiration or other termination of
this Lease. If Lessee removes any fixtures or equipment, Lessee
shall, at Lessee's own cost, restore the Leased Premises to the
same condition as existed at the commencement of the term hereof.
Condemnation or Casualty Loss. In the event of a
condemnation or a casualty loss, the Lessee shall have the right
to terminate this Lease if the building or the Leased Premises is
substantially taken or damaged and the Lessee, in its reasonable
discretion, determines that the remaining Leased Premises are no
longer suitable for Lessee's use, or if the Leased Premises
cannot be reconstructed to their prior condition within ninety
(90) days after the condemnation or casualty loss. The Lessor
shall promptly undertake such reconstruction, if reconstruction
within ninety (90) days is possible, and the rent provided herein
shall be abated during any such period of reconstruction. Lessor
shall be entitled to all condemnation proceeds awarded in any
condemnation proceeding; provided that Lessor shall use the net
condemnation proceeds to restore as much of the Leased Premises
as possible, and the rent shall abate proportionately.
Indemnification.
Except when caused by the act, omission or
negligence of Lessor, his agents, servants, contractors, or
employees, Lessee agrees to indemnify Lessor against loss and
save Lessor harmless from liabilities arising as a result of
Lessee's negligence or misconduct, including claims of third
persons, relating to Lessee's use or occupancy of the Leased
Premises or to the performance or nonperformance by Lessee of any
of its obligations under this Lease. Lessee shall give prompt
written notice to the Lessor of such claim.
Except when caused by the act, omission or
negligence of Lessee, its agents, servants, contractors, or
employees, Lessor agrees to indemnify Lessee against loss and
save Lessee harmless from liabilities arising as a result of
Lessor's negligence or misconduct, including liabilities relating
to the performance or nonperformance by Lessor of his obligations
under this Lease. Lessor shall give prompt written notice to the
Lessee of such claim.
Assignment or Subletting. Except as hereinafter
provided, Lessee shall not assign this Lease or sublet the Leased
Premises without first obtaining Lessor's prior written consent.
The approval of Lessor to assignment or subletting will not be
unreasonably withheld or delayed. In addition, the right to
assign or sublet to any parent, subsidiary, or affiliate
corporation of Allen Organ Company, or any successor to its
business is permitted without the necessity of obtaining the
Lessor's consent.
Notice to Quit Waived. The Lessee agrees that any
notice to quit required by law previous to proceedings to recover
possession of the Leased Premises on the day when such is due and
the benefit of all laws granting stay of execution, appeal,
inquisition and exemption are hereby waived by the Lessee;
provided, however, that nothing in this paragraph shall be
construed as a waiver of any notice specifically mentioned or
required by any other part of this lease.
Default, Notice of Default, Damages.
Lessee shall be in default under this Lease
(an "Event of Default") if Lessee:
defaults in the payment of any rent when
the same shall become due and such default shall continue
for ten (10) days after written notice thereof from Lessor
(the "Default Notice"), provided that Lessor shall be
obligated to give Lessee a Default Notice only two (2) times
in any calendar year;
shall remain in default under any other
term, condition, covenant or provision of this Lease for a
period of thirty (30) days after written notice thereof;
abandons the Leased Premises; or
becomes insolvent as evidenced by an
assignment by Lessee for the benefit of creditors, a
petition in bankruptcy or for reorganization or an
arrangement under any bankruptcy or insolvency law being
filed voluntarily by Lessee, the adjudication of Lessee as a
bankrupt, the issuance by any court of an order for relief
as to Lessee, the filing against Lessee of a petition for
appointment of a receiver of all or a substantial part of
Lessee's assets or property either in bankruptcy or other
insolvency proceedings, unless such proceedings shall be
stayed or dismissed within sixty (6) days of the filing
thereof. If an order for relief shall be granted, Lessee,
or any party claiming on behalf of Lessee, shall be deemed
to have given adequate assurances only if Lessor is
reasonably assured that a party of substantial financial
strength will continue occupancy of the Leased Premises,
continue to pay rent and in general be in a position to
operate a business on the Leased Premises for a term of more
than one year.
Upon the occurrence of an Event of Default:
Lessor may declare the term of this Lease
ended and enter upon and repossess the Leased Premises, with
or without process of law, and without giving any notice
whatsoever. Lessor agrees to mitigate damages, and Lessor
shall only be damaged to the extent that the fair rental
value of the Leased Premises is less than the rent set forth
in the Lease;
Lessor may declare the balance of all rent
and other charges to become due throughout the term hereof
accelerated and they shall be immediately due and payable,
and Lessor may in its own name, but as agent for Lessee,
assign, sublet or relet Leased Premises for any period equal
to or greater or less than the remainder of the term hereof
for any sum which Lessor may deem reasonable to any lessee
Lessor may select, and for any use or purpose which Lessor
may designate. If Lessor so sublets or assigns this Lease,
Lessee hereby irrevocably constitutes and appoints Lessor as
Lessee's agent to collect any rents due from such assignee
or sublessee and apply the same to the rent due hereunder;
and
Lessor may lease the Leased Premises or any
part or parts thereof to such person or persons for such
rents and for such terms as may, in Lessor's discretion,
seem best without affecting Lessee's liability for any loss
of rent for the balance of the term.
Toxic or Hazardous Substances; Indemnity.
Lessor represents and warrants to Lessee that
any handling, transportation, storage,
treatment or usage of toxic or hazardous substances that has
occurred on the Leased Premises to date has been in
compliance with all applicable federal, state and local
laws, regulations, and ordinances;
no leak, spill, release, discharge,
emission, or disposal of toxic or hazardous substances has
occurred on the Leased Premises to date in violation of
applicable law;
the soil, groundwater, and soil vapor on or
under the Leased Premises is free of toxic or hazardous
substances as of the date that the term of this Lease
commences in violation of applicable law;
there is no underground storage tank on the
Leased Premises; and
the Leased Premises and all operations and
activities on, at and about the Leased Premises comply and
have at all times complied, with all applicable
environmental, land use, zoning, safety and other laws.
Lessor shall indemnify, defend (with counsel
selected by Lessee) and hold Lessee and its officers, employees
and agents harmless from and against any and all claims,
judgments, damages, penalties, fines, costs, liabilities
(including sums paid in settlements of claims) or loss including
attorneys' fees, consultant and expert fees of individuals
recognized as experts in their field (consultants and experts to
be selected by Lessee) (i) that arise during or after the term of
this lease from or in connection with the presence or suspected
presence of toxic or hazardous substances in the soil,
groundwater, or soil vapor on or under the Leased Premises at the
date of execution of this Lease, unless the toxic or hazardous
substances are present solely as a result of the negligence or
willful misconduct of Lessee, its officers, employees or agents,
or (ii) that are incurred by Lessee as a result of any breach of
Lessor's representations, warranties and covenants in this Lease.
Without limiting the generality of the foregoing, the
indemnification provided by this paragraph shall specifically
cover losses, damages and costs incurred in connection with:
any investigation of site conditions or any
cleanup, remedial, removal, or restoration work required by
any federal, state, or local governmental agency or
political subdivision because of the presence or suspected
presence of toxic or hazardous substances in the soil,
groundwater, or soil vapor on or under the Leased Premises,
unless the toxic or hazardous substances are present solely
as a result of the negligence or willful misconduct of
Lessee, its officers, employees, contractors or agents;
toxic or hazardous substances present or
suspected to be present in the soil, groundwater, or soil
vapor on or under the Leased Premises before the term of
this Lease commences;
liability to third parties incurred in
connection with toxic or hazardous substances that migrate,
flow, percolate, diffuse, or in any way move onto or under
the Leased Premises after the term of this Lease commences;
and
liability to third parties incurred in
connection with toxic or hazardous substances present on or
under the Leased Premises as a result of any discharge,
dumping, or spilling (accidental or otherwise) onto the
Leased Premises during or after the term of this Lease by
any person, corporation, partnership or entity other than
Lessee.
All alterations made in the Leased Premises
by Lessee shall be in accordance with and shall comply with all
Environmental Laws.
If any statutes, laws, ordinances, rules or
regulations are promulgated at any time after the date of
execution of this Lease for the removal, abatement or containment
of a toxic or hazardous substance in the Leased Premises or any
portion of the Leased Premises and, in the reasonable judgment of
Lessor, it is hazardous for the Lessee to remain in the Leased
Premises during such removal, abatement, or containment of the
toxic or hazardous substance, Lessee shall vacate the Leased
Premises or that portion of the Leased Premises that is hazardous
and, provided that such condition did not result from Lessee's
acts, omissions, or operations, Lessee's rent shall be abated
proportionately for the period of time in which Lessee's use of
such portion of the Leased Premises has been interrupted.
Lessee shall not intentionally or
unintentionally use, store, handle, spill or discharge any toxic
or hazardous substance at or in the vicinity of the Leased
Premises. Lessee shall not use the Leased Premises in any manner
which will cause the Leased Premises to have a standard
industrial classification ("SIC") which is covered by any
Environmental Law or which will cause the premises to be deemed
an "Industrial Establishment" as defined under any Environmental
Law. Lessee's failure to abide by the terms of this
paragraph (e) shall be restrainable by injunction.
At anytime during the term of this Lease,
upon Lessor's notification to Lessee (which shall be based upon a
good faith belief on Lessor's part that the environmental
condition of the Leased Premises has been materially and
adversely affected), Lessee shall supply to Lessor affidavits of
an officer of Lessee setting forth and describing in detail the
operations and processes undertaken by Lessee at the Leased
Premises. Such affidavits shall include a certification that no
toxic or hazardous substance is generated, used, stored, handled
or disposed of at the Leased Premises or shall state the nature
of any such substance and the methods used in handling the same
in reasonable detail. Such affidavits shall be delivered to
Lessor within thirty (30) days after request therefor.
Within thirty (30) days after request
therefor, Lessee shall execute and deliver any document
reasonably required in order to comply with any Environmental
Law.
Lessee shall promptly deliver to Lessor
copies of all notices made by Lessee to, or received by Lessee
from, any governmental authority concerning environmental matters
or toxic or hazardous substances at the Leased Premises.
At any time throughout the term of this Lease
and any extension thereof, Lessor may cause an inspection be made
of the Leased Premises and its surrounding area for the purpose
of determining whether any toxic or hazardous substance is
present thereon.
Lessee shall indemnify, defend and hold
Lessor harmless of and from any and all claims arising by reason
of any violation by Lessee of the provisions of Sections 12(c)
through (i) and this indemnity shall survive expiration or other
termination of this Lease.
As used herein, the term "toxic or hazardous
substances" means any toxic or hazardous substance, material or
waste which is or becomes regulated by any local governmental
authority, the Commonwealth of Pennsylvania or the United States
Government. The term "toxic or hazardous substances" includes,
without limitation, any material or substance which is
(i) defined as a "toxic or hazardous substance" under applicable
Pennsylvania law, (ii) petroleum or a petroleum product,
including crude oil and any fraction thereof, (iii) asbestos or
any asbestos-containing material, (iv) designated as a "hazardous
substance" pursuant to Section 311 of the Federal Water Pollution
Control Act (33 U.S.C. 1321), (v) defined as a "hazardous waste"
pursuant to Section 1004 of the Federal Resource Conservation and
Recovery Act, 42 U.S.C. 6901 et seq. (42 U.S.C. 6903),
(vi) defined as a "hazardous substance" pursuant to Section 101
of the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. 9601 et seq. (42 U.S.C. 9601), or
(vii) defined as a "regulated substance" pursuant to
Subchapter IX, Solid Waste Disposal Act (Regulation of
Underground Storage Tanks), 42 U.S.C. 6991 et seq.
As used herein, the term "Environmental Law"
means any federal, state or local, statute, act, law, ordinance,
rule, regulation or order pertaining to the environment whether
now or hereafter enacted and whether or not listed in this
definition such as but not limited to the following:
The Comprehensive Environmental Response
Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section
9601 as amended by the Superfund Amendments and
Reauthorization Act of 1986 (Pub. L. 98-489, 100 Stat. 1613,
1986) ("SARA");
The Resource Conservation and Recovery Act,
42 U.S.C. Section 6801 et. seq. ("RCRA);
Toxic Substances Control Act, 15 U.S.C.
Section 2601 ("TSCA");
The Clean Water Act, 33 U.S.C. Section 407
et. seq. ("CWA");
The Clean Air Act, 42 U.S.C. Section 7901
et. seq.;
The Pennsylvania Solid Waste Management
Act, 35 P.S. Section 6018.103;
The Pennsylvania Hazardous Sites Clean Up
Act, 35 P.S. Section 6020.101 et. seq.;
Any similar statute, law, ordinance, rule,
regulation or order adopted in the jurisdiction in which the
Leased Premises is located.
The provisions of this Section 12 shall survive
the termination or expiration of this Lease, and the removal of
Lessee from the Leased Premises.
Lessor's Recourse. No termination of this Lease,
or taking or recovering of possession of the Leased Premises, or
entry of any judgment for possession, shall deprive the Lessor of
any other action against the Lessee for possession, for any money
due the Lessor hereunder whether as rent or otherwise, or for
damages hereunder. Failure of the Lessor or the Lessee to
exercise any right under the provisions of this Lease on any one
or more occasions shall not be construed as a waiver thereof on
any subsequent occasion and recourse to any one or more remedies
granted by this lease or by law shall not be deemed a waiver of
or a bar to any other remedy or remedies, it being the intent
that remedies shall be cumulative and not exclusive.
Zoning. Lessor represents, warrants, and
covenants that the Leased Premises are located in a zoning
district which permits the current use of the Leased Premises.
Lessor's Access. Lessee shall allow Lessor, its
agents or representatives, access to the Leased Premises at all
reasonable times for the purpose of repairing the same. Lessee
shall also allow Lessor access to the Leased Premises, at
reasonable times subject to the Lessee's prior approval, for the
purpose of inspecting the Leased Premises and buyers or, during
the final 180 days of the term of this Lease for the purpose of
showing the Leased Premises to prospective buyers or lessees
thereof. Except in cases of emergency, Lessor will obtain prior
approval of Lessee, its employees, agents, or representatives
before entering the Leased Premises.
Insurance.
Lessor shall procure and maintain throughout
the term of this Lease a policy or policies of general commercial
liability insurance, at Lessee's sole cost and expense and with
an insurance company reasonably satisfactory to Lessor and
Lessee, insuring both Lessor and Lessee against all claims,
demands, or actions arising out of or in connection with Lessee's
use or occupancy of the Leased Premises or the condition of the
Leased Premises ("Insurance"). The limits of the Insurance shall
be in an amount of not less than One Million Dollars
($1,000,000.00) in respect of injuries to or death of any one
person, in an amount of not less than One Million Dollars
($1,000,000.00) in respect of any one accident or disaster, and
in an amount not less than One Million Dollars ($1,000,000.00) in
respect of property damaged or destroyed. All such insurance
shall name the Lessor as an additional insured and shall provide
for thirty (30) day notice to Lessor of cancellation or reduction
of coverage. Evidence of the Insurance and any renewal thereof
or duly executed certificates of the Insurance shall be promptly
delivered to Lessor. If Lessee should fail to pay to Lessor the
costs of Insurance on demand, the Lessor may terminate this Lease
(subject to the cure provisions set forth in Section 11).
Lessee shall maintain insurance against loss
or damage to any buildings or improvements on the Leased Premises
under a standard Pennsylvania fire insurance policy with extended
coverage, in an amount equal to replacement cost coverage.
Waiver of Claims. Lessee waives all claims
against Lessor, its agents and servants and agrees to indemnify
and hold it and them harmless for loss of life, damage to person
or property sustained by Lessee or any other occupant of the
Leased Premises or by its or their agents, servants and employees
resulting directly or indirectly out of the condition of the
Leased Premises or resulting from any accident or occurrence in
or about the Leased Premises other than such loss of life or
damage to person or property due or claimed to be due to any
negligence or other act or failure of Lessor, or its officers,
agents or employees.
Cost of Enforcement. Lessee shall pay to Lessor,
as additional rent upon demand, all of Lessor's costs, charges
and expenses including without limitation the reasonable fees of
counsel, agents and others retained by Lessor for the enforcement
of Lessee's obligations under this Lease and also any such costs,
charges, expenses or fees incurred by Lessor in any litigation in
which Lessor, without Lessor's fault, becomes involved or
concerned by reason of this Lease or the relationship of Lessor
and Lessee under this Lease.
Cumulative Remedies. All of the remedies
hereinbefore given to Lessor and all rights and remedies given to
it by law and equity shall be cumulative and concurrent. No
termination hereof or the taking or recovering of the Leased
Premises shall deprive Lessor of any of its remedies or actions
against Lessee for rent or any and all other sums due at the time
or which, under the terms hereof, would in the future have become
due if there had been no termination, nor shall the bringing of
any action for rent or for breach or default under any term,
condition or covenant, or the resort to any other remedy herein
provided for the recovery of rent, be construed as a waiver of
the right to obtain possession of the Leased Premises.
Lessor's Right to Enforce Strictly. Any law,
usage or custom to the contrary notwithstanding, Lessor shall
have the right at all times to enforce all terms, conditions and
covenants hereof in strict accordance herewith, notwithstanding
any conduct or custom on the part of Lessor.
Accord and Satisfaction. No acceptance by Lessor
of an amount less than the monthly rent and other payments
stipulated to be due under this Lease shall be deemed to be other
than a payment on account of the earliest such rent or other
payments then due or in arrears nor shall any endorsement or
statement on any check or letter accompanying any such payment be
deemed an accord and satisfaction. Lessor may accept any check
for payment by Lessee without prejudice to Lessor's right to
recover the remainder of any rent or other payment then in
arrears and Lessor may pursue any other remedy provided in this
Lease. No acceptance by Lessor of any payment of rent or other
sum by Lessee shall be deemed a waiver of any of the obligations
of Lessee under this Lease.
Liens and Encumbrances. Lessor represents and
warrants to Lessee that no mortgage encumbrance presently affects
the Leased Premises. The Lessor shall not grant, or suffer to
exist, any lien or encumbrance affecting the Leased Premises
during the term of this Lease unless Lessor causes the holder of
such mortgage to enter into a Nondisturbance, Subordination, and
Attornment Agreement with Lessee on usual and customary terms.
Lessor also shall not enter into any lease, contract or agreement
or grant any rights with respect to the Leased Premises without
the prior written consent of the Lessee.
Notices. All notices and writings required under
this Lease shall be deemed to be served properly if delivered
personally, or sent by overnight courier providing receipt of
delivery, or by registered or certified mail, return receipt
requested, to the Lessor and the Lessee at the addresses set
forth on page 1 of this Lease, or at such other address as
Lessor, for itself, or Lessee, for itself, may designate in
writing from time to time. If mailed as set forth above, such
notice shall be deemed to be served when it is received by the
recipient as shown on the return receipt, if such notice is
accepted. If it is not so accepted, receipt by the recipient
will be deemed to have occurred on the third day following the
date of mailing.
Estoppel Certificate. The Lessee agrees that it
will from time to time upon request by the Lessor execute and
deliver to the Lessor a statement in recordable form certifying
that this Lease is unmodified and in full force and effect, or if
there has been any modification, that the same is in full force
and effect as so modified.
Governing Law. The domestic internal laws of the
Commonwealth of Pennsylvania shall govern the interpretation,
validity, performance and enforcement of this Lease. If any
provision of this Lease should be held to be invalid or
unenforceable, the validity or enforceability of the remaining
provisions of this Lease shall not be affected thereby.
Captions. The captions used herein are for
convenience only and do not limit or amplify the provisions of
this Lease.
Number, Gender. Whenever the singular number is
used in this Lease, it shall include the plural and words of any
gender shall include each other gender.
Binding Effect. The terms, provisions and
covenants contained in this Lease shall apply to, inure to the
benefits of and be binding upon the parties and their respective
heirs, successors in interest, and legal representatives except
as otherwise expressly provided in this Lease.
Modification. No agreement shall be effective to
change, modify, or terminate this Lease in whole or in part
unless such is in writing and duly signed by the party against
whom enforcement of such change, modification or termination is
sought.
Lessee's Right to Quiet Enjoyment. Lessee, upon
paying the rent herein provided and performing all of its other
obligations hereunder, shall and may peaceably hold and enjoy the
Leased Premises during the term hereof and any extension, without
interruption or disturbance from Lessor or anyone claiming
through Lessor.
Memo of Lease. The parties shall execute and
record in the Recorder of Deeds Office of Bucks County,
Pennsylvania a memorandum of this Lease, satisfactory in form and
substance to Lessor and Lessee.
Right of First Refusal.
If, during the term of this Lease or any
Option Period, Lessor receives a bona fide offer from someone
other than Lessee (the "Offeror") to purchase the Leased Premises
or any portion thereof (the property subject to such offer being
referred to herein as the "Sale Premises"), and Lessor desires to
sell the Sale Premises to the Offeror, Lessor shall give Lessee
notice in writing of such desire to sell and of the price, terms,
and conditions of sale contained in such offer ("Lessor's
Notice"). Included with Lessor's Notice shall be such
information as shall reasonably enable Lessee to establish all of
the terms of the offer and that the offer is bona fide, including
(without limitation) a true and correct copy of the letter of
intent or agreement of sale (if any). If any of the non-monetary
terms of the offer by their nature cannot be matched (such as,
without limitation, terms relating to the exchange of property,
or the provision of unique services), Lessor's Notice shall
contain a reasonable quantification in dollars of the value of
such terms, which shall constitute part of the price offered for
the Sale Premises.
During the period of ten (10) days
immediately following the giving of Lessor's Notice, Lessee shall
have the opportunity of exercising the right to purchase the Sale
Premises at the same price and under the same terms and
conditions recited in Lessor's Notice. If Lessee desires to
purchase the Sale Premises pursuant to the terms of this
Section 32, written notice of such intention to purchase
("Lessee's Acceptance") shall be given to Lessor on or before the
tenth (10th) day after receipt of Lessor's Notice. Lessee's
Acceptance shall constitute an acceptance by Lessee of Lessor's
offer to sell pursuant to the terms and conditions of Lessor's
Notice and shall be in the form of an agreement of sale. If such
notice by Lessee of its acceptance is not given, as above
provided, within such ten (10) day period, this Right of First
Refusal shall be deemed waived as to that Lessor's Notice and, at
any time within three (3) months after the giving of Lessor's
Notice, an agreement of sale may be made with, or a sale may be
made to, the Offeror according to the terms and conditions set
forth in Lessor's Notice and at a price not less than that stated
in Lessor's Notice. If (i) no such agreement of sale or sale
with or to the Offeror is made within such three (3) month
period; or (ii) such an agreement of sale is made within such
three (3) month period but closing thereunder does not occur for
any reason; or (iii) the sale price of the Sale Premises is
reduced within the three (3) month period to an amount below the
amount stated in Lessor's Notice, then the terms and conditions
of this Right of First Refusal shall remain in full force and no
agreement of sale shall be made with, or sale made to, anyone
other than Lessee unless and until the aforesaid written notice
has been given to Lessee and the ten (10) day period has expired
without Lessee's Acceptance.
IN WITNESS WHEREOF, the parties hereto have set their
hands and seals the day and year first above written.
__ALEX RABEY_________________(SEAL)
Alex Rabey
__LUBA RABEY_________________(SEAL)
Luba Rabey
"Lessor"
VIR ACQUISITION, INC.
By__STEVEN MARKOWITZ______________
Steven Markowitz,
Chief Executive Officer
"Lessee"
ASSIGNMENT AND ASSUMPTION OF LEASE AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION OF LEASE AGREEMENT made
this 1st day of August, 1995 by and between EASTERN RESEARCH,
INC., a Pennsylvania corporation (the "Assignor"), and ERI
ACQUISITION, INC., a New Jersey corporation (the "Assignee").
BACKGROUND
A. The Moorestown West Partnership, as landlord (the
"Landlord") and Assignor, as tenant, entered into a Lease
Agreement dated October 6, 1994 (the "Lease"), pursuant to which
Landlord leased to Assignor that portion of the building known as
Flex XI, 225 Executive Drive, Moorestown, New Jersey, consisting
of 11,200 square feet of rentable area, known as Units 5 & 6 (the
"Premises"), together with adequate parking for twenty-five (25)
vehicles.
B. Assignor desires to assign, transfer, convey and
set over to Assignee all of Assignor's right, title, and interest
in, to and under the Lease, and Assignee desires to accept such
assignment on the terms and conditions set forth herein.
ASSIGNMENT
NOW, THEREFORE, in consideration of the foregoing, the
parties hereto, each intending to be legally bound, hereby
covenant and agree as follows:
Assignment. Assignor hereby assigns, transfers,
conveys and sets over unto Assignee, effective the date hereof,
all of Assignor's right, title, and interest as lessee in, to and
under the Lease and all of the Assignor's rights thereunder
including, without limitation, (a) the security deposit in the
amount of $6,000 and any other deposits made by Assignor
thereunder or pursuant thereto, (b) the right to renew or
otherwise extend the term thereof, and (c) any rent prepaid
thereunder.
Acceptance and Assumption. Assignee hereby
accepts such assignment and agrees to be bound by all of the
terms and conditions set forth in the Lease and to assume and
perform all of the duties and obligations of the Assignor
thereunder from and after the date hereof.
Representations and Warranties of Assignor.
Assignor hereby represents and warrants to Assignee that:
The Lease has not been modified, changed,
altered, supplemented or amended in any respect and the copy
of the Lease previously delivered by Assignor to Assignee is
a true and complete copy of the Lease as in effect on the
date hereof;
The Lease is not in default and is valid and
in full force and effect on and as of the date hereof;
The Lease is the only lease or agreement
between Assignor and Landlord affecting or relating to the
Premises;
The Lease represents the entire agreement
between the Assignor and Landlord with respect to the
Premises;
There is one 2-year renewal option which has
not been exercised;
The initial term of the Lease commenced on
November 1, 1994;
There is a security deposit in the amount of
$6,000 under the Lease;
All rent and additional rent payments which
are due and payable have been made, and there are no
delinquent rent payments owing;
All Operation and Maintenance Costs (as
defined in the Lease) which are due and payable have been
made, and there are no delinquent Operation and Maintenance
Costs owing prior to the calendar year 1995;
No event has occurred and no condition exists
which, with the giving of notice or the lapse of time or
both will constitute a default under the Lease;
Assignor's interest in the Lease is free and
clear of any liens, encumbrances, or adverse interests of
third parties;
Assignor has full power and authority to
assign its interest in the Lease to Assignee hereunder;
Assignor has not sublet the Premises to any
person or entity and has not assigned any of its rights
under the Lease except as set forth herein;
No other person or entity except Assignor and
its employees occupies the Premises; and
Assignor has not received any notices,
written or oral, of the violation of any environmental,
safety or other law, rule or regulation with respect to the
Premises and/or Assignor's activities thereon or of any
allegation relating thereto which, if true, would contradict
anything contained herein, and there are no writs,
injunctions, decrees, orders or judgments outstanding, no
lawsuits, claims, proceedings or investigations pending or
threatened, relating to the use, maintenance or operation of
the Premises, nor is Assignor aware of a basis for any such
investigation or proceeding.
Covenants of Assignor. Assignor hereby covenants
and promises to Assignee that
Assignor shall, within ten (10) days after
the date of any written request by Assignee, deliver to Assignee
any and all information and documents requested by Assignee in
Assignor's possession concerning the environmental condition of
the Premises.
Assignor shall, on or before August 1, 1995,
file with the New Jersey Department of Environmental Protection
and Energy ("NJDEPE") an application for a Certificate of Non-
Applicability of the New Jersey Industrial Site Recovery Act
("ISRA") from NJDEPE, or an ISRA Negative Declaration from
NJDEPE, as provided in Paragraph 28(c) of the Lease. In
furtherance thereof, Assignor shall diligently pursue obtaining
the aforementioned certificate until such is furnished to
Assignee.
Indemnity by Assignor. Assignor hereby agrees to
indemnify, defend and hold Assignee harmless, from, against and
with respect to each and every claim, liability, obligation,
loss, damage, deficiency, assessment, encumbrance, cost, expense
(including, without limitation, reasonable attorneys' fees and
costs and other expenses incurred in investigating, preparing,
defending against or prosecuting any litigation or claim, action,
suit, proceeding or demand), of any kind or character, arising
out of or in any manner incident to, arising from or relating or
attributable to the Lease, the Premises and/or Assignor's
activities thereon or relating thereto on or before the date
hereof.
Indemnity by Assignee. Assignee hereby agrees to
indemnify, defend and hold Assignor harmless from, against and
with respect to each and every claim, liability, obligation,
loss, damage, deficiency, assessment, encumbrance, cost, expense
(including, without limitation, reasonable attorneys' fees and
costs and other expenses incurred in investigating, preparing,
defending against or prosecuting any litigation or claim, action,
suit, proceeding, or demand) of any kind or character arising out
of or in manner incident to, arising from or relating or
attributable to, the Lease, the Premises and/or Assignee's
activities thereon relating thereto after the date hereof.
Binding Effect. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and
their respective successors and assigns.
Governing Law. This Agreement shall be governed
and construed in accordance with the domestic, internal laws of
the Commonwealth of Pennsylvania without regard to its rules
pertaining to conflict of laws.
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Assumption of Lease Agreement to be duly executed
on the date first above written.
EASTERN RESEARCH, INC.
By:__ALEX RABEY__________________
President
Attest:__ALEX RABEY______________
Secretary
"Assignor"
ERI ACQUISITION, INC.
By:__STEVEN MARKOWITZ____________
Steven Markowitz,
Chief Executive Officer
Attest:__LEONARD W. HELFRICH_____
Leonard W. Helfrich,
Secretary
"Assignee"
STATE OF :
:ss.
COUNTY OF :
On this ____ day of August, 1995, before me, a notary
public, the undersigned officer, personally appeared
________________________, who acknowledged himself to be
President of EASTERN RESEARCH, INC., a Pennsylvania corporation,
and that he as such President, being authorized to do so,
executed the foregoing instrument for the purposes therein
contained by signing the name of the corporation by himself as
President.
IN WITNESS WHEREOF, I have hereunto set my hand and
official seal.
___________________________________
STATE OF :
:ss.
COUNTY OF :
On this ____ day of August, 1995, before me, a notary
public, the undersigned officer, personally appeared
_______________________, who acknowledged himself to be
___________________ of ERI ACQUISITION, INC., a New Jersey
corporation, and that he as such officer, being authorized to do
so, executed the foregoing instrument for the purposes therein
contained by signing the name of the corporation by himself as
such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and
official seal.
___________________________________
CONSENT OF LANDLORD
The undersigned, THE MOORESTOWN WEST PARTNERSHIP,
intending to be legally bound hereby, acknowledges and agrees
that it is the landlord under the Lease referred to in the
foregoing Assignment and Assumption of Lease Agreement (the
"Assignment") between EASTERN RESEARCH, INC., as assignor, and
ERI ACQUISITION, INC., as assignee, dated August 1, 1995, and
consents to the Assignment and all of the terms and conditions
set forth therein.
IN WITNESS WHEREOF, the undersigned has executed this
Consent of Landlord this ____ day of ________________, 1995.
THE
MOORESTOWN WEST PARTNERSHIP, a
partnership
By_________________________________
Managing Partner
STATE OF :
:ss.
COUNTY OF :
On this ____ day of ____________, 1995, before me, a
notary public, the undersigned officer, personally appeared
__________________________, who acknowledged himself to be the
Managing Partner of THE MOORESTOWN WEST PARTNERSHIP, and that he
as such managing partner, being authorized to do so, executed the
foregoing instrument for the purposes therein contained by
signing the name of the partnership by himself as such managing
partner.
IN WITNESS WHEREOF, I have hereunto set my hand and
official seal.
__________________________________
Notary Public
GUARANTY AND SURETYSHIP AGREEMENT
GUARANTY AND SURETYSHIP AGREEMENT dated August 1, 1995,
made and executed by ALLEN ORGAN COMPANY.
The undersigned, intending to be legally bound, agrees:
INTERPRETATION
Defined Terms. The following terms shall have the
following meanings:
Companies. VIR Acquisition, Inc., a Pennsylvania
corporation, ERI Acquisition, Inc., a New Jersey
corporation, and LSC Acquisition, Inc., a New Jersey
corporation.
Companies' Liabilities. Individually and
collectively, all present and future liabilities of (i) the
Companies to the Seller with respect to payments for
inventory purchased by the Companies pursuant to Section 2.4
of the Purchase Agreement, (ii) ERI Acquisition, Inc. to the
Seller under the Debenture, and (iii) VIR Acquisition, Inc.
to Alex Rabey under the Employment Agreement.
Debenture. The Debenture in the original
principal amount of $1,675,000 executed and delivered by ERI
Acquisition, Inc. to Seller on the date hereof.
Employment Agreement. The Employment Agreement
dated the date hereof between Alex Rabey and VIR
Acquisition, Inc.
Event of Default. As that term is defined in
subsection 5.1 of this Guaranty.
Guarantor. Allen Organ Company, a Pennsylvania
corporation.
Guarantor's Liabilities. All present and future
liabilities of the Guarantor to the Seller under this
Guaranty.
Guaranty. This guaranty and suretyship agreement,
and any future amendments to this guaranty and suretyship
agreement.
Purchase Agreement. The Assets Purchase Agreement
dated the date hereof among the Companies, Seller, Eastern
Research, Inc., Linear Switch Corporation, Alex Rabey and
Luba Rabey.
Seller. VIR, Inc.
Captions. The section and subsection captions of
this Guaranty are included for reference only and are not to be
used in the construction of this Guaranty.
Severability. Any provision contained in this
Guaranty which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Construction. This Guaranty and the rights and
obligations of the Seller and the Guarantor under this Guaranty
shall be governed and construed in accordance with the domestic,
internal laws (but not the law of the conflict of laws) of the
Commonwealth of Pennsylvania.
Number and Gender. As to all pronouns and other
terms in the Guaranty (whether or not the same shall be a
capitalized word and/or phrase), the singular shall include the
plural and the vice versa and any gender shall include the other
two genders, as the context may require.
GUARANTY OF PAYMENT
Guaranty of Payment. The Guarantor irrevocably
and unconditionally guarantees to the Seller and Alex Rabey, and
becomes surety to the Seller and Alex Rabey for, the prompt
payment when due (following default by the Companies and
expiration of any applicable grace, notice and cure periods) of
the Companies' Liabilities.
Continuing Guaranty. This Guaranty is and shall
be construed to be an absolute, unlimited, and continuing
guaranty of payment, regardless of the present or future
composition of the Companies or any future bankruptcy or
insolvency of the Companies, and all of the Companies'
Liabilities to which this Guaranty applies, or may apply under
the terms hereof, shall be conclusively presumed to have been
created in reliance hereon.
Invalidity, Irregularity, Unenforceability, Etc.
No Defense. No invalidity, irregularity or unenforceability of,
lack of prior enforcement of, delay in enforcement of, or failure
to preserve or enforce, any of the Companies' Liabilities or of
any security for the payment of the Companies' Liabilities
(although the Seller's rights have been lost) shall affect,
impair or be a defense to this Guaranty. This Guaranty is and
shall remain a primary obligation of the Guarantor.
Place, Mode of Payment. The Guarantor shall make
all payments under this Guaranty to the Seller or Alex Rabey, as
appropriate, at 1040 Coates Road, Meadowbrook, Pennsylvania
19046. Payments shall be in lawful money of the United States of
America in funds immediately available to the Seller or Alex
Rabey.
COMPANIES' LIABILITIES; SELLER AND ALEX RABEY ACTIONS
The Seller and Alex Rabey may take any or all of the
following actions at any time and from time to time without
notice to the Guarantor, without incurring any responsibility to
the Guarantor and without impairing or releasing the Guarantor's
obligations under this Guaranty.
Payment Terms. The Seller and Alex Rabey may
consent or agree to a change in the manner, place or terms of
payment, and/or a change or extension of the time of payment of,
renew or alter, or change the interest rate or rates applicable
to, any of the Companies' Liabilities, any security for the
Companies' Liabilities, or any liability incurred directly or
indirectly in respect of the Companies' Liabilities.
Exercise of Rights. The Seller and Alex Rabey may
exercise or refrain from exercising any rights against the
Companies, the Guarantor or others arising out of the Companies'
Liabilities, or otherwise act or refrain from acting.
Settlements. The Seller and Alex Rabey may settle
or compromise any of the Companies' Liabilities or the
Guarantor's Liabilities, any security for the Companies'
Liabilities or the Guarantor's Liabilities, or any liability
incurred directly or indirectly in respect of the Companies'
Liabilities or the Guarantor's Liabilities, and may subordinate
the payment of all or any part of such settlement or compromise
to the payment of any liability of the Companies (whether or not
then due) to the creditors of the Companies other than the
Seller, Alex Rabey and the Guarantor.
EVENTS OF DEFAULT; REMEDIES
Events of Default. The occurrence of any one or
more of the following shall be deemed an Event of Default
hereunder:
Failure by the Guarantor to pay any monies
due under this Guaranty upon demand by Seller or Alex Rabey,
as appropriate.
The making by the Companies or the Guarantor
of an assignment for the benefit of creditors, or a trustee
or receiver being appointed for the Companies or the
Guarantor or for any property of either of them.
Any proceeding being commenced by or against
the Companies or the Guarantor under any bankruptcy,
reorganization, arrangement of debt, insolvency,
readjustment of debt, receivership, liquidation or
dissolution law or statute, and the continuation of such
proceeding for a period of in excess of sixty (60) days.
Remedies. Upon the occurrence of an Event of Default,
and so long as such Event of Default shall continue uncured and
unwaived (which waiver must be in writing to be enforceable
against Seller or Alex Rabey):
the Seller and Alex Rabey may, at their
option and upon notice to the Companies or the Guarantor,
make the Companies' Liabilities, whether or not then due,
immediately due and payable under this Guaranty as to the
Guarantor and the Seller and Alex Rabey shall be entitled to
enforce the Companies' Liabilities against the Guarantor,
and
the Seller and Alex Rabey may exercise any of
their rights and remedies at law or equity provided by the
laws of the Commonwealth of Pennsylvania or any other
jurisdiction.
MISCELLANEOUS
Notices. All notices,
requests and demands to or upon the parties shall be deemed to
have been given or made when deposited in the mails, postage
prepaid, certified mail, return receipt requested, or when
deposited with an overnight courier service providing receipt of
delivery, charges prepaid, addressed as follows or to such other
address as the respective parties may designate in writing:
The Seller: VIR, Inc.
c/o Alex Rabey
1040 Coates Road
Meadowbrook, Pennsylvania 19046
Alex Rabey
1040 Coates Road
Meadowbrook, Pennsylvania 19046
with a copy to: Mesirov, Gelman,
Jaffe, Cramer & Jamieson
1735 Market Street
38th Floor
Philadelphia, Pennsylvania 19103
Attention: Robert P. Krauss, Esquire
The Guarantor: Allen Organ Company
P.O. Box 36
150 Locust Street
Macungie, Pennsylvania 18062
Attention: Steven Markowitz, President
with a copy to: Stevens & Lee
111 North Sixth Street
P.O. Box 679
Reading, Pennsylvania 19603
Attention: Ernest J. Choquette, Esquire
Legal Effect.
This Guaranty shall be binding upon the
Guarantor and the Guarantor's successors and assigns
(provided that the Guarantor may assign its obligations
hereunder only with the consent of Seller, which consent may
be withheld in Seller's sole discretion).
This Guaranty shall be binding upon and shall
inure to the benefit of the Seller and its successors and
assigns. Seller may assign its rights hereunder only to any
permitted assignee of Seller's rights and interests under
the documents evidencing the Companies' Liabilities.
IN WITNESS WHEREOF, and intending to be legally bound
hereby, the Guarantor has executed this Guaranty the day and year
first above written.
ALLEN ORGAN COMPANY
By__STEVEN MARKOWITZ______________
Steven Markowitz, President
Attest:__LEONARD W. HELFRICH______
(Assistant) Secretary
SECURITIES RESTRICTION AGREEMENT
THIS SECURITIES RESTRICTION AGREEMENT is made this 1st
day of August, 1995 by and among VIR, INC. ("VIR"), VIR
ACQUISITION, INC. ("Acquisition"), and ALLEN ORGAN COMPANY
("Allen").
BACKGROUND
Acquisition has delivered to VIR 24,390 shares of
capital stock (Class B Non-Voting Common) of Allen (the
"Securities") in connection with the purchase of certain assets
of VIR by Acquisition. Acquisition is a wholly owned subsidiary
of Allen.
The parties have agreed that VIR will be entitled
to transfer part or all of the Securities for not less or more
than a certain price per share, as hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the above premises
and the mutual promises contained herein, and intending to be
legally bound hereby, the parties hereto agree as follows:
Background. The Background section of this
Agreement is incorporated by reference in this Agreement, and all
capitalized terms defined in the Background section shall have
the meanings given therein to such terms whenever such terms are
used in this Agreement.
Investment Representations. VIR represents
and warrants to Allen and Acquisition as follows:
VIR is acquiring the Securities for
investment only and not with a view to resale or distribution;
VIR acknowledges that the Securities have not
been and will not be registered under the Securities Act of 1933,
as amended (the "Securities Act"), or any state securities or
"blue sky" laws;
VIR acknowledges that the Securities are not
registered under Section 12(g) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and that the Securities
are currently traded on the Nasdaq Stock Market;
VIR acknowledges that it has access to all
information it deems necessary to make an informed investment
decision to acquire the Securities by virtue of Allen filing with
the Securities and Exchange Commission such reports as are
required under Section 13 of the Exchange Act;
VIR acknowledges that Acquisition is a newly
formed corporation with only such assets as it is acquiring from
VIR and that Acquisition has no operating history. VIR further
acknowledges (i) that it is familiar with the financial condition
of Acquisition, and (ii) that VIR, its officers and directors
have had an opportunity to review all documents relating to the
incorporation of Acquisition and the purchase by Acquisition of
certain of the assets of VIR, have participated in negotiations
regarding the terms of the Securities and are familiar with the
terms thereof, and have had an opportunity to ask all questions
and to receive all other information relating to Acquisition and
Allen that they deem material to making an informed investment
decision to acquire the Securities;
VIR is a Pennsylvania corporation
headquartered in Southampton, Pennsylvania, and VIR's officers
and directors have such knowledge and experience in financial and
business matters that they are capable of evaluating the merits
and risks of an investment in the Securities;
VIR acknowledges that the Securities will
bear the following restrictive legend:
"These shares have not been registered under
the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities or blue sky law and may not
be transferred except pursuant to a registration statement
declared effective under such securities laws or pursuant to
an exemption from the registration requirements of the
Securities Act and such state securities and blue sky laws."
Alex Rabey owns one hundred percent (100%) of
the outstanding capital stock of VIR.
Put Rights.
At any time and from time to time prior to
August 1, 2000, if the Market Value (as defined in Section 15
hereof) of the Securities is less than $25.00 per share, VIR
shall have the option to require Allen to purchase all or any
portion (but not less than 2,000 shares) of the Securities owned
by VIR at a price of $25.00 per share (the "Put Option"). Each
exercise of a Put Option hereunder shall be made by delivering to
Allen written notice of such exercise, which notice shall set
forth the number of shares to be purchased by Allen (the "Put
Notice").
During the four (4) year period commencing
with the date of this Agreement, VIR shall have the option to
require Allen to purchase 2,439 shares of the Securities during
each twelve (12) month period commencing on the date of this
Agreement and each anniversary thereafter (the "10% Put Option").
The purchase price for Securities purchased by Allen pursuant to
the 10% Put Option shall be the Market Value. Each exercise of a
10% Put Option hereunder shall be made by delivering to Allen
written notice of such exercise (also a "Put Notice"). If a 10%
Put Option is not exercised during any twelve (12) month period,
VIR may, during the following twelve (12) month period(s),
exercise the 10% Put Option for the cumulative total of all 10%
Put Options that could have been exercised by VIR up to that
time.
Settlement on the purchase by Allen of any
Securities pursuant to the exercise of a Put Option or a 10% Put
Option shall be held on such date and at such time as is mutually
acceptable to Allen and VIR, but no later than thirty (30) days
after the Put Notice is given. Settlement shall be held at the
offices of Allen at 150 Locust Street, Macungie, Pennsylvania.
At such settlement, VIR shall deliver to Allen certificates for
such number of Securities as is set forth in the Put Notice,
endorsed in blank or accompanied by blank stock powers executed
by VIR. The purchase price for the Securities purchased by Allen
shall be paid at the settlement in cash or by certified check.
If less than all the Securities represented by the certificates
delivered by VIR are to be purchased by Allen, a new certificate
for the balance of such Securities not being purchased shall be
issued by Allen to VIR bearing such restrictive legends as are on
the certificate for the Securities being surrendered for
purchase.
If upon exercise of a Put Option or a 10% Put
Option Allen is not permitted under the applicable provisions of
the Pennsylvania Business Corporation Law to redeem all of the
Securities to be purchased from VIR, then the largest number of
Securities as may be purchased by Allen shall be purchased. Any
Securities which are specified for purchase in the Put Notice but
which remain unredeemed because of insufficient funds shall, at
VIR's option, thereafter be redeemed by Allen as soon as
sufficient funds become legally available therefor on the same
basis as set forth herein.
Right of First Refusal.
If at any time prior to August 1, 2000, VIR
desires to transfer any or all of the Securities then owned by
VIR (beneficially or of record, but not including a transfer to
Alex or Luba Rabey or their issue or to a trust or trusts for the
benefit of any of them), VIR shall first offer to sell such
Securities to Allen at a price equal to the lesser of (i) (A) the
Market Value, or (B) $55 per share. In addition, if at any time
on or subsequent to August 1, 2000, VIR desires to transfer any
or all of the Securities then owned by VIR (beneficially or of
record, but not including a transfer to Alex or Luba Rabey or
their issue or to a trust or trusts for the benefit of any of
them), VIR shall first offer to sell such Securities to Allen at
a price equal to the Market Value. Any such offer to Allen shall
be for the greater of (ii) (A) the number of Securities VIR
desires to transfer or (B) 2,000 shares. VIR shall give written
notice to Allen of its intention to sell such Securities, which
notice shall state the number of Securities to be sold (the
"Offer Notice"). Allen may accept such offer by giving written
notice to VIR of its acceptance within fifteen (15) days after
the Offer Notice is given. Such notice of acceptance shall state
the date and time of settlement on the purchase of such
Securities, which shall be no later than thirty (30) days after
the Offer Notice is given. Settlement shall be held at the
offices of Allen at 150 Locust Street, Macungie, Pennsylvania.
The purchase price for the Securities purchased shall be paid in
cash or by certified check at the settlement. VIR shall deliver
to Allen at the settlement certificates for the Securities to be
sold to Allen, endorsed in blank or accompanied by blank stock
powers executed by VIR. If less than all of the Securities
represented by such stock certificates are to be purchased, a new
certificate for the balance of the Securities not being purchased
shall be issued by Allen to VIR bearing such restrictive legends
as are on the certificate for the Securities being surrendered
for purchase.
The certificates representing the Securities
shall have the following legend printed or typed thereon:
"The transfer of the shares of
stock represented by this certificate is
restricted and subject to the terms and
conditions of a Securities Restriction
Agreement dated ____________, 1995 among VIR,
Inc., VIR Acquisition, Inc., and Allen Organ
Company, a copy of which is on file in the
office of Allen Organ Company at 150 Locust
Street, Macungie, Pennsylvania."
In addition, if Allen fails to exercise its rights
under paragraph (a) above and VIR sells any of the Securities in
compliance with applicable federal and state securities laws,
including Rule 144 (if applicable) as promulgated under the
Securities Exchange Act, upon request by VIR, Allen shall cause
the above restrictive legend to be removed on any certificates
representing the Securities so sold.
Adjustment of Purchase Price. The purchase price
per share to be paid for the Securities under Section 3
and clause (ii) of Section 4(a) hereof shall be adjusted to
reflect any stock splits, stock dividends, or reverse stock
splits of Allen's Class B Stock declared by the Board of
Directors of Allen and having a record date prior to any
settlement held under Section 3 or Section 4 hereof.
Restriction on Sale of Securities. VIR shall only
sell the Securities in compliance with applicable federal and
state securities laws, including Rule 144 (if applicable) as
promulgated under the Securities Act. In addition, VIR agrees
that during the four year period commencing on the first
anniversary of the date of this Agreement, VIR will not sell more
than ten percent (10%) of the Securities during any twelve-month
period commencing on each anniversary date of this Agreement.
After August 1, 2000, VIR shall not be restricted in the transfer
of the Securities in any manner other than as restricted under
Rule 144 (if applicable) or under Section 4 above.
Restriction on Transfer of Securities. VIR may
transfer the Securities to Alex and/or Luba Rabey (or their issue
or to a trust or trusts for the benefit of any of them) in
connection with any liquidation or dissolution of VIR, but all
Securities shall remain subject to the terms of this Agreement.
In the event Securities are transferred to Alex or Luba Rabey,
their issue, or a trust in accordance with the foregoing, the
rights granted VIR under this Agreement shall be exercisable by
the transferees of such Securities.
Equitable Relief. The parties recognize that this
Agreement is of particular importance for the protection of the
existing and future interests of the parties hereto and their
respective legal obligations under the federal and state
securities laws and that this Agreement relates to property which
is unique and unusual in nature. Therefore, if a party defaults
in the performance of any of the provisions of this Agreement or
attempts to transfer any Securities in violation of the
provisions of this Agreement, any other party may sue in equity
for a decree of specific performance, temporary restraining
order, preliminary and permanent injunctive relief, or any other
equitable remedies then available. Each party consents to such
jurisdiction, waives all defenses to such lawsuit (specifically
including the defense that there is an adequate remedy at law)
and all defects in such proceedings, and releases all claims for
damages by reason of such lawsuit. The party commencing such
action shall not be required to post any bond in connection with
such action, and the parties hereto waive the right to require or
request that any such bond be posted.
Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
Counterparts. This Agreement may be executed in
several counterparts, each of which shall constitute an original,
but all of which together shall constitute one instrument
notwithstanding that all parties are not signatories to the same
counterparts.
Entire Agreement. This Agreement constitutes the
entire agreement and understanding of the parties with respect to
the matters and transactions contemplated by this Agreement and
supersedes all prior agreements and understandings with respect
to those matters and transactions.
Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the Commonwealth
of Pennsylvania, without giving effect to the law or principles
of conflict of laws.
Amendment. This Agreement may only be amended or
modified by a written agreement executed by all of the parties
hereto, or their respective successors and assigns.
Notices. All notices required or permitted to be
given under this Agreement shall be in writing and shall be
deemed to have been given (a) when delivered if personally
delivered, (b) when delivered to a commercial courier service
promising next business day delivery and requiring receipt of
delivery, or (c) two days after deposit in the United States
mail, certified mail, return receipt requested, postage paid, if
sent or delivered to the following address:
If to Allen: Allen Organ Company
P.O. Box 36
150 Locust Street
Macungie, PA 18062-0036
Attention: Steven Markowitz,
President
If to Acquisition: VIR Acquisition, Inc.
c/o Allen Organ Company
150 Locust Street
P.O. Box 36
Macungie, PA 18042-0036
Attention: Steven Markowitz,
President
If to VIR: VIR, Inc.
1040 Coates Road
Meadowbrook, PA 19046
Attention: Alex Rabey, President
Any party may change the address to which notices are to be
sent hereunder by giving written notice of such change in address
to each other party hereunder in the manner provided in this
Section 14.
Definitions. When used in this Agreement, the
following terms shall have the following meanings whenever used
in this Agreement:
"Market Value" shall mean the average of the daily
closing prices for the twenty (20) consecutive business days
before the day in question. The closing price for any day
shall be (A) if Allen's Class B Non-Voting Stock is listed
or admitted for trading on any national securities exchange,
the last sale price (regular way), or the average of the
closing bid and ask prices, if no sale occurred, of Class B
Non-Voting Stock on the principal securities exchange on
which the Class B Non-Voting Stock is listed, (B) if not
listed as described in (A) but if quoted on the Nasdaq Stock
Market (formerly the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotation
System) the last sale price, or the average of the closing
bid and ask prices, if no sale occurred, of Class B
Non-Voting Stock on the Nasdaq Stock Market, (C) if not
quoted as described in clause (B), the mean between the
closing high bid and low asked quotations of Class B
Non-Voting Stock on the National Association of Securities
Dealers, Inc. Automated Quotation System, or any similar
system for automated dissemination of quotations of
securities prices then in common use, if so quoted, or
(D) if not quoted as described in clauses (B) or (C), the
mean between the high bid and low asked quotations for
Class B Non-Voting Stock as reported by the National
Quotation Bureau Incorporated if at least two securities
dealers have inserted both bid and asked quotations for
Class B Non-Voting Stock on at least 5 of the 10 preceding
business days. If none of the conditions set forth above is
met, the closing price of Class B Non-Voting Stock on any
day or the average of such closing prices for any period
shall be the fair market value of Class B Non-Voting Stock
as determined by a member firm of the New York Stock
Exchange, Inc. mutually selected by Allen and VIR.
IN WITNESS WHEREOF, the parties hereto have caused
their names to be signed hereto by their respective officers
thereunto duly authorized as of the date first above written.
VIR, INC.
By__ALEX RABEY_____________________
Alex Rabey, President
Attest:__ALEX RABEY________________
Title:
VIR ACQUISITION, INC.
By__STEVEN MARKOWITZ_______________
Steven Markowitz,
Chief Executive Officer
Attest:__LEONARD W. HELFRICH______
Title:
ALLEN ORGAN COMPANY
By__STEVEN MARKOWITZ______________
Steven Markowitz, President
Attest:__LEONARD W. HELFRICH______
Title: