PARTICIPATION RIGHTS AGREEMENT
This PARTICIPATION RIGHTS AGREEMENT ("Participation Agreement") is
made as of the 28th day of February, 1995 by and between AEL Industries,
Inc., a Pennsylvania corporation ("Corporation") and Dr. Leon Riebman ("Dr.
Riebman").
Background
A. This is the Participation Rights Agreement referred to in a
certain 1995 Agreement ("1995 Agreement") dated the date hereof between the
Corporation and Dr. Riebman.
B. The purpose of this Participation Agreement is to set forth the
terms and conditions upon which, in consideration for Dr. Riebman's
agreement to comply with the provisions of Section 8 of the 1982 Agreement,
as supplemented and restated by Section V of the 1995 Agreement, the
receipt and sufficiency of such consideration being hereby acknowledged;
the Corporation, upon the occurrence of a Qualifying Business Combination,
will make a cash payment to Dr. Riebman, in the amount and at the time
determined pursuant to this Participation Agreement.
NOW THEREFORE, intending to be legally bound hereby, the Corporation
and Dr. Riebman agree as follows:
1. Definitions. Terms capitalized but not defined herein shall have
the meanings ascribed to them in the 1982 Agreement (as defined in the 1995
Agreement) or in the Agreement (as defined in the 1995 Agreement) unless
the context otherwise requires.
2. Grant of Participation Rights. The Corporation hereby grants to
Dr. Riebman the right to participate in the proceeds of a Qualifying
Business Combination, such participation right to be paid in cash by the
Corporation to Dr. Riebman in accordance with the provisions hereof
("Participation Payment").
3. Amount of Participation Payment. The amount of the Participation
Payment shall be the "Calculated Amount" (as defined hereinbelow). The
Calculated Amount shall be determined as follows:
(i) If the "Aggregate Consideration" (as defined hereinbelow) in
connection with a Qualifying Business Combination is equal to or greater
than $60,000,000 the Calculated Amount shall be equal to $1,900,000; or
(ii) If the Aggregate Consideration in connection with a Qualifying
Business Combination is less than $60,000,000, the Calculated Amount shall
be equal to the product of (x) $1,900,000, multiplied by (y), a fraction,
the numerator of which is equal to the amount of the Aggregate
Consideration in connection with a Business Combination and the denominator
of which is $60,000,000;
(iii) The "Aggregate Consideration" shall be equal to the aggregate of
(A) the amount of any cash and (B) the fair market value of any property,
paid by a buyer as consideration to the Corporation and/or the shareholders
of the Corporation in connection with a Qualifying Business Combination
measured as of the closing date ("Closing Date") of the Qualifying Business
Combination. For the purposes of determining the amount of the Aggregate
Consideration: (1) the amount of any consideration to be paid following
the Closing Date shall be discounted to the Closing Date at a discount rate
of six percent (6%) per annum; (2) the fair market value of any common
stock or other securities received shall mean, with respect to each such
share or unit one of the following determined in the order of priority set
forth below: the weighted average of the closing prices for such share or
unit sold on all securities exchanges on which such share or unit may at
the time be listed for a period of twenty (20) consecutive trading days
prior to the Closing Date or, if there have been no sales on such exchanges
on such days, the weighted average of the highest bid and lowest asked
prices on all such exchanges at the end of each such days or, if such stock
or units are not so listed, the average of the representative bid and asked
prices quoted on the NASDAQ system as of 4:00 p.m. New York City time on
each of such days, or if such stock or units are not quoted on the NASDAQ
system, the average of the highest bid and lowest asked prices on such days
in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor organization, or,
if not so quoted, the value as determined in good faith by the Board of the
Corporation in consultation with Dr. Riebman and (3) the fair market value
of any consideration to be paid in property other than common stock or
securities shall be as determined in good faith by the Board of the
Corporation in consultation with Dr. Riebman. Notwithstanding any of the
foregoing, for purposes of this Section 3(iii), the Aggregate Consideration
shall be reduced by cash paid or to be paid to the Corporation as the
exercise price for stock options exercised in connection with a Qualifying
Business Combination.
4. Corporation's Obligation to Make the Participation Payment. The
Corporation's obligation to make the Participation Payment shall only arise
and be payable upon the delivery by the Voting Trustees of the certificates
representing the Contingent Shares to the holder(s) of the Voting Trust
Certificate(s) issued with respect to the Contingent Shares pursuant to
Paragraph 11(a) of the VT Agreement, and upon such delivery the
Participation Payment shall be made on the later of (a) the date of such
delivery or (b) August 28, 1995. The aforementioned delivery is the only
condition to the Corporation's obligation to make the Participation
Payment.
5. Amendment; Rescission; Actions by the Corporation. No amendment
or rescission of this Participation Agreement shall be effective unless set
forth in a writing signed by Dr. Riebman and the Corporation. Such
amendment or recission by the Corporation shall require the approval of a
majority of the members of the LRPC; provided, however, if at any time
there exist less than three members of the LRPC, all such actions shall
require the unanimous approval of the members of the LRPC. The foregoing
shall not excuse the performance by the Corporation of any obligations
which it has undertaken to perform hereunder.
6. Representations and Warranties. Dr. Riebman hereby represents
and warrants to the Corporation as follows:
a. He is sui juris and of full capacity to make and perform his
obligations under this Participation Agreement.
b. The execution, delivery and performance by Dr. Riebman of
this Participation Agreement will not violate or constitute a breach of or
default under any instrument to which he is party or pursuant to which he
is bound.
c. This Participation Agreement constitutes a valid and binding
obligation of Dr. Riebman enforceable in accordance with its terms.
7. Notices.
All communications provided for in this Agreement shall be in
writing and shall be sent to each party as follows:
To The Corporation:
AEL Industries, Inc.
305 Richardson Road
Lansdale, PA 19446
Attention: John R. Cox, Esquire
General Counsel
Fax 215-822-6056
With copies to:
Mr. Francis J. Dunleavy
560 Morris Road, Box 208
Blue Bell, PA 19422
Fax 215-643-9275
Frederick R. Einsidler
99 South Park Avenue, Apt. 109
Rockville Centre, NY 11570
Fax 516-536-6505
Conrad J. Fowler
826 North Fairway Road
Glenside, PA 19038
Fax 215-887-3293
Leeam Lowin
21 Fox Run Lane
Greenwich, CT 06831
Fax 203-661-6258
and
Vincent F. Garrity, Jr., Esquire
Duane, Morris & Heckscher
One Liberty Place
Philadelphia, PA 19103
Fax 215-979-1020
To Riebman:
Dr. Leon Riebman
1380 Barrowdale Road
Rydal, PA 19046
Fax 215-885-2238 (telephone first)
With a copy to:
Abraham H. Frumkin, Esquire
Eckert Seamans Cherin & Mellott
1700 Market Street
Suite 3232
Philadelphia, PA 19103
Fax 215-575-6015
or to such other address as such party may hereafter specify in writing,
and shall be deemed given on the earlier of (a) physical delivery, (b) if
given by facsimile transmission, when such facsimile is transmitted to the
telephone number specified in this Agreement and telephone confirmation of
receipt thereof is received, (c) three days after mailing by prepaid first
class mail and (d) one day after transmittal by prepaid overnight courier.
8. Miscellaneous.
a. Survival of Representations and Warranties. All
representations and warranties contained in this Participation Agreement
shall survive the execution and delivery of this Participation Agreement
and the consummation of the transactions contemplated hereby.
b. Binding Effect. This Participation Agreement shall be
binding upon, and inure to the benefit of, the Corporation and its
successors and Dr. Riebman and his heirs and personal representatives.
c. Governing Law. This Participation Agreement shall be
governed by, and construed and enforced in accordance with, the internal
law of the Commonwealth of Pennsylvania without giving effect to conflicts
of laws.
d. Entire Agreement. This Participation Agreement supersedes
any prior negotiations and understandings and constitutes the entire
agreement between the parties with regard to its subject matter.
e. Counterparts. This Participation Agreement may be executed
in several counterparts each of which shall be deemed an original, but all
of which taken together shall constitute one and the same document.
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Agreement as of the date first mentioned above.
AEL INDUSTRIES, INC.
By:/s/ George King
Name: George King
Title: Vice President
/s/ Dr. Leon Riebman
Dr. Leon Riebman