Exhibit 10.2
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COMMON STOCK PURCHASE AGREEMENT
COMMON STOCK PURCHASE AGREEMENT dated December 4, 2000 by and between
HERLEY WIRELESS TECHNOLOGIES, INC., a Delaware corporation (the "Purchaser"),
and Step Electronics, Inc. (the "Corporate Stockholder"), Gul Gazipura
("Gazipura"), (the Corporate Stockholder Step Electronics, Inc. and Gazipura
collectively referred to herein as the "Stockholders"), as the owners of a
majority of the issued and outstanding capital stock of TERRASAT, INC., a
California corporation (the "Company").
W I T N E S S E T H:
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WHEREAS, the Company has been engaged for several years in the business
of developing, manufacturing and selling microwave and millimeterwave subsystems
for use in point to point and multipoint digital radiowave and related products
and services; and
WHEREAS, the Purchaser and Stockholders have agreed effectively as of
October 1, 2000, to the sale by the Stockholders to the Purchaser of all of the
outstanding common stock of the Company upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the covenants, warranties and
mutual agreements herein set forth, and in reliance upon the representations and
warranties contained herein, the parties do hereby agree as follows:
1. Transfer of Stock.
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In reliance on the representations and warranties contained herein and
subject to all of the terms and conditions hereof, the Stockholders and all
other Stockholders of the Company (the "Other Stockholders") pursuant to
individual Stock Sale Agreements (the "Stock Sale Agreements") substantially in
the form annexed hereto as Exhibit B, shall sell, assign, transfer and deliver
to the Purchaser, and the Purchaser shall purchase from the Stockholders and
Other Stockholders on the Closing Date, all of the issued and outstanding common
stock of the Company (the "Stock"). The Other Stockholders shall include all
vested option holders who, as a condition to the Purchaser's obligation to
close, will have exercised all their options prior to the Closing. The Other
Stockholders and the Stockholders are sometimes collectively referred to herein
as the "Stockholders' Group."
2. Purchase Price and Payment.
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2.1. Purchase Price. In consideration of the sale of the Stock to the
Purchaser, and subject to the terms and conditions hereinafter set forth, the
Purchaser shall pay to the Stockholders' Group the sum of $6,000,000 which is to
be allocated to the Stockholders' Group in the amounts set forth on Schedules
2.1(a) and (b) hereto (the "Purchase Price") as follows:
(a) $3,000,000 at the Closing less any amounts paid to the
Stockholders in advance of the Closing, and subject to the
repayment of any outstanding indebtedness owed by any of the
Stockholders' Group as otherwise set forth in the Stock Sale
Agreements by delivering checks in the amounts set forth on
Schedule 2.1(a) to the Stockholders'
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Group Representative, pursuant to a written letter of
authorization signed by all of the Stockholders and Other
Stockholders; and
(b) subject to any offsets for outstanding indemnification
obligations then owed by the Stockholders to the Purchaser
pursuant to Section 10 of this Agreement, $3,000,000 within
five (5) business days after the first anniversary date of the
Closing Date, paid by transmitting checks in the amounts set
forth on Schedule 2.1(b) to the Stockholders' Group
Representative pursuant to the written letter of authorization
described in Section 2.1(a);
2.1.1 Notwithstanding anything herein to the contrary, the
portion of the Purchase Price to be paid at Closing pursuant to Section 2.1(a)
hereof, shall be reduced if the aggregate of the Company's outstanding
indebtedness to lending institutions and under its equipment lines of credit,
including notes payable to Banks and notes payable for equipment, as of
September 30, 2000 exceeds $580,000.00.
2.2. Earn-Out Payment.
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2.2.1 Based on the Gross Revenues (as hereinafter defined)
earned by the Company during the period from January 1, 2001 through and
including December 31, 2001 (the "Earn-Out Period") subject to any offsets for
outstanding indemnification obligations then owed by the Stockholders to the
Purchaser pursuant to Section 10 hereof, the Purchaser will pay to the
Stockholders and Other Stockholders a one-time Earn-Out Payment as follows: (a)
One Million Dollars ($1,000,000), if in the Earn-Out Period the Company
generates Gross Revenues of at least Seven Million Five Hundred Thousand Dollars
($7,500,000) and not more than Eight Million Four Hundred and Ninety-Nine
Thousand Dollars ($8,499,000); or (b) Two Million Dollars ($2,000,000), if in
the Earn Out Period the Company generates Gross Revenues of Eight Million Five
Hundred Thousand Dollars ($8,500,000) or greater.
2.2.2 For purposes of this Agreement, "Gross Revenues" shall
be defined as gross sales of the Company less credits, customary discounts and
returns. The Gross Revenues of the Company shall be determined in accordance
with generally accepted accounting principles consistently applied in accordance
with the historical practices of the Company.
2.2.3 Within ninety (90) days after the end of the Earn-Out
Period, Purchaser shall deliver to the Stockholders' Group Representative, on
behalf of the Stockholders and Other Stockholders, a statement setting forth the
computation and amount of the Gross Revenues for the Earn-Out Period ("Earn-Out
Statement") and shall pay the Earn-Out Payment, if any, to the Stockholders and
Other Stockholders within thirty (30) days after the delivery of the Earn-Out
Statement pursuant to Schedule 2.2.3.
2.2.4 The Stockholders' Group Representative shall have thirty
(30) days from the date the Earn-Out Statement is delivered to furnish Purchaser
with a letter requesting access to the books and records which the Stockholders'
Group deems necessary to compute the Gross Revenues for the Earn-Out Period.
Upon receipt of such request, Purchaser shall promptly make available such
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books and records to the Stockholders' Group Representative and his
representative. The Stockholders' Group through the Stockholders' Group
Representative shall have fifteen (15) days after such access is granted to
furnish Purchaser with a letter setting forth those items with which the
Stockholders' Group disagrees and the reasons for each such disagreement. The
parties shall promptly seek to reconcile any such disagreement. If the parties
fail to reach an agreement within ten (10) days of receipt by Purchaser of such
letter, then a "Big Six" independent public accounting firm retained by
Purchaser and Stockholders' Group to settle the disagreement, shall make its
determination within thirty (30) days after the dispute is submitted to it which
determination shall be conclusive ("the Determination"). The fee of the
accounting firm shall be paid exclusively by the Stockholders' Group if the
Determination does not result in the payment of greater Earn-Out Payment than as
originally set forth in the Earn-Out Statement. If the Determination does result
in a greater Earn-Out Payment, the fees of the accounting firm shall be borne
exclusively by the Purchaser. The payment of the Earn-Out Payment in dispute, if
any, ultimately determined (pursuant to the procedures set forth in this
paragraph) to be due to the Stockholders' Group shall be made within fifteen
(15) days of the Determination.
2.3. Additional Consideration.
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If the Purchaser consummates an underwritten public sale of
its common stock ("Registered Stock") under the Securities Act of 1933, as
amended, pursuant to a Registration Statement on Form S-1 or S-3 (or any
successor form), during the Earn-Out Period (the "Public Offering") which
generates net proceeds in an amount equal to or exceeding Fifty-Million Dollars
($50,000,000) (the "Net Proceeds"), then, in such event, the Stockholders and
Other Stockholders shall be entitled to receive from the Purchaser within ten
(10) business days after the closing thereof and the receipt of the Net Proceeds
by the Purchaser, the sum of Two Million Dollars ($2,000,000) (the "Additional
Consideration"), allocated to the Stockholders and Other Stockholders as set
forth on Schedule 2.3. Solely in the discretion of the Purchaser, the Purchaser
may elect to pay the Additional Consideration, in whole or in part, by the
delivery to the Stockholders and Other Stockholders of unregistered common stock
of the Purchaser, valued at a price per share equal to the price per share of
the Registered Stock sold in the Public Offering. The payment of the Additional
Consideration shall be subject to any offsets for outstanding indemnification
obligations then owed by the Stockholders to the Purchaser pursuant to Section
10 hereof.
3. The Closing.
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3.1. Place and Date.
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The closing of the transactions provided for in Section 1
shall take place at the offices of Blau, Kramer, Wactlar & Lieberman, P.C., 100
Jericho Quadrangle, Jericho, New York (or at such other place as the parties may
agree upon in writing) contemporaneously with the execution of this Agreement.
The closing is referred to in this Agreement as the "Closing" and date of the
closing is referred to herein as the "Closing Date".
3.2. Documents to be Delivered by the Stockholders.
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(a) the Stockholders or the Company, as the case may
be, shall execute and/or deliver to the Purchaser the
following:
(i) duly issued certificates representing all of the
Stock duly endorsed in blank, with blank Stock powers
attached;
(ii) a copy of resolutions of the Board of Directors
and the Stockholders of the Company authorizing the
execution, delivery and performance of this Agreement, and a
certificate of its secretary or assistant secretary, dated
the Closing Date, to the effect that such resolutions were
duly adopted and are in full force and effect;
(iii) a copy of resolutions of the Board of Directors
of the Corporate Stockholder authorizing the sale by the
Corporate Stockholder of the Stock owned by it and a
certificate of its secretary or assistant secretary, dated
the Closing Date to the effect that such resolutions were
duly adopted and are in full force and effect;
(iv) the opinions, certificates and other documents or
instruments specified in Section 7.1 of this Agreement;
(v) executed Stock Sale Agreements by each of the Other
Stockholders; and
(vi) an agreement signed by the Stockholders, Other
Stockholders and the Company which terminates effectively as
of the Closing the Shareholders Agreement among them dated
August 18, 1994, as amended (the "Shareholders Agreement").
(b) the Stockholders and the Company shall each execute such
other documents and instruments and take such action as may be necessary or
reasonably requested by the Purchaser to fully vest in Purchaser full title to
the Stock and place the Purchaser in possession and control of the Company and
its assets.
3.3. Documents to be Delivered by the Purchaser.
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At the Closing the Purchaser shall execute and/or deliver to
the Stockholders the following:
(i) a copy of resolutions of the Board of Directors of
the Purchaser authorizing the execution, delivery and
performance of this Agreement by the Purchaser, and a
certificate of its secretary or assistant secretary, dated
the Closing Date, to the effect that such resolutions were
duly adopted and are in full force and effect;
(ii) the opinions, certificates and other documents or
instruments specified in Section 7.2 of this Agreement.
3.4. Form of Documents.
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Unless specifically otherwise provided herein, all documents
to be delivered pursuant to this Section 3 by one party to the other party to
this Agreement shall be in form and substance reasonably satisfactory to such
other party and its counsel.
4. Representations and Warranties of the Stockholders.
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The Stockholders and the Company jointly and severally represent and
warrant to the Purchaser as of the date hereof and as of the Closing Date as
follows:
4.1. Organization and Authority.
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The Company is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation as
set forth in Schedule 4.1, with all requisite power and authority (corporate and
governmental) to own, operate and lease its properties and to carry on its
business as now being conducted. Except as set forth in Schedule 4.1, the
Company is duly licensed or qualified to do business and is in good standing in
each jurisdiction set forth on Schedule 4.1 hereto, which except as set forth in
Schedule 4.1 are all the jurisdictions in which the Company is required to be so
qualified or licensed.
4.2. Subsidiaries.
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The Company has no subsidiaries. The Company has no direct or
indirect interest or interests by Stock ownership or otherwise in any firm,
association, corporation or business enterprise, except as set forth on Schedule
4.2.
4.3. Authorization of Agreements.
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The Stockholders have the legal capacity and the power and
authority to execute, deliver and perform their obligations under this
Agreement. This Agreement has been duly executed and delivered by the
Stockholders and constitutes the legal, valid and binding obligation of the
Stockholders enforceable against them in accordance with its terms, except as
the enforcement thereof may be subject to or limited by bankruptcy, insolvency,
reorganization, moratorium, or other laws affecting the enforcement of
creditors' rights generally now or hereafter in effect and subject to the
application of equitable principles and the availability of equitable remedies.
4.4. Capital Stock.
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The authorized, issued and outstanding capital Stock of all
classes of the Company are set forth on Schedule 4.4. All of the outstanding
capital Stock of the Company has been duly authorized and is validly issued,
fully paid and nonassessable. Except as set forth on Schedule 4.4, all
outstanding capital Stock and any other outstanding securities of the Company
(including any employee stock options) were issued in compliance with all
federal and state securities laws. The lawful, registered and beneficial owners
(and their addresses) of all shares of the capital stock of the Company and the
number of shares held by each is as indicated on Schedule 4.4 hereto. The
Stockholders and Other Stockholders have and on the Closing Date will convey to
the Purchaser good
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title to the Stock, free and clear of any security interest, claim, lien,
pledge, option, warrant, encumbrance or restriction whatsoever. Except for the
Shareholders Agreement which will be terminated effectively as of the date
hereof, there are no rights, subscriptions, warrants, options, conversion
rights, commitments or agreements of any kind authorized or outstanding to
purchase or otherwise acquire from the Stockholders or Other Stockholders, the
Company or any other person, any shares of stock, or securities or obligations
of any kind convertible into or exchangeable for any stock, of any class of the
Company or any other equity interest in the Company. There is no proxy, or any
agreement, arrangement or understanding of any kind authorized or outstanding
which restricts, limits or otherwise affects the right to vote any share of
Stock or other securities of the Company.
4.5. No Conflicts.
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The execution, delivery and performance of this Agreement, any
other agreement or document contemplated herein or therein and the consummation
of all of the transactions contemplated hereby and thereby: (i) do not and will
not require the consent, waiver, approval, license, designation or authorization
of, or declaration with, any Person or court to which the Company is subject or
any governmental authority or agency; and (ii) do not and will not, with or
without the giving of notice or the passage of time or both, violate or conflict
with or result in a breach or termination of any provision of, or constitute a
default under, or accelerate or permit the acceleration of the performance
required by the terms of, or result in the creation of any mortgage, security
interest, claim, lien, charge or other encumbrance upon any of the assets of the
Company pursuant to, or otherwise give rise to any liability or obligation
under, the certificate of incorporation or bylaws of the Company, any agreement,
mortgage, deed of trust, indenture, license, permit or any other agreement or
instrument or any order, judgment, decree, statute or regulation to which the
Stockholders or the Company is a party or by which the Stockholders or the
Company or any of their assets may be bound; and (iii) will not terminate or
result in the termination of any such agreement or instrument, or in any
material way affect or violate the terms and conditions of, or result in the
cancellation, modification, revocation or suspension of, any rights of the
Company.
4.6. Financial Statements.
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Attached hereto as Schedule 4.6 are the Financial Statements
of the Company.
4.6.1 For the relevant periods, the Financial Statements: (1)
are complete and correct in all material respects; (2) present fairly the
financial position of the Company at such dates and the results of operations
and cash flows for the respective periods ended on such dates; and (3) were
prepared in accordance with generally accepted accounting principles,
consistently applied during the periods, and are in accordance with the books
and records maintained by the Company, with no differences between such
Financial Statements and the financial records maintained and accounting methods
applied by the Company for tax purposes, except as disclosed in the notes to the
Financial Statements.
4.6.2 The value at which any or all of the assets carried on
the Financial Statements as of September 30, 2000 is not overstated and does not
exceed each asset's or group of assets'
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replacement cost (or market, if lower) and does not exceed each asset's or group
of assets' fair market value.
4.6.3 As at September 30, 2000, the Company had no
liabilities, commitments or obligations of any nature, whether absolute,
accrued, contingent or otherwise, not shown and adequately provided for in the
Financial Statements or in Schedule 4.6.
4.6.4 As at September 30, 2000:
(a) the aggregate indebtedness and liability of the
Company to lending institutions and under the Company's
equipment credit lines, including notes payable to Banks and
notes payable for equipment, do not exceed $580,000.
(b) the total equity of the Company exceeds $920,000;
(c) the Company's sales for the fiscal year ended
September 30, 2000 exceed $4,250,000;
(d) the Company's income before taxes and inventory
writeoffs for the fiscal year ending September 30, 2000
exceeds $240,000;
(e) the Company's current liabilities do not exceed
$978,000; and
(f) the Company's current assets exceed $1,480,000.
Subparagraphs (a) through (f) of this Section 4.6.4 are sometimes
collectively referred to herein as the "Financial Statement Parameters".
4.7. Taxes.
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True and correct copies of the Company's federal and state
income tax returns for the years ended 1999 and 1998 have been delivered to the
Purchaser. All tax returns (including information returns) required by any
jurisdiction to have been filed by or with respect to the Company have been
filed, except for returns with respect to which extensions have been granted,
and each such return is true, correct and complete. Schedule 4.7 sets forth each
jurisdiction in which the Company is required to file all tax returns.
Except as set forth in Schedule 4.7, all liabilities of the
Company to any jurisdiction for taxes of every kind and nature, including
interest thereon and penalties with respect thereto, (collectively "Taxes")
relating to any period prior to September 30, 2000 have been timely paid by the
Company or are accrued and provided for in the Financial Statements for the
period ended September 30, 2000. Any liability for Taxes incurred by the Company
since September 30, 2000 was incurred in the ordinary course of business.
The U.S. federal income tax returns and state and foreign income
tax returns of the
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Company have been prepared from, and accurately reflect, the financial records
maintained by the Company, have been prepared using tax accounting methods that
are in compliance with the Internal Revenue Code, as amended and the regulations
promulgated thereunder (the "Code"), and have not been audited by the Internal
Revenue Service or other taxing authority within the past five years. Neither
the Internal Revenue Service nor any state, local or other taxing authority has
proposed any additional taxes, interest or penalties with respect to the Company
or any of its operations or business; there are no pending or, to the knowledge
of the Shareholders, threatened tax claims or assessments; and there are no
pending or threatened tax examinations by any taxing authorities.
The Company has not given any waivers of rights (which are
currently in effect) under applicable statutes of limitations with respect to
the federal income tax returns for any fiscal year. The Company has not
consented to the application of Section 341(f) of the Code.
4.8. No Adverse Changes.
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Except as set forth on Schedule 4.8, since September 30, 2000:
(i) the business of the Company has been conducted only in the ordinary course;
(ii) there has been no material change in the condition (financial or
otherwise), of the assets, liabilities, business, operations, affairs or
prospects of the Company other than changes in the ordinary course of business,
none of which singly and no combination of which, in the aggregate, has been
materially adverse; and (iii) there has been no damage, destruction or loss or
other occurrence or development, whether or not insured against, which, either
singly or in the aggregate, materially adversely affects, and the Stockholders
have no knowledge of any threatened occurrence or development which would
materially adversely affect, the condition (financial or otherwise), assets,
liabilities, business, operations, affairs or prospects of the Company.
4.9. Conduct of Business.
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Except as disclosed on Schedule 4.9 hereto, since September
30, 2000, the Company has not: (i) created or incurred any liability (absolute,
accrued, contingent or otherwise) except unsecured current liabilities incurred
in the ordinary course of business consistent with past practice; (ii)
mortgaged, pledged or subjected to any lien or otherwise encumbered any of its
assets, tangible or intangible; (iii) discharged or satisfied any lien or
encumbrance or paid any obligation or liability (absolute, accrued, contingent
or otherwise) other than current liabilities shown on the Financial Statements
as at September 30, 2000 and taxes and current liabilities incurred since
October 1, 2000 in the ordinary course of business or under contracts or
agreements entered into in the ordinary course of business (other than as a
result of any default or breach of, or penalty under, any such contracts or
agreements); (iv) waived, released or compromised any claims or rights of
substantial value, or experienced any labor trouble (including without
limitation any actual or threatened strike or lock-out) or lost, or been
threatened with the loss of, any key employees or any substantial number of
employees; (v) entered into any settlement, compromise or consent with respect
to any claim, proceeding or investigation; (vi) sold, assigned, transferred,
leased or otherwise disposed of any of its assets, tangible or intangible, or
canceled any debts or claims except, in each case, for fair consideration in the
ordinary course of business (it being understood that the disposition of any
asset, other than inventory consisting of finished products, or cancellation of
any debt or claim carried on
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the books at more than $10,000 shall be deemed not to be a disposition or
cancellation in the ordinary course of business); (vii) declared or paid any
dividends, or made any other distribution on or in respect of, or directly or
indirectly purchased, retired, redeemed or otherwise acquired any Stock of its
capital Stock, paid any notes or open accounts or paid any amount or transferred
any asset to the Stockholders, any member of his family or any other holder of
any capital Stock of the Company; (viii) made or become a party to, or become
bound by, any contract or commitment or renewed, extended, amended, modified or
terminated any contract or commitment which in any one case involved an amount
in excess of $25,000 (or in the aggregate an amount in excess of $100,000, but
excluding therefrom the amount of Material/Service Agreements entered into in
the ordinary course of business); (ix) issued or sold any Stock of its capital
Stock; (x) paid or agreed to pay, other than in the ordinary course of business,
conditionally or otherwise, any bonus, extra compensation, pension or severance
pay to any of its officers or employees, whether under any existing profit
sharing, pension or other plan or otherwise, or increased the rate or altered
the form of compensation, including without limitation salaries, fees,
commission rates, bonuses, profit sharing, incentive, pension, retirement or
other similar payments, from that being paid at September 30, 2000 to any of its
Stockholders, directors, officers or employees; (xi) entered into any
transaction not in the ordinary course of business (except for transactions
contemplated by this Agreement); (xii) made or announced any change in the form
or manner of distribution of any of its products or services; (xiii) changed any
of its accounting methods or principles used in recording transactions on its
books or records or in preparing the Financial Statements; or (xiv) entered into
any contract or commitment to do any of the foregoing.
4.10. Title to Assets.
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The Company has valid title to all of its personal property
and valid leasehold interests in all real and personal property leased by it,
free and clear of all claims, liens, charges, mortgages, pledges, security
interests, restrictions and other encumbrances of any kind whatsoever except as
set forth in Schedule 4.10. No instrument, easement, license or grant of record,
applicable zoning or building law, ordinance or administrative regulation or
other impediment of any kind prohibits or materially interferes with, limits or
impairs, or would, if not permitted by any prior nonconforming use, prohibit or
materially interfere with or limit or impair, the use, operation, maintenance
of, or access to, or the value of, the real or personal property owned or leased
by the Company. All of the assets and properties owned or leased by the Company
are (i) sufficient and adequate to carry on its business as presently conducted;
(ii) are in good condition and repair, normal wear and tear excepted, and are in
a state of maintenance, repair and operating condition required for the proper
operation and use thereof in the ordinary course of business; (iii) comply with
all applicable federal, state or local laws, ordinances, rules and regulations
and with the terms and conditions of all leases and other agreements affecting
or relating to any such property; and (iv) are adequate to provide the products
and services of the Company in accordance with the most current standards
established by customers, clients and governmental bodies.
4.11. Real Property.
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The Company owns no real property. Schedule 4.11 sets forth a true and
complete list of all leases of real property to which the Company is a party.
The Company enjoys quiet possession under
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all of its leases, each of which is enforceable in accordance with its terms
against the lessor thereunder and is not in default under the terms of any of
its leases; and no condition exists and no event has occurred which, with or
without the passage of time or the giving of notice or both, could constitute
such a default.
4.12. Personal Property.
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Schedule 4.12 hereto sets forth a true and complete list of
all items of personal property having an original cost of more than $10,000,
owned or leased by the Company and the location of each such item. No material
shortage or damage exists in (i) any raw materials, supplies, work in process or
finished goods owned by customers or suppliers of the Company and stored upon
its premises of the business or (ii) any other items of personal property owned
by another for which the Company is accountable to another, and any such items
referred to in clauses (i) or (ii) are described in Schedule 4.12 hereto.
4.13. Inventory.
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Schedule 4.13 hereto sets forth a true and complete
description of all of the inventory of the Company as of September 30, 2000. The
items listed in Schedule 4.13 together with the assets listed in Schedules 4.11
and 4.12 constitute substantially all of the tangible assets used in the
business of the Company. The inventory included in Schedule 4.13 and all
additions thereto acquired since September 30, 2000 and now on hand are in good
condition, of a quantity and quality usable and saleable in the ordinary course
of business and are adequate and appropriate for the business of the Company as
now conducted. Obsolete, discontinued, returned, damaged, overage or off-quality
items do not constitute a material part of such inventory and are carried on the
Financial Statements for the period ending September 30, 2000 at realizable
market value. Finished goods in inventory conform to specifications, including
without limitation all applicable governmental regulations, are free from any
known defects and are marketable in their current condition.
4.14. Accounts Receivable.
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Except as set forth on Schedule 4.14, all accounts receivable
shown on the Financial Statements as of September 30, 2000, or thereafter
acquired by the Company, have been collected or are current and payable within
90 days of issuance and are subject to no known counterclaims or setoffs. All
such accounts receivable have been generated in the ordinary course of business
and reflect a bona fide obligation for the payment of goods or services provided
by the Company and have been or will be collected within 120 days of date of
invoice therefor.
4.15. Material/Service Agreements; Other Contracts.
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(a) Schedule 4.15(a) sets forth a complete list with regard to
the Company of (i) all bids, applications or proposals submitted by the Company
to provide materials or services with a valuation of $15,000 or more to any
Person and for which the award, approval or selection is pending, (ii) all
contracts or agreements for the provision of materials or services with a
valuation of
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$15,000 or more to which the Company is a party and which have not yet been
performed in full (the items referred to in the foregoing clauses (i) and (ii)
being herein collectively called the "Material/Service Agreements"). All of such
Material/Service Agreements are fully performable by the Company in compliance
with their terms. To the knowledge of the Stockholders, no grounds exist for the
termination or cancellation of any Material/Service Agreement by the other party
thereto. Schedule 4.15(a) sets forth for each Material/Service Agreement: (1)
the customer, (ii) the remaining revenue to be earned, and (iii) delivery dates.
(b) Except as disclosed in Schedule 4.15(b) hereto, other than
as disclosed on Schedule 4.15(a), the Company is not a party to or bound by any
oral or written contracts, obligations or commitments with respect to any of the
following:
(i) contract, commitment or arrangement involving, in any one
case, $15,000 or more;
(ii) contract with a term of, or requiring performance, more than
six months from its date;
(iii) lease or lease purchase agreement, mortgage, conditional
sale or title retention agreement, indenture, security agreement,
credit agreement, pledge or option with respect to any property, real
or personal (tangible or intangible), in any capacity;
(iv) commitment, contract or undertaking for the purchase or use
of services, materials, supplies, inventory, machinery or equipment
and involving more than $5,000;
(v) employment contracts, undertaking, understanding or
arrangement;
(vi) contract or agreement with any labor union or other
collective bargaining group;
(vii) bonus, pension, savings, welfare, profit sharing, Stock
option, retirement, commission, executive compensation,
hospitalization, insurance or similar plan providing for employee
benefits or any other arrangement providing for benefits for any
former or current employees or for the remuneration, direct or
indirect, of the directors, officers or employees of the Company ;
(viii) note, loan, credit or financing agreement or other
contract for money borrowed, and all related security agreements and
collateral documents, including any agreement for any commitment for
future loans, credit or financing;
(ix) guarantees;
(x) contract or understanding regarding any capital expenditures
in excess of $15,000;
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(xi) agency (sales or otherwise), distribution, brokerage
(including, without limitation, any brokerage or finder's agreement or
arrangement with respect to any of the transactions contemplated by
this Agreement) or advertising agreement;
(xii) contract with investment bankers, accountants, attorneys,
consultants or other independent contractors, including those relating
to this Agreement;
(xiii) shareholder agreement or contract with the Stockholders
(or family member thereof), director or officer of the Company or any
Affiliate of such persons;
(xiv) contract, commitment or arrangement which would restrain
the Company from engaging or competing in any business or to maintain
the confidentiality of any matter;
(xv) contract, commitment or arrangement not made in the ordinary
course of business; and
(xvi) license, franchise or royalty agreement.
(c) The Stockholders have delivered to, or made available for
inspection by, the Purchaser correct and complete copies of all of the
contracts, agreements and other documents listed in Schedules 4.15(a)
and 4.15(b) hereto and all amendments thereto and any waivers granted
thereunder (the "Scheduled Contracts"). Except as specifically set
forth on Schedules 4.15(a) and 4.15(b), the sale of the Stock to the
Purchaser and the consummation of the other transactions contemplated
by this Agreement are not a violation of or grounds for the
modification or cancellation of any of the Scheduled Contracts or for
the imposition of any penalty or security interests thereunder. The
Company enjoys good working relationships under all Scheduled
Contracts, and no unresolved disputes are pending or, to the best of
the Stockholders's knowledge, threatened under or in respect of any
such Scheduled Contracts. The consideration to be received or paid by
the Company under all Scheduled Contracts have been determined in
accordance with its established policies. The Company has no
outstanding power of attorney other than routine power of attorney
relating to representation before governmental agencies or given in
connection with qualification to do business in another jurisdiction.
Except as described in Schedule 4.15 hereto, all Scheduled
Contracts described in such Schedule 4.15 are valid and enforceable in
accordance with their respective terms, except as the enforcement thereof may be
subject to or limited by bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally now or
hereafter in effect and subject to the application of equitable principles and
the availability of equitable remedies; and there is not, under any of such
documents or agreements or any obligation, or covenant or condition contained
therein, any existing default by the Company, to the Stockholders's knowledge,
by any other party, or any event which with notice, lapse of time, or both,
would constitute a default and which would have a material adverse effect on the
continued operation of the Company or its business.
12
4.16. Intellectual Property.
---------------------
Schedule 4.16 hereto sets forth a true and complete list of
all of trademarks, service marks and tradenames, and the federal, state and
foreign registrations and applications thereof, patents and patent applications
and extensions and renewals thereof and copyrights and copyright applications
and renewals thereof and Trade Secrets (the "Intellectual Property"). All the
Intellectual Property is owned by the Company free and clear of any and all
licenses, liens, claims, security interests, charges or other encumbrances or
restrictions of any kind, and no licenses for the use of any of such rights have
been granted by the Company to any third parties, except as reflected in
Schedule 4.16 attached hereto. All of such rights are valid, enforceable and in
good standing, and are sufficient and appropriate for the conduct of business of
the Company as currently conducted or as contemplated in its plans for future
activities. The sale of the Stock to the Purchaser and the consummation of the
other transactions contemplated hereby will not adversely affect any rights in
the Intellectual Property of the Company. The operation of the business of the
Company does not infringe in any way on or conflict with any registered or
unregistered patent, trademark, trade name, copyright, Trade Secret, contract,
license or other right, of any person, and the Company does not license any such
right from others except as set forth on Schedule 4.16. No claim is pending or,
to the knowledge of the Stockholders, threatened or has been made within the
past five years, to the effect that any such infringement or conflict has
occurred. No other Intellectual Property other than those owned or licensed by
the Company are required by it for its business as presently conducted. The
Stockholders have no knowledge of any infringement by any third parties upon any
of the Intellectual Property. True, correct and complete copies of all
documentation describing or relating to the Intellectual Property have been
delivered by the Stockholders to the Purchaser.
4.17. Insurance.
---------
Schedule 4.17 hereto contains a complete and correct list of
all insurance policies maintained by the Company together with a schedule of
required premiums under each such policy. The Stockholders have made available
to the Purchaser complete and correct copies of all such policies together with
all riders and amendments thereto. Such policies are in full force and effect,
and all premiums due thereon have been paid. The Company have complied in all
material respects with the provisions of such policies. No notice has been
received canceling or threatening to cancel or refusing to renew any of such
insurance. The rights of the insured under such policies will not be terminated
or adversely affected by the Closing or the consummation of the other
transactions contemplated hereby. To the knowledge of the Stockholders, there is
currently no basis for any insurance claim by the Company. The Company has not
created any letters of credit or other funding obligation with respect to such
policies.
4.18. Customer and Supplier Relationships.
-----------------------------------
Attached hereto as Schedule 4.18 is a complete and correct
list of all current customers of the Company showing the sales to each for the
24 month period ended September 30, 2000 and of all suppliers whose sales to the
Company amounted to more than $100,000 during such period showing the sales of
each such supplier. With respect to any such customer or supplier or group of
related customers or suppliers listed on Schedule 4.18, the Stockholders have no
knowledge that any
13
such customer, supplier or group of related customers or suppliers has
terminated or expects to terminate a material portion of its normal business
with the Company. Except as disclosed in Schedule 4.18 hereto, no Stockholder or
director or officer of the Company or any of their family members or Affiliates
has any direct or indirect interest, either by way of Stock ownership or
otherwise, in any firm, corporation, association or business enterprise, which
competes with, is a supplier or customer of, or is a distributor or sales agent
for, or is a party to any contract with the Company.
4.19. Employees.
---------
The Stockholders have furnished to Purchaser a true and
complete list setting forth all of the employees and officers of the Company
whose annual salary and bonus is in the aggregate $50,000 or more (listing each
such person individually by name) with a description of their job designations,
compensation, benefits (including severance pay and bonuses), outstanding loans
to officers or employees and all understandings not in the ordinary course of
business relating to terms and conditions of employment. Proper and accurate
amounts have been withheld by the Company from their employees for all periods
in full compliance with tax withholding provisions of applicable federal, state,
local or foreign law. Proper and accurate federal, state, local and foreign
returns have been filed by the Company for all periods for which returns were
due with respect to employee income tax withholding, social security and
unemployment taxes, and the amounts shown thereon to be due and payable have
been timely paid.
4.20. Labor Relations.
---------------
There has been no material violation of any federal, state or
local statutes, laws, ordinances, rules, regulations, orders or directives with
respect to the employment of individuals by, or the employment practices or work
conditions of the Company or their respective terms and conditions of
employment, wages and hours. The Company is not engaged in any unfair labor
practice or other unlawful employment practice or other unlawful employment
practice and, except as set forth on Schedule 4.20, there are no unfair labor
practice charges or other employee related complaints against the Company
pending or, to the knowledge of the Stockholders, threatened before the National
Labor Relations Board, the Equal Employment Opportunity Commission, the
Occupational Safety and Health Review Commission, the Department of Labor, or
any other federal, state, or local, or other governmental authority by or
concerning the employees of the Company. No representation question, grievance
or arbitration proceedings arising out of collective bargaining agreements
covering employees of the Company exists or is pending or, to the knowledge of
the Stockholders, threatened respecting the employees of the Company. There is
no work stoppage, strike, slowdown, lockout, picketing or other labor problem
involving persons employed by the Company pending or, to the knowledge of the
Stockholders, threatened. The Company has had good labor relations with its
employees for the previous five years. There are no labor union contracts or
collective bargaining agreements to which the Company is a party.
4.21. Benefit Plans.
-------------
(a) Schedule 4.21(a) hereto sets forth a true and complete list
of each
14
"employee welfare benefit plan" (as defined in Section 3(1) of ERISA) maintained
by the Company or an Affiliate or to which the Company or an Affiliate
contributes or is required to contribute, including any multiemployer employee
welfare benefit plan, on behalf of officers and employees of the Company or an
Affiliate (such multiemployer and other employee welfare benefit plans being
hereinafter collectively referred to as the "Welfare Benefit Plans"). With
respect to each Welfare Benefit Plan, all contributions or premiums due by, or
attributable to the period ending on, the Closing Date have been paid.
(b) Schedule 4.21(b) hereto sets forth a true and complete
list of each "employee pension benefit plan" (as defined in Section 3(2) of
ERISA) maintained by the Company or an Affiliate or to which the Company or an
Affiliate contributes or is required to contribute, including any multiemployer
employee pension benefit plan, on behalf of officers and employees of the
Company or an Affiliate (such multiemployer and other employee pension benefit
plans being hereinafter collectively referred to as the "Pension Benefit
Plans"). No Pension Benefit Plan is a "defined benefit plan" (as defined in
Section 3(35) of ERISA). With respect to each Pension Benefit Plan, all
contributions due by or attributable to the period ending on the Closing Date
have been made or accrued on the Financial Statements.
(c) Each Pension Benefit Plan, each Welfare Benefit Plan and
each related trust agreement and annuity contract and insurance policy complies
currently and has complied in the past, both as to form and operation, with the
provisions of (A) the Code in order to be tax qualified under Section 401(a) or
403(a) of the Code; (B) ERISA; and (C) all other applicable laws, rules and
regulations; all necessary government approvals for the Pension Benefit Plans
have been obtained; and favorable determination letters, copies of which have
been made available to the Purchaser, as to the qualification under the Code of
each of the Pension Benefit Plans, as amended, have been received from the
Internal Revenue Service and no event has occurred or condition exists which
would adversely affect such determination.
(d) Each Welfare Benefit Plan and each Pension Benefit Plan
has been administered to date in compliance with the requirements of the Code,
ERISA and all other applicable laws and all reports required by any government
agency with respect to each Welfare Benefit Plan and each Pension Benefit Plan
have been timely filed.
(e) Neither the Company, nor any Affiliate, nor any plan
fiduciary of any Welfare Benefit Plan or Pension Benefit Plan has engaged in any
transaction in violation of Section 406 of ERISA or any "prohibited transaction"
(as described in Section 4975(c) of the Code).
(f) Schedule 4.21(f) lists each deferred compensation plan,
bonus plan, Stock option plan, employee Stock purchase plan and any other
employee benefit plan, agreement, arrangement or commitment not required under a
previous subsection to be listed on Schedule 4.21(a) or 4.21(b) maintained by
the Company or an Affiliate with respect to the compensation of any of their
employees.
(g) There are no actions, suits or claims (other than routine
claims for benefits) pending or which could reasonably be expected to be
asserted against the Company in
15
connection with, or against, any Pension Benefit Plan or Welfare Benefit Plan,
and there are no civil or criminal actions pending or, to the knowledge of the
Stockholders, threatened against any fiduciary, Pension Benefit Plan or Welfare
Benefit Plan with respect to such Plans.
(h) All Welfare Benefit Plans, Pension Benefit Plans, related
trust agreements or annuity contracts (or any other funding instruments), and
all plans, agreements, arrangements and commitments referred to in subsection
(f) of this Section are legally valid and binding and in full force and effect.
4.22. Litigation; Compliance; Permits.
-------------------------------
Except as disclosed in Schedule 4.22 hereto, there are no
actions, suits, proceedings, arbitrations or governmental investigations
pending, or, to the best of Stockholders' knowledge, threatened against, by or
affecting the Company in which, individually or in the aggregate, an unfavorable
determination could materially affect the business of the Company or its
prospects, earnings or condition (financial or otherwise) or any of its assets
or result in any liability on the part of the Company or prevent, hinder or
delay the execution and performance of this Agreement or any of the transactions
contemplated hereby, or could declare this Agreement unlawful or cause the
rescission of any of the transactions hereunder, or require the Purchaser to
divest itself of the Stock; nor has any such suit been pending within the two
years prior to the date hereof. The Company has not been charged with or
received notice of any violation of any applicable federal, state, local or
foreign law, rule, regulation, ordinance, order or decree relating to it, or the
operation of its business, and the Stockholders are not aware of any threatened
claim of such violation (including any investigation) or any basis therefor.
Schedule 4.22 sets forth a list of all actions, suits, proceedings, arbitrations
or governmental investigations pending, or, to the best of Stockholders's
knowledge, threatened against, by or affecting the Company.
The Company has complied in all material respects and is in
compliance with, all laws, rules, regulations, ordinances, orders, judgments,
decrees, writs, injunctions, building codes, safety, fire and health approvals,
certificates of occupancy or other governmental restrictions applicable to them,
their assets, employees and employment practices.
The Company has all material governmental licenses, permits,
approvals or other authorizations required for the conduct of its business as
now conducted, all of which are in full force and effect and all of which are
listed on Schedule 4.22 hereto; there is no action pending or, to the knowledge
of the Stockholders, threatened, to terminate any rights under any such
governmental licenses, permits or authorizations; and except as disclosed on
Schedule 4.22 at the Closing, none of such licenses, permits, approvals and
authorizations will be adversely affected by the sale of the Stock to the
Purchaser or the consummation of the other transactions contemplated by this
Agreement.
4.23. Environmental Compliance.
------------------------
Except as set forth in Schedule 4.23, (i) all of the assets
and properties presently owned, leased or operated by the Company and its
Affiliates or divisions are in compliance with all Environmental Laws and are
not subject to any pending or, to the knowledge of the Stockholders or
16
the Company, threatened Environmental Actions; (ii) none of the assets and
properties which have been or are now owned, leased or operated by the Company,
its divisions and Affiliates have been used for the generation, storage,
manufacture, use, transportation, disposal or treatment of Hazardous Substances;
(iii) there has been no Hazardous Discharge on or from any of the assets and
properties presently or formerly owned, leased or operated by the Company, its
divisions or Affiliates; (iv) there are no outstanding or, to the knowledge of
the Stockholders, threatened Environmental Actions against the Company or any of
the owners or operators of any facilities that may have received solid waste or
Hazardous Substances from any of the assets, former assets and properties
presently or formerly owned, leased or operated by the Company, divisions or
Affiliates; and (v) the Company has not owned, possessed or arranged for the
transportation of Hazardous Substances at any site where it has performed
remediation services. No employee or other person has ever made a claim or
demand against the Company based on alleged damage to health caused by any
Hazardous Substance. All services performed by the Company, including, without
limitation, remediation activities, were and are in full compliance with all
Environmental Laws and applicable industrial and professional standards and
provide no basis for an Environmental Action against the Company or any other
Person or any other claim that such services were not properly performed.
Stockholders have delivered to the Purchaser, true and correct copies
or results of any reports, studies, tests, investigations and remediation
activities conducted at the Real Property in the possession or initiated by the
Company or the Stockholders pertaining to the existence of Hazardous Substances
and other environmental concerns on any part of the Real Property or any
properties previously owned or leased by the Company or any of its predecessors
or concerning compliance with or liability under Environmental Laws or other
environmental matters in connection with the operation of the Company's business
and/or Real Property.
4.24. Corporate Records.
-----------------
The copy of the certificate of incorporation of the Company,
and all amendments thereof to date, certified by the Secretary of State of their
respective jurisdictions of incorporation and of the by-laws of the Company, as
amended to date, certified by the Secretary or an Assistant Secretary of the
Company, as applicable, all under a date not more than five (5) days prior to
the Closing Date which have been or will be delivered to the Purchaser are
complete and correct, and the minute books of the Company correctly reflect all
material corporate actions taken at all meetings of directors (including
committees thereof) and the Stockholders. The Stock transfer books and Stock
ledgers are complete and correct and correctly reflect all issuances and
transfers of the capital Stock of the Company.
4.25. Bank Accounts; Power of Attorney.
--------------------------------
Schedule 4.25 hereto correctly sets forth: (i) a list of all
banks in which the Company has an account or safety deposit box, account number,
purpose of such account or safety deposit box and the names of all persons
authorized to draw thereon or have access thereto; and (ii) the names of all
persons holding powers of attorney from the Company and a description of the
power of attorney.
4.26. Warranties.
----------
17
Except as described in Schedule 4.26 annexed hereto, during
the past three years the Company has not given any written warranties other than
its standard warranty with respect to any of its products or services. Schedule
4.26 also sets forth a description of all claims in excess of $25,000 concerning
product liability or arising from services provided which have been made against
the Company during the past three years.
4.27. Brokers, Finders, etc.
----------------------
The Company and the Stockholders have not dealt with or
employed any broker, finder, investment banker or financial advisor in
connection with the negotiation, execution or performance of this Agreement.
4.28. Foreign Corrupt Practices Act.
-----------------------------
The Company has not made, offered or agreed to offer anything
of value to any government official, political party or candidate for government
office nor has it taken any action which would cause the Company to be in
violation of any law or any foreign jurisdiction or the United States, including
the Foreign Corrupt Practices Act of 1977.
4.29. Disclosure.
----------
No representation or warranty by the Stockholders and no
statement or certificate furnished or to be furnished by or on behalf of the
Stockholders to the Purchaser or its agents pursuant to this Agreement or in
connection with the transactions contemplated hereby contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements contained herein or
therein not misleading.
As used in this Section 4.29 and elsewhere in this Agreement,
the term "to the knowledge of the Stockholders" or "to the best of the
Stockholders' knowledge" means the actual knowledge of the Stockholders and the
knowledge of the Executive Officers and Directors of the Company. Knowledge with
regard to the Corporate Stockholder shall mean the knowledge of its corporate
officers and directors.
4.30. Schedules.
---------
Any matters set forth in any Schedule shall be deemed to be
referred to on all other Schedules to which such matter logically relates and
where such reference would be appropriate and can be inferred reasonably from
the matters disclosed on the first Schedule as if set forth on such other
Schedules.
5. Representations and Warranties of Purchaser.
-------------------------------------------
The Purchaser represents and warrants to the Stockholders and the
Company on the date hereof and on the Closing Date as follows:
18
5.1. Corporate Status.
----------------
The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware with full
corporate power and authority to carry on its business as now conducted.
5.2. Authority for Agreements.
------------------------
The Purchaser has the legal capacity and the power and
authority to execute and deliver this Agreement and to carry out its obligations
hereunder. The execution, delivery and performance by the Purchaser of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Purchaser.
This Agreement has been duly executed and delivered by the Purchaser and
constitutes the legal, valid and binding obligation of the Purchaser enforceable
against the Purchaser in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization and similar laws of general application relating to or affecting
the rights and remedies of creditors.
5.3 Purchase of Stock for Investment.
--------------------------------
Purchaser represents that it is acquiring the Stock for its
own account for investment and not with a view to or for sale in connection
therewith, any distribution thereof, nor with any present intention of
distributing or selling the same.
5.4 Brokers, Finders, etc.
The Purchaser has not dealt with or employed any broker,
finder, investment banker or financial advisor in connection with the
negotiation, execution or performance of this Agreement.
5.5 Regulations and Compliance.
--------------------------
The Purchaser has complied with all applicable state and
federal securities laws and regulations which, on its part, it is required to
comply with in connection with this transaction.
6. Covenants.
---------
6.1. Consents.
--------
The Stockholders have obtained all consents and approvals, if
any, required by any governmental entity or under any of the Scheduled Contracts
to the sale of the Stock to the Purchaser.
6.2. Expenses.
--------
The Purchaser and the Stockholders' Group shall bear their own
respective expenses incurred in connection with this Agreement and the Stock
Sale Agreements and the transaction
19
contemplated hereby and in connection with all obligations required to be
performed by each of them under this Agreement and under the Stock Sale
Agreements. The Company shall not pay any such expenses of the Stockholders'
Group or the Company in connection herewith, except that the Company may expend
up to $25,000 for accounting and audit expenses of the Company in connection
with this Agreement.
6.3. Resignations of Directors and Officers.
--------------------------------------
The Stockholders shall provide to the Purchaser written
resignations effective as of the Closing Date of such directors, officers,
trustees and bank signatories of the Company as the Purchaser may request prior
to the Closing Date. In the event that the Purchaser requests any bank signatory
or trustee resignations, the Stockholders shall cause to be delivered to
Purchaser written instructions to each bank at which the Company has an account
or credit facility or at which the Company rents a safe deposit box informing
such bank of the said resignations and revoking the authority of said persons to
act with respect to said account, credit facility or trust and to have access to
said safe deposit box. The Stockholders and the Company shall also cause to be
delivered to Purchaser effective the Closing Date the written surrender by all
persons holding powers of attorney from the Company of their authority and power
to act under such powers of attorney.
6.4. Minute Books, Stock Books and Corporate Records.
-----------------------------------------------
The complete and correct minute books, certificate of
incorporation, by-laws, Stock certificate and transfer books, Stock ledgers,
financial and other corporate records and the corporate seal of the Company
shall be delivered to the Purchaser by the Stockholders on or before the Closing
Date.
6.5. Taxes.
-----
The Stockholders and Other Stockholders shall pay any
applicable federal, state or local sales, transfer or stamp taxes payable in
connection with the sale and transfer of the Stock pursuant to this Agreement
and the Stock Sale Agreements. Also, upon request of Purchaser, Gazipura shall
sign all tax returns of the Company as President and Chief Executive Officer of
the Company for periods prior to the Closing Date. Subject to review by
Gazipura, Purchaser shall prepare the final corporation federal and state
corporate income tax returns for the Company.
6.6. Access to Books and Records of the Company. After the Closing
Date, the Purchaser shall permit the Stockholders and the representatives of the
Stockholders reasonable access, at reasonable intervals, during normal business
hours and in a manner so as not to interfere with the normal business operations
of the Company, to appropriate books, records (including tax records), contracts
and documents of or pertaining to the Company in connection with tax audits and
investigations of Stockholders conducted by a governmental authority or for any
other reasonable purpose relating to periods of time prior to the Closing Date.
The Stockholders will keep strictly confidential all such information which it
receives from the Company in the course of the tax reviews contemplated by this
Section and will not use any such information except in connection with tax
audits and investigations of Stockholders conducted by a governmental authority
relating to periods
20
of time prior to the Closing Date.
6.7. Stock Options. The Purchaser shall grant to those employees
approved by Purchaser in the amounts listed on Schedule 6.8, options to purchase
in the aggregate 50,000 shares of the Purchaser's common stock at an exercise
price equal to the closing market price of the Purchaser's common stock on
NASDAQ (National Market) on the date prior to the date hereof. Such options
shall be non-qualified stock options and subject to the terms and provisions of
the Purchaser's stock option plan under which such grant is made. Such options
shall only be exercisable after the Second Anniversary of the Closing Date, and
then not in an amount in any year greater than twenty-five (25%) percent of the
total options granted to each employee. Such options shall expire five years
after the Closing Date.
7. Conditions Precedent.
--------------------
7.1. Conditions to Obligations of the Purchaser.
------------------------------------------
The obligation of the Purchaser to pay the Purchase Price to
the Stockholders' Group and to satisfy its other obligations hereunder shall be
subject to the fulfillment (or waiver by the Purchaser) at or prior to the
Closing, of the following additional conditions, which the Company and the
Stockholders agree to use their best efforts to cause to be fulfilled:
(a) Representations, Performance. The representations and
warranties contained in Section 4 hereof shall be true at and as of the date
hereof and shall be repeated and shall be true at and as of the Closing Date
with the same effect as though made at and as of the Closing Date, except as
affected by the transactions contemplated hereby. All of the Financial Statement
Parameters set forth in Section 4.6.4. shall have been satisfied. The
Stockholders shall have duly performed and complied with all covenants,
agreements and conditions required by this Agreement to be performed or complied
with by them prior to or on the Closing Date. The Stockholders shall have
delivered to the Purchaser a certificate dated the Closing Date to the effect
set forth above in this Section 7.1(a).
(b) Consents under Scheduled Contracts. All required consents to
the sale of ---------------------------------- the Stock or any of the
other transactions contemplated hereby under any Scheduled Contracts
shall have been obtained.
(c) Litigation. No suit, action or other proceeding or
investigation shall be threatened or pending before any court or governmental
agency in which it is sought to restrain or prohibit or to obtain material
damage or other material relief in connection with this Agreement or the
consummation of the transactions contemplated hereby or which is likely to
affect materially the value of the assets, business or condition (financial or
otherwise) of the Company.
(d) Opinions of Counsel. The Purchaser shall have received a
favorable opinion, addressed to the Purchaser and dated the Closing Date, of
Martin Fenster, Esq., counsel for the Stockholders and Other Stockholders and
the Company, in the form annexed hereto as Exhibit A-1.
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21
(e) Proceedings and Documentation. All corporate and other
proceedings of the Company, the Corporate Stockholder, and the Stockholders'
Group in connection with the transactions contemplated by this Agreement, and
all documents and instruments incident to such corporate proceedings, shall be
satisfactory in substance and form to the Purchaser and the Purchaser's counsel,
and the Purchaser and the Purchaser's counsel shall have received all such
receipts, documents and instruments, or copies thereof, certified if requested,
to which the Company is entitled and as may be reasonably requested.
(f) Damage to Property. No portion of the plants, machinery or
equipment of or occupied by the Company material to the operation of the
business of the Company shall, after the date hereof and before the Closing
Date, be damaged, destroyed or taken by condemnation or eminent domain.
(g) Consents and Approvals. All material licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
or regulatory bodies which are necessary for the consummation of the
transactions contemplated hereby shall have been obtained.
(h)(i) Good Standing Certificates. The Stockholders shall have
delivered to the Purchaser a certificate as of a date not more than 10 days
prior to the Closing Date attesting to the good standing of the Company as a
corporation in its jurisdiction of incorporation by the Secretary of State of
the applicable jurisdiction.
(ii) The Stockholders shall have delivered to the Purchaser a certificate
as of a date not more than 10 days prior to the Closing Date attesting to the
good standing of Step Electronics, Inc. as a corporation in its jurisdiction of
incorporation by the Secretary of State of the applicable jurisdiction.
(i) Stock Sale Agreements. The Stockholders shall have delivered to
the Purchaser --------------------- the Stock Sale Agreements executed by
each of the Other Stockholders.
(j) Option Exercise. All vested options to purchase the Company's
common stock --------------- shall have been exercised prior to the
Closing.
(k) Shareholder's Agreement. The Stockholders shall have delivered an
agreement ----------------------- signed by the Company, the Stockholders
and the Other Stockholders terminating the Shareholders Agreement as of the
Closing Date.
7.2. Conditions to Obligations of the Stockholders.
---------------------------------------------
The obligation of the Stockholders and the Other Stockholders
to deliver the Stock and to satisfy their other respective obligations hereunder
and under the Stock Sale Agreements shall be subject to the fulfillment (or
waiver by the Stockholders), on or prior to the Closing Date, of the following
conditions, which the Purchaser agrees to use its best efforts to cause to be
fulfilled:
(a) Representations, Performance. Etc. The representations and
warranties of --------------------------------- the Purchaser contained in
Section 5 hereof shall be true at and as of the date hereof and shall be
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22
repeated and shall be true at and as of the Closing Date with the same effect as
though made at and as of such time. The Purchaser shall have duly performed and
complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by it prior to or on the Closing
Date. The Purchaser shall have delivered to the Stockholders an officer's
certificate dated the Closing Date to the effect set forth above in this Section
7.2.(a).
(b) Opinion of Counsel. The Principal Stockholders shall have
received a favorable opinion, addressed to the Stockholders and dated the
Closing Date, of Blau, Kramer, Wactlar & Lieberman, P.C., counsel for the
Purchaser, in the form annexed hereto as Exhibit A-2.
(c) Proceedings and Documentation. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement,
and all documents and instruments incident thereto, shall be satisfactory in
substance and form to the Stockholders and Stockholders's counsel, and the
Stockholders and Stockholders's counsel shall have received all such receipts,
documents and instruments, or copies thereof, certified if requested, to which
the Stockholders are entitled and as may be reasonably requested.
8. Competition.
-----------
8.1. Covenant Not to Compete.
-----------------------
(a) Each of the Stockholders agrees that in consideration of
the payments to him in connection with the sale of his Stock in the Company
pursuant to this Agreement, for a period commencing on the Closing Date and
ending four (4) years thereafter (the "Four Year Period") and during the Covered
Time, he shall not, directly or indirectly (A) offer or sell and products or
services, or participate in any business which offers or sells any products or
services, which compete in any geographic area of the Territory (as defined in
Section 8.1(c) and (d) below) with the products or services offered or sold by
the Company, or (B) induce or attempt to induce directly or indirectly any
customer of the Company to cease doing business in whole or in part with the
Company or solicit the business of any such customer for any products or
services which compete with any of the products or services offered or sold by
the Company. Participation in a business shall include, but not be limited to,
serving as a director, officer, employee, agent or representative or having a
direct and indirect interest in the business as a stockholder, partner, joint
venturer or any other financial interest; provided, however, that (i) ownership
by the Stockholders of not more than two (2%) percent of the outstanding shares
of stock of any such business listed on any national stock exchange or listed
and actively traded on NASDAQ shall not be a violation of this covenant.
(b) (i) The Stockholders understand and hereby acknowledge
that they have access to the Confidential Information, and that any such
Confidential Information, even though it may be developed or otherwise acquired
by the Stockholders, is the exclusive property of the Company, to be held by
them in trust solely for the benefit of the Company.
(ii) Each of the Stockholders agrees that in consideration of the
payments to him in connection with the sale of his Stock in the Company
pursuant to this Agreement, for the Four Year Period and during the Covered
Time, he shall not, and shall not cause others to, use,
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23
reveal, report, publish, transfer or otherwise disclose to any person,
corporation or other entity any Confidential Information without prior written
consent of the Board, except to (A) responsible officers and employees of the
Company or (B) responsible persons who are in a contractual or fiduciary
relationship with the Company or who need such information for purposes in the
interest of the Company. Notwithstanding the foregoing, the prohibitions of this
clause (ii) shall not apply to any Confidential Information that becomes of
general public knowledge other than from the Stockholder or is required to be
divulged by court order or administrative process.
(c) Each of the Stockholders agrees that in consideration of
the payments to him in connection with the sale of his Stock in the Company
pursuant to this Agreement, for the Four Year Period and during the Covered
Time, he shall not either on his own account or for any person, firm or company
solicit, interfere with, or endeavor to cause any employee of the Company to
leave his employment or induce or attempt to induce any such employee to breach
his employment agreements with the Company.
(d) For purposes of this Section 8, "Territory" shall mean the
United States and Canada and any other country or place where the Company has
engaged in business in any material respect during the three (3) years preceding
the date hereof.
(e) The Stockholders acknowledge that the geographic scope of
the restrictions imposed on the Stockholders hereunder are fair and reasonable
in the circumstances and are necessary and fundamental to the protection of the
business of the Company.
(f) For the purposes of this Section 8.1, the "Covered Time"
shall mean the later to expire of (i) the end of the Four Year Period; (ii) or a
12-month period immediately following the date any Stockholder's employment with
the Company terminates for whatever reason.
8.2. Remedies.
--------
Nothing herein contained shall be construed as prohibiting the
Company itself from pursuing any other remedies available to it for any
violation of the provisions of Section 8.1 including, but not limited to, any
injunctive or other equitable relief or the recovery of damages from the
Stockholders.
8.3. Equitable Relief.
-----------------
The Stockholders acknowledge that the covenants contained in
this Section 8 were a material and necessary inducement for the Purchaser to
agree to the transactions contemplated hereby, that the Stockholders realized
significant monetary benefit from these transactions, that violation of any of
the covenants contained in this Section 8 will cause irreparable and continuing
damage to the Purchaser, that the Purchaser shall be entitled to injunctive or
other equitable relief from any court of competent jurisdiction restraining any
further violation of such covenants and that such injunctive relief shall be
cumulative and in addition to any other rights or remedies to which the
Purchaser may be entitled. The covenants in this Section 8 shall run in favor of
the Company and its successors and assigns.
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24
8.4. Severability.
In case any one or more of the terms or provisions contained
in this Section 8 shall for any reason be held invalid, illegal or
unenforceable, such invalidity, illegality or unenforceability shall not affect
any other terms or provisions hereof, but such term or provision shall be deemed
modified or deleted as or to the extent required by applicable law, and such
modification or deletion shall not affect the validity of the other terms or
provisions of this Section 8. In addition, if any one or more of the
restrictions contained in this Section 8 shall for any reason be held to be
unreasonable with regard to time, duration, geographic scope or activity, the
parties contemplate and hereby agree that such restrictions shall be modified
and shall be enforced to the full extent compatible with applicable law.
9. Definitions; Miscellaneous.
--------------------------
9.1. Definition of Certain Terms.
---------------------------
As used herein, the following terms shall have the following
meanings:
Additional Consideration: as defined in Section 2.3.
------------------------
Advance Payment: as defined in Section 2.1(a).
---------------
Affiliate: with respect to any Person, any Person which,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person. The term "control" (including, with correlative meaning, the
terms "controlled by" and "under common control with"), as used with respect to
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
Agreement: this Stock Purchase Agreement.
---------
Closing: as defined in Section 3.1.
-------
Closing Date: as defined in Section 3.1.
------------
Code: the Internal Revenue Code of 1986, as amended,
together with the U.S. Treasury ---- rulings and regulations
promulgated thereunder.
Company: as defined in the Preamble to this Agreement.
-------
Confidential Information: means information not generally
available to the public, including, without limitation, all computer software
and database information, personnel information, financial information, customer
lists, supplier lists, Trade Secrets, patented proprietary information, forms,
information regarding operations, systems, services, know how, computer and any
other
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25
processed or collated data, computer programs, pricing, marketing and
advertising data, methods, forms, systems, services, designs, marketing ideas,
products or processes (whether or not capable of being trademarked, copyrighted
or patented).
Confidential Information shall not include (i) information that is in
the public domain; (ii) information that is revealed to the Stockholder by
persons who are entitled to disclose such information and are not subject to
non-disclosure agreements; and (iii) information that was known by the
Stockholder at the time of disclosure as identified then in writing by the
Stockholder.
Corporate Stockholder: shall mean Step Electronics, Inc.
---------------------
Covered Time: as defined in Section 8.1(f).
------------
Earn-Out Payment: as defined in Section 2.2.1.
----------------
Earn-Out Period: as defined in Section 2.2.2.
---------------
Employed Stockholders: shall mean Gul Gazipura.
---------------------
Employee Benefit Plan: any pension, retirement,
profit-sharing, deferred compensation, bonus or other incentive plan, or other
employee benefit program, arrangement, agreement or understanding, or medical,
vision, dental or other health plan, or life insurance or disability plan, or
any other employee benefit plan, including, without limitation, any Employee
benefit plan" as defined in Section 3(3) of ERISA to which the Company
contributes or is a party or is bound or under which it may have liability and
which employees or former employees of the Company (or their beneficiaries) are
eligible to participate or derive a benefit.
Environmental Actions: refers to any complaint, summons,
citation, notice, directive, order, claim, litigation, investigation,
proceeding, judgment, letter or other communication from any federal, state,
local or municipal agency, department, bureau, office or other authority or any
third party involving a Hazardous Discharge or any violation of any order,
permit or Environmental laws.
Environmental Laws: as defined in the definition of Hazardous
------------------ Substances.
Environmental Liabilities: as defined in Section 10.7.1.
-------------------------
ERISA: the Employee Retirement Income Security Act of 1974, as
----- amended.
Financial Statements: the unaudited financial statements of
the Company, for the fiscal years ended September 30, 1998, September 30, 1999
and the financial statement of the Company for the fiscal year ended September
30, 2000, in which only the balance sheets is reported and commented upon by
certified public accountants for the Company. A Financial Statement includes, in
each case, a balance sheet, a statement of income and retained earnings, a
statement of changes in financial position and a statement of cash flow.
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26
Four Year Period: as defined in Section 8.1(a).
----------------
Gross Revenues: as defined in Section 2.2.2.
--------------
Hazardous Discharge: means any releasing, spilling, leaking,
pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, disposing or dumping
of Hazardous Substances.
Hazardous Substance: means any substance, compound, chemical
or element which is (i) defined as a hazardous substance, hazardous material,
toxic substance, hazardous waste, pollutant or contaminant under any
Environmental law, or (ii) a petroleum hydrocarbon, including crude oil or any
fraction thereof, (iii) hazardous, toxic, corrosive, flammable, explosive,
infectious, radioactive, carcinogenic or a reproductive toxicant, or (iv)
regulated pursuant to any Environmental law. The term "Environmental Law" means
each and every applicable federal, state, local and foreign law, statute,
ordinance, regulation, rule, judicial or administrative order or decree, permit
license, approval, authorization or similar requirement of each and every
federal, and pertinent state, local and foreign governmental agency or other
governmental authority, pertaining to the protection of human health and safety
or the environment including, without limitation, the Comprehensive
Environmental Response Compensation and Liability Act (CERCLA), 42 U.S.C. 9601
et set, the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. 6901 et
seq., the Toxic Substances Control Act (TSCA), 15 U.S.C. 2601 et seq., the Water
Pollution Control Act (FWPCA), 33 U.S.C. 1251 et seq., and the Occupational
Safety and Health Act (OSHA), 42 U.S.C. 655. The term "Hazardous Substance"
shall also include asbestos-containing materials and manufactured products
containing Hazardous Substances.
Indemnified Party: a party hereto or other Person designated
----------------- herein entitled to indemnification under
this Agreement.
Indemnifying Party: a party hereto required to provide
------------------ indemnification under this Agreement.
Intellectual Property: as defined in Section 4.16.
---------------------
Material/Service Agreements: as defined in Section 4.15(a).
---------------------------
Other Stockholders: shall mean Jyotindra Patel, Jose Hecht,
------------------ Milton Deleon, Hui-Hsiung Wang, Vittal
Janardhana, Razia Gazipura, Howard Kim,
William Durish, Mary Ann Convertino, Be
Pham, Judy Petersen.
Pension Benefit Plans: as defined in Section 4.21(b).
---------------------
Person: any natural person, firm, partnership, association,
------ corporation, trust, public body or government.
Plan: each Pension Benefit Plan and each Welfare Benefit Plan.
----
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Pre-Closing Liability Conditions:as defined in Section 10.7.1.
--------------------------------
Purchaser: as defined in the Preamble to this Agreement.
---------
Purchase Price: as defined in Section 2.1.
--------------
Stockholders: as defined in the Preamble to this Agreement.
------------
Stockholders' Group: as defined in Section 1 of this Agreement
-------------------
Stockholders' Group Representative: shall mean Gul Gazipura.
----------------------------------
Stock Sale Agreements: as defined in Section 1 of this
--------------------- Agreement.
Taxes: as defined in Section 4.7.
-----
Trade Secret: any information used by the Company in its
business, including a formula, pattern, computer software, database information,
compilation, program, device, method, technique, or process, that has a material
independent economic value, actual or potential, not being generally known to,
and not being readily ascertainable by proper means by other Persons who can
obtain economic value by its disclosure or use.
Welfare Benefit Plans: as defined in Section 4.21(a).
---------------------
10. Survival of Representations & Warranties; Indemnification.
---------------------------------------------------------
10.1. Survival of Representations and Warranties.
------------------------------------------
Except as expressly provided in this Agreement, all
representations and warranties made hereunder or pursuant hereto or in
connection with the transactions contemplated hereby shall not terminate, but
shall survive the Closing and continue in effect until the expiration of two (2)
years following the Closing Date, at which time they shall expire; provided,
however, that representations and warranties under Sections 4.4, 4.7, the first
sentence of 4.10, and Section 4.23 shall remain in effect without limitation
except as limited by law; and further provided, that any such representation or
warranty as to which a claim shall have been asserted and notice given to the
Indemnifying Party during such survival period shall continue in effect until
such time as such claim shall have been resolved or settled.
10.2. Survival of Covenants and Agreements.
------------------------------------
Except as expressly provided in this Agreement, all covenants,
representations and warranties, and agreements made hereunder or pursuant hereto
or in connection with the transactions contemplated hereby shall not terminate
but shall survive the Closing. The Purchaser shall use its best efforts to
notify the Stockholders prior to the Closing of any information of which it
becomes aware which makes any of the Stockholder's representations and
warranties misleading or untrue.
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Notwithstanding the foregoing, Purchaser shall not be deemed to have waived or
released any breach of any covenant or agreement by Stockholders as the result
of engaging in the Closing even if Purchaser had actual or constructive
knowledge of the existence of such breach prior to, or at the time of, the
Closing and fails to notify the Stockholders thereof prior to the Closing. Any
representation and warranty made herein or in any certificate or writing in
connection herewith shall be deemed to have been relied upon by the party or
parties to whom made regardless of any investigation or inspection made by or on
behalf of such party or parties and shall not be affected in any respect by any
such investigation or inspection.
10.3. Indemnification by Stockholders.
-------------------------------
10.3.1 The Stockholders and the Company, jointly and
severally, agree to indemnify and hold harmless Purchaser, its affiliates, their
respective officers, directors and principal stockholders and their respective
successors and assigns from and against any claims, liabilities, losses, damages
or expenses (any one such item being herein called a "Loss" and all such items
being herein collectively called "Losses") which are caused by or arise out of:
(i) any breach or default in the performance by Stockholders or the Company of
any covenant or agreement of the Stockholders and/or the Company contained
herein or in any certificate delivered pursuant hereto; (ii) any breach of
warranty or representation made by the Company and/or the Stockholders contained
herein or in any certificate delivered pursuant hereto; (iii) any non-compliance
by the Company with the California Corporations Code in connection with the
issuance of options or shares of the Company, including, but not limited to, the
availability of an exemption from registration or otherwise; (iv) any claims by
third parties regarding the legitimacy of the state or federal trademark
registration and/or use by the Company of the name "TERRASAT" and any
derivations thereof; and (v) any and all actions, suits, proceedings, claims,
demands, judgments, costs and expenses (including reasonable legal fees)
incident to any of the foregoing. Notwithstanding the foregoing provisions of
this Section 10.3, no claim for indemnification shall be made by Purchaser under
this Section 10.3 unless and until the aggregate amount of all Losses of
Purchaser in respect thereof shall exceed $25,000 exclusive of any Losses
resulting from a breach of the representations and warranties contained in
Section 4.6.4. Such indemnification shall be made by (a) an offset to the
payment of the Purchase Price pursuant to Section 2.1(b), the Earn-Out Payment
payable pursuant to Section 2.2 and the Additional Consideration payable
pursuant to Section 2.3, and (b) next, by Stockholders paying cash to Purchaser
to the extent that Purchaser is not fully indemnified by recourse under (a)
above.
10.3.2 Notwithstanding anything herein to the contrary, the
Company's obligations under Section 10.3.1 shall terminate forever as of the
Closing Date and, accordingly, the Stockholders shall have no right of
contribution against the Company in the event of any claim for indemnification
by the Purchaser hereunder after the Closing.
10.4. Indemnification by Purchaser.
----------------------------
Purchaser agrees to indemnify and hold harmless Stockholders
and the Company, its affiliates, its respective officers, directors and
principal Stockholderss and its respective successors and assigns from and
against any claims, liabilities, losses, damages or expenses (any one such item
being herein called a "Loss" and all such items being herein collectively called
"Losses") which are caused
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by or arise out of: (i) any breach or default in the performance by Purchaser of
any covenant or agreement of the Purchaser contained herein or in any
certificate delivered pursuant hereto; (ii) any breach of warranty or
representation made by Purchaser contained herein or in any certificate
delivered pursuant hereto; and (iii)any and all actions, suits, proceedings,
claims, demands, judgments, costs and expenses (including reasonable legal fees)
incident to any of the foregoing. Notwithstanding the foregoing provisions of
this Section 10.3, no claim for indemnification shall be made by Stockholders or
the Company under this Section 10.4 unless and until the aggregate amount of all
Losses of Stockholders and the Company in respect thereof shall exceed $25,000.
Such indemnification shall be made by Purchaser paying cash to Stockholders.
10.5. Defense by Indemnifying Parties.
-------------------------------
(a) An Indemnified Party shall notify the Indemnifying Party
of any claim of such Indemnified Party for indemnification under this Agreement
within thirty (30) days of the date on which the Stockholders or an executive
officer of Purchaser, as the case may be, first becomes aware of the existence
of such claim whether such claim would be subject to the $25,000 limitation set
forth in Sections 10.3 and 10.4. Such notice shall specify the nature of such
claim in reasonable detail and the Indemnifying Party shall be given reasonable
access to any documents or properties within the control of the Indemnified
Party as may be useful in the investigation of the basis for such claim. The
failure to so notify the Indemnifying Party within such thirty-day period shall
not constitute a waiver of such claim (provided that it does not materially
interfere with the right of the Indemnifying Party to defend such action) but an
Indemnified Party shall not be entitled to receive any indemnification with
respect to any Loss that occurred as a result of the failure of such person to
give such notice.
In the event any Indemnified Party is entitled to indemnification hereunder
based upon a claim asserted by a third party, the Indemnifying Party shall be
given prompt notice thereof, in reasonable detail. The failure to so notify the
Indemnifying Party shall not constitute a waiver of such claim but an
Indemnified Party shall not be entitled to receive any indemnification with
respect to any Loss that occurred as a result of the failure of such person to
give such notice. The Indemnifying Party shall have the right (without prejudice
to the right of any Indemnified Party to participate at its expense through
counsel of its own choosing) to defend or prosecute such claim at its expense
and through counsel of its own choosing if it gives written notice of its
intention to do so not later than twenty (20) days following notice thereof by
the Indemnified Party or such shorter time period as required so that the
interests of the Indemnified Party would not be materially prejudiced as a
result of its failure to have received such notice; provided, however, that if
the defendants in any action shall include both an Indemnifying Party and an
Indemnified Party and the Indemnified Party shall have reasonably concluded that
counsel selected by the Indemnifying Party has a conflict of interest because of
the availability of different or additional defenses to the Indemnified Party,
the Indemnified Party shall have the right to select separate counsel to
participate in the defense of such action on its behalf, at the expense of the
Indemnifying Party. If the Indemnifying Party does not so choose to defend or
prosecute any such claim asserted by a third party for which any Indemnified
Party would be entitled to indemnification hereunder, then the Indemnified Party
shall be entitled to recover from the Indemnifying Party, on a monthly basis,
all of its attorneys' reasonable fees and other costs and expenses of litigation
of any nature whatsoever incurred in the defense of such claim. If the
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Indemnifying Party assumes the defense of any such claim, the Indemnifying Party
will hold the Indemnified Party harmless from and against any and all damages
arising out of any settlement approved by such Indemnifying Party or any
judgment in connection with such claim or litigation. Notwithstanding the
assumption of the defense of any claim by the Indemnified Party pursuant to this
Section 10.5(a), the Indemnifying Party shall have the right to approve the
terms of any settlement of a claim (which approval shall not be unreasonably
withheld).
(b) The Indemnifying Party and the Indemnified Party shall
cooperate in furnishing evidence and testimony and in any other manner which the
other may reasonably request, and shall in all other respects have any
obligation of good faith dealing, one to the other, so as not to unreasonably
expose the other to an undue risk of loss. The Indemnified Party shall be
entitled to reimbursement for out-of-pocket expenses reasonably incurred by it
in connection with such cooperation. Except for fees and expenses for which
indemnification is provided pursuant to Section 10.3 or 10.4 hereof, as the case
may be, and as provided in the preceding sentence, each party shall bear its own
fees and expenses incurred pursuant to this Section 10.5(b).
10.6. Remedies Exclusive.
------------------
Subject to the last sentence of this Section 10.6, from and
after the Closing Date, the rights and remedies under Sections 10.3 and 10.4
hereof shall be deemed to be exclusive of all other rights and remedies that
would otherwise be available to the parties hereto. No course of dealing by
either party, or any delay or omission of either party in exercising any rights
or remedies under this Agreement shall operate as a waiver of such right or
remedy. Notwithstanding the foregoing, each of the parties hereto shall have the
right to enforce their respective rights hereunder by an action or actions for
specific performance, injunction or other appropriate equitable remedies.
10.7. Special Provisions Relating to Environmental Matters.
----------------------------------------------------
10.7.1 As used in this Agreement, "Environmental Liabilities"
means: (i) all claims, judgments, liabilities, damages, losses, penalties,
fines, (including strict liability), encumbrances or liens, in each case with
respect to claims arising in any manner whatsoever out of the violation of any
Environmental Laws by the Company or the breach of any covenants or the
inaccuracy of the representations of the Stockholders pursuant to Section 4.23
of this Agreement ("Pre- Closing Liability Conditions"), and the costs and
expenses of investigation and defense of any such claim, as well as any good
faith settlement thereof; (ii) damages to third parties for personal injury, or
injury to property or natural resources arising from or related to the
existence, creation or occurrence of the Pre-Closing Liability Conditions; and
(iii) fees incurred for the services of attorneys, consultants, contractors,
experts, laboratories and all other costs incurred in connection with the
investigation or remediation arising from or related to the existence, creation
or occurrence of the Pre- Closing Liability Conditions, to the extent required
by paragraph (e) below.
10.7.2 For the purposes hereof, "third party" means a person
other than: (i) one of the parties to this Agreement or (ii) an heir, estate,
assign, successor, parent or affiliate corporation, of subsidiary corporation of
one of the parties to this Agreement.
31
10.7.3 In accordance with the procedures set forth previously
in this Section 10, the Stockholders agree to indemnify, defend, reimburse and
hold harmless the Purchaser from and against any and all Environmental
Liabilities. The Purchaser hereby waives any and all other claims against the
Stockholders under any Environmental Laws or common law.
10.7.4 In addition, the Stockholders shall, at their own
expense, but with counsel approved by the Purchaser defend all claims, suits and
administrative proceedings relating to Environmental Liabilities and pay and
discharge, when and as the same become due, any and all judgments, settlements,
penalties or other sums due against the Purchaser, but in each case only to the
extent relating to Environmental Liabilities. The Stockholders shall keep the
Purchaser apprised of the status of all such claims, suits, administrative
proceedings and negotiations and provide to the Purchaser copies of all relevant
documents and legal papers pertaining thereto.
10.7.5 The Stockholders shall, at their sole cost and expense
but only to the extent relating to the Environmental Liabilities, take all
actions to remediate that are required or reasonably necessary to meet
Environmental Laws, but only to the extent that such remediation is required as
a result of Environmental Liabilities ("Environmental Work"). The Stockholders
shall proceed diligently with such investigatory and remedial actions, provided
that in all cases, such actions shall be in accordance with all applicable
requirements of governmental entities. Any such actions shall be performed in a
good, safe and workmanlike manner. The Stockholders shall promptly provide to
the Purchaser copies of testing results and reports that are generated in
connection with the above activities.
10.7.6 Notwithstanding anything herein to the contrary, the
indemnification obligations of the Stockholders pursuant to this Section 10.7,
shall survive for so long as permitted by law.
11. Miscellaneous.
-------------
11.1. Consent to Jurisdiction and Waivers.
-----------------------------------
The Purchaser and the Stockholders each irrevocably consent
that any legal action or proceeding against any of them under, arising out of or
in any manner relating to, this Agreement or any other document delivered in
connection herewith, must be brought only in a federal or state court situated
either in the Commonwealth of Pennsylvania or in the State of New York. The
Purchaser and the Stockholders by the execution and delivery of this Agreement,
expressly and irrevocably consent and submit to the personal jurisdiction of any
of such courts in any such action or proceeding. The Purchaser and the
Stockholders further irrevocably consent to the service of any complaint,
summons, notice or other process relating to any such action or proceeding by
delivery thereof to it by hand or by any other manner provided for in Section
11.3. The Purchaser and the Stockholders hereby expressly and irrevocably waive
any claim or defense in any such action or proceeding based on any alleged lack
of personal jurisdiction, improper venue or forum non convenient or any similar
basis. Nothing in this Section shall affect or impair in any manner or to any
extent the right of the Purchaser to commence legal proceedings or otherwise
proceed against the Stockholders in any jurisdiction or to serve process in any
manner permitted by law.
32
11.2. Severability.
------------
If any provision of this Agreement, and, in particular, if any
provision of the covenant not to compete, shall be held or deemed to be or
shall, in fact, be inoperative or unenforceable as applied in any particular
case because it conflicts with any other provision or provisions hereof or any
constitution or statute or rule of public policy, or for any other reason, such
circumstances shall not have the effect of rendering the provision in question
inoperative or unenforceable in any other case or circumstance, or of rendering
any other provision or provisions herein contained invalid, inoperative, or
unenforceable to any extent whatever. The invalidity of any one or more phrases,
sentences, clauses, sections, or subsections of this Agreement shall not affect
the remaining portions of this Agreement.
11.3. Notices.
-------
All notices, consents, requests, instructions, approvals and
other communications provided for herein and all legal process in regard hereto
shall be validly given, made or served, if in writing and delivered personally
or sent by registered or certified mail (return receipt requested), postage
prepaid, recognized national or international air courier or by facsimile
transmission electronically confirmed:
if to Purchaser:
Herley Wireless Technologies, Inc.
10 Industry Drive
Lancaster, PA 17603
Attn.: Myron Levy
Fax: (707) 397-9503
with a copy to:
David H. Lieberman, Esq.
Blau, Kramer, Wactlar & Lieberman, P.C.
100 Jericho Quadrangle
Jericho, New York ll753
Fax: (516) 822-4824
33
if to the Stockholders:
c/o Gul Gazipura, as Stockholders' Representative
235 Vineyard Court
Morgan Hill, CA 95307
Fax: (408) 782-5912
with a copy to:
Martin B. Fenster
14625 Big Basin Way
Saratoga, CA
Fax: (408) 867-8260
if to the Stockholders' Group:
c/o Gul Gazipura, as Stockholders' Group Representative
235 Vineyard Court
Morgan Hill, CA 95307
Fax: (408) 782-5912
with a copy to:
Martin B. Fenster
14625 Big Basin Way
Saratoga, CA
Fax: (408) 867-8260
or, in each case, at such other address as may be specified in writing to the
other parties.
11.4. Waiver.
------
Any party may waive compliance by another with any of the
provisions of this agreement. No waiver of any provisions shall be construed as
a waiver of any other provision or a future waiver of any other provision
hereof. Any waiver must be in writing.
11.5. General Construction Principles
The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. The use of the masculine form of any word includes the feminine
version and vice versa and the singular form of any word includes the plural and
vice versa. This Agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof. This Agreement may not be amended
except by an instrument in writing duly executed and delivered on behalf of each
of the parties hereto. This Agreement may be executed in several
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counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same instrument. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of New York. This Agreement shall be binding upon and inure to the benefit
of the successors and assigns of the parties hereto. The rights and obligations
contained in this Agreement are solely for the benefit of the parties hereto and
are not intended to benefit or be enforceable by any other party, under the
third party beneficiary doctrine or otherwise.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
HERLEY WIRELESS TECHNOLOGIES, INC.
By:
-----------------------------
Title:
STEP ELECTRONICS, INC.
By:------------------------------
Title:
Gul Gazipura
STOCKHOLDERS' GROUP
REPRESENTATIVE
Gul Gazipura
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