STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated May 26, 1988, be-
tween Charter Power Systems, Inc., a Delaware corporation (the
"Company"), and Robert Alvine (the "Purchaser").
WHEREAS, the Company has entered into an employment
agreement, dated the date hereof (the "Employment Agreement"),
with the Purchaser, pursuant to which the Company has engaged
the Purchaser to serve as Vice Chairman of its Board of Direc-
tors, in an executive capacity, upon the terms and subject to
the conditions set forth therein; and
WHEREAS, in connection therewith, the Purchase has
agreed to purchase from the Company, and the Company has
agreed to sell to the Purchaser, 316,515 shares (the
"Shares"), of the common stock, $.01 par value, of the Company
("Common Stock"), upon the terms and subject to the conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and
the mutual agreements hereinafter set forth, the parties
hereto agree as follows:
1. PURCHASE OF SHARES. The Purchaser hereby agrees to
purchase from the Company, and the Company hereby agrees to sell
to the Purchaser, the Shares, at a purchase price of $4.20 a
share.
2. CLOSING OF PURCHASE. The closing of the purchase
and sale of the Shares hereunder (the "Closing") shall be sub-
ject to the approval of the sale of the Shares hereunder by
the holders of shares of Common Stock and to the approval of
the Shares for listing on the American Stock Exchange. The
Closing shall take place on a date within five business days
following the date that the Shares have been approved for
listing on the American Stock Exchange, or on such later date
as shall be agreed upon by the parties hereto. At the Clos-
ing, the Purchaser shall deliver to the Company (i) a duly
executed Secured Promissory Note in the form attached as Ex-
hibit A hereto (the "Note"), in the amount of $1,326,197.90,
representing the purchase price of the shares less the par
value thereof, and (ii) cash or a check in the amount of the
par value of the Shares plus the Company's good faith deter-
mination of its withholding tax obligation respecting the pur-
chase of the Shares. Also at the Closing, the Purchaser and
the Company shall enter into a Pledge and Security Agreement
in the form attached as Exhibit B hereto.
3. FORFEITURE. The Purchaser hereby agrees that the
Shares shall be subject to forfeiture under the following
terms and conditions:
(a) subject to clauses (c), (d) and (e) below, 100%
of the Shares shall be forfeited to the Company if the Pur-
chaser's employment with the Company is terminated, other than
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by the Company without "Cause" (as defined in the Employment
Agreement) or by the Purchaser as a result of a material
breach by the Company of the Employment Agreement, prior to
May 1, 1989;
(b) subject to clauses (c), (d) and (e) below, 50%
of the Shares shall be forfeited to the Company if the Pur-
chaser's employment with the Company is terminated, other than
by the Company without Cause or by the Purchaser as a result
of a material breach by the Company of the Employment Agree-
ment, prior to May 1, 1990;
(c) in the event such termination is the result of
the death or disability (as defined in the Employment Agree-
ment) of the Purchaser, the portion of the Shares determined
by multiplying the total number of Shares by a fraction, the
numerator of which is the number of complete months during the
period from May 1, 1988 through the date of termination and
the denominator of which is 24, shall no longer be subject
to forfeiture;
(d) in the event of a Business Combination (as de-
fined in the Employment Agreement), the forfeiture shall cease
to apply to all the Shares simultaneous with the closing of
the transaction; and
(e) in the event of a Change of Control (as defined
in the Employment Agreement) other than a Business Combina-
tion, (i) the portion of the Shares determined as provided in
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clause (c) above and (ii) the percentage of the remainder of
the Shares equal to the percentage of the unvested Option (as
defined in the Option Agreement, dated the date hereof, be-
tween the Company and the Purchaser (the "Option Agreement"))
that simultaneously will vest on an accelerated basis pursuant
to clause (b) of the last paragraph of Schedule 1 to the Op-
tion Agreement, shall no longer be subject to forfeiture.
If and to the extent any portion of the Shares is forfeited to
the Company as aforesaid, (i) the equivalent portion of the
unpaid balance of the Note shall be deemed paid and a notation
to that effect shall be made by the Company on the face of the
Note, (ii) the Purchaser shall deliver to the Company, within
ten business days after the forfeiture, stock certificates
representing the forfeited portion of the Shares and (iii) the
Company shall deliver to the Purchaser, within ten business
after the forfeiture, cash or a check in the amount of the par
value of those Shares.
4. IMPUTED INCOME. The Company and the Purchaser ac-
knowledge that the Purchaser must recognize in the current
taxable year income for federal income tax purposes (the "Im-
puted Income") on the loan evidenced by the Note, and that the
related interest deductions will be available over the initial
five-year term of the Note. To facilitate the payment by the
Purchaser of his federal income tax liability on the portion
of the Imputed Income for which there will be no related in-
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terest deduction for 1988, the Company shall make a loan (the
"Loan") to the Purchaser, on April 15, 1989, in the amount of
88% of his federal income tax liability (without taking into
account any offsetting interest deductions) on the Imputed
Income (the "Imputed Liability"); PROVIDED, HOWEVER, that if,
on or before August 31, 1988, the Purchaser shall deliver to
the Company, (a) written notice that he will be taking the
Imputed Liability into account in making his federal quarterly
estimated tax payments and (b) a letter from his accountant
advising that he is required to do so, then the Company shall
make the Loan to the Purchaser in two equal advances on Sep-
tember 15, 1988 and January 15, 1989, respectively. The
amount of the Loan shall be determined by the Company's inde-
pendent accountants (whose determination, in the absence of
manifest error, shall be final and binding on the Company and
the Purchaser), based on the provisions of this Agreement and
assuming a federal income tax rate of 28%, and the Company
shall cause a copy of a schedule setting forth the calcula-
tions on the basis of which the determination is made to be
provided to the Purchaser within ten business days after the
date of the Closing. On the date the Loan (or each advance
thereof) is made, the Purchaser shall execute and deliver to
the Company a duly executed Secured Promissory Note in the
form attached as Exhibit C hereto. If the maturity of the
Note shall be extended until April 30, 1998 in accordance with
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clause (ii) of the second paragraph thereof, the Company shall
make an additional loan to the Purchaser, on April 15, 1994,
under the same terms and conditions as the Loan.
5. PURCHASER'S REPRESENTATIONS, WARRANTIES AND COVE-
NANTS.
(a) INVESTMENT INTENTION. The Purchaser represents
and warrants that he is acquiring the Shares solely for his
own account, for investment, and not with a view to or for
sale in connection with any distribution thereof. The Pur-
chaser shall not, directly or indirectly, offer, transfer,
sell or otherwise dispose of any of the Shares (or solicit any
offers to buy, purchase or otherwise acquire any of the
Shares), except in compliance with the Securities Act of 1933
(the "Act") and the rules and regulations thereunder. The
Purchaser further understands, acknowledges and agrees that
none of the Shares may be transferred, sold or otherwise dis-
posed of unless (i) the disposition is pursuant to an effec-
tive registration statement under the Act, (ii) the Purchaser
shall have delivered to the Company an opinion, from counsel
and in form and substance reasonably satisfactory to the Com-
pany, to the effect that the disposition is exempt from the
provisions of Section 5 of the Act or (iii) a no-action letter
from the Securities and Exchange Commission shall have been
obtained with respect to the disposition.
-6-
(b) LEGEND. The certificate or certificates repre-
senting the Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF UNLESS (A)
THE DISPOSITION IS PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, (B) THE
HOLDER HEREOF SHALL HAVE DELIVERED TO THE COMPANY AN
OPINION, FROM COUNSEL AND IN FORM AND SUBSTANCE REASON-
ABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT THE
DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5
OF THAT ACT, OR (C) A NO-ACTION LETTER FROM THE SECURI-
TIES AND EXCHANGE COMMISSION SHALL HAVE BEEN OBTAINED
WITH RESPECT TO THE DISPOSITION. THE SHARES EVIDENCED
BY THIS CERTIFICATE ALSO ARE SUBJECT TO FORFEITURE UNDER
CERTAIN CIRCUMSTANCES IN ACCORDANCE WITH THE TERMS OF A
STOCK PURCHASE AGREEMENT, DATED MAY , 1988, BETWEEN
ROBERT ALVINE AND THE COMPANY, A COPY OF WHICH IS ON
FILE AT THE PRINCIPAL OFFICES OF THE COMPANY."
(c) COMPLIANCE WITH RULE 144. If any of the Shares
are disposed of in accordance with Rule 144 under the Act,
the Purchaser shall deliver to the Company at or prior to the
time of such disposition an executed copy of Form 144 (if
required by Rule 144) and such other documentation as the
Company may reasonably require in connection with the
disposition.
(d) SECTION 83(b) ELECTION. The Purchaser shall
make an election, pursuant to Section 83(b) of the Internal
Revenue Code of 1986, as amended, to include in his gross in-
come for 1988 the excess of the total fair market value of the
Shares on the date of the Closing over $1,329,363.
6. STOCKHOLDER APPROVAL; LISTING. The Company shall
solicit the holders of shares of Common Stock to approve the
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sale of the Shares hereunder and the grant of the Option
pursuant to the Option Agreement, and shall apply for the
listing on the American Stock Exchange of the Shares and the
shares of Common Stock issuable upon exercise of the Option
(subject to notice of issuance).
7. MISCELLANEOUS.
(a) NOTICES. All notices and other communications
required or permitted to be given under this Agreement shall
be in writing and shall be deemed to have been given if de-
livered personally or sent by certified mail, return receipt
requested, postage prepaid, to the Company at c/o Charterhouse
Group International, Inc., 535 Madison Avenue, New York, New
York 10022, Attention: Merril M. Halpern, with a copy to Feit
& Ahrens, 488 Madison Avenue, New York, New York 10022, Atten-
tion: Jonathan Shor, Esq., and to the Purchaser at the Pur-
chaser's address contained in the Company's records, with a
copy to Tyler Cooper & Alcorn, 205 Church Street, P.O. Box
1936, New Haven, Connecticut 06509, Attention: Jon T.
Hirschoff, Esq., or to such other address as either party to
this Agreement shall specify by notice to the other.
(b) BINDING EFFECT; BENEFITS. This Agreement shall
be binding upon and inure to the benefit of the parties to
this Agreement and their respective successors and permitted
assigns. Nothing in this Agreement, express or implied, is
intended or shall be construed to give any person other than
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the parties to this Agreement or their respective successors
or permitted assigns any legal or equitable right, remedy or
claim under or in respect of any agreement or any provision
contained herein.
(c) AMENDMENT. This Agreement may be amended, mo-
dified or supplemented only by a written instrument executed
by the Purchaser and the Company.
(d) ASSIGNABILITY. Neither this Agreement nor any
right, remedy, obligation or liability arising hereunder or by
reason hereof shall be assignable by either the Company or
Purchaser without the prior written consent of the other
party.
(e) APPLICABLE LAW. This Agreement shall be gov-
erned by and construed in accordance with the laws of the State
of New York, without giving effect to the conflicts of
law provisions thereof.
(f) COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which shall be deemed
to be an original and all of which together shall be deemed to
be one and the same instrument.
(g) ENTIRE AGREEMENT. This Agreement constitutes
the entire agreement and supersedes all prior agreements and
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understandings, both written and oral, among the parties with
respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company and the Purchaser
have executed this Agreement as of the date first above
written.
CHARTER POWER SYSTEMS, INC.
By: \s\ Merril M. Halpern
Title: Chairman
\s\ Robert Alvine
ROBERT ALVINE
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EXHIBIT A to
Stock Purchase Agreement
PURCHASE
SECURED PROMISSORY NOTE
$1,326,197.90 June___, 1988
FOR VALUE RECEIVED, ROBERT ALVINE (the "Payor")
hereby promises to pay to CHARTER POWER SYSTEMS, INC., a Dela-
ware corporation ("the Company"), the principal sum of One
Million Three Hundred Twenty Six Thousand One Hundred and
Ninety-Seven and 90/100 Dollars ($1,326,197.90), without in-
terest. Payment of principal is to be made in lawful money of
the United States of America at the offices of the Company or
at such other place as the holder hereof shall designate.
Subject to the prepayment and acceleration provi-
sions hereinafter set forth, this Note shall mature and be due
and payable in full on April 30, 1993; PROVIDED, HOWEVER, that
(i) if the employment of the Payor with the Company shall have
been terminated after October 31, 1991 and before May 1, 1993,
other than for "Cause", as defined in the employment agree-
ment, dated May 26, 1988, between the Payor and the Company (a
"Cause Termination"), the maturity of this Note shall be
extended until 18 months after the date of termination of the
Payor's employment with the Company; and (ii) if the employ-
ment of the Payor with the Company shall not have been termi-
nated on or before April 30, 1993, the maturity of this Note
shall be extended until April 30, 1998; PROVIDED, FURTHER,
that this Note shall mature and be due and payable 18 months
after the date of termination (other than a Cause Termination)
of the Payor's employment with the Company, which termination
shall occur after April 30, 1993.
This Note is secured by the pledge by the Payor to
the Company of certain shares of common stock of the Company,
in accordance with the terms of a Pledge and Security Agree-
ment (the "Security Agreement") between the Payor and the Com-
pany, dated June ___, 1988, and in that respect is subject to
all of the terms, provisions and conditions of the Security
Agreement.
This Note evidences a loan made by the Company to
the Payor to enable him to purchase 316,515 shares of common
stock of the Company (the "Shares"). If the Payor shall sell
or transfer any of his Shares or the proceeds thereof, or any
cash (other than cash dividends), securities, or other prop-
erty at any time and from time to time receivable or otherwise
distributed in respect of or in exchange for any or all of the
Shares (collectively, the "Additional Shares"), there shall be
due and payable, immediately upon the consummation of the sale
or transfer, a payment of principal hereunder in an amount
equal to the product obtained by multiplying the then out-
standing principal amount of this Note by a fraction, the nu-
merator of which shall be the number of Shares and Additional
Shares then sold or transferred and the denominator of which
shall be the number of Shares and Additional Shares then owned by
the Payor (before giving effect to the sale or transfer).
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Nothing in this paragraph shall be deemed to permit any sale
or transfer by the Payor of any Shares or Additional Shares,
to the extent the same otherwise would be prohibited by the
provisions of any other agreement to which the Payor and the
Company are parties.
If: (i) the Payor fails to make any payment here-
under within ten days after notice from the Company to the
Payor that the payment is due; or (ii) a Cause Termination oc-
curs; or (iii) a Default (as defined in the Security Agree-
ment) shall have occurred under the Security Agreement (each
of the events listed in (i), (ii) and (iii) above being an "Event
of Default" hereunder); the then outstanding principal
balance hereof shall become immediately due and payable.
The Payor may, at any time and from time to time,
prepay in whole or part, without premium or penalty, the then
outstanding principal balance hereof.
The Payor hereby agrees to pay all reasonable costs,
fees and expenses incurred by the Company for the collection
of all sums due hereunder, including reasonable attorneys'
fees and court costs. The Payor hereby waives presentment,
demand, notice of dishonor, protest and all other demands and
notices in connection with this Note (including any accelera-
tion of the maturity hereof) and further agrees that this Note
shall be deemed to have been made under and shall be governed
by the laws of the State of New York in all respects (without
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giving effect to the conflicts of law provisions thereof), in-
cluding matters of construction, validity and performance, and
that none of its terms or provisions may be waived, altered,
modified or amended except to the extent the Company may con-
sent thereto in writing.
IN WITNESS WHEREOF, the Payor has executed and de-
livered this Note to the Company as of the date first above
written.
________________________
ROBERT ALVINE
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EXHIBIT B to
Stock Purchase Agreement
PLEDGE AND SECURITY AGREEMENT
AGREEMENT, dated June ___, 1988, between ROBERT
ALVINE ("Pledgor") and CHARTER POWER SYSTEMS, INC., a Delaware
corporation ("the Company").
WHEREAS, the Company has made a loan to Pledgor on
the date hereof in the amount of $1,326,197.90, pursuant to
the Stock Purchase Agreement, dated May 26, 1988 (the "Stock
Agreement"), between Pledgor and the Company, to enable the
Pledgor to purchase 316,515 shares (the "Purchased shares") of
Common Stock of the Company, par value $.01 per share ("Common
Stock"), and the Company in the future may make additional
loans to Pledgor pursuant to Section 4 of the Stock Purchase
Agreement and to enable Pledgor to purchase certain additional
shares of Common Stock (the "Option Shares") issuable upon the
exercise of an option granted to him pursuant to the Option
Agreement, dated May 26, 1988 (the "Option Agreement"), be-
tween Pledgor and the Company (collectively, the "Loans"); and
WHEREAS, in order to induce the Company to make the
Loans, Pledgor has agreed to grant, and does hereby grant, to
the Company, a security interest in the Purchased Shares and
all Option Shares hereinafter purchased by Pledgor with the
proceeds of any of the Loans (collectively, the "Shares").
NOW, THEREFORE, in consideration of the premises and
the mutual agreements hereinafter contained, the parties here-
to agree as follows:
1. CREATION OF SECURITY INTEREST. As security for pay-
ment in full of the Loans, Pledgor hereby pledges, hypothe-
cates, assigns, transfers, sets over and delivers unto the
Company as collateral security, and hereby grants to the Com-
pany a first lien and security interest in, all of the Shares,
whether now owned or hereafter acquired, the proceeds thereof,
and all cash (other than cash dividends, except to the extent
expressly provided herein), securities or other property at
any time and from time to time receivable or otherwise distri-
buted in respect of or in exchange for any of the Shares (all
of such Shares, proceeds thereof, cash (other than cash divi-
dends, except to the extent expressly provided herein), secur-
ities and other property hereinafter being referred to collec-
tively as the "Collateral"). Concurrently with the execution
of this Agreement, Pledgor is delivering to the Company (i)
all stock certificates representing the Purchased Shares and
(ii) a duly endorsed irrevocable stock power in blank there-
fore. Upon the issuance of any Option Shares purchased by
Pledgor with the proceeds of any of the Loans, Pledgor shall
deliver to the Company (i) all stock certificates representing
those Option Shares and (ii) duly endorsed irrevocable stock
powers in blank therefor.
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2. STOCK DIVIDENDS AND ADJUSTMENTS; VOTING RIGHTS. If,
during the term of this Agreement, any stock dividend, re-
classification, stock split, readjustment, warrant, option or
right to acquire additional securities is issued with respect
to the Collateral or any part thereof, or any other change is
made in the capital structure of the Company, all new, substi-
tuted or additional shares or securities that Pledgor shall
become entitled to receive as a result thereof promptly shall
be delivered to the Company (together with appropriate instru-
ments of transfer duly endorsed in blank) and, from and after
the time Pledgor shall be entitled to receive the same, those
shares and securities shall be, and be deemed to be, part of
the property pledged hereunder and included in the term Col-
lateral as defined herein. So long as a Default (as herein-
after defined) shall not have occurred and be continuing,
Pledgor shall be entitled to receive all cash dividends pay-
able with respect to, and to exercise all rights to vote, the
securities contained in the Collateral. Upon the occurrence
and during the continuance of a Default, the Board of Direc-
tors of the Company shall be entitled to receive all such cash
dividends and to exercise all such voting rights.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS. Pledgor
hereby represents, warrants and covenants that:
(a) Pledgor is and will be the sole legal and
equitable owner of the Collateral, and that Pledgor has and
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will have the right to transfer, pledge and deliver the Col-
lateral to the Company hereunder;
(b) there are and will be no outstanding liens, en-
cumbrances, or claims in respect of the Collateral other than
the security interest created by this Agreement;
(c) Pledgor will preserve and defend all right,
title and interest of the Company in and to the Collateral
against all claims thereon; and
(d) the pledge of the Collateral made hereby and
the delivery of the Collateral in accordance herewith are and
will be effective to vest in the Company a perfected, first
priority security interest in the Shares as set forth herein.
4. DEFAULT; REMEDIES. (a) A Default shall be deemed
to have occurred hereunder if:
(i) an Event of Default (as such term is de-
fined in the Notes evidencing the Loans (the "Notes")) shall
occur;
(ii) Pledgor sells, assigns, transfers or
otherwise disposes of, or grants a lien on or security in-
terest in or option or right with respect to, or otherwise en-
cumbers the Collateral or any part thereof or any interest
therein, unless concurrently therewith Pledgor repays the
Notes to the extent required in accordance with the terms
thereof;
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(iii) Pledgor becomes insolvent, makes a gen-
eral assignment for the benefit of creditors, or files or has
filed against him any petition under any bankruptcy or insol-
vency law or any action for the appointment of a receiver or
trustee; PROVIDED, HOWEVER, that in the event of an involun-
tary bankruptcy or insolvency proceeding, Pledgor shall have
60 days from the date of filing thereof to stay such proceed-
ing;
(iv) any of the Collateral shall be attached or
levied upon or seized in any legal proceedings, or held by
virtue of any levy or distraint, which attachment, levy or
distraint shall not be vacated within 60 days; PROVIDED, HOW-
EVER, that any such attachment, levy or distraint shall not
constitute a Default so long as it is stayed; or
(v) Pledgor otherwise defaults in any material
respect in the observance or performance of any representation
or other covenant or agreement contained herein or in any of
the Notes, and that default continues for a period of ten days
after notice thereof from the Company.
(b) If a Default shall have occurred and be con-
tinuing, the Company shall be entitled, in addition to any
other rights granted under the Notes, to exercise all of the
rights and remedies with respect to the Collateral of a se-
cured party under the Uniform Commercial Code or any other ap-
plicable law, all of which rights and remedies, to the full
extent permitted by law, shall be cumulative and not alterna-
-5-
tive. Pledgor agrees that 30 days shall constitute reasonable
notice of a sale or other disposition of any of the Colla-
teral. The remainder of the proceeds from any such sale or
other disposition, after deducting therefrom all expenses in-
curred in connection therewith (including reasonable legal
fees and expenses) and after payment in full of Pledgor's ob-
ligations to the Company under the Notes and this Agreement,
shall be paid over to Pledgor. The Company shall not sell or
otherwise dispose of a greater number of Shares that it rea-
sonably determines is necessary for the payment in full of
Pledgor's obligations to the Company under the Notes and this
Agreement, including all expenses incurred in connection with
such sale or other disposition. Pledgor further agrees that a
private sale of the Collateral on such terms as the Company
approves shall be deemed to be commercially reasonable; PRO-
VIDED, HOWEVER, that the Company is authorized in its absolute
discretion to restrict the prospective purchasers to those
persons who represent and agree to the satisfaction of the
Company and its counsel that they are purchasing the Colla-
teral for their own account, for investment, and not with a
view to or for sale in connection with a distribution in vio-
lation of the Securities Act of 1933 or any other applicable
law or regulation.
5. WAIVER OF RIGHTS OR REMEDIES. (a) The Company, by
act, delay, omission, acceptance of partial payment or other-
wise, shall not be deemed to have waived any rights or reme-
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dies hereunder or under the Notes unless the waiver is in
writing and signed by the Company, and then only to the extent
therein set forth. A waiver by the Company of any right or
remedy on any one occasion, shall not be construed as a bar to
or waiver of any such right or remedy, or both, that the Com-
pany otherwise would have had on any future occasion.
(b) To the full extent that Pledgor may lawfully so
agree, Pledgor agrees that it will not at any time plead,
claim or take the benefit of any moratorium or redemption law
now or hereafter enforced, in order to prevent or delay the
enforcement of this Agreement or the application of any por-
tion or all of the Collateral as provided by this Agreement, and
Pledgor, for himself and all who may claim under Pledgor,
as far as they now or hereafter lawfully may, hereby waives
the benefit of all such laws.
6. AUTHORIZATION. The Company shall have and be en-
titled to exercise all such powers hereunder as are specific-
ally delegated to the Company by the terms hereof, together
with such powers as are reasonably incidental thereto. The
Company may execute any of its duties hereunder by or through
designees and shall be entitled to retain counsel and to act
in reliance upon the advise of such counsel concerning all
matters pertaining to its duties hereunder. Neither the Com-
pany, nor any director, officer or employee of the Company,
shall be liable to Pledgor for any action taken or omitted to
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be taken by it or them hereunder in connection herewith, ex-
cept for its or their own negligence or willful misconduct or
breach of this Agreement. The Company shall be entitled to
rely on any communication, instrument or document believed by
it to be genuine and correct and to have been signed or sent
by the proper person or persons.
7. FURTHER ASSURANCES. Pledgor agrees that he shall at
the request of the Company execute and deliver all such fur-
ther assignments, endorsements and other documents and take
all such further action as the Company may reasonably request
in order to effect the purposes and provisions of this Agree-
ment and to perfect, continue, better assure or confirm the
rights of the Company in the Collateral provided for here-
under.
8. TERMINATION. The security interest and assignment
created and granted hereunder shall terminate only when Pled-
gor has fully satisfied all of his obligations hereunder and
under the Notes, and at that time all Collateral remaining in
the possession of the Company shall be returned to Pledgor,
accompanied by appropriate stock powers.
9. NOTICES. Notices or other communications to either
of the parties shall be in writing and shall be deemed to have
been duly and properly given on the date such notices or other
communications are (i) personally delivered with receipt ac-
knowledged, or (ii) received when mailed by registered or cer-
tified mail, postage prepaid, return receipt requested, to the
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addresses set forth below or to such other address as either
party to this Agreement shall specify to the other:
To Pledgor: Robert Alvine
55 North Racebrook Road
Woodbridge, CT 06525
-with a copy to-
Tyler Cooper & Alcorn
205 Church Street
P.O. Box 1936
New Haven, CT 06509
Attention: Jon T. Hirschoff, Esq.
To the Company: Charter Power Systems, Inc.
c/o Charterhouse Group International,
Inc.
535 Madison Avenue
New York, New York 10022
Attention: Merril M. Halpern
-with a copy to-
Feit & Ahrens
488 Madison Avenue
New York, New York 10022
Attention: Jonathan Shor, Esq.
10. MISCELLANEOUS. (a) This Agreement shall be gov-
erned by and interpreted under the laws of the State of New
York applicable to contracts made and performed therein with-
out regard to the principles of conflict of laws thereof. If
any term or provision of this Agreement shall, for any reason,
be held to be illegal, invalid or unenforceable under the laws
of any governmental authority to which this Agreement is sub-
ject, the term or provision shall be deemed severed from this
Agreement, and the remaining terms and provisions shall be en-
forceable, to the fullest extent permitted by law.
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(b) This Agreement shall inure to the benefit of
and shall be binding upon the respective successors, assigns
and legal representatives of the parties, except that Pledgor
shall not be permitted to assign this Agreement or any inter-
est herein or in the Collateral, or any part thereof, or
otherwise pledge, encumber or grant any option with respect to
the Collateral, or any part thereof, or any cash or property
held by the Company as Collateral under this Agreement, except
to the extent provided herein. The Company may assign this
Agreement, any interest herein or in the Collateral or any
part thereof, to an affiliated entity of the Company.
(c) Captions used herein are inserted for reference
purposes only and shall not affect the interpretation or
meaning of this Agreement.
(d) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same agree-
ment.
(e) This Agreement may not be changed, modified or,
except as provided in Section 8 hereof, terminated, in whole
or in part, except by a written instrument signed by the party
-10-
against who any such change, modification or termination is
sought to be enforced.
IN WITNESS WHEREOF, Pledgor has executed this Agree-
ment on the date hereinabove first written.
________________________
ROBERT ALVINE
AGREED TO AND ACCEPTED:
CHARTER POWER SYSTEMS, INC.
By:________________________
-11-
EXHIBIT C to
Stock Purchase Agreement
IMPUTED INCOME
SECURED PROMISSORY NOTE
$___________ [Date]
FOR VALUE RECEIVED, ROBERT ALVINE (the "Payor")
hereby promises to pay to CHARTER POWER SYSTEMS, INC., a Dela-
ware corporation ("the Company"), the principal sum of _______
____________________________________ ($__________), without in-
terest, in four equal annual installments on April 15 of each
of 1990 through 1993. Payment of principal is to be made in
lawful money of the United States of America at the offices of
the Company or at such other place as the holder hereof shall
designate.
This Note is secured by the pledge by the Payor to
the Company of certain shares of common stock of the Company,
in accordance with the terms of a Pledge and Security Agree-
ment (the "Security Agreement") between the Payor and the Com-
pany, dated June ___, 1988, and in that respect is subject to
all of the terms, provisions and conditions of the Security
Agreement.
This Note evidences a loan made by the Company to
the Payor to enable him to purchase 316,515 shares of common
stock of the Company (the "Shares"). If the Payor shall sell
or transfer any of his Shares or the proceeds thereof, or any
cash (other than cash dividends), securities, or other prop-
erty at any time and from time to time receivable or otherwise
distributed in respect of or in exchange for any or all of the
Shares (collectively, the "Additional Shares"), there shall be
due and payable, immediately upon the consummation of the sale
or transfer, a payment of principal hereunder in an amount
equal to the product obtained by multiplying the then out-
standing principal amount of this Note by a fraction, the nu-
merator of which shall be the number of Shares and Additional
Shares then sold or transferred and the denominator of which
shall be the number of Shares and Additional Shares then owned
by the Payor (before giving effect to the sale or transfer).
Nothing in this paragraph shall be deemed to permit any sale
or transfer by the Payor of any Shares or Additional Shares,
to the extent the same otherwise would be prohibited by the
provisions of any other agreement to which the Payor and the
Company are parties.
If: (i) the Payor fails to make any payment
hereunder within ten days after notice from the Company to the
Payor that the payment is due; or (ii) the Payor's employment
with the Company is terminated for "Cause", as defined in the
employment agreement, dated May 26, 1988, between the Payor
and the Company; or (iii) a Default (as is defined in the Se-
curity Agreement) shall have occurred under the Security
Agreement (each of the events listed in (i), (ii) and (iii)
-2-
above being an "Event of Default" hereunder); the then out-
standing principal balance hereof shall become immediately due
and payable.
The Payor may, at any time and from time to time,
prepay in whole or part, without premium or penalty, the then
outstanding principal balance hereof.
The Payor hereby agrees to pay all reasonable costs,
fees and expenses incurred by the Company for the collection
of all sums due hereunder, including reasonable attorneys'
fees and court costs. The Payor hereby waives presentment,
demand, notice of dishonor, protest and all other demands and
notices in connection with this Note (including any accelera-
tion of the maturity hereof) and further agrees that this Note
shall be deemed to have been made under and shall be governed
by the laws of the State of New York in all respects (without
giving effect to the conflicts of law provisions thereof), in-
cluding matters of construction, validity and performance, and
that none of its terms or provisions may be waived, altered,
modified or amended except to the extent the Company may con-
sent thereto in writing.
IN WITNESS WHEREOF, the Payor has executed and de-
livered this Note to the Company as of the date first above
written.
_________________________
ROBERT ALVINE
-3-
OPTION AGREEMENT
ROBERT ALVINE (the "Optionee") hereby is granted the
option (the "Option") to purchase Two Hundred Eleven Thousand
and Ten (211,010) fully paid and nonassessable shares of the
common stock, par value $.01 per share (the "Common Stock"),
of Charter Power systems, Inc., a Delaware corporation (the
"Company"), upon and subject to the following terms and condi-
tions:
1. Option Price. The price at which shares of Common
Stock subject to the Option may be purchased is $6.04 a share.
2. Duration of Option. The Option shall expire, and
all rights to purchase share of Common Stock pursuant thereto
shall cease, on April 30, 1993 (the "Expiration Date").
3. Vesting of Option. No portion of the Option may be
exercised until it has vested. The Option shall vest as set
forth in Schedule 1 attached hereto.
4. Exercise of Options. A person entitled to exercise
the Option may exercise it in whole at any time, or in part
from time to time, by delivering to the Company at its princi-
pal office, directed to the attention of its Treasurer, (a)
written notice specifying the number of share of Common Stock
with respect to which the Option is being exercised, (b) pay-
ment in full of the purchase price for those shares and (c)
payment of the amount required for the Company to satisfy its
withholding tax obligation respecting that exercise as deter-
mined by the Company's independent accountants. Those pay-
ments shall be made in cash, by check to the order of the Com-
pany or, in the case of a payment of the amount described in
clause (b) above (less the par value of the relevant shares),
by delivery of a Secured Promissory Note in the form attached
as Exhibit A hereto.
5. Nontransferability. The Option shall not be trans-
ferable other than by will or the laws of descent and distri-
bution and the Option may not be exercised by anyone other
than the Optionee, except that, if the Optionee dies or be-
comes incapacitated, the Option may be exercised by the Op-
tionee's estate, legal representative or beneficiary, as the
case may be, subject to all other terms and conditions con-
tained in this Agreement.
6. Termination of Employment. The following rules
shall apply in the event of the termination of the Optionee's
employment with the Company:
(i) if the termination is for "Cause", as defined
in the employment agreement, dated the date hereof, be-
tween the Optionee and the Company, the Option immedi-
ately shall terminate;
-2-
(ii) if the termination is other than for Cause (in-
cluding due to death or disability), the Option shall ex-
pire 18 months after the date of termination, or on the
applicable Expiration Date, whichever first shall occur;
and
(iii) anything contained in this Section 6 to the
contrary notwithstanding, except as provided in part B of
Schedule 1 hereto, the Option may be exercised following
termination of the Optionee's employment only if, and to
the extent that, the Option was exercisable as of the
date of termination.
7. No Rights as Stockholder or to Continued Employ-
ment. The Optionee shall not have any rights as a stockholder
of the Company with respect to any shares covered by the Op-
tion prior to the date of issuance to the Optionee of the cer-
tificate or certificates for such shares, and the Option shall
not confer upon the Optionee any right to continuance of em-
ployment with the Company or any of its subsidiaries or inter-
fere in any way with the right of the Company or of its sub-
sidiaries to terminate the employment of the Optionee.
8. Issuance of Shares; Restrictions. (a) Subject to
the conditions and restrictions provided to this Section 8,
the Company shall, within 20 business days after the Option
has been duly exercised in whole or in part, deliver to the
person who exercised the Option one or more certificates, reg-
-3-
istered in the name of that person, for the number of shares
of Common Stock with respect to which the Option was exer-
cised. The Company may place a legend on any stock certifi-
cate issued hereunder to reflect any restriction s provided for
in this Section 8.
(b) Unless the issuance of the shares subject to
the Option has been registered under the securities Act of
1933 (the "Act") (and, if the Optionee may be deemed an "af-
filiate" of the Company, as defined in Rule 405 under the Act,
if the resale by the Optionee of those shares also has been
registered under the Act), or the Company (based upon advice
of counsel) has determined that an exemption from registration
under the Act is available, the Company may require prior to
and as a condition of the issuance of any shares of Common
Stock, that the person exercising the Option hereunder provide
to the Company a written representation in a form prescribed
by the Committee to the effect that that person is acquiring
those shares solely with a view to investment, for that per-
son's own account, and not with a view to the resale or dis-
tribution of all or any part thereof, and that such person
will not dispose of any of those shares other than in accord-
ance with the registration provisions of the Act, unless the
Company (based upon advice of counsel) is satisfied that an ex-
emption from such registration is available.
-4-
(c) Anything contained herein to the contrary not-
withstanding, the Company shall not be obligated to issue any
shares of Common Stock upon the exercise of the Option granted
hereunder unless and until the Company is satisfied that such
issuance complies with all applicable provisions of the Act
and all other applicable laws or regulations by which the Com-
pany is bound or to which the Company or those shares are sub-
ject.
9. Adjustments. The number of shares of Common Stock
covered by the Option and the exercise price therefor shall be
adjusted proportionately for any increase or decrease in the
number of outstanding shares of Common Stock resulting from a
stock split or other subdivision or consolidation of shares or
other capital adjustment, or the payment of a stock dividend;
provided, however, that any fractional shares resulting from
any such adjustment shall be eliminated. Notwithstanding the
foregoing, no adjustment shall be made upon the issuance of
new shares of Common Stock for fair consideration.
10. Condition. The Option is subject to the approval
thereof by the holders of shares of Common Stock and to the
listing on the American Stock Exchange of the shares of Common
Stock issuable upon exercise of the Option (subject to notice
of issuance).
11. Miscellaneous.
(a) Notices. All notices and other communications
required or permitted to be given hereunder shall be in
writing and shall be deemed to have been given if delivered
personally or sent by certified mail, return receipt re-
-5-
quested, postage prepaid, to the Company at c/o Charterhouse
Group International, Inc., 535 Madison Avenue, New York, New
York 10022, Attention: Merril M. Halpern, with a copy to Feit
& Ahrens, 488 Madison Avenue, New York, New York 10022, Atten-
tion: Jonathan Shor, Esq., and to the Optionee at the Op-
tionee's address contained in the Company's records, with a
copy to Tyler Cooper & Alcorn, 205 Church Street, P.O. Box
1936, New Haven, Connecticut 06509, Attention: Jon T.
Hirschoff, Esq., or to such other address as either party to
this Agreement shall specify by notice to the other.
(b) Binding Effect; Benefits. This Agreement shall
be binding upon and inure to the benefit of the parties to
this Agreement and their respective successors and permitted
assigns. Nothing in this Agreement, express or implied, is
intended or shall be construed to give any person other than
the parties to this Agreement or their respective successors
or permitted assigns any legal or equitable right, remedy or
claim under or in respect of any agreement or any provision
contained herein.
(c) Amendment. This Agreement may be amended, mo-
dified or supplemented only by a written instrument executed
by the Optionee and the Company.
(d) Applicable Law. This Agremeent shall be gov-
erened by and construed in accordance with the laws of the
State of New York, without giving effect to the conflicts of
law provisions thereof.
-6-
(e) Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed
to be an original and all of which together shall be deemed to
be one and the same instrument.
(f) Entire Agreement. This Agremeent 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.
IN WITNESS WHEREOF, the Company and the Optionee
have executed this Agreement as of the date written below.
Date of Grant: May 26, 1988.
CHARTER POWER SYSTEMS, INC.
By: \s\ Merril M. Halpern
Chairman
\s\ Robert Alvine
ROBERT ALVINE
-7-
Schedule 1
A. Vesting of Option.
The Option shall vest: (i) to the extent of 105,505
shares as of January 31, 1990, only if the Company's earnings
per share (the "EPS") for the fiscal year ending January 31,
1990 equal or exceed $1.05; and (ii) to the extent of the re-
maining 105,505 shares (the "Second Portion"), as of January
31, 1991, only if the EPS for the fiscal year ending January
31, 1991 equal to or exceed $1.25. For this purpose, the EPS
shall be as reported in the Company's audited financial state-
ments for the relevant fiscal year, adjusted to exclude from
the calculation of EPS (a) any extraordinary items (as deter-
mined by the Company's independent accountants in accordance
with generally accepted accounting principles), (b) any shares
issued or issuable pursuant to the Company's Stock Option Plan
and (c) any increase or decrease in the number of outstanding
shares resulting from a stock split or other subdivision or
consolidation of shares or other capital adjustment, or the
payment of a stock dividend.
If the employment of the Optionee with the Company
is terminated due to death or disability (as defined in the
employment agreement, dated the date hereof, between the Op-
tionee and the Company (the "Employment Agreement")) after
October 31, 1989 or 1990 and the applicable EPS amount for the
(i)
fiscal year ending January 31, 1990 or 1991, as the case may
be, is met, the Optionee shall be deemed to have been employed
through the end of the relevant fiscal year for the purpose of
the vesting of the Option.
B. Accelerated Vesting.
The Option (if (i) the circumstance or transaction
described in paragraph 1 or 2(a) below occurs or is completed
on or before January 31, 1991 or (ii) the transaction de-
scribed in paragraph 2(b) below is completed on or before
January 31, 1990) or the Second Portion (if the transaction
described in paragraph 2(b) below occurs or is completed after
January 31, 1990 and on or before January 31, 1991) shall vest
on an accelerated basis to the extent provided below:
1. If the average of the daily closing prices of the
Common Stock of the Company, as reported by the American Stock
Exchange (the "AMEX"), during any 60-day period equals or
exceeds $15.00 a share, full accelerated vesting shall occur on
the last day of that 60-day period.
2. If: (a) a Business Combination (as defined in the
Employment Agreement) has occurred at a weighted average price
per share on a fully diluted basis (the "Transaction Price") of
not less than $11.00; or (b) a Change of Control (as de-
fined in the Employment Agreement) other than a Business Com-
bination has occurred and the average of the daily closing
prices of a share of the Common Stock of the Company, as re-
ported by the AMEX, during the 20 trading days prior thereto
(ii)
(the "CC Price"), is not less than $11.00; accelerated vesting
to the extent of the percentage specified below shall occur
upon consummation of the transaction:
Transaction Price Percentage of Unvested
or CC Price Option to Vest
$11.00 - $11.99 20%
$12.00 - $12.99 40%
$13.00 - $13.99 60%
$14.00 - $14.99 80%
$15.00 or greater 100%
(iii)
EXHIBIT A to
Option Agreement
OPTION
SECURED PROMISSORY NOTE
$ _________ [Date]*
FOR VALUE RECEIVED, ROBERT ALVINE (the "Payor")
hereby promises to pay to CHARTER POWER SYSTEMS, INC., a Dela-
ware corporation ("the Company"), the principal sum of _______
_____________________________ ($____________), without inter-
est, on ___________**. Payment of principal is to be made in
lawful money of the United States of America at the offices of
the Company or at such other place as the holder hereof shall
designate.
This Note is secured by the pledge by the Payor to
the Company of certain shares of common stock of the Company,
in accordance with the terms of a Pledge and Security Agree-
ment (the "Security Agreement") between the Payor and the Com-
pany, dated June ___, 1988, and in that respect is subject to
all of the terms, provisions and conditions of the Security
Agreement.
________________
* Insert date of exercise of option respecting Shares pur-
chased with the principal amount of this Note.
** Insert date that is 18 months subsequent to date of this
Note.
This Note evidences a loan made by the Company to
the Payor to enable him to purchase _______*** shares of common
stock of the Company (the "Shares"). If the Payor shall sell
or transfer any of his Shares or the proceeds thereof, or any
cash (other than cash dividends), securities, or other prop-
erty at any time and from time to time receivable or otherwise
distributed in respect of or in exchange for any or all of the
Shares (collectively, the "Additional Shares"), there shall be
due and payable, immediately upon the consummation of the sale
or transfer, a payment of principal hereunder in an amount
equal to the product obtained by multiplying the then out-
standing principal amount of this Note by a fraction, the nu-
merator of which shall be the number of Shares and Additional
Shares then sold or transferred and the denominator of which
shall be the number of Shares and Additional Shares then owned
by the Payor (before giving effect to the sale or transfer).
Nothing in this paragraph shall be deemed to permit any sale
or transfer by the Payor of any Shares or Additional Shares,
to the extent the same otherwise would be prohibited by the
provisions of any other agreement to which the Payor and the
Company are parties.
____________
*** Insert number of Shares purchased with the principal
amount of this Note.
-2-
REGISTRATION RIGHTS AGREEMENT
AGREEMENT, dated May 26, 1988, between ROBERT ALVINE
(the "Shareholder") and CHARTER POWER SYSTEMS, INC., a Dela-
ware corporation (the "Company").
WHEREAS, the Shareholder on the date hereof has
agreed to purchase 316,515 shares of Common Stock, $.01 par
value, of the Company ("Common Stock") and has been granted
the option to purchase an additional 211,010 shares of Common
Stock (all such shares hereinafter are referred to
collectively as the "Shares");
WHEREAS, the Company has agreed to provide the
Shareholder with certain registration rights respecting the
Shares.
NOW, THEREFORE, in consideration of the foregoing
and of the mutual covenants and agreements set forth herein,
the parties hereto agree as follows:
1. DEMAND REGISTRATION. During each of the fol-
lowing periods: (a) the 18-month period following the termina-
tion of the employment of the Shareholder with the Company
without "Cause" (as defined in the Employment Agreement, of
even date herewith, between the Company and the Shareholder);
or (b) at any time after April 30, 1991, so long as the Share-
holder is employed by the Company at that time; the Share-
holder shall be entitled to request, and the Company thereupon
shall diligently effect in accordance with the terms hereof,
one registration under the Securities Act of 1933 (the "Act")
of all or any portion of his Shares owned at the time of the
request, in the case of clause (a) above, or up to 50% of such
Shares, in the case of clause (b) above, in which the Company
shall pay all Registration Expenses (as defined in Section 6
hereof) (the "Demand Registrations"). A registration will not
be deemed a Demand Registration permitted pursuant to this
Section 1 unless it has become effective and the Shareholder
is legally permitted to sell the Shares that are requested and
required to be included in that registration and the Company
has complied with the other applicable provisions of this
Agreement.
2. NO-SALE AGREEMENT. The obligation of the Com-
pany to include Shares in the Demand Registrations as provided
in Section 1 hereof shall be subject to the Company's receipt
from the Shareholder of a written agreement not to effect any
public sale or distribution (other than through the registered
public offering) of equity securities of the Company during
the ten days prior to and the 90-day period beginning on the
effective date of that registration or, if sooner, until all
Shares and other securities included in that registration have
been sold.
3. EFFECTING THE REGISTRATION. Whenever the Share-
holder requests that any Shares be registered pursuant to the
provisions of this Agreement, the Company shall use its best
efforts to effect the registration and the sale of those
Shares in accordance with the intended method of disposition
thereof and, pursuant thereto, the Company shall, as expedi-
tiously as possible:
(a) prepare and file with the Securities and
Exchange Commission (subject to its receipt from the Share-
holder of the written information specified in Section 7(b)
hereof) a registration statement with respect to those Shares,
which registration statement shall state that the Shareholder
may sell those Shares either under that registration statement
or (to the extent available to the Shareholder) pursuant to
Rule 144 (or any similar rule then in effect), and shall use
its best efforts to cause such registration statement to be-
come effective;
(b) prepare and file with the Securities and
Exchange Commission (subject to its receipt from the Share-
holder of the written information specified in Section 7(b)
hereof) such amendments and supplements to that registration
statement and the prospectus used in connection therewith as
may be necessary to keep that registration statement effective
for a period of not less than six months and comply with the
provisions of the Act with respect to the disposition of all
securities covered by that registration statement during that
six-month period in accordance with the intended method of
disposition by the Shareholder set forth in that registration
statement;
(c) provide to the Shareholder such number of
copies of that registration statement, each amendment and sup-
plement thereto, the prospectus included in such registration
statement (including each preliminary prospectus) and such
other documents as the Shareholder reasonably may request in
order to facilitate the disposition of the Shares owned by the
Shareholder included in that registration statement;
(d) use its best efforts to register or qualify
those Shares under the securities or blue-sky laws of such
jurisdictions as the Shareholder reasonably requests and do
any and all other acts and things that may be reasonably
-2-
necessary or advisable to enable the Shareholder to consummate
the disposition in those jurisdictions of the Shares owned by
the Shareholder included in that registration statement (PRO-
VIDED, HOWEVER, that the Company shall not be required, in
order to complete that registration or qualification, to (i)
qualify generally to do business in any such jurisdiction
where it otherwise would not be required to qualify but for
this subparagraph, (ii) subject itself to taxation in any such
jurisdiction, (iii) consent to general service of process in
any such jurisdiction (it being agreed that the Company shall
be obligated, to the extent required in any applicable juris-
diction, to consent to limited service of process with respect
to matters relating to the offering being so registered or
qualified), or (iv) otherwise subject itself or any of its af-
filiates to unreasonable expense or restrictions);
(e) notify the Shareholder, at any time when a
prospectus relating thereto is required to be delivered under
the Act, of the happening of any event or the discovery of any
information, as a result of which the prospectus included in
that registration statement contains any statement which, at
the time and in light of the circumstances under which it was
made, is false or misleading with respect to any material fact
or omits to state a material fact required to be stated
therein or necessary in order to make the statement therein
not false or misleading, and, at the request of the Share-
holder, the Company shall prepare a supplement or amendment to
that prospectus so that, as thereafter delivered to the pur-
chasers of those Shares, that prospectus will not contain any
statement which, at the time and in light of the circumstances
under which it was made, is false or misleading with respect
to any material fact or omits to state a material fact re-
quired to be stated therein or necessary in order to make the
statements therein not false or misleading;
(f) enter into such customary agreements (in-
cluding an underwriting agreement in customary form and on
terms reasonably agreeable to it) and take all such other ac-
tions as the holders of a majority of the securities covered
by the registration statement or the underwriters, if any,
reasonably request in order to expedite or facilitate the dis-
position of those securities; and
(g) make available for inspection by the Share-
holder, any underwriter participating in any disposition pur-
suant to the registration statement, and any attorney, ac-
countant or other agent retained by the Shareholder or that
underwriter, all financial and other records, pertinent corpo-
rate documents and properties of the Company, and cause the
Company's officers, directors and employees to supply all in-
-3-
formation reasonably requested by the Shareholder or that un-
derwriter, attorney, accountant or agent in connection with
that registration statement.
Notwithstanding anything contained in this Section 3 to the
contrary, the Company shall not be required to file any regis-
tration statement pursuant to Section 1 hereof; (i) until it
has filed its Form 10-Q (or its then equivalent) for its most
recently completed fiscal quarter (unless the Company meets
the eligibility requirements for the use of a registration
statement on Form S-2) and its Form 10-K for its most recently
completed fiscal year; or (ii) during any period of time when
(A) the Company is contemplating an underwritten public offer-
ing of any of its securities within three months and, in the
judgement of the managing or principal underwriter thereof or
of the Company, that filing would have an adverse effect on
the contemplated offering, (B) the Company is in possession of
material nonpublic information (notice of which shall have
been given by the Company to the Shareholder) that it deems in
its legitimate business interest not to disclose in a regis-
tration statement or (C) the Company is engaged in any program
for the purchase of shares of its Common Stock; PROVIDED, HOW-
EVER, that the aggregate of the periods in this clause (ii)
shall not exceed 120 days during the 18-month period provided
in Section 1(a) hereof).
4. OPINION OF COUNSEL AND LETTER FROM ACCOUNTANTS.
If and whenever the Company is required by the provisions of
this Agreement to use its best efforts to effect the registra-
tion of Shares under the Act, the Company shall provide, at
the request of the Shareholder, on the date that those Shares
are delivered to the underwriters for sale pursuant to that
registration or, if those Shares are not being sold through
underwriters, on the date the registration statement with re-
spect to those Shares becomes effective: (a) an opinion, dated
such date, of the independent counsel representing the Company
for the purposes of such registration, addressed to the under-
writers, if any, and to the Shareholder, to the effect that
(i) the registration statement, the related prospectus and
each amendment or supplement thereto, comply as to form in all
material respects with the requirements of the Act and the ap-
plicable rules and regulations of the Securities and Exchange
Commission thereunder (except that such counsel need express
no opinion as to the financial statements and schedules and
other financial and statistical data contained therein), (ii)
while such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of
the statements contained in the registration statement and the
prospectus (except for the matters referred to in clause (iii)
below), such counsel has no reason to believe either that the
registration statement or the prospectus (and any amendment or
supplement thereto), at the time that registration statement
became effective (or in the case of an amendment or supple-
-4-
ment, at the time it was filed), and with respect to the pros-
pectus, on the date of such prospectus, contains any statement
which, at the time and in light of the circumstances under
which it was made, is false or misleading with respect to any
material fact or omits to state a material fact required to be
stated therein or necessary in order to make the statements
therein not false or misleading (except that such counsel need
express no opinion as to the financial statements and sched-
ules and other financial and statistical data, or the informa-
tion provided by the Shareholder pursuant to Section 7(b)
hereof, contained therein), and (iii) all of the Shares in-
cluded in the registration statement have been duly authorized
and validly issued, and are fully paid and nonassessable; and
(b) a letter, dated that date, from the independent certified
public accountants of the Company, addressed to the under-
writers, if any, and to the Shareholder, if he would be deemed
an affiliate of the Company as defined in Rule 405 under the
Act, stating (i) that they are independent certified public
accountants within the meaning of the Act and that in the
opinion of such accountants, the financial statements and
schedules of the Company included in the registration state-
ment or the prospectus, or any amendment or supplement there-
to, comply as to form in all material respects with the appli-
cable accounting requirements of the Act, and (ii) such other
financial matters (including information as to the period end-
ing not more than five business days prior to the date of such
letter) with respect to the registration statement as the un-
derwriters, if any, or the Shareholder, if he would qualify as
an underwriter, may reasonably request; PROVIDED, HOWEVER,
that the Company shall not be considered to be in breach of
this Section 4 if its independent certified public accountants
or counsel shall have refused to deliver all or any part of
the letter or opinion specified in this Section 4 without
qualification or limitation (other than standard qualifica-
tions and limitations) not specified above, if the Company
shall have requested such accountants or counsel to provide
the same and shall have cooperated in all reasonable respects,
to the extent requested by such accountants or counsel, in
providing them with information required for the preparation
of that letter or opinion.
5. REVIEW BY THE SHAREHOLDER. No less than five
business days prior to the filing of a registration statement
or prospectus, or any amendment or supplement thereto, the
Company shall provide the Shareholder with a substantially
final copy of such proposed registration statement, pros-
pectus, amendment or supplement. If, prior to that filing,
the Company shall receive written notice from the Shareholder
to the effect that that registration statement, prospectus,
amendment or supplement contains any statement relating to the
Shareholder which is false or misleading or omits to state a
material fact, then the Company shall not file that registra-
tion statement, prospectus, amendment or supplement without
-5-
the prior written consent of the Shareholder, which consent
shall not be unreasonably withheld.
6. EXPENSES. All expenses incident to the Com-
pany's performance of or compliance with the registration ob-
ligations set forth in this Agreement, including all registra-
tion and filing fees, expenses of compliance with securities
or blue-sky laws, printing expenses, messenger and delivery
expenses, and fees and disbursements of counsel for the Com-
pany (but not counsel for the Shareholder) and all independent
certified public accountants, underwriters (excluding dis-
counts and commissions) and other persons retained by the Com-
pany (all such expenses being herein called "Registration Ex-
penses"), shall be borne by the Company.
7. INDEMNIFICATION. (a) The Company shall indem-
nify, to the extent permitted by law, the Shareholder and any
underwriter (and any controlling person thereof) acting on
his behalf, against all losses, claims, damages, liabilities
and expenses (including reasonable attorneys' fees and dis-
bursements) resulting from any untrue or alleged untrue state-
ment of material fact contained in any registration statement,
prospectus or preliminary prospectus, or any amendment or sup-
plement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or ne-
cessary to make the statements therein not misleading, except
insofar as the same are caused by or contained in any informa-
tion provided in writing to the Company by the Shareholder ex-
pressly for use therein or by the Shareholder's or such under-
writers' failure to deliver a copy of the registration state-
ment or prospectus or any amendments or supplements thereto
after the Company has provided the Shareholder or such under-
writer with a sufficient number of copies of the same.
(b) In connection with any registration state-
ment or amendment thereto in which the Shareholder is partici-
pating pursuant to the provisions of this Agreement, the
Shareholder shall provide the Company in writing with such in-
formation and affidavits as the Company reasonably shall re-
quest for use in connection with any such registration state-
ment or amendment and, to the extent permitted by law, shall
indemnify the Company, its directors and officers, each person
who controls the Company within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act of 1934 (the "Ex-
change Act") and any underwriter (and any controlling person
thereof) acting on the Company's behalf against any losses,
claims, damages, liabilities and expenses (including reason-
able attorneys' fees and disbursements) resulting from any un-
true or alleged untrue statement of material fact or any omis-
sion or alleged omission of a material fact required to be
stated in the registration statement or any amendment thereof
-6-
or supplement thereto or necessary to make the statements
therein not misleading, but only to the extent that such un-
true statement or omission is contained in (or should have
been contained in, but was omitted from) any information or
affidavit so provided in writing by the Shareholder.
(c) Any person entitled to indemnification
hereunder shall (i) give prompt notice to the indemnifying
party of any claim with respect to which the indemnified party
seeks indemnification and (ii) unless in the indemnified
party's reasonable judgement a conflict of interest between the
indemnified and indemnifying parties may exist with respect to
such claim, permit such indemnifying party to assume the de-
fense of such claim with counsel reasonably satisfactory to
the indemnified part. If such defense is assumed, the indem-
nifying party shall be entitled in its sole discretion to set-
tle such claim at no cost to the indemnified party. An indem-
nifying party who is not entitled to, or elects not to, assume
the defense of a claim shall not be obligated to pay the fees
and expenses of more than one counsel for all parties indemni-
fied by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party
and any other indemnified party with respect to such claim.
Notwithstanding the foregoing, any indemnified party shall
have the right, in any action the defense of which has been
assumed by the indemnifying party, to employ separate counsel
and to participate in the defense of such action, but the fees
and expenses of such counsel (except those, if any, incurred
before the defense was assumed by the indemnifying party)
shall be the responsibility of the indemnified party.
8. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.
The Shareholder may not participate in any underwritten regis-
tration pursuant to the provisions of this Agreement unless he
(i) agrees to sell his Shares on the basis provided in any un-
derwriting arrangements approved by the person entitled here-
under to approve such arrangements and (ii) completes and ex-
ecutes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the
terms of such underwriting arrangements.
9. SELECTION OF UNDERWRITERS. If any registration
pursuant hereto is an underwritten offering, the Company will
have the right to reasonably approve the investment banker(s)
and manager(s) selected by the Shareholder to administer the
offering.
10. COVENANTS OF THE COMPANY. The Company shall
use its best efforts to file in a timely manner all reports
required to be filed by it pursuant to the Exchange Act and,
upon request of the Shareholder, shall provide the Shareholder
-7-
with such information as may be necessary to enable the
Shareholder to effect routine sales pursuant to Rule 144 under
the Act.
11. MISCELLANEOUS. (a) NOTICES. All notices and
other communications required or permitted to be given under
this Agreement shall be in writing and shall be deemed to have
been given if delivered by hand, sent by telex, telecopy,
cable, same day or overnight courier, or mailed (registered or
certified mail, return receipt requested) to the Company at
c/o Charterhouse Group International, Inc., 535 Madison Ave-
nue, New York, NY 10022, Attention: Merril M. Halpern, with a
copy to Feit & Ahrens, 488 Madison Avenue, New York, New York
10022, Attention: Jonathan Shor, Esq., and to the Shareholder
at his address contained in the stock record book of the Com-
pany, with a copy to Tyler Cooper & Alcorn, 205 Church Street,
P.O. Box 1936, New Haven, Connecticut 06509, Attention: Jon
T. Hirschoff, Esq., or to such other address as a party to
this Agreement shall specify by notice to the other.
(b) BINDING EFFECT; BENEFITS. This Agreement
shall be binding upon and inure to the benefit of the parties
to this Agreement, and the successors and assigns of the Com-
pany, on the one hand, and any other person which acquires any
Shares from the Shareholder in a transaction that is exempt
from the registration and prospectus delivery requirements of
the Act and has given written notice to the Company of its ac-
quisition of these Shares, on the other hand. Nothing in this
Agreement, expressed or implied, is intended or shall be con-
strued to give any other person any legal or equitable right,
remedy or claim under or in respect of any agreement or any
provision contained herein. Except as provided in this sub-
section (b), neither this Agreement nor any right, remedy, ob-
ligation or liability arising hereunder or by reason hereof
shall be assignable by the Shareholder without the prior
written consent of the Company.
(c) WAIVER, AMENDMENT.
(i) WAIVER. Any party hereto may by written
notice to the others (a) extend the time for the performance
of any of the obligations or other actions of any other party
to it under this Agreement, (b) waive complaince with any of
the conditions or covenants of any other party to it contained
in this Agreement, and (c) waive or modify performance of any
of the obligations of any other party to it under this Agree-
ment. Except as provided in the preceding sentence, no action
taken pursuant to this Agreement, including, without limita-
tion, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action
of compliance with any representations, warranties, covenants
or agreements contained herein. The waiver by any party here-
to of a breach of any provision of the Agreement shall not
-8-
operate or be construed as a waiver of any preceding or suc-
ceeding breach and no failure by any party to exercise any
right or privilege hereunder shall be deemed a waiver of such
party's rights or privileges hereunder or shall be deemed a
waiver of such party's rights to exercise the same at any sub-
sequent time or times hereunder.
(ii) AMENDMENT. This Agreement may be amend-
ed, modified or supplemented only by a written instrument exe-
cuted by the Shareholder and the Company.
(d) APPLICABLE LAW. This Agreement shall be
governed as to its validity, interpretation and effect and
constured in accordance with the laws of the State of New
York, regardless of the law that might be applied under the
principles of conflicts of law.
(e) COUNTERPARTS. This Agreement and any amend-
ments, waivers, consents or supplements hereto may be executed
in any number of counterparts, each of which when so executed
shall be deemed to be an original, but all of which counter-
parts when taken together shall constitute one and the same
instrument.
(f) ENTIRE AGREEMENT. This Agreement constitu-
tutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
(g) ADJUSTMENTS AFFECTING SECURITIES. The term
"Shares" as used herein shall include all additional equity
securities issued with respect thereto pursuant to any subse-
quent stock split, stock dividend, recapitalization, merger,
consolidation or other reorganization affecting the number of
outstanding shares of Common Stock.
(h) SEVERABILITY. If any provision of this
Agreement is unenforceable for any reason, the remaining pro-
visions hereof shall not be effected thereby and shall never-
theless remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Agree-
ment on the date first written above.
CHARTER POWER SYSTEMS, INC.
By: \s\ Merril M. Halpern
Chairman
\s\ Robert Alvine
ROBERT ALVINE
-9-
AMENDMENT AGREEMENT
Amendment Agreement, dated May 30, 1989, between
Robert Alvine (the "Executive") and Charter Power Systems,
Inc., a Delaware corporation (the "Company").
WHEREAS, on May 26, 1988, the Executive and the
Company entered into an employment agreement (the
"Employment Agreement") and an Option Agreement (the "Option
Agreement"); and
WHEREAS, the Executive and the Company desire to
amend the terms of the Employment Agreement and the Option
Agreement as hereinafter set forth.
NOW, THEREFORE, the parties hereby agree as
follows:
1. Section 1(a) of the Employment Agreement is
hereby amended by replacing the date "April 30, 1991" on the
fifth line thereof with the date "April 30, 1992".
2. The second sentence of Section 2 of the
Employment Agreement is hereby deleted in its entirety and
replaced with the following:
"On May 1, 1991 and on the first day of each Renewal Term of
this agreement, if any, the Base Salary shall be adjusted by
multiplying the Base Salary by a fraction (i) the numerator
of which shall be the Consumer Price Index (for urban wage
earners and clerical workers, all items) as reported by the
Bureau of Labor Statistics of the United States Department of
Labor for the New York, New York-Northeastern New Jersey area
(or such other successor government agency as then shall
perform that reporting function) (the "Index") for the month
immediately preceding the month in which the Base Salary
adjustment shall occur and (ii) the denominator of which
shall be the Index for the month immediately preceding the
month in which the immediately preceding term commenced (or,
in the case of the Base Salary adjustment occurring on May 1,
1991, for the month of April 1988); PROVIDED, HOWEVER, that
in no event shall any such adjustment result in a decrease in
the Base Salary".
3. The first sentence of Section 6 of the
Employment Agreement is hereby amended by adding the phrase
"(the "Other Agreements")" after the word "agreements" on the
third line thereof.
4. The second sentence of Section 12(c) of the
Employment Agreement is hereby amended (a) by adding after
the first word thereof the phrase ", as used herein and in
the Other Agreements," and (b) by adding after clause (ii)
thereof the following:
"(an "Unexcused Voluntary Termination"); PROVIDED, HOWEVER,
that anything herein or in the Other Agreements to the
contrary notwithstanding, in the case of an Unexcused
Voluntary Termination, the Company shall not (except in
connection with any claim, litigation or judicial or
administrative proceeding that may arise therefrom or relate
thereto) make any public statement to the effect that such
termination constituted a termination for Cause, PROVIDED
that the Company shall not be restricted from making public
statements describing the consequences of such termination
pursuant to this agreement and the Other Agreements;".
5. Section 2 of the Option Agreement is hereby
amended by replacing the date "April 30, 1993" appearing
therein with the date "April 30, 1994".
2
6. Schedule 1 to the Option Agreement is hereby
deleted in its entirety and replaced with Schedule 1 attached
hereto.
7. Except as provide herein, the Employment
Agreement and the Option Agreement shall remain in full force
and effect, without modification or amendment.
CHARTER POWER SYSTEMS, INC.
By: \s\ D. L. Nevins, Jr.
VP Finance
\s\ Robert Alvine
Robert Alvine
3
Alvine
Schedule
SCHEDULE 1
A. VESTING OF OPTION.
The Option shall vest: (i) to the extent of
105,505 shares (the "First Portion"), as of January 31, 1990,
only if the Company's earnings per share (the "EPS") for the
fiscal year ending January 31, 1990 equal or exceed $1.05;
and (ii) to the extent of the remaining 105,505 shares (the
"Second Portion"), as of January 31, 1991, only if the EPS
for the fiscal year ending January 31, 1991 equal or exceed
$1.25. For this purpose, the EPS shall be as reported in the
Company's audited financial statements for the relevant
fiscal year, adjusted to exclude from the calculation of EPS
(a) any extraordinary items (as determined by the Company's
independent accountants in accordance with generally accepted
accounting principles), (b) any shares issued or issuable
pursuant to the Company's Stock Option Plan and (c) any
increase or decrease in the number of outstanding shares
resulting from a stock split or other subdivision or
consolidation of shares or other capital adjustment, or the
payment of a stock dividend.
If the employment of the Optionee with the Company
is terminated due to death or disability (as defined in the
employment agreement, dated the date hereof, between the
Optionee and the Company (the "Employment Agreement") after
1
October 31, 1989 or 1990 and the applicable EPS amount for
the fiscal year ending January 31, 1990 or 1991, as the case
may be, is met, the Optionee shall be deemed to have been
employed through the end of the relevant fiscal year for the
purpose of the vesting of the Option.
B. ALTERNATIVE VESTING.
The Option (if (i) the circumstance or transaction
described in paragraph 1 or 2(a) below occurs or is completed
on or before January 31, 1992 or (ii) the transaction
described in paragraph 2(b) below is completed on or before
January 31, 1991) or the Second Portion (if the transaction
described in paragraph 2(b) below occurs or is completed
after January 31, 1991 and on or before January 31, 1992)
shall vest on an accelerated basis to the extent provided
below:
1. If the average of the daily closing prices of
the Common Stock of the Company, as reported by the American
Stock Exchange (the "AMEX"), during any 60-day period equals
or exceeds $15.00 a share, full alternative vesting shall
occur on the last day of that 60-day period.
2. If: (a) a Business Combination (as defined in
the Employment Agreement) has occurred at a weighted average
price per share on a fully diluted basis (the "Transaction
Price") of not less than $11.00; or (b) a Change of Control
(as defined in the Employment Agreement) other than a
2
Business Combination has occurred and the average of the
daily closing prices of a share of the Common Stock of the
Company, as reported by the AMEX, during the 20 trading days
prior thereto (the "CC Price"), is not less than $11.00,
alternative vesting to the extent of the percentage specified
below shall occur upon consummation of the transaction:
Transaction Price Percentage of Unvested
or CC Price Option to Vest
$11.00 - $11.99 20%
$12.00 - $12.99 40%
$13.00 - $13.99 60%
$14.00 - $14.99 80%
$15.00 or greater 100%
PROVIDED, HOWEVER, that notwithstanding the foregoing, with
respect to the First Portion, if the Change in Control shall
occur during the period from February 1, 1990 through January
31, 1991 (it being agreed that alternative vesting shall
occur with respect to the Second Portion to the extent, if
any, hereinabove provided without regard to this proviso if
the Change in Control shall occur during that period), and
with respect to the Second Portion, if the Change in Control
shall occur during the period from February 1, 1991 through
January 31, 1992 (it being agreed that alternative vesting
shall not occur with respect to the First Portion on account
of a Change in Control that occurs during that period),
alternative vesting shall occur only if the CC Price is not
less than $12.00 (but the percentage of alternative vesting
if the CC Price is from $12.00 - $12.99 shall remain 40%).
3