STOCK PURCHASE AGREEMENT
by and among
HARRIS & HARRIS GROUP, INC.
and
AMERICAN BANKERS LIFE ASSURANCE
COMPANY OF FLORIDA
and
AMERICAN BANKERS INSURANCE
COMPANY OF FLORIDA
Dated as of May 18, 1995
TABLE OF CONTENTS
Section
1. Sale and Purchase of the Shares . . . . . . . . . . . . . 2
1.1 Authorization of the Shares. . . . . . . . . . . . . 2
1.2 Sale and Purchase of the Shares. . . . . . . . . . . 2
2. Closing . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Closing. . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Deliveries at the Closing. . . . . . . . . . . . . . 2
3. Representations and Warranties of the Company . . . . . . 2
3.1 Organization, Standing, etc. . . . . . . . . . . . . 2
3.2 SEC Reports and Financial Statements . . . . . . . . 2
3.3 Authorization of the Shares. . . . . . . . . . . . . 3
3.4 Valid and Binding Obligation . . . . . . . . . . . . 3
3.5 No Material Adverse Change . . . . . . . . . . . . . 3
3.6 Litigation, etc. . . . . . . . . . . . . . . . . . . 4
3.7 Compliance with Other Instruments, etc.. . . . . . . 4
3.8 Governmental Consent . . . . . . . . . . . . . . . . 4
3.9 Offer of Shares. . . . . . . . . . . . . . . . . . . 4
4. Representations of ABLAC. . . . . . . . . . . . . . . . . 5
4.1 Purchase for Investment. . . . . . . . . . . . . . . 5
4.2 Source of Funds. . . . . . . . . . . . . . . . . . . 5
5. Registration under Securities Act, etc. . . . . . . . . . 7
5.1 Registration on Request. . . . . . . . . . . . . . . 7
(a) Request . . . . . . . . . . . . . . . . . . . . 7
(b) Registration Statement Form . . . . . . . . . . 7
(c) Expenses. . . . . . . . . . . . . . . . . . . . 8
(d) Effective Registration Statement. . . . . . . . 8
(e) Priority in Requested Registrations . . . . . . 8
(f) Deferral. . . . . . . . . . . . . . . . . . . . 9
(g) Limitations on Registration Obligations . . . . 9
5.2 Incidental Registration. . . . . . . . . . . . . . . 10
(a) Right to Include Registrable Securities . . . . 10
5.3 Indemnification.. . . . . . . . . . . . . . . . . . . . . 10
(a) Indemnification by the Company. . . . . . . . . 10
(b) Indemnification by the Sellers. . . . . . . . . 11
(c) Notices of Claims, etc. . . . . . . . . . . . . 12
6. Definitions . . . . . . . . . . . . . . . . . . . . . . . 13
6.1 Certain Defined Terms. . . . . . . . . . . . . . . . 13
6.2 Other Provisions Regarding Definitions . . . . . . . 16
7. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 16
7.1 Survival of Representations and Warranties; Sever-
ability. . . . . . . . . . . . . . . . . . . . . . . 16
7.2 Amendment and Waiver . . . . . . . . . . . . . . . . 16
7.3 Notices, etc.. . . . . . . . . . . . . . . . . . . . 16
7.4 Successors and Assigns . . . . . . . . . . . . . . . 17
7.5 Descriptive Headings . . . . . . . . . . . . . . . . 17
7.6 Fees and Expenses. . . . . . . . . . . . . . . . . . 17
7.7 Stamp or Other Tax . . . . . . . . . . . . . . . . . 17
7.8 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . 17
7.9 Counterparts . . . . . . . . . . . . . . . . . . . . 17
7.10 Entire Agreement. . . . . . . . . . . . . . . . 17
STOCK PURCHASE AGREEMENT
dated as of May 18, 1995
by and between
HARRIS & HARRIS GROUP, INC.
and
AMERICAN BANKERS LIFE ASSURANCE COMPANY
OF FLORIDA
and
AMERICAN BANKERS INSURANCE COMPANY
OF FLORIDA
STOCK PURCHASE AGREEMENT (the "Agreement"), dated
as of May 18, 1995, by and among HARRIS & HARRIS GROUP,
INC., a New York corporation (the "Company"), and AMERICAN
BANKERS LIFE ASSURANCE COMPANY OF FLORIDA ("ABLACOF") and
AMERICAN BANKERS INSURANCE COMPANY OF FLORIDA ("ABIC";
ABLACOF AND ABIC being referred to individually or collec-
tively as the context requires as "ABLAC").
The Company and ABLACOF are parties to a Note and
Warrant Purchase Agreement, dated as of August 17, 1994 (the
"Purchase Agreement"). Pursuant to a Termination and Re-
lease Agreement of even date herewith, the Company and
ABLACOF have agreed to terminate the Purchase Agreement.
The Company and ABLAC wish to provide for the purchase of
1,075,269 shares (the "Shares") of common stock, par value
$.01 per share, of the Company (the "Common Stock"), by
ABLAC for a purchase price of $5,000,000.85 (the "Purchase
Price"). Certain capitalized terms used in this Agreement
are defined in Section 6 hereof.
Concurrently with the execution and delivery of
this Agreement, the Company and ABLAC are entering into a
Standstill Agreement whereby ABLAC is agreeing to certain
restrictions with respect to the acquisition, disposition
and voting of Voting Stock (the "Standstill Agreement").
1
The Company and ABLAC hereby agree as follows:
1. Sale and Purchase of the Shares.
1.1 Authorization of the Shares. Prior to the
date hereof, the Company has authorized the issuance and
sale of the Shares.
1.2 Sale and Purchase of the Shares. Subject to
the terms and conditions of this Agreement, and in reliance
upon the representations and warranties contained herein, at
the Closing (as hereinafter defined), the Company is issu-
ing, selling and delivering to ABLAC, and ABLAC is purchas-
ing from the Company, the Shares, for the Purchase Price.
2. Closing
2.1 Closing. The Closing of the transaction
provided for in Section 1.2 hereof (the "Closing") is taking
place at the offices of Skadden, Arps, Slate, Meagher &
Flom, 919 Third Avenue, New York, New York 10022, at 10:00
a.m., New York City time, on the date hereof. The date of
the Closing is referred to herein as the "Closing Date."
2.2 Deliveries at the Closing. At the Closing,
the Company is delivering to ABLAC a certificate or certifi-
cates for the Shares, registered in the name of ABLAC
against payment by ABLAC to the Company of Five Million
Dollars ($5,000,000) by wire transfer of immediately avail-
able funds.
3. Representations and Warranties of the Compa-
ny. The Company represents and warrants that:
3.1 Organization, Standing, etc. The Company is
a corporation duly organized, validly existing and in good
standing under the laws of the State of New York and has all
requisite corporate power and authority to own and operate
its properties, to carry on its business as now conducted,
to enter into this Agreement, to issue and sell the Shares
and to carry out the terms of this Agreement.
2
3.2 SEC Reports and Financial Statements. The
Company has heretofore made available to ABLAC complete and
correct copies of all forms, reports and documents required
to be filed by it since January 1, 1993 under the Securities
Act or the Exchange Act (as such documents have been amended
since the time of their filing, collectively, the "Company
SEC Documents"). The Company SEC Documents, including with-
out limitation, any financial statements or schedules in-
cluded therein, at the time filed, (a) did not contain any
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the cir-
cumstances under which they were made, not misleading and
(b) complied in all material respects with the applicable
requirements of the Securities Act or the Exchange Act, as
the case may be. The consolidated financial statements of
the Company included in the Company SEC Documents, at the
time filed, complied as to form in all material respects
with applicable accounting requirements and with the pub-
lished rules and regulations of the SEC with respect there-
to, were prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may
be indicated in the notes thereto or, in the case of unau-
dited statements included in the Company SEC Documents, as
permitted by Form 10-Q of the SEC) and fairly present (sub-
ject, in the case of the unaudited statements, to normal,
recurring audit adjustments) in all material respects the
consolidated financial position of the Company and its
consolidated Subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for
the periods then ended.
3.3 Authorization of the Shares. The execution,
delivery and performance by the Company of this Agreement
and the issuance and sale of the Shares hereunder have been
duly authorized by all requisite corporate action on the
part of the Company and will not conflict with, or result in
a breach of the terms, conditions or provisions of the
Certificate of Incorporation or By-laws.
3.4 Valid and Binding Obligation. This Agreement
has been duly executed and delivered by the Company and is
the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms
except as limited by bankruptcy and other laws affecting
creditors' rights generally and by general principles of
equity.
3.5 No Material Adverse Change. Except as previ-
ously disclosed to ABLAC in writing or in the Company SEC
Documents, since December 31, 1994, there has not been any
material adverse change in the assets, business or financial
condition of the Company and its Subsidiaries taken as a
whole (a "Material Adverse Change").
3
3.6 Litigation, etc. There is no action, pro-
ceeding or investigation pending or, to the knowledge of the
Company, threatened which questions the validity or legality
of, or seeks damages in connection with, this Agreement or
the transaction contemplated hereby, or any action taken or
to be taken pursuant to this Agreement or the transaction
contemplated hereby or which is reasonably likely to result
in a Material Adverse Change.
3.7 Compliance with Other Instruments, etc. Nei-
ther the Company nor any of its Subsidiaries is in violation
of any term of the Certificate of Incorporation or the By-Laws.
Neither the Company nor any of its Subsidiaries is in
violation of any term of any agreement or instrument to
which it is a party or by which it is bound or any term of
any applicable law, ordinance, rule or regulation of any
governmental authority or any term of any applicable order,
judgment or decree of any court, arbitrator or governmental
authority, which violation is reasonably likely to result in
a Material Adverse Change. The execution, delivery and per-
formance by the Company of this Agreement will not result in
any such violation of, or be in conflict with or constitute
a default under, any such term or result in the creation of
(or impose any obligation on the Company or any of its
Subsidiaries to create) any lien upon any of the properties
or assets of the Company or any of its Subsidiaries pursuant
to any such term, except for any such conflict or default
which is not reasonably likely to result in a Material
Adverse Change.
3.8 Governmental Consent. Except as required by
the Exchange Act and by the rules and regulations of the
NASD, no consent, approval or authorization of, or declara-
tion or filing with, any governmental authority on the part
of the Company or any of its Subsidiaries which has not been
obtained or made is required for the valid execution and
delivery by the Company of this Agreement or the valid
offer, issuance, sale and delivery by the Company of the
Shares pursuant to this Agreement.
3.9 Offer of Shares. Neither the Company nor
anyone acting on its behalf has taken or will take any
action which would subject the issuance and sale of the
Shares to the registration and prospectus delivery provi-
sions of the Securities Act.
4
4. Representations of ABLAC. ABLAC represents
and warrants that:
4.1 Purchase for Investment. ABLAC is purchasing
the Shares for ABLAC's own account (and expressly not for
the account of any pension or trust fund) for investment and
not with a view to the distribution thereof or with any
present intention of distributing or selling the Shares
acquired hereby. ABLAC understands that the Shares have not
been registered under the Securities Act and may be resold
(which resale is not now contemplated) only if registered
pursuant to the provisions of such Act or if an exemption
from registration is available, and that the Company is not
required to register the Shares except to the extent provid-
ed herein.
4.2 Source of Funds. One or more of the fol-
lowing statements is individually or collectively, as the
case may be, an accurate representation as to the source of
all the funds to be used by ABLAC to pay the Purchase Price:
(a) if ABLAC is an insurance company, no part of
such funds constitute assets allocated to a separate
account (within the meaning of ERISA and the regula-
tions thereunder) maintained by ABLAC in which an em-
ployee benefit plan (or its related trust) has any
interest; or
(b) if ABLAC is an insurance company, to the ex-
tent that any part of such funds constitutes assets
allocated to any separate account maintained by ABLAC,
(i) such separate account is a "pooled separate ac-
count" within the meaning of Prohibited Transaction
Class Exemption ("PTE") 90-1, in which case ABLAC have
disclosed to the Company in writing the names of each
employee benefit plan whose assets in such separate
account exceed 10% of the total assets or are expected
to exceed 10% of the total assets of such account as of
the date of such purchase (and for the purposes of this
Section 4.2, all employee benefit plans maintained by
the same employer or employee organization are deemed
to be a single plan), and every relevant requirement of
PTE 90-1 specifically applicable to ABLAC which is re-
quired to be satisfied as of the date of such purchase
will be satisfied in all material respects as of such
date of purchase or (ii) such separate account contains
only the assets of a specific employee benefit plan,
complete and accurate information as to the identity of
which ABLAC have delivered to the Company in writing;
or
5
(c) if ABLAC is a "qualified professional asset
manager" or "QPAM" (within the meaning of Part V of
Prohibited Transaction Class Exemption 84-14 (the "QPAM
Exemption")) of such funds which constitute assets of
an "investment fund" (within the meaning of Part V of
the QPAM Exemption) managed by ABLAC, every relevant
requirement of the QPAM Exemption specifically applica-
ble to ABLAC which is required to be satisfied as of
the date of such purchase will be satisfied in all
material respects as of the date of such purchase and
ABLAC have disclosed to the Company in writing ABLAC's
name as such QPAM and the names of all employee benefit
plans whose assets are included in such investment
fund;
(d) if ABLAC is an investment company, ABLAC is
registered under the 1940 Act;
(e) if ABLAC is other than an insurance company
or an investment company, all or a portion of such
funds consists of funds which do not constitute assets
of any employee benefit plan and the remaining portion,
if any, of such funds consists of funds which may be
deemed to constitute assets of one or more specific
employee benefit plans, complete and accurate informa-
tion as to the identity of each of which ABLAC deliv-
ered to the Company in writing; or
(f) if ABLAC's funds constitute assets of an "in-
vestment fund" (within the meaning of the QPAM Exemp-
tion referred to in subparagraph (c) above), such
assets of such "investment fund" are managed by a QPAM
(as defined in subparagraph (c) above), such QPAM has
investment discretion with respect to the transaction
for purposes of applying the QPAM exemption, and every
relevant requirement of the QPAM Exemption specifically
applicable to such QPAM which is required to be satis-
fied as of the date of such purchase will be satisfied
in all material respects as of the date of such pur-
chase.
As used in this Section 4.2, the term "employee
benefit plan" shall mean any employee benefit plan subject
to section 406 of ERISA and any employee benefit plan or
individual retirement account subject to section 4975 of the
Internal Revenue Code of 1986, as amended from time to time,
and the term "separate account" shall have the meaning
assigned to it in section 3 of ERISA.
6
5. Registration under Securities Act, etc.
5.1 Registration on Request.
(a) Request. Upon the written request of the
Initiating Holders, requesting that the Company effect
the registration under the Securities Act of all or
part of such Initiating Holders' Registrable Securities
and specifying the intended method of disposition
thereof, the Company will, subject to the terms hereof,
promptly give written notice of such requested regis-
tration to all registered holders of Registrable Secu-
rities, and thereupon the Company will use its reason-
able best efforts to effect the registration under the
Securities Act of
(i) the Registrable Securities which the
Company has been so requested to register by such
Initiating Holders for disposition in accordance
with the intended method of disposition stated in
such request, and
(ii) all other Registrable Securities the
holders of which shall have made a written request
to the Company for registration thereof within 30
days after the giving of such written notice by
the Company (which request shall specify the in-
tended method of disposition of such Registrable
Securities),
all to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid)
of the Common Stock, so to be registered. The Company shall
have the right to select the managing underwriter in any
registration pursuant to this Section 5.1, subject to the
approval of the Initiating Holders (not to be unreasonably
withheld).
(b) Registration Statement Form. Registrations
under this Section 5.1 shall be on such appropriate
registration form of the Commission (i) as shall be
selected by the Company and (ii) as shall permit the
disposition of such Registrable Securities in accor-
dance with the intended method or methods of disposi-
tion specified in the request(s) for registration made
pursuant to Section 5.1(a).
7
(c) Expenses. The Company will pay all Registra-
tion Expenses in connection with the registration
requested pursuant to this Section 5.1.
(d) Effective Registration Statement. A regis-
tration requested pursuant to this Section 5.1 shall
not be deemed to have been effected (i) unless a regis-
tration statement with respect thereto has become
effective, provided that a registration which does not
become effective after the Company has filed a regis-
tration statement with respect thereto solely by reason
of the refusal to proceed of the Initiating Holders
shall be deemed to have been effected by the Company at
the request of such Initiating Holders unless the
Initiating Holders shall have agreed in writing to pay
all Registration Expenses in connection with such
registration, (ii) if, after it has become effective,
such registration becomes subject to any stop order,
injunction or other order or requirement of the Commis-
sion or other governmental agency or court for any
reason, or (iii) the conditions to closing specified in
the purchase agreement or underwriting agreement en-
tered into in connection with such registration are not
satisfied, other than by reason of some act or omission
by such Initiating Holders.
(e) Priority in Requested Registrations. If a
requested registration pursuant to this Section 5.1
involves an underwritten offering, and the managing
underwriter shall advise the Company in writing (with a
copy to each holder of Registrable Securities request-
ing registration) that, in its opinion, the number of
securities requested to be included in such registra-
tion (including securities of the Company which are not
Registrable Securities) exceeds the number which can be
sold in such offering within a price range acceptable
to the holders of a majority of the Registrable Securi-
ties requested to be included in such registration, the
Company will include in such registration, to the
extent of the number which the Company is so advised
can be sold in such offering, (i) first, Registrable
Securities requested to be included in such registra-
tion, pro rata among the holders thereof requesting
such registration on the basis of the number of such
securities requested to be included by such holders,
(ii) second, securities the Company proposes to sell
and (iii) other securities of the Company requested to
be included in such registration by the holders there-
of.
8
(f) Deferral. Notwithstanding the foregoing, (i)
in the event that the Company intends to commence a
public offering of securities to which Section 5.2
hereof will apply, it shall so notify the holders of
Registrable Securities in writing and such holders
shall be deemed to have waived their right to request
registration under this Section 5.1 for a period of 120
days following such notice and (ii) the Company may
delay the filing of a registration statement for a
period not exceeding one hundred and eighty (180) days
following the Company's receipt of the written request
of the Initiating Holders pursuant to Section 5.1(a)
hereof at any time when (A) the Company is in posses-
sion of material non-public information the disclosure
of which, in the exercise of the Company's reasonable
good faith judgment, the Company believes would be
adverse to the best interests of the Company or (B)
such registration would adversely affect (including,
without limitation, through the premature disclosure
thereof) a proposed financing, reorganization, recapi-
talization, merger, consolidation or similar transac-
tion.
(g) Limitations on Registration Obligations.
Notwithstanding the foregoing provisions of this Sec-
tion 5.1, the Company shall not be obligated to (i)
file more than two registration statements pursuant to
Section 5.1(a) hereof; or (ii) file and use its reason-
able best efforts to cause to become effective (A) a
registration statement pursuant to this Section 5.1 (1)
within 180 days immediately following the effective
date of any registration statement pertaining to an
underwritten offering of the Company's securities or
(2) if a special or interim audit of the financial
statements of the Company or any of its affiliates
would be necessary in order for the financial state-
ments required to be included in such registration
statement to meet the requirements of Regulation S-X or
similar rules promulgated by the Commission, (B) more
than one registration statement in any twelve-month
period or (C) any such registration statement where the
proposed aggregate offering price of the Registrable
Securities to be sold thereunder is less than $3 mil-
lion; or (iii) keep effective any registration state-
ment filed pursuant to this Section 5.1 for a period of
more than ninety (90) days.
9
5.2 Incidental Registration.
(a) Right to Include Registrable Securities. If
the Company shall at any time after the date hereof
propose to register any shares of its Common Stock
under the Securities Act (other than a registration in
connection with an offering of shares to employees of
the Company pursuant to a stock plan, or in connection
with the issuance of securities or assets of or relat-
ing to a merger with another corporation), the Company
shall notify the holders of any Registrable Securities
as promptly as possible of such proposed registration,
following which notice such holder shall have thirty
(30) days after the receipt of such notice to request
inclusion in such registration of any Registrable
Securities. The Company shall, if so requested, in-
clude such Registrable Securities in such registration
unless the proposed managing underwriter of the securi-
ties covered by the registration advises the Company
that the inclusion of such shares would, in the opinion
of such underwriter, raise a substantial question as to
whether the proposed offering by the Company could be
successfully consummated on terms reasonably acceptable
to the Company. The Company shall pay all Registration
Expenses relating to a registration pursuant to this
Section 5.2.
5.3 Indemnification.
(a) Indemnification by the Company. In the event
of any registration of any securities of the Company
under the Securities Act in accordance with this Sec-
tion 5, the Company will, and hereby does, indemnify
and hold harmless each holder of Registrable Securities
included in such registration, each underwriter of the
securities so registered and each person who controls
any such underwriter within the meaning of Section 15
of the Securities Act, against any and all losses,
claims, damages or liabilities to which they or any of
them may become subject under the Securities Act or any
other statute or common law of the United States or any
jurisdiction therein, including any amount paid in
settlement of any litigation, commenced or threatened,
if such settlement is effected with the written consent
of the Company, and to reimburse them for any legal or
other expenses incurred by them in connection with
investigating any claims and defending any actions
insofar as any such losses, claims, damages, liabil-
ities or actions arise out of or are based upon (i) any
10
untrue statement or alleged untrue statement of a
material fact contained in the registration statement
relating to the sale of such Registrable Securities, or
any post-effective amendment thereof, or the omission
or alleged omission to state therein a material fact
necessary to make the statements therein, in light of
the circumstances under which they were made, not
misleading, or (ii) any untrue statement or alleged
untrue statement of a material fact contained in any
preliminary prospectus, if used prior to the effective
date of such registration statement, or contained in
the prospectus (as amended or supplemented if the
Company shall have filed with the Commission any amend-
ment thereof or supplement thereto) if used within the
period during which the Company is required to keep the
registration statement to which such prospectus relates
current, or the omission or alleged omission to state
therein (if so used) a material fact necessary in order
to make the statements therein, in light of the circum-
stances under which they were made, not misleading;
provided, however, that the indemnification agreement
contained in this Section 5.3(a) shall not (x) apply to
any such losses, claims, damages, expenses, liabilities
or actions arising out of, or based upon, any such
untrue statement or alleged untrue statement, or any
such omission or alleged omission, if such statement or
omission was made in reliance upon and in conformity
with information furnished in writing to the Company by
such holder or such underwriter for use in connection
with preparation of the registration statement or any
such amendment thereof of supplement thereto; or (y)
inure to the benefit of any underwriter (or to the
benefit of any person controlling such underwriter)
from whom the person asserting any such losses, claims,
damages, expenses, liabilities or actions purchased the
securities which are the subject thereof if such under-
writer failed to send or give a copy of the prospectus
to such person at or prior to the written confirmation
of the sale of such securities to such person.
(b) Indemnification by the Sellers. The Company
may require, as a condition to including any Registra-
ble Securities in any registration statement filed
pursuant to this Section 5, that the Company shall have
received an undertaking satisfactory to it from the
prospective seller of such Registrable Securities, to
indemnify and hold harmless (in the same manner and to
the same extent as set forth in subdivision (a) of this
Section 5.3) the Company, each director of the Company,
11
each officer of the Company and each other person, if
any, who controls the Company within the meaning of the
Securities Act, with respect to any statement or al-
leged statement in or omission or alleged omission from
such registration statement, any preliminary prospec-
tus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if
such statement or alleged statement or omission or
alleged omission was made in reliance upon and in
conformity with written information furnished to the
Company by such seller for use in the preparation of
such registration statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or
supplement. Any such indemnity shall remain in full
force and effect, regardless of any investigation made
by or on behalf of the Company or any such director,
officer or controlling person and shall survive the
transfer of Registrable Securities by any seller.
(c) Notices of Claims, etc. Promptly after re-
ceipt by an indemnified party of notice of the com-
mencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this
Section 5.3, such indemnified party will, if a claim in
respect thereof may be made against an indemnifying
party, give written notice to the latter of the com-
mencement of such action, provided that the failure of
any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of its obliga-
tions under the preceding subdivisions of this Section
5.3, except to the extent that the indemnifying party
is prejudiced by such failure to give notice. In case
any such action is brought against an indemnified party
in respect of such claim, the indemnifying party shall
be entitled to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indem-
nified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses
subsequently incurred by the latter in connection with
the defense thereof; provided that if in the reasonable
good faith judgment of the indemnified party a conflict
of interest exists between such indemnified party and
the indemnifying party, the indemnifying party shall be
entitled to be represented by one counsel of its own
choosing (the reasonable fees and disbursements of
which shall be payable by the indemnifying party) and
to participate in the defense of such action. No
12
indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or
enter into any settlement of any such action which does
not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such
claim or litigation. No indemnified party shall con-
sent to entry of any judgment or enter into any settle-
ment of any such action the defense of which has been
assumed by an indemnifying party without the consent of
such indemnifying party.
6. Definitions.
6.1 Certain Defined Terms. As used herein the
following terms have the following respective meanings:
Affiliate: any Person directly or indirectly
controlling or controlled by or under common control with
the Company or any Subsidiary, including (without limita-
tion) any Person beneficially owning or holding 10% or more
of any class of voting securities of the Company or any
Subsidiary or any other corporation of which the Company or
any Subsidiary owns or holds 10% or more of any class of
voting securities, provided that, for purposes of this
definition, "control" (including, with correlative meanings,
the terms "controlled by" and "under common control with"),
as used with respect to any Person, shall mean the posses-
sion, directly or indirectly, or the power to direct or
cause the direction of the management and policies of such
Person, whether through the ownership of voting securities
or by contract or otherwise.
Business Day: any day excluding Saturday, Sunday
and any other day on which banks are required or authorized
to close in New York City.
By-Laws: By-Laws of the Company, as in effect at
the time.
Certificate of Incorporation: Certificate of
Incorporation of the Company, as in effect at the time.
Closing: as defined in Section 2.1 hereof.
Closing Date: as defined in Section 2.1 hereof.
Common Stock: as defined in the introduction to
this Agreement.
13
Company: as defined in the introduction to this
Agreement.
Company SEC Documents: as defined in Section 3.2
hereof.
ERISA: the Employee Retirement Income Security
Act of 1974, as amended from time to time.
Exchange Act: the Securities Exchange Act of
1934, or any successor federal statute, and the rules and
regulations of the SEC thereunder, all as the same shall be
in effect at the time.
GAAP: generally accepted accounting principles as
from time to time in effect in the United States as set
forth in the opinions and pronouncements of the American
Institute of Certified Public Accountants and the statements
and pronouncements of the Financial Accounting Standards
Board or in such opinions, statements and pronouncements as
may be issued by any successor to either such entity.
Initiating Holders: any holder or holders of
Registrable Securities holding at least 51% of the Registra-
ble Securities (by number of shares at the time issued and
outstanding), and initiating a request pursuant to Section 5
hereof for the registration of all or part of such holder's
or holders' Registrable Securities.
Material Adverse Change: as defined in Section 3.5
hereof.
NASD: the National Association of Securities
Dealers, Inc.
1940 Act: The Investment Company Act of 1940 or
any successor Federal statute, and the rules and regulations
of the SEC thereunder, all as the same shall be in effect at
the time.
Person: a corporation, an association, a partner-
ship, an organization, a business, an individual, a govern-
ment or political subdivision thereof or a governmental
agency.
Purchase Price: as defined in the introduction to
this Agreement.
14
Registrable Securities: (a) the Shares and (b)
any Common Stock issued or issuable with respect to the
Shares by way of stock dividend or stock split or in connec-
tion with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. As to
any particular Registrable Securities, once issued, such
securities shall cease to be Registrable Securities when (w)
a registration statement with respect to the sale of such
securities shall have become effective under the Securities
Act and such securities shall have been disposed of in
accordance with such registration statement, (x) they shall
have been distributed to the public pursuant to Rule 144 (or
any successor provision) under the Securities Act, (y) they
shall have been otherwise transferred, new certificates for
them not bearing a legend restricting further transfer shall
have been delivered by the Company and subsequent disposi-
tion of them shall not require registration or qualification
of them under the Securities Act or any similar state law
then in force, or (z) they shall have ceased to be outstand-
ing.
Registration Expenses: all expenses incident to
the Company's performance of or compliance with Section 5
hereof, including, without limitation, all registration,
filing and NASD fees, all fees and expenses of complying
with securities or blue sky laws, all word processing,
duplicating and printing expenses, messenger and delivery
expenses, the fees and disbursements of counsel for the
Company and of its independent public accountants, including
the expenses of any special audits or "cold comfort" letters
required by or incident to such performance and compliance,
but excluding underwriting discounts and commissions and
transfer taxes, if any, and excluding the fees and disburse-
ments of counsel and accountants retained by the holder or
holders of any Registrable Securities being registered.
SEC: the United States Securities and Exchange
Commission.
Securities Act: the Securities Act of 1933, or
any successor federal statute, and the rules and regulations
of the SEC thereunder, all as the same shall be in effect at
the time.
Subsidiary: any corporation, association or other
business entity a majority (by number of votes) of the
Voting Stock of which is at the time owned by the Company or
by one or more Subsidiaries or by the Company and one or
more Subsidiaries.
15
Voting Stock: stock of any class or classes (or
equivalent interests), if the holders of the stock of such
class or classes (or equivalent interests) are ordinarily,
in the absence of contingencies, entitled to vote for the
election of the directors (or persons performing similar
functions) of such business entity, even though the right so
to vote has been suspended by the happening of such a con-
tingency.
6.2 Other Provisions Regarding Definitions: (a)
Unless otherwise defined therein, all terms defined in this
Agreement shall have the defined meanings when used in any
certificate, report or other document made or delivered
pursuant to this Agreement.
(b) The words "hereof," "herein," and "hereun-
der," and words of similar import when used in this Agree-
ment shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.
7. Miscellaneous.
7.1 Survival of Representations and Warranties;
Severability. All representations and warranties contained
in this Agreement shall survive the execution and delivery
of this Agreement, and the Closing. Any provision of this
Agreement that is prohibited or unenforceable in any juris-
diction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting
the validity or enforceability of such provisions in any
other jurisdiction.
7.2 Amendment and Waiver. Any term of this
Agreement may be amended and the observance of any term of
this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospective-
ly) only with the written consent of the Company and ABLAC.
Any amendment or waiver effected in accordance with this
Section 7.2 shall be binding upon ABLAC and the Company.
7.3 Notices, etc. Except as otherwise provided
in this Agreement, notices and other communications under
this Agreement shall be in writing and shall be delivered,
or mailed by registered or certified mail, return receipt
requested, by a nationally recognized overnight courier,
postage prepaid, or by telecopy addressed: (i) if to ABLAC,
at such address or telecopy number as ABLAC shall have fur-
nished to the Company in writing from time to time for such
purpose, or (ii) if to the Company, at such address or
telecopy number as the Company shall have furnished to ABLAC
in writing from time to time for such purpose, to the atten-
tion of its President.
16
7.4 Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of and be enforce-
able by the respective successors and permitted assigns of
the parties hereto, whether so expressed or not.
7.5 Descriptive Headings. The headings in this
Agreement are for purposes of reference only and shall not
limit or otherwise affect the meaning hereof.
7.6 Fees and Expenses. Whether or not the Clos-
ing occurs and except as otherwise expressly set forth here-
in, each party shall pay its own expenses incurred by it in
connection with the transactions contemplated by this Agree-
ment, including without limitation, the reasonable fees and
expenses of its counsel.
7.7 Stamp or Other Tax. Should any stamp, excise
tax or similar administration or governmental charge become
payable in respect of this Agreement or any modification
hereof or thereof, the Company shall pay the same (including
interest and penalties, if any) and shall hold ABLAC harm-
less with respect thereto.
7.8 GOVERNING LAW. THIS AGREEMENT SHALL BE CON-
STRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF
THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
7.9 Counterparts. This Agreement may be executed
in two counterparts, each of which shall be deemed an origi-
nal, but which together shall constitute one and the same
instrument, and it shall not be necessary in making proof of
this Agreement to produce or account for more than one such
counterpart.
7.10 Entire Agreement. This Agreement constitutes
the entire agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There
are no restrictions, promises, representations, warranties,
covenants or undertakings, other than those expressly set
forth or referred to herein. This Agreement supersedes all
prior agreements and understandings between the parties
including, without limitation, the Purchase Agreement, with
respect to such subject matter.
17
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed, all on the day and year
first above written
HARRIS & HARRIS GROUP, INC.
By: /s/_____________________
Name: Robert B. Schulz
Title: President
AMERICAN BANKERS LIFE
ASSURANCE COMPANY OF
FLORIDA
By: /s/____________________
Name: Floyd Denison
Title: Senior Vice President
AMERICAN BANKERS INSURANCE
COMPANY OF FLORIDA
By: /s/___________________
Name: Floyd Denison
Title: Senior Vice President
STANDSTILL AGREEMENT
STANDSTILL AGREEMENT dated as of May 18, 1995 by and
among American Bankers Life Assurance Company of Florida and
American Bankers Insurance Company of Florida (together the
"Investor") and Harris & Harris Group, Inc. (the "Company").
The Investor and the Company are entering into a Stock
Purchase Agreement of even date herewith (the "Stock
Purchase Agreement"), whereby, upon the terms set forth
therein, the Investor is purchasing from the Company, and the
Company is issuing and selling to the Investor, 1,075,269
shares (the "Shares") of the Company's Common Stock, $.01
par value per share (the "Common Stock"), constituting
approximately 10.4% of the shares of common stock
outstanding after giving effect to such issuance.
As a condition to entering into the Stock Purchase
Agreement, the Company has required that the Investor, and
as an inducement to the Company to enter into the Stock
Purchase Agreement the Investor has agreed to, enter into
this Agreement.
In consideration of the foregoing, and the agreements
contained herein, the parties hereto agree as follows:
A. Restriction on Acquisitions of Voting Securities.
The Investor will not, and will cause the other members of
the Investor Group (as defined herein) not to, in any
manner, acquire, agree to acquire, make any proposal to
acquire, directly or indirectly, any Voting Securities (as
defined herein) if, after any such acquisition, the Investor
Group would beneficially own Voting Securities possessing
aggregate voting power in excess of 10.5% of the total
voting power of all then outstanding Voting Securities. For
purposes of this Agreement, (i) "Investor Group" means the
Investor, its subsidiaries and affiliates, their respective
officers and directors and any person acting on behalf of
the Investor, any of such subsidiaries or affiliates or
their respective officers and directors and (ii) "Voting
Securities" means the Shares, any other shares of Common
Stock and any other issued and outstanding securities of the
Company generally entitled to vote in the election of
directors.
1
B. Restrictions on Certain Other Actions. The
Investor will not, and will cause the other members of the
Investor Group not to:
(1) propose to enter into, or
announce or disclose any intention to propose to enter into,
directly or indirectly, any merger or business combination
involving the Company or any of its subsidiaries or to pur-
chase, directly or indirectly, a material portion of the
assets of the Company or any of its subsidiaries;
(2) make, or in any way
participate, directly or indirectly, in any "solicitation"
of "proxies" (as such terms are defined or used in
Regulation 14A of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) to vote, or seek to advise or
influence any person or entity with respect to the voting
of, any Voting Securities, or become a "participant" in any
"election contest" (as such terms are used or defined in
Regulation 14A of the Exchange Act) relating to the election
of directors of the Company; provided, however, that neither
the Investor nor any other member of the Investor Group
shall be deemed to have engaged in a "solicitation" or to
have become a "participant" by reason of voting its Voting
Securities in any such election in accordance with the
provisions of this Agreement;
(3) form, join or in any way
participate in a "group" (within the meaning of Section
13(d)(3) of the Exchange Act) or otherwise act in concert
with any person or entity, (i) for the purpose of
circumventing the provisions of this Agreement or, (ii)
other than other members of the Investor Group (to the
extent permitted by this Agreement), for the purpose of
acquiring, holding, voting or disposing of any Voting
Securities;
(4) request the Company (or
its directors, officers, employees or agents), directly or
indirectly, to amend or waive Section 1 hereto or any of
paragraphs (i) through (iv) of this Section 2, or take any
action which might require the Company or any member of the
Investor Group to make a public announcement regarding the
possibility of (A) a business combination or merger
involving the Company or any of its subsidiaries, on the one
hand, and any member of the Investor Group, on the other
hand, or (B) the sale to any member of the Investor Group of
a material portion of the assets of the Company or any of
its subsidiaries.
2
(5) deposit any Voting Securities
in a voting trust, or subject any Voting Securities to a voting
or similar agreement; or
(6) sell, transfer, pledge or
otherwise dispose of or encumber any Voting Securities
except:
(A) sales or transfers of
Voting Securities to another member of the Investor
Group, provided such member has agreed in writing to be
bound by all of the provisions of this Agreement
applicable to such member's transferor;
(B) sales of Voting
Securities pursuant to a firm commitment, underwritten
distribution to the public, registered pursuant to
Section 5 of the Stock Purchase Agreement or otherwise
under the Securities Act of 1933, as amended (the
"Securities Act"), in which the Investor and the other
members of the Investor Group use their best efforts to
effect as wide a distribution of such Voting Securities
as reasonably practicable and to prevent any person or
entity, affiliated persons or entities or other group
from purchasing through such offering Voting Securities
having in the aggregate more than 4.9% of the aggregate
voting power of all then outstanding Voting Securities;
(C) sales of Voting
Securities in privately negotiated transactions, in which
the Investor and the other members of the Investor Group
use their best efforts to prevent any person or entity,
affiliated persons or entities or other group from pur-
chasing through such transactions Voting Securities
having in the aggregate more than 4.9% of the aggregate
voting power of all then outstanding Voting Securities;
provided that the Investor gives written notice to the
Company at least thirty (30) days prior to the date of
any such sale specifying the amount of Voting Securities
which the Investor and the other members of the Investor
Group intend to sell and that, if during such thirty (30)
day period the Company gives written notice to the
Investor of the pendency of any underwritten offering by
the Company of Voting Securities, neither the Investor
nor any other member of the Investor Group will effect
any sales pursuant to such privately negotiated transac-
tions until sixty (60) days after the consummation of
such offering;
3
(D) sales of Voting
Securities pursuant to Rule 144 of the General Rules and
Regulations under the Securities Act; provided that (1)
no such sale shall be effected to the extent the member
of the Investor Group seeking to effect such sale knows
or has reason to believe that the purchaser of Voting
Securities in such sale would, after such purchase,
beneficially own Voting Securities having in the
aggregate more than 4.9% of the aggregate voting power of
all then outstanding Voting Securities and (2) the Inves-
tor shall give written notice to the Company at least ten
(10) days prior to the date of any such sale specifying
the amount of Voting Securities which the Investor and
the other members of the Investor Group intend to sell
and that, if during such ten (10) day period the Company
gives written notice to the Investor of the pendency of
any underwritten offering by the Company of Voting
Securities, neither the Investor nor any other member of
the Investor Group will effect any such sale until sixty
(60) days after the consummation of such offering; or
(E) sales of Voting
Securities to the Company or in a tender or exchange
offer by a third party.
C. Voting. In any election of directors of the Company,
the Investor and each other member of the Investor Group will vote,
or execute written consents with respect to, their Voting Securities,
in accordance with the recommendation of the Company's Board of
Directors.
D. Termination. This Agreement shall terminate
automatically without any further action by any party on May 18,
2002. Upon such termination, this Agreement shall be void
and of no further force of effect, except that such termina-
tion shall not relieve a party from liability for breach of
this Agreement prior to such termination.
4
E. Amendment and Waiver. Any term of this Agreement
may be amended and the observance of any term of this Agreement
may be waived (either generally or in a particular instance and
either retroactively or prospectively but without limitation of
Section 2(iv)) only with the prior written consent of the Company
and the Investor.
F. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the
respective successors and permitted assigns of the parties hereto;
provided that the rights, obligations, covenants and agreements of
the Investor hereunder may not be assigned or delegated, as applicable,
except as provided in Section 2(vi)(A).
G. Notices. All notices, requests and other communications
to any party hereunder shall be in writing and shall be given (and
shall be deemed to have been given upon receipt) if delivered in
person or sent by facsimile, telegram, telex, by registered or
certified mail (postage prepaid, return receipt requested) or by
reputable overnight courier to the respective parties at the
following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this
Section 7):
if to the Investor, to:
American Bankers Insurance Group
11222 Quail Roost Drive
Miami, Florida 33157
Attention: Mr. Floyd Denison
Facsimile: (305) 252-7068
if to the Company, to:
Harris & Harris Group, Inc.
One Rockefeller Plaza
14 West 49th Street
New York, New York 10020
Attention: Chief Executive Officer
Facsimile: (212) 332-3601
5
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
One Beacon Street
Boston, MA 02108
Attention: Kent A. Coit, Esq.
Facsimile: (617) 573-4822
H. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES
SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
I. Counterparts. This Agreement may be executed in
two counterparts, each of which shall be deemed an original, but
which together shall constitute one and the same instrument, and
it shall not be necessary in making proof of this Agreement to
produce or account for more than one such counterpart.
6
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
AMERICAN BANKERS LIFE ASSURANCE
COMPANY OF FLORIDA
By: /s/________________________
Name: Floyd Denison
Title: Senior Vice President
AMERICAN BANKERS INSURANCE
COMPANY OF FLORIDA
By: /s/________________________
Name: Floyd Denison
Title: Senior Vice President
HARRIS & HARRIS GROUP, INC.
By: /s/________________________
Name: Robert B. Schulz
Title: President
7
TERMINATION AND RELEASE AGREEMENT
HARRIS & HARRIS GROUP, INC., a New York corpo-
ration (the "Company"), and AMERICAN BANKERS LIFE ASSURANCE
COMPANY OF FLORIDA ("ABLAC") are the parties to a Note and
Warrant Purchase Agreement, dated as of August 17, 1994 (the
"Purchase Agreement").
The Company and ABLAC hereby agree that effective
as of the date hereof (i) the Purchase Agreement is terminated
and shall be null and void and of no further force or
effect and (ii) each of the Company and ABLAC shall have no,
and hereby forever irrevocably releases the other from any,
liability or obligation under or with respect to the Purchase
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed as of this 18th day of
May, 1995.
HARRIS & HARRIS GROUP, INC.
/s/________________________
Name: Robert B. Schulz
Title: President and COO
AMERICAN BANKERS LIFE
ASSURANCE COMPANY OF
FLORIDA
/s/________________________
Name: Floyd Denison
Title: Senior Vice President