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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
September 2, 1996
(Date of earliest event reported)
UNIDYNE CORPORATION
(Exact name of small business issuer
as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 0-10372 23-2154902
(State or other jurisdiction (Commission File No.) (IRS Employer Identification No.)
of incorporation or organization)
</TABLE>
118 PICKERING WAY, SUITE 104, EXTON, PENNSYLVANIA 19341
(Address of principal executive offices)
(610) 363-8237
(Issuer's telephone number)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
On September 2, 1996, Registrant completed the acquisition of 100% of
the issued and outstanding shares of the common stock of United Dynamatics,
Inc., a Delaware corporation ("UDI"). In separate transactions, Registrant
also acquired nine percent (9%) of the issued and outstanding common stock of
Maxwell Dynamometer Systems, Inc., a Delaware corporation related to UDI
("Maxwell"), and approximately $1.05 million in principal amount of debt
instruments issued by Maxwell. The above transactions were effective as of
September 1, 1996. (The UDI common stock, the Maxwell common stock and the
Maxwell debt instruments are herein collectively referred to as the "Assets").
The Assets were acquired in exchange for a total of 6,677,031 shares
of newly issued shares of Registrant's common stock, $.001 par value per share
(the "Common Stock"). The number of shares issued in exchange for the Assets
constituted approximately 90% of Registrant's issued and outstanding Common
Stock at the time of issuance. Prior to acquisition of the Assets, Robert M.
Bernstein owned 51.9% of the Registrant's issued and outstanding Common Stock.
Immediately following acquisition, Robert M. Bernstein and Harvey
Kravetz, being all of the directors and officers of Registrant before
Registrant's acquisition of the Assets, resigned. The following persons were
elected as directors of Registrant:
C. EUGENE HUTCHESON, age 53, has been Chief Executive Officer and
Chairman of the Board of Directors of UDI since its inception in 1995. He was
a co-founder of UDI and is Chairman of the Board and President of Maxwell. Mr.
Hutcheson serves as Chairman and Chief Executive Officer of Dynamatic
Corporation ("Dynamatic"), a wholly owned subsidiary of UDI, and of Capital
Idea, Inc., a Colorado corporation which is the majority shareholder of Maxwell
("Capital Idea"). Previously, he was the Chairman and President of CIDCO
Group, Inc., which developed and patented products for the packaging and
container industry. Mr. Hutcheson is co-holder of a patent issued in September
1995 on a chassis dynamometer.
CHARLOTTE E. DOREMUS, age 52, Chief Administrative Officer, Secretary
and Director of UDI and Kenosha Corporation, is also Secretary/Treasurer and a
director of Maxwell and Capital Idea. Ms. Doremus has been an investor in
start-up companies for more than ten years. Ms. Doremus has also been an
Assistant to the Research Director and head of the Portfolio Review Department
at Argus Research Corp. and a Registered Representative and Portfolio Analyst
for Dean Witter Reynolds in New York City.
DAVID M. BARRETT, ESQ., age 58, is a senior partner of the law firm of
Barrett & Schuler, Washington, D.C. Mr. Barrett has been an instructor in law
at Notre Dame Law School. He has been an Assistant United States Attorney for
the District of Columbia and was recently appointed Independent Counsel for an
investigation of a Member of the Cabinet of the President of the United States.
DR. FRANK B. HOLZE, age 58, founded and manages Holze International
Investment, a Monaco-based investment consulting firm. Dr. Holze was with ITT
Corporation for 12 years. Subsequently, Dr. Holze was Vice President and a
member of the board of management in Europe for the Thyssen-Bornemisza Group,
which is based in Monaco, and was general manager of a number of the Group's
companies.
The following persons were elected as officers of Registrant:
C. EUGENE HUTCHESON - Chairman of the Board of Directors, President
and Chief Executive Officer
TIMOTHY M. FLYNN - Vice President and Assistant Treasurer
CHARLOTTE E. DOREMUS - Secretary and Treasurer
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The following persons are known by Registrant to be the beneficial
owners of more than five percent of Registrant's Common Stock as of September
6, 1996.
<TABLE>
<CAPTION>
Amount(1)
Name and Address and Nature Percentage
of Beneficial Owner of Ownership of Class
------------------- ------------ --------
<S> <C> <C>
Capital Idea, Inc. 4,603,860 57%
118 Pickering Way, Suite 104
Exton, PA 19341
C. Eugene Hutcheson 4,816,360(2) 59%
UNIDYNE Corporation
118 Pickering Way, Suite 104
Exton, PA 19341
Charlotte E. Doremus 4,816,360(3) 59%
UNIDYNE Corporation
118 Pickering Way, Suite 104
Exton, PA 19341
David M. Barrett 964,866(4) 12%
1000 Thomas Jefferson St., NW
Suite 305
Washington, D.C. 20007
Frank B. Holze 1,219,805(5) 15%
26 BIS Boulevard
Princess Charlotte
MC 98000 Monaco
</TABLE>
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(1) Unless otherwise indicated, all ownership is direct.
(2) Includes 127,885 shares which Mr. Hutcheson has the right to acquire
within sixty days through the exercise of options and 4,603,860 shares owned by
Capital Idea, of which Mr. Hutcheson is Chairman and Chief Executive Officer and
a 50% shareholder.
(3) Includes 187,885 shares which Ms. Doremus has the right to acquire
within sixty days through the exercise of options and 4,603,860 shares owned
by Capital Idea, of which Ms. Doremus is a director, Secretary and Treasurer,
and a 50% shareholder.
(4) Includes 228,692 shares which Mr. Barrett has the right to acquire
within sixty days through the exercise of options.
(5) Includes 500,000 shares owned by Darnley Holdings, Ltd., a Bahamian
corporation, of which Mr. Holze is Director.
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The following is certain information regarding the Common Stock of
Registrant beneficially owned by each of its directors and executive officers
and all directors and executive officers as a group.
<TABLE>
<CAPTION>
Amount(1)
Name and Address and Nature Percentage
of Beneficial Owner Position of Ownership of Class
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<S> <C> <C> <C>
C. Eugene Hutcheson Chairman of the 4,816,360(2) 59%
Board of Directors,
Chief Executive
Officer and President
Timothy Flynn Vice President and 3,000(3) less than 1%
Assistant Treasurer
David M. Barrett Director 964,866(4) 12%
Frank B. Holze Director 1,219,805(5) 15%
Charlotte E. Doremus Secretary, Treasurer 4,816,360(6) 59%
and a Director
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Directors and executive
officers as a group 7,116,531 88%
</TABLE>
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(1) Unless otherwise indicated, all ownership is direct.
(2) Includes 127,885 shares which Mr. Hutcheson has the right to acquire
within sixty days through the exercise of options and 4,603,860 shares owned by
Capital Idea, of which Mr. Hutcheson is Chairman and Chief Executive Officer and
a 50% shareholder.
(3) Includes 1,000 shares which Mr. Flynn has the right to acquire
within sixty days through the exercise of options.
(4) Includes 228,692 shares which Mr. Barrett has the right to
acquire within sixty days through the exercise of options.
(5) Includes 500,000 shares owned by Darnley Holdings, Ltd., a
Bahamian corporation, of which Mr. Holze is Director.
(6) Includes 187,885 shares which Ms. Doremus has the right to
acquire within sixty days through the exercise of options and
4,603,860 shares owned by Capital Idea, of which Ms. Doremus is a
director, Secretary and Treasurer, and a 50% shareholder.
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Registrant acquired the Assets from Capital Idea, David M. Barrett,
Frank B. Holze, Gregory J. Layton and Sharon D. Long in exchange for a total of
6,677,031 shares of newly issued Common Stock of Registrant. The number of
shares issued in connection with these transactions was determined through
negotiation between Registrant and the former owners of the Assets. Prior to
Registrant's acquisition of the Assets, there was no material relationship
between Registrant or any of its affiliates, any director or officer of
Registrant or any associate of any such director or officer and the persons
from whom the Assets were acquired.
UDI, through its wholly owned subsidiary, Dynamatic, manufactures
specialized electric motors and variable speed drives and controls utilizing
the Eddy Current Drive operating principle to control motor speed. The
variable speed drives are used in a variety of products including stamping
presses, pumps and special process equipment. Dynamatic also manufactures
engine dynamometers and transmission dynamometers for a variety of large
industrial customers, primarily in the automotive and heavy equipment
industries. UDI products are manufactured in facilities located in Kenosha,
Wisconsin, consisting of approximately 261,600 square feet of manufacturing,
laboratory and testing facilities and 46,100 square feet of office space
located on approximately 13.3 acres of land. Maxwell, which is based in Exton,
Pennsylvania, manufactures and installs customized dynamometer systems.
It is impracticable to provide financial statements for the business
operation acquired by Registrant as of the date hereof. Such financial
statement will be filed as an amendment to this Form 8-K no later than 60 days
from the date hereof.
ITEM 7. EXHIBITS.
EXHIBIT NO.
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10.1 First Amended Purchase and Sale Agreement, dated July 31,
1996, among Robert M. Bernstein, Blue Jay Enterprises,
Inc. and certain shareholders of UDI.
10.2 Second Amendment to Purchase and Sale Agreement, dated
September 2, 1996, among Robert M. Bernstein, Blue Jay
Enterprises, Inc. and certain shareholders of UDI.
10.3 Second Amended Purchase and Sale Agreement, dated September
2, 1996, among Robert M. Bernstein, Blue Jay Enterprises, Inc.
and Capital Idea, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: September 13, 1996 /s/ C. Eugene Hutcheson
-----------------------
C. Eugene Hutcheson
Chairman, Chief Executive Officer
and President
5
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EXHIBIT 10.1
FIRST AMENDED
PURCHASE AND SALE AGREEMENT
This First Amended Purchase and Sale Agreement (the "Agreement") is
entered into this 31st day of July, 1996 by and between Blue Jay, Enterprises,
Inc., a Delaware corporation ("Blue Jay"), Robert M. Bernstein ("Bernstein"),
and the following shareholders of United Dynamatics Inc., a Delaware
corporation ("UDI"); Darnley Holdings, Ltd., a Bahamian corporation ("Darnley")
; Capital Idea, Inc., a Colorado corporation; and EETC Inc., a Delaware
corporation, Frank B. Holze and David M. Barrett (hereinafter the foregoing
shareholders collectively are referred to as "Shareholders" and individually
referred to as a "Shareholder").
RECITALS
WHEREAS, the parties hereto, except Darnley, entered into a
Purchase and Sale Agreement as of May 17, 1996 (the "May 17 Agreement").
WHEREAS, the parties desires to amend the May 17 Agreement to
read in its entirety as hereinafter set forth.
WHEREAS, Vintage Enterprises, Inc., a Delaware corporation,
was a party to the May 17 Agreement and will no longer be a party to the
transactions contemplated hereby and by the May 17 Agreement.
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NOW, THEREFORE, the parties hereby amend the May 17 Agreement
to read in its entirety as follows:
WHEREAS, Shareholders own 1,068 shares (the "UDI Shares") of common
stock, no par value per share, of UDI (the "UDI Common Stock"), which
constitute all of the outstanding UDI Common Stock.
WHEREAS, UDI owns all of the issued and outstanding stock of Dynamatic
Corporation ("Dynamatic") and Kenosha Corporation ("Kenosha"), each a Delaware
corporation.
WHEREAS, Shareholders and Blue Jay desire that Blue Jay
acquire the UDI Shares in exchange for shares of common stock, $.001 par value
per share, of Blue Jay ("Blue Jay Common Stock") that, together with the
transfer of certain assets of Capital Idea, Inc. ("Capital Idea") to Blue Jay
pursuant to a Purchase and Sale Agreement of even date herewith between Blue
Jay and Capital Idea (the "Capital Idea Agreement"), is intended to qualify as
a tax-free transfer under Section 351(a) of the Internal Revenue Code of 1986,
as amended, and upon completion of which UDI will be a wholly-owned subsidiary
of Blue Jay; and
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
AGREEMENT:
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ARTICLE I
PURCHASE AND SALE
1.1 Purchase and Sale. Subject to the terms and conditions set forth
herein, on the Final Closing Date (as hereinafter defined), the Shareholders,
severally and individually, shall sell and deliver to Blue Jay, and Blue Jay
shall purchase and accept from each Shareholder, the UDI Shares.
ARTICLE II
CONSIDERATION; CLOSING
2.1 Consideration. The consideration to be paid by Blue Jay for the
UDI Shares shall be in the form of shares of Blue Jay Common Stock in the ratio
of 3779.77 shares of newly issued Blue Jay Common Stock for each outstanding
share of UDI Common Stock, or an aggregate 4,036,794 shares of Blue Jay Common
Stock (the "Blue Jay Shares").
2.2 Escrow Arrangement. The Shareholders, Blue Jay and Firstar Trust
Company, as escrow agent (the "Escrow Agent"), have entered into an escrow
agreement, as amended, in the form attached
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hereto as Exhibit A ("the Escrow Agreement") pursuant to which (a) the
Shareholders have delivered to the Escrow Agent the UDI Shares and (b) Blue Jay
has delivered to the Escrow Agent the Blue Jay Shares, all of which shares shall
be held by the Escrow Agent in accordance with the Escrow Agreement.
2.3 Closing. The closing in escrow of the transactions contemplated
hereby ("Escrow Closing") was held at Trafalgar Financial Services, Inc., 126
State Street, Boston, Massachusetts at 1:00 P.M. May 17, 1996. The "Final
Closing Date" shall mean the date on which the Escrow Agent releases the
documents pursuant to Section 3.1(a) of the Escrow Agreement which shall be the
first business day following satisfaction of all closing conditions set forth in
Article VIII and IX hereof.
2.4 Deliveries on the Final Closing Date. On the Final Closing Date:
(a) UDI, as representative of the Shareholders (in such capacity, the
"Representative"), and Blue Jay shall deliver to the Escrow Agent the Notice
of Release referred to in the Escrow Agreement;
(b) The Escrow Agent shall deliver to Blue Jay certificates
representing the UDI Shares, duly endorsed for transfer or in blank; and
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(c) The Escrow Agent shall deliver to the Representative certificates
representing the Blue Jay Shares in the amounts set forth on Schedule 2.4 hereto
or such other allocations as may be mutually agreed to by the Shareholders.
ARTICLE III
INDIVIDUAL AND SEVERAL REPRESENTATIONS OF THE SHAREHOLDERS
In order to induce Blue Jay to enter into this Agreement, each
of the Shareholders, severally and individually, makes the following
representations and warranties to Blue Jay.
3.1 Ownership of Shares. Such Shareholder is the record and
beneficial owner of the kind and number of UDI Shares as are set forth opposite
such Shareholder's name on Schedule 3.1 hereto. Such Shareholder owns such
shares free and clear of all liens, encumbrances, pledges, claims and other
security interests and all such shares are validly issued, fully paid and
nonassessable (except to the extent otherwise provided by Section 180.0622(2)(b)
of the Wisconsin Statutes). None of the UDI Shares owned by such Shareholder is
subject to any marital property or other agreement, judgment, order, voting
trust or proxy or other agreement which either limits or restricts such
Shareholder's absolute authority to
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transfer its UDI Shares as herein provided or requires the holder thereof to
vote such shares in any particular manner.
3.2 Enforceability; Conflicting Obligations. Such Shareholder has all
necessary power and authority to enter into and consummate the transactions
contemplated by this Agreement in accordance with its terms and to sell to Blue
Jay the number of UDI Shares set forth opposite such Shareholder's name on
Schedule 3.1 hereto. This Agreement has been duly authorized by such
Shareholder and is such Shareholder's valid and binding obligation, enforceable
against such Shareholder in accordance with its terms. The execution and
delivery by such Shareholder of this Agreement do not, and the consummation of
the sale of the UDI Shares by such Shareholder contemplated hereby will not,
conflict with or violate the provisions of any order, writ, decree, agreement,
contract, restriction or organizational documents to which such Shareholder is a
party or to which such Shareholder is bound.
ARTICLE IV
JOINT AND SEVERAL REPRESENTATIONS OF THE SHAREHOLDERS
In order to induce Blue Jay to enter into this Agreement, the
Shareholders, jointly and severally, make the following representations and
warranties to Blue Jay.
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4.1 Organization and Qualification. Each of UDI, Dynamatic and
Kenosha is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
4.2 Capitalization.
(a) Company. The entire authorized capital stock of UDI consists
of 1,500 shares of UDI Common Stock, of which 1,068 shares are outstanding and
owned by the Shareholders. Except as set forth on Schedule 4.2 hereof, there
are no outstanding options, warrants, convertible securities or other rights to
subscribe for or acquire any capital stock or securities convertible into
capital stock of UDI.
(b) Subsidiaries. Dynamatic and Kenosha (the "Subsidiaries")
constitute the only wholly-owned subsidiaries of UDI. The authorized capital
stock of Dynamatic consists of 1,500 shares of common stock, no par value per
share, of which 1,068 shares are outstanding, and the authorized capital stock
of Kenosha consists of 1,500 shares of common stock, no par value, of which
1,068 shares are outstanding. All such issued and outstanding shares of
Dynamatic and Kenosha are owned by UDI free and clear of all liens,
encumbrances, pledges, claims and other security interests.
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4.3 Litigation. Except as set forth on Schedule 4.3, there are no
claims, suits, actions, arbitrations, administrative proceedings or
investigations, pending or, to UDI's knowledge, threatened against UDI or either
Subsidiary that could have a material adverse effect on the financial condition
of UDI and the Subsidiaries, taken as a whole, or restrict the ability of the
Shareholders to consummate the transactions contemplated by this Agreement.
4.4 Financial Information. The financial information of UDI that has
been previously provided to Bernstein fairly presents in all material respects
the financial position of UDI as of the dates indicated, all in conformity with
generally accepted accounting principles consistently applied during the periods
involved, except as otherwise noted therein.
4.5 Investment Intent. The Blue Jay Shares being acquired by the
Shareholders hereunder are being acquired for investment and not with a view
toward distribution thereof. The Shareholders acknowledge that such shares have
not been registered under the Securities Act of 1933, as amended (the "1933
Act"), or any state securities laws and may be resold only pursuant to an
effective registration covering such shares or pursuant to an available
exemption from registration. The Shareholders further acknowledge that the
certificates representing the Blue Jay Shares shall bear the following legend:
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The securities evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"), or the
securities laws of any state, but have been issued in reliance upon
exemptions therefrom. The securities may not be offered, sold, pledged
or otherwise transferred without registration under the Act or the
opinion of counsel satisfactory to the Corporation that an exemption from
registration is available or that such transfer may otherwise lawfully be
made.
4.6 Brokers. Neither the Shareholders, UDI, nor either of the
Subsidiaries has incurred or made commitments for any brokerage, finders' or
similar fees in connection with the transactions contemplated by this
Agreement, except the engagement letter, dated April 15, 1996, among Trafalgar
Financial Services, Inc., UDI and Capital Idea, Inc.
4.7 Representations and Warranties True and Correct. The
representations and warranties contained herein, and all other documents,
certifications, materials and written statements or written information
concerning UDI or the Subsidiaries given to Blue Jay by or on behalf of the
Shareholders do not include any untrue statement of a material fact or omit to
state a material fact required to be stated herein or therein in order to make
the
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statements herein or therein, in light of the circumstances under which they are
made, not misleading.
ARTICLE V
REPRESENTATIONS OF BLUE JAY
In order to induce the Shareholders to enter into this Agreement, Blue
Jay and Robert M. Bernstein, jointly and severally, make the following
representations and warranties to the Shareholders.
5.1 Organization. Blue Jay is duly organized, validly existing and
in good standing under the laws of the State of Delaware with all requisite
power and authority to own, lease and operate its properties and to conduct
its business as currently operated and conducted.
5.2 Capitalization of Blue Jay. The authorized capital stock of Blue
Jay consists of 50,000,000 shares of Common Stock, $.001 par value per share,
of which 724,059 shares are issued and outstanding. All of such outstanding
shares have been issued pursuant to and in accordance with effective
registration statements under the 1933 Act and in compliance with applicable
state securities laws or pursuant to valid exemptions from
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registration under the 1933 Act and any applicable state securities laws and
rules and regulations under such laws. All of the outstanding shares of Blue
Jay Common Stock are duly authorized, validly issued, fully paid and
nonassessable, and are free of preemptive rights. There are no other shares
of capital stock or other equity securities (or debt securities with any
voting rights or convertible into securities with any voting rights) of Blue
Jay outstanding and no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, shares of capital stock of Blue Jay,
except for an option ("Option") granted to Bernstein pursuant to an Option
Agreement (the "Option Agreement") of even date herewith in the form of
Exhibit C hereto.
5.3 Authorization. Blue Jay has full power and authority to enter
into this Agreement and to carry out its obligations hereunder. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by Blue Jay's Board of Directors
and no other corporate proceedings on the part of Blue Jay are necessary to
authorize this Agreement or the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Blue Jay and is the legal,
valid and binding obligation of Blue Jay, enforceable against Blue Jay in
accordance with its terms. The Blue Jay Common Stock to be issued hereunder
and under the Capital Idea
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Agreement, respectively, will be validly issued, fully paid and nonassessable.
5.4 Reports and Financial Statements. Blue Jay has filed all reports
on Form 10-Q, Form 10-QSB and Form 10-K required to be filed with the Securities
and Exchange Commission (the "SEC") pursuant to the Securities Exchange Act of
1934, as amended (the "1934 Act") since 1986 (collectively, the "SEC Reports").
Each of the balance sheets (including the related notes) included in the SEC
Reports fairly presents in all material respects the financial position of Blue
Jay as of the date thereof, and each of the income statements and statements of
cash flow (including the related notes) included therein fairly present in all
material respects the results of operations and cash flows of Blue Jay for the
period or as of the date set forth therein, all in conformity with generally
accepted accounting principles consistently applied during the periods involved,
except as otherwise noted therein and subject, in the case of unaudited interim
financial statements, to normal year-end adjustments and any other adjustments
described therein.
5.5 Litigation. There are no claims, suits, actions, arbitrations,
administrative proceedings or investigations, pending or, to Blue Jay's or
Bernstein's knowledge, threatened against Blue Jay or Bernstein that could have
a material adverse effect on Blue Jay or restrict the ability of Blue Jay to
consummate the
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transactions contemplated by this Agreement or the other agreements referred to
herein.
5.6 Investment Intent. The UDI Shares are being acquired for
investment and not with a view toward distribution thereof. Blue Jay
acknowledges that such shares have not been registered under the 1933 Act or any
state securities laws and may be resold only pursuant to an effective
registration covering such shares or pursuant to an available exemption from
registration. Blue Jay further acknowledges that the certificates representing
the UDI Shares shall bear the legend set forth in Section 4.5 hereof:
5.7 Brokers. Neither Blue Jay nor Bernstein has incurred or made
commitments for, any brokerage, finders' or similar fees in connection with the
transactions contemplated by this Agreement.
5.8 Representations and Warranties True and Correct. The
representations and warranties contained herein, and all other documents,
certifications, materials and written statements or written information given
to the Shareholders by or on behalf of Blue Jay, do not include any untrue
statement of a material fact or omit to state a material fact required to be
stated herein or therein in order to make the statements herein or therein, in
light of the circumstances under which they are made, not misleading.
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ARTICLE VI
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
6.1 Survival of Representations. None of the representations or
warranties made by any party to this Agreement shall survive the Final Closing
Date, unless the party making the representation or warranty knew such
representation or warranty was false at the time it was made or as of
the Final Closing Date.
6.2 Agreement to Indemnify.
(a) Bernstein shall indemnify, defend and hold harmless the
Shareholders, UDI, the Subsidiaries, and each officer, director, employee and
agent thereof (collectively the "Indemnified Parties"), from and against all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses, including interest, penalties and reasonable
attorneys' fees and expenses (collectively, "Damages"), asserted against,
resulting to, imposed upon or incurred by any Indemnified Party, directly or
indirectly, during the one-year period following the Closing, by reason of or
resulting from any claims by stockholders of Blue Jay challenging the fairness
of the transactions contemplated by this Agreement or any claims by
stockholders of Blue Jay or arising out of any transaction by or activities of
Blue Jay prior to the Closing Date.
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(b) The obligations of Bernstein set forth in paragraph (a) above
shall be secured by and limited to a pledge by Bernstein to UDI, as
representative of the Indemnified Parties, of shares of Blue Jay Common Stock
and the Option Agreement pursuant to the Pledge Agreement in substantially the
form of Exhibit D attached hereto (the "Pledge Agreement").
(c) For purposes of satisfying any claim for Damages under this
Section 6.2, the value of the Blue Jay Common Stock pledged shall be
the average of the daily market prices of the Blue Jay Common Stock for the 10
trading days immediately preceding final agreement between Bernstein and the
Indemnified Parties, or final adjudication by a court of competent
jurisdiction, of such claim. For purposes of this Section 6.2(c), the market
price for each trading day shall be the closing price on such day on the
principal securities exchange or market in which the Blue Jay Common Stock is
then traded or, if no sale takes place on such day, the average of the closing
bid and asked prices on such day.
ARTICLE VII
COVENANTS PENDING THE FINAL CLOSING DATE
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7.1 Operation of Business. From the date hereof and until the Final \
Closing Date, without the prior written consent of the Representative, Blue
Jay shall not:
(a) Increase Compensation. Grant or promise any increase in
compensation to any shareholder, officer or director or employee, nor, by
means of any bonus, profit-sharing, incentive compensation payment, pension,
retirement, medical hospitalization, life insurance or other insurance plan or
plans, or otherwise, increase in any amount the benefits or compensation of
any such employees, directors or officers;
(b) Employment and Labor Contracts. Enter into, amend or renew or
extend any employment contract or collective bargaining agreement;
(c) Disposition of Assets. Sell or dispose of, or encumber,
mortgage or pledge any asset;
(d) Capital Expenditures. Make any capital expenditures, or enter
into any lease of capital equipment or real estate;
(e) Contracts. Enter into any contract, except as contemplated by
this Agreement.
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(f) Create or Incur Indebtedness. Enter into any transaction, or
create, assume, incur or guarantee any indebtedness;
(g) Issue Stock; Distributions on Stock. Except for the Option
Agreement and any Blue Jay Common Stock to be issued thereunder, authorize or
issue any shares of capital stock or other securities convertible into or
exercisable for capital stock, or declare or pay any dividend or make any sale
of, or distribution with respect to, any capital stock or directly or indirectly
redeem, purchase or otherwise acquire any capital stock;
(h) Accounting Procedures. Change any accounting procedures or
practices or its financial structure;
(i) Charter Amendments. Make any amendments to or changes in its
certificate of incorporation or bylaws;
(j) Breach of Contract. Perform any act, or attempt to do any act,
or permit any act or omission to act, which will cause a breach of any
contract, agreement, instrument, document, lease, license, permit, indenture
or other obligation to which it is a party or to which it is bound.
7.2 Access Prior to Final Closing. Blue Jay shall permit the
Shareholders and their counsel, accountants and other
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representatives full access during normal business hours to all of the offices,
properties, books and records and contracts of Blue Jay in order that the
Shareholders may have full opportunity to make such investigations as they shall
desire of Blue Jay in connection with the transactions contemplated by this
Agreement, and shall furnish the Shareholders during such period with all such
additional financial and operating data and other information as the
Shareholders or their representatives may from time to time reasonably request.
7.3 Blue Jay Acquisition Proposals. From and after the date hereof
and until the earlier of the consummation of the transactions contemplated by
this Agreement or the termination of this Agreement, neither Blue Jay nor
Bernstein shall (a) solicit or authorize any person to solicit, directly or
indirectly, any inquiries, proposals or offers from any person relating to any
acquisition or purchase of all or substantially all the assets of, or any equity
interest in, or any merger, consolidation or business combination with, Blue
Jay (a "Blue Jay Acquisition Transaction"), (b) enter into any agreement with
respect to any Blue Jay Acquisition Transaction, or (c) participate in any
negotiations regarding, cooperate with, facilitate or encourage a Blue Jay
Acquisition Transaction or furnish to any other person any non-public
information concerning Blue Jay in connection therewith. Blue Jay shall
immediately notify the Shareholders if any proposal or offer with respect
to a Blue Jay Acquisition Transaction is
- 18 -
<PAGE> 19
received by Blue Jay and communicate to the Representative the terms of any such
proposal or offer.
7.4 UDI Acquisition Proposals. From and after the date hereof and
until the earlier of the consummation of the transactions contemplated by this
Agreement or the termination of this Agreement, UDI shall not (a) solicit or
authorize any person to solicit, directly or indirectly, any inquiries,
proposals or offers from any person relating to any acquisition or purchase of
all or substantially all the assets of, or any equity interest in, or any
merger, consolidation or business combination with, UDI (a "UDI Acquisition
Transaction"), (b) enter into any agreement with respect to any UDI Acquisition
Transaction, or (c) participate in any negotiations regarding, cooperate with,
facilitate or encourage a UDI Acquisition Transaction or furnish to any other
person any non-public information concerning UDI in connection therewith. UDI
shall immediately notify Blue Jay if any proposal or offer with respect to a UDI
Acquisition Transaction is received by UDI and communicate to Blue Jay the
terms of any such proposal or offer.
ARTICLE VIII
CONDITIONS OF SHAREHOLDERS' OBLIGATION TO CLOSE
- 19 -
<PAGE> 20
The obligation of the Shareholders to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction and
fulfillment, prior to the Final Closing Date of each of the following express
conditions precedent:
8.1 Representation and Warranties. The representations and
warranties in this Agreement made by Blue Jay and Bernstein shall be true and
correct in all respects as of and on the Final Closing Date.
8.2 Performance of Covenants and Obligations. Blue Jay shall have
performed and complied with all of its covenants, agreements and obligations
under this Agreement which are to be performed or complied with by Blue Jay
prior to or on the Final Closing Date.
8.3 Closing of Capital Idea, Inc. Agreement. The transactions
contemplated by the Capital Idea Agreement shall have been consummated prior
to or concurrently with the Final Closing Date.
8.4 Bernstein Agreements. Bernstein shall have cancelled Blue Jay's
Convertible Note dated January 16, 1988 in the principal amount of $10,000 for
Blue Jay's agreement to pay all liabilities of Blue Jay to Bernstein and others
as of the date hereof in an amount not to exceed $25,000 which will be paid
within
- 20 -
<PAGE> 21
60 days of the final Closing Date and (ii) executed a Consulting Agreement in
the form attached hereto as Exhibit E.
8.5 Pledge Agreement. Bernstein shall have executed and delivered to
the Representative the Pledge Agreement.
8.6 Investigation of Blue Jay. The Shareholders shall have completed
their review of such books, records, accounts, contracts and documents of or
relating to the financial condition, liabilities, results of operations,
business and prospects of Blue Jay and such other inquiries or investigations
as they deem necessary or advisable and the results of such review and
investigation shall be satisfactory to the Shareholders in their sole
discretion. Without limiting the generality of the foregoing, the
Shareholders shall be satisfied that (a) Blue Jay has no liabilities or
obligations, whether absolute, accrued, contingent or otherwise and whether
due or to become due, that are not fully reflected on the balance sheet of
Blue Jay as of March 31, 1996, (b) there are no claims, suits, actions,
arbitrations, administrative proceedings or investigations pending or
threatened against Blue Jay that could have a material adverse effect on Blue
Jay, (c) that the Blue Jay Common Stock to be issued pursuant to this Agreement
and the Capital Idea Agreement when issued will be validly issued, fully paid
and nonassessable and (d) there is no reasonable basis for the assertion
against Blue Jay of any liability or obligation or for the assertion or
commencement of any
- 21 -
<PAGE> 22
such claim, suit, action, arbitration, administrative proceeding or
investigation.
ARTICLE IX
CONDITIONS TO BLUE JAY'S OBLIGATION TO CLOSE
The obligation of Blue Jay to consummate the transactions contemplated
by this Agreement shall be subject to the satisfaction and fulfillment, prior
to and on the Final Closing Date:
9.1 Representations and Warranties. The representations and
warranties in this Agreement made by the Shareholders shall be true and
correct in all respects as of and on the Final Closing Date.
9.2 Performance of Covenants and Obligations. The Shareholders shall
have performed and complied with all of their material covenants and obligations
under this Agreement.
9.3 Closing of the Capital Idea Agreement. The transactions
contemplated by the Capital Idea Agreement shall have been consummated prior
to or on the Final Closing Date.
- 22 -
<PAGE> 23
9.4 Investigation of UDI. Blue Jay shall have completed its review
of such books, records, accounts, contracts and documents of or relating to the
financial condition, liabilities, results of operations, business and prospects
of UDI and such other inquiries or investigations as it deems necessary or
advisable and the results of such review and investigation shall be satisfactory
to Blue Jay in its sole discretion.
ARTICLE X
OTHER AGREEMENTS
10.1 Cooperation: Public Announcements. The Shareholders and Blue
Jay shall cooperate fully with each other and their respective counsel and
accountants in connection with any actions that may be required to be taken in
order to satisfy their respective obligations under this Agreement. The
Shareholders and Blue Jay shall cooperate with each other in the preparation of
any press releases in connection with the transactions contemplated by this
Agreement and in the preparation and filing of any documents with the
Securities and Exchange Commission or any state securities agency required as a
result of such transactions. Except upon the advice of counsel or as may be
required by law (and in either case upon notice to the other party), neither the
Shareholders nor Blue Jay will, without prior consultation with the other, make
any press
- 23 -
<PAGE> 24
release or announcement to the public concerning the transactions contemplated
by this Agreement.
10.2 Confidentiality. Each party to this Agreement understands that
certain information which it has been furnished and will be furnished in
connection with this Agreement is confidential and proprietary, and agrees that
it will maintain the confidentiality of such information and will not disclose
it to others or use it, except in connection with the transaction contemplated
hereby, without the consent of the party furnishing such information.
Information which is generally known in the industry concerning a party or among
such party's creditors, generally, or which has been disclosed to the other
party by third parties which have right to do so, shall not be deemed
confidential or proprietary information for these purposes. In the event that a
party is at any time requested or required (by oral questions, interrogatories,
requests for information or documents, subpoena or similar process) to disclose
any information supplied to such party in connection with such transaction, such
party agrees to provide the party furnishing such information with prompt notice
of such request(s) so that the party furnishing such information may seek an
appropriate protective order and/or waive compliance of the party receiving such
information with the terms of this Section 10.2. Notwithstanding the terms of
this Section 10.2, if, in the absence of a protective order or the receipt of a
waiver hereunder, the party receiving such information is nonetheless, in the
opinion
- 24 -
<PAGE> 25
of its counsel, required to disclose information obtained in connection with
such transaction or else stand liable for contempt or suffer other censure or
penalty, the party receiving such information may disclose such information, to
the extent and in the manner so required, without liability hereunder. In the
event that such transaction is not consummated, each party agrees to promptly
return all confidential materials (and all copies thereof) which have been
furnished to him regarding the business and financial condition of the other
party, including all financial statements, reports, contracts, customer lists,
accounts, records, tax returns, data, plans, processes and trade secrets except
to the extent any such documents shall otherwise be publicly available.
10.3 Directors. On or prior to the Closing Date, the Board of
Directors of Blue Jay shall take all action necessary (including amending the
bylaws of Blue Jay) to elect to the Board of Directors four persons designated
by the Shareholders. Immediately upon consummation of the Closing, all directors
of Blue Jay, other than the persons designated by the Shareholders, shall resign
as directors.
ARTICLE XI
TERMINATION
- 25 -
<PAGE> 26
11.1 Termination. This Agreement may be terminated in the following
circumstances:
(a) By mutual consent of the Shareholders and Blue Jay;
(b) By the Shareholders in the event the conditions in
Article VIII of this Agreement are not satisfied or waived on or before
September 30, 1996;
(c) By Blue Jay in the event the conditions in Article IX of
this Agreement are not satisfied or waived on or before September 30, 1996.
11.2 Effect of Termination. In the event this Agreement is terminated
pursuant to this Article XI, this Agreement shall be void and have no further
force and effect.
ARTICLE XII
MISCELLANEOUS
12.1 Notices, Etc. All notices, requests, demands, and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered
- 26 -
<PAGE> 27
by hand, telegram, telex or telecopy (receipt confirmed) or seventy-two hours
after being mailed, first call, certified mail, postage prepaid:
(a) To Blue Jay:
Blue Jay Enterprises, Inc.
11835 West Olympic Boulevard
East Tower 705
Los Angeles, CA 90064
(310)208-5589, Fax: (310)473-3177
Attention: Robert M. Bernstein
With copies to:
Joseph M. Berl
Baker & Hostetler
1050 Connecticut Ave., N.W.
Washington, DC 20036-5304
(202) 861-1500; Fax: _____________
Timothy Smoot, Esq.
7002 Moody Street
Suite 112
LaPalma, CA 90623
(310)402-1801, Fax: (310)402-0643
- 27 -
<PAGE> 28
(b) To Bernstein:
Robert M. Bernstein
c/o Blue Jay Enterprises, Inc.
11835 West Olympic Boulevard
East Tower 705
Los Angeles, CA 90064
(310)208-5589, Fax: (310)473-3177
With a copy to:
C. Timothy Smoot, Esq.
Suite 112
7002 Moody Street
LaPalma, CA 90623-1181
(310)402-1801, Fax: (310)402-0643
(c) To Shareholders:
United Dynamatics, Inc.
118 Pickering Way, Suite 104
Exton, Pennsylvania 19341
(610)363-8237; Fax: (610)524-8715
Attention C. Eugene Hutcheson
With copies to:
- 28 -
<PAGE> 29
Peggy E. Brever, Esq.
Michael Best & Friedrich
100 East Wisconsin Avenue
Milwaukee, WI 53202
(414)271-6560: Fax: (414)277-0656
Barrett & Schuler
1000 Thomas Jefferson Street
Suite 305
Washington, DC 20007
Attention; David M. Barrett
(202) 728-0888; Fax: (202) 296-7490
12.2 Entire Agreement. This Agreement supersedes any other
discussions and agreement between the parties hereto with respect to he matters
contained herein, and this Agreement and the agreements to be executed and
delivered pursuant hereto and thereto contain the sole and entire agreement
between the parties hereto with respect to the transactions contemplated herein
and therein.
12.3 Amendments and Waivers. This Agreement may
be amended only by an instrument in writing executed by the party against whom
enforcement of the amendment is sought. The president or any vice president of
any corporate party may by a signed writing give any consent, take any action,
waive any inaccuracies in representations or other compliance by any other
party to any
- 29 -
<PAGE> 30
of the covenants or conditions herein, modify the terms of this Agreement to
take any other action deemed by him to be necessary or appropriate to
consummate the transactions contemplated by this Agreement.
12.4 Counterparts; Headings. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument. The headings herein set out
are for convenience of reference only and shall not be deemed a part of this
Agreement.
12.5 Binding Effect; Assignment. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, successors and assigns. The Shareholders shall have the right to assign
all or any portion of their rights under this Agreement to any of their
affiliates at any time without the consent of Blue Jay or Bernstein; provided,
however, that notwithstanding such assignment, the assigning Shareholder(s)
shall remain obligated to Blue Jay pursuant to the terms and conditions of this
Agreement.
12.6 Governing Law. The validity and effect of this Agreement shall
be governed by and construed and enforced in accordance with the laws of the
Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties have executed this First Amended
Agreement as of the date first written above.
- 30 -
<PAGE> 31
BLUE JAY ENTERPRISES, INC.
By: /s/ ROBERT M. BERNSTEIN
---------------------------
Robert M. Bernstein
President
/s/ ROBERT M. BERNSTEIN
---------------------------
Robert M. Bernstein
DARNLEY HOLDINGS, LTD.
By: /s/ C. EUGENE HUTCHESON PA /s/ FRANK HOLZE
---------------------------
E.E.T.C., Ltd.
By: /s/ C. EUGENE HUTCHESON PA /s/ FRANK HOLZE
---------------------------
Frank B. Holze
President
/s/ C. EUGENE HUTCHESON PA /s/ FRANK HOLZE
---------------------------
Frank B. Holze
CAPITAL IDEA, INC.
By: /s/ C. EUGENE HUTCHESON
---------------------------
C. Eugene Hutcheson
President
/s/ CHARLOTTE E. DOREMUS
---------------------------
Charlotte E. Doremus
Secretary
/s/ DAVID M. BARRETT
---------------------------
David M. Barrett
- 31 -
<PAGE> 32
INDEX OF EXHIBITS AND SCHEDULES
Schedule 2.4 Blue Jay Common Stock to be Received by each
Shareholder
Schedule 3.1 Ownership of Shares
Schedule 4.2 Options for UDI stock
Schedule 4.3 UDI, Dynamatic or Kenosha Litigation
Exhibit A Escrow Agreement
Exhibit B None
Exhibit C Bernstein Option Agreement
Exhibit D Pledge Agreement
Exhibit E Bernstein Consulting Agreement
<PAGE> 1
EXHIBIT 10.2
SECOND AMENDMENT TO
PURCHASE AND SALE AGREEMENT
This Second Amendment to the Purchase and Sale Agreement (the
"Agreement") is entered into this 2nd day of September, 1996 by and between
Blue Jay Enterprises, Inc., a Delaware corporation ("Blue Jay"), Robert M.
Bernstein ("Bernstein"), and the following shareholders of United Dynamatics
Inc., a Delaware corporation ("UDI"); Darnley Holdings, Ltd., a Bahamian
corporation ("Darnley"); Capital Idea, Inc., a Colorado corporation; and EETC,
Ltd., a Delaware corporation, Frank B. Holze and David M. Barrett (hereinafter
the foregoing shareholders collectively are referred to as "Shareholders" and
individually referred to as a "Shareholder").
RECITALS
WHEREAS, the parties hereto, except Darnley, entered into a Purchase
and Sale Agreement as of May 17, 1996, as amended by a July 31, 1996 First
Amended Purchase and Sale Agreement (collectively, the "Amended Agreements");
WHEREAS, the parties desires to further amend the Amended Agreements
as hereinafter set forth.
NOW, THEREFORE, the parties hereby further amend the Amended
Agreements as follows:
1. Section 2.1 of the Amended Agreements is hereby deleted in its
entirety and replaced with the following:
2.1 Consideration. The consideration to be paid by Blue
Jay for the UDI Shares shall be in the form of shares of Blue
Jay Common Stock in the ratio of 3826.59 shares of newly
issued Blue Jay Common Stock for each outstanding share of UDI
Common Stock, or an aggregate 4,086,794 shares of Blue Jay
Common Stock (the "Blue Jay Shares").
2. Schedule 2.4 to the Amended Agreements is deleted in its
entirety and replaced with Schedule 2.4 to this Agreement.
3. Except as expressly stated herein, the terms and conditions of
the Amended Agreements shall remain in full force and effect unchanged, and the
same are hereby ratified, confirmed and reaffirmed in all respects and Lender
shall not be deemed to have waived any of its rights thereunder.
4. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original,
<PAGE> 2
but all of which together shall constitute one and the same instrument.
5. The validity and effect of this Agreement shall be governed by
and construed and enforced in accordance with the laws of the Commonwealth of
Pennsylvania.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
BLUE JAY ENTERPRISES, INC.
By: /s/ ROBERT M. BERNSTEIN
---------------------------
Robert M. Bernstein
President
/s/ ROBERT M. BERNSTEIN
------------------------------
Robert M. Bernstein
DARNLEY HOLDINGS, LTD.
By: /s/ FRANK HOLZE
---------------------------
E.E.T.C., Ltd.
By: /s/ FRANK HOLZE
---------------------------
Frank B. Holze
Director
/s/ FRANK HOLZE
---------------------------
Frank B. Holze
CAPITAL IDEA, INC.
By: /s/ C. EUGENE HUTCHESON
---------------------------
C. Eugene Hutcheson
President
/s/ CHARLOTTE E. DOREMUS
---------------------------
Charlotte E. Doremus
Secretary
/s/ DAVID M. BARRETT
---------------------------
David M. Barrett
- 2 -
<PAGE> 3
Schedule 2.4
Blue Jay common stock to be received by each shareholder:
<TABLE>
<S> <C>
Capital Idea 2,174,123
Darnley 500,000
Holze 688,805
Barrett 723,866
---------
Total 4,086,794
</TABLE>
<PAGE> 1
EXHIBIT 10.3
SECOND AMENDED
PURCHASE AND SALE AGREEMENT
This SECOND AMENDED PURCHASE AND SALE AGREEMENT (the "Agreement") is
entered into this 2nd day of September, 1996 by and between Blue Jay
Enterprises, Inc., a Delaware corporation ("Blue Jay"), Robert M. Bernstein
("Bernstein") and Capital Idea, Inc. a Colorado corporation ("Seller").
RECITALS
WHEREAS, the parties hereto entered into a Purchase and Sale Agreement
dated as of May 17, 1996 and a First Amended Purchase and Sale Agreement dated
as of July 31, 1996 (collectively, the "Amended Agreements").
WHEREAS, the parties desire to further amend the Amended Agreements to
read in its entirety as hereinafter set forth.
NOW, THEREFORE, the parties hereby amend the Amended Agreements to
read in its entirety as follows:
WHEREAS, Seller is the owner of that certain 11% Subordinated Note due
2002 of Maxwell Dynamometer Systems, Inc. ("Maxwell") dated May 19, 1994 in
the principal amount of $542,000, that certain Promissory Note of Maxwell dated
August 15, 1996 in the principal amount of $313,000, and that certain Revenue
Note Agreement of Maxwell dated May 19, 1994 (collectively, the "Notes").
WHEREAS, Seller desires to sell and Blue Jay desires to purchase the
Notes on the terms and conditions hereinafter set forth for consideration of
shares of common stock, $.001 par value per share, of Blue Jay ("Blue Jay
Common Stock").
WHEREAS, this transaction, together with the transactions contemplated
by that Purchase and Sale Agreement of even date herewith between Blue Jay and
the shareholders of United Dynamatics, Inc. (the "UDI Agreement"), as amended,
is intended to qualify as a tax free exchange under Section 351(a) of the
Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
AGREEMENT:
ARTICLE I
PURCHASE AND SALE
1.1 Purchase and Sale. Subject to the terms and
conditions hereinafter set forth, on the Final Closing Date (as
<PAGE> 2
hereinafter defined), Seller shall sell and deliver to Blue Jay, and Blue Jay
shall purchase from Seller, the Notes.
ARTICLE II
CONSIDERATION; CLOSING
2.1 Consideration. The consideration to be paid by Blue
Jay for the Notes shall be 2,429,737 shares of newly issued Blue Jay Common
Stock (the "Blue Jay Shares").
2.2 Escrow Arrangement. The Seller, Blue Jay and Firstar
Trust Company, as escrow agent (the "Escrow Agent"), have entered into an
escrow agreement in the form attached hereto as Exhibit B, as amended, ("the
Escrow Agreement") pursuant to which, (a) Seller is delivering to the Escrow
Agent the Notes and (b) Blue Jay is delivering to the Escrow Agent the Blue Jay
Shares, all of which shares shall be held by the Escrow Agent in accordance
with the Escrow Agreement.
2.3 Closing. The closing in escrow of the transactions
contemplated hereby ("Escrow Closing") was held at Trafalgar Financial
Services, Inc., 126 State Street, Boston, Massachusetts at 1:00 P.M. May 17,
1996. The "Final Closing Date" shall mean the date on which the Escrow Agent
releases the documents pursuant to Section 3.1(a) of the Escrow Agreement which
shall be the first business day following satisfaction of all closing
conditions set forth in Article VII and VIII hereof.
2.4 Deliveries on the Final Closing Date. On the Final
Closing Date:
(a) Seller and Blue Jay shall deliver to the Escrow Agent the
Notice of Release referred to in the Escrow Agreement;
(b) The Escrow Agent shall deliver to Blue Jay the Notes; and
(c) The Escrow Agent shall deliver to Seller certificates
representing the Blue Jay Shares.
ARTICLE III
REPRESENTATIONS OF SELLER
In order to induce Blue Jay to enter into this Agreement, Seller makes
the following representations and warranties to Blue Jay.
- 2 -
<PAGE> 3
3.1 Organization and Qualification. Seller is a
corporation duly organized and validly existing and in good standing under the
laws of the State of Colorado.
3.2 Enforceability; Conflicting Obligations. Seller has
all necessary power and authority to enter into and consummate the transactions
contemplated by this Agreement in accordance with its terms and to sell and
transfer the Notes to Blue Jay. This Agreement has been duly authorized by
Seller, constitutes Seller's valid and binding obligation, and is enforceable
against Seller in accordance with its terms. The execution and delivery of
this Agreement do not, and the consummation of the sale of the Notes will not,
conflict with or violate the provisions of any order, writ, decree, agreement,
contract, restriction or organizational documents to which Seller is a party,
or to which such Seller is bound.
3.3 Investment Intent. The Blue Jay Common Stock being
acquired by Seller hereunder is being acquired for investment and not with a
view toward distribution thereof. Such shares have not been registered under
the Securities Act of 1933 or any state securities laws and may be resold only
pursuant to an effective registration covering such shares or pursuant to an
available exemption from registration. Certificates representing Blue Jay
Common Stock shall bear the following legend:
The securities evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended, or the Securities Laws
of any state, but have been issued in reliance upon exemptions
therefrom. The Securities may not be offered, sold, pledged or
otherwise transferred without registration under the Act or the
opinion of counsel satisfactory to the Corporation that an exemption
from registration is available or that such transfer may otherwise
lawfully be made.
3.4 Brokers. Seller has not incurred or made commitments
for, any brokerage, finders' or similar fees in connection with the
transactions contemplated by this Agreement except as set forth in that
engagement letter dated April 15, 1996 between Trafalgar Securities, Inc.,
United Dynamatics, Inc. and Seller.
3.5 Representations and Warranties True and Correct. The
representations and warranties contained herein, and all other documents,
certifications, materials and written statements or written information given
to Blue Jay by or on behalf of Seller, do not include any untrue statement of a
material fact or omit to state a material fact required to be stated herein or
therein in order to make the statements herein or therein, in
- 3 -
<PAGE> 4
light of the circumstances under which they are made, not misleading.
ARTICLE IV
REPRESENTATIONS OF BLUE JAY
In order to induce Seller to enter into this Agreement, Blue Jay makes
the following representations and warranties to the Shareholders.
4.1 Organization. Blue Jay is duly organized, validly
existing and in good standing under the laws of the State of Delaware with all
requisite power and authority to own, lease and operate its properties and to
conduct its business as currently operated and conducted.
4.2 Capitalization of Blue Jay. The authorized capital
stock of Blue Jay consists of 50,000,000 shares of Common Stock, $.001 par
value per share, of which 724,059 shares are issued and outstanding. All of
such outstanding shares have been issued pursuant to and in accordance with
effective registration statements under the 1933 Act and in compliance with
applicable state securities laws or pursuant to valid exemptions from
registration under the 1933 Act and any applicable state securities laws and
rules and regulations under such laws. All of the outstanding shares of Blue
Jay Common Stock are duly authorized, validly issued, fully paid and
nonassessable, and are free of pre-emptive rights. There are no other shares
of capital stock or other equity securities (or debt securities with any voting
rights or convertible into securities with any voting rights) of Blue Jay
outstanding and no outstanding options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities
or rights convertible into, shares of capital stock of Blue Jay, except for
400,000 shares of Blue Jay Common Stock to be issued to Bernstein upon exercise
of the Option Agreement.
4.3 Authorization. Blue Jay has full power and authority
to enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by Blue Jay's Board
of Directors and no other corporate proceedings on the part of Blue Jay are
necessary to authorize this Agreement or the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Blue Jay and is the
legal, valid and binding obligation of Blue Jay, enforceable against Blue Jay
in accordance with its terms.
- 4 -
<PAGE> 5
4.4 Reports and Financial Statements. Blue Jay has filed
all reports on Form 10-Q, Form 10-QSB and Form 10-K required to be filed with
the Securities and Exchange Commission (the "SEC") pursuant to the Securities
Exchange Act of 1934, as amended (the "1934 Act") since 1986 (collectively, the
"SEC Reports"). Each of the balance sheets (including the related notes)
included in the SEC Reports fairly presents in all material respects the
financial position of Blue Jay as of the date thereof, and each of the income
statements and statements of cash flow (including the related notes) included
therein fairly present in all material respects the results of operations and
cash flows of Blue Jay for the period or as of the date set forth therein, all
in conformity with generally accepted accounting principles consistently
applied during the periods involved, except as otherwise noted therein and
subject, in the case of unaudited interim financial statements, to normal
year-end adjustments and any other adjustments described therein.
4.5 Litigation. There are no claims, suits, actions,
arbitrations, administrative proceedings or investigations, pending or, to Blue
Jay's or Bernstein's knowledge, threatened against Blue Jay or Bernstein that
could have a material adverse effect on Blue Jay or restrict the ability of
Blue Jay to consummate the transactions contemplated by this Agreement or the
other agreements referred to herein.
4.6 Brokers. Neither Blue Jay nor Bernstein has incurred
or made commitments for, any brokerage, finders' or similar fees in connection
with the transactions contemplated by this Agreement.
ARTICLE V
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
5.1 Survival of Representations. None of the
representations or warranties made by any party to this Agreement shall survive
the Final Closing Date, unless the party making the representation or warranty
knew such representation or warranty was false at the time it was made or as of
the Final Closing Date.
5.2 Agreement to Indemnify.
(a) Bernstein shall indemnify, defend and hold harmless Capital Idea
and each officer, director employee or agent (collectively the "Indemnified
Parties"), from and against all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs and expenses, including
interest, penalties and reasonable attorneys' fees and expenses
- 5 -
<PAGE> 6
(collectively, "Damages"), asserted against, resulting to, imposed upon or
incurred by any Indemnified Party, directly or indirectly, during the one-year
period following the Closing, by reason of or resulting from any claims by
stockholders of Blue Jay challenging the fairness of the transactions
contemplated by this Agreement or any claims by stockholders of Blue Jay
arising out of any transaction by or activities of Blue Jay prior to the
Closing Date.
(b) The obligations of Bernstein set forth in paragraph (a) above
shall be secured by and limited to a pledge by Bernstein to Seller, of shares
of Blue Jay Common Stock and an option to purchase shares of Blue Jay Common
Stock pursuant to the Pledge Agreement in substantially the form of Exhibit C
attached hereto (the "Pledge Agreement").
(c) For purposes of satisfying any claim for Damages under this
Section 5.2, the value of the pledged Blue Jay Common Stock shall be the
average of the daily market prices of the Blue Jay Common Stock for the 10
trading days immediately preceding final agreement between Bernstein and the
Indemnified Parties, or final adjudication by a court of competent
jurisdiction, of such claim. For purposes of this Section 5.2(c), the market
price for each trading day shall be the closing price on such day on the
principal securities exchange or market in which the Blue Jay Common Stock is
then traded or, if no sale takes place on such day, the average of the closing
bid and asked prices on such day.
ARTICLE VI
COVENANTS PENDING THE CLOSING DATE
6.1 Operation of Business. From the date hereof and
until the Closing Date, without the prior written consent of the Seller, Blue
Jay shall not:
(a) Increase Compensation. Grant or promise any increase
in compensation to any shareholder, officer, employee or director, nor, by
means of any bonus, profit-sharing, incentive compensation payment, pension,
retirement, medical hospitalization, life insurance or other insurance plan or
plans, or otherwise, increase in any amount the benefits or compensation of any
such employees, directors or officers;
(b) Employment and Labor Contracts. Enter into, amend or
renew or extend any employment contract or collective bargaining agreement;
(c) Disposition of Assets. Sell or dispose of, or
encumber, mortgage or pledge any asset;
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(d) Capital Expenditures. Make any capital expenditures,
or enter into any lease of capital equipment or real estate;
(e) Contracts. Enter into any contract, except as
contemplated by this Agreement.
(f) Create or Incur Indebtedness. Enter into any
transaction, or create, assume, incur or guarantee any indebtedness;
(g) Issue Stock; Distributions on Stock. Except for the
option referred to in Section 5.2(b) hereof, authorize or issue any shares of
capital stock or other securities convertible into or exercisable for capital
stock, or declare or pay any dividend or make any sale of, or distribution with
respect to, any capital stock or directly or indirectly redeem, purchase or
otherwise acquire any capital stock;
(h) Accounting Procedures. Change any accounting
procedures or practices or its financial structure;
(i) Charter Amendments. Make any amendments to or
changes in its certificate of incorporation or bylaws;
(j) Breach of Contract. Perform any act, or attempt to
do any act, or permit any act or omission to act, which will cause a breach of
any contract, agreement, instrument, document, lease, license, permit,
indenture or other obligation to which it is a party or to which it is bound.
6.2 Access Prior to Closing. Blue Jay shall permit the
Seller and its counsel, accountants and other representatives full access
during normal business hours to all of the offices, properties, books and
records and contracts of Blue Jay in order that the Seller may have full
opportunity to make such investigations as it shall desire of Blue Jay in
connection with the transactions contemplated by this Agreement, and shall
furnish the Seller during such period with all such additional financial and
operating data and other information as the Seller or its representatives may
from time to time reasonably request.
6.3 Acquisition Proposals. From and after the date
hereof and until the earlier of the consummation of the transactions
contemplated by this Agreement or the termination of this Agreement, neither
Blue Jay nor Bernstein shall (a) solicit or authorize any person to solicit,
directly or indirectly, any inquiries, proposals or offers from any person
relating to any acquisition or purchase of all or substantially all the assets
of, or any equity interest in, or any merger, consolidation or business
combination with, Blue Jay (an "Acquisition Transaction"), (b) enter into any
agreement with respect to any
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Acquisition Transaction, or (c) participate in any negotiations regarding,
cooperate with, facilitate or encourage an Acquisition Transaction or furnish
to any other person any non-public information concerning Blue Jay in
connection therewith. Blue Jay shall immediately notify the Seller if any
proposal or offer with respect to an Acquisition Transaction is received by
Blue Jay and communicate to the Representative the terms of any such proposal
or offer.
ARTICLE VII
CONDITIONS OF SELLER'S OBLIGATION TO CLOSE
The obligation of Seller to consummate the transactions contemplated
by this Agreement shall be subject to the satisfaction and fulfillment, prior
to or on the Final Closing Date, of each of the following conditions:
7.1 Representation and Warranties. The representations
and warranties in this Agreement made by Blue Jay and Bernstein shall be true
and correct in all respects as of and at the Final Closing Date.
7.2 Performance of Covenants and Obligations. Blue Jay
shall have performed and complied with all of its covenants and obligations
under this Agreement which are to be performed or complied with by Blue Jay
prior to or on the Final Closing Date.
7.3 Closing of UDI, Inc. Agreement. The transactions
contemplated by the UDI Agreement shall have been consummated prior to or on
the Final Closing Date.
7.4 Bernstein Agreements. Bernstein shall have cancelled
Blue Jay's Convertible Note dated January 16, 1988 in the principal amount of
$10,000 for Blue Jay's agreement to pay all liabilities of Blue Jay to
Bernstein as of the date hereof in an amount not to exceed $25,000 and (ii)
executed a Consulting Agreement in the form attached hereto as Exhibit D.
7.5 Pledge Agreement. Bernstein shall have executed and
delivered to Seller the Pledge Agreement.
7.6 Investigation of Blue Jay. The Seller shall have
completed its review of such books, records, accounts, contracts and documents
of or relating to the financial condition, liabilities, results of operations,
business and prospects of Blue Jay and such other inquiries or investigations
as it deems necessary or advisable and the results of such review shall be
satisfactory to the Seller in its sole discretion. Without limiting the
generality of the foregoing, the Seller shall be
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satisfied that (a) Blue Jay has no liabilities or obligations, whether
absolute, accrued, contingent or otherwise and whether due or to become due,
that are not fully reflected on the balance sheet of Blue Jay as of March 31,
1996, (b) there are no claims, suits, actions, arbitrations, administrative
proceedings or investigations pending or threatened against Blue Jay that could
have a material adverse effect on Blue Jay, (c) that the Blue Jay common Stock
to be issued pursuant to that Agreement and the UDI Agreement when issued will
be validly issued, fully paid and non assessable and (d) there is no reasonable
basis for the assertion against Blue Jay of any such liability or obligation or
for the assertion or commencement of any such claim, suit, action, arbitration,
administrative proceeding or investigation.
ARTICLE VIII
CONDITIONS TO BLUE JAY'S OBLIGATION TO CLOSE
The obligation of Blue Jay to consummate the transactions contemplated
by this Agreement shall be subject to the satisfaction and fulfillment, prior
to or on the Final Closing Date of each of the following conditions:
8.1 Representations and Warranties. The representations
and warranties in this Agreement made by the Shareholders shall be true and
correct in all respects as of and at the Final Closing Date.
8.2 Performance of Covenants and Obligations. The Seller
shall have performed and complied with all of its material covenants and
obligations under this Agreement.
8.3 Closing of the UDI Agreement. The transactions
contemplated by the UDI Agreement shall have been consummated prior to or on
the Final Closing Date.
ARTICLE IX
OTHER AGREEMENTS
9.1 Cooperation: Public Announcements. Seller and Blue
Jay shall cooperate fully with each other and their respective counsel and
accountants in connection with any actions that may be required to be taken in
order to satisfy their respective obligations under this Agreement. Seller and
Blue Jay shall cooperate with each other in the preparation of any press
releases in connection with the transactions contemplated by this Agreement and
in the preparation and filing of any documents with
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the Securities and Exchange Commission or any state securities agency required
as a result of such transactions. Except upon the advice of counsel or as may
be required by law (and in either case upon notice to the other party), neither
Seller nor Blue Jay will, without prior consultation with the other, make any
press release or announcement to the public concerning the transactions
contemplated by this Agreement.
9.2 Confidentiality. Each party to this Agreement
understands that certain information which it has been furnished and will be
furnished in connection with this Agreement is confidential and proprietary,
and agrees that it will maintain the confidentiality of such information and
will not disclose it to others or use it, except in connection with the
transaction contemplated hereby, without the consent of the party furnishing
such information. Information which is generally known in the industry
concerning a party or among such party's creditors, generally, or which has
been disclosed to the other party by third parties which have right to do so,
shall not be deemed confidential or proprietary information for these purposes.
In the event that a party is at any time requested or required (by oral
questions, interrogatories, requests for information or documents, subpoena or
similar process) to disclose any information supplied to such party in
connection with such transaction, such party agrees to provide the party
furnishing such information with prompt notice of such request(s) so that the
party furnishing such information may seek an appropriate protective order
and/or waive compliance of the party receiving such information with the terms
of this Section 9.2. Notwithstanding the terms of this Section 9.2, if, in the
absence of a protective order or the receipt of a waiver hereunder, the party
receiving such information is nonetheless, in the opinion of its counsel,
required to disclose information obtained in connection with such transaction
or else stand liable for contempt or suffer other censure or penalty, the party
receiving such information may disclose such information, to the extent and in
the manner so required, without liability hereunder. In the event that such
transaction is not consummated, each party agrees to promptly return all
confidential materials (and all copies thereof) which have been furnished to
him regarding the business and financial condition of the other party,
including all financial statements, reports, contracts, customer lists,
accounts, records, tax returns, data, plans, processes and trade secrets except
to the extent any such documents shall otherwise be publicly available.
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ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated in the
following circumstances:
(a) By mutual consent of Seller and Blue Jay;
(b) By Seller in the event the conditions in
Article VII of this Agreement are not satisfied or waived on or before July 31,
1996;
(c) By Blue Jay in the event the conditions in
Article VIII of this Agreement are not satisfied or waived on or before July
31, 1996.
10.2 Effect of Termination. In the event this Agreement
is terminated pursuant to this Article X, this Agreement shall be void and have
no further force and effect.
ARTICLE XI
MISCELLANEOUS
11.1 Notices, Etc. All notices, requests, demands, and
other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given when delivered by hand, telegram, telex
or telecopy (receipt confirmed) or seventy-two hours after being mailed, first
call, certified mail, postage prepaid:
(a) To Blue Jay:
Blue Jay Enterprises, Inc.
11835 West Olympic Boulevard
East Tower 705
Los Angeles, CA 90064
(310)208-5589, Fax: (310)473-3177
Attention: Robert M. Bernstein
With copies to:
Joseph M. Berl
Baker & Hostetler
1050 Connecticut Ave., N.W.
Washington, DC 20036-5304
(202) 861-1500; Fax: (202)861-1783
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Timothy Smoot, Esq.
7002 Moody Street
Suite 112
LaPalma, CA 90623
(310)402-1801, Fax: (310)402-0643
(b) To Bernstein:
Robert M. Bernstein
c/o Blue Jay Enterprises, Inc.
11835 West Olympic Boulevard
East Tower 705
Los Angeles, CA 90064
(310)208-5589, Fax: (310)473-3177
(c) To Seller:
Capital Idea, Inc.
118 Pickering Way, Suite 104
Exton, Pennsylvania 19341
(610)363-8237; Fax: (610)524-8715
Attention C. Eugene Hutcheson
With copies to:
Peggy E. Brever, Esq.
Michael Best & Friedrich
100 East Wisconsin Avenue
Milwaukee, WI 53202
(414)271-6560: Fax: (414)277-0656
Barrett & Schuler
1000 Thomas Jefferson Street
Suite 305
Washington, DC 20007
Attention; David M. Barrett
(202) 728-0888; Fax: (202) 296-7490
11.2 Entire Agreement. This Agreement supersedes any
other discussions and agreement between the parties hereto with respect to he
matters contained herein, and this Agreement and the agreements to be executed
and delivered pursuant hereto and thereto contain the sole and entire agreement
between the parties hereto with respect to the transactions contemplated herein
and therein.
11.3 Amendments and Waivers. This Agreement may be
amended only by an instrument in writing executed by the party against whom
enforcement of the amendment is sought. The president or any vice president of
any corporate party may by a signed writing give any consent, take any action,
waive any inaccuracies in representations or other compliance by any other
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party to any of the covenants or conditions herein, modify the terms of this
Agreement to take any other action deemed by him to be necessary or appropriate
to consummate the transactions contemplated by this Agreement.
11.4 Counterparts; Headings. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same instrument. The
headings herein set out are for convenience of reference only and shall not be
deemed a part of this Agreement.
11.5 Binding Effect; Assignment. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, successors and assigns. The Shareholders shall have the
right to assign all or any portion of their rights under this Agreement to any
of their affiliates at any time without the consent of Blue Jay or Bernstein;
provided, however, that notwithstanding such assignment, the assigning
Shareholder(s) shall remain obligated to Blue Jay pursuant to the terms and
conditions of this Agreement.
11.6 Governing Law. The validity and effect of this
Agreement shall be governed by and construed and enforced in accordance with
the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
BLUE JAY ENTERPRISES, INC.
By: /s/ ROBERT M. BERNSTEIN
---------------------------
Robert M. Bernstein
President
By: /s/ HARVEY KRAVETZ
---------------------------
Harvey Kravetz
Secretary
CAPITAL IDEA, INC.
By: /s/ C. EUGENE HUTCHESON
---------------------------
C. Eugene Hutcheson
President
/s/ ROBERT M. BERNSTEIN
------------------------------
Robert M. Bernstein
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INDEX OF EXHIBITS AND SCHEDULES
Exhibit A None
Exhibit B Escrow Agreement
Exhibit C Pledge Agreement
Exhibit D Consulting Agreement
