UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Schedule 13D
Under the Securities Exchange Act of 1934
AEL Industries, Inc.
(Name of Issuer)
Class A Common Stock
and
Class B Common Stock
(Title and Class of Securities)
001030105
001030204
(CUSIP Number)
Vincent F. Garrity, Jr., Esquire
John W. Kauffman, Esquire
Duane, Morris & Heckscher
One Liberty Place, Philadelphia, PA 19103-7396
(215) 979-1227
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
February 28, 1995
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following: / /
Check the following box if a fee is being paid with this statement. /X/
SCHEDULE 13D
1. Name of Reporting Person: Class A Voting Trust,
Francis J. Dunleavy, Frederick R. Einsidler, Conrad
J. Fowler and Leeam Lowin, Voting Trustees
Under Voting Trust Agreement Dated as of February 28, 1995
I.R.S. Identification No.: Not applicable.
2. Check the Appropriate Box if a Member of a Group (a)/X/
(b)/ /
3. SEC Use Only
4. Source of Funds:Not applicable.
5. Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e) ___
6. Citizenship or Place of Organization: United States of America
Number of Shares 7. Sole Voting Power: 0
of Class A Common
Stock Beneficially Owned 8. Shared Voting Power: 191,593
by Each Reporting Person
with 9. Sole Dispositive Power: 0
10. Shared Dispositive Power: 191,593
11. Aggregate Amount Beneficially Owned by Each Reporting Person:
191,593
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares:
/X*/
13. Percent of Class Represented by Amount in Row (11): 5.41%
14. Type of Reporting Person: OO
*See Item 4 and Item 5 of this Schedule 13D.
SCHEDULE 13D
1. Name of Reporting Person: Class B Voting Trust,
Francis J. Dunleavy, Frederick R. Einsidler, Conrad
J. Fowler and Leeam Lowin, Voting Trustees
Under Voting Trust Agreement Dated as of February 28, 1995
I.R.S. Identification No.: Not applicable.
2. Check the Appropriate Box if a Member of a Group (a) /x/
(b) / /
3. SEC Use Only
4. Source of Funds: Not applicable.
5. Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e) / /
6. Citizenship or Place of Organization: United States of America
Number of Shares 7. Sole Voting Power: 0
of Class B Common
Stock Beneficially Owned 8. Shared Voting Power: 241,262
by Each Reporting Person
with 9. Sole Dispositive Power: 0
10. Shared Dispositive Power: 241,262
11. Aggregate Amount Beneficially Owned by Each Reporting Person:
241,262
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares:
/X*/
13. Percent of Class Represented by Amount in Row (11): 55.5%
14. Type of Reporting Person: OO
*See Item 4 and Item 5 of this Schedule 13D
PRELIMINARY NOTE
As more fully described in Items 1 and 4 of this Schedule 13D, the
Voting Trustees of the Class A Voting Trust and the Class B Voting Trust
are required to vote the shares of Class A Common Stock and Class B Common
Stock of the Company that have been deposited into the respective trusts in
accordance with the terms of the Voting Trust Agreement, which provides for
votes to be cast by the Voting Trustees in the manner summarized in Item 4
below. The Voting Trustees believe that none of them individually has or
shares the power to vote or dispose of any of the shares of Class A Common
Stock or Class B Common Stock deposited in the Voting Trusts apart from
their roles as Voting Trustees, whose determinations are made by majority
vote as long as there are at least three members of such committee or
unanimously if there are fewer than three members, as described more fully
in Item 4 below.
Inasmuch as the Voting Trusts and the Voting Trustees, solely with
respect to shares held by the Voting Trusts, may be deemed members of a
group under Rule 13d-5(b), the Voting Trustees have determined to jointly
file this Schedule 13D on behalf of each Voting Trust, and hereby agree
that this Schedule 13D is being filed on behalf of each of the Voting
Trusts pursuant to Rule 13d-3(f)(iii).
The information provided herein with respect to the shares of Class A
Common Stock held by the Class A Voting Trust and the Voting Trustees is
provided for informational purposes only, and the furnishing of such
information is subject to the position that such shares are not required to
be reported on Schedule 13D inasmuch as the Class A Common Stock is not a
class of "voting securities" as defined Rule 12b-2 and thus is not a class
of "equity securities" for purposes of Rule 13d-1(d).
The capitalized terms used in this Preliminary Note have the
respective meanings ascribed to them in Items 1, 2 and 4 of this Schedule
13D.
Item 1. Security and Issuer.
The title of the classes of equity securities to which this Schedule
13D relates are Class A Common Stock, par value $1.00 per share ("Class A
Common Stock"), of AEL Industries, Inc. (the "Company") and Class B Common
Stock, par value $1.00 per share ("Class B Common Stock"), of the Company.
The address of the principal executive offices of the Company is 305
Richardson Road, Lansdale, Pennsylvania 19446-1485.
On February 28, 1995, Leon Riebman and Claire E. Riebman, husband and
wife (hereinafter sometimes collectively referred to as the "Riebmans"), as
more fully described in Item 4 below, (a) acquired 180,947 shares of Class
A Stock from the Company and (b) transferred legal title to all shares of
Class A Stock held by them, including the shares referred to in clause (a)
of this Item 1, and all shares of Class B Stock held by them to the "Voting
Trustees" to be maintained by the "Voting Trustees" in the "Class A Voting
Trust" and the "Class B Voting Trust," respectively (as defined in Item 2
below) . As a result of the aforementioned transfer by the Riebmans, the
Voting Trustees under the respective two voting trusts hold legal title to,
and certain voting rights with respect to, (i) 10,646 shares of Class A
Stock previously held by the Riebmans (the "Existing Class A Shares"), (ii)
the 180,947 shares of Class A Stock that the Riebmans acquired from the
Company (the "Contingent Shares") and (iii) 241,262 shares of Class B Stock
previously held by the Riebmans (the "Existing Class B Shares"), all as
more particularly described in Item 2 and Item 4 of this Schedule 13D.
Item 2. Identity and Background
(a) Names: Class A Voting Trust, Francis J. Dunleavy, Frederick R.
Einsidler, Conrad J. Fowler and Leeam Lowin, Voting
Trustees Under Voting Trust Agreement Dated February
28, 1995 (the "Class A Voting Trust")
Class B Voting Trust, Francis J. Dunleavy, Frederick R.
Einsidler, Conrad J. Fowler and Leeam Lowin, Voting
Trustees Under Voting Trust Agreement dated February
28, 1995 (the "Class B Voting Trust")
(Each of the Class A Voting Trust and the Class B
Voting Trust are hereinafter sometimes collectively
referred to herein as the "Voting Trusts")
(b) Business Address: c/o Duane, Morris & Heckscher
One Liberty Place
Philadelphia, PA 19103-7396
Attn: Vincent F. Garrity, Jr., Esquire
(c) Present Principal Occupation: Not Applicable.
(d) Not Applicable.
(e) Not Applicable.
(f) Citizenship: Not Applicable
The following information is being furnished with respect to each of
the individual voting trustees (the "Voting Trustees") for the Voting
Trusts:
Francis J. Dunleavy is a private investor whose business address is
c/o AEL Industries, Inc., 305 Richardson Road, Lansdale, PA 19446-1485.
Mr. Dunleavy is a citizen of the United States of America.
Frederick R. Einsidler is a private investor whose business address
is c/o AEL Industries, Inc., 305 Richardson Road, Lansdale, PA 19446-1485.
Mr. Einsidler is a citizen of the United States of America.
Conrad J. Fowler is a private investor whose business address is c/o
AEL Industries, Inc., 305 Richardson Road, Lansdale, PA 19446-1485. Mr.
Fowler is a citizen of the United States of America.
Leeam Lowin is a private investor and investment manager, as well as a
financial and business consultant, whose business address is c/o AEL
Industries, Inc., 305 Richardson Road, Lansdale, PA 19446-1485. Mr. Lowin
is a citizen of the United States of America.
During the five years prior to the date hereof, none of the Voting
Trustees (i) has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors), (ii) was a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction and as a
result of such proceeding was or is subject to judgement, decree or final
order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
The shares were acquired by the Voting Trusts in connection
with the Agreement and the Voting Trust Agreement, as described in Item 4
below. The Voting Trustees have agreed to vote such shares in accordance
with the terms of the Voting Trust Agreement, as more particularly summarized
in Item 4 of this Schedule 13D.
Item 4. Purpose of Transaction.
On February 28, 1995, the following agreements (collectively, the
"Agreements") were entered into by the parties indicated:
1. Agreement (the "Agreement") dated as of February 28, 1995 by and
among Leon Riebman and Claire E. Riebman and the Company, in the form filed
herewith as Exhibit A;
2. Voting Trust Agreement (the "Voting Trust Agreement") dated as of
February 28, 1995 by and among the Company, the Riebmans and the Voting
Trustees in the form filed herewith as Exhibit B;
3. 1995 Agreement (the "1995 Agreement") dated as of February 28,
1995 by and between the Company and Leon Riebman, in the form filed
herewith as Exhibit C; and
4. Participation Rights Agreement (the "Participation Rights
Agreement") dated as of February 28, 1995 by and between the Company and
Leon Riebman, in the form filed herewith as Exhibit D.
The Agreements are summarized below. However, such summaries are
qualified in their entirety by reference to Exhibits A through D filed
herewith.
The Agreement. As more particularly described in the Agreement, the
Board of Directors of the Company (the "Board") had previously appointed a
Long Range Planning Committee (the "LRPC") for the purpose of considering
strategic alternatives for the Company in view of recent and significant
developments and consolidations in the defense industry. After assessing
certain factors more particularly described in the Agreement, the LRPC
decided, because of its belief that it could thereby perform its duty to
realize for the shareholders of the Company ("Shareholders") the best value
reasonably available, to pursue the following course of action: (i) the
negotiation of an arrangement with Leon Riebman and Claire E. Riebman
whereby they would transfer their voting control of the Company to the
Voting Trustees under the Voting Trusts for a period of time expected to be
sufficient to complete a "Qualifying Business Combination" (as defined in
the Agreement), and (ii) the negotiation of an arrangement with Leon
Riebman regarding his future relationship with the Company. The Agreement,
the Voting Trust Agreement, the 1995 Agreement and the Participation Rights
Agreement embody the results of these negotiations.
Under the Agreement, in consideration for (a) the Riebman's agreement
to accept the same consideration and other terms in a Qualifying Business
Combination as the other shareholders, (b) their entering into the Voting
Trust Agreement, and (c) their transfer of Class A Stock and Class B Stock
to the Voting Trustees for a period of time expected to be sufficient to
complete a Qualifying Business Combination, as described below, the Company
issued the Contingent Shares to the Riebmans (180,947 shares of Class A
Stock, which represents .75 shares of Class A Stock for each share of Class
B Stock beneficially owned by them immediately prior to such issuance).
The Contingent Shares were issued subject to a condition subsequent, as
more particularly described below under the description of the Voting Trust
Agreement.
The Agreement is intended to enable the LRPC to negotiate a
"Qualifying Business Combination" for inclusion in a "Proposal" to be
submitted for "Shareholder Approval" (as such terms are defined in the
Agreement). As used in the Agreement:
(a) "Qualifying Business Combination" means a Business Combination
not inconsistent in any material respect with the terms of the Agreement
which has been recommended by the LRPC and pursuant to which an opinion
acceptable to the LRPC is issued to the Company by a nationally recognized
investment banking firm with respect to the fairness, from a financial
point of view, to the Shareholders of the consideration offered to them
under an agreement providing for such Business Combination ("Business
Combination Agreement").
(b) "Business Combination" means (i) a sale of all or substantially
all of the assets of the Company in one transaction or a series of related
transactions; (ii) the acquisition by a person or group of persons acting
in concert of the beneficial ownership of more than eighty percent of the
issued and outstanding Class A Stock and Class B Stock; (iii) a merger or
consolidation of the Company with another entity; or (iv) any transaction
having like effect.
(c) "Proposal" means a single proposition submitted to the
Shareholders consisting of (i) ratification of the Agreement, the Voting
Trust Agreement, the 1995 Agreement and the Participation Rights Agreement,
and (ii) approval of a Business Combination Agreement; and
(d) "Shareholder Approval" means the approval and adoption of the
Proposal by the affirmative vote of a majority of votes cast respectively
by (i) the holders of shares of Class A Stock and (ii) the holders of
shares of Class B Stock, each voting as a class.
Under the terms of the Agreement, the LRPC has committed in good faith
to use all reasonable efforts to arrange for a Qualifying Business
Combination but it shall not have any obligation to do so unless it deems
the terms thereof to be in the best interests of the Company and the
Shareholders. The LRPC has the right, in the exercise of its fiduciary
duty, to withdraw its recommendation of a Business Combination Agreement.
Except as otherwise provided in the Agreement, the Closing of a Qualifying
Business Combination may not occur within six months of the date of the
Agreement.
All actions by the Company contemplated by the Agreement, the Voting
Trust Agreement and the 1995 Agreement shall be taken on its behalf
exclusively by the LRPC, which has the full authority of the Board of
Directors of the Company for such purpose. All actions of the LRPC require
the approval of a majority of the members of the LRPC, unless there exist
at any time fewer than three members of the LRPC, in which case all actions
at such time shall require the unanimous approval of the members of the
LRPC.
As provided in the Agreement, it is the intent of the LRPC that all
holders of Class A Stock and Class B Stock will be offered the same
consideration and other terms in a Qualifying Business Combination. The
LRPC has engaged an investment banking firm, an employee benefits
consultant and independent legal counsel in connection with these matters.
The Agreement has an initial term of nine months commencing
February 28, 1995 (the "Initial Term") and can be extended, at the option
of the Company, for up to two additional periods of three months each (the
"First Renewal Term" and the "Second Renewal Term," respectively) upon
payment by the Company to the Riebmans of $100,000 for the First Renewal
Term and $300,000 for the Second Renewal Term. Such payments shall be
credited against, and reduce to that extent, the Consulting Payments
provided for in the 1995 Agreement. In addition, if the Company has
entered into a Business Combination Agreement which contemplates a
Qualifying Business Combination at any time during the Initial Term, the
First Renewal Term or the Second Renewal Term, but Shareholder Approval of
the Proposal has not yet been obtained, the Initial Term, the First Renewal
Term or the Second Renewal Term, as the case may be, will be automatically
extended, if it would have otherwise expired, until the earlier of (i) the
consummation of such Qualifying Business Combination ("Closing") or (ii)
the termination of such Business Combination Agreement pursuant to its
terms. However, if such termination occurs in connection with a
recommendation by the LRPC, in the exercise of its fiduciary duty, of an
alternative agreement which contemplates a Qualifying Business Combination,
the alternative agreement, if entered into by the Company during the
Initial Term, the First Renewal Term or the Second Renewal Term and
provided that the payments by the Company described in the first sentence
of this paragraph have been made in a timely manner, will replace the
terminated Business Combination Agreement for purposes of the
aforementioned automatic extension.
The Agreement may be terminated at the option of the Riebmans if (i)
the Voting Trustees materially breach the Voting Trust Agreement or (ii)
the Company materially breaches the Agreement or the 1995 Agreement. The
Agreement may be terminated at the option of the Company if (i) the
Riebmans materially breach the Voting Trust Agreement, (ii) the Riebmans
materially breach the Agreement or (iii) Leon Riebman materially breaches
the 1995 Agreement.
Unless the Agreement has previously expired or terminated, it will
terminate upon the earlier to occur of the following events: (i)
immediately prior to the Closing under a Qualifying Business Combination
which has been included in a Proposal as to which Shareholder Approval has
been obtained, (ii) immediately following the conclusion of a meeting of
Shareholders at which Shareholder Approval of such Proposal has been sought
but not obtained, or (iii) November 28, 1996.
The Company has agreed to make a payment to Leon Riebman in the amount
of $500,000 if (i) a Closing occurs under a Qualifying Business Combination
included within a Proposal as to which Shareholder Approval has been
obtained, and (ii) Leon Riebman's employment with the Company terminates
thereafter for any reason, voluntarily or involuntarily.
The Company has agreed to reimburse the Riebmans for the reasonable
fees and disbursements (not to exceed $75,000) of their counsel incurred in
connection with the negotiation of the Agreement. In addition, as more
particularly described in the Agreement, the Company has agreed to pay the
reasonable counsel fees and disbursements incurred by the Riebmans as
parties to the Agreement, the members of the LRPC, the Voting Trustees, any
director or officer of the Company, or any of them in defense of any
pending or threatened action, suit or proceedings whether by or in the
right of the Company or otherwise, involving the Agreement or any exhibit
thereto, subject to the Company's receipt of an undertaking by such person
or persons to repay the amount so advanced if it is ultimately determined
by a court that such payment was not proper in the circumstances.
In connection with the execution and delivery of the Agreement and the
Voting Trust Agreement, the Company's bylaws were amended so as to
effectuate the purposes of the Agreement and the Voting Trust Agreement.
The form of bylaw amendment is filed herewith as Exhibit F.
The Voting Trust Agreement. Pursuant to the Voting Trust Agreement,
the Riebmans transferred to the Voting Trustees to be maintained in the
respective Voting Trusts (i) the Existing Class A Shares (10,646 shares of
Class A Stock), (ii) the Contingent Shares (180,947 shares of Class A
Stock) and (iii) the Existing Class B Shares (241,262 shares of Class B
Stock) in exchange for Voting Trust Certificates representing the shares of
Class A Stock and Class B Stock so transferred. The shares of Class A
Stock so transferred to the Voting Trustees are held in the "Class A Voting
Trust" and the shares of Existing Class B Stock so transferred to the
Voting Trustees are held in the "Class B Voting Trust." The Contingent
Shares were issued subject to a condition subsequent, as more particularly
described below.
The sole purpose of the Voting Trust Agreement is to enable the Voting
Trustees (i) to vote the Existing Class A Shares and the Existing Class B
Shares in favor of a Qualifying Business Combination included in a Proposal
for Shareholder Approval and (ii) to vote for the election of directors of
the Company, all in accordance with the terms and provisions of the Voting
Trust Agreement.
In the election of directors of the Company, the Voting Trustees are
required to (a) vote for the election of two persons nominated by Leon
Riebman or his personal representatives, (b) vote for the reelection of
incumbent directors of the Company unless one or more of them determines
not to seek reelection, resigns or dies, (c) consult with Leon Riebman and
Claire E. Riebman prior to voting for the election of any other person as a
director of the Company, and (d) assure that at all times a majority of the
directors of the Company are "Independent Directors" (as such term is
defined in the Voting Trust Agreement). In connection with a Proposal, the
Voting Trustees are required to vote (i) the Contingent Shares in the same
proportion as the votes cast with respect to the Proposal by the other
holders of shares of Class A Stock and (ii) the Existing Class A Shares and
the Existing Class B Shares in favor of any Proposal recommended by the
LRPC. With respect to any action of Shareholders other than in connection
with the election of directors or a Qualifying Business Combination
included in a Proposal for Shareholder Approval, the Voting Trustees are
required to vote the Existing Class A Shares and the Existing Class B
Shares as directed in writing by the Riebmans. Except as provided in the
Voting Trust Agreement, in voting shares deposited under the Voting Trust
Agreement, the Voting Trustees shall act by majority vote, unless at any
time there exists fewer than three Voting Trustees, in which event all acts
of the Voting Trustees shall require the unanimous vote of the Voting
Trustees.
During the term of the Voting Trust Agreement, if a Voting Trustee
ceases to be a member of the LRPC for any reason whatsoever, such Voting
Trustee thereupon shall cease to be a Voting Trustee under the Voting Trust
Agreement. Upon appointment of a substitute member or members to the LRPC,
such member or members shall thereupon become a Voting Trustee or Trustees
under the Voting Trust Agreement.
During the term of the Voting Trust Agreement, without the prior
written consent of the Company and the Voting Trustees, Leon Riebman and
Claire E. Riebman are not permitted to transfer any interest in Class A
Stock or Class B Stock owned by them or any beneficial interests evidenced
by Voting Trust Certificates, except that (a) the executors of the estate
of either of them may succeed to such interests and will be bound by the
Voting Trust Agreement, and (b) either of them may make donative transfers
of such interests to and among themselves or to their issue so long as the
donees agree to be bound by the Voting Trust Agreement. During the term of
the Voting Trust Agreement, Leon Riebman and Claire E. Riebman have agreed
not to acquire any additional shares of Class A Stock or Class B Stock
except in connection with (i) the exercise of options existing on February
28, 1995 or (ii) beneficial ownership of shares of Class A Stock or Class B
Stock issued in connection with stock dividends or stock distributions.
Any such newly acquired shares shall be deposited into the respective
Voting Trust.
The term of the Voting Trust Agreement is coextensive with the term of
the Agreement. Upon termination of the Voting Trust Agreement the
certificates representing the Existing Class A Shares and the Existing
Class B Shares will be returned to the holder(s) of the Voting Trust
Certificates representing those shares. Upon the earliest to occur of the
following events, certificates representing the Contingent Shares, together
with any cash dividends or stock distributions received on the Contingent
Shares, will be delivered by the Voting Trustees to the following person or
persons:
(a) Immediately prior to the Closing under a Qualifying Business
Combination included in a Proposal as to which Shareholder Approval has
been obtained, in which event such delivery will be made to the holder(s)
of the Voting Trust Certificates representing the Contingent Shares in
proportion to their respective holdings;
(b) The expiration or termination of the Agreement for any reason
other than as contemplated by clause (a) above, in which event such
delivery will be made to the Company which will thereupon cancel the
Contingent Shares without payment of any consideration therefor;
(c) The receipt by the Voting Trustees of joint written instructions
from Leon Riebman and Claire E. Riebman and the Company in which event such
delivery will be made to the person or persons designated in such
instruction; or
(d) The receipt by the Voting Trustees of a certified copy of a final
non-appealable order of a court of competent jurisdiction providing for the
disposition of the Contingent Shares, in which event such delivery will be
made to the person or persons designated in such order.
The 1995 Agreement. Pursuant to the 1995 Agreement, Leon Riebman has
agreed (a) that he will not voluntarily retire from active employment with
the Company prior to the expiration or termination of the Agreement and (b)
that he will provide consulting services to the Company for a period of
three years (up to 130 days per year) commencing with the date on which he
voluntarily retires from active employment with the Company (the
"Consulting Commencement Date"). In addition, the 1995 Agreement contains
a supplementary provision which improves the Company's rights with respect
to the protection of proprietary information, intellectual property and
restrictions on competition.
In consideration for his provision of consulting services to the
Company, Leon Riebman will be entitled to specified fringe benefits and
will receive $675,000 payable as follows: (a) $300,000 on the Consulting
Commencement Date, (b) $225,000 on the first anniversary of the Consulting
Commencement Date, and (c) $150,000 on the second anniversary of the
Consulting Commencement Date. Payment of any of the aforementioned amounts
is conditioned upon certificates representing the Contingent Shares being
delivered to the holders of the Voting Trust Certificates representing the
Contingent Shares. Further, the Company will have no obligation to make
any such payment unless Leon Riebman is available on the payment date to
provide consulting services for the forthcoming year. In addition, any
payments made by the Company pursuant to the Agreement for the First
Renewal Term and the Second Renewal Term will be credited against, and
reduce to that extent, such payments. If the Agreement expires or
terminates for a reason other than the Closing of a Qualifying Business
Combination included within a Proposal as to which Shareholder approval has
been obtained, the 1995 Agreement will terminate and be of no further force
and effect.
Participation Rights Agreement. In consideration for agreeing to the
supplement in the 1995 Agreement which improves the Company's rights with
respect to the protection of proprietary information, intellectual property
and restrictions on competition, the Company has granted to Leon Riebman
the right to participate in the proceeds of a Qualifying Business
Combination ("Participation Payment"). If the "Aggregate Consideration"
(as defined in the Participation Rights Agreement) in connection with a
Qualifying Business Combination is equal to or greater than $60,000,000,
the Participation Payment will be $1,900,000. If the Aggregate
Consideration in connection with a Qualifying Business Combination is less
than $60,000,000, the Participation Payment will be an amount equal to the
product of $1,900,000, multiplied by a fraction, the numerator of which is
the amount of such Aggregate Consideration and the denominator of which is
$60,000,000. The Company's obligation to make the Participation Payment is
conditioned on the delivery of certificates representing the Contingent
Shares to the holder(s) of the Voting Trust Certificate(s) representing the
Contingent Shares.
Except as set forth in this Item 4, the Voting Trusts and the Voting
Trustees have no present plans or proposals which relate to or would result
in any of the following:
(a) The acquisition by any person of additional securities of the
Company, or the disposition of securities of the Company;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its
subsidiaries;
(c) A sale or transfer of a material amount of assets of the Company
or any of its subsidiaries;
(d) Any change in the present Board of Directors or management of the
Company, including any plans or proposals to change the number of term of
directors or to fill any existing vacancies on the Board;
(e) Any material change in the present capitalization or dividend
policy of the Company;
(f) Any material change in the Company's business or corporate
structure;
(g) Changes in the Company's charter, bylaws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the Company by any person;
(h) Causing a class of securities of the Company to be delisted from
a national securities exchange or to cease to be authorized to be quoted in
an interdealer quotation system of a registered national securities
association;
(i) A class of equity securities of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Exchange
Act; or
(j) Any action similar to any of those enumerated above.
Item 5. Interest in Securities of Issuer.
(a) As a result of the deposit of the Existing Class A Shares and the
Contingent Shares into the Class A Voting Trust and the Existing Class B
Shares into the Class B Voting Trust as summarized in Item 4 above, the
aggregate number and percentage of the Class A Common Stock and the Class B
Common Stock beneficially owned by the respective Voting Trusts are as
follows:
Name of Number of Percentage
Beneficial Owner Shares and Class of Class
Class A Voting Trust 191,593 shares of Class A 5.41%
Common Stock
Class B Voting Trust 241,262 shares of Class B 55.50%
Common Stock
The percentage calculations set forth in this Item 5 are based upon
(a) 3,539,158 issued and outstanding shares of Class A Stock and (b)
434,717 issued and outstanding shares of Class B Common Stock. The
foregoing amounts of shares as of February 28, 1995 are based upon
information furnished by the Company. The share amount and percentage of
Class A Common Stock include the Contingent Shares; however, inasmuch as
the Voting Trustees do not have or share the power to convert the shares of
Class B Common Stock into Class A Common Stock or to exercise certain
options held by Leon Riebman, such amounts and percentages do not include
the number of shares of Class A Common Stock into which the shares of Class
B Common Stock are convertible or the 7,500 shares of Class A Common Stock
that Leon Riebman has the right to acquire pursuant to the exercise of
stock options that are exercisable within 60 days from the date of this
Schedule 13D.
(b) The number of shares as to which such person has:
Name of
Beneficial Owner Number of Shares and Class
(i) sole power to vote or direct the vote
Class A Voting Trust -0-
Class B Voting Trust -0-
(ii) shared power to vote or direct the vote
Class A Voting Trust 191,593 shares of Class A Common
Stock
Class B Voting Trust 241,262 shares of Class B Common
Stock
(iii)sole power to dispose or direct the disposition
Class A Voting Trust -0-
Class B Voting Trust -0-
(iv) share power to dispose or direct the disposition
Class A Voting Trust 191,593 shares of Class A Common
Stock
Class B Voting Trust 241,262 shares of Class B Common
Stock
The Voting Trustees have the right to vote the Existing Class A
Shares, the Contingent Shares and the Existing Class B Shares in the manner
described in Item 4 above under the Voting Trust Agreement.
Under the Voting Trust Agreement, the Riebmans (or the holders of
the Voting Trust Certificates, as the case may be) have agreed, except
under limited circumstances, not to transfer any interest in the Class A
Stock or Class B Stock owned by them or any beneficial interest evidenced
by the Voting Trust Certificates without the prior written consent of the
Company and the Voting Trustees, as described more fully in Item 4 above.
Therefore, the Voting Trustees believe that they might share dispositive
power with respect to the Existing Class A Shares, the Contingent Shares
and the Existing Class B shares.
(c) The acquisition of the shares by the Voting Trusts from the
Riebmans were effected as described more fully in Item 4 above on February
28, 1995.
(d) Cash dividends on the Existing Class A Shares and the Existing
Class B Shares are to be distributed to the holders of the Voting Trust
Certificates representing the respective shares. Cash dividends on the
Contingent Shares are to be received by the Voting Trustees and distributed
in the same manner as the delivery of certificates representing the
Contingent Shares, as described in Item 4 above. Stock distributions on
the Existing Class A Shares and the Existing Class B Shares are to be
received by the Voting Trustees and held by them in the Voting Trusts
pursuant to the terms of the Voting Trust Agreement. Stock distributions
on the Contingent Shares are to be received by the Voting Trustees in the
Voting Trusts and distributed in the same manner as the delivery of
certificates representing the Contingent Shares, as described in Item 4
above.
(e) Not applicable.
Each of the Individual Voting Trustees beneficially owns the shares set
forth in the table below, which shares are excluded from the totals
reported in this Schedule 13D by the respective Voting Trusts. Inasmuch as
none of the Voting Trustees believes that he is individually a beneficial
owner of the shares held in the respective Voting Trusts, and each of them
expressly disclaims beneficial ownership of such shares, the filing of this
Schedule 13D shall not be construed as an admission that they, or any of
them, are beneficial owners individually of any of the shares of Class A
Common Stock and Class B Common Stock deposited with them in the respective
Voting Trusts.
Each of the Voting Trustees individually beneficially owns the following
shares of Class A Common Stock and Class B Common Stock, respectively, of the
Company:
Number of Shares Beneficially Owned
Name of Voting Trustee and Class of Shares
Francis J. Dunleavy 1,900 shares of Class A Common Stock
Frederick R. Einsidler 627 shares of Class A Common Stock
Conrad J. Fowler 143 shares of Class A Common Stock(1)
93,874 shares of Class B Common Stock(1)
Leeam Lowin 1,075,700 shares of Class A Common Stock(2)
___________________________
(1) The sole voting and investment power of the Class A Common Stock
belongs to Mr. Fowler's wife, who also has sole voting and
investment power with respect to 32,789 shares of Class B Common
Stock. Mr. Fowler has sole voting and investment power as to the
remaining shares of Class B Common Stock.
(2) Mr. Lowin has sole voting and investment power with respect to
583,000 shares and shared investment power with respect to
475,700 shares. The sole voting power with respect to these
475,700 shares rests with other persons. The sole voting and
investment power of an additional 17,000 shares belongs to Mr.
Lowin's wife.
In connection with the Agreement, Messrs. Dunleavy, Einsidler and
Lowin have each agreed to vote his respective shares of Class A Common
Stock and Class B Common Stock over which he has voting power in favor of a
Qualifying Business Combination included within a Proposal submitted for
Shareholder Approval. The form of such letter agreement is filed herewith
as Exhibit E.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
See Item 4 and Item 5.
Item 7. Material to Be Filed as Exhibits.
A. Agreement dated as of February 28, 1995 by and among AEL Industries,
Inc. and Dr. Leon Riebman and Claire E. Riebman.
B. Voting Trust Agreement dated as of February 28, 1995 by and among AEL
Industries, Inc., Dr. Leon Riebman and Claire E. Riebman and Francis
J. Dunleavy, Frederick R. Einsidler, Conrad J. Fowler and Leeam Lowin.
C. 1995 Agreement dated as of February 28, 1995 by and between AEL
Industries, Inc. and Dr. Leon Riebman.
D. Participation Rights Agreement dated as of February 28, 1995 by and
between AEL Industries, Inc. and Dr. Leon Riebman.
E. Form of letter agreement executed by Francis J. Dunleavy, Frederick R.
Einsidler and Leeam Lowin dated February 28, 1995.
F. Bylaw Amendments
Signatures.
After reasonable inquiry and to the best of the undersigned's
knowledge and belief, the undersigned certifies that the information set
forth in this statement is true, complete and correct.
Class A Voting Trust:
Date: March 9, 1995 /s/ Francis J. Dunleavy
Francis J. Dunleavy
Voting Trustee
/s/ Frederick R. Einsidler
Frederick R. Einsidler
Voting Trustee
/s/ Conrad J. Fowler
Conrad J. Fowler
Voting Trustee
/s/ Leeam Lowin
Leeam Lowin
Voting Trustee
Signatures.
After reasonable inquiry and to the best of the undersigned's
knowledge and belief, the undersigned certifies that the information set
forth in this statement is true, complete and correct.
Class B Voting Trust:
Date: March 9, 1995 /s/ Francis J. Dunleavy
Francis J. Dunleavy
Voting Trustee
/s/ Frederick R. Einsidler
Frederick R. Einsidler
Voting Trustee
/s/ Conrad J. Fowler
Conrad J. Fowler
Voting Trustee
/s/ Leeam Lowin
Leeam Lowin
Voting Trustee
AGREEMENT
This Agreement is made as of the 28th day of February, 1995 by and
among AEL Industries, Inc., a Pennsylvania corporation ("Company") and Dr.
Leon Riebman and Claire E. Riebman (collectively the "Riebmans").
BACKGROUND:
A. The Board of Directors ("Board") of the Company has appointed a
committee of the Board known as the Long Range Planning Committee ("LRPC")
for the purpose of considering strategic alternatives for the Company in
view of recent and significant developments and consolidations in the
defense industry. Among other possibilities, the LRPC considered whether
the Company should remain independent. That alternative may entail a
search for a new Chief Executive Officer. The LRPC also took into account
the right of the Riebmans either to transfer their Company stock to family
members or to sell only their Company stock to a person who may not wish to
purchase the Company stock held by other shareholders. The LRPC also
addressed the practical difficulties of consummating a sale of the Company
on terms which may not be acceptable to the Riebmans as controlling
shareholders.
B. After assessing the implications of maintaining the Company's
independence and these other factors, the LRPC decided, because of its
belief that it could thereby perform its duty to realize for the
shareholders of the Company ("Shareholders") the best value reasonably
available, to pursue the following course of action: (i) the negotiation of
an arrangement with the Riebmans concerning their voting control of the
Company in anticipation of a possible sale of the Company and (ii) the
negotiation of an arrangement with Dr. Riebman regarding his future
relationship with the Company.
C. A sale of the Company may be effected by a "Business Combination"
which shall mean (i) a sale of all or substantially all of the assets of
the Company in one transaction or a series of related transactions; (ii)
the acquisition by a person or group of persons acting in concert of the
beneficial ownership of more than eighty percent of the issued and
outstanding shares of "Class A Stock" and "Class B Stock" (each as herein
defined); (iii) a merger or consolidation of the Company with another
entity; or (iv) any transaction having like effect. An agreement providing
for a Business Combination is referred to as a "Business Combination
Agreement".
D. The LRPC has engaged an investment banking firm, an employee
benefits consultant and independent legal counsel to serve as its advisors
in connection with these matters.
E. The authorized capital stock of the Company consists of
20,000,000 shares of Class A Common Stock, par value $1.00 ("Class A
Stock") of which 3,358,211 shares are issued and outstanding; 440,000
shares of Class B Common Stock, par value $1.00 ("Class B Stock") of which
434,717 shares are issued and outstanding; and 200,000 shares of Preferred
Stock, par value $1.00, none of which are issued and outstanding.
F. The holders of Class B Stock have the exclusive voting power with
respect to matters submitted to the Shareholders except as to any matter
directly affecting the rights and privileges of Class A Stock or as
otherwise required by law.
G. Since the Riebmans collectively own (as tenants by the entireties
with right of survivorship) approximately 55% of the total voting power of
Class B Stock, they possess effective voting control of the Company. The
Shareholders other than the Riebmans are called the "Public Shareholders".
H. The LRPC believes that a Business Combination will be facilitated
and value maximized for the Shareholders if (i) voting control of the
Company is transferred to the "Voting Trustees" (as hereinafter defined)
for the term of this Agreement and (ii) a predetermined allocation between
the Riebmans and the Public Shareholders of the consideration paid in a
Business Combination is agreed to by the LRPC with the Riebmans at this
time by the issuance to the Riebmans of .75 shares of Class A Stock for
each share of Class B Stock owned by them.
I. The LRPC believes that, in order to accomplish this goal, it is
in the best interests of the Company and the Public Shareholders for the
Company to agree to issue to the Riebmans additional shares of Class A
Stock in exchange for the transfer by the Riebmans of their voting control
of the Company to the Voting Trustees for a period of time expected to be
sufficient to complete a "Qualifying Business Combination" (as herein
defined); provided, however, that such additional shares be held by the
Voting Trustees and be returned to the Company for cancellation if a
Qualifying Business Combination is not consummated as provided herein. It
is the intent of the LRPC that all holders of Class A Stock and Class B
Stock will be offered the same consideration and other terms for each share
in connection with a Qualifying Business Combination.
J. Dr. Leon Riebman and the Company have entered into an Employment
and Retirement Agreement dated January 8, 1982, as amended on November 14,
1991 (collectively the "1982 Agreement") pursuant to which, among other
things, Dr. Riebman may, but is not required to, provide consulting
services to the Company.
K. The LRPC believes that the Company's interests will be
substantially enhanced by Dr. Riebman and the Company entering into an
agreement which will (a) assure Dr. Leon Riebman's availability exclusively
to the Company in the future, and (b) substantially improve the Company's
rights with respect to the protection of proprietary information,
intellectual property and restrictions on competition.
L. The purpose of this Agreement is to set forth the terms and
conditions of the arrangements which the LRPC, acting for the Company, has
negotiated with (i) the Riebmans with respect to their voting control of
the Company to the extent set forth in the "VT Agreement" (as herein
defined) and a predetermined allocation between the Riebmans and the Public
Shareholders of the proceeds of a possible Qualifying Business Combination;
and (ii) Dr. Leon Riebman concerning his future relationship with the
Company.
NOW THEREFORE, in consideration of the premises set forth above and
the covenants of the parties included herein, and intending to be legally
bound hereby, the Company and the Riebmans agree as follows:
I. Term
(a) The initial term of this Agreement ("Initial Term") shall be
nine (9) months from the date hereof subject to extension, renewal, or
termination as follows:
(1) This Agreement shall be renewable for three additional
months beyond the Initial Term ("First Renewal Term") (i) if written notice
to this effect is given by the Company to the Riebmans not less than five
days prior to the expiration of the Initial Term and (ii) not later than
the last day of the Initial Term a payment is made by the Company to the
Riebmans of One Hundred Thousand Dollars ($100,000) which shall be credited
against, and reduce to that extent, the "Consulting Payments" (as herein
defined) as contemplated in Section V(b) hereof in the chronological order
thereof.
(2) This Agreement shall be renewable for an additional
three months beyond the First Renewal Term ("Second Renewal Term") (i) if
written notice to this effect is given by the Company to the Riebmans not
less than five days prior to the expiration of the First Renewal Term and
(ii) not later than the last day of the First Renewal Term a payment is
made by the Company to the Riebmans of Three Hundred Thousand Dollars
($300,000) which shall be credited against, and reduce to that extent, the
Consulting Payments as contemplated in Section V(b) hereof in the
chronological order thereof.
(3) If a Business Combination Agreement which contemplates a
Qualifying Business Combination recommended by the LRPC has been executed
by the Company at any time during the Initial Term, First Renewal Term or
Second Renewal Term but "Shareholder Approval" of the "Proposal" (as each
such term is herein defined) has not yet been obtained, the Initial Term,
First Renewal Term or Second Renewal Term, as the case may be, shall
automatically be extended, if it would have otherwise expired, until the
earlier of (i) the consummation of the Qualifying Business Combination
contemplated in such Business Combination Agreement ("Closing") or (ii) the
termination of such Business Combination Agreement pursuant to the terms
thereof unless such termination occurs in connection with a recommendation
by the LRPC, in the exercise of its fiduciary duty, of an alternative
Business Combination Agreement which contemplates a Qualifying Business
Combination, in which event such alternative Business Combination Agreement
shall be deemed to be a "Business Combination Agreement" for purposes of
this Section I(a)(3). Any such automatic extension shall be subject to the
provisions of Section I(a)(4) and I(a)(7) hereof.
(4) If (i) the Initial Term or First Renewal Term has been
automatically extended under Section I(a)(3) hereof and (ii) the Business
Combination Agreement referred to therein has been terminated pursuant to
the terms thereof, the Company shall have the right to renew this Agreement
for one or two successive three month periods, as the case may be,
commencing as of the expiration of the Initial Term or the First Renewal
Term, as the case may be, as contemplated in Section I(a) (l) or Section
I(a)(2), as appropriate, by giving the notice provided therein within
fifteen (15) business days after the termination of such Business
Combination Agreement and by making the requisite payment within three (3)
business days thereafter which payment shall be deemed timely for purposes
of Section I(a)(1) or Section I(a)(2), as appropriate. The exercise by the
Company of its rights under this Section I(a)(4) as it relates to the First
Renewal Term shall not abrogate the Company's rights under Section I(a)(2).
(5) This Agreement may be terminated at the option of the
Riebmans if (i) the "Voting Trustees" (as herein defined) materially breach
the "VT Agreement" (as herein defined) and such breach is not cured within
thirty days of their receipt of a written notice to this effect from the
Riebmans, except in the event of a material breach by the Voting Trustees
of Paragraph 5 6, 11 (first sentence) or 11(a) of the VT Agreement in which
case this Agreement may be terminated immediately by written notice to this
effect by the Riebmans or (ii) the Company materially breaches this
Agreement or the 1995 Agreement (as herein defined) and such breach is not
cured within thirty days of its receipt of a written notice to this effect
from the Riebmans, except in the event of a material breach by the Company
of Section IX(c) of this Agreement in which case this Agreement may be
terminated immediately by written notice to this effect by the Riebmans.
(6) This Agreement may be terminated at the option of the
Company if (i) the Riebmans materially breach the "VT Agreement" (as herein
defined) and such breach is not cured within thirty days of their receipt
of a written notice to this effect from the Company, except in the event of
a material breach by the Riebmans of Paragraph 6 or 10 of the VT Agreement
in which case this Agreement may be terminated immediately by written
notice to this effect by the Company or (ii) the Riebmans materially breach
this Agreement or Dr. Leon Riebman materially breaches the 1995 Agreement
and such breach is not cured within thirty days of their receipt of a
written notice to this effect from the Company.
(7) Unless this Agreement shall have previously expired or
terminated, this Agreement shall terminate upon the earliest to occur of
the following events: (i) immediately prior to the Closing under a
Business Combination Agreement not inconsistent in any material respect
with the terms of this Agreement which has been recommended by the LRPC and
pursuant to which an opinion acceptable to the LRPC is issued to the
Company by a nationally recognized investment banking firm with respect to
the fairness, from a financial point of view, to the Shareholders of the
consideration offered to them under such Business Combination Agreement
("Qualifying Business Combination") and which Qualifying Business
Combination has been included in the Proposal as to which Shareholder
Approval has been obtained; (ii) immediately following the conclusion of a
meeting of Shareholders at which Shareholder Approval has been sought but
not obtained of such Proposal; or (iii) November 28, 1996.
(b) "Proposal" shall mean a single proposition submitted to
the Shareholders consisting of: (1) ratification of this Agreement, the
"VT Agreement", the "Participation Rights Agreement" and the "1995
Agreement" (as each term is herein defined) and (2) approval of a
Qualifying Business Combination.
(c) "Shareholder Approval" shall mean the approval and
adoption of the Proposal by the affirmative vote of a majority of the votes
cast respectively by: (1) the holders of shares of Class A Stock and (2)
the holders of shares of Class B Stock, each voting as a class.
(d) The withdrawal by the LRPC, in the exercise of its
fiduciary duty, of its recommendation of a Business Combination Agreement,
shall not, in and of itself, result in the reduction of the time period
comprehended by the Initial Term, First Renewal Term, Second Renewal Term
or any extension thereof.
II. Voting Trust Agreement
(a) Concurrently with the execution of this Agreement, the
Company, the Riebmans, and Messrs. Francis J. Dunleavy, Frederick R.
Einsidler, Conrad J. Fowler and Leeam Lowin, as voting trustees ("Voting
Trustees"), have executed a Voting Trust Agreement in the form attached
hereto as Exhibit A ("VT Agreement") pursuant to which two separate trusts
("A" and "B") have been created. Certain provisions of the VT Agreement
are summarized as follows for convenience only. The provisions of the VT
Agreement shall exclusively govern the interpretation thereof.
(b) The Riebmans have transferred to the Voting Trustees for
allocation to the A and B Trusts all of the shares of Class A Stock and
Class B Stock (and stock powers duly endorsed in favor of the Voting
Trustees) owned by the Riebmans prior to the execution of this Agreement
(the "Riebman Shares") and the Contingent Shares (and stock powers duly
endorsed in favor of the Voting Trustees) so that the Voting Trustees
possess voting power with respect to the Riebman Shares and the Contingent
Shares, subject to the limitations stated in the VT Agreement.
(c) The Voting Trustees have agreed to perform their duties in
good faith, in a manner each reasonably believes to be in the best interest
of the Company and the Shareholders and with such care including reasonable
inquiry, skill and diligence as a person with ordinary prudence would use
under similar circumstances.
(d) The term of the VT Agreement shall be coextensive with the
term of this Agreement.
(e) In no event shall the Voting Trustees vote (which shall
include action by written consent) the Riebman Shares or the Contingent
Shares in a manner which is not consistent with the effectuation of the
purpose of the VT Agreement as described in Paragraph B of the Background
thereof.
(f) The Voting Trustees shall vote for the election of two (2)
persons nominated by Dr. Riebman or his personal representatives as
directors of the Company. The Voting Trustees shall vote for the
reelection as directors of the incumbent directors of the Company unless
one or more of them determines not to seek re-election, resigns or dies.
The Voting Trustees shall consult with the Riebmans prior to voting for the
election of any other person as a director of the Company. The Voting
Trustees shall assure that at all times a majority of the directors of the
Company shall be "Independent Directors" (which term shall for the purposes
of this Agreement and the VT Agreement mean a person who (i) is not an
employee of or consultant to the Company; (ii) is not related by blood or
marriage to either of the Riebmans; and (iii) in the reasonable
determination of the LRPC, does not have a financial or other material
relationship with either of the Riebmans which might influence the
objectivity of his or her judgment as it relates to the best interests of
the Company and the Shareholders). The Riebmans in their capacity as
directors of the Company shall take such action as is appropriate to give
effect to the foregoing sentence.
(g) Upon the termination of the VT Agreement, the Riebman shares
shall be delivered to the holder(s) of the Voting Trust Certificates issued
with respect to the Riebman Shares.
(h) The VT Agreement may not be amended or rescinded without the
written consent of the Company, the Riebmans and a majority of the Voting
Trustees unless there are at any time less than three Voting Trustees in
which case all actions at such time shall require the unanimous approval of
the Voting Trustees.
(i) "Voting Trustees" shall include their respective successors.
III. Contingent Issuance of Shares of Class A Stock
(a) The Company has issued .75 shares of Class A Stock
("Contingent Shares") to the Riebmans for each share of Class B Stock owned
by them and the Riebmans have concurrently transferred the Contingent
Shares (and stock powers duly endorsed in favor of the Voting Trustees) to
the Voting Trustees who shall hold them in the A Trust under the VT
Agreement as otherwise in accordance with the terms thereof.
(b) The VT Agreement provides, with respect to the Contingent
Shares, among other things, that:
(1) The Contingent Shares shall be held by the Voting
Trustees until the earlier of the following:
(i) Immediately prior to the Closing under a Qualifying
Business Combination included in the Proposal as to which Shareholder
Approval has been obtained, in which event the Contingent Shares shall be
delivered to the holder(s) of the voting trust certificate(s) issued with
respect to the Contingent Shares, or
(ii) The expiration or termination of this Agreement
for a reason other than as contemplated in Section III(b)(1)(i) hereof,
in which event the Contingent Shares shall be delivered to the Company which
shall thereupon cancel them without the payment of any consideration therefor.
(2) The Contingent Shares shall be voted by the Voting
Trustees in connection with the Proposal in the same proportion as the
votes cast with respect to the Proposal by the other holders of shares of
Class A Stock.
(c) On the date hereof, Dillon, Read & Co. Inc. has issued an
opinion to the LRPC and the Board with respect to the fairness, from a
financial point of view, to the Public Shareholders of the issuance of the
Contingent Shares pursuant to this Agreement.
IV. Undertakings by the Riebmans and Dr. Riebman
(a) During the Initial Term, First Renewal Term, Second Renewal
Term or any extension thereof, without the prior written consent of the
Company, the Riebmans agree that they will not transfer or agree to
transfer any interest in: (i) the Riebman Shares or (ii) their respective
beneficial interests evidenced by voting trust certificates under the VT
Agreement; provided that the executor(s) of the estates of either of the
Riebmans may succeed to such interests and shall be bound by this Agreement
and the VT Agreement; and provided further that the Riebmans may make
donative transfers of such interests to and among themselves or to their
issue so long as the donee(s) thereof agree(s) in writing to be bound by
this Agreement and the VT Agreement.
(b) During the Initial Term, First Renewal Term, Second Renewal
Term or any extension thereof, the Riebmans agree that neither of them will
acquire any additional shares of Class A Stock or Class B Stock except in
connection with: (i) the exercise of options existing on the date hereof
or (ii) the beneficial ownership of shares of Class A Stock or Class B
Stock issued in respect of stock dividends or stock distributions hereafter
declared.
(c) At such times as requested by the LRPC, Dr. Riebman shall
consult and cooperate with the LRPC in connection with its efforts to
arrange for a Qualifying Business Combination.
V. 1995 Agreement
(a) Concurrently with the execution of this Agreement, the
Company and Dr. Leon Riebman have executed a 1995 Agreement ("1995
Agreement") in the form attached hereto as Exhibit B. Certain provisions
of the 1995 Agreement are summarized as follows for convenience only. The
provisions of the 1995 Agreement shall exclusively govern the
interpretation thereof.
(b) The Company shall not be obligated to make the "Participation
Payment" or the "Consulting Payments" (as therein defined) contemplated
under Sections 8.F. and 4 of the 1995 Agreement unless the Contingent
Shares shall have been delivered by the Voting Trustees to the holder(s) of
the voting trust certificates issued with respect to the Contingent Shares
pursuant to Paragraph 11(a) of the VT Agreement.
(c) The Participation Payment contemplated in the 1995 Agreement
shall be in consideration of various noncompetition and other undertakings
made by Dr. Leon Riebman on the date hereof for the benefit of the Company
in Section V of the 1995 Agreement.
(d) Dr. Leon Riebman has on this date hereof agreed to hold
himself available to the Company, whenever requested by the Company, to
provide consulting services ("Consulting Services") for a three year period
commencing upon the date ("Consulting Commencement Date") on which Dr.
Riebman voluntarily retires from active employment with the Company, which
shall in no event occur prior to the date on which this Agreement expires,
as and to the extent requested by the Company in consideration of the
payment (collectively the "Consulting Payments" and individually a
"Consulting Payment") by the Company of Six Hundred Seventy-five Thousand
Dollars ($675,000) as follows:
1. Three Hundred Thousand Dollars ($300,000) payable on the
Consulting Commencement Date.
2. Two Hundred Twenty-Five Thousand Dollars ($225,000)
payable on the first anniversary of the Consulting Commencement Date.
3. One Hundred Fifty Thousand Dollars ($150,000) payable on
the second anniversary of the Consulting Commencement Date.
The Company shall not be obligated to make any of the Consulting
Payments unless certificates representing the Contingent Shares shall have
been delivered by the Voting Trustees to the holder(s) of the voting trust
certificates representing the Contingent Shares pursuant to Paragraph 11(a)
of the VT Agreement; provided that this provision shall not reduce or
otherwise affect the Company's obligations under Section I(a)(1), I(a)(2)
or I(a)(4).
If on the date such payment is otherwise due, Dr. Riebman will not be
available to provide Consulting Services for the forthcoming year, the
Company shall have no obligation to make any additional Consulting
Payments.
Any payment(s) made by the Company pursuant to Sections I(a)(l),
I(a)(2) or I(a)(4) hereof shall be credited against, and reduce to that
extent, Consulting Payments in chronological order thereof.
(e) The 1995 Agreement may not be amended or rescinded without
the written consent of Dr. Riebman and the Company.
VI. Change in Control Payment
The Corporation shall make a payment ("Change in Control
Payment") to Dr. Leon Riebman in the amount of Five Hundred Thousand
Dollars ($500,000) if (i) Closing occurs under a Qualifying Business
Combination included within the Proposal as to which Shareholder Approval
has been obtained; and (ii) Dr. Riebman's employment with the Company
terminates thereafter for any reason, voluntary or involuntary.
VII. Business Combination
The LRPC shall in good faith use all reasonable efforts to
arrange for a Qualifying Business Combination but it shall not have any
obligation to do so unless it deems the terms thereof to be in the best
interests of the Company and the Shareholders. The LRPC shall have the
right, in the exercise of its fiduciary duty, to withdraw its
recommendation of a Business Combination Agreement. The Closing of a
Qualifying Business Combination shall not occur within six months of the
date hereof unless the Riebmans are advised in writing by their counsel
that the sale by them of the Contingent Shares at such time will not expose
them to liability under Section 16(b) of the Securities and Exchange Act of
1934.
VIII. Advancing Counsel Fees
(a) Subject to the condition set forth in the following sentence,
the Company shall pay the reasonable counsel fees and disbursements
incurred by the Riebmans as parties to this Agreement, the members of the
LRPC, the Voting Trustees, any director or officer of the Company, or any
of them in the defense of any pending or threatened action, suit or
proceedings whether by or in the right of the Company or otherwise,
involving this Agreement or any Exhibit hereto (collectively "Proceeding")
in advance of the final disposition of the Proceeding. The foregoing
obligation of the Company is conditioned upon its prior receipt of an
undertaking by such person or persons to repay the amount so advanced if it
is ultimately determined by a court that such payment was not proper in the
circumstances.
(b) Except as provided in the following sentence, the Company
shall have the right to engage one law firm ("Primary Counsel") to
represent the Riebmans as parties to this Agreement, the members of the
LRPC, the Voting Trustees, any director or officer of the Company, or any
of them in connection with any Proceeding. The Company shall pay (and
advance subject to the provisions of Section VIII(a) hereof) the reasonable
fees and disbursements of separate counsel who may be selected by the
Riebmans (and reasonably acceptable to the Company) to represent them in
any Proceeding but only upon the following condition: the Primary Counsel
shall advise the Company in writing that it is such Primary Counsel's
opinion that the retention of separate counsel for the Riebmans is
appropriate because (i) the representation of the Riebmans and the other
persons described above by one law firm would involve a conflict of
interest or (ii) there are separate and additional defenses available to
the Riebmans which are not available to the other persons described above.
The Company shall have the right to determine the reasonableness of such
separate counsel's fees and disbursements. The Company shall have the
right to assume and control the defense of any Proceeding, including the
engagement of Primary Counsel subject, however, to the terms of the second
sentence of this Section VIII(b).
(c) The foregoing undertakings by the Company shall not inure to
the benefit of any party or parties other than the Riebmans, the members of
the LRPC, the Voting Trustees or any director or officer of the Company, or
any of them, and their heirs and personal representatives.
IX. Amendment or Recision; Company Actions Exclusively by LRPC;
Company Covenants; Bylaw Amendments
(a) This Agreement may not be amended or rescinded without the
written consent of the Riebmans and the Company.
(b) All actions by the Company contemplated by this Agreement,
the VT Agreement and the 1995 Agreement shall be taken on its behalf
exclusively by the LRPC which shall have the full authority of the Board
for the purposes hereof and thereof. All actions of the LRPC shall require
the approval of a majority of the members of the LRPC; provided, however,
if at any time there exist less than three (3) members of the LRPC, all
actions at such time shall require the unanimous approval of the members of
the LRPC. The foregoing shall not excuse the performance by the Company of
any obligations which it has undertaken to perform hereunder all of which
obligations having been approved by the LRPC, no further approval being
required.
(c) The Company agrees not to issue, or authorize the issuance
of, any additional shares of Class B Stock, any options for Class B Stock,
or securities exchangeable for or convertible into Class B Stock, during
the Initial Term, First Renewal Term, Second Renewal Term, or any
extension thereof. The Company further agrees not to change, or authorize
the change of, the voting rights relating to the Company's capital stock
during the Initial Term, the First Renewal Term, Second Renewal Term or
any extension thereof. It is the intention of this Section IX(c) that if
this Agreement expires or terminates for a reason other than the Closing of
a Qualifying Business Combination included within the Proposal as to which
Shareholder Approval has been obtained, the voting power of the Riebmans
with respect to the Company shall be restored to no less than what such
voting power would have been (i.e. voting control of the Company) had this
Agreement and the VT Agreement not been entered into.
(d) The Board shall: (i) maintain the LRPC in existence during
the Initial Term, First Renewal Term, Second Renewal Term or any extension
thereof; (ii) not change the present composition of the LRPC except upon
the request of the LRPC; and (iii) cause any successor member of the LRPC
to be a person who the LRPC considers to be an Independent Director.
(e) The Bylaws of the Company have been amended on the date
hereof so as to effectuate the purposes of this Agreement and the VT
Agreement.
X. Representations and Warranties
(a) The Company represents and warrants to the Riebmans as
follows:
(1) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania.
(2) The authorized and issued and outstanding capital stock
of the Company is as set forth in the recitals hereof. All of the issued
and outstanding shares of the capital stock are duly authorized, validly
issued, fully paid and nonassessable.
(3) All corporate actions on the part of the Company,
including, without limitation, the approval of this Agreement, the VT
Agreement, the Participation Rights Agreement and the 1995 Agreement by the
LRPC and the approval thereof by the requisite vote of the Board (the
Riebmans having abstained from voting thereon) necessary for the execution
and delivery by the Company of this Agreement, the VT Agreement, the
Participation Rights Agreement and the 1995 Agreement and the performance
by the Company of its obligations hereunder and thereunder, have been duly
taken.
(4) This Agreement, the VT Agreement, the Participation
Rights Agreement and the 1995 Agreement each constitutes a valid and
binding obligation of the Company enforceable against the Company in
accordance with the terms of each.
(5) The Contingent Shares have been duly authorized and
validly issued and are fully paid and nonassessable.
(b) The Riebmans severally represent and warrant to the Company
as follows:
(1) Each of them is sui juris and of full capacity to make
and perform his or her obligations under this Agreement. The execution,
delivery and performance by each of them of this Agreement will not violate
or constitute a breach of or default under any instrument to which either
of them is a party.
(2) This Agreement constitutes a valid and binding
obligation of each of them enforceable in accordance with its terms.
(3) The Riebmans beneficially own the Riebman Shares.
(4) The Riebmans have good, valid and indefeasible title to
the Riebman Shares, free and clear of all security interests, liens,
encumbrances, options, calls, pledges, trusts, voting trusts and other
agreements, covenants or restrictions.
(5) Each of them is acquiring the Contingent Shares solely
for their own account and in connection with a sale thereof pursuant to a
Qualifying Business Combination as contemplated herein and not with a view
to the distribution thereof within the meaning of the Securities Act of
1933. Each of them acknowledges that the Contingent Shares will not have
been registered under the Securities Act of 1933 or under any applicable
state securities law and may not be transferred (assuming the consent
required in Section IV(a) hereof has been given) unless they are
subsequently so registered or an exemption from such registration is
available.
(6) Each of them acknowledges that each voting trust
certificate evidencing a beneficial interest under the VT Agreement will
bear a legend as provided therein restricting transferability thereof.
XI. Notices
All communications provided for in this Agreement shall be in
writing and shall be sent to each party as follows:
To the Company:
AEL Industries, Inc.
305 Richardson Road
Lansdale, PA 19446
Attention: John R. Cox, Esquire
General Counsel
Fax 215-822-6056
With copies to:
Mr. Francis J. Dunleavy
560 Morris Road, Box 208
Blue Bell, PA 19422
Fax 215-643-9275
Frederick R. Einsidler
99 South Park Avenue, Apt. 109
Rockville Centre, NY 11570
Fax 516-536-6505
Conrad J. Fowler
826 North Fairway Road
Glenside, PA 19038
Fax 215-887-3293
Leeam Lowin
21 Fox Run Lane
Greenwich, CT 06831
Fax 203-661-6258
and
Vincent F. Garrity, Jr., Esquire
Duane, Morris & Heckscher
One Liberty Place
Philadelphia, PA 19103
Fax 215-979-1020
To the Riebmans
Dr. & Mrs. Leon Riebman
1380 Barrowdale Road
Rydal, PA 19046
Fax 215-885-2238 (telephone first)
With a copy to:
Abraham H. Frumkin, Esquire
Eckert Seamans Cherin & Mellott
1700 Market Street, Suite 3232
Philadelphia, PA 19103
Fax 215-575-6015
or to such other address as such party may hereafter specify in writing,
and shall be deemed given on the earlier of (a) physical delivery, (b) if
given by facsimile transmission, when such facsimile is transmitted to the
telephone number specified in this Agreement and telephone confirmation of
receipt thereof is received (c) three days after mailing by prepaid first
class mail and (d) one day after transmittal by prepaid overnight courier.
XII. Miscellaneous
(a) Equitable Relief. In the event of a breach or threatened
breach of any provision in this Agreement, in addition to any and all other
legal and equitable remedies which may be available, any party hereto may
specifically enforce the terms of this Agreement and may obtain temporary
or permanent injunctive relief without the necessity of proving actual
damage by reason of any such breach or threatened breach.
(b) Survival of Representations and Warranties; Section VIII
Obligations
All representations and warranties contained in this Agreement
and the obligations of the Company set forth in Section VIII hereof shall
survive the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby.
(c) Binding Effect
This Agreement shall be binding upon, and inure to the benefit
of, the Company and its successors and the Riebmans and their respective
heirs and personal representatives.
(d) Governing Law
This Agreement shall be governed by, and construed and enforced
in accordance with the internal law of the Commonwealth of Pennsylvania
without giving effect to conflicts of laws.
(e) Counsel Fees
The Company agrees to reimburse the Riebmans for the reasonable
fees and disbursements (but not in excess of Seventy-Five Thousand Dollars)
of their counsel incurred in connection with the negotiation of this
Agreement.
(f) Entire Agreement
This Agreement (including the VT Agreement, the 1995 Agreement,
and the Participation Rights Agreement) supersedes any prior negotiations
and understandings and constitutes the entire agreement between the parties
with regard to its subject matter. The recitals contained in the
Background of this Agreement are an integral part of this Agreement.
(g) Counterparts
This Agreement may be executed in several counterparts each of
which shall be deemed an original but all of which taken together shall
constitute one and the same document.
IN WITNESS WHEREOF, the parties hereto have executed, or caused to be
executed, this Agreement as of the date first mentioned above.
AEL INDUSTRIES, INC.
By:/s/ George King
/s/ Dr. Leon Riebman
Dr. Leon Riebman
/s/ Claire E. Riebman
Claire E. Riebman
AEL INDUSTRIES, INC.
VOTING TRUST AGREEMENT
This AEL Industries, Inc. Voting Trust Agreement ("Voting Trust
Agreement") is made as of the 28th day of February, 1995 by and among AEL
Industries, Inc., a Pennsylvania corporation (the "Corporation"), Dr. Leon
Riebman and Claire E. Riebman (collectively the "Riebmans") and Francis J.
Dunleavy, Frederick R. Einsidler, Conrad J. Fowler and Leeam Lowin, as
voting trustees (collectively, the "Voting Trustees").
Background
A. This is the Voting Trust Agreement referred to in Section
II of an agreement dated the date hereof by and among the Corporation and
the Riebmans ("Agreement").
B. The sole purpose of this Voting Trust Agreement is to
enable the Voting Trustees (i) to vote the Existing Class A Shares and the
Class B Shares (as defined herein) in favor of a Qualifying Business
Combination which has been recommended by the LRPC and submitted in a
Proposal for Shareholder Approval and (ii) to vote for the election of
directors of the Company, all in accordance with the terms and provisions
of this Voting Trust Agreement.
C. All terms defined in the Agreement shall have the same
meaning when used herein and capitalized unless the context clearly
indicates otherwise.
NOW, THEREFORE, in consideration of the premises and for the
purposes set forth above and the covenants of the parties included herein
and intending to be legally bound hereby, the Corporation, the Riebmans and
the Voting Trustees agree as follows:
1. The Riebmans have concurrently deposited the certificates
representing (a) all of the shares of Class A Stock currently owned by them
and listed below their signatures at the end of this Voting Trust Agreement
(the "Existing Class A Shares"), and (b) the Contingent Shares (the
Existing Class A Shares and the Contingent Shares shall be collectively
referred to as the "Class A Shares"), with proper transfers thereof in
favor of the Voting Trustees, with the Voting Trustees and have received in
exchange therefor Voting Trust Certificates as provided below. The Class A
Shares represented by the stock certificates so deposited shall be trans-
ferred on the books of the Corporation to the name of the Voting Trustees
and shall be maintained by the Voting Trustees in the "Class A Voting
Trust."
2. The Riebmans have concurrently deposited the certificates
representing all of the shares of Class B Stock owned by them and listed
below their signatures at the end of this Voting Trust Agreement (the
"Class B Shares," and together with the Class A Shares, the "Shares"),
with proper transfers thereof in favor of the Voting Trustees, with the
Voting Trustees and have received in exchange therefor a Voting Trust
Certificate as provided below. The Class B Shares represented by the stock
certificates so deposited shall be transferred on the books of the
Corporation to the name of the Voting Trustees and shall be maintained by
the Voting Trustees in the "Class B Voting Trust."
3. The Voting Trustees shall be Voting Trustees with respect to
both the Class A Voting Trust and the Class B Voting Trust (collectively,
the "Voting Trusts").
4. Subject to the provisions of Paragraphs 5 and 6 hereof,
while this Voting Trust Agreement is in effect, the Voting Trustees shall
have the legal title to the Shares, and be entitled to exercise, in person
or by their nominee or proxy, all rights and powers in respect to any and
all such Shares by voting the shares and taking part in or consenting to
any action of Shareholders for the election of directors or in favor of a
Qualifying Business Combination which has been recommended by the LRPC and
submitted in a Proposal for Shareholder Approval. With respect to any
action of the Shareholders other than in connection with the election of
directors or a Qualifying Business Combination which has been recommended
by the LRPC and submitted in a Proposal for Shareholder Approval, the
Voting Trustees shall vote (which shall include action by written consent)
the Existing Class A Shares and the Class B Shares as directed in writing
by the Riebmans; provided, however, in no event shall the Voting Trustees
be required to vote (which shall include action by written consent) the
Existing Class A Shares or Class B Shares in a manner which is not consis-
tent with the effectuation of the purpose of this Voting Trust Agreement as
described in Paragraph B of the Background hereof.
5. The Voting Trustees agree that in connection with a Proposal
the Voting Trustees shall vote the Contingent Shares in the same proportion
as the votes cast with respect to the Proposal by the other holders of
shares of Class A Stock.
6. The Voting Trustees shall vote for the election of two (2)
persons nominated by Dr. Riebman or his personal representatives as
directors of the Company. The Voting Trustees shall vote for the
reelection as directors of the incumbent directors of the Company unless
one or more of them determines not to seek re-election, resigns or dies.
The Voting Trustees shall consult with the Riebmans prior to voting for the
election of any other person as a director of the Company. The Voting
Trustees shall respectively assure that at all times a majority of the
directors of the Company shall be "Independent Directors" (which term shall
for the purposes of the Agreement and this VT Agreement mean a person who
(i) is not an employee of or consultant to the Company; (ii) is not related
by blood or marriage to either of the Riebmans; and (iii) in the reasonable
determination of the LRPC, does not have a financial or other material
relationship with either of the Riebmans which might influence the
objectivity of his or her judgment as it relates to the best interests of
the Company and the Shareholders). The Riebmans in their capacity as
directors of the Company shall take such action as is appropriate to give
effect to the foregoing sentence. In no event shall the Voting Trustees
vote (which shall include action by written consent) the Shares in a manner
which is not consistent with the effectuation of the purpose of this Voting
Trust Agreement as described in Paragraph B of the Background hereof.
7. The Voting Trustees shall issue to the Riebmans Voting Trust
Certificates in respect of the Shares in substantially the form of Exhibits
1, 2 and 3 hereto. While this Voting Trust Agreement is in effect, the
holders of Voting Trust Certificates shall not have any right, either under
said Voting Trust Certificates or under this Voting Trust Agreement, or
under any agreement express or implied, or otherwise, with respect to any
Shares held by the Voting Trustees hereunder to vote such Shares or to take
part in or consent to any action of Shareholders, or to do or perform any
other act or thing relating to voting power which the holders of the
Corporation's Class A Stock or Class B Stock are now or may hereafter
become entitled to do or perform; provided, however, that the holders of
Voting Trust Certificates, excluding the holders of Voting Trust
Certificates issued with respect to the Contingent Shares, shall be enti-
tled to receive payments of all dividends other than pro rata distributions
of additional shares of capital stock of the Corporation declared by the
Corporation with respect to the Shares. With respect to the Contingent
Shares, the Voting Trustees shall take possession of all dividends other
than pro rata distributions of additional shares of capital stock of the
Corporation declared by the Corporation with respect to the Shares and
shall cause all such dividends to be distributed as provided in Paragraph
11 with respect to the distribution of the Contingent Shares. All stock
distributions shall be issued in the name of the Voting Trustees as
additional Existing Class A Shares, Contingent Shares and Class B Shares
hereunder and the Voting Trustees shall issue additional Voting Trust
Certificates therefor to the Riebmans.
8. Upon the declaration of any cash dividends by the Corpo-
ration with respect to the Existing Class A Shares or the Class B Shares
the Voting Trustees shall cause all such dividends to be distributed by the
Corporation to the holders of the voting trust certificates issued with
respect to the Existing Class A Shares or the Class B Shares as if such
holders themselves held the Shares represented by their Voting Trust
Certificates. Upon the declaration of any cash dividends by the Corpo-
ration with respect to the Contingent Shares, the Voting Trustees shall
take possession of all such dividends and shall cause all such dividends to
be distributed as provided in Paragraph 11 with respect to the distribution
of the Contingent Shares.
9. The term of this Voting Trust Agreement shall be coextensive
with the term of the Agreement.
10. During the term hereof, without the prior written consent of
the Corporation and the Voting Trustees, the Riebmans agree that they will
not transfer or agree to transfer (a) any interest in any Class A Stock or
Class B Stock owned by either of them or (b) their respective beneficial
interests evidenced by the Voting Trust Certificates; provided, however,
that the executors of the estate of either of the Riebmans may succeed to
such interests and shall be bound by this Voting Trust Agreement; and
provided further that the Riebmans may make donative transfers of such
interests to and among themselves or to their issue so long as the donee(s)
thereof agree(s) in writing to be bound by this Voting Trust Agreement.
During the term hereof, the Riebmans agree that neither of them will
acquire any additional shares of Class A Stock or Class B Stock except in
connection (i) with the exercise of options existing on the date hereof or
(ii) the beneficial ownership of shares of Class A Stock or Class B Stock
issued in respect of stock dividends or stock distributions hereafter de-
clared; the Riebmans shall deliver the certificates representing any such
additional shares so acquired to the Voting Trustees for deposit in the
applicable Voting Trust in exchange for Voting Trust Certificates.
11. Upon the termination of this Voting Trust Agreement certifi-
cates representing the Existing Class A Shares and Class B Shares deposited
hereunder shall be delivered by the Voting Trustees to the holder(s) of the
Voting Trust Certificates issued with respect to the Existing Class A
Shares and Class B Shares in the proportion of their respective holdings,
upon presentation and surrender to the Voting Trustees of the Voting Trust
Certificates therefor. Upon the earliest to occur of the following events,
certificates representing the Contingent Shares deposited hereunder shall
be delivered by the Voting Trustees to the person or persons designated
below:
(a) Immediately prior to the Closing under a Qualifying
Business Combination included in the Proposal as to which Shareholder
Approval has been obtained in which event the delivery shall be made to the
holder(s) of the Voting Trust Certificate(s) issued with respect to the
Contingent Shares in proportion to their respective holdings.
(b) The expiration or termination of the Agreement for a
reason other than as contemplated in subparagraph (a) of this Paragraph 11
in which event the delivery shall be made to the Corporation which shall
thereupon cancel the Contingent Shares without the payment of any consid-
eration therefor;
(c) The receipt by the Voting Trustees of joint written in-
structions from the Riebmans and the Corporation, in which event the
delivery shall be made to the person or persons designated in such in-
structions; or
(d) Receipt by the Voting Trustees of a certified copy of a
final non-appealable order by a court of competent jurisdiction providing
for the disposition thereof, in which event the delivery shall be made to
the person or persons designated therein.
12. The Voting Trustees may serve as directors, officers,
employees or consultants of the Corporation and be compensated therefor,
and may hold stock in the Corporation or become a creditor of the
Corporation or otherwise deal with it in good faith.
13. Except as provided in Paragraph 5, in voting the Shares
deposited hereunder, the Voting Trustees shall act by majority vote;
provided, however, if at any time there exist less than three (3) Voting
Trustees, all acts of the Voting Trustees shall require the unanimous vote
of the Voting Trustees. At such time as any of the Voting Trustees ceases
to be a member of the LRPC for any reason whatsoever, such Voting Trustee
thereupon shall cease to be a Voting Trustee hereunder. In the event any
substitute member or members of the LRPC shall be subsequently appointed by
the Board, such member or members shall thereupon become a Voting Trustee
or Trustees under this Voting Trust Agreement.
14. In voting the Shares deposited hereunder, the Voting Trust-
ees agree to perform their duties in good faith, in a manner each
reasonably believes to be in the best interests of the Corporation and the
Shareholders and with such care, including reasonable inquiry, skill and
diligence, as a person with ordinary prudence would use under similar
circumstances. No Voting Trustee shall be liable for any acts or omissions
taken or omitted in compliance with Paragraphs 5 and 6 and this Paragraph
13. No Voting Trustee shall be responsible for any act or omission by any
predecessor or successor Voting Trustee.
15. The Voting Trustees shall serve hereunder without compensa-
tion. The Voting Trustees shall have the right to incur and pay such
reasonable expenses and charges and to employ and pay such agents,
attorneys and counsel as they may deem necessary and proper. Any such
expenses or charges incurred by and due to the Voting Trustees will be paid
by the Corporation. The Corporation shall indemnify the Voting Trustees
against all costs, charges, expenses, loss, liability and damage incurred
by them in the administration of the Voting Trusts or in the exercise of
any power conferred upon the Voting Trustees by this Voting Trust Agree-
ment.
16. In the event of a breach or threatened breach of any
provision in this Voting Trust Agreement, in addition to any and all other
legal and equitable remedies which may be available, any party hereto may
specifically enforce the terms of this Voting Trust Agreement and may
obtain temporary or permanent injunctive relief without the necessity of
proving actual damage by reason of any such breach or threatened breach.
17. The term "Trustee" as used in this Voting Trust Agreement
shall apply equally to the Voting Trustees named herein and to their
successors hereunder.
18. The Voting Trustees by executing this Voting Trust Agreement
accept the Voting Trusts herein created.
<PAGE>
19. The Corporation by executing this Voting Trust Agreement
consents to all the terms and conditions hereof, and agrees that it will
take all action necessary or appropriate for carrying out the terms hereof.
20. All communications provided for in this Voting Trust Agree-
ment shall be in writing and shall be sent to each party as follows:
To The Corporation:
AEL Industries, Inc.
305 Richardson Road
Lansdale, PA 19446
Attention: John R. Cox, Esquire
General Counsel
Fax 215-822-6056
To the Voting Trustees:
Francis J. Dunleavy
560 Morris Road, Box 208
Blue Bell, PA 19422
Fax 215-643-9275
Frederick R. Einsidler
99 South Park Avenue, Apt. 109
Rockville Centre, NY 11570
Fax 516-536-6505
Conrad J. Fowler
826 North Fairway Road
Glenside, PA 19038
Fax 215-887-3293
Leeam Lowin
21 Fox Run Lane
Greenwich, CT 06831
Fax 203-661-6258
With a copy to:
Vincent F. Garrity, Jr., Esquire
Duane, Morris & Heckscher
One Liberty Place
Philadelphia, PA 19103
Fax 215-979-1020
<PAGE>
To the Riebmans
Dr. & Mrs. Leon Riebman
1380 Barrowdale Road
Rydal, PA 19046
Fax 215-885-2238 (telephone first)
With a copy to:
Abraham H. Frumkin, Esquire
Eckert Seamans Cherin & Mellott
1700 Market Street
Suite 3232
Philadelphia, PA 19103
Fax 215-575-6015
or to such other address as such party may hereafter specify in writing,
and shall be deemed given on the earlier of (a) physical delivery, (b) if
given by facsimile transmission, when such facsimile is transmitted to the
telephone number specified in this Voting Trust Agreement and telephone
confirmation of receipt thereof is received, (c) three days after mailing
by prepaid first class mail and (d) one day after transmittal by prepaid
overnight courier.
21. The invalidity or unenforceability of any provision hereof
shall not affect the validity or enforceability of any other provision. A
court of competent jurisdiction may reduce or limit the scope or
application of any provision hereof in order to make such provision
enforceable.
22. This Voting Trust Agreement may be executed in several
counterparts each of which shall be deemed an original, but all of which
taken together shall constitute one and the same document.
23. This Voting Trust Agreement may be amended or rescinded only
by written instrument signed by the Corporation, the Riebmans and by the
same number of Voting Trustees whose vote would be required at the time
pursuant to Paragraph 13 hereof as if the Voting Trustees were voting the
shares deposited hereunder.
24. The Voting Trustees shall file a copy of this Voting Trust
Agreement in the registered office of the Corporation.
25. This Voting Trust Agreement supersedes any prior negotia-
tions and understandings and constitutes the entire agreement between the
parties with regard to its subject matter. The recitals contained in the
Background of this Voting Trust Agreement are an integral part of this
Voting Trust Agreement.
26. This Voting Trust Agreement shall be binding upon, and inure
to the benefit of, the Corporation and its successors and the Riebmans and
their heirs and personal representatives.
27. This Voting Trust Agreement shall be governed by, and
construed and enforced in accordance with the internal laws of the
Commonwealth of Pennsylvania without giving effect to conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have executed or caused
this Voting Trust Agreement to be executed as of the date first written
above.
AEL INDUSTRIES, INC.
By: /s/ George King
Name: George King
Title: Vice President
/s/ Francis J. Dunleavy /s/ Conrad J. Fowler
Francis J. Dunleavy, Conrad J. Fowler,
Voting Trustee Voting Trustee
/s/ Frederick R. Einsidler /s/ Leeam Lowin
Frederick R. Einsidler, Leeam Lowin,
Voting Trustee Voting Trustee
Signature of Shareholder
/s/ Dr. Leon Riebman
Dr. Leon Riebman
/s/ Claire E. Riebman
Claire E. Riebman
Number of Shares Deposited
Existing Class A Shares: 10,646
Class B Shares: 241,262
Contingent Shares: 180,947<PAGE>
EXHIBIT 1
AEL INDUSTRIES, INC.
Voting Trust Certificate
No. 1 10,646 Shares of
Class A Common Stock
This certifies that Dr. Leon and Mrs. Claire E. Riebman
have deposited 10,646 shares of Class A Common Stock of AEL
INDUSTRIES, INC. (the "Corporation"), a Pennsylvania corporation,
with the undersigned Voting Trustees, under the AEL Industries,
Inc. Voting Trust Agreement dated as of February __, 1995, among
the Corporation, the Voting Trustees and Dr. Leon Riebman and
Claire E. Riebman ("VT Agreement") a copy of which will be fur-
nished to the holder hereof without charge upon written request
therefor to the Voting Trustees.
This Certificate has not been registered under the
Securities Act of 1933, as amended, and may not be sold or other-
wise transferred unless (a) covered by an effective registration
statement under the Securities Act of 1933, as amended, or (b)
the Voting Trustees and the Corporation have been furnished with
an opinion of counsel satisfactory to them to the effect that no
registration is legally required for such transfer.
The holder of this Certificate takes the same subject to
all terms and conditions of the VT Agreement and is bound by and
entitled to the benefit of such Voting Trust Agreement.
THE TRANSFERABILITY OF THIS CERTIFICATE IS RESTRICTED AS
PROVIDED IN THE VT AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, the Voting Trustees have signed this
Certificate as of this __ day of February, 1995.
______________________________________
Francis J. Dunleavy, Voting Trustee
______________________________________
Frederick R. Einsidler, Voting Trustee
______________________________________
Conrad J. Fowler, Voting Trustee
______________________________________
Leeam Lowin, Voting Trustee
<PAGE>
EXHIBIT 2
AEL INDUSTRIES, INC.
Voting Trust Certificate
No. 2 241,262 Shares of
Class B Common Stock
This certifies that Dr. Leon and Mrs. Claire E. Riebman
have deposited 241,262 shares of Class B Common Stock of AEL
INDUSTRIES, INC. (the "Corporation"), a Pennsylvania corporation,
with the undersigned Voting Trustees, under the AEL Industries,
Inc. Voting Trust Agreement dated as of February __, 1995, among
the Corporation, the Voting Trustees and Dr. Leon Riebman and
Claire E. Riebman ("VT Agreement") a copy of which will be fur-
nished to the holder hereof without charge upon written request
therefor to the Voting Trustees.
This Certificate has not been registered under the
Securities Act of 1933, as amended, and may not be sold or other-
wise transferred unless (a) covered by an effective registration
statement under the Securities Act of 1933, as amended, or (b)
the Voting Trustees and the Corporation have been furnished with
an opinion of counsel satisfactory to them to the effect that no
registration is legally required for such transfer.
The holder of this Certificate takes the same subject to
all terms and conditions of the VT Agreement and is bound by and
entitled to the benefit of such Voting Trust Agreement.
THE TRANSFERABILITY OF THIS CERTIFICATE IS RESTRICTED AS
PROVIDED IN THE VT AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, the Voting Trustees have signed this
Certificate as of this __ day of February, 1995.
______________________________________
Francis J. Dunleavy, Voting Trustee
______________________________________
Frederick R. Einsidler, Voting Trustee
______________________________________
Conrad J. Fowler, Voting Trustee
______________________________________
Leeam Lowin, Voting Trustee
<PAGE>
EXHIBIT 3
AEL INDUSTRIES, INC.
Voting Trust Certificate
No. 3 180,947 Shares of
Class A Common Stock
This certifies that Dr. Leon and Mrs. Claire E. Riebman
have deposited 180,947 shares of Class A Common Stock of AEL
INDUSTRIES, INC. (the "Corporation"), a Pennsylvania corporation,
with the undersigned Voting Trustees, under the AEL Industries,
Inc. Voting Trust Agreement dated as of February __, 1995, among
the Corporation, the Voting Trustees and Dr. Leon Riebman and
Claire E. Riebman ("VT Agreement") a copy of which will be fur-
nished to the holder hereof without charge upon written request
therefor to the Voting Trustees.
This Certificate has not been registered under the
Securities Act of 1933, as amended, and may not be sold or other-
wise transferred unless (a) covered by an effective registration
statement under the Securities Act of 1933, as amended, or (b)
the Voting Trustees and the Corporation have been furnished with
an opinion of counsel satisfactory to them to the effect that no
registration is legally required for such transfer.
The holder of this Certificate takes the same subject to
all terms and conditions of the VT Agreement and is bound by and
entitled to the benefit of such Voting Trust Agreement.
THE TRANSFERABILITY OF THIS CERTIFICATE IS RESTRICTED AS
PROVIDED IN THE VT AGREEMENT.<PAGE>
IN WITNESS WHEREOF, the Voting Trustees have signed this
Certificate as of this __ day of February, 1995.
______________________________________
Francis J. Dunleavy, Voting Trustee
______________________________________
Frederick R. Einsidler, Voting Trustee
______________________________________
Conrad J. Fowler, Voting Trustee
______________________________________
Leeam Lowin, Voting Trustee
1995 Agreement
This 1995 AGREEMENT ("1995 Agreement") is made as of the 28th day of
February, 1995 by and between AEL Industries, Inc., a Pennsylvania
corporation ("Corporation") and Dr. Leon Riebman ("Riebman").
Background
A. This is the 1995 Agreement referred to in Section V of an
agreement dated the date hereof by and among the Corporation and Dr. Leon
Riebman and Claire E. Riebman (the "Agreement").
B. The Corporation and Riebman have entered into an Employment and
Retirement Agreement, dated January 8, 1982, as amended on November 14,
1991 (collectively, "1982 Agreement").
C. The Corporation's rights will be substantially enhanced if
Riebman and the Corporation enter into this 1995 Agreement which will (a)
assure Riebman's availability exclusively to the Corporation in the future
and (b) substantially improve the Corporation's rights with respect to the
protection of proprietary information, intellectual property and
restrictions on competition, all as hereinafter more particularly set
forth. The purpose of this 1995 Agreement is to set forth the terms and
conditions thereof.
NOW THEREFORE, intending to be legally bound hereby, the Corporation
and Riebman agree as follows:
I. Definitions. All terms defined in the 1982 Agreement or the
Agreement shall have the same meaning when used herein and capitalized
unless the context clearly indicates otherwise.
II. Effective Date. This 1995 Agreement shall become effective on
the date hereof and shall supplement the 1982 Agreement to the extent
provided herein.
III. Limitation on Voluntary Retirement. Notwithstanding the
provisions of the 1982 Agreement, Riebman agrees that he shall not
voluntarily retire from active employment prior to the date of expiration
or termination of the Agreement.
IV. Consultancy. As contemplated in Section 4B of the 1982
Agreement, the Corporation and Riebman agree as follows:
4. Consultancy. For a period of three (3) years commencing
upon the date on which Riebman voluntarily retires from active employment
with the Corporation (which shall in no event occur prior to the date on
which the Agreement expires or terminates) ("Consulting Commencement Date")
Riebman shall provide to the Corporation, for up to 130 days per year, at
the Corporation's request, such consulting services ("Consulting Services")
which are not inconsistent with the position held by Riebman prior to the
date hereof as shall be required by the Corporation in its sole reasonable
discretion, which Consulting Services shall include, without limitation,
developing and continuing to cultivate relationships in the Corporation's
industry for the benefit of the Corporation. As consideration therefor,
the Corporation shall make payments (collectively the "Consulting Payments"
and individually a "Consulting Payment") to Riebman in the amount of Six
Hundred Seventy-five Thousand Dollars ($675,000) as follows:
(1) On the Consulting Commencement Date, a payment of Three
Hundred Thousand Dollars ($300,000);
(2) On the first anniversary of the Consulting Commencement
Date, a payment of Two Hundred Twenty-five Thousand
Dollars ($225,000); and
(3) On the second anniversary of the Consulting
Commencement Date, a payment of One Hundred Fifty
Thousand Dollars ($150,000).
The Corporation shall not be obligated to make any of the
Consulting Payments unless the certificates representing the Contingent
Shares shall have been delivered by the Voting Trustees to the holder(s) of
the voting trust certificates representing the Contingent Shares pursuant
to Paragraph 11(a) of the VT Agreement.
The Corporation shall have no obligation to make any additional
Consulting Payments if on the date any such payment is otherwise due
Riebman will not be available to provide Consulting Services for the
forthcoming year. Any payment(s) made by the Company pursuant to Sections
I(a)(1), I(a)(2) or I(a)(4) of the Agreement shall be credited against, and
reduce to that extent, the Consulting Payments in chronological order
thereof.
For the period during which Riebman is performing the Consulting
Services, Riebman shall (i) be entitled to the Fringe Benefits provided in
Section 3C of the 1982 Agreement, provided Riebman shall not be entitled to
any vacation; and (ii) observe the covenants set forth in Section 8 of the
1982 Agreement, as supplemented and restated by Section V of this 1995
Agreement.
V. Proprietary Information and Non-Competition. Section 8 of the
1982 Agreement is hereby supplemented and restated in its entirety as
follows:
"8. Proprietary Information and Non-Competition.
A. Proprietary Information.
(1) Disclosure; Confidentiality Agreements. Riebman
covenants and agrees that he will not, during the Employment Period or at
any time thereafter, except with the express written consent of the
Corporation, directly or indirectly disclose, furnish, communicate or
divulge to any Person, or use for the benefit of any Person, other than the
Corporation, any confidential knowledge or information with respect to the
conduct or details of the Corporation's business, including, without
limitation, all manufacturing processes, technology, patents, copyrights,
inventions, proprietary information, computer software, computer hardware
designs, formulae, trade secrets, know-how, equipment, methods of
operation, financial condition, prices, fees, costs, designs, marketing
methods, forms, statistics, suppliers, customer lists, business methods,
financial and cost data and secret processes (collectively, the
"Proprietary Information"). Riebman further agrees to be bound by the
provisions of any confidentiality or similar agreement with any customer or
supplier of the Corporation to which Riebman is a party or to which the
Corporation is a party and as to which Riebman has knowledge of the terms
and conditions thereof on the date hereof, as employee, consultant,
officer, director or otherwise.
(2) Technical Data; Assignment of Rights Promptly
upon termination of his relationship with the Corporation, as employee,
consultant, officer, director or otherwise, for any reason whatsoever,
Riebman agrees to return to the Corporation any and all technical data,
drawings, memoranda, customer lists, notes, computer programs and listings
thereof, books of accounts, specifications, price lists and any other
papers and items embodying Proprietary Information which are in Riebman's
possession or control, all of which materials shall be the property of the
Corporation. Riebman further agrees to assign, transfer and convey to the
Corporation any patents, trademarks or other intellectual property rights
obtained by Riebman at any time in the future and which in any respect
relate to the business of the Corporation and are developed or derived by
him as a result of his relationship with the Corporation as employee,
consultant, officer, director or otherwise.
B. Non-Competition. Riebman covenants and agrees that for
so long as he shall have any relationship with the Corporation as employee,
consultant, officer, director or otherwise, and for a period of five (5)
years following the termination of such relationship for any reason
whatsoever ("Non-Competition Period"), Riebman shall not, without the
express written consent of the Corporation, directly or indirectly
(1) establish, engage, participate or invest in or
assist (whether as owner, part-owner, shareholder, partner, director,
officer, trustee, employee, agent, shareholder, partner or consultant or in
any other capacity) any business organization which
(a) is in competition with the Corporation in any
geographic area in which the Corporation conducts its business or sells its
products or in which the Corporation, to the knowledge of Riebman, plans to
conduct its business or sell its products;
(b) solicits or accepts, or intends to solicit or
accept, the business of any person or entity
(i) which was a customer or supplier of the
Corporation at any time within five (5) years prior to the termination of
Riebman's relationship with the Corporation, or
(ii) which was engaged in significant
discussions with the Corporation or had received a proposal from the
Corporation with a view toward establishing a customer or supplier
relationship at any time within two (2) years prior to the termination of
Riebman's relationship with the Corporation, or
(iii) with which Riebman shall have had
significant contact on behalf of the Corporation and which was, at the time
of such contact, a customer or supplier of the Corporation;
(2) divert or attempt to divert any business from the
Corporation by influencing or attempting to influence any customer or
prospective customer of the Corporation;
(3) hire, as employee, consultant, agent or otherwise,
or solicit the participation in any business activity (as owner, part-
owner, shareholder, partner, director, officer, trustee, employee, agent or
consultant or in any other capacity) of, any person who was an employee,
consultant or officer of the Corporation at any time within two (2) years
preceding the date of the termination of Riebman's relationship with the
Corporation.
Notwithstanding the foregoing provisions of this Section 8(B), Riebman may
make passive investments in a competitive enterprise the shares of
ownership of which are publicly traded if Riebman's investment constitutes
less than 5% of the equitable ownership of such enterprise.
C. Remedies.
(1) Equitable Relief. Riebman recognizes and
acknowledges that the Corporation's damages from any breach of the
provisions of this Section 8 may be difficult to measure and that the
Corporation's legal remedy for any such breach may accordingly be
inadequate. Riebman agrees that upon any actual or threatened violation
of the provisions of this Agreement, in addition to any other rights and
remedies which the Corporation may have at law or in equity, an order,
either temporary or permanent, may be entered by any court of competent
jurisdiction in an action brought by the Corporation for the purpose of
enjoining Riebman and his partners, agents, servants, employers and
employees from violating any of the provisions of this Section 8. The
existence of any claim or cause of action which Riebman may have against
the Corporation or any other Person (other than a claim for the
Corporation's breach of this Agreement for failure to make payments
hereunder) shall not constitute a defense or bar to the enforcement of such
covenants. If the Corporation is obliged to resort to the courts for the
enforcement of any of the covenants or agreements contained in this Section
8, or if such covenants or agreements are otherwise the subject of
litigation between the parties, then the term of such covenants and
agreements shall be extended for a period of time equal to the period of
such breach, such extension commencing on the later of (a) the date of a
final court order (without further right of appeal) enforcing such covenant
or agreement, and (b) the last date on which the covenants and agreements
would be enforceable without such an extension.
(2) Monetary Relief. In the event of any breach by
Riebman of any of the covenants or agreements contained in this Section 8,
the Corporation shall (in addition to its other rights and remedies) have
the right to suspend any or all of the payments otherwise due to Riebman
under this Agreement for the period of the breach (with no obligation to
pay such suspended payments after the period of the breach) and in the
event of a material breach, to permanently terminate any or all such
payments; any suspension or permanent termination of the payments shall not
relieve Riebman of his obligations under this Section 8 or other sections
of this Agreement.
The suspension or permanent termination of payments
otherwise due to Riebman under this Agreement shall not preclude an award
of equitable relief nor shall it be construed as liquidated damages.
Riebman recognizes and acknowledges that the damages which may be suffered
by the Corporation and recovered by it for a violation by Riebman of this
Section 8 may exceed the amount set forth in Subparagraph F.
D. Invalidity or Unenforceability. If any portion of the
covenants or agreements contained in this Section 8, or the application
thereof, is construed to be invalid or unenforceable, then the other
portions of such covenant(s) or agreement(s) or the application thereof
shall not be affected and shall be given full force and effect without
regard to the invalid or unenforceable portions to the fullest extent
possible. If any covenant or agreement in this Section 8 is held to be
unenforceable because of the area covered, the duration thereof, or the
scope thereof, then the court making such determination shall have the
power to reduce the area and/or duration and/or limit the scope thereof,
and the covenant or agreement shall then be enforceable in its reduced
form.
E. Definition of Corporation. For purposes of this
Section 8, the term "Corporation" shall include Corporation and all direct
and indirect subsidiaries and affiliates of Corporation.
F. Proprietary Information and Noncompetition Payment;
Participation Rights Agreement. The Corporation and Riebman have entered
into a "Participation Rights Agreement" on the date hereof in the form of
Exhibit C to the Agreement which provides that in consideration of
Riebman's agreement to comply with the provisions of this Section 8, the
Corporation shall, subject to the conditions set forth therein, make a
"Participation Payment" (as defined therein).
VI. Amendment; Rescission; Actions by the Corporation.
a. No amendment or rescission of this 1995 Agreement shall be
effective unless set forth in writing, signed by Riebman and the
Corporation and approved by the Long Range Planning Committee ("LRPC") o
the Board of Directors of the Corporation as provided in Section VI b.
hereof.
b. All actions by the Corporation contemplated by this 1995
Agreement shall be taken by and require the approval of a majority of the
members of the LRPC; provided, however, if at any time there exist less
than three members of the LRPC, all such actions shall require the
unanimous approval of the members of the LRPC. The foregoing shall not
excuse the performance by the Corporation of any obligations which it has
undertaken to perform hereunder all of which obligations having been
approved by the LRPC, no further approval being required.
VII. Representations and Warranties. Riebman hereby represents and
warrants to the Corporation as follows:
a. He is sui juris and of full capacity to make and perform his
obligations under this 1995 Agreement.
b. The execution, delivery and performance by Riebman of this
1995 Agreement will not violate or constitute a breach of or default under
any instrument to which he is party or pursuant to which he is bound.
c. This 1995 Agreement constitutes a valid and binding
obligation of Riebman enforceable in accordance with its terms.
d. To his knowledge, there are no breaches or violations of any
condition, covenant or provision of the 1982 Agreement, no event of
default has occurred under the 1982 Agreement, and no event has occurred
which, with the passage of time or the giving of notice or both, would
constitute an event of default under the 1982 Agreement.
e. To his knowledge, there exist no defenses or offsets to the
rights of the Corporation under the 1982 Agreement.
VIII. Termination
If the Agreement expires or terminates for a reason other than
the Closing of a Qualifying Business Combination included within a Proposal
as to which Shareholder Approval has been obtained, this 1995 Agreement
shall terminate and shall be of no further force and effect.
IX. Notices
All communications provided for in this 1995 Agreement shall be
in writing and shall be sent to each party as follows:
To The Corporation:
AEL Industries, Inc.
305 Richardson Road
Lansdale, PA 19446
Attention: John R. Cox, Esquire
General Counsel
Fax 215-822-6056
With copies to:
Francis J. Dunleavy
560 Morris Road, Box 208
Blue Bell, PA 19422
Fax 215-643-9275
Frederick R. Einsidler
99 South Park Avenue, Apt. 109
Rockville Centre, NY 11570
Fax 516-536-6505
Conrad J. Fowler
826 North Fairway Road
Glenside, PA 19038
Fax 215-887-3293
<PAGE>
Leeam Lowin
21 Fox Run Lane
Greenwich, CT 06831
Fax 203-661-6258
and
Vincent F. Garrity, Jr., Esquire
Duane, Morris & Heckscher
One Liberty Place
Philadelphia, PA 19103
Fax 215-979-1020
To Riebman
Dr. Leon Riebman
1380 Barrowdale Road
Rydal, PA 19046
Fax 215-885-2238 (telephone first)
With a copy to:
Abraham H. Frumkin, Esquire
Eckert Seamans Cherin & Mellott
1700 Market Street
Suite 3232
Philadelphia, PA 19103
Fax 215-575-6015
or to such other address as such party may hereafter specify in writing,
and shall be deemed given on the earlier of (a) physical delivery, (b) if
given by facsimile transmission, when such facsimile is transmitted to the
telephone number specified in this Agreement and telephone confirmation of
receipt thereof is received, (c) three days after mailing by prepaid first
class mail and (d) one day after transmittal by prepaid overnight courier.
X. Miscellaneous
a. Survival of Representations and Warranties. All
representations and warranties contained in this 1995 Agreement shall
survive the execution and delivery of this 1995 Agreement and the
consummation of the transactions contemplated hereby.
b. Binding Effect. This 1995 Agreement shall be binding upon,
and inure to the benefit of, the Corporation and its successors and the
Riebmans and their heirs and personal representatives.
c. Governing Law. This 1995 Agreement shall be governed by, and
construed and enforced in accordance with, the internal law of the
Commonwealth of Pennsylvania without giving effect to conflicts of laws.
d. Entire Agreement. This 1995 Agreement and the 1982 Agreement
taken together supersede any prior negotiations and understandings and
constitute the entire agreement between the parties with regard to its
subject matter.
e. The 1982 Agreement, with the enhancements in favor of the
Corporation provided by this 1995 Agreement, remains in full force and
effect.
f. Counterparts. This 1995 Agreement may be executed in several
counterparts each of which shall be deemed an original, but all of which
taken together shall constitute one and the same document.
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Agreement as of the date first mentioned above.
AEL INDUSTRIES, INC.
By:/s/ George King
Name: George King
Title: Vice President
/s/ Dr. Leon Riebman
Dr. Leon Riebman
PARTICIPATION RIGHTS AGREEMENT
This PARTICIPATION RIGHTS AGREEMENT ("Participation Agreement") is
made as of the 28th day of February, 1995 by and between AEL Industries,
Inc., a Pennsylvania corporation ("Corporation") and Dr. Leon Riebman ("Dr.
Riebman").
Background
A. This is the Participation Rights Agreement referred to in a
certain 1995 Agreement ("1995 Agreement") dated the date hereof between the
Corporation and Dr. Riebman.
B. The purpose of this Participation Agreement is to set forth the
terms and conditions upon which, in consideration for Dr. Riebman's
agreement to comply with the provisions of Section 8 of the 1982 Agreement,
as supplemented and restated by Section V of the 1995 Agreement, the
receipt and sufficiency of such consideration being hereby acknowledged;
the Corporation, upon the occurrence of a Qualifying Business Combination,
will make a cash payment to Dr. Riebman, in the amount and at the time
determined pursuant to this Participation Agreement.
NOW THEREFORE, intending to be legally bound hereby, the Corporation
and Dr. Riebman agree as follows:
1. Definitions. Terms capitalized but not defined herein shall have
the meanings ascribed to them in the 1982 Agreement (as defined in the 1995
Agreement) or in the Agreement (as defined in the 1995 Agreement) unless
the context otherwise requires.
2. Grant of Participation Rights. The Corporation hereby grants to
Dr. Riebman the right to participate in the proceeds of a Qualifying
Business Combination, such participation right to be paid in cash by the
Corporation to Dr. Riebman in accordance with the provisions hereof
("Participation Payment").
3. Amount of Participation Payment. The amount of the Participation
Payment shall be the "Calculated Amount" (as defined hereinbelow). The
Calculated Amount shall be determined as follows:
(i) If the "Aggregate Consideration" (as defined hereinbelow) in
connection with a Qualifying Business Combination is equal to or greater
than $60,000,000 the Calculated Amount shall be equal to $1,900,000; or
(ii) If the Aggregate Consideration in connection with a Qualifying
Business Combination is less than $60,000,000, the Calculated Amount shall
be equal to the product of (x) $1,900,000, multiplied by (y), a fraction,
the numerator of which is equal to the amount of the Aggregate
Consideration in connection with a Business Combination and the denominator
of which is $60,000,000;
(iii) The "Aggregate Consideration" shall be equal to the aggregate of
(A) the amount of any cash and (B) the fair market value of any property,
paid by a buyer as consideration to the Corporation and/or the shareholders
of the Corporation in connection with a Qualifying Business Combination
measured as of the closing date ("Closing Date") of the Qualifying Business
Combination. For the purposes of determining the amount of the Aggregate
Consideration: (1) the amount of any consideration to be paid following
the Closing Date shall be discounted to the Closing Date at a discount rate
of six percent (6%) per annum; (2) the fair market value of any common
stock or other securities received shall mean, with respect to each such
share or unit one of the following determined in the order of priority set
forth below: the weighted average of the closing prices for such share or
unit sold on all securities exchanges on which such share or unit may at
the time be listed for a period of twenty (20) consecutive trading days
prior to the Closing Date or, if there have been no sales on such exchanges
on such days, the weighted average of the highest bid and lowest asked
prices on all such exchanges at the end of each such days or, if such stock
or units are not so listed, the average of the representative bid and asked
prices quoted on the NASDAQ system as of 4:00 p.m. New York City time on
each of such days, or if such stock or units are not quoted on the NASDAQ
system, the average of the highest bid and lowest asked prices on such days
in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor organization, or,
if not so quoted, the value as determined in good faith by the Board of the
Corporation in consultation with Dr. Riebman and (3) the fair market value
of any consideration to be paid in property other than common stock or
securities shall be as determined in good faith by the Board of the
Corporation in consultation with Dr. Riebman. Notwithstanding any of the
foregoing, for purposes of this Section 3(iii), the Aggregate Consideration
shall be reduced by cash paid or to be paid to the Corporation as the
exercise price for stock options exercised in connection with a Qualifying
Business Combination.
4. Corporation's Obligation to Make the Participation Payment. The
Corporation's obligation to make the Participation Payment shall only arise
and be payable upon the delivery by the Voting Trustees of the certificates
representing the Contingent Shares to the holder(s) of the Voting Trust
Certificate(s) issued with respect to the Contingent Shares pursuant to
Paragraph 11(a) of the VT Agreement, and upon such delivery the
Participation Payment shall be made on the later of (a) the date of such
delivery or (b) August 28, 1995. The aforementioned delivery is the only
condition to the Corporation's obligation to make the Participation
Payment.
5. Amendment; Rescission; Actions by the Corporation. No amendment
or rescission of this Participation Agreement shall be effective unless set
forth in a writing signed by Dr. Riebman and the Corporation. Such
amendment or recission by the Corporation shall require the approval of a
majority of the members of the LRPC; provided, however, if at any time
there exist less than three members of the LRPC, all such actions shall
require the unanimous approval of the members of the LRPC. The foregoing
shall not excuse the performance by the Corporation of any obligations
which it has undertaken to perform hereunder.
6. Representations and Warranties. Dr. Riebman hereby represents
and warrants to the Corporation as follows:
a. He is sui juris and of full capacity to make and perform his
obligations under this Participation Agreement.
b. The execution, delivery and performance by Dr. Riebman of
this Participation Agreement will not violate or constitute a breach of or
default under any instrument to which he is party or pursuant to which he
is bound.
c. This Participation Agreement constitutes a valid and binding
obligation of Dr. Riebman enforceable in accordance with its terms.
7. Notices.
All communications provided for in this Agreement shall be in
writing and shall be sent to each party as follows:
To The Corporation:
AEL Industries, Inc.
305 Richardson Road
Lansdale, PA 19446
Attention: John R. Cox, Esquire
General Counsel
Fax 215-822-6056
With copies to:
Mr. Francis J. Dunleavy
560 Morris Road, Box 208
Blue Bell, PA 19422
Fax 215-643-9275
<PAGE>
Frederick R. Einsidler
99 South Park Avenue, Apt. 109
Rockville Centre, NY 11570
Fax 516-536-6505
Conrad J. Fowler
826 North Fairway Road
Glenside, PA 19038
Fax 215-887-3293
Leeam Lowin
21 Fox Run Lane
Greenwich, CT 06831
Fax 203-661-6258
and
Vincent F. Garrity, Jr., Esquire
Duane, Morris & Heckscher
One Liberty Place
Philadelphia, PA 19103
Fax 215-979-1020
To Riebman:
Dr. Leon Riebman
1380 Barrowdale Road
Rydal, PA 19046
Fax 215-885-2238 (telephone first)
With a copy to:
Abraham H. Frumkin, Esquire
Eckert Seamans Cherin & Mellott
1700 Market Street
Suite 3232
Philadelphia, PA 19103
Fax 215-575-6015
or to such other address as such party may hereafter specify in writing,
and shall be deemed given on the earlier of (a) physical delivery, (b) if
given by facsimile transmission, when such facsimile is transmitted to the
telephone number specified in this Agreement and telephone confirmation of
receipt thereof is received, (c) three days after mailing by prepaid first
class mail and (d) one day after transmittal by prepaid overnight courier.
8. Miscellaneous.
a. Survival of Representations and Warranties. All
representations and warranties contained in this Participation Agreement
shall survive the execution and delivery of this Participation Agreement
and the consummation of the transactions contemplated hereby.
b. Binding Effect. This Participation Agreement shall be
binding upon, and inure to the benefit of, the Corporation and its
successors and Dr. Riebman and his heirs and personal representatives.
c. Governing Law. This Participation Agreement shall be
governed by, and construed and enforced in accordance with, the internal
law of the Commonwealth of Pennsylvania without giving effect to conflicts
of laws.
d. Entire Agreement. This Participation Agreement supersedes
any prior negotiations and understandings and constitutes the entire
agreement between the parties with regard to its subject matter.
e. Counterparts. This Participation Agreement may be executed
in several counterparts each of which shall be deemed an original, but all
of which taken together shall constitute one and the same document.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Agreement as of the date first mentioned above.
AEL INDUSTRIES, INC.
By:/s/ George King
Name: George King
Title: Vice President
/s/ Dr. Leon Riebman
Dr. Leon Riebman
February 28, 1995
Dr. & Mrs. Leon Riebman
Dear Dr. & Mrs. Riebman:
In order to induce you to enter into the Agreement ("Agreement")
between AEL Industries, Inc. ("Company") and you dated as of this date and
the related agreements referred to therein, intending to be legally bound
hereby, I agree that I will vote all the shares of Company Class A Common
Stock and Class B Common Stock over which I have voting power in favor of a
Qualifying Business Combination included within a Proposal submitted for
Shareholder Approval and for which the Voting Trustees are voting the
Riebman Shares (as each of such capitalized terms are defined in the
Agreement).
/s/Leeam Lowin
Leeam Lowin
<PAGE>
February 28, 1995
Dr. & Mrs. Leon Riebman
Dear Dr. & Mrs. Riebman:
In order to induce you to enter into the Agreement ("Agreement")
between AEL Industries, Inc. ("Company") and you dated as of this date and
the related agreements referred to therein, intending to be legally bound
hereby, I agree that I will vote all the shares of Company Class A Common
Stock and Class B Common Stock over which I have voting power in favor of a
Qualifying Business Combination included within a Proposal submitted for
Shareholder Approval and for which the Voting Trustees are voting the
Riebman Shares (as each of such capitalized terms are defined in the
Agreement).
/s/Frederick R. Einsidler
Frederick R. Einsidler
<PAGE>
February 28, 1995
Dr. & Mrs. Leon Riebman
Dear Dr. & Mrs. Riebman:
In order to induce you to enter into the Agreement ("Agreement")
between AEL Industries, Inc. ("Company") and you dated as of this date and
the related agreements referred to therein, intending to be legally bound
hereby, I agree that I will vote all the shares of Company Class A Common
Stock and Class B Common Stock over which I have voting power in favor of a
Qualifying Business Combination included within a Proposal submitted for
Shareholder Approval and for which the Voting Trustees are voting the
Riebman Shares (as each of such capitalized terms are defined in the
Agreement).
/s/Francis J. Dunleavy
Francis J. Dunleavy
AEL INDUSTRIES, INC.
BYLAW AMENDMENT RESOLUTION
RESOLVED, that the Board of Deirectors of AEL INDUSTRIES, INC. ,
a Pennsylvania corporation ("Corporation"), by the affirmative
vote of a majority of the Board of Directors of the Corporation
at a meeting duly convened and held on February 28, 1995, does
hereby amend the Bylaws of the Corporation as follows so as to
effectuate the purposes of an Agreement dated February 28, 1995
between the Corporation and Dr. Leon Riebman and Claire Riebman.
ARTICLE IV. DIRECTORS AND BOARD MEETINGS.
Section 401. Management by Board of Directors. Except as
provided in Section 410 of these Bylaws, the business and affairs
of the Corporation shall be managed by its Board of Directors,
and the Board of Directors may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by
statute or by the Articles of Incorporation or by these Bylaws
directed or required to be exercised or done by the shareholders.
Section 402. Number of Directors. (a) The Board of Directors
shall consist of not less than three (3) nor more than ten (10)
directors. The number of directors to be elected, subject to the
foregoing limits, shall be determined by resolution of the Board
of Directors. The directors shall be elected by the shareholders
at the annual meeting of shareholders to serve until the next
annual meeting of shareholders. Each director shall serve until
his successor shall have been elected and shall qualify, even
though his term of office as herein provided has otherwise
expired, except in the event of his earlier resignation or
removal. A majority of the Board of Directors, whether or not he
or they constitute a quorum, may designate a successor to fill a
vacancy arising from the resignation, death, incapacity or
disqualification of any director.
(b) A majority of the Board of Directors shall be
independent directors. For the purpose of these bylaws the term
"independent director" shall mean a person (i) who is not an
employee of or consultant to the Company; (ii) is not related by
blood or marriage to either Dr. Leon Riebman or Claire E.
Riebman; and (iii), in the reasonable determination of the
Committee, does not have a financial or other material
relationship with either Dr. Leon Riebman or Claire E. Riebman
which might influence the objectivity of his or her judgment as
it relates to the best interests of the Company and its
shareholders.
Section 403. Resignations. Any director may resign at any
time. Such resignation shall be in writing, but the acceptance
thereof shall not be necessary to make it effective.
Section 404. Compensation of Directors. No director shall be
entitled to any salary as such; but the Board of Directors may
fix, from time to time, a reasonable fee to be paid each director
for his services in attending meetings of the Board. Directors
may also be reimbursed by the Corporation for all reasonable
expenses incurred in attending each meeting of the Board or any
Committee of the Board.
Section 405. Regular Meetings. Regular meetings of the Board
of Directors shall be held on such day and at such hour as the
Board shall from time to time designate. The Board of Directors
shall meet for reorganization at the first regular meeting
following the annual meeting of shareholders at which the
directors are elected. Notice of regular meetings of the Board
of Directors need not be given.
Section 406. Special Meetings. Special meetings of the Board
of Directors may be called by the Chairman of the Board or the
President and shall be called whenever two or more members of the
Board so request in writing. Notice of the time and place of
every special meeting, which need not specify the business to be
transacted thereat and which may be either verbal or in writing,
shall be given by the Secretary to each member of the Board at
least one calendar day before the date of such meeting.
Section 407. Reports and Records. The reports of officers and
committees shall be filed with the Secretary. The Board of
Directors shall keep complete records of its proceedings. When a
director shall request it, the vote of each director upon a
particular question shall be recorded in the minutes.
Section 408. Executive Committee. The Board of Directors may,
without limiting its right to establish other committees,
establish an Executive Committee of the Board which shall consist
of any two or more directors. The Executive Committee shall have
and exercise the authority of the Board of Directors in the
management and affairs of the Corporation, except as otherwise
provided by applicable statute or in the resolution establishing
the Executive Committee, and except as provided in Section 410 of
these Bylaws.
Section 409. Absence or Disqualification of Committee Members.
In the absence or disqualification of any member of any committee
(other than the Long Range Planning Committee) or committees
established by the Board of Directors, the member or members
thereof present at any meeting of such committee or committees,
and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another director to
act at the meeting in the place of any such absent or
disqualified member.
Section 410. Long Range Planning Committee. (a) All actions
by the Company contemplated by the Agreement dated February 8,
1995 by and among the Company and Dr. Leon Riebman and Claire E.
Riebman (the "Agreement"), and by the Voting Trust Agreement, the
Escrow Agreement, the 1995 Agreement and the Participation Rights
Agreement, all referred to therein, shall be taken on its behalf
exclusively by the Long Range Planning Committee (the
"Committee"), which shall have the full authority of the Board of
Directors for the purposes of all four of the foregoing
agreements.
(b) All actions of the Committee shall require the approval
of a majority of the members thereof; provided, however, if at
any time there exist fewer than three members of the Committee,
all actions at such time shall require the unanimous approval of
the members of the Committee.
(c) The Board of Directors shall (i) maintain the Committee
in existence during the Initial Term, Renewal Term (as those
terms are defined in the Agreement) or any extension of the
Agreement; (ii) not change the present composition of the
Committee except upon request of the Committee; and (iii) cause
any successor member of the Committee to be a person who the
Committee considers to be an independent director, as defined in
Section 402(b) of these Bylaws.
(d) The amendment or repeal of any provision of Article IV
relating to the Committee shall require the approval of the
Committee.
