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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) August 28, 1998
---------------
RADYNE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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NEW YORK 0-11685-NY 11-2569467
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification)
5225 SOUTH 37TH STREET, PHOENIX, ARIZONA 85040
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 602-437-9620
-------------
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
On August 28, 1998, Radyne Corporation (the "Company") signed a definitive
agreement (the "Agreement") to acquire ComStream Holdings, Inc. ("ComStream")
from Spar Aerospace Limited ("Spar"), a Canadian advanced technology company.
ComStream, a wholly owned subsidiary of Spar, is an international provider of
digital transmission solutions for voice, data, audio and video applications
with offices in the United States, Singapore, Indonesia, China and the United
Kingdom. Revenues of ComStream for 1997 were approximately $56 million and for
1998 are expected to be in excess of $40 million.
Pursuant to the terms of the Agreement, all of the outstanding shares of
common stock of ComStream will be purchased for an aggregate purchase price of
$17,000,000, of which $10 million will be payable in cash at the closing and $7
million will be payable up to nine months thereafter pursuant to a note which
will be convertible into Radyne common stock (the "Common Stock") under certain
circumstances. The acquisition has been approved by the boards of directors of
Radyne, Spar and ComStream and is subject to customary closing conditions. In
addition, the transaction is subject to governmental review under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the Exon-Florio law.
It is expected that the transaction will close during the month of September,
1998. The acquisition will be accounted for under the purchase method and will
result in a one-time charge of approximately $6 million, which represents the
value assigned to purchased research and development. In addition, Radyne
expects to incur a one-time charge of approximately $2.5 million for
restructuring costs.
Radyne intends to finance the acquisition, the restructuring costs and its
ongoing working capital needs via the offering of Common Stock to its existing
shareholders and the extension and enhancement of its bank line of credit.
Stetsys Pte Ltd and Stetsys US, Inc., Radyne's controlling shareholders have
committed to purchase an aggregate of $16 million of common stock upon the
closing of the ComStream acquisition at a price per share equal to the average
trading price of Radyne shares for the first 5 trading days following the date
of this announcement, less 50 cents. This will also be the conversion price in
the convertible note provided to Spar as part of the acquisition consideration.
Radyne's other shareholders will be offered approximately $1,660,000 of common
shares at the same price per share, in amounts proportionate to their
shareholdings. This offering will be made strictly by means of a prospectus
which will be distributed to shareholders of record at a date selected at the
time of Radyne's filing with the Securities and Exchange Commission of a
registration statement for the offering, which is anticipated to occur at or
about the time of the closing of the ComStream acquisition.
Radyne, a member of the Singapore Technologies group, based in Phoenix, has
designed and produced digital data communications equipment and associated
equipment for satellite telecommunications systems for eighteen years. The
company designs, manufactures and sells satellite modems, frequency converters,
ancillary products and equipment racks containing integrated modems and
supporting equipment for data communications.
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7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
c. Exhibits
2.1 Stock Purchase Agreement dated August 28, 1998 between Spar
Aerospace Limited and the Company
4.1 Form of Convertible Promissory Note
4.2 Form of Registration Rights Agreement between Spar and the Company
99.1 Press release issued by the Company on August 28, 1998
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: August 28, 1998
RADYNE CORPORATION
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(Registrant)
By: /s/ Robert C. Fitting
------------------------------
Its: President
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[EXECUTION COPY]
Exhibit 2.1
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
SPAR AEROSPACE LIMITED
AND
RADYNE CORP.
AUGUST 28, 1998
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TABLE OF CONTENTS
Page
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ARTICLE I. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Other Definitional Provisions . . . . . . . . . . . . . . . . . . . 6
ARTICLE II. TRANSFER OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . 6
2.1. Purchase and Sale of the Shares . . . . . . . . . . . . . . . . . . 6
2.2. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3. Deliveries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SPAR . . . . . . . . . . . . . 7
3.1. Organization; Standing and Authority of Spar. . . . . . . . . . . . 7
3.2. Organization; Standing and Authority of Holdings. . . . . . . . . . 7
3.3. Organization; Standing and Authority of the Subsidiaries. . . . . . 8
3.4. The Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5. The Subsidiary Shares . . . . . . . . . . . . . . . . . . . . . . . 8
3.6. Capital Stock of Holdings . . . . . . . . . . . . . . . . . . . . . 8
3.7. Capital Stock of the Subsidiaries . . . . . . . . . . . . . . . . . 9
3.8. Equity Interests. . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.9. No Breach or Default; Consents and Approvals. . . . . . . . . . . . 9
3.10. Financial Statements; Undisclosed Liabilities. . . . . . . . . . .10
3.11. Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.12. Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . .10
3.13. Absence of Certain Changes or Events . . . . . . . . . . . . . . .11
3.14. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
3.15. Assets Other than Real Property Interests. . . . . . . . . . . . .13
3.16. Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . .13
3.17. Patents, Marks, Trade Names, Copyrights and Registrations. . . . .14
3.18. Material Contracts . . . . . . . . . . . . . . . . . . . . . . . .15
3.19. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.20. Employee Benefit Plan. . . . . . . . . . . . . . . . . . . . . . .15
3.21. ERISA Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . .16
3.22. Employee and Labor Relations . . . . . . . . . . . . . . . . . . .16
3.23. Compliance with Applicable Laws. . . . . . . . . . . . . . . . . .17
3.24. Environmental Matters. . . . . . . . . . . . . . . . . . . . . . .17
3.25. Minute Books and Stock Records . . . . . . . . . . . . . . . . . .17
3.26. Warranty Work and Products Liability . . . . . . . . . . . . . . .17
3.27. Absence of Certain Commercial Practices. . . . . . . . . . . . . .18
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Page
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3.28. Potential Conflicts of Interest. . . . . . . . . . . . . . . . . .18
3.29. Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . .18
3.30. Suppliers and Customers. . . . . . . . . . . . . . . . . . . . . .18
3.31. Accuracy of Information. . . . . . . . . . . . . . . . . . . . . .18
3.32. Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
3.33. Securities Not Registered. . . . . . . . . . . . . . . . . . . . .18
3.34. Accredited Investor. . . . . . . . . . . . . . . . . . . . . . . .19
3.35. SEC Disclosure Forms . . . . . . . . . . . . . . . . . . . . . . .19
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . .19
4.1. Organization; Standing and Authority of Buyer . . . . . . . . . . .19
4.2. No Breach or Default; Consents and Approvals. . . . . . . . . . . .19
4.3. Investment Interest; Accredited Investor; Risk. . . . . . . . . . .20
4.4. Availability of Funds . . . . . . . . . . . . . . . . . . . . . . .20
4.5. Buyer's Acknowledgment. . . . . . . . . . . . . . . . . . . . . . .20
4.6. Capital Stock of Buyer. . . . . . . . . . . . . . . . . . . . . . .20
4.7. Accuracy of Information . . . . . . . . . . . . . . . . . . . . . .21
4.8. Absence of Certain Changes or Events. . . . . . . . . . . . . . . .21
4.9. Suppliers and Customers.. . . . . . . . . . . . . . . . . . . . . .21
ARTICLE V. MUTUAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . .22
5.1. Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
5.2. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
5.3. Governmental Filings. . . . . . . . . . . . . . . . . . . . . . . .22
5.4. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
5.5. Sequence Lease. . . . . . . . . . . . . . . . . . . . . . . . . . .23
5.6. Transition Plan . . . . . . . . . . . . . . . . . . . . . . . . . .23
ARTICLE VI. COVENANTS OF SPAR . . . . . . . . . . . . . . . . . . . . . . . .24
6.1. Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
6.2. Interim Operations. . . . . . . . . . . . . . . . . . . . . . . . .24
6.3. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
6.4. Resignations; Use of ComStream Name . . . . . . . . . . . . . . . .25
6.5. Intercompany Payables; Other Amounts. . . . . . . . . . . . . . . .26
ARTICLE VII. COVENANTS OF BUYER . . . . . . . . . . . . . . . . . . . . . . .26
7.1. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . .26
7.2. Intercompany Payables; Other Amounts. . . . . . . . . . . . . . . .26
7.3. Capital Structure.. . . . . . . . . . . . . . . . . . . . . . . . .26
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Page
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ARTICLE VIII. CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . . . . . . . .27
8.1. Mutual Conditions . . . . . . . . . . . . . . . . . . . . . . . . .27
8.2. Buyer's Conditions. . . . . . . . . . . . . . . . . . . . . . . . .27
8.3. Spar's Conditions . . . . . . . . . . . . . . . . . . . . . . . . .29
ARTICLE IX EMPLOYEE BENEFIT MATTERS . . . . . . . . . . . . . . . . . . . . .30
9.1. Employment. . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
9.2. Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
ARTICLE X. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . .32
10.1. Indemnification by Spar. . . . . . . . . . . . . . . . . . . . . .32
10.2. Indemnification by Buyer; Recoveries . . . . . . . . . . . . . . .32
10.3. Tax Indemnification. . . . . . . . . . . . . . . . . . . . . . . .33
10.4. Losses Net of Insurance, etc . . . . . . . . . . . . . . . . . . .34
10.5. Procedures Relating to Indemnification (Other than Under
Section 10.3). . . . . . . . . . . . . . . . . . . . . . . . . . .35
10.6. Survival of Representations; Termination of Indemnification. . . .36
ARTICLE XI. COVENANT NOT TO COMPETE . . . . . . . . . . . . . . . . . . . . .37
11.1. Covenant Not to Compete. . . . . . . . . . . . . . . . . . . . . .37
11.2. Consideration. . . . . . . . . . . . . . . . . . . . . . . . . . .37
11.3. Reasonableness of Covenant . . . . . . . . . . . . . . . . . . . .37
11.4. Separate Covenants . . . . . . . . . . . . . . . . . . . . . . . .37
11.5. Equitable Relief . . . . . . . . . . . . . . . . . . . . . . . . .37
ARTICLE XII. CERTAIN CLOSING AND POST-CLOSING MATTERS . . . . . . . . . . . .38
12.1. Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . .38
12.2. Access to Former Business Records. . . . . . . . . . . . . . . . .39
ARTICLE XIII. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . .39
13.1. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . .39
13.2. Notice of Termination. . . . . . . . . . . . . . . . . . . . . . .40
13.3. Effect of Termination. . . . . . . . . . . . . . . . . . . . . . .40
ARTICLE XIV. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . .40
14.1. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
14.2. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
14.3. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . .41
iii
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14.4. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
14.5. Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . .42
14.6. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
14.7. Interpretation; Exhibits and Schedules . . . . . . . . . . . . . .42
14.8. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . .42
14.9. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . .42
14.10. Finders and Brokers . . . . . . . . . . . . . . . . . . . . . . .42
14.11. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . .43
14.12. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . .43
14.13. Consent to Jurisdiction: Forum Selection. . . . . . . . . . . . .43
14.14. Jury Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . .43
iv
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EXHIBITS
Exhibit A Convertible Promissory Note
SCHEDULES
Schedule 1.1 Officers and Key Employees for Knowledge Definition
Schedule 3.4 Restrictions on Holdings Shares and Subsidiaries Shares
Schedule 3.6 Capital Stock of Holdings
Schedule 3.9 No Breach or Default; Consents and Approvals
Schedule 3.10 Exceptions to Financial Statements
Schedule 3.13 Certain Changes
Schedule 3.14 Taxes
Schedule 3.15 Liens
Schedule 3.16 Leasehold Interests
Schedule 3.17 Intellectual Property
Schedule 3.18 Material Contracts
Schedule 3.19 Material Litigation
Schedule 3.20 Employee Benefit Plans
Schedule 3.22 Employee and Labor Relations
Schedule 3.26 Defect Claims
Schedule 3.28 Conflicts of Interest
Schedule 3.29 Bank Accounts
Schedule 3.30 Suppliers and Customers of the Company
Schedule 4.2 No Breach or Default; Consents and Approvals
Schedule 4.6 Capital Stock of Buyer
Schedule 4.7 Certain Changes of Buyer
Schedule 4.9 Suppliers and Customers of the Buyer
Schedule 6.3 Insurance Policies Maintained by the Company
Schedule 8.3 Exceptions to Spar's Conditions
v
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made and entered into
as of August 28, 1998 by and between Spar Aerospace Limited, a Canadian
corporation ("Spar"), and Radyne Corp., a New York corporation ("Buyer"), for
the purchase and sale of all of the outstanding capital stock of ComStream
Holdings, Inc., a Delaware corporation (referred to herein as "Holdings" or as
the "Company" when included with its subsidiaries).
BACKGROUND FACTS
Holdings is engaged in the communications equipment business and is a
wholly-owned subsidiary of Spar.
Spar desires to sell to Buyer and Buyer desires to purchase all of the
issued and outstanding shares of Holdings, consisting of 20,000,000 shares of
Common Stock, par value $.001 per share and 100 shares of Preferred Stock, par
value $.001 per share (the "Shares").
NOW, THEREFORE, in consideration of the foregoing recitals and the
representations, warranties and covenants hereinafter set forth, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Affiliate" shall have the meaning ascribed to such term in Rule 12b-2
promulgated under the Exchange Act by the SEC, as in effect on the date hereof.
"Apportioned Short Period" shall have the meaning set forth in
Section 10.3(b).
"Balance Sheet" shall have the meaning set forth in Section 3.10.
"Business Day" means a day other than a Saturday or a Sunday or other
day on which commercial banks in Toronto, Ontario, Phoenix, Arizona or
Los Angeles, California, are authorized or required by law to close.
"Buyer's SEC Reports" shall have the meaning set forth in
Section 3.35.
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"Closing" shall have the meaning set forth in Section 2.2.
"Closing Date" means the day on which the Closing occurs pursuant to
Section 2.2.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Company" means Holdings and its subsidiaries.
"Company Employee" has the meaning set forth in Section 9.1(a).
"Company Plan(s)" means each and all Employee Benefit Plans and
Employee Benefit Arrangements sponsored or maintained by the Company under which
any Company Employee participates or is entitled to receive benefits.
"ComStream" means ComStream Corporation, a Delaware corporation and
wholly-owned subsidiary of Holdings.
"Confidentiality Agreement" shall have the meaning set forth in
Section 7.1.
"Contract" means any contract, agreement, license, lease, sales or
purchase order or other legally binding commitment, whether written or oral.
"Contractual Obligation" means, as to a Person, any provision of any
note, bond or security issued by such Person or of any mortgage, indenture, deed
of trust, franchise, Contract, instrument or undertaking to which such Person is
a party or by which it or any of its property or assets is subject.
"DOJ" shall have the meaning set forth in Section 5.3.
"Employee Benefit Arrangements" means each and all pension,
supplemental pension, accidental death and dismemberment, life and health
insurance and benefits (including medical, dental, vision and hospitalization),
short- and long-term disability, savings, bonus, deferred compensation,
incentive compensation, holiday, vacation, severance pay, salary continuation,
sick pay, sick leave, tuition refund, service award, company car, scholarship,
relocation, patent award, fringe benefit, flexible spending account programs and
other employee benefit plans, contracts or policies providing employee or
executive compensation or benefits to Company Employees, other than the Employee
Benefit Plans.
"Employee Benefit Plans" means each and all "employee benefit plans,"
as defined in Section 3(3) of ERISA, maintained or contributed to by the Company
or in which the Company participates or participated and which provides benefits
to Company Employees, including (i) any such plans that are "employee welfare
benefit plans" as
2
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defined in Section 3(1) of ERISA and (ii) any such plans that are "employee
pension benefit plans" as defined in Section 3(2) of ERISA.
"Environmental Law" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Resource Conservation
and Recovery Act of 1976, as amended, and any applicable statutes, regulations,
rules, ordinances, codes, licenses, permits, orders, approvals, plans,
authorizations, concessions, franchises and similar items of all Governmental
Authorities and all applicable judicial, administrative and regulatory decrees,
judgments and orders, any of which relate to the protection of human health or
the environment from the effects of Hazardous Materials, including, but not
limited to, those pertaining to reporting, licensing, permitting, investigating
and remediating emissions, discharges, releases or threatened releases of
Hazardous Materials into the air, surface water, groundwater or land, or relate
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations of the SEC promulgated from
time to time thereunder.
"Exon-Florio Act" means the Trade Act of 1988, Pub.L. 100-418, 102
stat. 1107 (August 23, 1988), as amended.
"Financial Statements" shall have the meaning set forth in
Section 3.10(a).
"FTC" shall have the meaning set forth in Section 5.3.
"GAAP" means generally accepted accounting principles in the United
States of America as applied by the Company on a consistent basis from period to
period.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Hazardous Material" means any substance: (i) that is defined as a
hazardous waste, hazardous substance, pollutant or contaminant under any
Environmental Law; (ii) that is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is
regulated by any Governmental Authority; or (iii) that contains gasoline, diesel
fuel or other petroleum hydrocarbons.
"Holdings" means ComStream Holdings, Inc., a Delaware corporation.
3
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"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended from time to time.
"Indemnified Person" means any Person entitled to seek indemnification
hereunder.
"Indemnifying Person" means any Person from whom indemnification is
being sought hereunder.
"Interim Date" shall have the meaning set forth in Section 3.13.
"IRS" means the United States Internal Revenue Service.
"Knowledge of Spar" with reference to any of the representations and
warranties of Spar means the actual knowledge of any individual listed on
Schedule 1.1 hereto.
"Leased Property" has the meaning set forth in Section 3.16.
"Lien" means any mortgage, pledge, hypothecation, assignment,
encumbrance, lien (statutory or other) or other security agreement of any kind
or nature whatsoever (including, without limitation, any conditional sale or
other title retention agreement or any financing lease having substantially the
same economic effect as any of the foregoing).
"Loss" means any loss, liability, claim, damage or expense net of any
related recoveries (including reasonable attorneys' fees and disbursements and
the costs of investigation).
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, property or condition (financial or other) of the Company
or (b) the ability of Spar to consummate the transactions contemplated by this
Agreement.
"Permitted Lien" means (a) mechanics', carriers', workmen's,
repairmen's or other like Liens arising or incurred in the ordinary course of
business, (b) Liens arising under original purchase price conditional sales
contracts and equipment leases with third parties entered into in the ordinary
course of business, (c) Liens for Taxes and other governmental charges which are
not due and payable or which may thereafter be paid without penalty, and
(d) other imperfections of title, restrictions or encumbrances, if any, which
Liens, imperfections of title, restrictions or other encumbrances do not,
individually or in the aggregate, materially impair the continued use and
operation or marketability of the specific assets to which they relate.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of whatever
nature.
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"Pre-Closing Tax Period" shall have the meaning set forth in
Section 10.3(b).
"Purchase Price" has the meaning set forth in Section 2.1.
"Records" means all of the ledgers, journals, bookkeeping memoranda,
account cards, reports, computer listings, indexes, stored computer data,
customer files, credit files, magnetic media, collateral records and all other
correspondence, memoranda and records, including Federal, state and local Tax
Returns of the Company.
"Requirement of Law" means, as to any Person, the Certificate or
Articles of Incorporation and Bylaws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Restricted Territory" shall have the meaning set forth in
Section 11.1.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and the rules and regulations of the SEC promulgated from time to
time thereunder.
"SEC" means the Securities and Exchange Commission.
"Shares" is defined in the recitals hereto.
"Short Period" shall have the meaning set forth in Section 10.3(b).
"Subsidiary" and "Subsidiaries" means the direct and indirect
subsidiaries of Holdings listed on Schedule 3.4.
"Subsidiary Shares" means all of the issued and outstanding shares of
the Subsidiaries.
"Tax" or "Taxes" means all federal, state, local, foreign or other
taxes, including net income, alternative minimum or add-on minimum tax, gross
income, unitary, gross receipts, sales, use, intangible, ad valorem, franchise,
profits, license, withholding on amounts paid to or by the Company, payroll,
employment, excise, severance, stamp, transfer, occupation, premium, property or
environmental windfall profit tax, custom, duty or other tax, governmental fee
or other like assessment or charge of any kind whatsoever, together with any
interest or penalty, addition to tax or additional amount imposed by any
jurisdiction or other Governmental Authority (federal, state, local or foreign)
on the Company.
"Tax Claim" shall have the meaning set forth in Section 10.3(d).
"Tax Indemnitee" shall have the meaning set forth in Section 10.3(d).
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"Tax Indemnitor" shall have the meaning set forth in Section 10.3(d).
"Tax Returns" means all returns or material reports or forms required
to be filed with a Governmental Authority with respect to Tax.
"Third Party Claim" shall have the meaning set forth in
Section 10.5(a).
"Transition Plan" shall have the meaning set forth in Section 5.6
hereof.
"WARN Act" means the Worker Adjustment and Retraining Notification Act
of 1988, as amended from time to time.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Terms defined in this Agreement in Sections other than
Section 1.1 shall have the meanings as so defined when used in this Agreement.
(b) Unless express reference is made to Business Days,
references to days shall be to calendar days.
ARTICLE II
TRANSFER OF SHARES
2.1 PURCHASE AND SALE OF THE SHARES. On the terms and subject to
the conditions of this Agreement, Spar will sell, transfer and deliver the
Shares to Buyer, and Buyer will purchase the Shares from Spar, for a total
purchase price of Seventeen Million Dollars ($17,000,000.00) ("Purchase Price"),
payable at the time and in accordance with the terms set forth in Section 2.3.
2.2 CLOSING. The closing ("Closing") of the purchase and sale of
the Shares shall be held at the offices of Gibson, Dunn & Crutcher LLP, Jamboree
Center, 4 Park Plaza, Irvine, California, at 10:00 a.m. on September 30, 1998,
or if the conditions to Closing set forth in Article VIII shall not have been
satisfied or waived by such date, subject to the termination rights set forth in
Article XIII, as soon as practicable after such conditions shall have been
satisfied or waived. The date on which the Closing shall occur is hereinafter
referred to as the "Closing Date."
2.3 DELIVERIES. At the Closing, Buyer shall deliver to Spar by
wire transfer (to a bank account designated at least three Business Days prior
to the Closing Date in writing by Spar) immediately available funds in an amount
equal to Ten Million Dollars ($10,000,000.00) and a convertible promissory note
(the "Convertible Note") in the form attached hereto as Exhibit A in an amount
equal to Seven Million Dollars ($7,000,000.00). At the Closing, Spar shall
deliver or cause to be delivered to Buyer certificates representing the Shares,
duly endorsed in blank or accompanied by stock powers duly endorsed in blank in
proper form for transfer, with appropriate transfer
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stamps, if any, affixed thereto. In addition, at the Closing Buyer and Spar
shall deliver to and receive from each other all documents required to be
delivered and received pursuant to Article VIII hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SPAR
Spar hereby represents and warrants to Buyer as follows:
3.1 ORGANIZATION; STANDING AND AUTHORITY OF SPAR. Spar is a
corporation duly organized, validly existing and in good standing under the laws
of Canada. Spar has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. All
corporate acts and other proceedings required to be taken by Spar to authorize
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby have been duly taken. This Agreement
has been duly executed and delivered by Spar and constitutes a valid and binding
obligation of Spar, enforceable against Spar in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally or by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3.2 ORGANIZATION; STANDING AND AUTHORITY OF HOLDINGS. Holdings is
a corporation duly organized and validly existing under the laws of the State of
Delaware. Holdings is duly qualified and in good standing to do business in
each jurisdiction in which the nature of its business or the ownership, leasing
or holding of its properties makes such qualification necessary, except such
jurisdictions where the failure to be so qualified or in good standing,
individually or in the aggregate, would not have a Material Adverse Effect.
Holdings has all requisite corporate power and authority and possesses all
governmental franchises, licenses, permits, authorizations and approvals
necessary to enable it to carry on its business as presently conducted other
than such franchises, licenses, permits, authorizations and approvals the lack
of which, individually or in the aggregate, would not have a Material Adverse
Effect. Spar has made available to Buyer (i) the Certificate of Incorporation,
as amended to date, and the Bylaws, as in effect on the date hereof, of Holdings
and (ii) the stock certificate and transfer books and the minute books of
Holdings.
3.3 ORGANIZATION; STANDING AND AUTHORITY OF THE SUBSIDIARIES. Each
Subsidiary listed on Schedule 3.4 is a corporation duly organized and validly
existing under the laws of its jurisdiction of incorporation. Each Subsidiary
is duly qualified and in good standing to do business in each jurisdiction in
which the nature of its business or the ownership, leasing or holding of its
properties makes such qualification necessary, except such jurisdictions where
the failure to be so qualified or in good standing, individually or in the
aggregate, would not have a Material Adverse Effect. Each
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Subsidiary has all requisite corporate power and authority and possesses all
governmental franchises, licenses, permits, authorizations and approvals
necessary to enable it to carry on its business as presently conducted other
than such franchises, licenses, permits, authorizations and approvals the lack
of which, individually or in the aggregate, would not have a Material Adverse
Effect. Spar has made available to Buyer (i) the Certificate of Incorporation
(or similar charter document), as amended to date, and the Bylaws, as in effect
on the date hereof, of each Subsidiary and (ii) the stock certificate and
transfer books and the minute books of each Subsidiary.
3.4 THE SHARES. Except as set forth on Schedule 3.15, Spar has
good and valid title to the Shares, free and clear of any Liens and has full
power and authority to transfer good and valid title to the Shares free and
clear of any Liens. Assuming Buyer has the requisite power and authority to be
the lawful owner of the Shares, upon delivery to Buyer at the Closing of
certificates representing the Shares, duly endorsed by Spar for transfer to
Buyer, and upon Spar's receipt of the Purchase Price, good and valid title to
the Shares will pass to Buyer, free and clear of any Liens other than those
arising from acts of Buyer or its Affiliates. Other than this Agreement and
except as set forth on Schedule 3.4, the Shares are not subject to any voting
trust agreement or other Contractual Obligation restricting or otherwise
relating to the voting, dividend rights or disposition of the Shares. The
certificates representing the Shares to be delivered at Closing will constitute
all of the outstanding Shares.
3.5 THE SUBSIDIARY SHARES. Except as set forth on Schedule 3.15,
the Company has good and valid title to the Subsidiary Shares, free and clear of
all Liens. Other than this Agreement and except as set forth on Schedule 3.4,
the Subsidiary Shares are not subject to any voting trust agreement or other
Contractual Obligation restricting or otherwise relating to the voting, dividend
rights or disposition of the Subsidiary Shares. The certificates representing
the Subsidiary Shares to be delivered at Closing will constitute all of the
outstanding Subsidiary Shares.
3.6 CAPITAL STOCK OF HOLDINGS. The authorized capital stock of
Holdings consists of 8,000,000 shares of Preferred Stock, $.001 par value, and
100,000,000 shares of Common Stock, $.001 par value. The Shares were duly
authorized and validly issued and are outstanding, fully paid and nonassessable.
Except for the Shares, there are no shares of capital stock or other equity
securities of the Company outstanding. Spar is the record owner of the Shares.
The Shares have not been issued in violation of, and none of the Shares are
subject to, any preemptive or subscription rights. Except as set forth on
Schedule 3.6, there are no outstanding warrants, options, "phantom" stock
rights, agreements, convertible or exchangeable securities or other commitments
(other than this Agreement) pursuant to which Spar or Holdings is or may become
obligated to issue, sell, purchase, return or redeem any shares of capital stock
or other securities of Holdings, and no equity securities of the Company are
reserved for issuance for any purpose.
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3.7 CAPITAL STOCK OF THE SUBSIDIARIES. The authorized capital
stock of each Subsidiary is as set forth on Schedule 3.4. The Subsidiary Shares
were duly authorized and validly issued and are outstanding, fully paid and
nonassessable. Except for the Subsidiary Shares, there are no shares of capital
stock or other equity securities of any Subsidiary outstanding. Holdings is the
record owner of the Subsidiary Shares. The Subsidiary Shares have not been
issued in violation of, and none of the Subsidiary Shares are subject to, any
preemptive or subscription rights. There are not outstanding warrants, options,
"phantom" stock rights, agreements, convertible or exchangeable securities or
other commitments (other than this Agreement) pursuant to which Spar or the
Company is or may become obligated to issue, sell, purchase, return or redeem
any shares of capital stock or other securities of any Subsidiary, and no equity
securities of the Subsidiaries are reserved for issuance for any purpose.
3.8 EQUITY INTERESTS. Other than its ownership of all the
outstanding capital stock of the Subsidiaries, Holdings does not directly or
indirectly own capital stock of or other equity interests in any Person. The
Subsidiaries do not directly or indirectly own capital stock of or other equity
interests in any Person.
3.9 NO BREACH OR DEFAULT; CONSENTS AND APPROVALS.
(a) Except as set forth in Schedule 3.9, the execution and
delivery by Spar of this Agreement and the other documents referenced herein to
which Spar is a party and the consummation of the transactions contemplated
hereby and thereby will not result in or constitute any of the following: (i) a
default or an event that, with the giving of notice or lapse of time, or both,
would be a default, breach or violation of the charter documents or bylaws of
Spar or Holdings or any material Contractual Obligation of the Company, (ii) an
event that would permit any party to terminate any material Company Contract or
to accelerate the maturity of any indebtedness or other material Contractual
Obligation of the Company, (iii) the creation or imposition of any Lien on any
of the properties of the Company, or (iv) a violation of any order, writ,
injunction, decree, statute, rule or regulation applicable to Spar or the
Company.
(b) Except as set forth in Schedule 3.9, no authorization,
consent or approval of any Governmental Authority or any third party is
necessary for the consummation by Spar of the transactions contemplated by this
Agreement and the other documents referenced herein to which Spar is a party.
3.10 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
(a) Spar has delivered to Buyer the audited consolidated
balance sheets of the Company as of December 31, 1997 and 1996 and related
consolidated statements of operations, stockholder's equity (deficit) and cash
flows for the three years in the period ended December 31, 1997, and its
unaudited consolidated balance sheet ("Balance Sheet"), and unaudited
consolidated statements of operations and cash flows for the six months in the
period ended, June 30, 1998 ("Financial Statements"). The Financial Statements
have been prepared in accordance with GAAP
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and fairly present the financial condition and results of operations of the
Company as of the respective dates thereof and for the respective periods
covered thereby. The unaudited interim financial statements have been prepared
in accordance with GAAP except in that they exclude substantially all notes and
related disclosures required under GAAP.
(b) Except as reflected on the Balance Sheet or disclosed
on Schedule 3.10, the Company does not have any material indebtedness,
obligations or liabilities other than (i) liabilities which have arisen in the
ordinary course of business since the date of the Balance Sheet, and (ii) those
liabilities otherwise disclosed on Schedule 3.10 or another Schedule to this
Agreement.
3.11 INVENTORIES. ComStream has good and marketable title to all of
the inventories reflected on the June 30, 1998 Balance Sheet or acquired
subsequent thereto (other than inventories disposed of in the ordinary course of
business), free and clear of all claims, liens, charges, encumbrances and rights
of third parties and no inventory is outstanding on consignment with any third
party. The inventory of Company and the Subsidiaries (including, without
limitation, finished goods, work-in-process, raw materials, parts and supplies)
reflected on the Balance Sheet is or was, prior to the sale thereof,
(i) purchased in the ordinary course of their businesses, (ii) has been carried
on the respective books of account of Company or the Subsidiaries at the lower
of cost or market on a consistent basis in accordance with generally accepted
accounting principles consistently applied and (iii) has been determined on a
first-in first-out inventory basis.
3.12 ACCOUNTS RECEIVABLE. Except for (i) cash discounts in the
ordinary course of business, (ii) product discounts as to which a liability
account is reflected on the books of ComStream, (iii) offsets to the extent that
amounts (including costs associated with such recovery) will be recovered by
ComStream from third parties, (iv) discounts taken for incorrect billing terms,
(v) bad debt reserves determined in accordance with GAAP, and (vi) offsets taken
with respect to products returned, all accounts, notes and other receivables of
ComStream arose in the ordinary course of business, and no entitlements to or
claims of offset or reduction in respect thereof have been made or are known to
ComStream.
3.13 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
Schedule 3.13, since June 30, 1998 (the "Interim Date") neither Holdings nor any
Subsidiary has (a) paid or declared any cash, stock or other dividends; (b) made
any other distribution on or payment, redemption or repurchase with respect to
outstanding shares; (c) sold or otherwise disposed of any of its property or
assets of any kind or character other than in the ordinary course of business;
(d) entered into any agreement, written or oral, contemplating any indebtedness
or transaction outside of the usual and ordinary course of its business;
(e) entered into any transaction which would result in the recognition of
goodwill or any other intangible asset; or (f) granted to any officer or
salaried employee or any class of other employees any bonus or any increase in
compensation in any form in excess of 5% of the amount thereof in effect as of
the
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Interim Date or any severance or termination pay other than an arrangement in
effect as of the Interim Date, or loan, or entered into any written employment
agreement with any person. Since the Interim Date, there has not been any
change in the accounting principles, policies or practices of Holdings or the
Subsidiaries as theretofore applied, or the method or ratio of allocating or
charging expenses, including the basis upon which assets and liabilities are
recorded and earnings and profits are ascertained.
3.14 TAXES.
(a) The Company has filed or caused to be filed in a timely
manner (within any applicable extension periods) with the appropriate
Governmental Authority all Tax Returns required to be filed by the Code or by
applicable Tax laws. As of the time of filing the Tax Returns of the Company or
any Tax Returns of the Company not yet filed as of the Closing Date, the Tax
Returns correctly reflected or will correctly reflect the facts regarding the
income, business, assets, operations, activity, or status of the Company and any
other information required to be shown thereon. All Taxes due from the Company
prior to the date hereof have been timely paid in full by the due date thereof
(within any applicable extension periods). As set forth on Section 3.14, the
Federal income tax returns of Holdings and ComStream have been examined by the
IRS and all deficiencies resulting from such examinations have either been paid
or adequately provided for.
(b) Except as set forth on Schedule 3.14, there are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any Tax Returns with respect to the Company.
(c) As of the close of business on the Closing Date, the
Company will not be a party to any Tax sharing agreement or similar arrangement
and will have no obligation under or related to any prior such agreement or
arrangement.
(d) Except as set forth on Schedule 3.14, to the Knowledge
of Spar (i) the charges, accruals, and reserves for Taxes with respect to the
Company for any Pre-Closing Tax Period (as defined in Section 10.3(b)) or any
Pre-Closing Tax Period for which no Tax Return has yet been filed reflected on
the books of the Company (excluding any provision for deferred income taxes) are
adequate to cover such Taxes; (ii) neither Holdings nor any Subsidiary is
delinquent in the payment of any Tax or has requested any extension of time
within which to file any Tax Return and has not yet filed such Return;
(iii) there are no request for rulings or determinations in respect of any Tax
pending between the Company or any Subsidiary; (iv) there are no requests for
rulings or determinations in respect of any Tax pending between the Company and
any Governmental Authority; (v) neither Holdings nor any Subsidiary owns any
interest in real property in the State of New York or in any other jurisdiction
in which a Tax is imposed on the transfer of a controlling interest in an entity
that owns any interest in real property; (vi) none of the property owned or used
by the Company is subject to a tax benefit transfer lease executed in accordance
with Section 168(f) of the Internal Revenue
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Code of 1954, as amended; (vii) none of the property owned or used by Holdings
or any Subsidiary is subject to a lease, other than a "true" lease for federal
income tax purposes; (viii) none of the property owned by the Company is
"tax-exempt use property" within the meaning of Section 168(h) of the Code;
(ix) there are no liens for Taxes upon the assets of the Company except liens
for current Taxes not yet due; (x) Spar is not subject to withholding under
Section 1445 of the Code with respect to any transaction contemplated hereby;
(xi) neither Holdings nor any Subsidiary has been a member of an affiliated
consolidated, combined or unitary group other than one of which Holdings was the
common parent; (xii) neither Holdings nor any Subsidiary will be required to
include any adjustment in taxable income for any Tax period or portion of a Tax
period following the Closing Date under Section 481(c) of the Code (or any
similar provision of the Tax laws of any jurisdiction) as a result of a change
in method of accounting for a Pre-Closing Tax Period or pursuant to the
provisions of any agreement entered into with any Governmental Authority with
regard to the Tax liability of the Company for any Pre-Closing Tax Period other
than as reflected in the deferred tax asset on the books of the Company;
(xiii) all information set forth in the notes to the financial records of the
Company relating to Tax matters is true and complete; (xiv) the Company
possesses, or will possess on the Closing Date, all previously filed Tax Returns
and work papers reasonably necessary for Buyer to duly file all Tax Returns for
periods ending after the Closing Date; and (xv) there are no deferred
intercompany transactions (within the meaning of Treasury Regulations
Section 1.1502-13 or any predecessor provision) between Holdings and/or any
Subsidiary, which would impose Tax liability on the Company after the Closing
Date.
(e) To the Knowledge of Spar, Holdings and the Subsidiaries
have disclosed on their federal income Tax Returns all positions taken therein
that in the Company's judgment could give rise to a substantial understatement
of federal income Tax within the meaning of Code Section 6662 or its
predecessor.
(f) Schedule 3.14 sets forth the filed amount of any
federal and California net operating loss carryover, net capital loss carryover,
investment or other credit carryover, unused foreign tax, or excess charitable
contribution allocable to Holdings and ComStream as of December 31, 1996. As to
the representation contained in this Section 3.14(f), Spar does not represent
that any of such net operating loss carryover, net capital loss carryover,
investment or credit carryover, unused foreign tax, or excess charitable
contribution can be utilized by the Buyer.
3.15 ASSETS OTHER THAN REAL PROPERTY INTERESTS. The Company has
good and valid title to all assets reflected on the Balance Sheet, except those
sold or otherwise disposed of since the date of the Balance Sheet in the
ordinary course of business, in each case free and clear of all Liens except any
Permitted Liens and those Liens set forth on Schedule 3.15. This Section 3.15
does not relate to real property or interests in real property, such items being
the subject of Section 3.16.
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3.16 REAL PROPERTY. The Company does not own in fee or otherwise
any real property. Schedule 3.16 sets forth a complete list of all real
property and interests in real property leased by the Company (individually, a
"Leased Property") and as to Leased Property, identifies any leases relating
thereto. The Company has good and valid title to the leasehold estates in all
Leased Property, in each case free and clear of all Liens, easements, covenants,
rights-of-way and other similar restrictions of any nature whatsoever, except
(i) Permitted Liens, (ii) easements, covenants, rights-of-way and other similar
restrictions of record, and (iii) (A) zoning, building and other similar
restrictions, (B) Liens that have been placed by any developer, landlord or
other third party on property over which the Company has easement rights or on
any Leased Property and subordination or similar agreements relating thereto and
(C) unrecorded easements, covenants, rights-of-way or other similar
restrictions, none of which items set forth in clauses (A), (B) and (C) above,
individually or in the aggregate, materially impair the continued use and
operation of the property to which they relate. Except as set forth on
Schedule 3.16, Spar and Company have heretofore made available to Buyer true and
complete copies of all leases and similar documents relating to all real
property leased by Company or any Subsidiary. Company and the Subsidiaries have
performed all material obligations required to be performed with respect to such
leased real property and are not in default under any lease or other agreement
to which any of them is or has been made a party with respect to such leased
real property. Except as set forth on Schedule 3.16, the consummation of the
transactions contemplated hereby will not result in any breach or cancellation
or other adverse effect in respect of the real property lease interests of
Company or any Subsidiary. None of the improvements made to such leased real
property for the businesses conducted by Company or the Subsidiaries thereon is
in violation of any use or occupancy restriction, limitation or other condition
or any zoning or building law, code or ordinance.
3.17 PATENTS, MARKS, TRADE NAMES, COPYRIGHTS AND REGISTRATIONS.
(a) The Company has sufficient title and interest in, or
the right to use, all Intellectual Property (as defined below) of ComStream and
its subsidiary in their business as now conducted, and the consummation of the
transactions contemplated hereby will not alter or impair in an adverse manner
such Intellectual Property.
(b) "Intellectual Property" includes United States and
foreign patents, trademarks, service marks, trade names, copyrights, mask work
registrations, trade secrets (including processes and software programs) and
other proprietary rights, registrations and applications therefor.
(c) The Company is not in default under any material
agreement pursuant to which it is licensing Intellectual Property of a third
party or granting licenses to its own Intellectual Property. The Company has
not notified any other party of an alleged default of any such agreement, except
as set forth in Schedule 3.17. The Company has not received any communications
alleging that the Company has
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violated in any material respect any other person's Intellectual Property rights
or has engaged in unfair competition against such person, except as set forth in
Schedule 3.17.
(d) The Company has written agreements in effect with all
of their employees and consultants who have access to the Company's Intellectual
Property.
(e) The Company (i) does not now infringe or misappropriate
any third party's Intellectual Property rights, and (ii) does not have any
material liability for any past infringement or misappropriation. Except as set
forth in Schedule 3.17, no claim has been made or is, to the Knowledge of Spar,
threatened with regard to any third party Intellectual Property right, including
any allegation of Intellectual Property infringement or misappropriation or of
any breach or default of an Intellectual Property license or similar agreement.
(f) Each of the Company's patents and patent applications,
registered copyrights and copyright applications, trademarks and service marks
and trademark and service mark applications, and mask work registrations and
mask work registration applications are set forth on Schedule 3.17.
(g) Schedule 3.17 sets forth a list that is true, accurate
and complete in all material respects of the material technologies and
proprietary rights of the Company that are necessary for the business of the
Company as now conducted (collectively, the "Proprietary Rights"). The Company
has all Proprietary Rights necessary to conduct the Company's business as it is
conducted as of the date hereof. All agreements that grant or otherwise convey
to any third party any ownership or license rights to, or interest in, the
Proprietary Rights are expressly identified in Schedule 3.17 and/or in
Schedule 3.18, except for such agreements that would not impair in any material
respect the ownership or usage of the Proprietary Rights. The Company has taken
all necessary actions to protect the confidentiality of the trade secrets
embodied in the Proprietary Rights, except where the failure to take such
actions would not impair in any material respect the ownership or usage of the
Proprietary Rights. The Company has not made any disclosure of the Proprietary
Rights to any third party nor taken any other action that would have a material
adverse effect on the Proprietary Rights. All information concerning the
Proprietary Rights set forth on Schedule 3.17 is true, accurate and complete in
all material respects.
3.18 MATERIAL CONTRACTS. The Company is not in material breach of
any contract, agreement or commitment that is material to the Company's business
taken as a whole. The Company is not a party to any government contract subject
to the Assignment of Contracts Act, 41 U.S.C. Section 3727 or the Federal
Acquisition Regulations. Each of the Company's material contracts is set forth
on Schedule 3.18 hereto. All of the agreements set forth in Schedule 3.18 are
in full force and effect, are valid and binding and are enforceable in
accordance with their terms in favor of the Company, except (a) as such terms
may be limited by bankruptcy, insolvency and similar laws affecting the
enforcement of creditors' rights generally and (b) as the remedy of specific
performance
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and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. To the Knowledge of Spar (i) there are no liabilities
(including without limitation penalties) of any party to any such agreement
arising from any material delay, breach or default thereunder, and (ii) no event
has occurred which with the passage of time or the giving of notice or both
would constitute a material breach or default by any party thereto.
3.19 LITIGATION. Schedule 3.19 sets forth a list, as of the date of
this Agreement, of all pending and, to the Knowledge of Spar, threatened
lawsuits or claims which (a) involves a claim by the Company of more than
$250,000 or a claim against the Company of an unspecified amount or for more
than $50,000, (b) seeks any injunctive relief or (c) relates to the transactions
contemplated by this Agreement. Except as disclosed on Schedule 3.19, neither
the Company nor the Subsidiaries is in default under any judgment, order or
decree of any court, administrative agency or commission or other Governmental
Authority applicable to it or any of its properties, assets, operations or
businesses; except where such default would not have a Material Adverse Effect.
3.20 EMPLOYEE BENEFIT PLAN. Schedule 3.20 sets forth a list of each
Company Plan. The Company has made available to Buyer true, complete and
correct copies of (i) each Company Plan, (ii) the most recent annual report on
Form 5500 filed with the IRS with respect to each Company Plan (if any such
report was required), (iii) the most recent summary plan description for each
Company Plan for which such a summary plan description is required, and
(iv) each trust agreement and group annuity contract relating to any Company
Plan.
3.21 ERISA PLANS. To the Knowledge of Spar, each Company Plan
conforms in all material respects to, and its administration is in conformity in
all material respects with, all applicable federal laws; no liability under
ERISA has been or is expected to be incurred by the Company with respect to any
such plan; full payment has been made of all amounts that the Company is
required to have paid as contributions to such plans; there is not any
accumulated funding deficiency with respect to any of such plans; and to the
Company's best knowledge, the current value of accrued benefits of each such
plan does not exceed the current value of such plan's assets.
3.22 EMPLOYEE AND LABOR RELATIONS.
(a) There is no labor strike, dispute, or work stoppage or
lockout pending, or, to the Knowledge of Spar, threatened, against the Company.
(b) To the Knowledge of Spar, no union organization
campaign is in progress with respect to the Company Employees, and no question
concerning representation exists respecting such Employees.
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(c) Except as set forth on Schedule 3.22, there is no
unfair labor practice charge or complaint against the Company pending, or, to
the Knowledge of Spar, threatened, before the National Labor Relations Board.
(d) Except as set forth on Schedule 3.22, there is no
pending, or, to the Knowledge of Spar, threatened, formal written employee
grievance.
(e) Except as set forth on Schedule 3.22, no charges with
respect to or relating to the Company are pending before the Equal Employment
Opportunity Commission or any other Governmental Authority responsible for the
prevention of unlawful employment practices.
(f) Schedule 3.22 sets forth certain pending immigration
matters in connection with persons in the employ of the Company.
(g) The Company has no obligations to Dale Hancock,
including without limitation any actual or contingent obligation to repurchase
shares of the Company's common stock from him.
(h) All outstanding options to purchase Common Stock of
Holdings will terminate as of the Closing to the extent not theretofore
exercised.
(i) The Company has no obligations to its employees under
the retention (as opposed to the severance) provisions of the Prior Plan (as
defined in Section 5.6).
3.23 COMPLIANCE WITH APPLICABLE LAWS. The Company is in compliance
with all applicable Requirements of Law, except for such incidents of
noncompliance which, individually and in the aggregate, would not have a
Material Adverse Effect. The Company has not received any written communication
from a Governmental Authority that alleges that the Company is not in compliance
with any Requirement of Law. This Section 3.23 does not relate to environmental
matters, which are the subject of Section 3.24, or matters with respect to
Taxes, which are the subject of Section 3.14.
3.24 ENVIRONMENTAL MATTERS. To the Knowledge of Spar:
(a) The Company is not in material violation of any
applicable Environmental Law nor is Holdings or any Subsidiary under
investigation or review by any Governmental Authority with respect to compliance
therewith, or with respect to the generation, use, treatment, storage or
disposal, or the spillage or other release of any Hazardous Material;
(b) There is no Hazardous Material that may pose any
material risk to safety, health or the environment on or under any property
owned, leased or operated by the Company as of the date hereof and there has
heretofore been no spillage,
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discharge, release or disposal of any such Hazardous Material on or under such
property by the Company in an amount and of a nature which could reasonably be
expected to result in material liability to the Company; and
(c) No pending citations, fines, penalties or claims have
been asserted against the Company under any Environmental Law.
3.25 MINUTE BOOKS AND STOCK RECORDS. Spar has made available to
Buyer true and correct copies of the minute books of the Company, which contain
a complete and correct record of all meetings of the Boards of Directors of the
Company and all meetings of its and their shareholders and all actions by
written consent without a meeting by such Boards of Directors and its and their
shareholders since the date of incorporation and reflect accurately in all
material respects all actions by such directors and by shareholders with respect
to all transactions referred to in such minutes.
3.26 WARRANTY WORK AND PRODUCTS LIABILITY. Except as disclosed on
Schedule 3.26, to the Knowledge of Spar, there are no claims by an individual
customer or relating to a particular product line aggregating in excess of
$50,000 made or threatened in writing against the Company based upon alleged
defects in products manufactured or services performed by it.
3.27 ABSENCE OF CERTAIN COMMERCIAL PRACTICES. Neither Company nor
any Subsidiary has taken any action in violation of the Foreign Corrupt
Practices Act.
3.28 POTENTIAL CONFLICTS OF INTEREST. Except as set forth on
Schedule 3.28 hereto, neither Spar nor any entity controlled by Spar:
(i) owns, directly or indirectly, any interest in (excepting not
more than 1% stockholdings for investment purposes in securities of publicly
held and traded companies), or otherwise receives remuneration from, any person
which is, or is engaged in business as, a competitor, lessor, lessee, customer
or supplier of the business of Company or the Subsidiaries; or
(ii) owns, directly or indirectly, in whole or in part, any tangible
or intangible property that Company or any Subsidiary uses or the use of which
is necessary for the conduct of the business of Company or any Subsidiary.
3.29 BANK ACCOUNTS. Schedule 3.29 contains a true and complete list
showing for Company and each Subsidiary the name and address of each bank in
which it has an account or safe deposit box and the name of each person
authorized to draw thereon or have access thereto.
3.30 SUPPLIERS AND CUSTOMERS. Schedule 3.30 contains a list of the
ten largest customers and suppliers of Company and the Subsidiaries (measured by
dollar volume in each case) during the fiscal year ended December 31, 1997,
showing with respect to each, the name and dollar volume.
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3.31 ACCURACY OF INFORMATION. No representation or warranty by Spar
or Company hereunder and no certificate or Schedule furnished or to be furnished
pursuant hereto by Spar or Company contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material fact necessary to
make the statements contained therein not misleading in light of the
circumstances.
3.32 INVESTMENT. Spar is acquiring the Convertible Note and any
Radyne Corp. Common Stock which it may acquire upon conversion of the
Convertible Note (collectively, the "Radyne Securities") for its own account,
for investment, and without a view toward the public distribution thereof in
violation of the Securities Act.
3.33 SECURITIES NOT REGISTERED. Spar acknowledges that (i) the
Radyne Securities are not registered under the Securities Act, (ii) the Radyne
Securities are therefore subject to restrictions on transfer and resale as
prescribed therein; and (iii) the certificates representing the Radyne
Securities will contain appropriate restrictive legends.
3.34 ACCREDITED INVESTOR. Spar hereby acknowledges that it is an
"accredited investor" as such term is defined in the Securities Act, it is a
sophisticated investor which is capable of evaluating its investment in the
Radyne Securities and the risks involved in such investment and it has been
provided the opportunity to make appropriate inquiries of members of Buyers
management with respect to the business of Buyer.
3.35 SEC DISCLOSURE FORMS. Spar has received and has reviewed
Buyer's Form 10-K for the fiscal year ended December 31, 1997 as well as the
Buyer's Forms 10-Q for the fiscal periods ended March 31, 1998 and June 30, 1998
("Buyer's SEC Reports").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Spar as follows:
4.1 ORGANIZATION; STANDING AND AUTHORITY OF BUYER. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of New York. Buyer has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. All
corporate acts and other proceedings required to be taken by Buyer to authorize
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby have been duly taken. This Agreement
has been duly executed and delivered by Buyer and constitutes a valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
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creditors' rights generally or by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
4.2 NO BREACH OR DEFAULT; CONSENTS AND APPROVALS.
(a) Except as set forth on Schedule 4.2, the execution and
delivery by Buyer of this Agreement and the other documents referenced herein to
which Buyer is a party and the consummation of the transactions contemplated
hereby and thereby will not result in or constitute any of the following: (i) a
default or an event that, with the giving of notice or lapse of time, or both,
would be a default, breach or violation of the charter documents or bylaws of
Buyer or any material Buyer Contract, (ii) an event that would permit any party
to terminate any material Buyer Contract or to accelerate the maturity of any
indebtedness or other material obligation of Buyer, (iii) the creation or
imposition of any material Lien on any of the properties of Buyer, or (iv) a
violation of any order, writ, injunction, decree, statute, rule or regulation
applicable to Buyer, except for violations which would not have a material
adverse effect on the financial condition, assets or results of operations of
Buyer.
(b) Except as set forth on Schedule 4.2, no authorization,
consent or approval of any Governmental Authority or any third party is
necessary for the consummation by Buyer of the transactions contemplated by this
Agreement and the other documents referenced herein to which Buyer is a party.
4.3 INVESTMENT INTEREST; ACCREDITED INVESTOR; RISK. The Shares
purchased by Buyer pursuant to this Agreement are being acquired for investment
only and not with a view to any public distribution thereof, and Buyer will not
offer to sell or otherwise dispose of the Shares so acquired by it in violation
of any of the registration requirements of the Securities Act or of any other
Requirement of Law. Buyer represents and warrants that it is an "Accredited
Investor" as such term is defined in Rule 501 under Regulation D of the
Securities Act. Buyer represents that it is able to bear the economic risk of
its investment in the Shares for an indefinite period of time.
4.4 AVAILABILITY OF FUNDS. Buyer has available all funds required
to consummate the transactions contemplated hereby.
4.5 BUYER'S ACKNOWLEDGMENT. Buyer acknowledges and agrees that,
(a) other than the representations and warranties of Spar specifically contained
in this Agreement, there are no representations or warranties of Spar either
expressed or implied with respect to Spar, the Company or the transactions
contemplated hereby and (b) it shall have a right to indemnification solely as
provided in Article X hereof and shall have no claim or right to indemnification
with respect to any other information, documents or materials furnished by Spar
or the Company or any of their officers, directors, employees, agents or
advisors to Buyer, including, without limitation, that certain Information
Memorandum dated July 1997 and supplements thereto or any information, documents
or material made available to Buyer in certain "data rooms," management
presentations or in any other form in expectation of the transactions
contemplated by this Agreement.
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4.6 CAPITAL STOCK OF BUYER. The authorized capital stock of Buyer
is as set forth on Schedule 4.6. The Buyer's shares were duly authorized and
validly issued and are outstanding, fully paid and nonassessable. Except as set
forth on Schedule 4.6, there are no shares of capital stock or other equity
securities of the Buyer outstanding. The shares have not been issued in
violation of, and none of the shares are subject to, any preemptive or
subscription rights. Except as set forth on Schedule 4.6, there are no
outstanding warrants, options, "phantom" stock rights, agreements, convertible
or exchangeable securities or other commitments (other than this Agreement and
the Convertible Note) pursuant to which Buyer is or may become obligated to
issue, sell, purchase, return or redeem any shares of capital stock or other
securities of Buyer and no equity securities of Buyer are reserved for issuance
for any purpose.
4.7 ACCURACY OF INFORMATION. No representation or warranty by
Buyer hereunder and no certificate or Schedule furnished or to be furnished
pursuant hereto by Buyer contains or will contain any untrue statements of a
material fact, or omits or will omit to state a material fact necessary to make
the statement contained therein not misleading in light of the circumstances.
No representation contained in the Buyer's SEC Reports contains any untrue
statement of material fact, or omits to state any material fact necessary to
make statements contained therein not misleading. Buyer represents and warrants
that, since June 30, 1998, there has been no material adverse change to Buyer's
business.
4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
Schedule 4.8, since the Interim Date Buyer has not (a) paid or declared any
cash, stock ore other dividends; (b) made any other distribution on or payments,
redemptions or repurchase with respect to any outstanding shares; (c) sold or
otherwise disposed of any of its property or assets of any kind or character
other than in the ordinary course of business; (d) entered into any agreement
,written or oral contemplating any indebtedness or any transaction outside the
usual or ordinary course of its business; (e) entered into any transactions
which would result in the recognition of goodwill or any intangible assets.
Since the Interim Date, there has not been any change in the accounting
principles, policies or practices of Buyer as theretofore applied, or the method
or ratio of allocating or charging expenses, including the basis on which assets
and liabilities are recorded and earnings and profits are ascertained.
4.9 SUPPLIERS AND CUSTOMERS. Schedule 4.9 contains a list of the
ten largest customers and suppliers of Buyer (measured by dollar volume in each
case) during the fiscal year ended December 31, 1997, showing with respect to
each, the name and dollar volume.
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ARTICLE V
MUTUAL COVENANTS
Each of Spar and Buyer covenants and agrees as follows:
5.1 CONSENTS Without modifying the mutual condition set forth in
Section 8.1: (i) Spar shall, and shall cause the Company to, use best efforts
to obtain all consents needed to consummate the transactions contemplated by
this Agreement, and (ii) Buyer shall cooperate with Spar and the Company in any
reasonable manner in connection with Spar and the Company obtaining any consents
required in connection with the transactions contemplated herein; PROVIDED,
HOWEVER, that such cooperation shall not include any requirement of any party
hereto to commence any litigation or offer or grant any accommodation (financial
or otherwise) to any third party. To the Knowledge of Spar, no such third party
has requested any such accommodation in exchange for such consent or otherwise
expressed an intent to withhold such consent.
5.2 PUBLICITY. Spar and Buyer agree that, from the date hereof
through the Closing Date, no public release or announcement concerning the
transactions contemplated hereby shall be issued by either party without the
prior consent of the other party (which consent shall not be unreasonably
withheld or delayed), except as such release or announcement may be required by
law or the rules or regulations of Canadian, United States or foreign securities
exchanges, in which case the party required to make the release or announcement
shall allow the other party reasonable time to comment on such release or
announcement in advance of such issuance.
5.3 GOVERNMENTAL FILINGS. Each of Spar and Buyer will as promptly
as practicable file with the United States Federal Trade Commission (the "FTC")
and the United States Department of Justice (the "DOJ") the notification and
report form, if any, required for the transactions contemplated hereby and any
supplemental information requested in connection therewith pursuant to the HSR
Act and any filing required by Section 5021 of the Trade Act of 1988, Pub.L.
100-418, 102 stat. 1107 (Aug. 23, 1988). Any such notification and report form
and supplemental information will be in substantial compliance with the
requirements of the HSR Act and the Exon-Florio Act. Each of Buyer and Spar
shall furnish to the other such necessary information and reasonable assistance
as the other may request in connection with its preparation of any filing or
submission which is necessary under the HSR Act and the Exon-Florio Act. Spar
and Buyer shall keep each other apprised of the status of any communications
with, and inquiries or requests for additional information from, the FTC, the
DOJ and the Committee on Foreign Investment and shall comply promptly with any
such inquiry or request. Each of Spar and Buyer will use its best efforts to
obtain any clearance required under the HSR Act and the Exon-Florio Act for the
purchase and sale of the Shares.
5.4 RECORDS. After the Closing, with reasonable advance written
notice and at the expense of the requesting party, Buyer and Spar agree to
furnish or
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cause to be furnished to each other and their representatives, employees,
counsel and accountants access, during normal business hours, to such
information (including Records pertinent to the Company) and assistance relating
to the Company as is reasonably necessary for financial reporting and accounting
matters, the settlement of any insurance claims, the preparation and filing of
any tax returns, reports or forms or the defense of any tax claim or assessment;
PROVIDED, HOWEVER, that such access does not unreasonably disrupt the normal
operations of Spar, Buyer or the Company.
5.5 SEQUENCE LEASE. Spar and Buyer agree to cooperate in seeking
approval from the landlord of the buildings known as "Sequence A" and
"Sequence B," which are currently leased to ComStream, to subdivide the lease on
such buildings into separate leases for Sequence A and Sequence B. Buyer agrees
that in the event the parties are unable to subdivide the lease prior to the
Closing Date, Spar will reimburse ComStream for all rent and direct operating
costs related to Sequence B until such time as such lease is subdivided. Spar
and Buyer agree that the Balance Sheet reflects a reserve of approximately
$1,700,000 designated for estimated future costs related to Sequence B. Upon
the Closing, such reserve shall be credited to income in the accounts of the
Company. Spar agrees to indemnify the Company for any losses in connection with
and Spar shall be entitled to any recoveries relating to leases of California
real property to which the Company is presently party, except in respect of
Sequence A. The Company shall pursue, at Spar's expense, existing litigation
with respect to rent due on the Company's Santa Maria facility.
5.6 TRANSITION PLAN. Spar and Buyer agree to cooperate in good
faith to develop, document in writing and implement a customer transition and an
employee transition and retention plan (the "Transition Plan") prior to the
public announcement of the transactions contemplated by this Agreement. Buyer
agrees that (a) the loss of one or more employees, regardless of position, shall
not constitute a material adverse change in the Company's business and (b) the
Company shall retain, and shall indemnify Spar and its Affiliates against,
severance (but not retention) liabilities arising under ComStream's 1997
retention plan (the "Prior Plan") to employees retained by ComStream after the
date of execution of this Agreement. Spar shall assume, and Spar shall
indemnify Buyer and its Affiliates (including the Company) against, all
liabilities arising under the Prior Plan to former ComStream employees
terminated on or prior to the date of execution of this Agreement.
ARTICLE VI
COVENANTS OF SPAR
Spar covenants and agrees as follows:
6.1 ACCESS. Subject to the confidentiality provisions of
Section 7.1 hereof, prior to the Closing, Spar will, and will cause the Company
to, give Buyer and its representatives, employees, counsel and accountants
reasonable access and upon
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reasonable advance notice, to the personnel, properties and Records of the
Company; PROVIDED, HOWEVER, that such access does not unreasonably disrupt the
normal operations of the Company.
6.2 INTERIM OPERATIONS. Except as set forth on Schedule 3.13 or as
otherwise contemplated by this Agreement or consented to or approved by Buyer in
writing, Spar covenants and agrees that from the date hereof until the Closing
Date or the earlier termination of this Agreement pursuant to Article XIII
hereof, the Company:
(a) shall be operated in the ordinary and usual course,
consistent with the management practices in effect on the Interim Date,
including, that the Company (i) shall not sell, transfer, mortgage or otherwise
dispose of, or encumber, any of the assets of the Company, other than in the
ordinary course of business, consistent with existing practice, (ii) shall not
make or become obligated to make any capital expenditures or enter into any
commitments therefor, except in the ordinary course of business, consistent with
existing practice, (iii) shall not change in any way its accounting policies or
practices from those in effect on the Interim Date; (iv) shall continue to
satisfy its accounts payable and collect its accounts receivable in accordance
with past practices; and (v) shall not incur or pay any Spar management fees or
pay interest to Spar.
(b) shall not amend the Certificate of Incorporation or
Bylaws of Holdings or any Subsidiary;
(c) shall use commercially reasonable efforts to preserve
intact its business organization and to preserve the goodwill of those having
business relationships with the Company;
(d) shall not authorize for issuance, issue, sell or
deliver any shares of capital stock or any other securities or issue any
securities convertible into or exchangeable for, or options, warrants to
purchase, scrip, rights to subscribe for, calls or commitments of any character
whatsoever relating to, or enter into any contract, understanding or arrangement
with respect to the issuance of, any shares of capital stock or any other
securities or enter into any arrangement or contract with respect to the
purchase or voting of any shares of capital stock, or adjust, split, combine or
reclassify its capital stock or other securities, or make any other changes in
its capital structure;
(e) shall not declare, set aside, pay or make any dividend
or other distribution or payment (whether in cash, stock or property) with
respect to, or purchase or redeem, any shares of their capital stock;
(f) except as may be required to comply with applicable
law, shall not (i) adopt or amend any existing bonus, profit sharing,
compensation, severance, termination, stock option, stock appreciation right,
restricted stock, performance unit, pension, retirement, deferred compensation,
employment or other employee benefit agreements, trusts, plans, funds or other
arrangements for the benefit or welfare of any present or former director,
officer or employee, or increase in any manner the
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compensation or fringe benefits of any director, officer or employee or pay any
benefit not required by any existing plan or arrangement (including without
limitation the granting of stock options, stock appreciation rights, shares of
restricted stock or performance units) or take any action or grant any benefit
not expressly required under the terms of any existing agreements, trusts,
plans, funds or other such arrangements or enter into any contract, agreement,
commitment or arrangement to do any of the forgoing, or (ii) make any loan to,
or otherwise extend credit to, any employee, officer, director or shareholder of
the Company, and on the Closing Date, no such loans to employees, officers,
directors or shareholders shall be outstanding, except pursuant to and under any
employee pension benefit plan, computer loans, or advances made in the ordinary
course of business; and
(g) shall terminate no employees without cause or the
Buyer's consent.
6.3 INSURANCE. Spar shall keep, or cause to be kept, all insurance
policies presently maintained relating to the Company and its properties, or
replacements therefor, in full force and effect through the close of business on
the Closing Date. Schedule 6.3 sets forth all the insurance policies presently
owned and maintained by the Company. Any and all additional insurance policies
presently maintained relating to the Company are maintained by Spar and
described on Schedule 6.3. Neither Buyer nor the Company will have any rights
under any such Spar insurance policies from and after the Closing Date; provided
that Spar shall take such actions as are necessary to seek recovery by the
Company of insurable Losses under Article X hereof.
6.4 RESIGNATIONS; USE OF COMSTREAM NAME. On the Closing Date, Spar
shall cause to be delivered to Buyer duly signed resignations, effective
immediately after the Closing, of all directors of Holdings and each Subsidiary,
and shall take such other action as is necessary to accomplish the foregoing.
On the Closing Date, or as promptly as practicable thereafter, Spar shall cause
the name "ComStream" to be deleted from any subsidiaries or Affiliates of Spar.
6.5 INTERCOMPANY PAYABLES; OTHER AMOUNTS. Before the Closing Date,
Spar shall, to the extent feasible, cause Holdings and each Subsidiary to settle
all current intercompany payables and receivables between Spar and Holdings and
such Subsidiary. Any such intercompany amounts not so settled by the Closing
Date shall be paid within thirty (30) days of Closing. Spar agrees promptly to
forward to Holdings any and all amounts due to the Company that are received by
Spar after the Closing Date.
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ARTICLE VII
COVENANTS OF BUYER
Buyer covenants and agrees as follows:
7.1 CONFIDENTIALITY. Buyer acknowledges that the information
heretofore and hereafter provided to it by Spar is subject to the terms of a
confidentiality agreement between Buyer and Spar (the "Confidentiality
Agreement"), the terms of which are incorporated herein by reference. Effective
upon, and only upon, the Closing, the Confidentiality Agreement will terminate;
provided, however, that Buyer acknowledges that the Confidentiality Agreement
will terminate only with respect to information relating solely to Holdings and
the Subsidiaries; and provided further, however, that Buyer acknowledges that
any and all other information provided to it by Spar or Spar's representatives
concerning Spar shall remain subject to the terms and conditions of the
Confidentiality Agreement after the date of the Closing. Except as required by
applicable law, Spar covenants and agrees to keep confidential and not to
disclose any material non-public information regarding the Company after the
Closing as if subject itself to the Confidentiality Agreement.
7.2 INTERCOMPANY PAYABLES; OTHER AMOUNTS. On the Closing Date,
Buyer shall, to the extent feasible, cause the Company to settle all current
intercompany payables and receivables between Spar and the Company. To the
extent any such intercompany amounts remain unsettled as of the time of Closing,
Buyer shall cause the Company to pay such amounts as promptly as practicable and
in no event later than thirty (30) days after Closing. Buyer agrees to promptly
forward or cause to be forwarded to Spar any and all amounts due to Spar that
are received by Buyer or the Company after the Closing Date.
7.3 CAPITAL STRUCTURE. As of the Interim Date and until the Closing
Date, Buyer shall not authorize for issuance, issue, sell or deliver any shares
of capital stock or any other securities or issue any securities convertible
into or exchangeable for, or options (except for employee stock options),
warrants to purchase, scrip, rights to subscribe for, calls or commitments of
any character whatsoever relating to, or enter into any contract, understanding
or arrangement with respect to the issuance of, any shares of capital stock or
any other securities or enter into any arrangement or contract with respect to
the purchase or voting of any shares of capital stock, or adjust, split, combine
or reclassify its capital stock or other securities, or make any other purchase
or voting of any shares of capital stock, changes in its capital structure.
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ARTICLE VIII
CONDITIONS PRECEDENT TO CLOSING
8.1 MUTUAL CONDITIONS. The obligation of each party to effect the
transactions contemplated hereby shall be subject to fulfillment, at or prior to
the Closing, of each of the following conditions:
(a) There shall be no claim, action, suit, injunction,
order, investigation or other proceeding pending or threatened before any court
or Governmental Authority which restrains or prohibits the transactions
contemplated by this Agreement or the obtaining of material damages or other
relief in connection therewith.
(b) The waiting period under the HSR Act and the
Exon-Florio Act, if applicable to the purchase and sale of the Shares, shall
have expired or been terminated.
8.2 BUYER'S CONDITIONS. The obligations of Buyer to purchase and
pay for the Shares are subject to fulfillment (or written waiver by Buyer) as of
the Closing of each of the following conditions:
(a) The representations and warranties of Spar made in this
Agreement shall be true and correct in all material respects as of the date
hereof and, except as specifically contemplated by this Agreement, on and as of
the Closing Date, as though made on and as of the Closing Date; and Spar shall
have performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by Spar by
the time of the Closing; and Spar shall have delivered to Buyer a certificate
dated the Closing Date and signed by an authorized officer of Spar confirming
the foregoing. The conditions in this Section 8.2(a) shall not be deemed
unsatisfied solely because any one or more of the following events, changes or
developments affecting the representations and warranties shall have occurred
after the date hereof and such events, changes or developments have or could
reasonably be expected to have a Material Adverse Effect:
(i) changes to contracts (or amendments to contracts)
with respect to which the Buyer has given its consent;
(ii) failure or inability by the Company to acquire new
customers or prospective orders, including, without limiting the generality of
the foregoing, the failure or inability to execute (a) contracts and agreements
currently under discussion or negotiation or (b) contracts and agreements with
respect to which Buyer refuses to give its consent;
(iii) changes in general market conditions related to the
business of the Company, including, without limiting the generality of the
foregoing, the
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entry of new competitors into the market related to the business or the
expansion of existing competitors within such markets;
(iv) delays in product shipments due to changes or delays
in the needs of customers in the ordinary course of business;
(v) delays in the delivery of materials from suppliers in
the ordinary course of business;
(vi) loss of customers due to a pre-existing competitive
relationship between the customer and Buyer; and
(vii) delays in the design or implementation process of
products in the ordinary course of business;
(b) Buyer shall have received opinions dated the Closing
Date of Gibson, Dunn & Crutcher LLP and Borden & Elliot, as to matters customary
in stock purchase transactions, which opinions shall be in form and substance
reasonably satisfactory to Buyer.
(c) Buyer shall have received a certified copy of the
duly adopted resolutions of the Board of Directors of Spar authorizing the
execution of this Agreement and the consummation of the transactions
contemplated hereby.
(d) Buyer shall have received an incumbency certificate
with respect to all parties executing on behalf of Spar this Agreement or any of
the documents relating to the transactions contemplated hereby.
(e) All third party consents (including those set forth
on Schedule 3.9), terminations, approvals, permits and authorizations required
to be obtained by Spar, Holdings or the Subsidiaries in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby shall have been made or obtained, and Spar,
Holdings or the Subsidiaries shall have delivered to Buyer evidence thereof that
is reasonably satisfactory to Buyer.
(f) All of the Company's indebtedness to Spar and its
Affiliates or to the Bank of Nova Scotia or any other institutional lender
(collectively, "Lenders") shall have been eliminated without the recognition of
income in excess of available net operating losses of the Company for federal or
state income tax purposes, and Spar shall have delivered to Buyer a certificate
dated the Closing Date and signed by an authorized officer of Spar confirming
the foregoing.
(g) Buyer shall have received from Spar a certificate of
Holdings to the effect that the Shares do not constitute a U.S. real property
interest within the meaning of Treasury Regulations Section 1.897-2(h).
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8.3 SPAR'S CONDITIONS. The obligations of Spar to sell and deliver
the Shares to Buyer are subject to fulfillment (or written waiver by Spar) as of
the Closing of each of the following conditions:
(a) The representations and warranties of Buyer made in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as specifically contemplated by this Agreement, on and as of
the Closing Date, as though made on and as of the Closing Date, and Buyer shall
have performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by Buyer
by the time of the Closing; and Buyer shall have delivered to Spar a certificate
dated the Closing Date and signed by an authorized officer of Buyer confirming
the foregoing.
(b) Spar shall have received an opinion dated the Closing
Date of Dorsey & Whitney, counsel to Buyer, as to the customary in stock
purchase transactions, which opinion shall be reasonably satisfactory in form
and substance to Spar.
(c) Spar shall have received a certified copy of the duly
adopted resolutions of the Board of Directors of Buyer authorizing the execution
of this Agreement and the consummation of the transactions contemplated hereby.
(d) Spar shall have received an incumbency certificate
with respect to all parties executing on behalf of Buyer this Agreement or any
of the documents relating to the transactions contemplated hereby.
(e) Except as set forth on Schedule 8.3, any and all
support agreements, lines of credit, guarantees, letters of credit and similar
instruments issued or guaranteed by Spar relating to the business of the Company
shall be canceled or terminated by the Closing.
(i) The Buyer shall on Closing deliver to Spar a standby
or replacement letter of credit from a financial institution reasonably
acceptable to Spar in an amount at least equal to the amount of the non-NSI
letters of credit set forth on Schedule 8.3 and on terms reasonably acceptable
to Spar to secure the obligations of the Buyer.
(ii) The Buyer shall use its best efforts to immediately
following the Closing (a) replace each of the non-NSI letters of credit
identified on Schedule 8.3 with a replacement letter of credit acceptable to the
beneficiaries thereof on the same terms as those contained in such letter of
credit (or terms otherwise acceptable to the beneficiary) and (b) cause the
non-NSI letters of credit to be canceled and returned to Spar upon delivery to
the beneficiary of the said replacement letter of credit.
(iii) The Buyer shall reimburse Spar on demand for any
costs incurred by Spar in maintaining each non-NSI letter of credit for the
period
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following the Closing and shall indemnify and hold harmless Spar from and
against any losses suffered or incurred by Spar as a result of or arising out of
any payment made or obligation incurred under any of the non-NSI letters of
credit except any loss which results from any breach or default of the Company
or Spar prior to Closing of its obligations to the applicable beneficiary. Spar
shall reimburse the Company on demand for any costs incurred by the Company in
maintaining each NSI letter of credit identified on Schedule 8.3 and Buyer
agrees to cause the Company to maintain such letters of credit until their
expiration (or expiration of required replacement letter of credit).
(f) All third party consents (including those set forth
on Schedule 3.9), terminations, approvals, permits and authorizations required
to be obtained by Buyer in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby shall have been made or obtained, and Buyer shall have
delivered to Spar evidence thereof that is reasonably satisfactory to Spar.
ARTICLE IX
EMPLOYEE BENEFIT MATTERS
9.1 EMPLOYMENT.
(a) Effective as of the Closing, each employee of
Holdings or the Subsidiaries who is an employee of Holdings or a Subsidiary
immediately prior to the Closing shall continue to be employed by Holdings or
the Subsidiaries, as appropriate (or may be transferred to one of their
Affiliates), PROVIDED, HOWEVER, that any such continued employment shall not be
construed to limit the ability of the Buyer, Holdings, the Subsidiaries or their
Affiliates to terminate any such employee at any time for any reason. Each
employee who remains an employee of Holdings or the Subsidiaries as of the
Closing shall be a "Company Employee" for purposes of this Agreement until such
time as such employee is terminated by Company. Employment of Company Employees
after the Closing shall be subject to all of the Company's policies and
practices as the same may be amended from time to time on or after the Closing
Date, including the policy of employment-at-will.
(b) In the event of termination of any Company Employees
after Closing, Buyer agrees to cause the Company to pay in full all severance
obligations of the Company as in force as of the Closing Date, giving full
credit for all service with the Company both before and after the Closing Date.
(c) Buyer assumes all obligations and liabilities, if
any, under the WARN Act arising out of the transactions contemplated by this
Agreement. Buyer also agrees to comply with the terms of the WARN Act following
the Closing Date.
(d) Nothing contained herein, whether expressed or
implied, is intended to confer upon any Company Employee or their legal
representatives, any rights
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or remedies, including, without limitation, any rights of employment for any
period of any nature or kind whatsoever under or by reason of this Agreement.
(e) For a period of two (2) years from and after the
Closing Date, Spar will not without Buyer's consent, which consent shall not be
unreasonably withheld, solicit Company Employees for employment.
9.2 BENEFITS.
(a) IN GENERAL. On and after the Closing Date, Buyer
shall provide Company Employees with the employee benefits generally provided to
other employees of the Buyer, subject to the terms of the Buyer's plans.
(b) WELFARE BENEFIT PLANS. Buyer will grant for purposes
of vacation and all welfare benefit plans (as defined in Employee Retirement
Income Security Act of 1974, as amended), except its retiree medical plan (if
any), past service credit to all Company Employees for all periods of time
credited to such Company Employees under the Company's welfare benefit plans.
With respect to Buyer Benefit Plans that provide medical or dental benefits
after the Closing Date, such plans shall waive any exclusions or limitations
with respect to pre-existing conditions, and actively-at-work exclusions and
shall provide that any expenses incurred on or before the Closing Date shall be
taken into account under such Buyer Benefit Plans for purposes of satisfying
applicable deductible, coinsurance and maximum out-of-pocket provisions.
(c) DEFINED CONTRIBUTION PENSION PLAN. Buyer shall take
whatever action is necessary, including amendment of its defined contribution
pension plan, to grant to each Company Employee past service credit for all
purposes under Buyer's defined contribution pension plan for all periods of
service credited to each such Company Employee under the Company's Retirement
Plan. Within ninety (90) days after the Closing Date, Spar shall provide to
Buyer such information as the Buyer requires to establish the service for the
Company Employees credited under Spar's defined contribution pension plan.
ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION BY SPAR. Subject to the terms and conditions
of this Article X, Spar shall indemnify Buyer, its Affiliates (including the
Company) and each of their respective officers, directors, employees and agents
against, and hold them harmless from, any Losses suffered or incurred by any
such Indemnified Person to the extent arising from, (a) if the Closing occurs,
any breach of any representation or warranty (both of which for the purposes of
determining Losses for indemnification purposes shall exclude any materiality
and knowledge qualifiers contained therein) of Spar contained in this Agreement
or in any certificate, instrument or other document delivered pursuant hereto or
(b) any breach of any covenant of Spar contained in this
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Agreement requiring performance after the Closing Date, (c) other than as set
forth on the Balance Sheet or as contemplated by Section 3.10(b), any liability
or financial obligation of any nature, whether known or unknown or fixed or
contingent in nature, relating to the business and operations of Holdings and
the Subsidiaries prior to the Closing Date or (d) any Losses arising from
(i) the lawsuit captioned South Texas Electronics Co. v. ComStream Corporation,
(ii) the ownership, operation or sale of ComStream's Components division to
Rockwell Semiconductor Systems, Inc., (iii) the ownership, operation or sale of
ComStream's Satellite Global Access Division to NSI Network Sciences
International Ltd. including without limitation all claims of Axio International
(Hong Kong) Limited, (iv) Spar's obligations under Section 5.5 and 5.6 or
(v) that certain SGA Business and Technology Non-Competition Agreement dated
April 16, 1998 between ComStream Corporation and NSI Network Sciences
International Ltd. as the same may be applied in respect of activities of Buyer
and its Affiliates (except the Company); PROVIDED, HOWEVER, that Spar shall not
have any liability under Sections 10.1(a), (b), (c) or Section 10.3 unless the
aggregate of all Losses relating thereto for which Spar would, but for this
provision, be liable exceeds on a cumulative basis an amount equal to $2,500,000
(and then only to the extent of any such excess) and PROVIDED, FURTHER, that
Spar's aggregate liability pursuant to Sections 10.1(a), (b), (c) or
Section 10.3 shall not exceed amount of the Convertible Note and PROVIDED,
FURTHER, that Spar's liability pursuant to this Section 10.1 shall first be
offset by any outstanding principal and interest owed Spar under the Convertible
Note and in the event that the Convertible Note has been converted into equity,
Spar's liability pursuant to this Section 10.1 shall be satisfied by Spar's
transfer of shares of the Buyer's Common Stock to Buyer.
10.2 INDEMNIFICATION BY BUYER; RECOVERIES.
(a) Subject to the terms and conditions of this
Article X, Buyer shall, and shall cause the Company, jointly and severally, to,
indemnify Spar and each of its Affiliates, officers, directors, employees and
agents against, and hold them harmless from, any Losses suffered or incurred by
any such Indemnified Person (other than any relating to Taxes, for which
indemnification provisions are set forth in Section 10.3) to the extent arising
from, (a) if the Closing occurs, any breach of any representation or warranty
(both of which for the purposes of determining Losses for indemnification
purposes shall exclude any materiality and knowledge qualifiers contained
therein) of Buyer contained in this Agreement or in any certificate, instrument
or other document delivered pursuant hereto or (b) any breach of any covenant of
Buyer contained in this Agreement requiring performance after the Closing Date
or (c) any liability or financial obligation of any nature, whether known or
unknown or fixed or contingent in nature, relating to the business and
operations of the Company on or after the Closing Date (including, without
limitation, any loss related in any manner to employment decisions or
terminations by the Company after the Closing).
(b) The Company shall pay to Spar all amounts received
with respect to the items set forth in Section 10.1(d) above.
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10.3 TAX INDEMNIFICATION.
(a) Subject to the terms and conditions of this
Article X, Spar shall indemnify Buyer and its Affiliates (including the Company)
and each of their respective officers, directors, employees and agents and hold
them harmless from (i) all liability for Taxes of the Company incurred during
the Pre-Closing Tax Period (as defined in Section 10.3(b)) and (ii) all
liability for reasonable legal fees and expenses incurred with respect to any
item indemnified pursuant to clause (i).
(b) For purposes of this Agreement, "Pre-Closing Tax
Period" shall mean any Tax period ending prior to or on the Closing Date
(including, as defined below, any Short Period or Apportioned Short Period). In
order to appropriately apportion any Taxes relating to a period that includes
(but that would not, but for this Section, close on) the Closing Date, Spar and
the Buyer will, to the extent permitted by applicable law, elect with the
relevant Governmental Authority to treat for all purposes the Closing Date as
the last day of a Tax period of Holdings and the Subsidiaries, and such period
shall be treated as a "Short Period." In any case where applicable law does not
permit Holdings and the Subsidiaries to treat the Closing Date as the last day
of a Short Period, then for purposes of this Agreement, the portion of Taxes
attributable to the operations of Holdings and the Subsidiaries for an
Apportioned Short Period (as defined below) shall be (i) in the case of Taxes
that are not based on income or gross receipts, the total amount of such Taxes
for the period in question multiplied by a fraction, the numerator of which is
the number of days in the Apportioned Short Period, and the denominator of which
is the total number of days in the entire period in question, and (ii) in the
case of Taxes that are based on income or gross receipts, the Taxes that would
be due with respect to the Apportioned Short Period, if such Period were a Short
Period. "Apportioned Short Period" means with respect to any Taxes imposed on
Holdings and the Subsidiaries on a periodic basis for which the Closing Date is
not the last day of a Short Period, the period of time beginning on the first
day of the actual Tax period in question that includes (but does not end on) the
Closing Date and ending on and including the Closing Date. All determinations
necessary to give effect to the foregoing allocations shall be made in a manner
consistent with the prior practice of Holdings and the Subsidiaries.
(c) Buyer agrees to indemnify Spar and its Affiliates for
any additional Tax owed by Spar and its Affiliates resulting from any
transaction initiated by the Company or Buyer not in the ordinary course of
business occurring on the Closing Date after Buyer's purchase of the Common
Stock of the Company.
(d) If a claim is made by the IRS that, if successful,
might result in an indemnity payment to either Spar or Buyer pursuant to this
Section 10.3, the party against whom the claim is asserted and who would be
entitled to receive an indemnity payment (the "Tax Indemnitee") shall promptly
notify the party against whom indemnification is sought (the "Tax Indemnitor")
in writing of such claim (a "Tax Claim"). If notice of a Tax Claim is not given
to the Tax Indemnitor within a sufficient
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period of time to allow the Tax Indemnitor to effectively contest such Tax Claim
taking into account the facts and circumstances with respect to such Tax Claim,
the Tax Indemnitor shall not be liable to the Tax Indemnitee to the extent that
the Tax Indemnitor's ability to effectively contest such Tax Claim is actually
prejudiced as a result thereof.
(e) With respect to any Tax Claim, the Tax Indemnitor
shall control all proceedings taken in connection with such Tax Claim
(including, without limitation, selection of counsel) and, without limiting the
foregoing, may in its sole discretion (and at its sole cost and expense) pursue
or forego any and all administrative appeals, proceedings, hearings, and
conferences with any Governmental Authority with respect thereto and may, in its
sole discretion, either pay the Tax claimed and sue for a refund where
applicable law permits such refund suits or contest the Tax Claim in any
permissible manner. The Tax Indemnitee, and each of its Affiliates, shall
cooperate with the Tax Indemnitor in contesting any Tax Claim, which cooperation
shall include, without limitation, the retention and (upon the Tax Indemnitor's
request) the provision to the Tax Indemnitor of Records and information which
are reasonably relevant to such Tax Claim, and making employees available on a
mutually convenient basis to provide additional information or explanation of
any material provided hereunder or to testify at proceedings relating to such
Tax Claim.
(f) In no case shall the Tax Indemnitee settle or
otherwise compromise any Tax Claim that might result in an indemnity payment
without the Tax Indemnitor's prior written consent, which consent shall not be
unreasonably withheld.
10.4 LOSSES NET OF INSURANCE, ETC.
(a) The amount of any Loss or Tax for which
indemnification is provided under this Article X shall be net of any (i) any
related reserves (excluding reserves related to SGA), (ii) any Tax refund or Tax
benefit item not reflected on the Balance Sheet that is payable to the Company
and (iii) all amounts recovered or recoverable by the Indemnified Person under
insurance policies with respect to such Loss or Tax and shall be (x) increased
to take account of any net actual Tax cost incurred by the Indemnified Person
arising from the receipt of indemnity payments hereunder (grossed up for such
increase) and (y) reduced to take account of any actual net tax benefit realized
by the Indemnified Person arising from the incurrence or payment of any such
Loss or Tax. In computing the amount of any such Tax cost or Tax benefit, the
Indemnified Party shall be deemed to recognize all other items of income, gain,
loss, deduction or credit before recognizing any item arising from the receipt
of any indemnity payment hereunder or the incurrence or payment of any
indemnified Loss or Tax.
(b) If the Indemnifying Person makes any payment under
this Article X in respect of any Losses, the Indemnifying Person shall be
subrogated, to the extent of such payment, to the rights of the Indemnified
Person against any insurer or third party with respect to such Losses.
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(c) Notwithstanding anything to the contrary elsewhere in
this Agreement, no Indemnifying Person shall, in any event, be liable to the
other party for any consequential damages, including, but not limited to, loss
of revenue or income, cost of capital, diminution in value or loss of business
reputation or opportunity relating to the breach or alleged breach of this
Agreement. Each party agrees that it will not seek punitive damages as to any
matter under, relating to or arising out of the transactions contemplated by
this Agreement.
(d) The parties hereto agree that the indemnification
provisions of this Article X are intended to provide the exclusive remedy as to
all Losses either may incur arising from, or relating to the transactions
contemplated hereby and each party hereby waives, to the extent they may do so,
any other rights or remedies that may arise under any applicable statute, rule
or regulation.
10.5 PROCEDURES RELATING TO INDEMNIFICATION (OTHER THAN UNDER
SECTION 10.3).
(a) In order for an Indemnified Person to be entitled to
any indemnification provided for under this Agreement (other than under
Section 10.3) in respect of, arising out of or involving a claim or demand made
by any Person against the Indemnified Person (a "Third Party Claim"), such
Indemnified Person must notify the Indemnifying Person in writing, and in
reasonable detail, of the Third Party Claim within 30 Business Days after
receipt by such Indemnified Person of written notice of the Third Party Claim;
PROVIDED, HOWEVER, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the Indemnifying Person
shall have been actually prejudiced as a result of such failure (except that the
Indemnifying Person shall not be liable for any Losses incurred during the
period in which the Indemnified Person failed to give such notice). Thereafter,
the Indemnified Person shall deliver to the Indemnifying Person, within five
Business Days after the Indemnified Person's receipt thereof, copies of all
notices and documents (including court papers) received by the Indemnified
Person relating to the Third Party Claim.
(b) If a Third Party Claim is made against an Indemnified
Person, the Indemnifying Person will be entitled to participate in the defense
thereof and, if it so chooses, to assume the defense thereof with counsel
selected by the Indemnifying Person. Should the Indemnifying Person so elect to
assume the defense of a Third Party Claim, the Indemnifying Person will not be
liable to the Indemnified Person for legal fees and expenses subsequently
incurred by the Indemnified Person in connection with the defense thereof. If
the Indemnifying Person assumes such defense, the Indemnified Person shall have
the right to participate in the defense thereof and to employ counsel, at its
own expense, separate from the counsel employed by the Indemnifying Person, it
being understood that the Indemnifying Person shall control such defense. The
Indemnifying Person shall be liable for the fees and expenses of counsel
employed by the Indemnified Person for any period during which the Indemnifying
Person has not
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assumed the defense thereof (other than during any period in which the
Indemnified Person shall have failed to give notice of the Third Party Claim as
provided above).
(c) If the Indemnifying Person chooses to defend or
prosecute any Third Party Claim, all parties hereto shall cooperate in the
defense or prosecution thereof. Such cooperation shall include the retention
and (upon the Indemnifying Person's request) the provision to the Indemnifying
Person of Records and information which are reasonably relevant to such Third
Party Claim, and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder.
(d) Whether or not the Indemnifying Person shall have
assumed the defense of a Third Party Claim, the Indemnified Person shall not
admit any liability with respect to, or settle, compromise or discharge, such
Third Party Claim without the Indemnifying Person's prior written consent (which
consent shall not be unreasonably withheld). All Tax Claims (as defined in
Section 10.3) shall be governed by Section 10.3.
(e) In order for Buyer to be entitled to any
indemnification provided for in this Agreement in connection with the Satellite
Global Access Division matter set forth on Section 10.1(d)(iii), Buyer shall
first consult with Spar's representative and Spar shall, in its sole discretion,
have the right to require the Company to exercise any applicable rights under
that certain Irrevocable Letter of Credit by and between Royal Bank of Canada
and NSI Communication Systems Inc. dated June 26, 1998, in lieu of
indemnification by Spar. Buyer shall cause the Company to provide Spar's
representative with office space at the Company's headquarters.
10.6 SURVIVAL OF REPRESENTATIONS; TERMINATION OF INDEMNIFICATION.
The representations, warranties and covenants in this Agreement and in any other
document delivered in connection herewith shall survive the Closing for a period
of fifteen (15) months (excluding the representations and warranties in
Section 3.12, which shall expire at the Closing). The obligation to indemnify
and hold harmless shall not terminate with respect to any item as to which the
Person to be indemnified shall have, before the expiration of such fifteen
(15) month period, previously made a claim by delivering a written notice
(stating in reasonable detail the basis of such claim) to the Indemnifying
Person. The obligations to indemnify and hold harmless a Person pursuant to
Section 10.1(d) shall survive the Closing indefinitely and pursuant to
Section 10.3 shall survive for the applicable statute of limitations.
ARTICLE XI
COVENANT NOT TO COMPETE
11.1 COVENANT NOT TO COMPETE. Until three years after Closing Date,
Spar covenants and agrees with Buyer that, it will not, either directly or
indirectly itself or through a wholly or partially owned subsidiary, compete or
engage in the design,
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manufacturing and marketing of satellite modems and earth stations, digital
audio and data receivers, digital set top boxes and broadband PC receiver cards,
as conducted by the Company as of the Closing Date throughout the world (the
"Restricted Territory").
11.2 CONSIDERATION. Spar acknowledges and agrees that it will
receive a direct, material and substantial benefit from the consummation of the
transactions contemplated by this Agreement and that such direct, material and
substantial benefit is good and sufficient consideration to it for the
performance of its obligations under this Article XI.
11.3 REASONABLENESS OF COVENANT. Spar recognizes and acknowledges
that the Covenant Not to Compete together with Spar's performance thereunder is
necessary in order to protect and maintain the proprietary interests and other
legitimate business interests of Buyer and to afford Buyer the benefit of its
bargain under this Agreement and that such covenants are reasonable in all
respects.
11.4 SEPARATE COVENANTS. The parties intend for the covenants
contained in this Article XI to comply with the provisions of the laws of each
state in the United States and to be construed as a series of separate
covenants, one for each city, county, market area or business area in the
Restricted Territory, for each year. Except for geographic coverage, each such
covenant shall be deemed identical in terms to the covenants contained herein.
11.5 EQUITABLE RELIEF. The parties hereto agree that the
obligations contained in this Article XI are of a special and unique character
which gives them a peculiar value, and that Buyer may not be reasonably or
adequately compensated in damages in an action at law in the event that Spar
breaches such obligations. Spar therefore expressly agrees that Buyer shall be
entitled to preliminary and permanent injunctive and other equitable relief to
prevent a breach of said obligations, in addition to any other rights and
remedies that Buyer may have.
ARTICLE XII
CERTAIN CLOSING AND POST-CLOSING MATTERS
12.1 TAX MATTERS.
(a) Other than income Tax Returns with respect to periods
for which a unitary or combined income Tax Return of Spar will include the
operations of Holdings and/or the Subsidiaries, Buyer shall prepare or cause to
be prepared and file or cause to be filed all Tax Returns of Holdings and the
Subsidiaries for Tax periods ending prior to the Closing Date or for a Short
Period (as defined in Section 10.3(b)) and which are due after the Closing Date.
Buyer shall file such Tax Returns consistent with the manner in which Spar
previously filed such Tax Returns and shall permit Spar to review and comment on
each such Tax Return prior to filing and shall make such revisions to such Tax
Returns as are reasonably requested by Spar. Spar shall reimburse Buyer for
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Taxes of Holdings and the Subsidiaries with respect to such periods within
fifteen (15) business days after payment by Buyer, Holdings, or the Subsidiaries
of such Taxes to the extent such Taxes are not accrued on the books of Holdings
and the Subsidiaries on the Closing Date.
(b) Buyer shall prepare or cause to be prepared and file
or cause to be filed any Tax Returns of Holdings and the Subsidiaries for Tax
periods which begin before the Closing Date and end after the Closing Date.
Spar shall pay to Buyer within fifteen (15) business days after the date on
which Taxes are paid with respect to such period an amount equal to the portion
of such Taxes which relates to the Apportioned Short Period (as defined and
determined under Section 10.3(b)) to the extent such Taxes are not accrued on
the books of Holdings and the Subsidiaries on the Closing Date.
(c) Spar, Buyer, Holdings and the Subsidiaries shall
cooperate fully, as and to the extent requested by the other party, in
connection with filing of Tax Returns pursuant to this Section 12.1 and any
audit, litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's request) the provision
of records and information which are reasonably relevant to any such Tax
Returns, audit, litigation or other proceeding and making employees available on
a mutually convenient basis to provide additional information and explanation of
any material provided hereunder. Buyer shall cooperate fully as reasonably
requested by Spar in connection with the filing of the unitary or combined Tax
Return of Spar referred to in the first clause of Section 12.1(a) above.
(d) All transfer, documentary, sales, use, stamp,
registration, value added and other such Taxes and fees (including any penalties
and interest) incurred in connection with this Agreement shall be borne and paid
by Spar when due.
(e) Any Tax sharing agreement between Spar and the
Company will be terminated as of the close of business on the Closing Date and
will have no further effect for any taxable year (whether the current year, a
future year, or any past year). Upon termination of any such Tax sharing
agreement, Spar, Holdings and the Subsidiaries shall make any payments required
under such agreement with respect to any Taxes covered by such agreement and
accrued as of the close of business on the Closing Date.
12.2 ACCESS TO FORMER BUSINESS RECORDS. For a period of five (5)
years following the Closing, Buyer will retain all Records of Holdings and the
Subsidiaries arising prior to the Closing in accordance with the Buyer's then
existing records retention policies and/or procedures; provided, however, in the
case of Records relating to Taxes and Tax Returns of Holdings and the
Subsidiaries, the period shall be six (6) years or, if notified by Spar, until
the termination of any applicable statute of limitations. During such period,
Buyer will afford authorized representatives of Spar access to all of such
Records at reasonable times and during normal business hours at the principal
business
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office of Holdings, or at such other location or locations at which such Records
may be stored or maintained from time to time, and will permit such
representatives to make abstracts from, or copies of, any of such Records, or to
obtain temporary possession of any thereof as may be reasonably required by Spar
at Spar's sole cost and expense. During such period, Buyer will, at Spar's
expense, cooperate with Spar in furnishing information, evidence, testimony, and
other reasonable assistance in connection with any action, proceeding, or
investigation relating to the business of Holdings prior to the Closing.
ARTICLE XIII
TERMINATION
13.1 TERMINATION. Anything contained herein to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing Date:
(a) by mutual written consent of Spar and Buyer;
(b) by Spar if any of the conditions set forth in
Sections 8.1 or 8.3 shall have become incapable of fulfillment, and shall not
have been waived by Spar;
(c) by Buyer if any of the conditions set forth in
Sections 8.1 or 8.2 shall have become incapable of fulfillment, and shall not
have been waived by Buyer; or
(d) by either party hereto, if the Closing does not occur
on or prior to November 30, 1998, unless the delay is caused by the failure of
Spar or Buyer to fulfill their respective obligations hereunder.
13.2 NOTICE OF TERMINATION. In the event of termination by Spar or
Buyer pursuant to this Article XIII, written notice thereof shall forthwith be
given to the other party and the transactions contemplated by this Agreement
shall be terminated, without further action by either party. If the
transactions contemplated by this Agreement are terminated as provided herein:
(a) Buyer shall promptly return all documents and copies
and other material received directly or indirectly from Spar or the Company
relating to the transactions contemplated hereby, whether so obtained before or
after the execution hereof, to Spar; and
(b) all confidential information received by Buyer with
respect to the businesses of Spar and the Company shall be treated in accordance
with the Confidentiality Agreement which shall remain in full force and effect
notwithstanding the termination of this Agreement.
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13.3 EFFECT OF TERMINATION. If this Agreement is terminated and the
transactions contemplated hereby are abandoned as described in this
Article XIII, this Agreement shall become void and of no further force and
effect, except for the provisions of (i) Section 7.1 relating to the obligation
of Buyer to keep confidential certain information and data obtained by it,
(ii) Section 14.4 relating to certain expenses, (iii) Section 14.5 relating to
attorneys' fees and expenses, (iv) Section 5.2 relating to publicity,
(v) Section 14.10 relating to finder's fees and broker's fees and (vi) this
Article XIII; provided, however, that if any party hereto willfully fails to
perform its obligations herein or willfully neglects to perform acts that are
necessary to the fulfillment of conditions hereof or willfully prevents the
fulfillment of a condition hereof, the other party may seek any available legal
and equitable remedies in addition to those provided herein.
ARTICLE XIV
GENERAL PROVISIONS
14.1 NOTICES. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent telecopy, or sent, postage prepaid, by registered, certified or
express mail, or reputable overnight courier service and shall be deemed given
when so delivered by hand or telecopied with electronic confirmation, or if
mailed, three days after mailing (one Business Day in the case of express mail
or overnight courier service), as follows:
(i) if to Buyer:
Radyne Corp.
5225 South 37th Street
Phoenix, Arizona 85040
Attention: Mr. Robert C. Fitting
Fax: (602) 437-4811
with a copy to:
Dorsey & Whitney LLP
250 Park Avenue
New York, New York 10177
Attention: John B. Wade, III, Esq.
Fax: (212) 953-7201
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(ii) if to Spar:
Spar Aerospace Limited
121 King Street West, Suite 1800
Toronto, Ontario M5H 4C2
Canada
Attention: Sheldon Polansky
General Counsel
Fax: (416) 682-7631
with a copy to:
Gibson, Dunn & Crutcher LLP
Jamboree Center, 4 Park Plaza
Irvine, California 92614-8557
Attention: Robert E. Dean, Esq.
Fax: (949) 475-4632
14.2 ASSIGNMENT. This Agreement and the rights and obligations
hereunder shall not be assignable or transferable (including by operation of law
in connection with a merger, or sale of substantially all the assets, of Buyer)
by Buyer prior to the Closing, without the prior written consent of Spar.
14.3 NO THIRD-PARTY BENEFICIARIES. Except as provided in Article X
as to Indemnified Persons, this Agreement is for the sole benefit of the parties
hereto and their permitted assigns and nothing herein expressed or implied shall
give or be construed to give to any person or entity, other than the parties
hereto and such assigns, any legal or equitable rights hereunder.
14.4 EXPENSES. Whether or not the transactions contemplated hereby
are consummated, and except as otherwise provided in this Agreement, all fees,
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such fees,
costs or expenses.
14.5 ATTORNEYS' FEES. Should any litigation be commenced concerning
this Agreement or the rights and duties of any party with respect to it, the
party prevailing shall be entitled, in addition to such other relief as may be
granted, to a reasonable sum for such party's attorneys' fees and expenses
determined by the court in such litigation or in a separate action brought for
that purpose.
14.6 AMENDMENTS. No amendment to this Agreement shall be effective
unless it shall be in writing and signed by both parties hereto.
14.7 INTERPRETATION; EXHIBITS AND SCHEDULES. The headings contained
in this Agreement, in any Exhibit or Schedule hereto and in the table of
contents to this Agreement, are for reference purposes only and shall not affect
in any way the meaning
40
<PAGE>
or interpretation of this Agreement. Any matter disclosed in one Schedule
hereto shall be deemed incorporated by reference into each other Schedule hereto
and disclosed in each such Schedule. All Exhibits and Schedules annexed hereto
or referred to herein are hereby incorporated in and made a part of this
Agreement as if set forth in full herein. Any capitalized terms used in any
Schedule or Exhibit, but not otherwise defined therein, shall have the meaning
as defined in this Agreement.
14.8 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
14.9 ENTIRE AGREEMENT. This Agreement and the Confidentiality
Agreement contain the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersede all prior oral
and written agreements and understandings relating to the subject matter hereof.
14.10 FINDERS AND BROKERS. Spar represents and warrants that the
only broker or finder that has acted for Spar in connection with this Agreement
or the transactions contemplated hereby or that may be entitled to any brokerage
fee, finder's fee or commission in respect thereof is BT Alex. Brown
Incorporated and that Spar will pay all fees or commissions which may be payable
to BT Alex. Brown Incorporated. Buyer represents and warrants that it has
retained no such brokers or finders in connection with this Agreement or the
transactions contemplated hereby and that no such party is entitled to any such
fee or commission from Buyer in connection with this Agreement or the
transactions contemplated hereby.
14.11 SEVERABILITY. If any provision of this Agreement or the
application of any such provision to any person or circumstance shall be held
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision hereof.
14.12 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of California
applicable to agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
14.13 CONSENT TO JURISDICTION: FORUM SELECTION. The parties agree
that all actions or proceedings arising in connection with this Agreement shall
be tried and litigated exclusively in the Federal courts located in the County
of Orange or the County of San Diego, State of California. The aforementioned
choice of venue is intended by the parties to be mandatory and not permissive in
nature, thereby precluding the possibility of litigation between the parties
with respect to or arising out of this Agreement in any jurisdiction other than
those specified in this paragraph. Each party hereby waives any right it may
have to assert the doctrine of forum non conveniens or similar doctrine or to
object to venue with respect to any proceeding brought in accordance with this
paragraph, and stipulates that the Federal courts located in the County of
Orange or the County of
41
<PAGE>
San Diego, State of California shall have in personam jurisdiction and venue
over each of them for the purpose of litigating any dispute, controversy or
proceeding arising out of or related to this Agreement. Each party hereby
authorizes and accepts service of process sufficient for personal jurisdiction
in any action against it as contemplated by this paragraph by registered or
certified mail, return receipt requested, postage prepaid, to its address for
the giving of notices as set forth in this Agreement, or in the manner set forth
in Section 14.1 of this Agreement for the giving of notice. Any final judgment
rendered against a party in any action or proceeding shall be conclusive as to
the subject of such final judgment and may be enforced in other jurisdictions in
any manner provided by law.
14.14 JURY WAIVER. SPAR AND BUYER EACH HEREBY WAIVE TRIAL BY JURY IN
ANY JUDICIAL PROCEEDING INVOLVING ANY MATTER IN ANY WAY ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE INSTRUMENTS TO BE EXECUTED IN CONNECTION
HEREWITH.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
SPAR AEROSPACE LIMITED
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
RADYNE CORP.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
42
<PAGE>
Exhibit 4.1
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, TRANSFERRED PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS SO REGISTERED OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE.
RADYNE CORP.
CONVERTIBLE PROMISSORY NOTE
$7,000,000.00 Irvine, California
______________, 1998
RADYNE CORP., a New York corporation (the "Company"), for value received
hereby promises to pay to SPAR AEROSPACE LIMITED, or its registered assigns, the
sum of Seven Million Dollars ($7,000,000.00), or such lesser amount as shall
then equal the outstanding principal amount hereof and any unpaid accrued
interest hereon, as set forth below. Unless sooner paid, such amounts shall be
due and payable on the Maturity Date, which shall be the earlier to occur of
(i) [Nine Months from Closing], (ii) the consummation of a public or private
equity or debt offering by the Company, excluding bank debt, affiliate debt,
employee stock option grants and exercises and the offering described in Section
7(e) Company (an "Equity Offering") (PROVIDED that in the event the Equity
Offering is in an amount less than the full principal and interest then
outstanding hereunder, the debt shall mature in an amount no greater than the
net amount of the Equity Offering) or (iii) when declared due and payable by the
Holder upon the occurrence of an Event of Default (as defined below). Payment
of all amounts due hereunder shall be made by wire transfer to a bank account
designated in writing by the Holder at least three business days prior to
payment. This Note is issued pursuant to the provisions of Section 2.3 of that
certain Stock Purchase Agreement, dated as of August 28, 1998, by and between
the Company and Spar Aerospace Limited (the "Stock Purchase Agreement").
The following is a statement of the rights of the Holder of this Note and
the conditions to which this Note is subject, and to which the Holder hereof, by
the acceptance of this Note, agrees.
1. DEFINITIONS. As used in this Note, the following terms, unless the
context otherwise requires, have the following meanings:
(a) "Company" includes any corporation which shall succeed to or
assume the obligations of the Company under this Note.
(b) "Holder," when the context refers to a holder of this Note, shall
mean any person who shall at the time be the registered holder of this
Note. As of the date hereof the Holder is Spar Aerospace Limited
Exhibit A
<PAGE>
2. INTEREST. The principal amount of this Note shall bear simple
interest, payable on the Maturity Date, at 8% per annum on the principal of this
Note outstanding (the "Note Rate") during the period beginning on the date of
issuance of this Note and ending on the date that the principal amount hereof is
paid in full. In the event of a partial or full conversion of the Note,
interest shall accrue on the converted amount through the date of the
conversion. Following the occurrence of an Event of Default (as defined below),
the Note Rate shall increase to and shall thereafter be 12%. Interest shall be
computed daily at the Note Rate on the basis of the actual number of days in
which all or any portion of the principal amount hereof is outstanding computed
on the basis of a 360 day year.
3. EVENTS OF DEFAULT. If any of the events specified in this Section 3
shall occur (herein individually referred to as an "Event of Default"), the
Holder of the Note may, so long as such condition exists, declare the entire
principal and unpaid accrued interest hereon immediately due and payable, by
notice in writing to the Company:
(a) Default in the payment of the principal and unpaid accrued
interest of this Note when due and payable if such default is not cured by
the Company within five (5) days after the Holder has given the Company
written notice of such default;
(b) The institution by the Company of proceedings to be adjudicated
as bankrupt or insolvent, or the consent by it to institution of bankruptcy
or insolvency proceedings against it or the filing by it of a petition or
answer or consent seeking reorganization or release under the federal
Bankruptcy Act, or any other applicable federal or state law, or the
consent by it to the filing of any such petition or the appointment of a
receiver, liquidator, assignee, trustee or other similar official of the
Company, or of any substantial part of its property, or the making by it of
an assignment for the benefit of creditors, or the taking of corporate
action by the Company in furtherance of any such action;
(c) If, within sixty (60) days after the commencement of an action
against the Company (and service of process in connection therewith on the
Company) seeking any bankruptcy, insolvency, reorganization, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, such action shall not have been resolved in favor of the
Company or all orders or proceedings thereunder affecting the operations or
the business of the Company stayed, or if the stay of any such order or
proceeding shall thereafter be set aside, or if, within sixty (60) days
after the appointment without the consent or acquiescence of the Company of
any trustee, receiver or liquidator of the Company or of all or any
substantial part of the properties of the Company, such appointment shall
not have been vacated;
(d) If the Company merges or consolidates with any person; or sells,
leases (as lessor) or otherwise disposes of all or substantially all of the
consolidated assets of the Company, or sells, leases (as lessor) or
otherwise dispose of assets representing more than 25% of the corporation's
total consolidated assets in any three-month period (other
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<PAGE>
than sales or other dispositions of inventory in the ordinary course of
business); or liquidates or dissolves;
(e) If Stetsys Pte. Ltd. ceases to have the voting power to elect a
majority of the Company's board of directors;
(f) Default in the payment, whether at maturity or otherwise, of any
debt of the Company in an aggregate amount exceeding $3,000,000 and the
lender shall have declared an event of default to be existing under the
relevant loan agreement or agreements.
4. PREPAYMENT. The Company shall have the right, exercisable from time
to time on ten (10) days written notice to the Holder, to call this Note,
without prepayment penalty, and prepay the entirety or any portion of the
outstanding principal amount, together with all accrued interest thereon.
5. CONVERSION. Holder shall have the right (a) at any time to convert
20% of the original principal balance of the Note and (b) at any time after the
Maturity Date, prior to payment in full of the principal balance of this Note,
to convert the then outstanding balance of this Note in accordance with the
provisions of Section 6 hereof, in whole or in part, into shares (the "Shares")
of the Company's common stock, par value $.002 per share (the "Common Stock").
The number of Shares into which this Note may be converted shall be determined
by dividing the aggregate principal amount and all accrued but unpaid interest
to the date of conversion by [price equal to $.50 discount from average OTC
trading price for the first five trading days after announcement of transaction]
(the "Conversion Price"), as such Conversion Price may be adjusted from time to
time in accordance with the terms of Section 7 hereof. Upon conversion of this
Note, the Company shall appoint Spar Representatives to the Board of Directors
of the Company in a number commensurate with Holder's percentage of ownership of
the Company.
6. MECHANICS AND EFFECT OF CONVERSION. No fractional Shares shall be
issued upon conversion of this Note. In lieu of the Company issuing any
fractional shares to the Holder upon the conversion of this Note, the Company
shall pay to the Holder the amount of outstanding principal and interest that is
not so converted. Upon any partial conversion of this Note, the Holder shall
surrender this Note and shall receive a new Note for the remaining principal
amount. Upon the full conversion of this Note, the Holder shall surrender this
Note, duly endorsed, at the principal office of the Company. At its expense,
the Company shall, as soon as practicable thereafter, issue and deliver to such
Holder at such principal office a certificate or certificates for the number of
Shares to which the Holder shall be entitled upon such conversion (bearing such
legends as are required by applicable state and federal securities laws in the
opinion of counsel to the Company), together with any other securities and
property to which the Holder is entitled upon such conversion under the terms of
this Note, including a check payable to the Holder for any cash amounts payable
as described above. Upon conversion of this Note, the Company shall be forever
released from all its obligations and liabilities under this Note, except that
the Company shall be obligated to pay the Holder, within ten (10) days after the
date
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<PAGE>
of such conversion, any interest accrued and unpaid or unconverted to and
including the date of such conversion, and no more. Concurrently with the
delivery of the Shares, the Company shall deliver to the Holder an executed
counterpart of the Registration Rights Agreement attached hereto as Exhibit A.
7. ADJUSTMENTS TO CONVERSION PRICE.
(a) If outstanding shares of the Common Stock of the Company shall be
subdivided into a greater number of shares, or a dividend in Common Stock or
other securities of the Company convertible into or exchangeable for Common
Stock (in which latter event the number of shares of Common Stock issuable upon
the conversion or exchange of such securities shall be deemed to have been
distributed) shall be paid in respect to the Common Stock of the Company, the
Conversion Price in effect immediately prior to such subdivision or at the
record date of such dividend shall, simultaneously with the effectiveness of
such subdivision or immediately after the record date of such dividend, be
proportionately reduced, and conversely, if outstanding shares of the Common
Stock of the Company shall be combined into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall
simultaneously with the effectiveness of such combination, be proportionately
increased.
Any adjustment to the Conversion Price under this Section 7(a)
shall become effective at the close of business on the date the subdivision or
combination referred to herein becomes effective.
(b) In the event the Company at any time, or from time to time, shall
make or issue, or fix a record date for the determination of holders of Common
Stock entitled to receive, a dividend or other distribution payable in
securities of the Company other than shares of Common Stock or securities
convertible into or exchangeable for Common Stock, then and in each such event,
provision shall be made so that the Holder shall receive upon conversion of the
Note, in addition to the number of shares of Common Stock receivable thereupon,
the amount and kind of securities of the Company which it would have received
had the Note been converted into Common Stock on the date of such event and had
thereafter, during the period from the date of such event to and including the
date of conversion, retained such securities receivable by them as aforesaid
during such period, giving application to all adjustments called for during such
period under this Section 7 with respect to the rights of the Holder.
(c) In the event of any capital reorganization, any reclassification
of the Common Stock (other than a change in par value or as a result of a stock
dividend, subdivision, split-up or combination of shares), the consolidation or
merger of the Company with or into another person (collectively referred to
hereinafter as "Reorganizations"), the Holder shall thereafter be entitled to
receive, and provision shall be made therefor in any agreement relating to a
Reorganization, upon conversion of the Note, the kind and number of shares of
Common Stock or other securities or property (including cash) of the Company, or
other corporation resulting from such consolidation or surviving such merger, to
which a holder of the number of shares of the Common Stock of the Company which
the Note entitled the Holder to convert to immediately prior to such
Reorganization would have been entitled to receive with respect to
A-4
<PAGE>
such Reorganization; and in any such case appropriate adjustment shall be made
in the application of the provisions herein set forth with respect to the rights
and interests thereafter of the Holder, to the end that the provisions set forth
herein (including the specified changes and other adjustments to the Conversion
Price) shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares, other securities or property thereafter receivable upon
conversion of the Note. The provisions of this Section 7(c) shall similarly
apply to successive Reorganizations.
(d) (i) If at any time or from time to time the Company shall
issue or sell Additional Shares of Common Stock (as hereinafter defined) other
than as a dividend or other distribution on any class of stock as provided in
Section 7(b) above and other than as a subdivision or combination of shares of
Common Stock as provided in Section 7(a) above, for a consideration per share
less than the then existing Conversion Price, then, and in each such case, the
then existing Conversion Price shall be reduced, as of the opening of business
on the date of such issuance or sale, to a price determined by dividing (1) an
amount equal to the sum of (A) the number of shares of Common Stock outstanding
immediately prior to that issuance or sale (including as outstanding all shares
of Common Stock issuable upon conversion of the portion of the Note for which
the conversion price is being adjusted) multiplied by such Conversion Price then
in effect, and (B) the consideration, if any, received by the Company upon that
issuance or sale, by (2) the total number of shares of Common Stock outstanding
immediately after that issuance or sale (including as outstanding all shares of
Common Stock issuable upon conversion of the portion of the Note for which the
conversion price is being adjusted).
(ii) For the purpose of making any adjustment in the Conversion
Price or number of shares of Common Stock issuable upon conversion of the Note,
as provided above, the consideration received by the Company for any issue or
sale of securities shall:
(A) To the extent it consists of cash, be computed at
the net amount of cash received by the Company after deduction of any
underwriting or similar commissions, compensations, discounts or concessions
paid or allowed by the Company in connection with such issuance or sale;
(B) To the extent it consists of property other than
cash, the consideration other than cash shall be computed at the fair market
value thereof as determined in good faith by the Board of Directors, at or
about, but as of, the date of the adoption of the resolution specifically
authorizing such issuance or sale, irrespective of any accounting treatment
thereof; and
(C) If Additional Shares of Common Stock, Convertible
Securities (as hereinafter defined) or rights or options to purchase either
Additional Shares of Common Stock or Convertible Securities are issued or sold
together with other stock or securities or other assets of the Company for
consideration which covers both, the consideration received for the Additional
Shares of Common Stock, Convertible Securities or rights or options shall be
computed as that portion of the consideration so received which is reasonably
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<PAGE>
determined in good faith by the Board of Directors to be allocable to such
Additional Shares of Common Stock, convertible Securities or rights or options.
(iii) For the purpose of making any adjustment in the Conversion
Price provided in this Section 7(d), if at any time, or from time to time, the
Company issues any stock or other securities convertible into Additional Shares
of Common Stock (such stock or other securities being hereinafter referred to as
"Convertible Securities") or issues any rights or options to purchase Additional
Shares of Common Stock or Convertible Securities (such rights or options being
hereinafter referred to as "Rights"), then, and in each such case, if the
Effective Conversion Price (as hereinafter defined) of such Rights or
Convertible Securities shall be less than the Conversion Price in effect
immediately prior to the issuance of such Rights or Convertible Securities, the
Company shall be deemed to have issued at the time of the issuance of such
Rights or Convertible Securities the maximum number of Additional Shares of
Common Stock issuable upon exercise or conversion thereof and to have received
in consideration for the issuance of such shares an amount equal to the
aggregate Effective Conversion Price of such Rights or Convertible Securities.
For the purposes of this Section 7(d)(iii), "Effective Conversion Price" shall
mean an amount equal to the sum of the consideration, if any, received or
receivable by the Company with respect to each Additional Share of Common Stock
upon issuance of the Rights or Convertible Securities and upon their exercise or
conversion, respectively. No further adjustment of the Conversion Price
adjusted upon the issuance of such Rights or Convertible Securities shall be
made as a result of the actual issuance of Additional Shares of Common Stock on
the exercise of any such Rights or the conversion of any such Convertible
Securities. If any such Rights or the conversion privilege represented by any
such Convertible Securities shall expire without having been exercised, such
Conversion Price as adjusted upon the issuance of such Rights or Convertible
Securities shall be readjusted to the Conversion Price which would have been in
effect had such adjustment been made on the basis that the only Additional
Shares of Common Stock so issued were the Additional Shares of Common Stock, if
any, actually issued or sold on the exercise of such Rights or on the conversion
of such Convertible Securities, and such Additional Shares of Common Stock, if
any, were issued or sold for the consideration actually received by the Company
upon such exercise, plus the consideration, if any, actually received by the
Company for the granting of all such Rights, whether or not exercised, plus the
consideration received for issuing or selling the Convertible Securities
actually converted plus the consideration, if any, actually received by the
Company (other than by cancellation of liabilities or obligations evidenced by
such Convertible Securities) on the conversion of such Convertible Securities.
(e) "Additional Shares of Common Stock" as used in this Section 7
shall mean all shares of Common Stock issued by the Company, whether or not
subsequently reacquired or retired by the Company, other than (i) shares of
Common Stock issued upon the conversion of the Note, (ii) shares of Common Stock
issued in connection with an offering to existing shareholders of the Company
and employees of the Company announced on or before the closing date of the
Stock Purchase Agreement in which Stetsys US, Inc., a Delaware corporation, and
Stetsys Pte. Ltd., a Singapore corporation, will collectively purchase Common
Stock of the Company, (iii) shares of Common Stock issued in connection with an
Equity Offering the proceeds of which are used to repay all outstanding
principal and accrued but unpaid
A-6
<PAGE>
interest on the Note; and (iv) shares issued upon the exercise of employee stock
options or underwriters' warrants.
(f) In each case of an adjustment or readjustment of the Conversion
Price or the number of shares of Common Stock or other securities issuable upon
conversion of the Note, the Company, at its expense, shall cause the Chief
Financial Officer of the Company to compute such adjustment or readjustment in
accordance with the provisions of this Note and prepare a certificate showing
such adjustment or readjustment, and shall mail such certificate, by first-class
mail, postage prepaid, to the registered Holder at the Holder's address as shown
on the Company's stock transfer books. The certificate shall set forth such
adjustment or readjustment, showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (i) the
consideration received or to be received by the Company for any Additional
Shares of Common Stock issued or sold or deemed to have been issued or sold,
(ii) the Conversion Price at the time in effect for the Note and (iii) the
number of Additional Shares of Common Stock and the type and amount, if any, of
other property which at the time would be received upon conversion of the Note.
Such notice may be given in advance of such adjustment or readjustment and may
be included as part of a notice required to be given pursuant to Section 7(g)
below.
(g) In the event the Company shall propose to take any action of the
type or types requiring an adjustment to the Conversion Price as set forth
herein, the Company shall give notice to the Holder in the manner set forth in
Section 14 below, which notice shall specify the record date, if any, with
respect to any such action and the date on which such action is to take place.
Such notice shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the Conversion Price and the
number, kind or class of shares or other securities or property which shall be
deliverable upon the occurrence of such action or deliverable upon the
conversion of the Note.
8. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the Note,
such number of its shares of Common Stock as shall from time to time be
sufficient to effect a conversion of the Note, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of the Note, the Company shall promptly seek such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose. In the event of the consolidation or merger of
the Company with another corporation where the Company is not the surviving
corporation, effective provisions shall be made in the certificate or articles
of incorporation, merger or consolidation, or otherwise of the surviving
corporation so that such corporation will at all times reserve and keep
available a sufficient number of shares of Common Stock or other securities or
property to provide for the conversion of the Note in accordance with the
provisions of this Section 8.
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<PAGE>
9. PAYMENT OF TAXES. The Company shall pay all taxes and other
governmental charges (other than any income or other taxes imposed upon the
profits realized by the recipient) that may be imposed in respect of the issue
or delivery of shares of Common Stock or other securities or property upon
conversion of the Note, except any tax or other charge imposed in connection
with any transfer involved in the issue and delivery of shares of Common Stock
or other securities in a name other than that of which the Note was registered.
10. COVENANTS.
(a) The Company shall, concurrently with the mailing thereof
to the Company's shareholders, provide the Holder with copies of all Annual
Reports and reports on Forms 10-K, 10-Q and 8-K prepared by the Company. The
Company shall also provide the Holder with copies of all Registration Statements
and Prospectuses prepared with respect to the Company.
(b) The Company will permit any representative designated by
the Holder upon reasonable notice and during normal business hours, to visit and
inspect any of the properties of the Company, examine the corporate and
financial records of the Company and make copies thereof or extracts therefrom,
and to discuss the affairs, finances and accounts of the Company with the
directors, officers, key employees and independent accountants of the Company
provided that no such representative shall unduly interfere with the normal
business and operations of the Company during such visit or inspection.
(c) The Company will perform and observe all of its
obligations to the Holder set forth in this Agreement, and all of its
obligations to holders of Registrable Securities (as defined in the Registration
Rights Agreement attached hereto as Appendix A) set forth in the Registration
Rights Agreement, as the foregoing may from time to time be amended.
(d) The Holder shall maintain the confidentiality of all
nonpublic information obtained by it from the Company; PROVIDED, that (a) the
Holder may, to the extent required by law, disclose such information in
connection with the sale or transfer of the Note (or the Common Stock issued
upon conversion thereof) if the Holder's transferee agrees in writing to be
bound by the provisions hereof and (b) after reasonable notice to the Company,
the Holder may disclose such information (i) at the request of any applicable
regulatory authority or in connection with an examination of the Company by any
such authority, (ii) pursuant to subpoena or other court process, (iii) when
required to-do so in accordance with the provisions of any applicable law, (iv)
to the Holder's independent auditors and other professional advisors provided
such persons acknowledge and agree to be bound by the Holder's confidentiality
obligations hereunder
(e) The Company shall not amend its certificate of
incorporation in a manner that adversely impacts or may adversely impact the
Holder without the prior written consent of the Holder.
11. ASSIGNMENT. The rights and obligations of the Company and the Holder
of this Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and
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<PAGE>
transferees of the parties. Holder agrees not to assign the Note to any direct
competitor of the Company or its affiliates.
12. WAIVER AND AMENDMENT. Any provision of this Note may only be amended,
waived or modified upon the written consent of the Company and the Holder.
13. TREATMENT OF NOTE. To the extent permitted by generally accepted
accounting principles, the Company will treat, account and report the Note as
debt and not equity for accounting purposes and with respect to any returns
filed with federal, state or local tax authorities.
14. NOTICE. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or if telecopied or mailed by registered or
certified mail, postage prepaid, at the respective addresses of the parties set
forth in the Stock Purchase Agreement. Any party hereto may by notice so given
change its address for future notice hereunder. Notice shall conclusively be
deemed to have been given when personally delivered or when deposited in the
mail or telecopied in the manner set forth in the Stock Purchase Agreement and
shall be deemed to have been received when delivered.
15. DISPUTE RESOLUTION. Any dispute between the Company and the Holder
shall be resolved in accordance with the dispute resolution provisions of the
Stock Purchase Agreement.
16. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, excluding that body of law
relating to conflict of laws.
17. HEADING; REFERENCES. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
Except where otherwise indicated, all references herein to Sections refer to
Sections hereof.
IN WITNESS WHEREOF, the Company has caused this Note to be issued this
____ day of ____________, 1998.
RADYNE CORP.
By:
-------------------------------------
Name:
-----------------------------------
Its:
------------------------------------
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<PAGE>
APPENDIX A
REGISTRATION RIGHTS AGREEMENT
<PAGE>
EXHIBIT 4.2
APPENDIX A
TO
CONVERTIBLE PROMISSORY NOTE
RADYNE CORP.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of
__________, 199_ by and between RADYNE CORP., a New York corporation (the
"COMPANY"), and [__________] (the "PURCHASER").
RECITALS
A. The Company is the maker of that certain Convertible Promissory Note
dated as of ____________, 1998 (the "Note"), which Note is convertible into
Common Stock, par value $.002, of the Company (the "Common Stock");
B. The Purchaser has exercised its right to convert the Note to Common
Stock and concurrently with the execution of this Agreement the Company is
issuing to the Purchaser [__________] shares of Common Stock (the "Shares").
C. Pursuant to the terms of the Note, the Company is required to execute
and deliver this Agreement with the Shares.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the parties agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission of the
United States or any other United States federal agency at the time
administering the Securities Act.
"HOLDER" shall mean the Purchaser, and its transferees or assigns as
permitted by SECTION 11 HEREOF, holding Registrable Securities or securities
convertible into or exercisable for Registrable Securities.
"REGISTRABLE SECURITIES" means (i) the Shares and (ii) any shares of
Common Stock issued or issuable in respect of the Shares upon any stock split,
stock dividend, recapitalization, or similar event. Shares shall only be
treated as Registrable Securities if they (A) have not been sold to or through a
broker or dealer or underwriter in a public distribution or a public securities
transaction, or (B) are not able to be sold in a single transaction exempt
pursuant to Rule 144(k) from the registration and prospectus delivery
requirements of the Securities Act
<PAGE>
so that all transfer restrictions and restrictive legends with respect thereto
are removed upon the consummation of such sale.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement by the Commission.
"REGISTRATION EXPENSES" shall mean all expenses, excluding Selling
Expenses (as defined below) except as otherwise stated below, incurred by the
Company in complying with SECTION 2, SECTION 3 and SECTION 4 hereof, including,
without limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company and
reasonable fees and disbursements of one counsel for the Holder selected by the
Holder and approved by the Company (which consent shall not be unreasonably
withheld), Blue Sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder.
"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holder. Such expenses shall be borne by the Holder.
2. DEMAND REGISTRATION.
(a) REQUEST FOR REGISTRATION. In the event the Company shall receive
a written request from Holders collectively holding at least twenty five percent
(25%) of the Registrable Securities on or after the maturity date of the Note
then held by all Holders of Registrable Securities at the time of such request
that the Company effect any registration, qualification or compliance with
respect to Registrable Securities having an aggregate proposed selling price of
not less than One Million Dollars ($1,000,000) (a "REGISTRATION NOTICE"), the
Company will, as soon as practicable, use its best efforts to effect such
registration, qualification or compliance (including, without limitation,
appropriate qualification under applicable Blue Sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act and any other governmental requirements or regulations) as may be
so requested and as would permit or facilitate the sale and distribution of all
or such portion of such Registrable Securities as are specified in such request.
Notwithstanding the foregoing, the Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this SECTION 2 (i) prior to the effective date of the Company's first registered
public offering of its stock or (ii) after the Company has effected one
registration pursuant to this SECTION 2 and such registrations have been
declared or ordered effective.
Subject to the foregoing clauses (i) and (ii), the Company shall file
a registration statement covering the Registrable Securities so requested to be
registered as soon as practicable,
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<PAGE>
after receipt of the request or requests of the Holder. Notwithstanding the
foregoing, the Company shall be entitled to defer for a reasonable period of
time, but not in excess of 120 days, the filing of any registration statement
otherwise required to be prepared and filed by it under this SECTION 2 if
(i) (A) the Company is at such time conducting or about to conduct an
underwritten public offering of its securities for its own account and the Board
of Directors of the Company determines in good faith that such offering by the
Company would be materially adversely affected by such registration requested by
the Holder(s), (B) the Company is pursuing an acquisition, merger,
reorganization, disposition or other similar transaction and the Board of
Directors of the Company determines in good faith that the Company's ability to
pursue or consummate such transaction would be materially adversely affected by
such registration requested by the Holder(s), or (C) the Company is in
possession of material nonpublic information concerning it or its business and
affairs and the Board of Directors of the Company determines in good faith that
the prompt public disclosure of such information in such registration requested
by the Holder(s) would have a material adverse effect on the Company; and (ii)
the Company so notifies the requesting Holder(s) within ten (10) days after the
Company's receipt of the Registration Notice from such Holder(s).
(b) UNDERWRITING. In the event that a registration pursuant to this
Section is for a registered public offering involving an underwriting, the
Company shall so advise the Holder as part of the notice given pursuant to
SECTION 2(A). In such event, the right of the Holder to registration pursuant
to this Section shall be conditioned upon the Holder's participation in the
underwriting arrangements required by this Section, and the inclusion of the
Holder's Registrable Securities in the underwriting to the extent requested
shall be limited to the extent provided herein. The Holder shall, together with
the Company, enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company, but subject
to the reasonable approval of the Holder. If the Holder disapproves of the
terms of any such underwriting, the Holder may elect to withdraw therefrom by
written notice to the Company and the managing underwriter. Any securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration.
3. REGISTRATION ON FORM S-3.
(a) REQUEST FOR REGISTRATION. If at any timeon or after the maturity
date of the Note, or from time to time thereafter, the Holder requests that the
Company file a registration statement on Form S-3 (or any successor form to Form
S-3) for a public offering of Registrable Securities and the Company is a
registrant entitled to use Form S-3 to register the Registrable Securities for
such an offering, the Company shall use its best efforts to cause such
Registrable Securities to be registered for the offering on such form and to
cause such Registrable Securities to be qualified in such jurisdictions as the
Holder may reasonably request. Notwithstanding the foregoing, the Company shall
not be obligated to take any action pursuant to Section 2 and SECTION 3 more
than one (1) time per calendar year.
Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities so requested to be registered as
soon as practicable, after receipt of the request or requests of the Holder.
Notwithstanding the foregoing, the Company shall be entitled
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<PAGE>
to defer for a reasonable period of time, but not in excess of 120 days, the
filing or any other actions with respect to any registration statement otherwise
required to be prepared and filed by it under this SECTION 3 if (i) (A) the
Company is at such time conducting or about to conduct an underwritten public
offering of its securities for its own account and the Board of Directors of the
Company determines in good faith that such offering by the Company would be
materially adversely affected by such registration requested by the Holder(s),
(B) the Company is pursuing an acquisition, merger, reorganization, disposition
or other similar transaction and the Board of Directors of the Company
determines in good faith that the Company's ability to pursue or consummate such
transaction would be materially adversely affected by such registration
requested by the Holder(s), or (C) the Company is in possession of material
nonpublic information concerning it or its business and affairs and the Board of
Directors of the Company determines in good faith that the prompt public
disclosure of such information in such registration requested by the Holder(s)
would have a material adverse effect on the Company; and (ii) the Company so
notifies the requesting Holder(s) within ten (10) days after the Company's
receipt of the registration request from such Holder(s).
(b) UNDERWRITING. The substantive provisions of SECTION 2(B) shall
be applicable to each such registration initiated under this Section involving
an underwriting.
4. INCIDENTAL REGISTRATIONS.
(a) NOTICE OF REGISTRATION. If at any time on or after the maturity
date of the Note or from time to time thereafter the Company shall determine to
file a registration statement under the Securities Act for the general
registration of any of its securities to be sold for cash, either for its own
account or the account of a security holder or holders, other than (i) a
registration relating solely to stock option or other employee benefit plans or
(ii) a registration relating solely to a Commission Rule 145 transaction, the
Company will: (A) promptly give the Holders written notice thereof; and (B)
include in such registration (and any related qualification under Blue Sky laws
or other compliance), and in any underwriting involved therein, all the
Registrable Securities specified in a written request or requests, made within
twenty (20) days after receipt of such written notice from the Company, by the
Holder, subject to the terms of SECTION 4(B).
(b) UNDERWRITING. If the registration with respect to which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holder as a part of the written
notice given pursuant to SECTION 4(A). In such event, the right of the Holder
to registration pursuant to this Section shall be conditioned upon the Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. The Holder shall, together
with the Company, enter into an underwriting agreement in customary form with
the managing underwriter selected for such underwriting by the Company. If the
Holder disapproves of the terms of any such underwriting, the Holder may elect
to withdraw therefrom by written notice to the Company and the managing
underwriter. Any securities excluded or withdrawn from such underwriting shall
be withdrawn from such registration.
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<PAGE>
Notwithstanding any provision contained herein to the contrary, if the
managing underwriter or underwriters of the registration in which the Company
gives notice under this SECTION 4 shall advise the Company in writing that, in
its opinion, the total amount of Registrable Securities that the Holder(s)
request to include in such registration, together with any other securities with
similar incidental or piggyback registration rights (collectively, the
"REQUESTED SECURITIES") would materially reduce the amount of securities to be
offered by the Company or interfere in any material respect with the offer of
the Company's securities, then the amount and kind of Requested Securities to be
offered for the accounts of any Holder whose shares of Requested Securities were
requested to be included in such registration shall be reduced pro rata with
respect to each such Holder to the extent necessary to reduce the total amount
of securities to be included in such registration to the amount recommended by
such managing underwriter or underwriters; PROVIDED, HOWEVER, that such
reduction shall not include the following: (i) if the registration initially
occurs at the insistence of the Company, shares to be issued by the Company; or
(ii) if the registration occurs due to a demand registration right, including
the Demand Registration provided in SECTION 2, shares of the Holder(s) making
that demand.
(c) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section prior to the effectiveness of such registration whether or not the
Holder has elected to include Registrable Securities in such registration;
provided, however, if the Holder elects to use its demand registration right
pursuant to SECTION 2, then such registration shall be governed by SECTION 2 and
it shall not be terminated.
5. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the
date hereof, the Company will not, without the prior written consent of holders
of two-thirds of the Registrable Securities, enter into any agreement with any
holder or prospective holder of any securities of the Company which allows such
holder or prospective holder of any securities of the Company to include such
securities in any registration filed under SECTION 2 hereof, unless, under the
terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of his
securities will not adversely affect the Holder's registration rights pursuant
to such SECTION 2.
6. EXPENSES OF REGISTRATION.
(a) REGISTRATION EXPENSES. The Company shall bear all Registration
Expenses incurred in connection with all registrations pursuant to SECTION 2 or
SECTION 4 hereof, and shall bear all Registration Expenses incurred in
connection with the first registration pursuant to SECTION 3. In the event the
Holder withdraws a Registration Notice, abandons a registration statement or,
following an effective registration pursuant to SECTION 2 hereof, does not sell
Registrable Securities, then all Registration Expenses in respect of such
Registration Notice shall be borne, at the Holder's option, either by the Holder
or by the Company (in which case, if borne by the Company, such withdrawn or
abandoned registration shall be deemed to be an effective registration for
purposes of SECTION 2(A)(II) hereof). The Holder shall bear all Registration
Expenses incurred in connection with the second and any subsequent registration
pursuant to SECTION 3.
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<PAGE>
(b) SELLING EXPENSES. Unless otherwise stated, all Selling Expenses
relating to securities registered on behalf of the Holders shall be borne by the
Holders pro rata on the basis of the number of shares so registered.
7. REGISTRATION AND QUALIFICATION. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act pursuant to this Agreement, the Company will
as promptly as is practicable:
(a) prepare and file with the Commission, as soon as practicable, and
use its best efforts to cause to become effective for a time period not to
exceed 90 days, a registration statement under the Securities Act relating to
the Registrable Securities to be offered on such form as the Holder, or if not
filed pursuant to SECTION 2 or SECTION 3 hereof, the Company, determines and for
which the Company then qualifies;
(b) prepare and file with the Commission such amendments (including
post-effective amendments) to such registration statement and the prospectus and
supplements used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities
until the earlier of such time as all of such Registrable Securities have been
disposed of in accordance with the intended methods of disposition set forth in
such registration statement or the expiration of ninety (90) days after such
registration statement becomes effective; provided that such ninety (90) day
period shall be extended in the case of a registration pursuant to SECTION 2 or
SECTION 3 hereof for such number of days that equals the number of days elapsing
from (i) the date the written notice contemplated by SECTION 7(F) hereof is
given by the Company to (ii) the date on which the Company delivers to the
Holder the supplement or amendment contemplated by SECTION 7(F) hereof;
(c) furnish to the Holder and to any underwriter of Registrable
Securities such number of conformed copies of such registration statement and of
each such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any summary prospectus), in
conformity with the requirements of the Securities Act, such documents
incorporated by reference in such registration statement or prospectus, and such
other documents, as the Holder or such underwriter may reasonably request;
(d) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of such registration statement at the
earliest possible moment;
(e) if requested by the Holder, (i) furnish to the Holder an opinion
of counsel for the Company addressed to the Holder and dated the date of the
closing under the underwriting agreement (if any) (or if such offering is not
underwritten, dated the effective date of the registration statement), and (ii)
use its best efforts to furnish to the Holder a "comfort" or "special
procedures" letter addressed to the Holder and signed by the independent public
accountants who have audited the Company's financial statements included in such
registration statement, in each such case covering substantially the same
matters with respect to such registration statement (and the prospectus included
therein) as are customarily covered in
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<PAGE>
opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities and such other
matters as the Holder may reasonably request and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements;
(f) immediately notify the Holder in writing (i) at any time when a
prospectus relating to a registration hereunder is required to be delivered
under the Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and (ii)
of any request by the Commission or any other regulatory body or other body
having jurisdiction for any amendment of or supplement to any registration
statement or other document relating to such offering, and in either such case
(i) or (ii) at the request of the Holder prepare and furnish to the Holder a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statement therein, in light of the
circumstances under which they are made, not misleading;
(g) use its best efforts to list all such Registrable Securities
covered by such registration statement on each securities exchange and
inter-dealer quotation system on which a class of common equity securities of
the Company is then listed, and to pay all fees and expenses in connection
therewith; and
(h) upon the transfer of Shares by the Holder in connection with a
registration hereunder, furnish unlegended certificates representing ownership
of the Registrable Securities being sought in such denominations as shall be
requested by the Holder or the underwriters.
8. INDEMNIFICATION.
(a) BY THE COMPANY. The Company will indemnify the Holders, their
respective officers, directors, partners, legal counsel and accountants, and
each person controlling any Holder within the meaning of Section 15 of the
Securities Act, with respect to which registration, qualification or compliance
has been effected pursuant to this Agreement, and each underwriter, if any, and
each person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statementor prospectus, or any amendment or
supplement thereto, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
or any violation by the Company of the Securities Act or any rule or regulation
promulgated under the Securities Act applicable to the Company in connection
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<PAGE>
with any such registration, qualification or compliance, and the Company will
reimburse the Holder, its officers, directors and partners, each person
controlling the Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission or alleged untrue
statement or omission, made in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by the
Holder, controlling person or underwriter and stated to be specifically for use
therein. If the Holder is represented by counsel other than counsel for the
Company, the Company will not be obligated under this SECTION 8(A) to reimburse
legal fees and expenses of more than one separate counsel for the Holder.
(b) BY THE HOLDER. The Holder will indemnify the Company, its
directors, officers, legal counsel, accountants, each underwriter, if any, of
the Company's securities covered by such a registration statement, and each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statementor prospectus, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company, such directors, officers, underwriters or control persons for any legal
or any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement or prospectus in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by the
Holder and stated to be specifically for use therein. Notwithstanding the
foregoing, the liability of the Holder under this subsection (b) shall be
limited in an amount equal to the net proceeds of the shares sold by the Holder,
unless such liability arises out of or is based on willful misconduct by the
Holder.
(c) PROCEDURE FOR INDEMNIFICATION. Each party indemnified under
paragraph (a) or (b) of this SECTION 8 (the "INDEMNIFIED PARTY") shall, promptly
after receipt of notice of any claim or the commencement of any action against
such Indemnified Party in respect of which indemnity may be sought, notify the
party required to provide indemnification (the "INDEMNIFYING PARTY") in writing
of the claim or the commencement thereof; provided that the failure of the
Indemnified Party to notify the Indemnifying Party shall not relieve the
Indemnifying Party from any liability which it may have to an Indemnified Party
on account of the indemnity agreement contained in paragraph (a) or (b) of this
SECTION 8, unless the Indemnifying Party was materially prejudiced by such
failure, and in no event shall relieve the Indemnifying Party from any other
liability which it may have to such Indemnified Party. If any such claim or
action shall be brought against an Indemnified Party, it shall notify the
Indemnifying Party thereof and the Indemnifying Party shall be entitled to
participate therein, and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the Indemnified Party. After
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<PAGE>
notice from the Indemnifying Party to the Indemnified Party of its election to
assume the defense of such claim or action, the Indemnifying Party shall not be
liable (except to the extent the proviso to this sentence is applicable, in
which event it will be so liable) to the Indemnified Party under this SECTION 8
for any legal or other expenses subsequently incurred by the Indemnified Party
in connection with the defense thereof other than reasonable costs of
investigation; provided that each Indemnified Party shall have the right to
employ separate counsel to represent it and assume its defense (in which case,
the Indemnifying Party shall not represent it) if (i) upon the advice of
counsel, the representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them, or
(ii) in the event the Indemnifying Party has not assumed the defense thereof
within ten (10) days of receipt of notice of such claim or commencement of
action, and in which case the fees and expenses of one such separate counsel
shall be paid by the Indemnifying Party. If any Indemnified Party employs such
separate counsel it will not enter into any settlement agreement which is not
approved by the Indemnifying Party, such approval not to be unreasonably
withheld. If the Indemnifying Party so assumes the defense thereof, it may not
agree to any settlement of any such claim or action as the result of which any
remedy or relief, other than monetary damages for which the Indemnifying Party
shall be responsible hereunder, shall be applied to or against the Indemnified
Party, without the prior written consent of the Indemnified Party. In any
action hereunder as to which the Indemnifying Party has assumed the defense
thereof with counsel reasonably satisfactory to the Indemnified Party, the
Indemnified Party shall continue to be entitled to participate in the defense
thereof, with counsel of its own choice, but, except as set forth above, the
Indemnifying Party shall not be obligated hereunder to reimburse the Indemnified
Party for the costs thereof.
If the indemnification provided for in this Section shall for any
reason be unavailable to an Indemnified Party in respect of any loss, claim,
damage or liability, or any action in respect thereof, referred to therein, then
each Indemnifying Party shall, in lieu of indemnifying such Indemnified Party,
contribute to the amount paid or payable by such Indemnified Party as a result
of such loss, claim, damage or liability, or action in respect thereof, in such
proportion as shall be appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and the Indemnified Party on the other with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to whether the untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact relates to information supplied by
the Indemnifying Party on the one hand or the Indemnified Party on the other,
the intent of the parties and their relative knowledge, access to information
and opportunity to correct or prevent such statement or omission, but not by
reference to any Indemnified Party's stock ownership in the Company. In no
event, however, shall the Holder of Registrable Securities be required to
contribute in excess of the amount of the net proceeds received by the Holder in
connection with the sale of Registrable Securities in the offering which is the
subject of such loss, claim, damage or liability. The amount paid or payable by
an Indemnified Party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this paragraph shall be deemed
to include, for purposes of this paragraph, any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim. No person guilty of
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fraudulent misrepresentation (within the meaning of Section 12(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
9. INFORMATION FROM THE HOLDERS. Notwithstanding any provision contained
herein to the contrary, it shall be a condition precedent to the obligation of
the Company to take any action pursuant to this Agreement in respect of the
Registrable Securities that are to be registered at the request of any Holder
thereof that (i) such Holder furnish to the Company such information regarding
the Holder as shall be necessary to enable the Company to comply with the
provisions hereof in connection with any registration, qualification or
compliance referred to in this Agreement, and (ii) such Holder deliver and
perform under any underwriting and selling shareholder agreements as may be
reasonably requested by the underwriters.
10. RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission that may at any time permit the
sale of the Registrable Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Company, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT");
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
(at any time after it has become subject to such reporting requirements); and
(c) Furnish to any Holder forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company and other information in the possession of or
reasonably obtainable by the Company as the Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing the Holder
to sell any such securities without registration.
11. TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company to
register securities under SECTION 2, SECTION 3 or SECTION 4 may be assigned in
connection with any transfer or assignment by the Holder of Registrable
Securities provided that: (a) such transfer may otherwise be effected in
accordance with applicable securities laws; (b) such transfer is effected in
compliance with the restrictions on transfer contained in this Agreement and in
any other agreement between the Company and the Holder; and (c) such assignee or
transferee acquires at least 25% of the Registrable Securities then outstanding
and shall execute a counterpart of this Agreement whereby such assignor or
transferee agrees to be bound by the terms of this Agreement and assumes all of
the obligations of the transferring Holder hereunder.
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No transfer or assignment will divest the Holder or any subsequent owner of such
rights and powers unless all Registrable Securities are transferred or assigned.
12. TERMINATION. This Agreement shall terminate at such time as all
Registrable Securities held by the Holders constitute less than one percent (1%)
of the voting securities of the Company (on an as-converted basis) and can be
sold pursuant to Rule 144, other than Rule 144(k), within a consecutive three
(3) month period without compliance with the registration requirements of the
Securities Act. The respective indemnities, representations and warranties of
the Purchaser and the Company shall survive such termination.
13. MARKET STAND-OFF. If requested by an underwriter of securities of the
Company, each Holder of Registrable Securities shall not sell or otherwise
transfer or dispose of any Registrable Securities held by such Holder during the
one-hundred twenty (120) day period following the effective date of a
registration statement; provided, however, that such agreement shall apply only
to the first registration statement covering the offered securities to be sold
on the Company's behalf to the public in an underwritten offering.
14. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement will be governed by and construed
in accordance with the State of California without given effect to the conflicts
of law principles thereof.
(b) AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holder of
at least two-thirds (2/3) of the Registrable Securities, voting as a class. Any
amendment or waiver effected in accordance with this paragraph will be binding
upon the Company, each holder of any securities purchased under this Agreement
at the time outstanding (including securities into which such securities are
convertible), and any transferee of such securities.
(c) SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
invalid, unenforceable or void, this Agreement shall continue in full force and
effect without said provision. In such event, the parties shall negotiate, in
good faith, a legal, valid and binding substitute provision which most nearly
effects the intent of the parties in entering into this Agreement.
(d) NOTICES. All notices and other communications required or
permitted hereunder shall be in writing (or in the form of a telex or telecopy
(confirmed in writing) to be given only during the recipient's normal business
hours unless arrangements have otherwise been made to receive such notice by
telex or telecopy outside of normal business hours) and shall be mailed by
registered or certified mail, postage prepaid, or otherwise delivered by hand,
messenger, or telex-or telecopy (as provided above) addressed (a) if to the
Purchaser, at such address as the Purchaser shall have furnished to the Company
in writing or (b) if to the Company, one copy should be sent to its principal
executive offices and addressed to the
11
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attention of the Corporate Secretary, or at such other address as the Company
shall have furnished to the Purchaser.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally or, if sent by mail, at the earlier of its receipt or 72
hours after the same has been deposited in a regularly maintained receptacle for
the deposit of the United States mail, addressed and mailed as aforesaid, or, if
by telex or telecopy pursuant to the above, when received.
(e) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
(f) CAPTIONS. The section captions used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
RADYNE CORP., a New York corporation
By:
-------------------------------------
Its:
------------------------------------
[ADD PURCHASER]
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<PAGE>
Exhibit 99.1
RADYNE TO ACQUIRE COMSTREAM FOR $17 MILLION
PHOENIX- Radyne Corporation (OTC BULLETIN BD. - RADN) announced today the
signing of a definitive agreement to acquire ComStream Holdings, Inc. from Spar
Aerospace Limited, a Canadian advanced technology company. ComStream, a wholly
owned subsidiary of Spar, is an international provider of digital transmission
solutions for voice, data, audio and video applications with offices in the
United States, Singapore, Indonesia, China and the United Kingdom. Revenues of
ComStream for 1997 were approximately $56 million, and for 1998 are expected to
be in excess of $40 million.
"The acquisition of ComStream, will create substantial synergies offering Radyne
a tremendous opportunity to expand its business and become a major provider of
satellite modems and data communications equipment," explained Robert Fitting,
President of Radyne.
Pursuant to the terms of the agreement, all of the outstanding shares of
ComStream will be purchased for an aggregate purchase price of $17,000,000, of
which $10 million will be payable in cash at the closing and $7 million will be
payable up to nine months thereafter pursuant to a note which will be
convertible into Radyne common stock under certain circumstances. The
acquisition has been approved by the boards of directors of Radyne, Spar and
ComStream and is subject to customary
<PAGE>
closing conditions. In addition, the transaction is subject to governmental
review under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the
Exon-Florio law. It is expected that the transaction will close during the
month of September, 1998. The acquisition will be accounted for under the
purchase method and will result in a one-time charge of approximately $6
million, which represents the value assigned to purchased research and
development. In addition, Radyne expects to incur a one-time charge of
approximately $2.5 million for restructuring costs.
Radyne intends to finance the acquisition, the restructuring costs and its
ongoing working capital needs via the offering of common stock to its existing
shareholders and the extension and enhancement of its bank line of credit.
Stetsys Pte Ltd and Stetsys US, Inc., Radyne's controlling shareholders have
committed to purchase an aggregate of $16 million of common stock upon the
closing of the ComStream acquisition at a price per share equal to the average
trading price of Radyne shares for the first 5 trading days following the date
of this announcement, less 50 cents. This will also be the conversion price in
the convertible note provided to Spar as part of the acquisition consideration.
Radyne's other shareholders will be offered approximately $1,660,000 of common
shares at the same price per share, in amounts proportionate to their
shareholdings. This offering will be made strictly by means of a prospectus
which will be distributed to shareholders of record at a date selected at the
time of Radyne's filing with the Securities and Exchange Commission of a
<PAGE>
registration statement for the offering, which is anticipated to occur at or
about the time of the closing of the ComStream acquisition.
Radyne, a member of the Singapore Technologies group, based in Phoenix, has
designed and produced digital data communications equipment and associated
equipment for satellite telecommunications systems for eighteen years. The
company designs, manufactures and sells satellite modems, frequency converters,
ancillary products and equipment racks containing integrated modems and
supporting equipment for data communications.
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