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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): June 16, 1999
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Nuclear Research Corporation
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(Exact name of Registrant as specified in its charter)
Pennsylvania 0-9613 1343870
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(State or other juris- (Commission (IRS Employer
diction of incorporation File No.) Identification No.)
125 Titus Avenue, Warrington, Pennsylvania 18976
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 343-5900
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
On June 16, 1999, Nuclear Research Corporation ("NRC") entered into an
Agreement and Plan of Merger (the "Merger Agreement") by and among NRC, Aptec
Instruments Ltd., an Ontario corporation ("Aptec"), and Aptec Acquisition Corp.
("Mergeco"), a Pennsylvania corporation and wholly owned subsidiary of Aptec. A
copy of the Merger Agreement is filed herewith as Exhibit 2(a). Pursuant to the
Merger Agreement, NRC will merge with and into Mergeco (the "Merger"), with
Mergeco being the surviving corporation, NRC's principal shareholders, Earl M.
Pollock and Dorothy S. Pollock (the "Pollock Holders"), will receive cash and
common stock of Aptec, and all other NRC shareholders will receive cash, for
their shares of common stock of NRC, par value $5.00 per share (each a "Share").
Concurrently with the execution of the Merger Agreement, NRC and the
Pollock Holders entered into a Stock Acquisition Agreement (the "Purchase
Agreement") dated June 16, 1999, by and among NRC, the Pollock Holders, Eurisys
Mesures SA, a French corporation ("EM"), Aptec, Mergeco and the stockholders of
Aptec (the "Aptec Holders"). A copy of the Purchase Agreement is filed herewith
as Exhibit 2(b). Under the Purchase Agreement, immediately upon consummation of
the Merger, EM will purchase 4,000 shares of newly issued Aptec common stock
directly from Aptec for $2 million cash, 14,365 shares of Aptec common stock
from the Aptec Holders for $7,182,500 cash and 5,860 shares of Aptec common
stock from the Pollock Holders for $2,930,000 cash, giving it a 51% controlling
interest in Aptec. The effectiveness of the Merger and the closing under the
Purchase Agreement are contingent upon each other.
The transactions pursuant to the Merger Agreement and the Purchase
Agreement (the "Transactions") have been treated by NRC's Board of Directors as
one transaction for purposes of allocating value to the Pollock Holders and the
remaining NRC shareholders. The investment banking firm of Howard, Lawson & Co.
has delivered an opinion to the Board of Directors that the allocation of the
value of the Transactions to the shareholders of NRC other than the Pollock
Holders is fair to such shareholders, from a financial point of view.
EM required that its participation in the Transactions be conditioned
upon (a) its acquisition of no more and no less than 51% ownership of Aptec and
(b) the elimination, as shareholders, of all shareholders of NRC other than the
Pollock Holders, who will own 6,860 shares of Aptec common stock (constituting
14.4% of Aptec's outstanding shares) at the completion of the Transactions.
Accordingly, the cash to be received by the non-Pollock Holders of NRC of
$3,285,201 and the $3,144,799 cash to be received by the Pollock Holders,
combined with the 6,860 shares of Aptec common stock to be retained by the
Pollock Holders, represents a price per Share to all NRC shareholders (adjusted
for outstanding stock options and warrants), including the Pollock Holders, of
$226.02. The Transaction documents provide for possible reductions in the
purchase price to all NRC shareholders in certain events to be determined at
closing. In the event all potential pre-closing purchase price adjustments
contained in the Transaction documents are taken at closing against the
aggregate purchase price for the
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Transactions, the effective price per Share for all NRC shareholders would be
reduced to $215.59. In the event adjustments reduce the purchase price further
than stated above, either EM or NRC are permitted to terminate the Transactions.
EM has further required that its participation in the Transactions be
conditioned upon: (i) the provision by the Pollock Holders of all
representations and warranties obtained by EM relating to NRC; (ii) the receipt
of indemnification rights against the Pollock Holders in the event of breach of
representations, warranties and covenants; and (iii) an escrow holdback of
$314,480 from the cash portion of the Pollock Holders' proceeds of the
Transactions.
The terms of the Merger Agreement require, among other things, approval
by NRC's shareholders. Under the terms of a Voting Agreement (the "Voting
Agreement") dated June 16, 1999 entered into between Aptec and the Pollock
Holders, the Pollock Holders will be required to vote in favor of the Merger. A
copy of the Voting Agreement is filed herewith as Exhibit 10(a). In addition,
the Merger is subject to certain conditions, including, among other things,
regulatory approvals and the extension of existing credit facilities with First
Union National Bank ("First Union") (such credit facilities having already been
extended to June 30, 1999 pursuant to a Forbearance and Loan Restructure
Agreement dated as of April 29, 1999, by and among NRC, the Pollock Holders and
First Union, a copy of which is filed herewith as Exhibit 10(b)).
Until consummation of the Merger or the termination of the Merger
Agreement and the Purchase Agreement in accordance with their terms, NRC will be
managed by Edward Zieba, President of Aptec, pursuant to and subject to the
terms and conditions of an Interim Management Agreement (the "Management
Agreement"), dated as of June 16, 1999, by and among Aptec, Edward Zieba, NRC
and the Pollock Holders. A copy of the Management Agreement is filed herewith as
Exhibit 10(c). Under the terms of the Management Agreement, Mr. Zieba will
assume the roles of Interim Chief Executive Officer and Interim Chief Operating
Officer of NRC.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
Exhibit 2(a). Agreement and Plan of Merger dated as of June
16, 1999, by and among Nuclear Research
Corporation, a Pennsylvania corporation,
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Aptec Instruments Ltd., an Ontario
corporation, and Aptec Acquisition Corp., a
Pennsylvania corporation.
Exhibit 2(b). Stock Acquisition Agreement dated as of June
16, 1999, by and among Nuclear Research
Corporation, a Pennsylvania corporation,
Earl M. Pollock and Dorothy S. Pollock,
Eurisys Mesures SA, a French corporation,
Aptec Instruments Ltd., an Ontario
corporation, Aptec Acquisition Corp., a
Pennsylvania corporation, and certain
stockholders of Aptec Instruments Ltd.
Exhibit 10(a). Voting Agreement dated as of June 16, 1999,
by and between Aptec Instruments Ltd., an
Ontario corporation, and Earl M. Pollock and
Dorothy S. Pollock.
Exhibit 10(b). Forbearance and Loan Restructure Agreement
dated as of April 29, 1999, by and among
Nuclear Research Corporation, a Pennsylvania
corporation, Earl M. Pollock and Dorothy S.
Pollock and First Union National Bank.
Exhibit 10(c). Interim Management Agreement dated as of
June 16, 1999, by and among Aptec
Instruments Ltd., an Ontario corporation,
Edward Zieba, Nuclear Research Corporation,
a Pennsylvania corporation, and Earl M.
Pollock and Dorothy S. Pollock.
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SIGNATURE
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.
Nuclear Research Corporation
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(Registrant)
Date: June 25, 1999
By: /s/ Carl G. Katz
-----------------------------
Carl G. Katz
Chief Financial Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description Method of Filing
- ------- ----------- ----------------
<S> <C> <C>
2(a) Agreement and Plan of Merger dated as of June 16, Filed electronically herewith.
1999, by and among Nuclear Research Corporation, a Pennsylvania
corporation, Aptec Instruments Ltd., an Ontario corporation, and
Aptec Acquisition Corp., a Pennsylvania corporation. NRC will
furnish to the Securities and Exchange Commission a copy of any
omitted schedule upon request.
2(b) Stock Acquisition Agreement, dated as of June 16, Filed electronically herewith.
1999, by and among Nuclear Research Corporation, a
Pennsylvania corporation, Earl M. Pollock and
Dorothy S. Pollock, Eurisys Mesures SA, a French
corporation, Aptec Instruments Ltd., an Ontario
corporation, Aptec Acquisition Corp., a Pennsylvania
corporation, and certain stockholders of Aptec
Instruments Ltd. NRC will furnish to the Securities and
Exchange Commission a copy of any omitted schedule upon request.
10(a) Voting Agreement dated as of June 16, 1999 entered Filed electronically herewith.
into between Aptec Instruments Ltd. and the Earl M.
Pollock and Dorothy S. Pollock.
10(b) Forbearance and Loan Restructure Agreement dated Filed electronically herewith.
as of April 29, 1999, by and among Nuclear Research
Corporation, Earl M. Pollock and Dorothy S. Pollock
and First Union National Bank.
10(c) Interim Management Agreement dated as of June 16, Filed electronically herewith.
1999, by and among Aptec Instruments Ltd., Edward
Zieba, Nuclear Research Corporation and Earl M.
Pollock and Dorothy S. Pollock.
</TABLE>
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger is made on the 16th day of
June 1999 by and among (i) Aptec Instruments Ltd., an Ontario corporation,
which, prior to the Closing (as defined below), shall be continued as a
corporation formed under the laws of the province of New Brunswick, Canada
("Aptec"), (ii) Nuclear Research Corporation, a Pennsylvania corporation
("NRC"), and (iii) Aptec Acquisition Corp., a Pennsylvania corporation which is
a wholly-owned subsidiary of Aptec ("Newco").
WHEREAS, the Boards of Directors of Aptec and NRC deem it in the best interests
of Aptec and NRC and their respective shareholders that Aptec and NRC combine
their businesses and operations in a transaction pursuant to which Aptec will
own 100% of the capital stock of NRC;
WHEREAS, the issued and outstanding share capital of Aptec consists of 30,780
shares of common stock, no par value ("Aptec Common Stock") all of which are
currently owned by the shareholders whose names appear on Exhibit A (the "Aptec
Shareholders"); and
WHEREAS, the issued and outstanding capital stock of NRC consists of 27,658
shares of common stock, par value $5.00 per share (the "NRC Common Stock"), of
which 15,502 shares are owned by the shareholders whose names appear on Exhibit
B hereto (the "Pollock Holders") and 12,156 shares are owned by other
shareholders.
ARTICLE I
THE MERGER
Section 1.01 The Merger.
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(a) At the Effective Time (as defined in Section 1.01(c)), NRC
shall be merged (the "Merger") with and into Newco in accordance with the
Pennsylvania Business Corporation Law of 1988 , as amended (the "PBCL"),
whereupon the separate existence of NRC will cease, and Newco shall be the
surviving corporation (the "Surviving Corporation").
(b) The closing of the Merger (the "Closing") will take place
at 10:00 a.m. (New York City time) on a date to be specified by the parties (the
"Closing Date"), which shall be no later than the second Business Day after
satisfaction of the conditions set forth in Article V, at the offices of Gibson,
Dunn & Crutcher LLP, 200 Park Avenue, New York, New York 10166, unless the
parties agree in writing to another time, date or place.
(c) Upon the Closing, NRC and Newco will file articles of
merger with the Department of State of the Commonwealth of Pennsylvania and make
all other filings or recordings required by Pennsylvania law in connection with
the Merger. The Merger will become effective at such time as the articles of
merger are filed with the Department of State of the Commonwealth of
Pennsylvania (the "Effective Time").
<PAGE>
The amounts in Section 1.02 are to be adjusted to reflect the
purchase price adjustments set forth in Schedule A of the Stock Acquisition
Agreement.
(d) From and after the Effective Time, the Surviving
Corporation will possess all the rights, powers, privileges and franchises and
be subject to all of the obligations, liabilities, restrictions and disabilities
of NRC and Newco, all as provided under the PBCL.
Section 1.02 Merger Consideration. At the Effective Time:
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(a) Each share of NRC Common Stock issued and outstanding
immediately prior to the Effective Time held by the Public Shareholders (as
defined below) shall be converted into the right to receive from Newco $226.02
per share in cash (the "Cash Consideration") and each NRC option, warrant and
other rights to acquire shares under any stock option or purchase plan, program
or similar arrangement (each, as amended, an "Option Plan" and such option,
warrant and other rights, "Stock Options") held by a Public Shareholder
immediately prior to the Effective Time shall be converted into the right to
receive in cash from Newco the difference between the Cash Consideration and the
exercise price of such Stock Options as set forth on Schedule 1.02(a).
(b) Nine Hundred and Fifty (950) of the shares of NRC Common
Stock held by the Pollock Holders issued and outstanding immediately prior to
the Effective Time shall be converted into the right to receive from Newco
$226.02 per share in cash. The remaining 14,552 shares of NRC Common Stock held
by the Pollock Holders issued and outstanding immediately prior to the Effective
Time shall be exchanged with Newco for 7,055 shares of Aptec Common Stock (an
exchange ratio of .4848 share of Aptec Common Stock per share of NRC Common
Stock). Accordingly, assuming that the Pollock Holders own 15,502 shares of NRC
Common Stock at the Effective Time, the Pollock Holders will receive an
aggregate of 7,055 shares of Aptec Common Stock and $214,799 in cash.
(c) The Stock Options of NRC Common Stock set forth on
Schedule 1.02(c) held by the Pollock Holders immediately prior to the Effective
Time (the "Pollock Warrants") shall be exchanged for 5,665 shares of Aptec
Common Stock and the Pollock Warrants shall be canceled.
(d) At the Effective Time, the share certificates for the NRC
Common Stock held by the Pollock Holders (the "Pollock Share Certificates") and
the Pollock Warrants shall each be automatically converted into the number of
shares of Aptec Common Stock provided in Sections 1.02(b) and (c). Upon delivery
to Aptec by the Pollock Holders of the Pollock Share Certificates and the
Pollock Warrants, Aptec shall issue new Aptec share certificates in exchange
therefor. The aggregate of 12,720 shares of Aptec Common Stock issued to the
Pollock Holders under Sections 1.02(b) and (c) shall represent 29.241% of the
shares of all classes of equity securities of Aptec (including options, warrants
and convertible securities) outstanding immediately after the Effective Time.
(e) Notwithstanding the foregoing amounts in Section 1.02 are
to be adjusted to reflect the purchase price adjustments set forth in Schedule A
of the Stock Acquisition Agreement.
Section 1.03 Letter of Transmittal. Promptly after the
Effective Time, Newco will mail to each record holder of NRC Common Stock at the
Effective Time other than the Pollock Holders ("Public Shareholder" or in the
plural "Public Shareholders") (i) a letter of
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transmittal (the "Letter of Transmittal") that will specify that delivery will
be effected, and risk of loss and title to the certificates formerly
representing the NRC Common Stock will pass, upon delivery of such certificates
to the Surviving Corporation and will be in such form and have such other
provisions, including appropriate provisions with respect to back-up
withholding, as Newco reasonably may specify and (ii) instructions for effecting
the surrender of the certificates formerly representing shares of NRC Common
Stock in exchange for the Cash Consideration, without interest. The Letter of
Transmittal shall contain customary provisions for lost certificates.
Section 1.04 Surrender and Payment.
----------------------
(a) Upon surrender for cancellation to Newco of a certificate
formerly representing shares of NRC Common Stock, together with the Letter of
Transmittal, duly executed and completed in accordance with the instructions
thereto, a Public Shareholder will be entitled to receive a check from Newco in
the amount equal to the aggregate amount of the Cash Consideration which such
holder has the right to receive pursuant to the provisions of this Article I.
After the Effective Time and until so surrendered, each certificate representing
shares of NRC Common Stock will represent for all purposes only the right to
receive the Cash Consideration and shall have no further rights except as
provided in Section 1.09.
(b) If the Cash Consideration (or any portion thereof) is to
be delivered to a Person other than the Person in whose name the surrendered
certificate or certificates are registered, it will be a condition of such
delivery that the surrendered certificate or certificates shall be properly
endorsed or otherwise be in proper form for transfer and that the Person
requesting such payment shall pay any transfer or other Taxes required by reason
of the delivery of the Cash Consideration to a Person other than the registered
holder of the surrendered certificate or certificates or such Person shall
establish to the satisfaction of the Surviving Corporation that any such Tax has
been paid or is not applicable.
Section 1.05 Withholding of Tax. Newco will be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any former holder of NRC Common Stock such amounts as Newco
reasonably determines it is required to deduct and withhold with respect to the
making of such payment under the Code, or any provision of state, local or
foreign tax law. Such withheld amounts will be treated for all purposes of this
Agreement as having been paid to the former holder of NRC Common Stock in
respect of whom such deduction and withholding was made by Newco.
Section 1.06 Stock Transfer Books. At the Effective Time, the
stock transfer books of NRC will be closed and there will be no further
registration of transfers of shares of NRC Common Stock on the records of NRC.
Certificates formerly representing shares of NRC Common Stock that are presented
to the Surviving Corporation after the Effective Time will be canceled.
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Section 1.07 Stock Option Plans. As of the Effective Time, all
existing Option Plans of NRC shall terminate and any rights under any provisions
in any other plan, program or arrangement providing for the issuance or grant by
NRC of any interest in respect of the capital stock of NRC shall be canceled.
Section 1.08 Shareholder Approval. This Agreement shall be
governed by Section 1906 of the PBCL. This Agreement will be submitted for
adoption and approval to the holders of shares of NRC Common Stock at a special
meeting of the NRC shareholders convened for such purpose in accordance with the
provisions of this Agreement. The affirmative vote of the holders of shares of
NRC Common Stock representing a majority of the votes that may be cast by the
holders of all outstanding shares of NRC Common Stock (voting together as a
single class) is required to approve this Agreement. No other approval of NRC's
shareholders shall be required in order to consummate the Merger. Concurrently
herewith, the Pollock Holders have entered into the Voting Agreement attached
hereto as Exhibit C.
Section 1.09 Dissenters Rights. Notwithstanding any provision
of this Agreement to the contrary, NRC Common Stock that is outstanding
immediately prior to the Effective Time and that is held by Public Shareholders
who shall have dissented and demanded the right to receive the fair value of
their shares of NRC Common Stock in accordance with, and otherwise complied in
all respects with, Sections 1930 and 1571 through 1580 of the PBCL
(collectively, the "Dissenting Shares") shall be canceled but not converted into
or represent the right to receive the Cash Consideration. Such Public
Shareholders shall be entitled instead to receive payment of the fair value of
such Dissenting Shares (which may be more than, equal to, or less than the Cash
Consideration) in accordance with the provisions of such Sections 1930 and 1571
through 1580 of the PBCL, except that all shares of NRC Common Stock held by
Public Shareholders who shall fail to perfect or who effectively withdraw or
lose their rights to be paid the fair value for such NRC Common Stock under such
Sections 1930 and 1571 through 1580 of the PBCL shall thereupon be deemed to
have been converted into and to have become exchangeable for, as of the
Effective Time, the right to receive the Cash Consideration, without any
interest thereon, upon surrender, in the manner provided in Section 1.04, of the
certificate or certificates that formerly evidenced such shares of NRC Common
Stock.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF NRC
NRC represents and warrants to Aptec and Newco as follows:
Section 2.01 Corporate Existence and Power. NRC is a
corporation duly incorporated, validly existing and subsisting under the laws of
the Commonwealth of Pennsylvania and has all corporate power required to carry
on its business as now conducted. Except as set forth in Schedule 2.01, NRC is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary, except where
the failure to so qualify or be in good standing would not have a Material
Adverse Effect.
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NRC has delivered to Aptec copies of NRC's articles of incorporation and by-laws
as currently in effect.
Section 2.02 Corporate Authorization. The execution, delivery
and performance by NRC of this Agreement and the consummation by NRC of the
transactions contemplated hereby are within NRC's corporate powers and, except
for the approval and adoption by NRC's shareholders of this Agreement and the
Merger, have been duly authorized by all necessary corporate action on the part
of NRC. This Agreement has been duly and validly executed and delivered by NRC
and, assuming the due and valid authorization, execution and delivery of this
Agreement by Aptec and Newco constitutes a valid and binding agreement of NRC,
enforceable in accordance with its terms except as may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and other similar
laws affecting creditors' rights generally and by equitable principles of
general applicability. The Board of Directors of NRC has approved the Merger,
this Agreement and the transactions contemplated hereby. Howard, Lawson & Co.
has delivered to the Board of Directors of NRC its opinion that the Allocation
(as such term is defined in such opinion) of the value of the transactions is
fair to the Public Shareholders from a financial point of view. No other
corporate proceedings on the part of NRC are necessary to authorize or approve
this Agreement or to consummate the transactions contemplated hereby, other than
the approval and adoption of the Merger and this Agreement by the shareholders
of NRC.
Section 2.03 Governmental Authorization. The execution,
delivery and performance by NRC of this Agreement and the consummation by NRC of
the Merger and the other transactions contemplated hereby require no consent,
waiver, approval, authorization or permit by or from, or action by or in respect
of, or filing with, any Governmental Entity, other than: (i) the filing of the
articles of merger as contemplated by Section 1.01(a); (ii) compliance with any
applicable requirements of the Securities Exchange Act of 1934, as amended
(together with the rules and regulations promulgated thereunder, the "Exchange
Act") and (iii) compliance with any applicable requirements under any contracts
with a Governmental Entity to which NRC is a party.
Section 2.04 Non-contravention. Except as set forth on
Schedule 2.04, the execution, delivery and performance by NRC of this Agreement
and the consummation by NRC of the transactions contemplated hereby do not and
will not: (i) contravene or conflict with the articles of incorporation or
by-laws of NRC; (ii) contravene or conflict with or constitute a violation of
any provision of any state or federal law, regulation, judgment, injunction,
order or decree and to the knowledge of NRC, any foreign law or regulation
binding upon or applicable to NRC or any NRC Subsidiary; (iii) result in a
breach or violation of or constitute a default (or an event that with the giving
of notice or the lapse of time or both would constitute a default) under or give
rise to a right of termination, amendment, cancellation or acceleration of any
material right or obligation of NRC or any NRC Subsidiary or to a loss of any
material benefit to which NRC or any NRC Subsidiary is entitled or require any
consent, approval or authorization under any provision of any material
agreement, contract or other instrument binding upon NRC or any NRC Subsidiary
or any of their respective assets; or (iv) result in the creation or imposition
of any Lien on any material asset of NRC or any NRC Subsidiary.
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Section 2.05 Capitalization.
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(a) As of June 16, 1999, the authorized capital stock of NRC
consisted solely of 60,000 shares of NRC Common Stock, of which 27,658 were
issued and outstanding.
(b) As of June 16, 1999, there were outstanding Stock Options
and Pollock Warrants to purchase an aggregate of 20,230 shares of NRC Common
Stock, held by the persons and in the amounts appearing in Schedule 1.02(a) and
Schedule 1.02(c).
(c) All outstanding shares of NRC Common Stock have been duly
authorized and validly issued and are fully paid and non-assessable. Except as
set forth in this Section 2.05, there are outstanding (i) no shares of capital
stock or other voting securities of NRC, (ii) no securities of NRC convertible
into or exchangeable for shares of capital stock or voting securities of NRC and
(iii) no options or other rights to acquire from NRC, and no obligation of NRC
to issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of NRC. The securities
described in Section 2.05(a) and Section 2.05(b) are referred to collectively as
the "NRC Securities". Except pursuant to the terms of the NRC Securities, there
are no outstanding obligations of NRC or any NRC Subsidiary to repurchase,
redeem or otherwise acquire any NRC Securities.
(d) There are no outstanding contractual obligations of NRC or
any NRC Subsidiary to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any other Person other than to
wholly-owned NRC Subsidiaries, in the ordinary course of business consistent
with past practice.
Section 2.06 Subsidiaries.
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(a) Except as set forth on Schedule 2.06(a), each NRC
Subsidiary is a corporation or other legal entity duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, has all corporate, partnership or similar powers required to carry
on its business as now conducted and is duly qualified to do business as a
foreign corporation or other legal entity and is in good standing in each
jurisdiction where the character of the property owned or leased by it or the
nature of its activities makes such qualification necessary, except any
jurisdiction where the failure to so qualify or be in good standing would not
have a Material Adverse Effect. All NRC Subsidiaries and their respective
jurisdictions of organization are identified in Schedule 2.06(b).
(b) All of the outstanding shares of capital stock of, or
other ownership interests in, each NRC Subsidiary, are owned by NRC, directly or
indirectly, free and clear of any Lien and free of any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership interests). There are no
outstanding (i) securities of NRC convertible into or exchangeable for shares of
capital stock or other voting securities or ownership interests in any NRC
Subsidiary or (ii) options or other rights to acquire from NRC or any NRC
Subsidiary, and no other obligation of NRC or any NRC Subsidiary to issue, any
capital stock, voting securities or other ownership interests in, or any
securities convertible into or exchangeable for any capital stock, voting
securities or ownership
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interests in, any NRC Subsidiary. The securities described in clauses (i) and
(ii) above are referred to collectively as the "NRC Subsidiary Securities".
There are no outstanding obligations of NRC or any NRC Subsidiary to repurchase,
redeem or otherwise acquire any outstanding NRC Subsidiary Securities or pay any
dividend or make any other distribution in respect thereof to a Person other
than NRC or a wholly-owned NRC Subsidiary.
Section 2.07 SEC Filings. NRC has filed with the SEC all
forms, reports, definitive proxy statements, schedules and registration
statements required to be filed with the SEC since January 1, 1996 through and
including the date hereof (the "SEC Reports"). No NRC Subsidiary is required to
file any report, form or document with the SEC. As of its respective filing
date, no SEC Report contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. The SEC Reports when filed complied in all material
respects with applicable requirements of the Securities Act of 1933, as amended,
and the Exchange Act.
Section 2.08 Financial Statements.
---------------------
(a) The audited consolidated financial statements and
unaudited consolidated interim financial statements of NRC included in the SEC
Reports (including, without limitation, the audited consolidated balance sheet
at June 30, 1998 (the "Balance Sheet") and the unaudited consolidated balance
sheet at March 31, 1999 (the "Interim Balance Sheet") (collectively, the
"Financial Statements") fairly present, in conformity with GAAP applied on a
consistent basis (except as may be indicated in the notes thereto or in the case
of unaudited interim financial statements as permitted by Form 10-Q or 10-QSB of
the SEC), the consolidated financial position of NRC and its consolidated NRC
Subsidiaries as of the dates thereof and its consolidated statements of
operations, shareholders' equity and cash flows for the periods then ended
(subject to normal year-end adjustments in the case of any unaudited interim
financial statements). The Financial Statements have been prepared from the
books and records of NRC and the NRC Subsidiaries maintained in the ordinary
course of business and reflect and provide adequate reserves in respect of all
known liabilities of NRC and the NRC Subsidiaries, including all known
contingent liabilities, as of their respective dates.
(b) NRC and each of the NRC Subsidiaries keeps books, records
and accounts that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of assets of such entity. None of NRC or any of
the NRC Subsidiaries, and no employee, agent or shareholder of any such entity,
directly or indirectly has made any payment of funds of any such entity or
received or retained any funds in violation of any applicable law, rule or
regulation.
Section 2.09 Disclosure Documents. The Proxy Statement and any
amendment or supplement thereto, when filed, will comply as to form in all
material respects with the applicable requirements of the Exchange Act. At the
time the Proxy Statement or any amendment or supplement thereto is first mailed
to shareholders of NRC and at the time such shareholders vote on the approval
and adoption of this Agreement, the Proxy Statement, as supplemented or amended,
if applicable, will not contain any untrue statement of a material fact
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or omit to state any material fact necessary in order to make the statements
contained therein, in the light of the circumstances under which they were made,
not misleading. The representations and warranties in this Section 2.09 do not
apply to statements in or omissions from the Proxy Statement or any amendment or
supplement thereto based upon information furnished to NRC in writing by Aptec
or Eurisys Mesures SA ("EM") for use therein.
Section 2.10 Absence of Certain Changes or Events. Since June
30, 1998, except as disclosed in the SEC Reports, there has not been: (i) any
change in the business, operations or financial condition of NRC or any of the
NRC Subsidiaries that has had or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect; (ii) any
declaration, setting aside or payment of any dividend or other distribution with
respect to any shares of capital stock of NRC, or any repurchase, redemption or
other acquisition by NRC or any of the NRC Subsidiaries of any outstanding
shares of capital stock or other securities of, or other ownership interests in,
NRC or any of the NRC Subsidiaries; (iii) any incurrence, assumption or
guarantee by NRC or any of the NRC Subsidiaries of any indebtedness for borrowed
money other than in the ordinary course of business and in amounts and on terms
consistent with past practices; or (iv) as of the date hereof, any damage,
destruction or other casualty loss (whether or not covered by insurance)
affecting the business or assets of NRC or any of the NRC Subsidiaries that has
had or would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
Section 2.11 Real Property.
--------------
(a) Set forth on Schedule 2.11(a) is (i) a complete list of
all real property (the "Owned Property") that NRC or any of the NRC Subsidiaries
owns, or in which NRC or any of the NRC Subsidiaries has legal or equitable
title and (ii) a description of each lease of real property under which NRC or
any of the NRC Subsidiaries is a lessee, lessor, sublessee or sublessor (the
"Leased Property"). The Owned Property and the Leased Property sometimes
collectively are referred to as the "Real Property". True and complete copies of
all leases to which NRC or any Subsidiary is a party respecting any real
property and all other instruments granting such leasehold interests, rights,
options or other interests (the "Property Leases"), and to the extent in
possession of NRC or any NRC Subsidiary of all deeds, title insurance policies,
surveys, mortgages, agreements and other documents granting to NRC or any of the
NRC Subsidiaries title to or an interest in any Real Property (the "Title
Documents"), have been made available to Aptec.
(b) With respect to the Property Leases, no breach or event of
default on the part of NRC or any NRC Subsidiary to any of the Property Leases
and no event that, with the giving of notice or lapse of time or both, would
constitute such breach or event of default, have occurred and are continuing
unremedied. All the Property Leases are in full force and effect and are valid
and enforceable against the parties thereto in accordance with their terms. All
rental and other payments due under each of the Property Leases have been duly
paid in accordance with the terms of such Property Lease. The Merger does not
require the consent of any party to, constitute an event of default under or
trigger any options to terminate or otherwise change the existing terms of any
Property Lease.
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(c) With respect to the Title Documents, to NRC's knowledge,
no breach or event of default on the part of NRC or any NRC Subsidiary, or on
the part of any other party thereto and no event that, with the giving of notice
or lapse of time or both, would constitute such breach or event of default under
any term, covenant or condition of such Title Documents, has occurred and is
continuing unremedied.
(d) NRC and the Subsidiaries have good and marketable title in
fee simple to the Owned Property and to all plants, buildings and improvements
thereon, free and clear of any mortgages, Liens, security interests, claims,
charges, imperfections of title, encroachments, easements, rights-of-way,
squatters' rights, encumbrances, covenants, conditions or restrictions
("Impairments"), except for those Impairments that are described on Schedule
2.11(d) or described in the Title Documents.
(e) To NRC's knowledge, the buildings and improvements owned
or leased by NRC or any NRC Subsidiary, and the operation or maintenance thereof
as operated and maintained do not, (i) contravene any zoning or building law or
ordinance or other administrative regulation (including but not limited to those
relating to zoning, land division, building, fire, health and safety) or (ii)
violate any restrictive covenant or any provision of federal, state, local or
foreign law.
(f) There is no pending or, to NRC's knowledge, threatened
condemnation or eminent domain proceeding with respect to, or that could affect,
any Owned Property or Leased Property.
(g) Schedule 2.11(g) includes a complete and accurate list of
the property classifications for zoning purposes of all Real Property as of the
date hereof. Each parcel of Real Property is currently being used in a manner
that is consistent with and in compliance with the property classification
assigned to it for zoning purposes.
Section 2.12 Personal Property. NRC and the NRC Subsidiaries
have good and marketable title to all personal property reflected on the Balance
Sheet and all personal property acquired by NRC or any of the NRC Subsidiaries
since the date of the Balance Sheet (except such personal property as has been
disposed of in the ordinary course of business), free and clear of any Liens (as
hereinafter defined), except for: (i) the Liens identified on Schedule 2.12;
(ii) Liens for current taxes not yet due and payable or delinquent; and (iii)
mechanics', carriers', workmen's, and similar Liens arising in the ordinary
course of business.
Section 2.13 Accounts Receivable. All accounts receivable of
NRC that are reflected on the Financial Statements or the accounting records of
NRC and the NRC Subsidiaries as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the ordinary course of business.
The Accounts Receivable are or will be as of the Closing Date collectible within
360 days of the date due. Except as set forth in Schedule 2.13(a), there is no
contest, claim, or right of setoff other than returns in the ordinary course of
business, under any contract with any obligor of an Accounts Receivable relating
to the amount or validity of such Accounts Receivable. Schedule 2.13(b) contains
complete and accurate lists of all Accounts
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Receivable as of the date of the Interim Balance Sheet and as of the date of
this Agreement, which lists set forth the aging of such Accounts Receivable.
Since the date of the Interim Balance Sheet, NRC has not written off or written
down or created reserves against any Accounts Receivable and from the date
hereof to the Closing Date, NRC will not write-off or write down or create
reserves against any Accounts Receivable.
Section 2.14 Personnel.
----------
(a) Set forth on Schedule 2.14 (a) is a true and complete list
of:
(i) the name of each person employed by NRC or any
NRC Subsidiary (other than hourly employees) whose total compensation
for services rendered, including without limitation bonuses and
deferred compensation, for the fiscal year ended June 30, 1998 was in
excess of the rate of $40,000 per year, the title or job classification
of each such person and the current compensation of each such person;
(ii) the name of each person, if any, holding tax or
other powers of attorney from NRC or any NRC Subsidiary and a summary
of the terms thereof;
(iii) the name and title or job description of each
director and officer, and each other key employee, of NRC and each of
the NRC Subsidiaries; and
(iv) the name and title or job description of each
employee in respect of whom NRC is the beneficiary of a life insurance
policy, and the details of such policy.
(b) Except as set forth on Schedule 2.14(b), since June 30,
1998, there has been no material change in the rate of total compensation for
services rendered, including without limitation bonuses and deferred
compensation, for any of the employees listed on Schedule 2.14(a), and the
bonuses and deferred compensation established for the fiscal year ending June
30, 1998 were consistent with the past practices of NRC for similar employees in
similar situations.
Section 2.15 Labor Matters.
--------------
(a) Except as set forth on Schedule 2.15, neither NRC nor any
NRC Subsidiary is a party to any contract or collective bargaining agreement
with any labor organization. Other than as set forth on Schedule 2.15, no
organization or representation question is pending respecting the employees of
NRC or the NRC Subsidiaries, and no such question has been raised within the
preceding three years.
(b) All reasonably anticipated obligations of NRC or the NRC
Subsidiaries, whether arising by operation of law, contract, past custom or
otherwise, for unemployment compensation benefits, pension benefits, salaries,
wages, bonuses, sick leave, vacation and other forms of compensation payable to
the officers, directors and other employees of NRC or the NRC Subsidiaries have
been paid or adequate accruals therefore have been made in the Balance Sheet.
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(c) There is no claim, grievance, arbitration, negotiation,
suit, action or charge of or by any employee of NRC or any NRC Subsidiary
pending against NRC or any NRC Subsidiary before the National Labor Relations
Board or any state or local agency or in any court, nor to NRC's knowledge is
there any basis therefor. NRC and the NRC Subsidiaries have complied, in respect
of their employees, in all material respects with all applicable statutes,
regulations, orders and restrictions of the United States of America, all states
and other subdivisions thereof, and to NRC's actual knowledge, all foreign
jurisdictions and all agencies and instrumentalities of the foregoing, except
where the failure to so comply would not have a Material Adverse Effect.
(d) NRC has made available to Aptec copies of all claims,
complaints, reports or other documents in NRC's files concerning NRC or any NRC
Subsidiary or their employees made by or against NRC or any NRC Subsidiary
during the past five years pursuant to workers' compensation laws, Title VII of
the Civil Rights Act of 1964, the Occupational Safety and Health Act of 1970,
the National Labor Relations Act of 1935 or any other federal or state laws
relating to employment of labor.
Section 2.16 Environmental Matters.
----------------------
(a) (i) Except as set forth on Schedule 2.16, none of
NRC, the NRC Subsidiaries nor any previous owner, tenant, occupant,
operator or user of any Real Property or Former Real Property (as
hereinafter defined) or any other Person has engaged in or permitted
any operation or activity at or upon, or any use or occupancy of, any
Real Property or Former Real Property for the purpose of or in any way
involving the handling, manufacture, treatment, storage, use,
generation, release, discharge, refining, reclaiming, recycling,
dumping or disposal of any Hazardous Materials (as hereinafter defined)
on, under, in or about any Real Property or Former Real Property (as
hereinafter defined), or transported any Hazardous Materials to, from
or across any Real Property or Former Real Property (as hereinafter
defined). No Hazardous Materials currently are produced, incorporated
in any construction, deposited, stored or otherwise located on, under,
in or about any Real Property other than in compliance in all material
respects with Environmental Requirements.
(ii) Except as set forth on Schedule 2.16, no
Hazardous Materials have migrated from any Real Property or Former Real
Property onto or under other properties, and no Hazardous Materials
have migrated or threatened to migrate from other properties onto or
under any Real Property.
(iii) Except as set forth on Schedule 2.16, no
underground improvement, including without limitation treatment or
storage tank or water, gas or oil well, is or ever has been located on
any Real Property or Former Real Property. All underground treatment
and storage tanks, if any, have been exhumed and disposed of, and all
portions of the Real Property and Former Real Property and all
groundwater
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contaminated by any Hazardous Materials contained therein, have been
remediated in full compliance with all Environmental Requirements.
(iv) All Real Property and Former Real Property and
all current and past activities thereon, during NRC's ownership and
operation, including without limitation the use, maintenance and
operation of all Real Property and Former Real Property and all
activities and conduct of business related thereto, currently comply
and at all times in the past during NRC's ownership and operation have
complied in all material respects with all Environmental Requirements.
(v) None of NRC, the NRC Subsidiaries nor, any
current or prior owner or occupant of any Real Property or Former Real
Property has received any notice or other communication concerning or
has any knowledge of (A) any violation or alleged violation of
Environmental Requirements, whether or not corrected or (B) any alleged
liability for Environmental Damages (as defined below) in connection
with any Real Property, Former Real Property, or material transported
to, from or across any Real Property or Former Real Property. No writ,
injunction, decree, order or judgment relating to the foregoing is
outstanding. There is no lawsuit, claim, proceeding, citation,
directive, summons or investigation pending or threatened against NRC
or any of the NRC Subsidiaries relating to any alleged violation of or
liability under any applicable Environmental Requirements or the
presence of any Hazardous Materials on any Real Property or Former Real
Property.
(b) For the purposes of this Agreement:
(i) "Environmental Damages" means all claims,
judgments, damages, losses, penalties, fines, liabilities (including
strict liability), encumbrances, Liens, costs and expenses of defense
of a claim (whether or not such claim is ultimately defeated), good
faith settlements of judgment, and costs and expenses of reporting,
investigating, removing and/or remediating Hazardous Materials, of
whatever kind or nature, contingent or otherwise, matured or unmatured,
including without limitation reasonable attorney's fees and
disbursements and consultants' fees, any of which arise out of or
relate to the existence of Hazardous Materials at, upon, about or
beneath the Real Property or Former Real Property, or migrating or
threatening to migrate to or from the Real Property or Former Real
Property or transported to, from, or across any Real Property or Former
Real Property.
(ii) "Environmental Requirements" means all
applicable statutes, regulations, rules, ordinances, codes, actions,
licenses, permits, orders, approvals, plans, authorizations,
concessions, franchises and similar items of all federal state, and
local governmental branches agencies, departments, commissions, boards,
bureaus or instrumentalities domestic and foreign, having jurisdiction
and all applicable judicial and administrative and regulatory decrees,
judgments and orders and all covenants running with the land that
relate to the protection of health or the environment, including
without limitation those that relate to the existence, handling,
manufacture, treatment, storage, use, generation, release, discharge,
refining, recycling, reclaiming or disposal of Hazardous Materials.
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(iii) "Former Real Property" means any real property
in which NRC or any of the NRC Subsidiaries heretofore held but no
longer holds a fee, leasehold or other legal, beneficial or equitable
interest.
(iv) "Hazardous Materials" means any substance: (A)
the presence of which requires reporting, investigation, removal or
remediation under any Environmental Requirement; (B) that is defined as
a "hazardous waste," "hazardous substance" or "pollutant" or
"contaminate" under any Environmental Requirement; (C) that is toxic,
explosive, corrosive, flammable, ignitable, infectious, radioactive,
reactive, carcinogenic, mutagenic or otherwise hazardous and is
regulated under any Environmental Requirement; (D) the presence of
which on any Real Property or Former Real Property poses a hazard to
the health or safety of persons on or about any Real Property or Former
Real Property; (E) the presence of which on adjacent properties
constitutes a trespass by NRC or an NRC Subsidiary; (F) that contains
gasoline, diesel fuel or other petroleum hydrocarbons; or (G) that
contains PCBs, asbestos or urea formaldehyde foam insulation.
(c) Except as set forth on Schedule 2.16, NRC and the NRC
Subsidiaries have complied in all material respects with all Environmental
Requirements.
(d) NRC has made available to Aptec true and complete copies
of all claims, complaints, reports assessments, audits, investigations and other
documents in the possession of or obtainable by NRC made by, on behalf of or
against NRC or any NRC Subsidiary during the past five (5) years pertaining to
Environmental Requirements or Hazardous Materials.
(e) Notwithstanding anything to the contrary in this Section
2.16, all representations made by NRC in this Section 2.16 with respect to the
actions or omissions of any current or prior owner or occupant of any Real
Property or Former Real Property, other than NRC or any NRC Subsidiary, are made
to the actual knowledge of NRC.
Section 2.17 Non-ERISA Plans. Set forth on Schedule 2.17 is a
complete list of each current employment contract and consulting agreement
entered into by NRC or any NRC Subsidiary, or by which NRC or any NRC Subsidiary
is bound (b), and each deferred compensation, bonus, incentive compensation,
restricted stock, stock option, employee stock purchase, savings, severance or
termination pay agreement or plan and any other employee benefit plan,
agreement, arrangement or commitment, whether formal or informal, not required
to be listed on Schedule 2.18, maintained, entered into or contributed to, or
which is required to be maintained, entered into or contributed to, by NRC or
any NRC Subsidiary for the benefit of any current or former director, officer or
employee of NRC or any NRC Subsidiary (the "Non- ERISA Plans").
Section 2.18 ERISA Plans.
------------
(a) Except as set forth on Schedule 2.18(a), there is no
employee pension benefit plan (the "Pension Plans") as defined in Section 3(2)
of the Employee Retirement Income Security Act of 1974 ("ERISA") or employee
welfare benefit plan (the "Welfare Plans" and, together with the Pension Plans,
collectively referred to as the "ERISA Plans") as defined in
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Section 3(1) of ERISA established, maintained or contributed to by NRC or any
ERISA Affiliate or to which NRC or any ERISA Affiliate had an obligation to
contribute during the five years preceding the date hereof. As used herein, the
term "ERISA Affiliate" means a corporation which is a member of a controlled
group of corporations with NRC or any NRC Subsidiary within the meaning of
Section 414(b) of the Internal Revenue Code of 1986 (the "Code"), a trade or
business (including a sole proprietorship, partnership, trust, estate or
corporation) which is under common control with NRC or any NRC Subsidiary within
the meaning of Section 414(c) of the Code, or a member of an affiliated service
group with NRC or any NRC Subsidiary within the meaning of Section 414(m) or
Section 414(o) of the Code.
(b) Except as set forth on Schedule 2.18(b), no contract,
agreement, plan or other arrangement, whether or not an ERISA Plan (other than
this Agreement), exists pursuant to which the execution of this Agreement would
trigger an obligation by NRC or any NRC Subsidiary to pay any amount or provide
any property to any employee, officer or director of NRC or any of the NRC
Subsidiaries.
Section 2.19 Compliance with Law. Except as set forth in
Schedule 2.16 or 2.19, NRC and the NRC Subsidiaries, their officers, directors,
agents and employees have complied with all applicable statutes, regulations,
orders and restrictions of the United States of America, all states and other
subdivisions thereof, to NRC's actual knowledge all applicable foreign
jurisdictions, all agencies and instrumentalities of the foregoing and all
national and international self-regulatory bodies and authorities in respect of
the conduct of NRC's and the NRC Subsidiaries' business and ownership of their
properties, except where such failure to comply would not have a Material
Adverse Effect.
Section 2.20 Litigation. Except as set forth on Schedule 2.20,
there is no action, suit, claim, proceeding, inquiry or investigation pending
or, to NRC's knowledge, threatened, against or affecting NRC or any NRC
Subsidiary, or the assets, properties, business or business prospects of NRC or
any NRC Subsidiary, or relating to or involving the transactions contemplated by
this Agreement at law or in equity, or before or by any arbitrator or any
federal, state, local or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, and NRC knows of no
basis for any of the foregoing. Except as set forth on Schedule 2.20, none of
NRC or any NRC Subsidiary has received any opinion or memorandum or legal advice
or notice from legal counsel to the effect that it is exposed, from a legal
standpoint, to any liability or disadvantage that may have a Material Adverse
Effect. Neither NRC nor any NRC Subsidiary is in default with respect to any
order, writ, injunction or decree known to or served upon NRC or such NRC
Subsidiary. Except as set forth on Schedule 2.20, there is no pending action or
suit brought by NRC or any NRC Subsidiary against others.
Section 2.21 Material Contracts.
-------------------
(a) Except as set forth on Schedules 2.21(a), neither NRC nor
any NRC Subsidiary is a party to any written or to NRC's knowledge, oral:
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(i) contract involving an income or expense in excess
of $50,000 (on an annualized basis) or contract not made in the
ordinary course of business;
(ii) consulting agreement or contract for the
employment of any officer, employee or other person on a full-time,
part-time or consulting basis;
(iii) agreement, mortgage, indenture, loan or credit
agreement, security agreement, guaranty or indemnity or other agreement
or instrument relating to the borrowing or lending of money or
extension of credit or providing for the mortgaging or pledging of, or
otherwise placing a Lien or security interest on, any assets or
properties of NRC or any NRC Subsidiary;
(iv) option, warrant or other contract for the purchase
of any debt or equity security of any corporation, or for the issuance
of any debt or equity security, or the conversion of any obligation,
instrument or security into debt or equity securities, of NRC or any
NRC Subsidiary; or
(v) settlement agreement of any administrative or
judicial proceedings within the past five years; or
(vi) intellectual property (including trademark)
licensing agreement.
(b) Except as set forth in Schedule 2.21(b), neither NRC nor
any of the NRC Subsidiaries is in breach of or in default in any material
respect under any provisions of the contracts, obligations or commitments set
forth on Schedule 2.21 (collectively, the "Contracts"), and no event has
occurred that, with the giving of notice or lapse of time or both, would
constitute such a breach or default. NRC has made available to Aptec a true and
complete copy of all written contracts, obligations or commitments set forth on
Schedule 2.21(b), and accurate descriptions of all oral contracts, obligations
or commitments set forth on Schedule 2.21(b).
Section 2.22 Conduct of Business. Since June 30, 1998, NRC has
preserved the business organization of NRC intact, kept available to NRC the
services of all current officers and employees and preserved the goodwill of the
suppliers, customers, employees and others having business relations with NRC.
Except as set forth on Schedule 2.22, since June 30, 1998, NRC has conducted its
business in the ordinary course, has maintained its assets and properties in at
least as good order and condition as existed on June 30, 1998 (other than wear
as may be accounted for by reasonable use) and as is necessary to continue to
conduct its business and has not and will not through to the Closing Date:
(a) incurred any material obligation or liability (absolute,
accrued, contingent or other), except in the ordinary course of business;
(b) discharged or satisfied any material Lien or encumbrance,
or paid or satisfied any material obligation or liability (absolute, accrued,
contingent or other), other than liabilities reflected on the Balance Sheet or
incurred since June 30, 1998 in the ordinary course of business consistent with
past practice;
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(c) written down or written off any Accounts Receivable,
except as permitted under Section 2.13;
(d) increased or established any reserve for taxes or other
liabilities on its books or otherwise provided therefor, except for current
taxes due in the ordinary course of business;
(e) mortgaged, pledged or subjected to any Lien, charge or
other encumbrance any of the assets or properties of NRC or any of the NRC
Subsidiaries; except for leases and financing of equipment in the ordinary
course of business.
(f) sold, assigned or transferred any asset, property or
business or canceled any debt or claim or waived any right, except sales of
inventory and immaterial amounts of other assets in the ordinary course of
business;
(g) granted any increase in the compensation (including
bonuses and deferred compensation) payable to any executive officer, director,
or key employee of NRC, or granted any increase in compensation to any other
employee of NRC in excess of five percent (5%).
(h) made or authorized any capital expenditure for additions
to plant and equipment of NRC and the NRC Subsidiaries in excess of $100,000 in
the aggregate except as may have been necessary for ordinary repair, maintenance
and replacement;
(i) made or forgiven any loan to any shareholder or any
relative or affiliate of any shareholder, or declared, set aside or paid to any
shareholder any dividend or other distribution in respect of its capital stock,
or redeemed or purchased any of its capital stock, or agreed to take any such
action;
(j) transferred any asset or paid any commission, salary or
bonus to any shareholder or any relative or affiliate of any shareholder other
than the payment of wages or salaries to shareholder employees in the ordinary
course of business and as disclosed on Schedule 2.15 or paid any rent,
commission or fee to any shareholder or any relative or affiliate of any
shareholder other than pursuant to leases disclosed on Schedule 2.11 in the
amounts shown thereon;
(k) entered into or agreed to enter into any transaction with
or for the benefit of any shareholder or any relative or affiliate of any
shareholder other than the transactions contemplated by this Agreement and the
Stock Acquisition Agreement;
(l) issued, sold or transferred, or agreed to issue, sell or
transfer, any stock, bond, debenture or other security of NRC or the NRC
Subsidiaries;
(m) paid, incurred or made any commitments to pay or incur any
default rate of interest, fees, costs or expenses of any nature whatsoever in
connection with any credit or loan facilities extended to NRC.
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Section 2.23 Tax Matters.
------------
(a) Except as set forth on Schedule 2.23(a), NRC and the NRC
Subsidiaries in a timely manner (including extensions) have filed and will file
all returns and other reports required to be filed on or before the Effective
Time by them under all federal, state, local and foreign tax laws to which they
are subject. All such returns and reports are true, correct and complete in all
material respects and accurately set forth all items to the extent required to
be reflected or included in such returns by applicable federal, state, local or
foreign tax laws, regulations or rules. NRC and the NRC Subsidiaries have paid
in full or set up an adequate reserve in respect of all taxes for the periods
covered by such returns, as well as all other taxes, penalties, interest, fines,
deficiencies, assessments and governmental charges that have become due or
payable, including without limitation all taxes that NRC or any of the
Subsidiaries is obligated to withhold from amounts paid or payable to or
benefits conferred upon employees, creditors and third parties. Neither NRC nor
any NRC Subsidiary has any tax liability for which an adequate tax reserve has
not been established on the Balance Sheet, whether or not disputed, including
any interest and penalty in connection therewith, for all periods ending on or
prior to the date of the Balance Sheet. There are no representations or
warranties being made with respect to: (i) the availability of net operating
loss carry forwards for income tax purposes or other carry forwards which may
apply for taxable periods after the Effective Time; or (ii) the income tax basis
for any assets of NRC or any NRC Subsidiary. With respect to any periods for
which tax returns have not yet been required to be filed or for which taxes are
not yet due and payable, NRC has only incurred liability for taxes in the
ordinary course of its business and in the manner and at a level consistent with
prior years.
(b) Set forth on Schedule 2.23(b) is a complete list of income
and other tax returns filed by NRC or any of the NRC Subsidiaries pursuant to
the laws or regulations of any federal, state, local or foreign tax authority
that have been examined or audited by the IRS or other appropriate authority
during the preceding five years. Also set forth on Schedule 2.23(b) is a
complete list of all adjustments resulting from each such examination or audit.
No tax examination or audit is in progress. No changes proposed by a taxing
authority in an audit during such five year period (other than changes disclosed
in Schedule 2.23(b)) can reasonably be expected to affect the amount of tax
liability for NRC or any NRC Subsidiary in the future. All deficiencies proposed
as a result of such examinations or audits have been paid or finally settled and
no issue has been raised in any such examination or audit that, by application
of similar principles, reasonably can be expected to result in the assertion of
a deficiency for any other year not so examined or audited. The results of any
settlement and the necessary adjustments resulting therefrom properly are
reflected in the Balance Sheet. The period during which any assessment against
NRC or any of the NRC Subsidiaries may be made by the IRS or other appropriate
authority has expired without waiver or extension for the years set forth on
Schedule 2.23(b) for each such authority. There are no grounds for any further
tax liability with respect to the years ended on or before the date of the
Balance Sheet that have not been examined or audited. There is no outstanding
agreement or waiver made by or on behalf of NRC or any of the NRC Subsidiaries
for the extension of time for any applicable statute of limitations, and neither
NRC nor any of the NRC Subsidiaries has requested any extension of time in which
to file any tax return.
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(c) Except for taxes for the payment of which an adequate
reserve has been established on the Balance Sheet and for property taxes that
are not delinquent, there is no tax Lien, whether imposed by any federal, state,
local or foreign taxing authority, outstanding against any of the assets or
properties of NRC or any of the NRC Subsidiaries.
(d) NRC is not a United States Real Property Holding
Corporation (a "USRPHC") within the meaning of Section 897 of the Code and was
not a USRPHC on any "determination date" (as defined in ss.1.897-2(c) of the
Treasury Regulations) that occurred in the five-year period preceding the
Closing Date.
(e) Neither NRC nor any NRC Subsidiary has executed any
closing agreement pursuant to Section 7121 of the Code or any predecessor
provision thereof, or any similar provision of state or local law.
(f) NRC has not filed a consent pursuant to Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by NRC or any NRC Subsidiary.
(g) None of the assets owned by NRC or any NRC Subsidiary is
property that is required to be treated as owned by any other Person pursuant to
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended, as in effect
immediately prior to the enactment of the Tax Reform Act of 1986 or is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(h) NRC is not a party to a tax sharing agreement or similar
arrangement.
(i) Neither NRC nor any NRC Subsidiary has agreed to make, and
none is required to make any adjustments pursuant to Section 481(a) of the Code
or any similar provision of state or local law by reason of a change in
accounting method initiated by it or any other relevant party; none has any
knowledge that the IRS has proposed any such adjustment or change in accounting
method; and there is no application pending with any taxing authority requesting
permission for any changes in accounting methods that relate to the business or
assets of NRC or any NRC Subsidiary.
(j) NRC has not made any payments, is not obligated to make
any payments, and is not a party to any agreement that under any circumstances
could obligate it to make payments, that would not in each case be deductible
under Section 280G of the Code.
(k) As used in this Agreement, the term "Tax Return" includes
any material report, statement, form, return or other document or information
required to be supplied to a taxing authority in connection with taxes. As used
in this Agreement, the term "Taxes" means any federal, state, local or foreign
income or gross receipts tax, alternative or add-on minimum tax, sales and use
tax, customs duty and any other tax, charge, fee, levy or other assessment
including without limitation property, transfer, occupation, service, license,
payroll, franchise, excise, withholding, ad valorem, severance, stamp, premium,
windfall profit, employment, rent or other tax, governmental fee or like
assessment or charge of any kind whatsoever, together with
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any interest, fine or penalty thereon, addition to tax, additional amount,
deficiency, assessment or governmental charge imposed by any federal, state,
local or foreign taxing authority.
Section 2.24 Absence of Undisclosed Liabilities. Except as
specifically identified on Schedules 2.20 and 2.24, neither NRC nor any NRC
Subsidiary has any indebtedness or liability, whether accrued, fixed or
contingent, other than (a) liabilities reflected in the Balance Sheet, and (b)
liabilities incurred in the ordinary course of business of NRC and the NRC
Subsidiaries (consistent with past practice in terms of both frequency and
amount) subsequent to the date of the Balance Sheet.
Section 2.25 Insurance. Set forth on Schedule 2.25 is a
complete list and description of all policies of insurance, together with the
premiums currently payable thereon, (i) covering damage to goods being
manufactured, shipped, held or otherwise processed by NRC or any of the NRC
Subsidiaries, (ii) providing for fire, property, casualty, business
interruption, personal or product liability, workers' compensation and other
forms of insurance coverage for NRC, or (iii) providing for fire, property,
casualty and other forms of insurance coverage for the Real Property. All such
policies or substantially comparable insurance coverage will be outstanding and
in full force and effect at the Closing Date. There was no material inaccuracy
in any application for any such insurance coverage. Except as set forth on
Schedule 2.25, there is no claim, action, suit or proceeding arising out of or
based upon any of such policies of insurance, and no basis for any such claim,
action, suit or proceeding exists. There is no notice of any pending or
threatened termination or premium increase with respect to any of such policies,
and NRC and the NRC Subsidiaries are in compliance with all conditions contained
therein.
Section 2.26 Corporate Name. "Nuclear Research Corporation",
"NRC" and "NRC Industries" constitute all of the corporate names presently used
by NRC and the NRC Subsidiaries. Set forth on Schedule 2.26 is a list of all
jurisdictions, and the locations in such jurisdictions, in which the corporate
name, or any variations thereof are used by NRC or the NRC Subsidiaries. NRC and
the NRC Subsidiaries have the full legal right to use such names in each of such
jurisdictions and locations. There is no actual or, to NRC's knowledge,
threatened claim by any third party with respect to the use of such names or of
any actual or proposed use of the name or any variations thereof by any third
party in conflict with the use thereof by NRC and the NRC Subsidiaries. To NRC's
knowledge, the use by NRC and the NRC Subsidiaries of the name or any variations
thereof do not infringe upon the rights of any third party and neither NRC nor
any NRC Subsidiary has granted any third party any right to use such name or any
variations thereof.
Section 2.27 Transactions with Related Parties.
----------------------------------
(a) Except as set forth on Schedule 2.27, there are no
outstanding notes payable to, accounts receivable from or advances by NRC or any
of the NRC Subsidiaries to, and neither NRC nor any of the NRC Subsidiaries is
otherwise a creditor of, any shareholder or former shareholder of NRC or any
relative or affiliate of any shareholder or former shareholder of NRC. Since the
date of the Balance Sheet, neither NRC nor any of the NRC Subsidiaries has
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incurred any obligation or liability to, or become a creditor of, any
shareholder or former shareholder of NRC or any relative or affiliate of any
shareholder or former shareholder of NRC.
(b) Except as set forth on Schedule 2.27, since the date of
the Balance Sheet, NRC has neither declared any dividends nor paid any dividends
to any shareholder or former shareholder of NRC or any relative or affiliate of
any shareholder or former shareholder of NRC.
(c) Neither NRC nor any of the NRC Subsidiaries has purchased
or leased real property from any shareholder or former shareholder of NRC or any
relative or affiliate of such person, including any other instruments granting
such leasehold interests, or involving rights, options or other interests.
Section 2.28 Permits. NRC and the NRC Subsidiaries have all
franchises, licenses, permits, certificates and other authorizations from
federal, state, local or to NRC's actual knowledge foreign governments or
governmental agencies, departments or bodies that are necessary for the conduct
of their business and which, if not obtained, would, individually or in the
aggregate, have a Material Adverse Effect (each a "Permit"). Schedule 2.28
contains a list of all Permits. NRC has no knowledge of any fact, error or
omission relevant to any Permit that would permit the revocation or withdrawal,
or the threatened revocation or withdrawal, thereof. NRC and the Subsidiaries
will continue to have the use and benefit thereof and the rights granted thereby
after the Merger has occurred.
Section 2.29 Bank Accounts. Schedule 2.29 contains an
accurate and complete list of:
(a) the names and addresses of each bank in which NRC or any
NRC Subsidiary has an account;
(b) the account numbers of such accounts; and
(c) the authorized signatories and amounts for such accounts.
Section 2.30 Product Liability. Except as set forth on
Schedule 2.30, there are no pending product liability, warranty, backcharge, or
other claims by any third party (whether based on contract or tort and whether
relating to personal injury, including death, property damage or economic loss)
arising from (A) services rendered by NRC or any NRC Subsidiary, (B) the
manufacture, sale, distribution, erection or installation of products by NRC or
any NRC Subsidiary or (C) the operation of NRC's or any NRC Subsidiary's
business.
Section 2.31 Customers. Set forth on Schedule 2.31 is a
complete list of the ten (10) largest (in terms of dollar volume) customers of
NRC and the NRC Subsidiaries for each of the fiscal years ended June 30, 1997
and 1998, indicating the amount paid to NRC by each customer for each such
fiscal year and the names of the employees of NRC who are primarily responsible
for servicing each such customer as of the date hereof. Except as set forth on
Schedule 2.31, to NRC's knowledge, none of such customers has terminated or
indicated an intention or plan to terminate all or a material part of the
services performed for or orders
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historically placed by such customers. Except as set forth on Schedule 2.31, NRC
has satisfactory relationships with its major customers, suppliers and
contractors, and NRC has no reason to believe there will be any adverse change
in any of such relationships, whether by reason of the Merger or for any other
reason. None of the employees primarily responsible for servicing customers
listed thereon has indicated an intention or to NRC's knowledge, plan to
terminate his or her employment with NRC.
Section 2.32 Intellectual Property Matters.
------------------------------
(a) As used herein, the term "Intellectual Property Assets"
includes:
(i) all fictional business names, trading names,
registered and unregistered trademarks, service marks, and applications
(collectively, "Marks");
(ii) all patents, patent applications, and inventions
and discoveries that may be patentable owned by NRC or any NRC
Subsidiary (collectively, "Patents");
(iii) all registered copyrights in both published
works and unpublished works, and all rights in mask works
(collectively, "Copyrights"); and
(iv) all know-how, trade secrets, confidential
information, customer lists, customer histories, product formulations,
product information and specifications, software, technical
information, data, process technology, plans, drawings, and blueprints
(collectively, "Trade Secrets") owned, used, or licensed by NRC as
licensee or licensor.
(b) (i) Schedule 2.32(b) attached hereto contains a
complete and accurate list and summary description, including any
royalties paid or received by NRC, of all contracts relating to the
Intellectual Property Assets to which NRC is a party or by which NRC is
bound, except for any license implied by the sale of a product and
perpetual, paid-up licenses for commonly available software programs
with a value of less than $500 under which NRC is the licensee. There
are no outstanding and to NRC's knowledge no threatened disputes or
disagreements with respect to any such agreement.
(ii) The Intellectual Property Assets owned or used
by NRC are all those necessary for the operation of NRC's business as
currently conducted. Except as set forth on Schedule 2.32(b), NRC is
the owner of all right, title, and interest in and to each of the
Intellectual Property Assets, free and clear of all Liens and, to NRC's
knowledge, other adverse claims, and to NRC's knowledge has the right
to use without payment to a third party all of the Intellectual
Property Assets. No employee of NRC has any rights to or interests in
the Intellectual Property Assets.
(iii) Except as set forth in Schedule 2.32(c) attached
hereto, all NRC research employees who are currently employed or were
employed during the past two years have executed written contracts with
NRC that assign to NRC all rights to any inventions, improvements,
discoveries, or information relating to the business of NRC. To NRC's
knowledge, no employee has entered into any contract that restricts or
limits in
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any way the scope or type of work in which the employee may be engaged
or requires the employee to transfer, assign, or disclose information
concerning his work to anyone other than NRC.
(c) Patents.
(i) Schedule 2.32(c) attached hereto contains a
complete and accurate list and summary description of all Patents.
(ii) All of the issued Patents are currently in
compliance with formal legal requirements (including payment of filing,
examination, and maintenance fees and proofs of working or use), and,
to NRC's knowledge, are valid and enforceable and are not subject to
any maintenance fees or taxes or actions falling due within ninety days
after the Closing Date.
(iii) To NRC's knowledge, no Patent has been or is
now involved in any interference, reissue, reexamination, or opposition
proceeding. To NRC's knowledge, there is no potentially interfering
patent or patent application of any third party.
(iv) Except as set forth on Schedule 2.32(c), and to
NRC's actual knowledge, no Patent is infringed or, has been challenged
or threatened in any way. None of the products manufactured and sold,
nor any process or know-how used, by NRC infringes or is alleged to
infringe any patent or other proprietary right of any other Person. NRC
has not received notice of any Person's intent to challenge the
validity of any of the Patents.
(v) All products made, used, or sold under the
Patents have been marked with the proper patent notice.
(d) Trademarks.
(i) Schedule 2.32(d) attached hereto contains a
complete and accurate list and summary description of all Marks.
(ii) All Marks that have been registered with the
United States Patent and Trademark Office are currently in compliance
with all formal legal requirements (including the timely
post-registration filing of affidavits of use and incontestability and
renewal applications), are valid and enforceable, and are not subject
to any maintenance fees or taxes or actions falling due within ninety
days after the Closing Date.
(iii) No Mark has been or is now involved in any
opposition, invalidation, or cancellation and, to NRC's knowledge, no
such action is threatened with respect to any of the Marks.
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(iv) To NRC's knowledge, there is no potentially
interfering trademark or trademark application of any third party.
(v) To NRC's knowledge, no Mark is infringed or has
been challenged or threatened in any way and none of the Marks used by
NRC infringes or is alleged to infringe any trade name, trademark, or
service mark of any third party.
(vi) All products and materials containing a Mark
bear the proper federal registration notice where permitted by law.
(e) Copyrights.
(i) Schedule 2.32(e) attached hereto contains a
complete and accurate list and summary description of all Copyrights.
(ii) All Copyrights have been registered and are
currently in compliance with all formal legal requirements, are valid
and enforceable, and are not subject to any maintenance fees or taxes
or actions falling due within ninety days after the Closing Date.
(iii) No Copyright is infringed or, to NRC's
knowledge, has been challenged or threatened in any way. None of the
subject matter of any of the Copyrights infringes or is alleged to
infringe any copyright of any third party or is a derivative work based
on the work of a third party.
(iv) All works encompassed by the Copyrights have
been marked with the proper copyright notice.
(f) Trade Secrets.
(i) With respect to each Trade Secret, the
documentation if any, defining such Trade Secret is current, accurate,
and sufficient in detail and content to identify and explain it and to
allow its full and proper use without reliance on the knowledge or
memory of any individual.
(ii) NRC has taken all reasonable precautions to
protect the secrecy, confidentiality, and value of the Trade Secrets.
(iii) NRC has an absolute (but not necessarily
exclusive) right to use the Trade Secrets. Except as set forth on
Schedule 2.32(f), the Trade Secrets are not part of the public
knowledge or literature, and, to NRC's knowledge, have not been used,
divulged, or appropriated either for the benefit of any Person or to
the detriment of NRC. No Trade Secret is subject to any adverse claim
or has been challenged or threatened in any way.
Section 2.33 Government Contracts. Schedule 2.33 sets forth
the nature and dollar amount of each contract obtained by NRC and the NRC
Subsidiaries since January 1, 1994
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from any U.S. governmental body, agency or department or by reason of NRC's and
the NRC Subsidiaries' status as a "small business" or any other preferential,
priority or set-aside treatment granted under any federal, state or local law.
Section 2.34 Brokers. None of NRC or any of the NRC
Subsidiaries, or any of their respective officers, directors or employees, has
employed any investment banker, broker, finder or other intermediary or incurred
any liability for any brokerage fees, commissions or finder's fees in connection
with the transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF APTEC AND NEWCO
Aptec and Newco represent and warrant to NRC as follows:
Section 3.01 Corporate Existence and Power.
------------------------------
(a) Aptec is a corporation duly incorporated, validly existing
and subsisting under the laws of Ontario, and will on or before the Closing
Date, subject to regulatory approval, be continued as a corporation incorporated
under the law of the province of New Brunswick, and has and will have on the
Closing Date all corporate power required to carry on its business as now
conducted. Aptec is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction where the character of the property
owned or leased by it or the nature of its activities makes such qualification
necessary, except where the failure to so qualify or be in good standing would
not have a Material Adverse Effect. Aptec has delivered to NRC copies of Aptec's
certificate of incorporation and by-laws as currently in effect.
(b) Newco is a corporation duly incorporated, validly existing
and subsisting under the laws of the Commonwealth of Pennsylvania and has all
corporate power required to carry on its business as now conducted. Newco is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary. Newco has
delivered to NRC copies of Newco's articles of incorporation and by-laws as
currently in effect.
Section 3.02 Corporate Authorization. The execution, delivery
and performance by each of Aptec and Newco of this Agreement and the
consummation by Aptec and Newco of the transactions contemplated hereby are
within the corporate powers of each of Aptec and Newco and have been duly
authorized by all necessary corporate action on the part of Aptec and Newco.
This Agreement has been duly and validly executed and delivered by each of Aptec
and Newco and, assuming the due and valid authorization, execution and delivery
of this Agreement by NRC, constitutes a valid and binding agreement of each of
Aptec and Newco, enforceable in accordance with its terms except as may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other similar laws affecting creditors' rights generally and by
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equitable principles of general applicability. The Board of Directors of each of
Aptec and Newco, and Aptec as the sole shareholder of Newco, have approved the
Merger, this Agreement and the transactions contemplated hereby. No other
corporate proceedings or shareholder approvals on the part of Aptec or Newco are
necessary to authorize or approve this Agreement or to consummate the
transactions contemplated hereby.
Section 3.03 Governmental Authorization. The execution,
delivery and performance by each of Aptec and Newco of this Agreement and the
consummation by each of Aptec and Newco of the Merger and the other transactions
contemplated hereby require no consent, waiver, approval, authorization or
permit by or from, or action by or in respect of, or filing with, any
Governmental Entity, other than: (i) the filing of the articles of merger as
contemplated by Section 1.01(a); (ii) compliance with any applicable
requirements of the Exchange Act; and (iii) Canadian, federal and provincial
regulatory consents and filings.
Section 3.04 Non-contravention. Assuming compliance with the
matters referred to in Section 3.03, the execution, delivery and performance by
each of Aptec and Newco of this Agreement and the consummation by each of Aptec
and Newco of the transactions contemplated hereby do not and will not: (i)
contravene or conflict with the articles or by-laws of each of Aptec and Newco;
(ii) contravene or conflict with or constitute a violation of any provision of
any law, regulation, judgment, injunction, order or decree binding upon or
applicable to Aptec, Newco or any Subsidiary of Aptec; (iii) result in a breach
or violation of or constitute a default (or an event that with the giving of
notice or the lapse of time or both would constitute a default) under or give
rise to a right of termination, amendment, cancellation or acceleration of any
right or obligation of Aptec, Newco or any Subsidiary of Aptec or to a loss of
any material benefit to which Aptec, Newco or any Subsidiary of Aptec is
entitled or require any consent, approval or authorization under any provision
of any material agreement, contract or other instrument binding upon Aptec,
Newco or any Subsidiary of Aptec or any of their respective assets (including
any material license, franchise, permit or other similar authorization held by
Aptec, Newco or any Subsidiary of Aptec); or (iv) result in the creation or
imposition of any Lien on any material asset of Aptec, Newco or any Subsidiary
of Aptec.
Section 3.05 Aptec Shares. The Shares of Aptec Common Stock
issued to the Pollock Holders in the Merger, when issued, will be validly
issued, fully paid, and non-assessable.
ARTICLE IV
COVENANTS OF APTEC AND NRC
Section 4.01 Reasonable Best Efforts. Subject to the terms and
conditions herein provided, each of the parties will use its reasonable best
efforts to take, or cause to be taken, all action, and to do, or cause to be
done and to assist and cooperate with the other parties in doing, as promptly as
practicable, all things necessary or advisable under applicable laws and
regulations to ensure that the conditions set forth in Article V are satisfied
and to consummate and make effective the transactions contemplated by this
Agreement. If at any time after the
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Effective Time any further action is reasonably necessary or desirable to carry
out the purposes of this Agreement, including the execution of additional
instruments, the proper officers and directors of each party will take all such
action.
Section 4.02 NRC Shareholder Meeting.
(a) NRC will take all action necessary in accordance with the
PBCL, the Exchange Act, and its Articles of Incorporation and by-laws to call,
give notice of and hold a meeting (the "Shareholder Meeting") of its
shareholders to consider and vote upon the approval and adoption of this
Agreement and the Merger and for such other purposes as may be necessary or
desirable.
(b) Promptly after the date hereof, NRC will prepare a proxy
statement pertaining to the Shareholder Meeting to be distributed to the holders
of NRC Common Stock (the "Proxy Statement"). The NRC Board will recommend that
the shareholders of NRC vote to approve the Merger and adopt this Agreement and
approve any other matters to be submitted to shareholders in connection
therewith, and NRC will include such recommendation in the Proxy Statement.
(c) NRC will promptly notify Aptec of the receipt of comments
from the SEC and of any request by the SEC for amendments or supplements to the
Proxy Statement or for additional information, and promptly will supply Aptec
with copies of all correspondence between NRC and the SEC with respect thereto.
If, at any time prior to the NRC Shareholder Meeting, any event should occur
relating to or affecting NRC, Aptec or Newco, or to their respective
Subsidiaries, officers or directors, which event should be described in an
amendment or supplement to the Proxy Statement, the parties promptly will inform
each other and cooperate in preparing, filing and having declared effective or
clearing with the SEC and, if required by applicable state securities laws,
distributing to NRC's shareholders such amendment or supplement.
Section 4.03 Consents. Each of the parties will use its
reasonable best efforts to obtain as promptly as practicable all consents,
waivers, approvals, authorizations or permits of any Governmental Entity or any
other Person required in connection with the consummation of the transactions
contemplated by this Agreement.
Section 4.04 Public Announcements. Neither Aptec nor NRC will
issue any press release or make any other public announcement concerning this
Agreement, the Merger or the transactions contemplated hereby without the prior
consent of the other, except that either party may make such public disclosure
that it believes in good faith to be required by law (in which event such party
will notify the other party prior to making such disclosure).
Section 4.05 Notification of Certain Matters. Aptec and NRC
promptly will notify the other of: (i) the occurrence or non-occurrence of any
fact or event that would be reasonably likely to cause any (x) representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Effective Time or (y) material
covenant, condition or agreement contained in this Agreement not to be
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complied with or satisfied in all material respects; and (ii) any failure of
NRC, Aptec or Newco to comply with or satisfy in any material respect any
covenant, condition or agreement contained in this Agreement.
Section 4.06 Access to Information. From the date hereof until
the Effective Time, Aptec and NRC will, and will cause each of their
Subsidiaries to: (i) give the other party and its counsel, financial advisors,
auditors and other authorized representatives reasonable access during normal
business hours to the offices, properties, books and records of such party and
its Subsidiaries as the other party reasonably may request, and furnish the
other party with such financial and operating data and other information as the
other party reasonably may request; and (ii) instruct such parties' employees,
counsel and financial advisors to cooperate with the other party in their
investigation of the business of such party and its Subsidiaries.
Section 4.07 Tax-free Reorganization. Prior to the Effective
Time, each party will use its best efforts to cause the Merger to qualify as a
reorganization within the meaning of Section 368 of the Code, and will not take
any action reasonably likely to cause the Merger not to qualify as such a
reorganization.
ARTICLE V
CONDITIONS TO THE MERGER
Section 5.01 Conditions to the Obligations of Each Party. The
respective obligations of the parties to consummate the Merger are subject to
the satisfaction, at or prior to the Effective Time, of each of the following
conditions:
(a) The shareholders of NRC shall have approved and adopted
this Agreement and the Merger pursuant to the requirements of NRC's articles of
incorporation and by-laws and the PBCL;
(b) The consummation of the Merger shall not be restrained,
enjoined or prohibited by any order, judgment, decree, injunction or ruling of a
court of competent jurisdiction or any Governmental Entity entered after the
parties have used their reasonable best efforts to prevent such entry. There
shall not have been any statute, rule or regulation enacted, promulgated or
deemed applicable to the Merger by any Governmental Entity that prevents the
consummation of the Merger;
(c) NRC shall have received an opinion of Wolf, Block, Schorr
and Solis- Cohen LLP, dated the Effective Time, to the effect that (i) the
Merger should be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code and (ii) each of Aptec, Newco
and NRC should be a party to the reorganization within the meaning of Section
368(b) of the Code. In rendering such opinion, Wolf, Block, Schorr and
Solis-Cohen LLP may receive and rely upon representations contained in
certificates of Aptec,
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Newco, EM, NRC and others, in each case in form and substance reasonably
acceptable to such counsel;
(d) NRC's indebtedness to First Union National Bank shall have
been repaid in full and new credit facilities acceptable to Aptec and EM shall
have been established in an amount sufficient to effect make such repayment;
(e) Howard, Lawson & Co. shall not have withdrawn its fairness
opinion; and
(f) All conditions to closing of the Stock Acquisition
Agreement dated the date hereof among EM, the Pollock Holders, the Zieba
Holders, Aptec and NRC (the "Stock Acquisition Agreement") shall have been
satisfied or waived and the closing of the transactions contemplated therein
shall have taken place simultaneously with the Merger.
Section 5.02 Conditions Precedent to the Obligations of Aptec
and Newco. The obligations of Aptec and Newco to consummate the Merger are
subject to the satisfaction, at or prior to the Effective Time, of each of the
following further conditions:
(a) Each of the representations and warranties of NRC
contained in this Agreement shall have been true and correct in all material
respects when made and on and as of the Closing Date as if made on and as of
such date. Aptec shall have received a certificate to such effect by an
executive officer of NRC;
(b) NRC shall have performed and complied in all material
respects with all agreements and covenants required to be performed and complied
with by it under this Agreement on or prior to the Closing Date. Aptec shall
have received a certificate to such effect of an executive officer of NRC;
(c) All consents, waivers, approvals and authorizations
required to be obtained from any Governmental Entity prior to the consummation
of the transactions contemplated hereby shall have been obtained, except where
the failure to obtain any such consent, waiver, approval or authorization would
not have a Material Adverse Effect;
(d) On or before the tenth (10th) Business Day from the date
of this Agreement, First Union National Bank shall have delivered to NRC, and
NRC shall have delivered to Aptec and EM, in form and substance acceptable to
Aptec and EM, written confirmation that its credit facilities have been extended
through October 31, 1999 upon the terms currently in effect; and
(e) Public Shareholders who shall have dissented and demanded
the right to receive the fair value of their shares of NRC Common Stock, as
provided in Section 1.09, shall not represent in the aggregate more than ten
percent (10%) of all shares of NRC Common Stock held by the Public Shareholders
immediately before the Effective Time.
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Section 5.03 Conditions Precedent to the Obligations of NRC.
The obligation of NRC to consummate the Merger is subject to the satisfaction,
at or prior to the Effective Time, of each of the following further conditions:
(a) Each of the representations and warranties of Aptec and
Newco contained in this Agreement shall have been true and correct in all
material respects when made and on and as of the Closing Date as if made on and
as of such date. NRC shall have received a certificate to such effect of an
executive officer of Aptec;
(b) Each of Aptec and Newco shall have performed and complied
in all material respects with all agreements and covenants required to be
performed and complied with by it under this Agreement on or prior to the
Closing Date. NRC shall have received a certificate to such effect of an
executive officer of Aptec; and
(c) All consents, waivers, approvals and authorizations
required to be obtained from any Governmental Entity prior to the consummation
of the transactions contemplated hereby shall have been obtained, except where
the failure to obtain any such consent, waiver, approval or authorization would
not have a Material Adverse Effect.
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS SURVIVING
THE MERGER
Section 6.01 Covenants to the Pollock Holders. The
representations, warranties and covenants in this Article VI shall survive the
Merger and apply for the period of set forth therein; provided, however, that
such covenants shall terminate and have no further force or effect in the event
that each Statement Filer, as defined below, disposes of its shares of Aptec
stock in a taxable transaction. The indemnification provision of Section 6.03
shall survive for the period provided in Section 6.03.
Section 6.02 Representations, Warranties and Covenants of
Aptec. Aptec hereby represents, warrants and covenants with the Pollock Holders
that:
(a) On the Closing Date, Aptec will have been engaged in an
active trade or business (as defined in Treas. Reg. ss. 1.367(a)-3(c)(3)(i)(A)
and (ii)) in Canada throughout the entire 36-month period ending at the
Effective Time;
(b) Neither Aptec nor Newco has, nor will have at the
Effective Time, any intention to dispose of or discontinue the trade or business
that it conducts in Canada referred to in Section 6.02(a);
(c) Before January 1, 2005, Aptec will not dispose of any of
the shares of Newco stock owned following the Merger, except in (i) dispositions
that do not constitute
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exchanges for United States federal income tax purposes and (ii) dispositions in
which gain is not required to be recognized for United States federal income tax
purposes;
(d) Before January 1, 2005, Aptec will cause Newco not to
dispose of substantially all, within the meaning of Section 368(a)(1)(C) of the
Code, of the assets of NRC received in the Merger, except for dispositions
described in Treas. Reg. ss. 1.367(a)-8(e)(3)(B);
(e) (i) In the event Aptec disposes of the stock of Newco or
Newco disposes of substantially all of the assets of NRC received in the Merger,
in either case in a transaction not violating Section 6.02(c) or Section
6.02(d), Aptec shall cooperate with the Pollock Holders in complying with the
requirements of Section 367 of the Code and the regulations promulgated
thereunder, and shall provide the Pollock Holders with any information that is
within the control of Aptec or Newco and that is reasonably requested to enable
them to comply with such statute and regulations and (ii) in the event Aptec
disposes of the stock of Newco or Newco disposes of substantially all of the
assets of NRC received in the Merger, in either case in a transaction violating
the covenants of Section 6.02(c) or Section 6.02(d), Aptec shall provide notice
of such disposition to the Pollock Holders;
(f) Aptec shall cause NRC to attach to NRC's timely filed
income tax return for the fiscal year ending on the date of the Merger a
"Section 367(a) - Reporting of Cross-- Border Transfer under Reg. ss.
1.367(a)-3(c)(6)" statement including the information required by Treas. Reg.
ss. 1.367(a)-3(c)(6) and meeting the other requirements of that section;
(g) None of the Shareholders of Aptec is, and immediately
before the Effective Time none will be, a U.S. person for U.S. federal income
tax purposes; and
(h) No assets have been or will be acquired by Aptec during
the 36-month period ending at the Effective Time other than in the ordinary
course of business, except assets the acquisition of which is described in
Treas. Reg. ss. 1.367(a)-3(c)(3)(iii)(B)(1).
Section 6.03 Indemnification for Certain Tax Consequences.
---------------------------------------------
(a) If Aptec or Newco breaches or violates any of the
representations, warranties and covenants contained in Section 6.02 of this
Agreement, which results in a Statement Filer, as defined below, (or any other
person) being required to recognize gain on the exchange of his or her NRC
Common Stock or warrants for Aptec Common Stock (the "NRC Exchange"), prior to
the end of the five taxable year period referred to in Treas. Reg. ss. 1.367(a)-
8(b)(3) (the "End Date"), then Aptec shall be liable to reimburse the Statement
Filer (or other person) for the amount of interest and penalties which he or she
is required to pay to the United States Government as a consequence of such gain
recognition [plus an amount equal to the Hypothetical Interest (as defined
below) on the amount of income tax paid to the United States Government by the
Statement Filer(s) as a consequence of such gain recognition;] provided,
however, that no amounts shall be due pursuant to this Section 6.03 to the
extent that amounts are paid by EM pursuant to Section 5.11 of the Stock
Acquisition Agreement. Each such reimbursement amount shall be grossed up to
take into account the amount of additional tax payable by the Statement Filer as
a consequence of receipt of any reimbursement as provided
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above plus the amount of any gross-up received pursuant to this sentence. Any
claim for indemnification under this Section 6.03 must be made within 30 days
after the expiration of the statute of limitations on assessment of tax for the
relevant year.
(b) A "Statement Filer" is a person who files a Gain
Recognition Agreement under Treas. Reg. ss. 1.367(a)-8 with respect to any NRC
Exchange.
(c) Any amounts due pursuant to Section 6.03(a) with respect
to the payment of interest and penalties paid to the United States Government by
the Statement Filer(s) shall be paid to the Statement Filer(s) within ten (10)
Business Days after the delivery to EM of a calculation in reasonable detail of
the interest and penalties paid and proof of payment of the interest and
penalties. Any amounts due pursuant to Section 6.03(a) with respect to the tax
on any gross-up shall be paid to the Statement Filer(s) within ten (10) Business
Days after the delivery to EM of a calculation in reasonable detail of the
amount of income tax due as a result of the receipt of any such gross-up and
proof of payment of the tax.
(d) "Hypothetical Interest" with respect to tax paid by any
Statement Filer shall mean an amount of interest calculated at the rate of Prime
(as defined below) plus three percentage points compounded monthly for the
period beginning with the date on which an amount of tax is paid by the
Statement Filer(s) to United States Government and ending on the End Date.
Hypothetical Interest due hereunder to the Statement Filer(s) shall be paid in
arrears on the first day of each quarter annual period following the Tax Payment
Date.
(e) "Prime" for purposes of this Agreement shall mean the
Prime Rate as published in the Wall Street Journal on the Closing Date.
(f) No limitation set forth in this Agreement except in this
Article VI or any other agreement with respect to time or amount of
indemnification due any party hereunder shall apply to amounts due under this
Section 6.03.
ARTICLE VII
TERMINATION
Section 7.01 Termination. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the shareholders of NRC:
(a) by mutual written agreement of NRC and Aptec;
(b) by either NRC or Aptec, if the Merger has not been
consummated by September 30, 1999; provided that the right to terminate this
Agreement pursuant to this Section 7.01(b) will not be available to any party
whose breach of any provision of this Agreement results in the failure of the
Merger to be consummated by such time; and further provided that Aptec may in
its sole discretion extend the date for the consummation of the
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Merger to a date not later than October 31, 1999 in the event that the
definitive Proxy Statement is not mailed to NRC's Shareholders on or before
August 16, 1999;
(c) by either NRC or Aptec, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise prohibited
or if any judgment, injunction, order or decree enjoining the parties from
consummating the Merger is entered and such judgment, injunction, order or
decree shall become final and nonappealable;
(d) by Aptec, in the event of any material breach by the
Pollock Holders under the Voting Agreement;
(e) by Aptec, upon a material breach of any representation,
warranty, covenant or agreement of NRC, or if any representation or warranty of
NRC shall become untrue in any material respect; and
(f) by NRC, upon a material breach of any representation,
warranty, covenant or agreement of Aptec or Newco, or if any representation or
warranty of Aptec or Newco shall become untrue.
(g) If an event comes to the attention of Aptec at any time
prior to Closing which could reasonably form the basis of a claim by EM under
the Stock Acquisition Agreement ("SAA") that EM would not close under the SAA
(the "Event"), Aptec shall be required to:
(i) Immediately notify each of EM and NRC of the
occurrence of the Event and inquire of EM if it intends to close under
the SAA notwithstanding the Event, and
(ii) within 10 business days of such notice advise
NRC of EM's reply to the inquiry reference in clause (i) above.
If, as and when EM advises Aptec of its intention not to close
under the SAA, or fails to respond to such notice, NRC shall be entitled to
terminate, and be released of its obligations pursuant to the Agreement and Plan
of Merger without any further action on the part of either Aptec or NRC.
The party desiring to terminate this Agreement pursuant to
this Section 7.01 shall give notice of such termination to the other party.
Section 7.02 Effect of Termination. If this Agreement is
terminated pursuant to Section 7.01, this Agreement will become void and of no
effect with no liability on the part of any party hereto or its respective
directors, officers or shareholders, except that the agreements contained in
Section 7.03 will survive the termination hereof. Nothing herein shall relieve
any party from liability for any breach of this Agreement.
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Section 7.03 Fees and Expenses. Whether or not the Merger is
consummated, all costs and expenses incurred in connection with the Merger, this
Agreement and the transactions contemplated by this Agreement will be paid by
the party incurring such expenses, except as otherwise provided in the SAA.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Notices. All notices, requests and other
communications to any party hereunder shall be in writing and shall be deemed to
have been duly given when delivered in person, by overnight courier or by
facsimile to the respective parties as follows:
If to Aptec or Newco, to:
Aptec Instruments Ltd.
East 50B Caldari Road
Concord, Ontario
Canada L4K 4N8
Attention: Edward Zieba
with a copy to:
Torkin Manes Cohen & Arbus
151 Yonge Street, Suite 1500
Toronto, Ontario
Canada M5C 2W7
Attention: Howard Burshtein, Esq.
and with a copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Telephone: (212) 351-4000
Facsimile: (212) 351-4035
Attention: Stephan H. Haimo, Esq.
If to NRC, to:
Nuclear Research Corporation
125 Titus Avenue
Warrington, Pennsylvania 18976
Attention: Earl M. Pollock
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with a copy if on or before July 4, 1999 to:
Wolf, Block, Schorr and Solis-Cohen LLP
111 South 15th Street
Philadelphia, Pennsylvania 19102-2678
Attention: Mark K. Kessler, Esq.
and if after July 4, 1999 a copy to:
Wolf, Block, Schorr & Solis-Cohen LLP
1650 Arch Street, 22nd Floor
Philadelphia, Pennsylvania 19103
Attention: Mark K. Kessler, Esq.
and a copy to:
Adelman, Lavine, Gold and Levin
Two Penn Center Plaza
Suite 1900
Philadelphia, Pennsylvania 19102
Attention: Gary M. Schildhorn, Esq.
or such other address or facsimile number as such party may specify for the
purpose by written notice to the other parties hereto. Each such notice, request
or other communication will be effective: (i) if delivered in person, when such
delivery is made at the address specified in this Section 8.01; (ii) if
delivered by overnight courier, the next Business Day after such delivery is
sent to the address specified in this Section 8.01; or (iii) if delivered by
facsimile, when such facsimile is transmitted to the facsimile number specified
in this Section 8.01 and the appropriate confirmation is received.
Section 8.02 Survival of Representations, Warranties and
Agreements. The representations and warranties and agreements contained herein
and in any certificate or other writing delivered pursuant hereto will not
survive beyond the Effective Time. This Section 8.02 will not limit any covenant
or agreement of the parties which by its terms contemplates performance or
application after the Effective Time, including, but not limited to, the
representations, warranties and covenants contained in Article VI and Section
7.03.
Section 8.03 Amendment. This Agreement may be amended by NRC
and Aptec at any time before or after any approval of this Agreement by the
shareholders of NRC. After any such approval, no amendment may be made that: (i)
decreases the Cash Consideration or that adversely affects the rights of NRC's
shareholders without the approval of such shareholders; or (ii) adversely
affects the rights of the Pollock Holders without the approval of the Pollock
Holders. This Agreement may not be amended except by an instrument in writing
signed on behalf of all the parties.
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Section 8.04 Extension; Waiver. At any time prior to the
Effective Time, the parties may: (i) extend the time for the performance of any
of the obligations or other acts of any other party; (ii) waive any inaccuracies
in the representations and warranties contained herein by any other party or in
any document, certificate or writing delivered pursuant hereto by any other
party; or (iii) waive compliance with any of the agreements of any other party
or with any conditions to its own obligations. Any agreement on the part of any
party to any such extension or waiver will be valid only if set forth in an
instrument in writing signed on behalf of such party.
Section 8.05 Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. No party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the prior written consent of the other parties.
Section 8.06 Governing Law. This Agreement will be construed
in accordance with and governed by the law of the State of New York applicable
to agreements entered into and to be performed wholly within such State, except
that the PBCL will apply to the Merger.
Section 8.07 Jurisdiction. Each of the parties: (i) consents
to submit itself to the personal jurisdiction of any federal or state court
located in the State of New York in the event any dispute arises out of this
Agreement or the Merger; (ii) agrees that it will not attempt to deny or defeat
such personal jurisdiction by motion or other request for leave from any such
court; and (iii) agrees that it will not bring any action relating to this
Agreement or the Merger in any court other than a federal or state court sitting
in the State of New York.
Section 8.08 Counterparts; Effectiveness. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement will become effective when each party shall have
received counterparts hereof signed by all of the other parties.
Section 8.09 Entire Agreement. This Agreement and the other
agreements referred to herein or executed contemporaneously herewith constitute
the entire agreement, and supersede all prior agreements and understandings,
both written and oral, between the parties with respect to the subject matter of
this Agreement. No representation, inducement, promise, understanding, condition
or warranty not set forth herein has been made or relied upon by any party.
Section 8.10 Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 8.11 Severability. In the event that any one or more
of the provisions contained in this Agreement shall be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement.
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Section 8.12 Additional Definitions.
-----------------------
(a) When used in this Agreement, the following terms have the
following meanings:
"Affiliate" as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person.
"Business Day" means any day other than a Saturday, Sunday or
any other day on which banks in the State of New York are authorized or
obligated to be closed.
"Code" means the Internal Revenue Code of 1986, as amended.
"Dollars" or "$" means United States dollars, unless otherwise
specified.
"GAAP" means generally accepted accounting principles
consistently applied in effect in the United States of America as of the date of
the applicable determination.
"Governmental Entity" means any government or subdivision
thereof, or any administrative, governmental or regulatory authority, agency,
commission, tribunal or body, domestic, foreign or supranational.
"knowledge of NRC" means any fact or matter which is known by
any officer or director of NRC, or should have been known by such person after
due inquiry.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset.
"Material Adverse Effect" means any change or event that
individually or when taken together with all other changes and events, is or is
reasonably likely to be materially adverse to the business, assets, liabilities,
operations or condition (financial or otherwise) or prospects of NRC and its
Subsidiaries, taken as a whole, other than any such effect arising out of or
resulting from the transactions contemplated by this Agreement or general
economic, financial, or market conditions. A Material Adverse Effect shall be
conclusively deemed to exist if there occurs any event which causes or may
reasonably be expected to cause or result in estimable monetary loss which,
individually or when aggregated with all other events, exceeds $75,000.
"NRC Subsidiary" means any Subsidiary of NRC.
"Person" means an individual, a corporation, a limited
liability company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof.
"SEC" means the Securities and Exchange Commission.
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<PAGE>
"Subsidiary" of any Person means any other Person of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other Persons performing similar functions
are directly or indirectly owned or controlled by such Person.
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IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed by its respective authorized officer as of the day
and year first above written.
APTEC INSTRUMENTS LTD.
By: /s/ Edward Zieba
-----------------------------------------
Name: Edward Zieba
Title: President
APTEC ACQUISITION CORPORATION
By: /s/ Edward Zieba
-----------------------------------------
Name: Edward Zieba
Title: President
NUCLEAR RESEARCH CORPORATION
By: /s/ Earl M. Pollock
-----------------------------------------
Name: Earl M. Pollock
Title: President
38
<PAGE>
STOCK ACQUISITION AGREEMENT
This Stock Acquisition Agreement ("Agreement") is made on the
_____ day of June 1999 by and among (i) Eurisys Mesures SA, a French corporation
("EM"), (ii) Aptec Instruments Ltd., an Ontario corporation which prior to
Closing (as defined below) shall be continued as a corporation formed under the
laws of the Province of New Brunswick, Canada ("Aptec"); (iii) Aptec Acquisition
Corp., a Pennsylvania corporation which is wholly-owned by Aptec ("Newco"); (iv)
the shareholders of Aptec identified in Exhibit A hereto (each a "Zieba Holder"
and collectively the "Zieba Holders"); (v) Nuclear Research Corporation, a
Pennsylvania corporation ("NRC"); (vi) Mr. Edward Zieba, an individual resident
in Aurora, Ontario ("Mr. Zieba") and (vii) and certain shareholders of NRC
identified in Exhibit B hereto (each a "Pollock Holder" and collectively the
"Pollock Holders"). The Zieba Holders and the Pollock Holders are sometimes
collectively referred to as the "Sellers". Aptec, Newco and the Zieba Holders
are sometimes collectively referred to as the "Zieba Parties".
WHEREAS, the capital stock of Aptec currently consists of 23,780 common shares
("Aptec Common Stock"), all of which are currently owned by the Zieba Holders
and, immediately prior to the Closing and the Merger shall consist of 30,780
shares of Aptec Common Stock;
WHEREAS, pursuant to an Agreement and Plan of Merger of even date herewith (the
"Merger Agreement"), Aptec and NRC have agreed to a transaction whereby NRC will
be merged (the "Merger") into Newco, a wholly-owned subsidiary of Aptec and the
Pollock Holders will receive in the Merger, $214,799 in cash and 12,720 newly
issued shares of the Aptec Common Stock; and
WHEREAS, EM wishes to acquire Aptec Common Stock representing 51% of all Aptec
Common Stock issued and outstanding after the Merger and the transactions
contemplated in this Agreement, through the acquisition of (i) 4,000 shares of
newly issued Aptec Common Stock purchased from Aptec; (ii) 14,365 shares of
Aptec Common Stock purchased from the Zieba Holders; and (iii) 5,860 shares of
Aptec Common Stock purchased from the Pollock Holders.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
THE ACQUISITION TRANSACTIONS
Section 1.01 Loan to Zieba Holders. Immediately prior to or at
the Closing, EM will make a loan to Mr. Edward Zieba ("Mr. Zieba") in the amount
of $3,500,000 (the "Loan"). Mr. Zieba will execute and deliver to EM a
promissory note (the "Offset Note") in the form of Exhibit C hereto. Mr. Zieba
will contribute all proceeds of the Loan to the capital of Aptec in
consideration for the issuance to Mr. Zieba of 7,000 shares of Aptec Common
Stock and Aptec will contribute such amount to the capital of Newco in
consideration for the issuance of all the
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capital stock of Newco. The $3,500,000 contributed to Newco will be used to
satisfy its obligations in the Merger, comprising the payment of the Cash
Consideration to the Public Shareholders (as such terms are defined in the
Merger Agreement) aggregating $3,285,201 and the payment of $214,799 in cash to
the Pollock Holders at the Closing such amount to be adjusted to reflect the
purchase price adjustments set forth in Schedule A.
Section 1.02 Purchase from the Zieba Holders. At the Closing
and following the Merger, EM will purchase from the Zieba Holders, and the Zieba
Holders will sell to EM, an aggregate of 14,365 shares of Aptec Common Stock,
for an aggregate purchase price of $7,182,500 (the "Zieba Purchase Price"). The
Zieba Purchase Price, and the allocation of the Zieba Purchase Price as set out
in Subsections (i), (ii) and (iii) directly below shall be adjusted to reflect
the purchase price adjustments set forth in Schedule A.
The Zieba Purchase Price will be paid by EM as follows:
(i) First, by offsetting the Offset Note against the Zieba
Purchase Price, resulting in a net Purchase Price for the Zieba Holders of
$3,682,500;
(ii) Second, by making a cash payment to the Zieba Holders at
the Closing of $3,314,250, (the "Closing Zieba Payment"); and
(iii) Third, by a cash payment of $368,250 which will be
deposited into an account (the "Zieba Escrow Account") with Citibank N.A., New
York, N.Y. as escrow agent ("Escrow Agent") and will be disbursed in accordance
with the provisions of Section 5.10 hereof.
The number of shares of Aptec Common Stock, the Zieba Purchase
Price, the Closing Zieba Payment and the Zieba Escrow Account with respect to
each Zieba Holder is set forth on Exhibit A.
Section 1.03 Purchase from the Pollock Holders. At the Closing
and following the Merger, EM will purchase from the Pollock Holders, and the
Pollock Holders will sell to EM, an aggregate of 5,860 shares of Aptec Common
Stock, for an aggregate purchase price of $2,930,0000 (the "Pollock Purchase
Price"). The Pollock Purchase Price, and the allocation of the Pollock Purchase
Price as set out in Subsections (i) and (ii) directly below shall be adjusted to
reflect the purchase price adjustments set forth in Schedule A.
The Pollock Purchase Price will be paid by EM as follows:
(i) First, by a cash payment to the Pollock Holders at the
Closing of $2,615,500, (the "Closing Pollock Payment"); and
(ii) Second, by a cash payment of $314,500 which will be
deposited into an account (the "Pollock Escrow Account") with the Escrow Agent
and disbursed in accordance with the provisions of Section 5.10 hereof.
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The number of shares of Aptec Common Stock, the Pollock
Purchase Price, the Closing Pollock Payment and the Pollock Escrow Account with
respect to each Pollock Holder is set forth on Exhibit B.
Section 1.04 Purchase of Shares from Aptec. At the Closing, EM
will subscribe to and purchase from Aptec, and Aptec will sell and issue to EM,
4,000 shares of newly issued Aptec Common Stock, in consideration for a payment
of $2,000,000 in cash such amount to be adjusted to reflect the purchase price
adjustments set forth in Schedule A.
Section 1.05 Closing. The closing of the Transactions (the
"Closing") will take place at 10:00 a.m. (New York City time) on a date (the
"Closing Date") to be specified by the parties and on the same day as the
Effective Date (as defined in the Merger Agreement) of the Merger, which shall
be no later than the second Business Day after satisfaction of the conditions
set forth in Article VII, at the offices of Gibson, Dunn & Crutcher LLP, 200
Park Avenue, New York, New York 10166, unless the parties agree in writing to
another time, date or place. All payments to be made by EM at the Closing shall
be made by wire transfers of immediately available funds to bank accounts in the
United States designated by the beneficiaries thereof not later than three (3)
Business Days prior to the Closing Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE ZIEBA HOLDERS
The Zieba Holders, jointly and severally, represent and
warrant to EM as set forth below. For the avoidance of doubt, all reference
herein to Aptec or Aptec Subsidiaries shall be expressly deemed to exclude any
assets, rights, obligations, liabilities and business of NRC or any NRC
Subsidiaries existing prior to the Merger, which upon the Merger shall be
possessed by Newco.
Section 2.01 Corporate Existence and Power. Aptec is a
corporation duly incorporated, validly existing and subsisting under the
Business Corporations Act (Ontario) and has all corporate power required to
carry on its business as now conducted. On or before the Closing, Aptec will
have been continued, subject to Regulatory approval, under the laws of the
province of New Brunswick and will be duly incorporated, validly existing and
subsisting under the Business Corporations Act [New Brunswick]. Aptec is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except where
the failure to so qualify or be in good standing would not have a Material
Adverse Effect. Aptec has delivered to EM copies of Aptec's certificate and
articles of incorporation as amended, and by-laws currently in effect. Aptec's
New Brunswick Articles of Continuance and by-laws in effect at the Closing Date
shall be those attached as Schedule 2.01.
Section 2.02 Corporate Authorization; Ownership.
(a) The execution, delivery and performance by the Zieba
Parties of this Agreement and the consummation by the Zieba Parties of the
transactions contemplated hereby
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are within Aptec's corporate powers and have been duly authorized by all
necessary corporate action on the part of the Zieba Parties. This Agreement has
been duly and validly executed and delivered by the Zieba Parties and, assuming
the due and valid authorization, execution and delivery of this Agreement by EM,
constitutes a valid and binding agreement of the Zieba Parties, enforceable in
accordance with its terms except as may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws affecting
creditors' rights generally and by equitable principles of general
applicability. The Board of Directors and the shareholders of Aptec and Newco
have approved this Agreement, the Merger Agreement and the transactions
contemplated hereby and thereby. No corporate or other proceedings on the part
of the Zieba Parties are necessary to authorize or approve this Agreement, the
Merger Agreement or to consummate the transactions contemplated hereby and
thereby.
(b) The shares of Aptec Common Stock held, or to be acquired
pursuant to the transactions contemplated in the Merger Agreement and herein, by
the Zieba Holders are owned or will be owned by them of record and beneficially,
free and clear of any Liens. At the Closing, EM will acquire valid and
marketable title to the shares of Aptec Common Stock sold by the Zieba Holders
under Section 1.02, free and clear of any Liens.
Section 2.03 Governmental Authorization. The execution,
delivery and performance by Aptec of this Agreement and the consummation by the
Zieba Parties of the Merger and the Transactions require no consent, waiver,
approval, authorization or permit by or from, or action by or in respect of, or
filing with, any Governmental Entity.
Section 2.04 Non-contravention. The execution, delivery and
performance by the Zieba Parties of this Agreement and the consummation by the
Zieba Parties of the transactions contemplated hereby do not and will not: (i)
contravene or conflict with the certificate of incorporation or by-laws of the
corporate Zieba Parties; (ii) contravene or conflict with or constitute a
violation of any provision of any law, regulation, judgment, injunction, order
or decree binding upon or applicable to the Zieba Parties; (iii) result in a
breach or violation of or constitute a default (or an event that with the giving
of notice or the lapse of time or both would constitute a default) under or give
rise to a right of termination, amendment, cancellation or acceleration of any
material right or obligation of the Zieba Parties or to a loss of any benefit to
which the Zieba Parties are entitled or require any consent, approval or
authorization under any provision of any agreement, contract or other instrument
binding upon the Zieba Parties or any of their respective assets; or (iv) result
in the creation or imposition of any Lien on any asset of the Zieba Parties.
Section 2.05 Capitalization.
(a) The authorized capital stock of Aptec consists of an
unlimited number of common shares, of which (i) 23,780 shares of Aptec Common
Stock are currently issued and outstanding; (ii) 30,780 shares of Aptec Common
Stock will be issued and outstanding after the contribution of the Loan and
issuance of shares of Aptec Common Stock as contemplated in Section 1.01; (iii)
43,500 shares of Aptec Common Stock will be issued and outstanding after the
completion of the Merger; and (iv) 47,500 shares of Aptec Common Stock will be
issued and outstanding immediately after the acquisition by EM of shares of
Aptec Common Stock as contemplated herein.
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(b) All outstanding shares of Aptec Common Stock have been
duly authorized and validly issued and are fully paid and non-assessable. Each
Zieba Holder now owns and will on the Closing Date immediately following and
after giving effect to the Merger, own of record and beneficially the number of
shares of Aptec Common Stock opposite such Holder's name in Exhibit A, free and
clear of all Liens. At the Closing, EM will acquire valid and marketable
beneficial and legal title to such shares, free and clear of any Liens. Except
as set forth in this Section 2.05, there are outstanding (i) no shares in the
capital or other voting securities of Aptec, (ii) no securities of Aptec
convertible into or exchangeable for shares in the capital or voting securities
of Aptec, (iii) no options or other rights to acquire from Aptec or any Zieba
Holder, and no obligation of Aptec or any Zieba Holder to issue, any shares in
the capital, voting securities or securities convertible into or exchangeable
for shares in the capital or voting securities of Aptec and (iv) no other
securities or agreements of Aptec issued and outstanding giving a right to the
holder to participate in a percentage of the sales, profits or cash flow of
Aptec or any Aptec Subsidiary. There are no outstanding obligations of Aptec or
any Aptec Subsidiary to repurchase, redeem or otherwise acquire any Aptec
Securities.
(c) There are no outstanding contractual obligations of Aptec
or any Aptec Subsidiary to provide funds to, or make any investment (in the form
of a loan, capital contribution or otherwise) in, any other person other than to
wholly-owned Aptec Subsidiaries, in the ordinary course of business consistent
with past practice except to the extent contemplated in the Merger Agreement or
herein.
Section 2.06 Subsidiaries.
(a) Each Aptec Subsidiary is, [or in the case of Newco will
be], a corporation or other legal entity duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization, has, [or in
the case of Newco, will have] all corporate, partnership or similar powers
required to carry on its business as now conducted and is, [or in the case of
Newco will be] duly qualified to do business as a foreign corporation or other
legal entity and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except any jurisdiction where the failure to so quality
or be in good standing would not have a Material Adverse Effect. All Aptec
Subsidiaries and their respective jurisdictions of organization are identified
in Schedule 2.06.
(b) All of the outstanding shares of capital stock of, or
other ownership interests in, each Aptec Subsidiary are owned by Aptec, directly
or indirectly, free and clear of any Lien and free of any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership interests, except as otherwise
contemplated in the Merger Agreement or herein,). Except as otherwise
contemplated in the Merger Agreement or herein, there are no outstanding (i)
securities of Aptec convertible into or exchangeable for shares of capital stock
or other voting securities or ownership interests
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in any Aptec Subsidiary or (ii) options or other rights to acquire from Aptec or
any Aptec Subsidiary, and no other obligation of Aptec or any Aptec Subsidiary
to issue, any capital stock, voting securities or other ownership interests in,
or any securities convertible into or exchangeable for any capital stock, voting
securities or ownership interests in, any Aptec Subsidiary. The securities
described in clauses (i) and (ii) above are referred to collectively as the
"Aptec Subsidiary Securities". There are no outstanding obligations of Aptec or
any Aptec Subsidiary to repurchase, redeem or otherwise acquire any outstanding
Aptec Subsidiary Securities or pay any dividend or make any other distribution
in respect thereof to a Person other than Aptec or a wholly-owned Aptec
Subsidiary.
Section 2.07 Financial Statements; Book Value.
(a) The audited consolidated financial statements and
unaudited consolidated interim financial statements of Aptec identified on
Schedule 2.07 (including, without limitation, the audited consolidated balance
sheet at August 31, 1998 (the "Balance Sheet")) (collectively, the "Financial
Statements") fairly present, in conformity with Canadian GAAP applied on a
consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of Aptec and its consolidated Aptec Subsidiaries
as of the dates thereof and its consolidated statements of operations, retained
earnings and changes in financial position for the periods then ended (subject
to normal year-end adjustments in the case of any unaudited interim financial
statements). The Financial Statements have been prepared from the books and
records of Aptec and the Aptec Subsidiaries maintained in the ordinary course
and reflect and provide adequate reserves in respect of all known liabilities of
Aptec and the Aptec Subsidiaries, including all known contingent liabilities, as
of their respective dates.
(b) At August 31, 1998, the consolidated Book Value of Aptec
and its Subsidiaries was, and on the Closing Date will be, not less than
C$1,648,048.
(c) Aptec and each of the Aptec Subsidiaries (i) keeps books,
records and accounts that, in reasonable detail, accurately and fairly reflect
(A) the transactions and dispositions of assets of such entity and (B) the value
of inventory calculated in accordance with Canadian GAAP. None of Aptec or any
of the Aptec Subsidiaries, and no employee, agent or shareholder of any such
entity, directly or indirectly has made any payment of funds of any such entity
or received or retained any funds in violation of any applicable law, rule or
regulation.
Section 2.08 Absence of Certain Changes or Events. Except for
the transactions contemplated in the Merger Agreement or herein, since August
31, 1998, there has not been: (i) any change in the business, operations or
financial condition of Aptec or any of the Aptec Subsidiaries that has had or
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect; (ii) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of capital stock of
Aptec, or any repurchase, redemption or other acquisition by Aptec or any of the
Aptec Subsidiaries of any outstanding shares of capital stock or other
securities of, or other ownership interests in, Aptec or any of the Aptec
Subsidiaries; (iii) any incurrence, assumption or guarantee by Aptec or any of
the Aptec Subsidiaries of any indebtedness for borrowed money other than in the
ordinary course
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and in amounts and on terms consistent with past practices; or (iv) as of the
date hereof, any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of Aptec or any of the
Aptec Subsidiaries that has had or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
Section 2.09 Real Property.
(a) Set forth on Schedule 2.09 is (i) a complete list of all
real property (the "Owned Property") that Aptec or any of the Aptec Subsidiaries
has legal or equitable title and (ii) a description of each lease of real
property under which Aptec or any of the Aptec Subsidiaries is a lessee, lessor,
sublessee or sublessor (the "Leased Property"). The Owned Property and the
Leased Property sometimes collectively are referred to as the "Real Property".
True and complete copies of all leases to which Aptec or any Subsidiary is a
party respecting any real property and all other instruments granting such
leasehold interests, rights, options or other interests (the "Property Leases"),
and of all deeds, title insurance policies, title opinions, surveys, mortgages,
agreements and other documents granting to Aptec or any of the Aptec
Subsidiaries title to or an interest in or otherwise affecting or relating to
any Real Property (the "Title Documents"), have been made provided to EM.
(b) With respect to the Property Leases, no breach or event of
default on the part of any party to any of the Property Leases and no event
that, with the giving of notice or lapse of time or both, would constitute such
breach or event of default, have occurred and are continuing unremedied. All the
Property Leases are in full force and effect and are valid and enforceable
against the parties thereto in accordance with their terms. All rental and other
payments due under each of the Property Leases have been duly paid in accordance
with the terms of such Property Lease. The transactions contemplated in this
Agreement do not require the consent of any party to, constitute an event of
default under, or trigger any options to, terminate or otherwise change the
existing terms of any Property Lease.
(c) To Aptec's knowledge, the buildings and improvements
leased by Aptec or any Aptec Subsidiary, and the operation or maintenance
thereof as operated and maintained, do not (i) contravene any zoning or building
law or ordinance or other administrative regulation (including but not limited
to those relating to zoning, land division, building, fire, health and safety)
or (ii) violate any restrictive covenant or any provision of federal, state,
local or foreign law.
(d) To Aptec's knowledge, there is no pending or, threatened
condemnation or expropriation proceeding with respect to, or that could affect,
any Real Property.
Section 2.10 Personal Property. Except as described in
Schedule 2.10, Aptec and the Aptec Subsidiaries have good and marketable title
to all personal property reflected on the Balance Sheet and all personal
property acquired by Aptec or any of the Aptec Subsidiaries since the date of
the Balance Sheet (except such personal property as has been disposed of in the
ordinary course of business), free and clear of any Liens.
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Section 2.11 Inventories. The inventories set forth in the
Balance Sheet have been valued in accordance with Canadian GAAP applied
consistently throughout the period covered. Physical adjustments to inventories
since August 31, 1998 have been correctly recorded in the ordinary course of
business. All obsolete items and items below-standard quality have been written
off or written down to net realizable value in the Balance Sheet. All
inventories not written off on the Balance Sheet have been priced at the lower
of cost or market. Such inventories are usable in the ordinary course of
business of Aptec at a value which is no less than the value at which such
inventories are carried by Aptec. The inventory is adequate for the conduct of
the business of Aptec and inventory levels are not in excess of normal operating
requirements of Aptec.
Section 2.12 Accounts Receivable. All accounts receivable of
Aptec that are reflected on the Financial Statements or the accounting records
of Aptec and the Aptec Subsidiaries as of the Closing Date (collectively, the
"Accounts Receivable") represent or will represent valid obligations arising
from sales actually made or services actually performed in the ordinary course
of business. The Accounts Receivable are or will be as of the Closing Date
collectible within 180 days of the date due net of the respective reserves shown
on the Balance Sheet or on the accounting records of Aptec as of the Closing
Date (which reserves are adequate and calculated consistent with past practice
and, in the case of the reserve as of the Closing Date, will not represent a
greater percentage of the Accounts Receivable as of the Closing Date than the
reserve reflected in the Balance Sheet represented of the Accounts Receivable
reflected therein and will not represent a material adverse change in the
composition of such Accounts Receivable in terms of aging). There is no contest,
claim, or right of setoff other than returns in the ordinary course of business,
under any contract with any obligor of any Accounts Receivable relating to the
amount or validity of such Accounts Receivable. Schedule 2.12 contains a
complete and accurate list of all Accounts Receivable as of the date of this
Agreement, which list sets forth the aging of such Accounts Receivable.
Section 2.13 Personnel.
(a) Set forth on Schedule 2.13 is a true and complete list of:
(i) the name of each person employed by Aptec or any Aptec
Subsidiary (other than hourly employees) whose total compensation for
services rendered, including without limitation bonuses and deferred
compensation, for the fiscal year ended August 31, 1998 was in excess
of the rate of C$70,000 per year, the title or job classification of
each such person, the current compensation of each such person and the
place in which such person is employed;
(ii) the name of each person, if any, holding tax or other
powers of attorney from Aptec or any Aptec Subsidiary and a summary of
the terms thereof;
(iii) the name and title or job description of each
director and officer, and each other key employee, of Aptec and each of
the Aptec Subsidiaries; and
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(iv) the name and title or job description of each
employee in respect of whom Aptec is the beneficiary of a life
insurance policy, and the details of such policy.
(b) Except as set forth on Schedule 2.13, since August 31,
1998, there has been no material change in the rate of total compensation for
services rendered, including without limitation bonuses and deferred
compensation, for any of the employees listed on Schedule 2.13, other than Mr.
Edward Zieba, and the bonuses and deferred compensation established for the
fiscal year ending August 31, 1998 were consistent with the past practices of
Aptec for similar employees in similar situations.
Section 2.14 Labor Matters.
(a) Except as set forth on Schedule 2.14, neither Aptec nor
any Aptec Subsidiary is a party to any contract or collective bargaining
agreement with any labor organization. Other than as set forth on Schedule 2.14,
no organization or representation question, is pending respecting the employees
of Aptec or the Aptec Subsidiaries, and no such question has been raised within
the preceding three years.
(b) All reasonably anticipated obligations of Aptec or the
Aptec Subsidiaries, whether arising by operation of law, contract, past custom
or otherwise, for unemployment compensation benefits, pension benefits,
salaries, wages, bonuses, sick leave, vacation, workers' compensation and other
forms of compensation payable to the officers, directors and other employees and
independent contractors of Aptec or the Aptec Subsidiaries have been paid or
adequate accruals therefore have been made in the Balance Sheet.
(c) There is no claim, grievance, arbitration, negotiation,
suit, action or charge of or by any employee of Aptec or any Aptec Subsidiary
against or involving Aptec or any Aptec Subsidiary, and no complaint is pending
against Aptec or any Aptec Subsidiary before any labor relations board, labor
standards board, occupational safety and health authority, human rights tribunal
or any federal, state, provincial or local agency, court, board or tribunal,
nor, to Aptec's knowledge, is there any basis therefor. Aptec and the Aptec
Subsidiaries have complied, in respect of their employees, in all material
respects with all applicable statutes, regulations, rules, decrees, orders and
restrictions of the United States of America, all states and other subdivisions
thereof, Canada, all provinces and territories thereof, all foreign
jurisdictions and all agencies and instrumentalities of the foregoing.
(d) Aptec has made available to EM copies of all claims,
complaints, reports or other documents in Aptec's files concerning Aptec or any
Aptec Subsidiary or their employees made by or against Aptec or any Aptec
Subsidiary during the past five years pursuant to workers' compensation laws,
labor standards laws, human rights laws, occupational safety and health laws,
Title VII of the Civil Rights Act of 1964, the Occupational Safety and Health
Act of 1970, the National Labor Relations Act of 1935 or any other federal or
state provincial or local laws, regulations, by-laws, orders, rules or decrees,
relating to employment of labor.
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Section 2.15 Environmental Matters.
(a) (i) None of Aptec, the Aptec Subsidiaries nor any previous
owner, tenant, occupant, operator or user of any Real Property or Former Real
Property or any other person has engaged in or permitted any operation or
activity at or upon, or any use or occupancy of, any Real Property or Former
Real Property for the purpose of or in any way involving the handling,
manufacture, treatment, storage, use, generation, release, discharge, refining,
reclaiming, recycling, dumping or disposal of any Hazardous Materials (as
defined below) on, under, in or about any Real Property or Former Real Property
or any property adjoining any such property, or transported any Hazardous
Materials to, from or across any Real Property or Former Real Property. No
Hazardous Materials currently are produced, incorporated in any construction on,
deposited, stored or otherwise located on, under, in or about any Real Property,
other than as disclosed in the waste generator permit attached in Schedule 2.27.
(ii) No Hazardous Materials have migrated from any Real
Property or Former Real Property upon or beneath other properties, and no
Hazardous Materials have migrated or threatened to migrate from other properties
upon, about or beneath any Real Property.
(iii) No underground improvement, including without
limitation treatment or storage tank or water, gas or oil well, is or ever has
been located on any Real Property or Former Real Property. All underground
treatment and storage tanks, if any, have been exhumed and disposed of, and all
portions of the Real Property and Former Real Property and all groundwater
contaminated by any Hazardous Materials contained therein, have been remediated
in full compliance with all Environmental Requirements and to a degree that any
remaining concentrations of Hazardous Materials are below maximum contaminate
levels or other regulatory limits set forth in applicable or relevant
Environmental Requirements.
(iv) All Real Property and Former Real Property and all
current and past activities thereon, including without limitation the use,
maintenance and operation of all Real Property and Former Real Property and all
activities and conduct of business related thereto, currently comply and at all
times in the past have complied in all material respects with all Environmental
Requirements.
(v) None of Aptec or any Aptec Subsidiaries has received
any notice or other communication concerning or has any knowledge of (A) any
violation or alleged violation of Environmental Requirements, whether or not
corrected or (B) any alleged liability for Environmental Damages (as defined
below) in connection with any Real Property, Former Real Property, or material
transported to, from or across any Real Property or Former Real Property. No
writ, injunction, decree, order or judgment relating to the foregoing is
outstanding. There is no lawsuit, claim, proceeding, citation, directive,
summons or investigation pending or threatened against Aptec or any of the Aptec
Subsidiaries relating to any alleged violation of or liability under any
applicable Environmental Requirements or the presence of any Hazardous Materials
thereon.
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(b) For the purposes of this Agreement:
(i) "Environmental Damages" means all claims, judgments,
damages, losses, penalties, fines, liabilities (including strict liability),
encumbrances, liens, costs and expenses of defense of a claim (whether or not
such claim is ultimately defeated), good faith settlements of judgment, and
costs and expenses of reporting, investigating, removing and/or remediating
Hazardous Materials, of whatever kind or nature, contingent or otherwise,
matured or unmatured, including without limitation reasonable attorney's fees
and disbursements and consultants' fees, any of which arise out of or relate to
the existence of Hazardous Materials at, upon, about or beneath the Real
Property or Former Real Property, or migrating or threatening to migrate to or
from, or released or discharged on or from, the Real Property or Former Real
Property or transported to, from, or across any Real Property or Former Real
Property.
(ii) "Environmental Requirements" means all applicable
statutes, regulations, rules, ordinances, codes, actions, licenses, permits,
orders, decrees, approvals, plans, authorizations, concessions, franchises and
similar items of all federal, state, provincial and local governmental branches
agencies, departments, commissions, boards, bureaus or instrumentalities
domestic and foreign, having jurisdiction and all applicable judicial and
administrative and regulatory decrees, judgments and orders and all covenants
running with the land that relate to the protection of health or the
environment, including without limitation those that relate to the existence,
handling, manufacture, treatment, storage, use, generation, release, discharge,
refining, recycling, reclaiming or disposal of Hazardous Materials.
(iii) "Former Real Property" means any real property in
which Aptec or any of the Aptec Subsidiaries heretofore held but no longer holds
a fee, leasehold or other legal, beneficial or equitable interest.
(iv) "Hazardous Materials" means any substance: (A) the
presence of which requires reporting, investigation, removal or remediation
under any Environmental Requirement; (B) that is defined as a "hazardous waste",
"hazardous substance" or "pollutant" or "contaminant" under any Environmental
Requirement; (C) that is toxic, explosive, corrosive, flammable, ignitable,
infectious, radioactive, reactive, carcinogenic, mutagenic or otherwise
hazardous and is regulated under any Environmental Requirement; (D) the presence
of which on any Real Property or Former Real Property poses or posed a hazard to
the health or safety of persons on or about any Real Property or Former Real
Property; (E) the presence of which on adjacent properties constitutes a
trespass by Aptec or an Aptec Subsidiary; (F) that contains gasoline, diesel
fuel or other petroleum hydrocarbons; or (G) that contains PCBs, asbestos or
urea formaldehyde foam insulation.
(c) Aptec and the Aptec Subsidiaries have complied in all
material respects with all Environmental Requirements.
(d) Aptec has furnished EM with true and complete copies of
all claims, complaints, reports, assessments, audits, investigations and other
documents in the possession of or obtainable by Aptec made by, on behalf of or
against Aptec or any Subsidiary during the past five (5) years pertaining to
Environmental Requirements or Hazardous Materials.
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(e) Notwithstanding anything to the contrary in this Section
2.15, all representations made in this Section 2.15 with respect to the actions
or omissions of any current or prior owner or occupant of any Real Property or
Former Real Property, other than Aptec or any Aptec Subsidiary, are made to the
knowledge of Aptec.
Section 2.16 Benefit Plans.
(a) Set forth on Schedule 2.16 is a complete list of each
current employment contract and consulting agreement entered into by Aptec or
any Aptec Subsidiary, or by which Aptec or any Aptec Subsidiary is bound, and
each pension, retirement, deferred compensation, bonus, incentive compensation,
restricted stock, stock option, stock appreciation, employee stock purchase,
savings, insurance, medical, hospitalization, disability, death, severance,
change of control or termination pay agreement or plan and any other employee
benefit plan, agreement, arrangement or commitment, whether formal or informal,
not required to be listed on Schedule 2.17, maintained, entered into or
contributed to, or which is required to be maintained, entered into or
contributed to, by Aptec or any Aptec Subsidiary for the benefit of any current
or former director, officer or employee of Aptec or any Aptec Subsidiary (each
the "Benefit Plan" and collectively the "Benefit Plans"). Aptec has no Benefit
Plans which are or are required to be funded by any contributions, premiums or
source-deducted employee contributions. Aptec has delivered to EM true and
correct copies of each Benefit Plan listed on Schedule 2.16.
(b) Each Benefit Plan is legally valid and binding and in full
force and effect, and benefits under the Benefit Plans are as represented in
such plan documents. The following information is set forth on Schedule 2.16
with respect to each Benefit Plan: (i) the cost to Aptec or any Aptec Subsidiary
associated with such Benefit Plan for each of the past three fiscal years and
the plan year in which the Closing Date occurs; (ii) the amount of any liability
of Aptec or any Aptec Subsidiary for payments or contributions past due with
respect to such Benefit Plan as of the last day of its most recent plan year and
as of the end of any subsequent month ending prior to the Closing Date, and the
date any such amounts were paid; (iii) any contribution to such Benefit Plan in
a form other than cash; and (iv) whether such Benefit Plan has been terminated.
Except as set forth on Schedule 2.16, neither Aptec nor any Aptec Subsidiary has
any obligation or liability with respect to any Benefit Plan, including without
limitation under any collective bargaining agreement to which Aptec or any Aptec
Subsidiary is a party or by which it is bound. Aptec and the Aptec Subsidiaries
have made adequate provisions for reserves to meet contributions that have not
been made because they are not yet due under the terms of any Benefit Plan or
related agreement.
(c) Except as expressly set forth in Schedule 2.16, all
Benefit Plans and any amendments thereto are duly registered or filed where
required or permitted by law (including registration or filing with the relevant
tax authorities where such registration or filing is required to qualify for
tax-exemption or other beneficial tax status or to receive a ruling with respect
to qualifying for such tax-exemption or other beneficial tax status) and are in
good standing under, and in compliance with, all laws.
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(d) Except as set forth expressly on Schedule 2.16 or as
expressly contemplated in any employment agreement disclosed on Schedule 2.16,
Aptec and the Aptec Subsidiaries have reserved all rights necessary to amend or
terminate each of the Benefit Plans without the consent of any other person,
except with respect to claims under any such Benefit Plan that are incurred but
unpaid as of the date of any such amendment or termination.
(e) There are no outstanding defaults or violations by Aptec
and the Aptec Subsidiaries (or, to the knowledge of Aptec, any allegations
thereof) of any obligation required to be performed by any of them in connection
with any Benefit Plan. No order has been made or notice given pursuant to any
laws requiring (or proposing to require) Aptec or any Aptec Subsidiary or the
administrator or any funding agent to take (or refrain from taking) any action
in respect of any Benefit Plan.
(f) No returns, filings, reports and disclosures relating to
Benefit Plans are required by such Benefit Plans or by any governmental bodies
or any all laws.
(g) Except as set forth expressly in Schedule 2.16, Aptec and
the Aptec Subsidiaries have delivered to the EM the following documents:
(i) true, complete and up-to-date copies of all
documents embodying and summarizing the Benefit Plans including, without
limitation, with respect to each Benefit Plan, all amendments thereto, any trust
agreement, insurance contract or other funding arrangement and any summaries of
such Benefit Plans provided to employees;
(ii) the two (2) most recent actuarial valuations
prepared for each Benefit Plan for which valuations are required and any
subsequent interim or revised actuarial opinions or certificates for each such
Benefit Plan;
(iii) for those Benefit Plans which are funded plans,
the most recent accounting of such Benefits Plans' assets and liabilities; and
(iv) for those Benefit Plans which must be registered
with any governmental body (including, without limitation, revenue authorities),
evidence of the relevant registration.
Except as set forth expressly in Schedule 2.16, knowledge of any fact, condition
or circumstance since the date of the above listed documents which would
materially affect the information contained therein, in particular and without
limiting the generality of the foregoing, no contracts, promises or commitments
(whether legally binding or not) have been made by Aptec or any Subsidiary to
create or establish any additional Benefit Plan or amend any Benefit Plan or to
provide increased benefits thereunder to any employee, except as required by
applicable legislation.
(h) No event has occurred and there has been no act or failure
to act on the part of Aptec, any Aptec Subsidiary, any agent or any
administrator that has or could subject Aptec or any Aptec Subsidiary to any
liability or obligation to pay benefits not provided for
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under the terms of the Benefit Plans (including as required to be amended by any
applicable legislation in effect as of the Closing Date) or to the imposition of
any tax, penalty or other disability, whether by way of indemnity or otherwise,
that could have a Material Adverse Effect.
(i) Except as specifically set forth in Schedule 2.16, the
consummation of the transactions contemplated by this Agreement shall not
(either alone or upon the occurrence of any additional or subsequent event)
constitute an event under the terms of any Benefit Plan that shall or may result
in any payment (whether of severance or otherwise) or acceleration, vesting or
increase in benefits with respect to any employee or any acceleration or
increase in the funding requirements in respect of any Benefit Plan.
(j) Aptec and its Subsidiaries has maintained books and
records in respect of each Benefit Plan in accordance with all applicable laws
and such books and records are complete and accurate in all material respects
and include all data and information in respect of the Benefit Plans and the
assets held by Aptec and its Subsidiaries in connection therewith that EM may
reasonably be expected for the administration of such Benefit Plans and include
all books and records which are customarily maintained in respect of such
benefit plans.
(k) No Benefit Plan provides for post-employment health, life
insurance or other welfare benefit coverage.
Section 2.17 ERISA Plans.
(a) There is no employee pension benefit plan (the "Pension
Plans") as defined in Section 3(2) of the Employee Retirement Income Security
Act of 1974 ("ERISA") or employee welfare benefit plan (the "Welfare Plans" and,
together with the Pension Plans, collectively referred to as the "ERISA Plans")
as defined in Section 3(1) of ERISA, which is subject to ERISA, established,
maintained or contributed to by Aptec or any ERISA Affiliate or to which Aptec
or any ERISA Affiliate had an obligation to contribute during the five years
preceding the date hereof. As used herein, the term "ERISA Affiliate" means a
corporation which is a member of a controlled group of corporations with Aptec
or any Aptec Subsidiary within the meaning of Section 414(b) of the Internal
Revenue Code of 1986 (the "Code"), a trade or business (including a sole
proprietorship, partnership, trust, estate or corporation) which is under common
control with Aptec or any Aptec Subsidiary within the meaning of Section 414(c)
of the Code, or a member of an affiliated service group with Aptec or any Aptec
Subsidiary within the meaning of Section 414(m) or Section 414(o) of the Code.
(b) No contract, agreement, plan or other arrangement, whether
or not an ERISA Plan (other than this Agreement), exists pursuant to which the
execution of this Agreement would trigger an obligation by Aptec or any Aptec
Subsidiary to pay any amount or provide any property to any employee, officer or
director of Aptec or any of the Aptec Subsidiaries.
Section 2.18 Compliance with Law. Aptec and the Aptec
Subsidiaries, their officers, directors, agents and employees have complied with
all applicable statutes, regulations, orders and restrictions of the United
States of America, all states and other subdivisions thereof,
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of Canada, all provinces and subdivisions thereof, all applicable foreign
jurisdictions, all agencies and instrumentalities of the foregoing and all
national and international self-regulatory bodies and authorities in respect of
the conduct of Aptec's and the Aptec Subsidiaries' business and ownership of
their properties, except where such failure to comply would not have a Material
Adverse Effect.
Section 2.19 Litigation. Except set forth in Schedule 2.19,
there is no action, suit, claim, proceeding, inquiry or investigation pending
or, to the knowledge of Aptec, threatened, against or affecting Aptec or any
Aptec Subsidiary, or the assets, properties, business or business prospects of
Aptec or any Aptec Subsidiary, or relating to or involving the transactions
contemplated by this Agreement at law or in equity, or before or by any
arbitrator or any federal, state, local or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, and
Aptec knows of no basis for any of the foregoing. Except as set forth on
Schedule 2.19, none of Aptec or any Aptec Subsidiary has received any opinion or
memorandum or legal advice or notice from legal counsel to the effect that it is
exposed, from a legal standpoint, to any liability or disadvantage that may have
a Material Adverse Effect. Neither Aptec nor any Aptec Subsidiary is in default
with respect to any order, writ, injunction or decree known to or served upon
Aptec or such Aptec Subsidiary. There is no pending action or suit brought by
Aptec or any Aptec Subsidiary against others.
Section 2.20 Material Contracts.
(a) Except for this Agreement, the Merger Agreement and the
collateral agreements contemplated in this Agreement and the Merger Agreement to
be entered into among the parties hereto and except as set forth on Schedule
2.20, neither Aptec nor any Aptec Subsidiary is a party to any written or oral:
(i) contract involving an income or expense in excess of
C$75,000 (on an annualized basis) or contract not made in the ordinary
course of business;
(ii) consulting agreement or contract for the employment
of any officer, employee or other person on a full-time, part-time or
consulting basis;
(iii) agreement, mortgage, indenture, loan or credit
agreement, security agreement, guaranty or indemnity or other agreement
or instrument relating to the borrowing or lending of money or
extension of credit or providing for the mortgaging or pledging of, or
otherwise placing a lien or security interest on, any assets or
properties of Aptec or any Aptec Subsidiary;
(iv) option, warrant or other contract for the purchase of
any debt or equity security of any corporation, or for the issuance of
any debt or equity security, or the conversion of any obligation,
instrument or security into debt or equity securities, of Aptec or any
Aptec Subsidiary;
(v) settlement agreement of any administrative or judicial
proceedings within the past five years; or
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(vi) intellectual property (including trademark) licensing
agreements.
(b) Neither Aptec nor any of the Aptec Subsidiaries is in
breach of or in default under any of the contracts, obligations or commitments
set forth on Schedule 2.20 (collectively, the "Contracts"), and no event has
occurred that, with the giving of notice or lapse of time or both, would
constitute such a breach or default. Except as set forth on Schedule 2.20, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not (i) violate, or conflict with, or
result in a breach of any provision of or constitute a default (or an event
which, with the giving of notice the passage of time or otherwise, would
constitute a default) under, or entitle any party (with the giving of notice,
the passage of time or otherwise) to terminate, accelerate or call a default
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Aptec or any Aptec
Subsidiaries under, any of the terms or conditions of any Contract or (ii)
require the consent of any party (other than Aptec or Aptec Subsidiaries) to any
Contract. Aptec has furnished Aptec with a true and complete copy of all written
contracts, obligations or commitments set forth on Schedule 2.20, and with
accurate descriptions of all oral contracts, obligations or commitments set
forth on Schedule 2.20.
Section 2.21 Conduct of Business. Except pursuant to the
transactions contemplated in the Merger Agreement or herein, since August 31,
1998, Aptec has preserved the business organization of Aptec and the Aptec
Subsidiaries intact, kept available to Aptec and the Aptec Subsidiaries the
services of all current officers and employees, and preserved the goodwill of
the suppliers, customers, employees and others having business relations with
Aptec and the Aptec Subsidiaries. Except pursuant to the transactions
contemplated in the Merger Agreement or herein, and except as set forth on
Schedule 2.21, since August 31, 1998, Aptec and the Aptec Subsidiaries have
conducted their business in the ordinary course, have maintained their assets
and properties in at least as good order and condition as existed on August 31,
1998 (other than wear as may be accounted for by reasonable use) and as is
necessary to continue to conduct their business and have not and will not
through to the Closing Date:
(a) incurred any obligation or liability (absolute, accrued,
contingent or other), except in the ordinary course of business;
(b) discharged or satisfied any lien or encumbrance, or paid
or satisfied any obligation or liability (absolute, accrued, contingent
or other), other than liabilities reflected on the Balance Sheet or
incurred since August 31, 1998 in the ordinary course of business
consistent with past practice; or in connection with the Purchase for
Cancellation Agreement with Philip Stark in an amount of up to US$
43,859.
(c) written down or written off any Accounts Receivable,
except for the accrual of reserves as permitted under Section 2.12.
(d) increased or established any reserve for taxes or other
liabilities on its books or otherwise provided therefor, except for
current taxes due in the ordinary cause of business;
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(e) mortgaged, pledged or subjected to any lien, charge or
other encumbrance any of the assets or properties of Aptec or any of
the Aptec Subsidiaries;
(f) sold, assigned or transferred any asset, property or
business or canceled any debt or claim or waived any right, except
sales of inventory, immaterial amounts of other assets in the ordinary
course of business and the aircraft referred to in paragraph (k) below;
(g) except as set forth in Schedule 2.21(g), granted any
increase in the compensation (including bonuses and deferred
compensation) payable to any executive officer, director, key employee
of Aptec or any Aptec Subsidiary other than Mr. Edward Zieba or granted
any increase in compensation to any other employee of Aptec or any
Aptec Subsidiary in excess of five percent (5%); or paid or accrued for
the benefit of Mr. Edward Zieba any salary, bonus or other compensation
or benefit which would have the effect of reducing the Book Value of
Aptec at August 31, 1999 to less than C$1,648,048.
(h) made or authorized any capital expenditure for additions
to plant and equipment of Aptec and the Aptec Subsidiaries in excess of
C$20,000 in the aggregate except as may have been necessary for
ordinary repair, maintenance and replacement;
(i) made or forgiven any loan to any shareholder or any
relative or affiliate of any shareholder, or declared, set aside or
paid to any shareholder any dividend or other distribution in respect
of its capital stock, or redeemed or purchased any of its capital
stock, or agreed to take any such action;
(j) transferred any asset or paid any commission, salary or
bonus to any shareholder or any relative or affiliate of any
shareholder other than the payment of wages or salaries to shareholder
employees in the ordinary course of business and as disclosed on
Schedule 2.13, or paid any rent, commission or fee to any shareholder
or any relative or affiliate of any shareholder other than pursuant to
leases disclosed on Schedule 2.09 in the amounts shown thereon;
(k) entered into or agreed to enter into any transaction with
or for the benefit of any shareholder or any relative or affiliate of
any shareholder, other than the transactions contemplated by this
Agreement or the Merger Agreement and the sale of the Cessna 340 to Mr.
Zieba or his designee at a cash price payable on or before the Closing
Date equal to its depreciated book value at the time of sale; or
(l) issued, sold or transferred, or agreed to issue, sell or
transfer, any stock, bond, debenture or other security of Aptec or the
Aptec Subsidiaries.
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Section 2.22 Tax Matters.
(a) Aptec and the Aptec Subsidiaries in a timely manner have
filed all returns and other reports required of them under all Canadian federal,
provincial, local and foreign tax laws to which they are subject and have paid
all taxes shown due on such returns. All such returns and reports are true,
correct and complete in all material respects and accurately set forth all items
to the extent required to be reflected or included in such returns by applicable
federal, state, local or foreign tax laws, regulations or rules. Aptec and the
Aptec Subsidiaries have paid in full or set up an adequate reserve in respect of
all taxes for the periods covered by such returns, as well as all other material
taxes, penalties, interest, fines, deficiencies, assessments and governmental
charges that have become due or payable, including without limitation all taxes
that Aptec or any of the Subsidiaries is obligated to withhold from amounts paid
or payable to or benefits conferred upon employees, creditors and third parties.
Neither Aptec nor any Aptec Subsidiary has any tax liability for which an
adequate tax reserve has not been established on the Balance Sheet, whether or
not disputed, including any interest and penalty in connection therewith, for
all periods ending on or prior to the date of the Balance Sheet. With respect to
any periods for which tax returns have not yet been required to be filed or for
which taxes are not yet due and payable, Aptec and the Aptec Subsidiaries have
only incurred liability for taxes in the ordinary course of their business and
in the manner and at a level consistent with prior years.
(b) Set forth on Schedule 2.22 is a complete list of income
and other tax returns filed by Aptec or any of the Aptec Subsidiaries pursuant
to the laws or regulations of any federal, state, local or foreign tax authority
that have been examined or audited by the IRS or other appropriate authority
during the preceding ten years (or five years, with respect to all returns other
than income tax returns). Also set forth on Schedule 2.22 is a complete list of
all adjustments resulting from each such examination or audit. No tax
examination or audit is in progress. No changes proposed by a taxing authority
in an audit during such ten (or five) year period (other than changes disclosed
in Schedule 2.22) can reasonably be expected to affect the amount of tax
liability for Aptec or any Aptec Subsidiary in the future. All deficiencies
proposed as a result of such examinations or audits have been paid or finally
settled and no issue has been raised in any such examination or audit that, by
application of similar principles, reasonably can be expected to result in the
assertion of a deficiency for any other year not so examined or audited. The
results of any settlement and the necessary adjustments resulting therefrom
properly are reflected in the Balance Sheet. The period during which any
assessment against Aptec or any of the Aptec Subsidiaries may be made by the IRS
or other appropriate authority has expired without waiver or extension for the
years set forth on Schedule 2.22 for each such authority. There are no grounds
for any further tax liability with respect to the years that have not been
examined or audited. There is no outstanding agreement or waiver made by or on
behalf of Aptec or any of the Aptec Subsidiaries for the extension of time for
any applicable statute of limitations, and neither Aptec nor any of the Aptec
Subsidiaries has requested any extension of time in which to file any tax
return.
(c) Except for taxes for the payment of which an adequate
reserve has been established on the Balance Sheet and for property taxes that
are not delinquent, there is no tax lien, whether imposed by any federal, state,
local or foreign taxing authority, outstanding against any of the assets or
properties of Aptec or any of the Aptec Subsidiaries.
(d) No Aptec Subsidiary has executed any closing agreement
pursuant to Section 7121 of the Code or any predecessor provision thereof, or
any similar provision of state or local law.
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(e) Aptec has not filed a consent pursuant to Section 341(f)
of the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by Aptec or any Subsidiary.
(f) None of the assets owned by any Aptec Subsidiary is
property that is required to be treated as owned by any other person pursuant to
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended, as in effect
immediately prior to the enactment of the Tax Reform Act of 1986 or is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(g) Aptec is not a party to a tax sharing agreement or similar
arrangement.
(h) Neither Aptec nor any Aptec Subsidiary has agreed, and
neither is required to make any adjustments pursuant to Section 481(a) of the
Code or any similar provision of state or local law by reason of a change in
accounting method initiated by it or any other relevant party, and neither has
any knowledge that the IRS has proposed any such adjustment or change in
accounting method, and there is no application pending with any taxing authority
requesting permission for any changes in accounting methods that relate to the
business or assets of Aptec or any Aptec Subsidiary.
(i) Aptec has not made any payments, is not obligated to make
any payments, and is not a party to any agreement that under any circumstances
could obligate it to make payments, in each case that would not be deductible
under Section 280G of the Code.
(j) As used in this Agreement, the term "tax return" includes
any material report, statement, form, return or other document or information
required to be supplied to a taxing authority in connection with taxes. As used
in this Agreement, the term "taxes" means any federal, state, local and foreign
income or gross receipts tax, alternative or add-on minimum tax, sales and use
tax, customs duty and any other tax, charge, fee, levy or other assessment
including without limitation property, transfer, occupation, service, license,
payroll, franchise, excise, withholding, ad valorem, severance, stamp, premium,
windfall profit, employment, rent or other tax, governmental fee or like
assessment or charge of any kind whatsoever, together with any interest, fine or
penalty thereon, addition to tax, additional amount, deficiency, assessment or
governmental charge imposed by any federal, state, local or foreign taxing
authority.
(k) There are no contingent tax liabilities or any other
grounds that could prompt an assessment or reassessment of Aptec or the Aptec
Subsidiaries, including, but without limitation, aggressive treatment of income,
expenses, deductions, credits or other amounts in the filing of earlier or
current tax returns, nor has Aptec or the Aptec Subsidiaries received any
indication from any taxation authorities than an assessment or reassessment of
taxes is proposed.
(l) Aptec and the Aptec Subsidiaries have collected from each
receipt from any of their past and present customers (or other persons paying an
amount to Aptec or the Aptec Subsidiaries) the amount of all taxes (including
good and services tax and provincial sales tax) required to be collected and
have remitted such taxes when due, in the form required under the appropriate
legislation or made adequate provision for the payment of such amount to the
proper receiving authorities.
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(m) Aptec and the Aptec Subsidiaries have not at any time
benefited from a forgiveness of debt or entered into any transaction or
arrangement (including conversions of debt into shares of its share capital)
which could have resulted in the application of Section 80 and following of the
Income Tax Act, Canada (the "ITA") or the corresponding provisions of any
applicable provincial legislation.
(n) All refunds of taxes or credits claimed with respect to
research and development expenses (R&D) (Credits or Refunds) were claimed by
Aptec and the Aptec Subsidiaries in accordance with the ITA and the relevant
provincial legislation and Aptec and the Aptec Subsidiaries have satisfied at
all times the relevant criteria and conditions entitling them to such R&D
Credits or Refunds.
(o) Since the date of their incorporation, Aptec and Aptec's
Canadian subsidiaries have been "Canadian controlled private corporations"
within the meaning of the ITA.
(p) As of the Closing Date, there will not be any contract,
agreement, plan or arrangement including but not limited to the provisions of
this section, covering any employee or former employee of Aptec or the Aptec
Subsidiaries that, individually or collectively, could give rise to the payment
of any amount that would not be deductible by Aptec or the Aptec Subsidiaries as
an expense under any applicable tax law.
(q) The Zieba Holders are not non-resident persons within the
meaning of the ITA and any applicable provincial legislation.
(r) The Reorganization (as defined below) will not result in
the imposition of any tax on EM, Aptec or the Aptec Subsidiaries. The term
"Reorganization" shall mean the transaction described on Schedule 2.22 hereto.
Section 2.23 Absence of Undisclosed Liabilities. Neither Aptec
nor any Aptec Subsidiary has any indebtedness or liability, whether accrued,
fixed or contingent, other than (a) liabilities reflected in the Balance Sheet,
and (b) liabilities incurred in the ordinary course of business of Aptec and the
Aptec Subsidiaries (consistent with past practice in terms of both frequency and
amount) subsequent to the date of the Balance Sheet.
Section 2.24 Insurance. Set forth on Schedule 2.24 is a
complete list and description of all policies of insurance, together with the
premiums currently payable thereon, covering (i) damage to goods being
manufactured, shipped, held or otherwise processed by Aptec or any of the Aptec
Subsidiaries, (ii) providing for fire, property, casualty, business
interruption, personal or product liability, workers' compensation and other
forms of insurance coverage for Aptec or (iii) providing for fire, property,
casualty and other forms of insurance coverage for the Real Property. All such
policies or substantially comparable insurance will be outstanding and in full
force and effect at the Closing Date, and the consummation of the transactions
contemplated
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hereby will not cause a cancellation or reduction in the coverage of such
policies. There was no material inaccuracy in any application for any such
insurance coverage. Except as set forth on Schedule 2.24, there is no claim,
action, suit or proceeding arising out of or based upon any of such policies of
insurance, and no basis for any such claim, action, suit or proceeding exists.
There is no notice of any pending or threatened termination or premium increase
with respect to any of such policies, and Aptec and the Aptec Subsidiaries are
in compliance with all conditions contained therein.
Section 2.25 Corporate Name.
"Aptec" and "Aptec Instruments" constitute all of the business
styles and trade names presently used by Aptec and the Aptec Subsidiaries. Set
forth on Schedule 2.25 is a list of all jurisdictions, and the locations in such
jurisdictions, in which the corporate name "Aptec" and "Aptec Instruments", or
any variations thereof are used by Aptec or the Aptec Subsidiaries. Aptec has
the full legal right to use such names in Ontario and from and after the Closing
in New Brunswick. There is no actual or, to the knowledge of Aptec, threatened
claim by any third party with respect to the use of such names or of any actual
or proposed use of the name "Aptec" and "Aptec Instruments" or any variations
thereof by any third party in conflict with the use thereof by Aptec and the
Aptec Subsidiaries. The use by Aptec and the Aptec Subsidiaries of the name
"Aptec" and "Aptec Instruments" or any variations thereof does not infringe upon
the rights of any third party and neither Aptec nor any Subsidiary has granted
any third party any right to use such name or any variations thereof.
Section 2.26 Transactions with Related Parties.
(a) Except pursuant to the transactions contemplated in the
Merger Agreement or herein, and except as set forth on Schedule 2.26, there are
no outstanding notes payable to, accounts receivable from or advances by Aptec
or any of the Aptec Subsidiaries to, and neither Aptec nor any of the Aptec
Subsidiaries is otherwise a creditor of, any shareholder or former shareholder
of Aptec or any relative or affiliate of any shareholder or former shareholder
of Aptec. Except pursuant to the transactions contemplated in the Merger
Agreement or herein, since the date of the Balance Sheet, neither Aptec nor any
of the Aptec Subsidiaries has incurred any obligation or liability to, or become
a creditor of any shareholder or former shareholder of Aptec or any relative or
affiliate of any shareholder or former shareholder of Aptec.
(b) Except as set forth on Schedule 2.26, since the date of
the Balance Sheet, Aptec has neither declared any dividends nor paid any
dividends to any shareholder or former shareholder of Aptec or any relative of
any shareholder or former shareholder of Aptec.
(c) Neither Aptec nor any of the Aptec Subsidiaries has
purchased or leased real property from any shareholder or former shareholder of
Aptec or any relative of such person, including any other instruments granting
such leasehold interests, or involving rights, options or other interests.
Section 2.27 Permits. Aptec and the Aptec Subsidiaries have
all franchises, licenses, permits, certificates and other authorizations from
federal, state, provincial, local or
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foreign governments or governmental agencies, departments or bodies that are
necessary for the conduct of their business and which, if not obtained, would,
individually or in the aggregate, have a Material Adverse Effect (each a
"Permit"). Schedule 2.27 contains a list of all Permits. Aptec has no knowledge
of any fact, error or omission relevant to any Permit that would permit the
revocation or withdrawal, or the threatened revocation or withdrawal, thereof.
Aptec and the Subsidiaries will continue to have the use and benefit thereof and
the rights granted thereby after the Merger has occurred.
Section 2.28 Bank Accounts. Schedule 2.28 attached hereto
contains an accurate and complete list of:
(a) the names and addresses of each bank in which Aptec or any
Aptec Subsidiary has an account;
(b) the account numbers of such accounts; and
(c) the authorized signatories and amounts for such accounts.
Section 2.29 Product Liability. There are no pending product
liability, warranty, backcharge, additional work, field repair or other claims
by any third party (whether based on contract or tort and whether relating to
personal injury, including death, property damage or economic loss) arising from
(A) services rendered by Aptec or any Aptec Subsidiary, (B) the manufacture,
sale, distribution, erection or installation of products by Aptec or any Aptec
Subsidiary or (C) the operation of Aptec's or any Aptec Subsidiary's business.
Section 2.30 Customers. Set forth on Schedule 2.30 is a
complete list of the ten (10) largest (in terms of dollar volume) customers of
Aptec and the Aptec Subsidiaries for each of the fiscal years ended August 31,
1997 and 1998, indicating the amount paid to Aptec by each customer for each
such fiscal year and the names of the employees of Aptec who are primarily
responsible for servicing each such customer as of the date hereof. Except as
set forth on Schedule 2.30, none of such customers has terminated or indicated
an intention or plan to terminate all or a material part of the services
performed for or orders historically placed by such customers. Except as set
forth on Schedule 2.30, Aptec has satisfactory relationships with its major
customers, and suppliers and contractors, and Aptec has no reason to believe
there will be any adverse change in any of such relationships, whether by reason
of the Merger or for any other reason. None of the employees primarily
responsible for servicing customers listed thereon has indicated an intention or
plan to terminate his or her employment with Aptec.
Section 2.31 Intellectual Property Matters.
(a) As used herein, the term "Intellectual Property Assets"
includes:
(i) all fictional business names, trading names,
registered and unregistered trademarks, service marks, and applications
(collectively, "Marks");
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(ii) all patents, patent applications, and inventions
and discoveries that may be patentable owned by Aptec (collectively,
"Patents");
(iii) all registered copyrights in both published
works and unpublished works, and all rights in mask works
(collectively, "Copyrights"); and
(iv) all know-how, trade secrets, confidential
information, customer lists, customer histories, product formulations,
product information and specifications, software, technical
information, data, process technology, plans, drawings, and blue prints
(collectively, "Trade Secrets"), owned, used, or licensed by Aptec as
licensee or licensor.
(b) (i) Schedule 2.31(b) attached hereto contains a
complete and accurate list and summary description, including any royalties paid
or received by Aptec, of all contracts relating to the Intellectual Property
Assets to which Aptec is a party or by which Aptec is bound, except for any
license implied by the sale of a product and perpetual, paid-up licenses for
commonly available software programs with a value of less than $500 under which
Aptec is the licensee. There are no outstanding and, to Aptec's knowledge, no
threatened disputes or disagreements with respect to any such agreement.
(ii) The Intellectual Property Assets owned or used
by Aptec are all those necessary for the operation of Aptec's business as
currently conducted. Aptec is the owner of all right, title, and interest in and
to each of the Intellectual Property Assets, free and clear of all Liens and to
Aptec's knowledge other adverse claims, and to Aptec's knowledge has the right
to use without payment to a third party all of the Intellectual Property Assets.
No employee of Aptec has any rights to or interests in the Intellectual Property
Assets.
(iii) Except as set forth in Schedule 2.31(b)
attached hereto, all Aptec research employees who are currently employed or were
employed in the past two years have executed written contracts with Aptec that
assign to Aptec all rights to any inventions, improvements, discoveries, or
information relating to the business of Aptec. To Aptec's knowledge, no employee
has entered into any contract that restricts or limits in any way the scope or
type of work in which the employee may be engaged or requires the employee to
transfer, assign, or disclose information concerning his work to anyone other
than Aptec.
(c) Patents.
(i) Aptec and the Aptec Subsidiaries own no Patents.
(ii) None of the products manufactured and sold, nor
any process or know-how used by Aptec, infringes or is alleged to infringe any
patent or other proprietary right of any other Person, other than as disclosed
in Schedule 2.19.
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(d) Trademarks.
(i) Schedule 2.31(d) attached hereto contains a
complete and accurate list and summary description of all Marks.
(ii) All Marks that have been registered with the
United States Patent and Trademark Office are currently in compliance with all
formal legal requirements (including the timely post-registration filing of
affidavits of use and incontestability and renewal applications), are valid and
enforceable, and are not subject to any maintenance fees or taxes or actions
falling due within ninety days after the Closing Date.
(iii) No Mark has been or is now involved in any
opposition, invalidation, or cancellation and, to Aptec's knowledge, no such
action is threatened with respect to any of the Marks.
(iv) To Aptec's knowledge, there is no potentially
interfering trademark or trademark application of any third party.
(v) To Aptec's knowledge, no Mark is infringed or has
been challenged or threatened in any way and none of the Marks used by Aptec
infringes or is alleged to infringe any trade name, trademark, or service mark
of any third party.
(vi) All products and materials containing a Mark
bear the proper federal registration notice where permitted by law.
(e) Copyrights.
(i) Aptec and the Aptec Subsidiaries own no
Copyrights.
(ii) No Copyright is infringed or, to Aptec's
knowledge, has been challenged or threatened in any way. None of the subject
matter of any of the Copyrights infringes or is alleged to infringe any
copyright of any third party or is a derivative work based on the work of a
third party.
(iii) All works encompassed by the Copyrights have
been marked with the proper copyright notice.
(f) Trade Secrets.
(i) With respect to each Trade Secret, the
documentation if any defining relating to such Trade Secret is current,
accurate, and sufficient in detail and content to identify and explain it and to
allow its full and proper use without reliance on the knowledge or memory of any
individual.
(ii) Aptec has taken all reasonable precautions to
protect the secrecy, confidentiality, and value of the Trade Secrets.
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(iii) Aptec has good title and an absolute (but not
necessarily exclusive) right to use the Trade Secrets. Except as set forth on
Schedule 2.31(f), the Trade Secrets are not part of the public knowledge or
literature, and, to Aptec's knowledge, have not been used, divulged, or
appropriated either for the benefit of any person or to the detriment of Aptec.
No Trade Secret is subject to any adverse claim or has been challenged or
threatened in any way.
Section 2.32 Government Contracts. Schedule 2.32 sets forth
the nature and dollar amount of each contract obtained by Aptec and the Aptec
Subsidiaries since January 1, 1994 from any governmental body, agency or
department by reason of Aptec's and the Aptec Subsidiaries' status as a "small
business", with respect to which Aptec's status as a Canadian-controlled private
corporation is relevant or any other preferential, priority or set-aside
treatment granted under any federal, state or local law.
Section 2.33 Brokers. None of Aptec or any of the Aptec
Subsidiaries, or any of their respective officers, directors or employees, has
employed any investment banker, broker, finder or other intermediary or incurred
any liability for any brokerage fees, commissions or finder's fees in connection
with the transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE POLLOCK HOLDERS
The Pollock Holders, jointly and severally, make to EM the
representations and warranties as follows:
Section 3.01 Representations and Warranties in the Merger
Agreement. The representations and warranties set forth in Sections 2.01 through
and including Section 2.34 of the Merger Agreement are as of the date hereof,
and will on the Closing Date be, true and correct and are hereby made by the
Pollock Holders for the benefit of EM as though fully set forth herein. Any such
representations and warranties in the Merger Agreement which are qualified by
reference to knowledge shall continue to be so qualified for purposes of the
representations and warranties made by the Pollock Holders herein.
Section 3.02 Power and Authority. The execution, delivery and
performance by the Pollock Holders of this Agreement and the consummation by the
Pollock Holders of the transactions contemplated hereby are within the Pollock
Holders' power and authority. This Agreement has been duly and validly executed
and delivered by each Pollock Holder and, assuming the due and valid
authorization, execution and delivery of this Agreement by EM and all other
parties hereto other than the Pollock Holders, constitutes a valid and binding
agreement of the Pollock Holders, enforceable in accordance with its terms
except as may be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights generally
and by equitable principles of general applicability.
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Section 3.03 Ownership of Shares. (a) The shares of Aptec
Common Stock when issued to the Pollock Holders in the Merger will be owned by
them of record and beneficially, free and clear of any Liens. At the Closing, EM
will acquire valid and marketable title to the shares of Aptec Common Stock sold
by the Pollock Holders under Section 1.03, free and clear of any Liens.
(b) The shares of NRC Common Stock and the warrants to
purchase shares of NRC Common Stock held by the Pollock Holders were acquired by
the Pollock Holders for fair value.
Section 3.04 Allocation to Public Shareholders. The Allocation
(as such term is defined in the Fairness Opinion) of the value to the Public
Shareholders in the Merger is fair to such Public Shareholders from a financial
point of view, and from and after the Closing Date none of Aptec, Newco or EM
shall by virtue of the Merger or otherwise, have any obligations or liabilities
to the Public Shareholders, except as set forth in the Merger Agreement.
Section 3.05 Risks Associated with Aptec Common Stock. The
Pollock Holders understand and acknowledge that:
(i) They have carefully evaluated the Transactions with the
assistance and advice of their financial advisor and legal counsels;
(ii) There exist substantial risks associated with their
receipt of Aptec Common Stock in the Merger, including the possible loss or
decline in the value of such securities;
(iii) In deciding to accept their shares of Aptec Common Stock
in the Merger they have not relied upon any representations or warranties
whatsoever of Aptec or EM or their respective officers, directors, shareholders
and affiliates; and
(iv) Any projections, evaluations or other documents furnished
by or on behalf of Aptec or EM do not constitute a representation or warranty as
to the anticipated future financial performance of Aptec and the Pollock Holders
are not relying on any such projections, evaluations or other documents in
making their decision to vote in favor of the Merger and receive shares of Aptec
Common Stock.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EM
EM represents and warrants to the Zieba Holders and the
Pollock Holders as follows:
Section 4.01 Corporate Existence and Power. EM is a
corporation duly incorporated, validly existing and in good standing under the
laws of France and has all corporate power required to carry on its business as
now conducted. EM is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction where the character of the property
owned or leased by it or the nature of its activities makes such qualification
necessary.
Section 4.02 Corporate Authorization. The execution, delivery
and performance by EM of this Agreement and the consummation by EM of the
transactions contemplated hereby are within the corporate powers of EM and have
been duly authorized by all necessary corporate action on the part of EM. This
Agreement has been duly and validly executed and delivered by EM and, assuming
the due and valid authorization, execution and delivery of this Agreement by the
Zieba Holders, Aptec, the Pollock Holders and NRC, constitutes a valid and
binding agreement of EM, enforceable in accordance with its terms except as may
be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other similar laws affecting creditors' rights generally and by
equitable principles of general applicability. The Board of Directors of EM has
approved this Agreement and the transactions contemplated hereby. No other
corporate proceedings or shareholder approvals on the part of EM are necessary
to authorize or approve this Agreement or to consummate the transactions
contemplated hereby.
Section 4.03 Governmental Authorization. The execution,
delivery and performance by EM of this Agreement and the consummation by EM of
the Transactions contemplated hereby require no consent, waiver, approval,
authorization or permit by or from, or action by or in respect of, or filing
with, any Governmental Entity, other than Canadian federal and provincial
regulatory filings.
Section 4.04 Non-contravention. The execution, delivery and
performance by EM of this Agreement and the consummation by EM of the
transactions contemplated hereby do not and will not: (i) contravene or conflict
with the certificate of incorporation or by-laws of EM; (ii) contravene or
conflict with or constitute a violation of any provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to EM; (iii)
result in a breach or violation of or constitute a default (or an event that
with the giving of notice or the lapse of time or both would constitute a
default) under or give rise to a right of termination, amendment, cancellation
or acceleration of any right or obligation of EM or to a loss of any material
benefit to which EM is entitled.
Section 4.05 Financial Ability. At the Closing, EM will have
the financial ability, or will have available to it the financial resources from
its parent organization, to consummate the transactions contemplated in Article
I to this Agreement and to make the Loans and to purchase the shares of Aptec
Common Stock from Aptec, the Zieba Holders and the Pollock Holders as provided
in this Agreement.
Section 4.06 No other Agreements. Neither EM nor any of its
Affiliates has any agreement, option or right to acquire shares of Aptec Common
Stock, except for this Stock Acquisition Agreement and the Exhibits hereto.
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ARTICLE V
INDEMNIFICATION AND REMEDIES
Section 5.01 Survival. All representations, warranties,
covenants, and obligations in this Agreement, the Schedules, and any other
certificate or document delivered pursuant to this Agreement will survive the
Closing for the periods provided in this Article V. The right to
indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted by EM with respect to, or any knowledge acquired (or
capable of being acquired by EM) at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date, with respect to
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. The closing by EM of the Transactions
notwithstanding the inaccuracy of any representation or warranty, or on the lack
of performance of or compliance with any covenant or obligation, will not affect
EM's right to indemnification or payment of Damages (as hereafter defined),
based on such representations, warranties, covenants, and obligations.
Section 5.02 Indemnification and Payment of Damages by the
Zieba Holders. Subject to the provisions contained in this Article V, the Zieba
Holders, jointly and severally, will indemnify and hold harmless EM for, and
will pay EM the amount of any loss, liability, claim, damage or expense
(including reasonable costs of investigation and defense and reasonable
attorneys' fees), whether or not involving a third-party claim (collectively,
"Damages"), arising, directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by the
Zieba Holders in this Agreement, the Schedules, or any
certificate or document delivered by the Zieba Holders or
Aptec pursuant to this Agreement as if such representation
or warranty were made on and as of the Closing Date;
(b) any breach by the Zieba Holders or Aptec or Newco of any
covenant or obligation of the Zieba Holders or Aptec or
Newco in this Agreement;
(c) any Taxes for any period ending on or before the Closing
Date, or the portion of any period including but not
ending on the Closing Date, other than current Taxes for
such periods and except to the extent amounts have been
accrued on Aptec's financial statements in respect of such
Taxes;
(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement
or understanding alleged to have been made by any such
Person with the Zieba Holders or Aptec (or any Person
acting on their behalf) in connection with the Merger or
any of the transactions contemplated in this Agreement;
and
(e) any claim with respect to the matter disclosed in Schedule
2.19
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Section 5.03 Indemnification and Payment of Damages by the
Pollock Holders. Subject to the provisions contained in this Article V, the
Pollock Holders, jointly and severally, will indemnify and hold harmless EM for,
and will pay to EM the amount of any Damages, arising, directly or indirectly,
from or in connection with:
(a) any breach of any representation or warranty made by the
Pollock Holders in this Agreement, the Schedules, or any
certificate or document delivered by the Pollock Holders
or NRC pursuant to this Agreement as if such
representation or warranty were made on and as of the
Closing Date;
(b) any breach by the Pollock Holders or NRC of any covenant
or obligation of the Pollock Holders or NRC in this
Agreement;
(c) any Taxes in respect of NRC and the NRC Subsidiaries for
any period ending on or before the Closing Date, or the
portion of any period including but not ending on the
Closing Date, other than current Taxes for such period and
except to the extent amounts have been accrued on
Financial Statements in respect of such Taxes;
(d) any claim by a Public Shareholder that the Allocation is
not fair to such holder;
(e) any Environmental Damages in respect of NRC and the NRC
Subsidiaries, notwithstanding that the matter giving rise
thereto is disclosed on Schedule 2.16 of the Merger
Agreement; and
(f) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement
or understanding alleged to have been made by any such
Person with the Pollock Holders or NRC (or any Person
acting on their behalf) in connection with the Merger or
any of the transactions contemplated in this Agreement.
Section 5.04 Indemnification and Payment of Damages by EM. EM
will indemnify and hold harmless Sellers, and will pay to Sellers the amount of
any Damages arising, directly or indirectly, from or in connection with (a) any
breach of any representation or warranty made by EM in this Agreement or in any
certificate delivered by EM pursuant to this Agreement, (b) any breach by EM of
any covenant or obligation of EM in this Agreement, or (c) any claim by any
Person for brokerage or finder's fees or commissions or similar payments based
upon any agreement or understanding alleged to have been made by such Person
with EM (or any Person acting on its behalf) in connection with any of the
transactions contemplated in this Agreement.
Section 5.05 Time Limitations. Sellers will have no liability
(for indemnification or otherwise) with respect to any representation or
warranty, or covenant or obligation to be performed and complied with prior to
the Closing Date, unless on or before the expiration of the applicable claim
periods set forth in this Section 5.05, EM notifies Sellers of a
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claim specifying the factual basis thereof in reasonable detail to the extent
then known by EM. The time periods within which EM may assert a claim for
Damages shall be as follows:
(a) as against the Zieba Holders:
(i) with respect to claims for matters covered by
Sections 2.02, 2.05 and 2.22 of this Agreement (collectively, "Statute
Claims"), until the expiration of the applicable statute of
limitations, including any tolling thereof;
(ii) with respect to claims for matters covered by
Sections 2.07, 2.11 and 2.12 of this Agreement, until March 31, 2001;
(iii) with respect to claims for matters covered by
Section 2.15 of this Agreement, until the third (3rd) anniversary of
the Closing Date; and
(iv) with respect to claims for matters covered by
all other Sections of Article II of this Agreement not enumerated in
clauses (i), (ii) or (iii) above, until the expiration of the second
(2nd) anniversary of the Closing Date.
(b) as against the Pollock Holders:
(i) with respect to claims for matters covered by
Sections 2.05 and 2.23 of the Merger Agreement and claims for matters
covered by Sections 3.02, 3.03, 3.04 and 3.05 of this Agreement
(collectively, "Statute Claims"), until the expiration of the
applicable statute of limitations, including any tolling thereof.
(ii) with respect to claims for matters covered by
Sections 2.08 and 2.13 of the Merger Agreement, until March 31, 2001.
(iii) with respect to claims for matters covered by
Section 2.16 of the Merger Agreement, until the third (3rd) anniversary
of the Closing Date; and
(iv) with respect to claims for matters covered by
all other Sections of Article II of the Merger Agreement not enumerated
in clauses (i), (ii) or (iii) above, until the expiration of the second
(2nd) anniversary of the Closing Date.
Section 5.06 Threshold Amounts.
(a) The Zieba Holders will have no liability (for
indemnification or otherwise) with respect to claims
under this Article V until the total of all Damages
with respect to all such matters reaches or exceeds
$75,000 in the aggregate and then only for the excess
above such amount; provided, however, that the Zieba
Holders will be liable for all Statute Claims from
the first dollar incurred.
(b) The Pollock Holders will have no liability (for
indemnification or otherwise) with respect to claims
under this Article V until the total of all
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Damages with respect to all such matters reaches or
exceeds $75,000 in the aggregate and then only for
the excess above such amount; provided, however, that
the Pollock Holders will be liable for all Statute
Claims from the first dollar incurred.
Section 5.07 Limitations on Indemnification.
(a) Notwithstanding anything to the contrary in this
Article V, EM's rights to indemnification in respect
of all claims other than Statute Claims shall be
limited to the sum of $1,500,000 as against the Zieba
Holders and the sum of $1,500,000 as against the
Pollock Holders.
(b) EM's rights of recourse under this Article V with
respect to all claims except Statute Claims shall be
exercised in the following order:
(i) first, against the Zieba Escrow Account or the
Pollock Escrow Account, as the case may be up to the
amount of principal and interest then held by the
Escrow Agent;
(ii) second, against the Zieba Holders or the Pollock
Holders, as the case may be, to the extent of any
claims of EM in excess of clause (i) above and up to
an additional amount of $425,000 for the Pollock
Holders and $425,000 for the Zieba Holders, who shall
be liable personally to pay such amounts in cash to
EM; and
(iii) third, to the extent of any claims of EM in
excess of the foregoing clauses (i) and (ii) and up
to the aggregate amounts set forth in Section
5.07(a), against the Pollock Holders or the Zieba
Holders, as the case may be, who shall be liable
personally to EM for such amounts and shall settle
them in cash, at face value, unless they irrevocably
elect, by written notice to EM within thirty (30)
days of their receipt of a notice of claim to settle
such amounts by tendering to EM shares of Aptec
Common Stock free and clear of any Liens, each of
which, for purposes solely of this Section 5.07(b)
shall be deemed to represent the equivalent of $500
in cash.
Section 5.08 Procedure for Indemnification.
(a) Promptly after receipt by an indemnified party
(an "Indemnified Party") under this Article V of
notice of a claim or the commencement of any
proceeding against it (a "Third Party Claim"), such
Indemnified Party will, if a claim is to be made
against an indemnifying party (an "Indemnifying
Party") under this Article V, give written notice
within 15 Business Days to the Indemnifying Party of
the commencement of such claim or proceeding,
describing in reasonable detail such claim or
proceeding, but the failure to notify the
Indemnifying Party will not relieve the Indemnifying
Party of any liability that it may have to any
Indemnified
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Party, except to the extent that the Indemnifying
Party demonstrates that the defense of such action is
prejudiced by the Indemnifying Party's failure to
give such notice.
(b) Upon receipt by the Indemnifying Party of written
notice of the commencement of any proceeding against
the Indemnified Party, the Indemnifying Party will,
unless the claim is a Statute Claim, be entitled to
participate in such proceeding and, to the extent
that it wishes (unless (i) the Indemnifying Party is
also a party to such proceeding and the Indemnified
Party determines in good faith that joint
representation would be inappropriate, or (ii) the
Indemnifying Party fails to provide reasonable
assurance to the Indemnified Party of its financial
capacity to defend such proceeding and provide
indemnification with respect to such proceeding), to
assume the defense of such proceeding with counsel
reasonably satisfactory to the Indemnified Party and,
after notice from the Indemnifying Party to the
Indemnified Party of its election to assume the
defense of such proceeding, the Indemnifying Party
will not, as long as it diligently conducts such
defense, be liable to the Indemnified Party under
this Article V for any fees of other counsel or any
other expenses with respect to the defense of such
proceeding, in each case subsequently incurred by the
Indemnified Party in connection with the defense of
such proceeding, other than reasonable costs of
investigation. If the Indemnifying Party assumes the
defense of a proceeding, (i) it will be conclusively
established for purposes of this Agreement that the
claims made in that proceeding are within the scope
of and subject to indemnification; (ii) no compromise
or settlement of such claims may be effected by the
Indemnifying Party without the Indemnified Party's
consent, which consent shall not be unreasonably
withheld, provided that the Indemnified Party's
consent shall not be required if (A) there is no
finding or admission of any violation of Legal
Requirements or any violation of the rights of any
Person and no effect on any other claims that may be
made against the Indemnified Party, and (B) the sole
relief provided is monetary damages that are paid in
full by the Indemnifying Party; and (iii) the
Indemnified Party will have no liability with respect
to any compromise or settlement of such claims
effected without its consent, which consent shall not
be unreasonably withheld. If notice is given to an
Indemnifying Party of the commencement of any
proceeding and the Indemnifying Party does not,
within twenty days after the Indemnified Party's
notice is given, give notice to the Indemnified Party
of its election to assume the defense of such
proceeding, the Indemnifying Party will be bound by
any determination made in such proceeding or any
compromise or settlement effected by the Indemnified
Party.
(c) Notwithstanding the foregoing, if an Indemnified
Party determines in good faith that there is a
reasonable probability that a proceeding may
adversely
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affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to
indemnification under this Agreement, the Indemnified
Party may, by notice to the Indemnifying Party,
assume the exclusive right to defend, compromise, or
settle such proceeding, but the Indemnifying Party
will not be bound by any determination of a
proceeding so defended or any compromise or
settlement effected without its consent (which may
not be unreasonably withheld).
(d) Sellers hereby consent to the non-exclusive
jurisdiction of any court in which a Proceeding is
brought against any Indemnified Party for purposes of
any claim that an Indemnified Party may have under
this Agreement with respect to such Proceeding or the
matters alleged therein and agree that process may be
served on Sellers with respect to such a claim
anywhere in the world.
(e) A claim for indemnification for any matter not
involving a third-party claim or a Proceeding shall
be asserted by written notice by the Indemnified
Party to the Indemnifying Party. Claims against the
Zieba Escrow Account or the Pollock Escrow Account
will be made in accordance with the procedures set
forth in the Escrow Agreements.
Section 5.09 Computation of Damages.
(a) For purposes of this Article V, the amount of Damages in
each instance where indemnification is sought shall be deemed to be an amount
(x) net of any insurance proceeds and any indemnity, contribution or other
similar payment actually received from any third party with respect thereto, and
(y) net of any tax benefit actually realized by Aptec or Newco, as the case may
be (i.e. the amount of Damages shall be computed on an after-tax-basis to the
extent that the costs to which such Damages relate actually give rise to a tax
deduction). For purposes of this Section, a tax benefit will arise when actually
realized by Aptec or Newco in the year in which the accrual of such costs is
made and the amount of such tax benefit shall be determined by reference to
Newco's (if the claim pertains to indemnification to EM by the Pollock Holders)
or Aptec's (if the claim pertains to indemnification to EM by the Zieba Holders)
effective rate of taxation in such year, without giving effect to the inclusion
of Newco or Aptec in any consolidated tax return of EM or its Affiliates.
(b) Notwithstanding anything to the contrary in this Article
V, in respect of any claims by EM arising from costs, losses or expenses
incurred by Aptec or its Subsidiaries or NRC or its Subsidiaries, EM's sole
remedy shall be to receive indemnification for Damages under this Article V
equal to fifty-one percent (51%) of such costs, losses or expenses after
application of Section 5.09(a).
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Section 5.10(A) Special Indemnity from the Pollock Holders.
The Pollock Holders shall promptly upon demand pay to Aptec or Newco the
following:
(a) The amount of all Accounts Receivable (other than
retainers not yet due) of NRC or any NRC Subsidiary which remain uncollected
after one year from the Closing Date which in the aggregate exceeds $100,000;
(b) The amount of any claims in respect of the matters
disclosed in Schedule 2.24 of the Merger Agreement; and
(c) The amount of any claims in respect of the matter
disclosed in item 3 of Schedule 2.20 of the Merger Agreement.
The foregoing indemnity shall be excluded from the scope of Sections 5.05, 5.06,
5.07 and 5.09 and shall survive for a period of three years from the Closing,
and shall be in lieu of and not in addition to any right of indemnification of
EM in respect to similar indemnification matters contained in Article V.
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Section 5.11 Indemnification for Certain Tax Consequences.
(a) If EM takes any action, or causes Aptec or any Subsidiary
of Aptec to take any action, that breaches or violates any of the
representations, warranties and covenants contained in Section 6.02 of the
Merger Agreement or Section 6.06 hereof and which results in a Statement Filer,
as defined below, (or any other person) being required to recognize gain on the
exchange, in accordance with the Merger Agreement, of his or her NRC Common
Stock or warrants for Aptec Common Stock (the "NRC Exchange") prior to the end
of the five taxable year period referred to in Treas. Reg. ss. 1.367(a)-8(b)(3)
(the "End Date"), then EM shall be liable to reimburse the Statement Filer (or
other person) for the amount of interest and penalties which he or she is
required to pay to the United States Government as a consequence of such gain
recognition [plus an amount equal to the Hypothetical Interest (as defined
below) on the amount of income tax paid to the United States Government by the
Statement Filer(s) as a consequence of such gain recognition]; provided,
however, that no amounts shall be due pursuant to this Section 5.11 to the
extent that amounts are paid by Aptec pursuant to Section 6.03 of the Merger
Agreement. Each such reimbursement amount shall be grossed up to take into
account the amount of additional tax payable by the Statement Filer as a
consequence of receipt of any reimbursement as provided above plus the amount of
any gross-up received pursuant to this sentence. Any claim for indemnification
under this Section 5.11 must be made within thirty (30) days after the
expiration of the statute of limitations on the assessment of the tax for the
relevant year.
(b) A "Statement Filer" is a person who files a Gain
Recognition Agreement under Treas. Reg. ss. 1.367(a)-8 with respect to any NRC
Exchange.
(c) Any amount due pursuant to Section 5.11(a) with respect to
the payment of interest and penalties paid to the United States Government by
the Statement Filer(s) shall be paid to the Statement Filer(s) within ten (10)
Business Days after the delivery to EM of a calculation in reasonable detail of
the interest and penalties paid and proof of payment of the interest and
penalties. Any amounts due pursuant to Section 5.11(a) with respect to the tax
on any gross-up shall be paid to the Statement Filer(s) within ten (10) Business
Days after the delivery to EM of a calculation in reasonable detail of the
amount of income tax due as the result of the receipt of any such gross-up and
proof of payment of the tax.
(d) "Hypothetical Interest" with respect to tax paid by any
Statement Filer shall mean an amount of interest calculated at the rate of Prime
(as defined below) plus three percentage points compounded monthly for the
period beginning with the date on which an amount of tax is paid by the
Statement Filer(s) to United States Government and ending on the End Date.
Hypothetical Interest due hereunder to the Statement Filer(s) shall be paid in
arrears on the first day of each quarter annual period following the Tax Payment
Date.
(e) "Prime" for purposes of this Agreement shall mean the
Prime Rate as published in the Wall Street Journal on the Closing Date.
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(f) No limitation set forth in this Agreement except in this
Section 5.11 or any other agreement with respect to time or amount of
indemnification due any party hereunder shall apply to amounts due under this
Section 5.11.
Section 5.12 Interest on claims. Any claims for
indemnification under this Article V which are not paid when due will bear
interest at the rate of seven percent (7%) per annum from thirty (30) days after
the date such claims are first made until such claims are paid.
Section 5.13 Disputes. Any disputes with respect to claims for
indemnification under this Article V shall be subject to the jurisdiction of the
courts as provided in Section 9.06. The party prevailing on a claim to enforce
its right to indemnification hereunder shall be entitled to collect its costs of
the action, including attorneys' fees and court costs.
ARTICLE VI
COVENANTS OF THE PARTIES
Section 6.01 Reasonable Best Efforts. Subject to the terms and
conditions herein provided, each of the parties will use its reasonable best
efforts to take, or cause to be taken, all action, and to do, or cause to be
done and to assist and cooperate with the other parties in doing, as promptly as
practicable, all things necessary or advisable under applicable laws and
regulations to ensure that the conditions set forth in Article VII are satisfied
and to consummate and make effective the transactions contemplated by this
Agreement. If at any time after the Closing Date any further action is
reasonably necessary or desirable to carry out the purposes of this Agreement,
including the execution of additional instruments, the proper officers and
directors of each party will take all such action.
Section 6.02 Consents. Each of the parties will use its
reasonable best efforts to obtain as promptly as practicable all consents,
waivers, approvals, authorizations or permits of any Governmental Entity or any
other Person required in connection with the consummation of the transactions
contemplated by this Agreement.
Section 6.03 Public Announcements. None of Aptec, NRC or the
Sellers will issue any press release or make any other public announcement
concerning this Agreement, the Merger or the transactions contemplated hereby
without the prior consent of EM, except that any party may make such public
disclosure that it believes in good faith and upon the reasoned advice of
counsel to be required by law (in which event such party will notify EM prior to
making such disclosure).
Section 6.04 Notification of Certain Matters. The Sellers
promptly will notify EM of: (i) the occurrence or non-occurrence of any fact or
event that would be reasonably likely to cause any (x) representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Closing Date or (y) material
covenant, condition or agreement contained in this Agreement not to be complied
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with or satisfied in all material respects; and (ii) any failure of NRC, Aptec
or the Sellers to comply with or satisfy in any material respect any covenant,
condition or agreement contained in this Agreement.
Section 6.05 Access to Information. From the date hereof until
the Closing Date, Aptec, NRC and the Sellers will, and will cause each of their
respective Subsidiaries to: (i) give EM and its counsel, financial advisors,
auditors and other authorized representatives reasonable access during normal
business hours to the offices, properties, books and records of such party and
its Subsidiaries as EM reasonably may request, and furnish EM with such
financial and operating data and other information as EM reasonably may request;
and (ii) instruct such parties' employees, counsel and financial advisors to
cooperate with EM in its investigation of the business of such party and its
Subsidiaries.
Section 6.06 Covenants Regarding Section 367.
(a) Before January 1, 2005, EM will cause Aptec not to dispose
of any of the shares of Newco stock owned following the Merger, except in (i)
dispositions that do not constitute exchanges for United States federal income
tax purposes and (ii) dispositions in which gain is not required to be
recognized for United States federal income tax purposes;
(b) Before January 1, 2005, EM will cause Newco not to dispose
of substantially all, within the meaning of Section 368(a)(1)(C) of the Code, of
the assets of NRC, received in the Merger except for dispositions described in
Treas. Reg. ss. 1.367(a)-8(e)(3)(B); and
(c) In the event Aptec disposes of the stock of Newco or Newco
disposes of substantially all of the assets of NRC received in the Merger, in
either case in a transaction not violating this Section 6.06, EM will cause
Aptec to cooperate with the Pollock Holders in complying with the requirements
of Section 367 of the Code and the regulations promulgated thereunder, and shall
provide the Pollock Holders with any information that is within the control of
Aptec or Newco and that is reasonably requested to enable them to comply with
such statute and regulations.
ARTICLE VII
CONDITIONS TO THE TRANSACTIONS
Section 7.01 Conditions to the Obligations of Each Party. The
respective obligations of the parties to consummate the Transactions are subject
to the satisfaction, at or prior to the Closing Date, of each of the following
conditions:
(a) The shareholders of NRC shall have approved and adopted
the Merger Agreement and the Merger pursuant to the requirements of NRC's
articles of incorporation and by-laws and applicable law, all conditions to the
Merger shall have been fulfilled and the Merger shall have been consummated at
the Effective Date.
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(b) The consummation of the Merger and the Transactions shall
not be restrained, enjoined or prohibited by any order, judgment, decree,
injunction or ruling of a court of competent jurisdiction or any Governmental
Entity entered after the parties have used their reasonable best efforts to
prevent such entry. There shall not have been any statute, rule or regulation
enacted, promulgated or deemed applicable to the Merger or the Transactions by
any Governmental Entity that prevents the consummation of the Merger or the
Transactions.
(c) The governmental and other consents required to be
obtained in connection with the Merger and the Transactions, as set forth in
Schedule 7.01, shall have been obtained or waived.
(d) The Escrow Agreements in the form of Exhibit D1 and D2
hereto shall have been executed and delivered by all parties thereto.
(e) The Shareholders Agreement in the form of Exhibit E hereto
shall have been executed and delivered by all parties thereto.
Section 7.02 Conditions Precedent to the Obligations of EM.
The obligations of EM to consummate the Transactions are subject to the
satisfaction, at or prior to the Closing Date, of each of the following further
conditions:
(a) Each of the representations and warranties of the Sellers
contained in this Agreement shall have been true and correct in all respects
when made and on and as of the Closing Date as if made on and as of such date,
and the Sellers shall have performed and complied in all material respects with
all agreements and covenants required to be performed and complied with by each
of them under this Agreement on or prior to the Closing Date. EM shall have
received certificates to such effect from the Zieba Holders and the Pollock
Holders, in the form of Exhibits F and G, respectively.
(b) Mr. Earl Pollock shall have duly executed and delivered
the Non-Competition Employment and Consulting Agreement in the form of Exhibit H
hereto.
(c) Mr. Edward Zieba shall have executed and delivered the
Non- Competition and Employment Agreement in the form of Exhibit I hereto.
(d) EM shall have received instruments of transfer and share
certificates representing the shares of Aptec Common Stock acquired pursuant to
Article I, in form reasonably acceptable to EM's counsel.
(e) EM shall have received a favorable opinion of Wolf, Block,
Schorr and Solis-Cohen LLP, dated the Closing Date, with respect to matters set
forth in Exhibit J and a favorable opinion of Torkin Manes Cohen & Arbus, dated
the Closing Date, with respect to the matters set forth in Exhibit K.
(f) The loan to Mark Pollock from NRC shall have been repaid
in full.
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Section 7.03 Conditions Precedent to the Obligations of the
Zieba Holders. The obligations of the Zieba Holders to consummate the
Transactions is subject to the satisfaction, at or prior to the Closing Date, of
each of the following further conditions:
(a) Each of the representations and warranties of EM contained
in this Agreement shall have been true and correct in all respects when made and
on and as of the Closing Date as if made on and as of such date EM shall have
performed and complied in all material respects with all agreements and
covenants required to be performed and complied with by it under this Agreement
on or prior to the Closing Date and the Zieba Holders shall have received a
certificate to such effect.
(b) Mr. Edward Zieba shall have received the Non Competition
and Employment Agreement in the form of Exhibit I duly executed by Aptec.
Section 7.04 Conditions Precedent to the Obligations of the
Pollock Holders. The obligations of the Pollock Holders to consummate the
Transactions is subject to the satisfaction, at or prior to the Closing Date, of
each of the following further conditions:
(a) Each of the representations and warranties of EM contained
in this Agreement shall have been true and correct in all respects when made and
on and as of the Closing Date as if made on and as of such date EM shall have
performed and complied in all material respects with all agreements and
covenants required to be performed and complied with by it under this Agreement
on or prior to the Closing Date and the Pollock Holders shall have received a
certificate to such effect.
(b) Mr. Earl Pollock shall have received the Non-Competition
Employment and Consulting Agreement in the form of Exhibit H duly executed by
Aptec.
(c) Earl Pollock and Dorothy Pollock shall have received
releases from their obligations as guarantors of the loan obligations of NRC and
its Subsidiaries to First Union National Bank in form and substance reasonably
acceptable to their counsel.
(d) NRC shall have assigned and transferred to Mr. Earl
Pollock or his designee all of NRC's right, title and interest in that certain
insurance policy on the life of Dorothy Pollock described on Schedule 2.14 of
the Merger Agreement, in consideration for the payment by Earl Pollock at
Closing to NRC of $142,404.49 (through May 1999) plus all premiums paid through
the Closing Date.
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ARTICLE VIII
TERMINATION; OTHER PROVISIONS
Section 8.01 Termination. This Agreement may be terminated and
the Transactions may be abandoned at any time prior to the Closing Date:
(a) by mutual written agreement of the Sellers and EM;
(b) by any of the Sellers or EM, upon termination of the
Merger Agreement or in the event the Transactions have not been
consummated on or before November 24, 1999; provided that the right to
terminate this Agreement pursuant to this Section 8.01(b) will not be
available to any party whose breach of any provision of the Merger
Agreement or of this Agreement results in the failure of the Merger or
of the Transactions to be consummated by such time;
(c) by any of the Sellers or EM, if there shall be any law or
regulation that makes consummation of the Transactions illegal or
otherwise prohibited or if any judgment, injunction, order or decree
enjoining the parties from consummating the Transactions is entered and
such judgment, injunction, order or decree shall become final and
non-appealable.
The party desiring to terminate this Agreement pursuant to
this Section 8.01 shall give notice of such termination to the other party.
Section 8.02 Effect of Termination. If this Agreement is
terminated pursuant to Section 8.01, this Agreement will become void and of no
effect with no liability on the part of any party hereto or its respective
directors, officers or shareholders, except that the agreements contained in
Section 8.03 will survive the termination hereof. Nothing herein shall relieve
any party from liability for any breach of this Agreement.
Section 8.03 Assessment and Remediation of Environmental
Matters.
(a) Promptly after the execution of this Agreement, EM will
retain the services of a firm (the "Consulting Firm") to conduct an
environmental assessment and investigation of NRC's facility located in
Warrington, PA (the "Property") in accordance with protocols and methods
approved by EM. The purpose of the assessment and investigation shall be to
ascertain the nature and extent of any environmental conditions on the Property,
including, inter alia, those that may be associated with the presence of
underground storage tanks on the Property.
(b) The Consulting Firm will perform such tests, soil borings,
samplings, analyzes and other procedures as EM and the Consulting Firm see fit
to determine whether or not there exists any contamination of the buildings,
vegetation soil or groundwater on the Property.
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(c) All fees, expenses and costs of any kind of the Consulting
Firm and agents, contractors, laboratories and others retained by or for EM in
connection with the environmental assessment and investigation ("Assessment
Costs") of the Property and sampling, testing and analyzing will be promptly
paid by NRC, whether or not the transactions contemplated by this Agreement are
consummated.
(d) In the event that the results of the tests and procedures
described in paragraph b above indicate, in the opinion of the Consulting Firm,
that cleanup, removal, containment or other remediation or corrective action
(collectively, "Remediation") is necessitated by any Environmental Requirement,
the Consulting Firm shall establish an estimate of the probable cost of such
Remediation (the "Remediation Estimate"). The Remediation Estimate will be
provided to all parties.
(e) NRC shall bear the first $75,000 of Assessment Costs and
Remediation Estimate (together, the "Total Costs") and up to an additional
amount of $425,000 of such Total Costs shall be deducted at the Closing from the
amounts payable to the Public Shareholders and the Pollock Holders under the
Merger Agreement and this Agreement on a basis consistent with the Allocation of
the value of the transactions contemplated in the Merger Agreement and this
Agreement.
(f) In the event that the Total Costs exceed $500,000 (any
such excess, the "Excess Remediation Costs"), EM or the Pollock Holders may
elect to terminate this Agreement by written notice to Aptec and NRC within five
(5) Business Days of the EM's receipt of the Remediation Estimate; provided
that, no such termination shall become effective if, within two (2) Business
Days of their receipt of EM's termination notice, the Pollock Holders and NRC
give written notice to EM and Aptec that they consent to a reduction of the
consideration to be paid at Closing to the Pollock Holders and the Public
Shareholders in the Merger and this Agreement on a basis consistent with the
Allocation of the value of the transactions contemplated in the Merger Agreement
and this Agreement by the amount of the Excess Remediation Costs. In the event
that the Pollock Holders exercise their right of termination as aforesaid, they
shall pay to EM $125,000 upon such termination.
(g) NRC and the Pollock Holders shall authorize the Consulting
Firm, its agents, contractors and their respective employees unrestricted access
to the Property to conduct their investigation, testing, borings and other
procedures and shall cooperate with and promptly provide to EM and the
Consulting Firm, and cause NRC's employees to provide, all information and data
in their custody or control deemed necessary or relevant by EM or the Consulting
Firm.
(h) Aptec agrees to substantially comply with the
recommendations of the Consulting Firm and to proceed with the Remediation up to
the amounts provided in paragraphs (e) or (f) above.
Section 8.04 Fees and Expenses. Each party shall bear its own
fees, costs and expenses (including accounting, auditing, and attorneys' fees)
incurred by such party in connection with the Merger, this Agreement and the
Transactions; provided, however, that the Pollock Holders will pay or reimburse
NRC or Aptec at the Closing for all such fees, costs and expenses incurred or
payable by NRC for services rendered from and after April, 1999 which are in
excess of $350,000 in the aggregate.
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ARTICLE IX
MISCELLANEOUS
Section 9.01 Notices. All notices, requests and other
communications to any party hereunder shall be in writing and shall be deemed to
have been duly given when delivered in person, by overnight courier or by
facsimile to the respective parties as follows:
If to Aptec or the Zieba Holders, to:
Aptec Instruments Ltd.
East 50B Caldari Road
Concord, Ontario
Canada L4K 4N8
Facsimile: (905) 660-9693
Attention: Mr. Edward Zieba
with a copy to:
Torkin, Manes, Cohen & Arbus
151 Yonge Street, Suite 1500
Toronto, Ontario
Canada M5C 2W7
Facsimile: (416) 863-0305
Attention: Howard Burshtein, Esq.
If to NRC or the Pollock Holders, to:
Nuclear Research Corporation
125 Titus Avenue
Warrington, Pennsylvania 18976
Facsimile: (215) 343-4670
Attention: Mr. Earl M. Pollock
with a copy if on or before July 4, 1999 to:
Wolf, Block, Schorr and Solis-Cohen LLP
111 South 15th Street
Philadelphia, Pennsylvania 19102-2678
Facsimile: (215) 977-2334
Attention: Mark K. Kessler, Esq.
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and if after July 4, 1999 with a copy to:
Wolf, Block, Schorr and Solis-Cohen LLP
1650 Arch Street, 22nd Floor
Philadelphia, Pennsylvania 19103
Attention: Mark K. Kessler, Esq.
and a copy to:
Adelman, Lavine, Gold and Levin
Two Penn Center Plaza
Suite 1900
Philadelphia, Pennsylvania 19102
Facsimile: (215) 557-7922
Attention: Gary M. Schildhorn, Esq.
If to EM:
Eurisys Mesures SA
ZA de L'Observatoire
4 Avenue Des Fresnes
Montigny Le Bretonneux
St. Quentin Yvelines Cedex 78067
France
Facsimile: 011-33-1-39-48-57-91
Attention: Mr. Christian Petit
with a copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Facsimile: (212) 351-4035
Attention: Stephan H. Haimo, Esq.
or such other address or facsimile number as such party may specify for the
purpose by written notice to the other parties hereto. Each such notice, request
or other communication will be effective: (i) if delivered in person, when such
delivery is made at the address specified in this Section 9.01; (ii) if
delivered by overnight courier, the next Business Day after such delivery is
sent to the address specified in this Section 9.01; or (iii) if delivered by
facsimile, when such facsimile is transmitted to the facsimile number specified
in this Section 9.01 and the appropriate confirmation is received.
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Section 9.02 Amendment. This Agreement may not be amended
except by an instrument in writing signed on behalf of all the parties.
Section 9.03 Extension; Waiver. At any time prior to the
Closing Date, the parties may: (i) extend the time for the performance of any of
the obligations or other acts of any other party; (ii) waive any inaccuracies in
the representations and warranties contained herein by any other party or in any
document, certificate or writing delivered pursuant hereto by any other party;
or (iii) waive compliance with any of the agreements of any other party or with
any conditions to its own obligations. Any agreement on the part of any party to
any such extension or waiver will be valid only if set forth in an instrument in
writing signed on behalf of such party.
Section 9.04 Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. No party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the prior written consent of the other parties, except that EM
may assign this Agreement to any Affiliate of EM provided that such assignment
shall not relieve EM of its obligations hereunder, and after the Closing EM may
assign its rights hereunder without restriction provided, however, that no such
assignment will relieve EM of its obligations under this Agreement and the
Exhibits hereto.
Section 9.05 Governing Law. This Agreement will be construed
in accordance with and governed by the law of the State of New York applicable
to agreements entered into and to be performed wholly within such State.
Section 9.06 Jurisdiction. Each of the parties: (i) consents
to submit itself to the personal jurisdiction of any federal or state court
located in the State of New York in the event any dispute arises out of this
Agreement; (ii) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court; and (iii)
agrees that it will not bring any action relating to this Agreement in any court
other than a federal or state court sitting in the State of New York.
Section 9.07 Counterparts; Effectiveness. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement will become effective when each party shall have
received counterparts hereof signed by all of the other parties.
Section 9.08 Entire Agreement. This Agreement, the Exhibits
and Schedules hereto and the other agreements referred to herein or executed
contemporaneously herewith constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter of this Agreement. No representation,
inducement, promise, understanding, condition or warranty not set forth herein
or therein has been made or relied upon by any party.
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Section 9.09 Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 9.10 Severability. In the event that any one or more
of the provisions contained in this Agreement shall be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement.
Section 9.11 EM as sole beneficiary of representations and
warranties. The representations and warranties made by the Zieba Holders and the
Pollock Holders in this Agreement are made solely for the benefit of EM, its
successors and assigns. Nothing in this Agreement shall be deemed to create any
rights or remedies to the benefit of the Zieba Holders or the Pollock Holders
against each other or against Aptec or NRC which shall survive the Closing. In
consideration for the payment of the Closing Pollock Payment, the Pollock
Holders hereby affirmatively waive and relinquish any rights to make any claims
whatsoever against Aptec or Newco before and after the Closing, except for their
rights under agreements relating to the Transactions.
Section 9.12 Additional Definitions.
(a) When used in this Agreement, the following terms have the
following meanings:
"Affiliate" as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person.
"Book Value" means total assets less total liabilities
calculated in accordance with GAAP.
"Business Day" means any day other than a Saturday, Sunday or
any other day on which banks in the State of New York are authorized or
obligated to be closed.
"Code" means the Internal Revenue Code of 1986, as amended.
"Dollars" or "$" means United States dollars.
"C$" means Canadian dollars.
"GAAP" means generally accepted accounting principles in
effect in the United States of America or Canada, as the case may be, as of the
date of the applicable determination.
"Governmental Entity" means any government or subdivision
thereof, or any administrative, governmental or regulatory authority, agency,
commission, tribunal or body, domestic, foreign or supranational.
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"knowledge of Aptec" means any fact or matter which is known
by any officer or director of Aptec, or should have been known by such person
after due inquiry.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset.
"Material Adverse Effect" means any change or event that
individually or when taken together with all other changes and events, is or is
reasonably likely to be materially adverse to the business, assets, liabilities,
operations or condition (financial or otherwise) or prospects of Aptec and its
Subsidiaries, taken as a whole, other than any such effect arising out of or
resulting from the transactions contemplated by this Agreement or general
economic, financial, or market conditions. A Material Adverse Effect shall be
conclusively deemed to exist if there occurs any event which causes or may
reasonably be expected to cause or result in estimable monetary loss which,
individually or when aggregated with all other events, exceeds $50,000.
"Aptec Subsidiary" means any Subsidiary of Aptec, excluding in
all cases NRC and Subsidiaries of NRC.
"Person" means an individual, a corporation, a limited
liability company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof.
"Subsidiary" of any Person means any other Person of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other Persons performing similar functions
are directly or indirectly owned or controlled by such Person.
"Transactions" means the transactions contemplated in Article
I of this Agreement.
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IN WITNESS WHEREOF, each of the Parties has caused this
Agreement to be duly executed by its respective authorized officer as of the day
and year first above written.
EURISYS MESURES SA APTEC INSTRUMENTS LTD.
By: /s/ Christian Petit By: /s/ Edward Zieba
----------------------------- ---------------------------
Name: Christian Petit Name: Edward Zieba
Title: Chairman & CEO Title: President
APTEC ACQUISITION CORP. NUCLEAR RESEARCH CORPORATION
By: /s/ Edward Zieba By: /s/ Earl M. Pollock
----------------------------- ---------------------------
Name: Edward Zieba Name: Earl M. Pollock
Title: President Title: President
POLLOCK HOLDERS ZIEBA HOLDERS
Earl M. Pollock Edward Zieba
By: /s/ Earl M. Pollock By: /s/ Edward Zieba
----------------------------- ---------------------------
Name: Earl M. Pollock Name: Edward Zieba
Dorothy Pollock Rochelle Zieba
By: /s/ Dorothy Pollock By: /s/ Rochelle Zieba
----------------------------- ---------------------------
Name: Dorothy Pollock Name: Rochelle Zieba
The Zieba Family Trust
By: /s/ Jack Shuster
---------------------------
Name: Jack Shuster
Title: Trustee
By /s/ Edward Zieba
---------------------------
Edward Zieba, Trustee
1356359 Ontario Inc.
By: /s/ Edward Zieba
---------------------------
Name: Edward Zieba
Title: President
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EXHIBIT C
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Voting Agreement") is dated as of
June 16, 1999 among Aptec Instruments Ltd., an Ontario corporation, to be
continued under the laws of New Brunswick ("Aptec"), and the holders of shares
of Common Stock of Nuclear Research Corporation, a Pennsylvania corporation (the
"Company"), identified on Schedule 1 (each a "Shareholder" and collectively, the
"Shareholders").
RECITALS
A. Aptec and Aptec Acquisition Corp., a wholly-owned
subsidiary of Aptec ("Newco") and the Company have entered into an Agreement and
Plan of Merger, dated as of the date hereof (the "Merger Agreement") providing
for the merger of the Company with and into Newco on the terms, and subject to
the conditions, set forth therein.
B. As an inducement to Aptec and Newco to enter into the
Merger Agreement and to incur the obligations set forth therein, the
Shareholders have agreed to enter into this Voting Agreement concurrently with
the execution and delivery of the Merger Agreement.
In consideration of the premises and the respective
representations, warranties, covenants, and agreements set forth herein, the
Shareholders agree as follows:
Section 1. Definitions. Capitalized terms used but not defined
herein will have the meanings ascribed to them in the Merger Agreement.
Section 2. Representations and Warranties of the Shareholders.
Each Shareholder, severally and not jointly, represents and warrants to Aptec in
respect to itself as follows:
(a) Authority. Such Shareholder has all requisite power and
authority to enter into this Voting Agreement and to comply with its obligations
hereunder. This Voting Agreement has been duly executed and delivered by such
Shareholder and constitutes the valid and binding obligation of such
Shareholder, enforceable in accordance with its terms except as may be limited
by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
other similar laws affecting creditors' rights generally and by equitable
principles of general applicability.
(b) Non-contravention. The execution and delivery of this
Voting Agreement do not, and compliance with such Shareholder's obligations
hereunder will not, (i) contravene or conflict with or constitute a violation of
any provision of any law, regulation, judgment, injunction, order or decree
binding upon or applicable to such Shareholder; (ii) result in a breach or
violation of or constitute a default (or an event that with the giving of notice
or the lapse of
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time or both would constitute a default) under or require any consent, approval
or authorization under any provision of any agreement for borrowed money that is
secured by a Lien upon the Company Common Stock owned by such Shareholder or any
trust or similar agreement applicable to the Company Common Stock owned by such
Shareholder.
(c) Ownership. Such Shareholder is the record and beneficial
owner of, and has valid title to, the shares of NRC Common Stock (the " Shares")
and the Pollock Warrants, if any, set forth opposite the name of such
Shareholder on Schedule 1, free and clear of any Lien (other than any Lien
deemed to be created hereby and restrictions on transfer arising under federal
and state securities laws).
Section 3. Agreement to Vote. Until the earlier of (i)
termination of the Merger Agreement pursuant to Section 7.01 thereof or (ii) the
Effective Time, each Shareholder, severally and not jointly, agrees that, at any
meeting of shareholders of the Company or at any adjournment thereof or in any
other circumstances upon which its vote, consent or approval is sought, such
Shareholder will vote, or cause to be voted, its Shares: (i) in favor of the
Merger, the approval and adoption of the Merger Agreement and each of the other
transactions contemplated by the Merger Agreement; and (ii) against (A) any
other merger agreement or other merger, consolidation, combination, sale of
substantial assets, reorganization, recapitalization, dissolution, liquidation
or winding up of or by the Company or any sale or exchange of any other
substantial part or all of the stock or assets of the Company (an "Acquisition
Transaction") or (B) any amendment to the Company's articles of incorporation or
by-laws or other proposal, which amendment or proposal would impede, frustrate,
prevent or nullify the Merger or the Merger Agreement or change the voting
rights of any class of capital stock of the Company.
Section 4. Covenants of the Shareholders. Until the
termination of this Voting Agreement pursuant to Section 5, each Shareholder,
severally and not jointly, agrees as follows:
(a) Except as otherwise provided in the immediately succeeding
sentence or pursuant to this Voting Agreement, such Shareholder will not: (i)
sell, transfer, pledge, assign or otherwise encumber or dispose of (a
"Transfer"), or enter into any contract, option or other arrangement with
respect to a Transfer of, such Shareholder's Shares to any Person other than
pursuant to the Merger or that certain Acquisition Agreement entered into
simultaneously herewith; or (ii) enter into any voting arrangement, whether by
proxy, power of attorney, voting agreement, voting trust or otherwise, in
connection with any Acquisition Transaction. Aptec acknowledges that the
Shareholders have pledged their shares in favor of First Union National Bank in
connection with the forbearance and Loan Restructure Agreement dated April 29,
1999.
(b) Such Shareholder will not solicit, initiate or knowingly
encourage the submission to the Company of any proposal relating to an
Acquisition Transaction or participate in any negotiations regarding, or furnish
any information to any Person for the purposes of encouraging, a proposal
relating to an Acquisition Proposal.
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Section 5. Termination. This Agreement will terminate on the
earlier of (i) October 31, 1999, (ii) the Effective Time or (iii) termination of
the Merger Agreement pursuant to Section 7.01 thereof.
Section 6. Shareholder Capacity. No Shareholder who is a
director or officer of the Company makes any agreement in this Voting Agreement
in his or her capacity as such director or officer. Each Shareholder is entering
into this Voting Agreement solely in such Person's capacity as a shareholder of
the Company. The provisions of this Voting Agreement shall not apply to actions
taken or omitted to be taken by any such Person in his or her capacity as a
director or officer of the Company.
Section 7. Miscellaneous.
(a) All notices, requests and other communications to any
party hereunder shall be in writing and shall be deemed to have been duly given
when delivered in person, by overnight courier or by facsimile to the respective
parties as follows:
If to Aptec:
Aptec Instruments Ltd.
East 50B Caldari Road
Concord, Ontario
Canada L4K 4N8
Attention: Edward Zieba
with a copy to:
Torkin Manes Cohen & Arbus
151 Yonge Street, Suite 1500
Toronto, Ontario
Canada M5C 2W7
Attention: Howard Burshtein
and a copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Telephone: (212) 351-4000
Facsimile: (212) 351-4035
Attention: Stephan H. Haimo
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If to any of the Shareholders, to their respective addresses
set forth on Schedule A, with a copy to:
with a copy if on or before July 4, 1999 to:
Wolf, Block, Schorr and Solis-Cohen LLP
111 South 15th Street
Philadelphia, Pennsylvania 19102-2678
Attention: Mark K. Kessler, Esq.
and if after July 4, 1999 a copy to:
Wolf, Block, Schorr & Solis-Cohen LLP
1650 Arch Street, 22nd Floor
Philadelphia, Pennsylvania 19103
Attention: Mark K. Kessler, Esq.
and a copy to:
Adelman, Lavine, Gold and Levin
Two Penn Center Plaza
Suite 1900
Philadelphia, Pennsylvania 19102
Attention: Gary M. Schildhorn, Esq.
or such other address or facsimile number as such party may specify for the
purpose by written notice to the other parties. Each such notice, request or
other communication will be effective: (i) if delivered in person, when such
delivery is made at the address specified in this Section 7(a); (ii) if
delivered by overnight courier, the next business day after such delivery is
sent to the address specified in this Section 7(a); or (iii) if delivered by
facsimile, when such facsimile is transmitted to the facsimile number specified
in this Section 7(a) and the appropriate confirmation is received.
(b) The representations and warranties and agreements
contained herein and in any certificate or other writing delivered pursuant
hereto will not survive beyond the termination of this Voting Agreement.
(c) This Voting Agreement may not be amended except by an
instrument in writing signed on behalf of all the parties.
(d) This Voting Agreement will be construed in accordance with
and governed by the law of the State of New York applicable to agreements
entered into and to be performed wholly within such State.
(e) This Voting Agreement may not be amended terminated or
supplemented without the prior written consent of Eurisys Mesures SA., which is
simultaneously herewith entering into that certain Stock Acquisition Agreement
in reliance on the Shareholders' covenants and representations in this Voting
Agreement and is an intended third party beneficiary hereof.
4
<PAGE>
(f) This Voting Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement will
become effective when each party shall have received counterparts hereof signed
by all of the other parties.
5
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Voting
Agreement to be duly executed as of the day and year first above written.
APTEC INSTRUMENTS LTD.
By: /s/ Edward Zieba
-----------------------------
Name:
Title:
Earl M. Pollock
By: /s/ Earl M. Pollock
-----------------------------
Name: Earl M. Pollock
Dorthy Pollock
By: /s/ Dorothy Pollock
---------------------------
Name: Dorothy Pollock
ACKNOWLEDGED
EURISYS MESURES SA
By: /s/ Christian Petit
------------------------
Name: Christian Petit
Title: Chairman & CEO
<PAGE>
SCHEDULE 1
HOLDERS OF NRC COMMON STOCK AND OPTIONS
<PAGE>
FORBEARANCE AND LOAN RESTRUCTURE AGREEMENT
between
NUCLEAR RESEARCH CORPORATION, as Borrower
and
EARL M. POLLOCK and DOROTHY S. POLLOCK, as Sureties
and
FIRST UNION NATIONAL BANK, successor by merger to CoreStates
Bank, N.A. and Bucks County Bank & Trust Company, as Lender
April 29, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
1. Definitions ........................................................... 2
2. Accuracy of Background/Forbearance by Bank ............................ 4
3. Validity of Loan Documents ............................................ 4
4. Outstanding Indebtedness/Termination of Credit Facilities ............. 4
5. Minimum Required Payments ............................................. 5
6. Repayment and Restructure of Loans .................................... 5
7. Confirmation of Collateral and Security Interests ..................... 6
8. Representations and Warranties ........................................ 7
9. Covenants ............................................................. 8
10. Closing Date .......................................................... 8
11. Conditions Precedent to this Agreement ................................ 8
12. Events of Default ..................................................... 9
13. No Waiver; Cumulative Remedies ........................................ 10
14. Expedited Hearing Regarding Relief from Automatic Stay ................ 10
15. Indemnity ............................................................. 10
16. Additional Documents and Cooperation .................................. 10
17. Amendments and Waivers ................................................ 11
18. Notices ............................................................... 11
19. Joint and Several Obligations ......................................... 11
20. Ratification of Loan Documents ........................................ 11
21. Advice of Counsel and Others .......................................... 11
22. Integration ........................................................... 12
23. No Marshalling ........................................................ 12
24. Brokerage ............................................................. 12
25. Negation of Partnership ............................................... 12
26. Confidentiality ....................................................... 12
27. Recision of Payments .................................................. 12
28. Miscellaneous ......................................................... 12
29. Consent to Jurisdiction ............................................... 13
30. Waiver of Jury Trial .................................................. 13
31. Confession of Judgment ................................................ 13
(i)
<PAGE>
FORBEARANCE AND LOAN RESTRUCTURE AGREEMENT
------------------------------------------
THIS AGREEMENT is made this 29th day of April, 1999, between NUCLEAR
RESEARCH CORPORATION, a Pennsylvania business corporation with its chief
executive office and principal place of business at 125 Titus Avenue,
Warrington, Pennsylvania 18976 (the "Borrower"), EARL M. POLLOCK and DOROTHY S.
POLLOCK, husband and wife with a residence address at 3 Valley Drive, Chalfont,
Pennsylvania 18914 (individually a "Surety" and, collectively, the "Sureties")
and FIRST UNION NATIONAL BANK, successor by merger to CoreStates Bank, N.A. and
Bucks County Bank and Trust Company, a national banking association with offices
located at 123 South Broad Street, Philadelphia, Pennsylvania 19103 (the
"Bank").
BACKGROUND
----------
A. The Borrower and the Bank are currently parties to various loan and
other credit agreements pursuant to which the Bank has provided various loans
and other extensions of credit to the Borrower, including (without limitation):
(i) a line of credit in the original principal amount of Five Million Five
Hundred Thousand Dollars ($5,500,000), which was subsequently increased to Six
Million Dollars ($6,000,000) pursuant to an Amendment Agreement dated May 20,
1998 (the "Line of Credit"); (ii) a term loan in the original principal amount
of One Million Eight Hundred Thousand Dollars ($ 1,800,000), originally extended
on or about January 14, 1997 (the "Term Loan"); (iii) a second term loan in the
original principal amount of Three Hundred Thousand Dollars ($300,000),
originally extended on or about August 21, 1995 (the "Second Term Loan"); and
(iv) a facility for the issuance of letters of credit, the repayment of which is
evidenced in part by a demand note in the original principal amount of Seven
Hundred Seventy-Four Thousand Three Hundred and Three Dollars ($774,303)
executed and delivered by the Borrower to the Bank on or about March 13, 1997
(the "Letter of Credit Facility"). The Line of Credit, the Term Loan, the Second
Term Loan, the Letter of Credit Facility, and any other loans or other
extensions of credit made by the Bank to the Borrower are referred to,
collectively, as the Loans.
B. Repayment of the Line of Credit is evidenced in part by that certain
Master Demand Note dated January 14, 1997, in the original principal amount of
$5,500,000, as amended by an Allonge dated May 20, 1998 increasing the maximum
principal amount of Line of Credit to $6,000,000 (the "Line of Credit Note"),
the repayment of the Term Loan is evidenced in part by that certain promissory
note dated January 14, 1997, in the original principal amount of $1,800,000 (the
"Term Note"), the repayment of the Letter of Credit Facility is evidenced in
part by that certain master demand note dated March 13, 1997, in the original
principal amount of $774,303.03 (the "Demand Note") and the repayment of the
Second Term Loan is evidenced in part by that certain promissory note dated
August 21, 1995 in the original principal amount of $300,000 (the "Second Term
Note"). The Loans, each of the foregoing promissory notes and all other
indebtedness and obligations of the Borrower to the Bank is secured by, among
other things, a first priority security interest in all of the Borrower's
present and future accounts, inventory, equipment, contract rights, instruments,
investment property, documents, chattel paper and general intangibles, and all
proceeds and products of, and
<PAGE>
replacements to, all of the foregoing, as evidenced by various security
agreements, mortgages and other lien instruments previously executed and
delivered by the Borrower to the Bank. The foregoing indebtedness and
obligations are also secured by various mortgage liens on the Borrower's real
property and appurtenances thereto located at and known as 125 Titus Avenue,
Warrington, Pennsylvania (the "Real Property").
C. In order to induce the Bank to continue the availability of the
Loans to the Borrower, as well as to increase the borrowing availability of, and
maximum amount available under, the Line of Credit, the Sureties have executed
and delivered to the Bank that certain guaranty agreement and attached rider
dated May 20, 1998 (the "Surety Agreement"). The Borrower and the Sureties are
sometimes referred to, jointly and severally in this Agreement, as the Obligors.
D. The borrowing availability under the Line of Credit expired by its
terms on June 30, 1998 and, in addition to this expiration, the Borrower's
indebtedness and obligations owing under the Line of Credit Note and Demand Note
have been and continue to be payable on demand. Pursuant to the terms and
conditions of a letter of intent originally dated on or about October 15, 1998,
as amended, modified and supplemented (the "Letter of Intent") the Borrower is
negotiating with Aptec Instruments, Ltd. ("Aptec"), a Canadian corporation, and
Eurisys Mesures, S.A., a French corporation, for the sale of a controlling
interest in the Borrower to Aptec, initially and, thereafter, to Eurisys
Mesures, S.A. In order to allow the Obligors additional time to consummate the
transactions contemplated by the Letter of Intent, they have requested that the
Bank refrain from demanding payment under the Line of Credit Note and the Demand
Note (which would also accelerate the maturity of all the other Loans), which
the Bank is willing to do subject to the terms and conditions set forth below.
TERMS
-----
In consideration of the foregoing and of the covenants and mutual
agreements set forth below, and for other good and valuable consideration, the
receipt of which is acknowledged, the parties, intending to be legally bound,
agree:
1. Definitions. In addition to terms defined elsewhere in this Agreement
and the Background of this Agreement (which terms are incorporated by
reference), the following terms as used in this Agreement shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"Agreement" means this Forbearance and Loan Restructure Agreement, as
the same may be amended, modified, restated or supplemented from time to time.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended,
and codified at 11 U.S.C. Section 101 et seq.
"Cash Collateral Account" means that certain account maintained in the
name of the Bank, for the account of the Borrower, but over which the Borrower
shall have sole and exclusive control.
2
<PAGE>
"Closing Date" has the meaning given to that term in paragraph 10 of
this Agreement.
"Collateral" means all property and assets of the Borrower in which
the Bank now has a lien, security interest, right of set-off or other
encumbrance as security for the Loans or any other Indebtedness, and also
includes the Real Property, other property and assets described in the
Background of this Agreement and the property pledged pursuant to the Stock
Pledge Agreement.
"Eligible Inventory" means Inventory (as defined in the Pennsylvania
Uniform Commercial Code) of the Borrower consisting of raw materials,
work-in-process and finished goods products, and with respect to which (i) the
Bank maintains a perfected, first priority security interest and lien, and (ii)
the Bank has obtained a landlord's waiver acceptable to it if such Inventory is
stored, located or warehoused at a location not owned by the Borrower.
"Eligible Receivables" means Accounts (as defined in the Pennsylvania
Uniform Commercial Code) due and owing to the Borrower for the sale of goods or
the rendition of services (exclusive of sales, excise or any other taxes) where:
(a) delivery of the merchandise or rendition of the services has been completed;
(b) no return, rejection or repossession has occurred; (c) the merchandise or
the services have been finally accepted by the account debtor without dispute,
offset, defense, counterclaim or other claim of avoidance; (d) no more than
ninety (90) days have elapsed from the date of the invoice on which the account
is based; (e) the Account is, and continues to be, in full conformity with the
representations and warranties made by the Borrower to the Bank; and (f) the
Borrower is, and continues to be, satisfied with the credit standing of the
account debtor in relation to the amount of credit extended. Without limiting
the general nature of the foregoing, the following types of Accounts shall not
be deemed Eligible Receivables: (i) any Account known to be not readily
collectible for any reason (including, without limitation, bankruptcy of the
account debtor); (ii) any Account represented by an invoice without a definite
due date; (iii) any Account represented by a pre-billed invoice; (iv) any
Account in litigation or arbitration; (v) any Account of an account debtor where
fifty percent (50%) or more of the amounts of all Accounts owing by such account
debtor are outstanding more than ninety (90) days past the end of the month in
which the invoice on which the Account is based; (vi) any Account not arising in
the ordinary course of business; (vii) any Account owing by the United States
government or any of its departments, instrumentalities, or agencies which has
not been assigned to the Bank in accordance with the Federal Assignment of
Claims Act; (viii) any Account in which the Bank does not have a first priority
perfected security interest and lien; (ix) any Account owing by an account
debtor located outside of the United States (unless, as determined by the Bank
in its sole discretion, such Account is payable in United States dollars and is
guaranteed as to payment by a letter of credit or other means acceptable to the
Bank); (x) any Account owing by a subsidiary or affiliate of the Borrower, or by
an entity controlling or under common control with the Borrower, and (xi) any
Account arising out of a consignment or commission contract or agreement.
"Event of Default" has the meaning given to that term in paragraph 12
of this Agreement.
3
<PAGE>
"Fraudulent Transfer" means any transfer, sale, exchange, payment or
other conveyance of any nature, direct or indirect, which may be deemed a
fraudulent transfer pursuant to either the Pennsylvania Uniform Fraudulent
Transfer Act, 12 Pa.C.S.A. ss. 5-101 to ss. 5-110, or ss. 548 of the Bankruptcy
Code.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis.
"Indebtedness" means (i) the outstanding principal of the Loans, and
all interest accrued thereon and all costs, fees and expenses relating thereto,
(ii) all other indebtedness and other obligations and undertakings now or
hereafter owing by the Borrower to the Bank under this Agreement or the Loan
Documents, and (iii) all other liabilities and obligations of the Borrower to
the Bank, whether primary or secondary, absolute or contingent, direct or
indirect, joint, several, joint and several, or independent, voluntary or
involuntary, now or hereafter existing, due or to become due, or held or to be
held by the Bank for its own account or as agent for others, whether created
directly or acquired by negotiation, assignment, or otherwise.
"Insolvency or Liquidation Proceeding" means (a) any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding relative to any Obligor or their assets, or
to the creditors of any Obligor, irrespective of whether a case or proceeding is
commenced under the Bankruptcy Code or other applicable law, (b) any
liquidation, dissolution, reorganization or winding-up of the affairs of any
Obligor, whether voluntary or involuntary, and whether or not involving
insolvency or bankruptcy, and (c) any assignment for the benefit of creditors
or any other marshalling of assets and liabilities of any of the Obligors.
"Intellectual Property" means all existing and future patents,
trademarks, service marks, copyrights (or applications relating to any of the
foregoing) tradenames, technology, know-how, processes, names and the likenesses
used in or necessary to the conduct of the Borrower's business, or works or
items that are protectable as patents, trademarks, copyrights, tradenames,
know-how, and all other assets of rights consisting of or commonly known as
intellectual property, and all goodwill associated with all of the foregoing.
"Line of Credit Principal Balance" means the principal amount
outstanding and remaining unpaid under the Line of Credit Loans extended by the
Bank to the Borrower.
"Liquid Collateral" means the total of eighty percent (80%) of Eligible
Receivables, plus twenty percent (20%) of Eligible Inventory, plus one hundred
percent (100%) of the total of collected funds constituting cash held by the
Bank in the Cash Collateral Account.
"Liquid Collateral Shortfall" means the difference between the Line of
Credit Principal Balance and the Liquid Collateral. The amount of any such
Liquid Collateral Shortfall shall be determined initially from the borrowing
base certification (in the form attached as Exhibit "A" to this Agreement)
prepared from the books and records of the Borrower as regularly kept by it in
the ordinary course of business and as reflected on the borrowing base
certifications from time to time submitted by the Borrower to the Bank, all of
which shall be
4
<PAGE>
maintained in accordance with GAAP; provided, however, that the Bank shall
maintain the right to audit, inspect and verify the books and records of the
Borrower to determine whether the borrowing base certification accurately
reflects the amount of Liquid Collateral. For purposes of this Agreement and the
limited liability of the Sureties under the Surety Agreement, the Liquid
Collateral Shortfall shall be $3,800,000 as of and effective January 1, 1999,
and shall not increase above this amount for purposes of determining whether an
Event of Default has occurred under this Agreement. (TAPE)
"Loan Documents" means and includes the Notes, the Stock Pledge
Agreement and all credit agreements, security agreements, mortgages, lien
instruments and all other agreements, documents and instruments now or in the
future executed and delivered to the Bank in connection with the Indebtedness,
as the foregoing may be amended, modified, supplemented or restated from time to
time.
"Net Proceeds" means, upon the sale or refinance of any of the
Collateral and/or in connection with or pursuant to the transactions
contemplated by the Letter of Intent, all sums remaining after payment of
customary and reasonable closing costs, satisfactory in nature and amount to the
Bank (at its sole discretion), and the payment prior perfected liens (if any) in
favor of lienholders not affiliated with, or controlled by, any of the Obligors.
"Notes" means, collectively, the Term Note, the Second Term Note, the
Line of Credit Note and the Demand Note.
"Prime Rate" means a floating annual rate of interest that is
designated from time to time by the Bank as its Prime Rate, and used by the Bank
as a reference base with respect to different rates of interest rates charged to
Borrowers, it being understood that the Bank's determination and designation
from time to time of its Prime Rate shall not in any way preclude it from making
loans to other Borrowers at rate that is higher or lower than, or different
from, its Prime Rate as announced from time to time.
"Stock Pledge Agreement" means collectively, those agreements of even
date pursuant to which Earl M. Pollock and Dorothy S. Pollock pledge and grant
to the Bank, on a non-recourse basis, a first priority security interest in and
lien on all of the issued and outstanding shares of stock in the Borrower in
which they have any legal, equitable or other interest.
2. Accuracy of Background/Forbearance by Bank. The Borrower acknowledges
and agrees that the Background of this Agreement (as set forth above) is true
and correct and that, but for the execution and delivery of this Agreement, the
Bank has and maintains the right, without further demand or notice of any kind,
or opportunity to cure, to: (i) receive full and immediate payment and
performance of the Loans, and all other Indebtedness; (ii) exercise all rights
and remedies available to the Bank under the Loan Documents, at law, in equity,
by virtue of statute or otherwise; and (iii) foreclose upon or otherwise
exercise foreclosure related remedies relative to the Collateral.
Notwithstanding the foregoing, but subject to the full and complete compliance
with the terms and conditions of this Agreement and each of the Loan Documents
(and except as otherwise provided in this Agreement or the Loan Documents), the
Bank agrees to forbear from
5
<PAGE>
the exercise of the rights and remedies available to it as a result of the
defaults noted in the Default Letters until the occurrence of an additional or
further Event of Default. Immediately upon the occurrence of such additional or
further Event of Default, all of the existing Events of Default referred to in
the Default Letters shall be deemed fully reinstated for the benefit of the Bank
exercising at that time such rights and remedies as may be available to it.
3. Validity of Loan Documents. The Obligors acknowledge and agree, and
represent and warrant that: (i) the Loan Documents executed by them are legal,
valid and binding obligations, enforceable in accordance with their terms, and
all security interests, liens and other encumbrances granted in or created by
the Loan Documents have been duly granted or created, properly filed or
recorded, and duly perfected; and (ii) the Obligors do not have or maintain, and
shall not assert any defense, set-off, counterclaim or claim of avoidance of any
nature to the Loans, any other Indebtedness or to any of the Loan Documents
executed by them.
4. Outstanding Indebtedness/Termination of Credit Facilities. The Borrower
acknowledges and agrees that, as of February 2, 1999, the Borrower is indebted
to the Bank (on account of the Loans) for outstanding principal, and accrued but
unpaid interest (at the non-Default Rate) of:
Loan Principal Interest
---- --------- --------
The Term Loan $105,000 $616.01
The Second Term Loan Paid in Full Paid in Full
The Line of Credit $4,917,116.18 $2,116.18
Letter of Credit Facility $ 774,303 $ N/A
The Obligors further acknowledge and agree, and represent and warrant that: (i)
interest has continued to accrue on the outstanding principal balances of the
Loans at the applicable rates of interest set forth in the Loan Documents; and
(ii) the Borrower is liable to the Bank for all costs, fees and expenses
(including fees and expenses of legal counsel of $22,150.07 from January, 1998,
through March 31, 1999, a portion of which has been previously reimbursed by the
Borrower) that the Bank may have incurred, or may in the future incur, in
connection with the preparation, execution and administration of this Agreement
and the Loan Documents, the collection and enforcement of the Indebtedness of
the Obligors to the Bank, and the preservation and realization upon the
Collateral. The Obligors also acknowledge and agree that the availability of
additional borrowing under the Line of Credit and Letter of Credit Facility has
been properly terminated, and that the Bank has no obligation to make any
additional loans or other extensions of credit to any Obligor under the Line of
Credit, the Letter of Credit Facility or otherwise.
5. Minimum Required Payments. The Borrower shall pay or cause to be paid
to the Bank, by not later than the 15th day of each month commencing effective
January 15, 1999, principal payments in the amount of not less than Twenty Five
Thousand Dollars ($25,000.00)
6
<PAGE>
which shall be applied against the principal portion of the Loans then
outstanding in such manner as the Bank may determine in its sole discretion. The
Borrower shall also continue to pay, on the first day of each month continuing
on March 1, 1999, until all of the Indebtedness is paid finally and in full,
interest and fees at the rates provided for in the Notes and with respect to the
Loans.
6. Repayment and Restructure of Loans. Notwithstanding anything to the
contrary set forth in any of the Loan Documents, all of the Indebtedness shall
be due and payable in full, without the need for further notice or demand by the
Bank, on the earlier of (i) the occurrence of an Event of Default, (ii) closing
with respect to the transactions contemplated by the Letter of Intent, (iii)
transfer of any Obligor's interest in all or any portion of the Collateral,
including any of the shares of stock in the Borrower owned in any capacity by
either Surety, or (iv) June 30, 1999.
7. Confirmation of Collateral and Security Interests. As security for the
repayment of the Loans and Indebtedness referred to in this Agreement, and the
performance of the obligations of the Obligors under this Agreement and the Loan
Documents, the Borrower confirms to the Bank the grant of the security interests
and liens as provided for in the Loan Documents executed by it and in existence
prior to the execution of this Agreement, as well as those agreements, documents
and instruments executed in connection with this Agreement, all of which shall
constitute Loan Documents.
8. Representations and Warranties. In order to induce the Bank to enter
into this Agreement, the Obligors represent and warrant to the Bank that:
(a) The Obligors have full power and authority to execute, deliver and
perform this Agreement, and all other documents and instruments executed or
delivered by them in connection with this Agreement. This Agreement, and all
other documents and instruments executed or delivered in connection with this
Agreement by the applicable Obligor have been duly authorized, executed and
delivered, and constitute legal, valid and binding obligations of the Obligors,
enforceable in accordance with their respective terms.
(b) None of the Obligors has made, cause to be made or acquiesced in
any Fraudulent Transfer.
(c) Except as otherwise set forth on Exhibit "B" to this Agreement, the
representations and warranties made by the Borrower to the Bank in the Loan
Documents are true and correct, as though made on and as of the date of this
Agreement.
(d) None of the Obligors have applied for or consented, and shall not
apply for or consent, to the appointment of any receiver, trustee or liquidator
for themselves or any of their properties or assets, made a general assignment
for the benefit of creditors, been adjudicated a bankrupt or insolvent, or filed
(or at any time will file) a voluntary petition in bankruptcy or petition or
answer seeking an arrangement with creditors or seeking to take advantage of any
law or statute relating to Insolvency or Liquidation Proceeding, adjustment of
debt or otherwise. No petition of the type requesting the relief mentioned in
this paragraph 8(d) has been filed against any of the
7
<PAGE>
Obligors, and no action has been or will be taken by any of them for the purpose
of effectuating any of the foregoing.
(e) Neither this Agreement, nor any certificate, statement, report or
other document furnished or to be furnished in connection with this Agreement
contains any untrue statement of material fact, or omits to state any fact
necessary in order to make the statements contained in this Agreement not
misleading. The Borrower has disclosed to the Bank all facts that materially and
adversely affects its business or financial conditions, or its ability to
perform their obligations under this Agreement or the Loan Documents.
(f) Exhibit "C" to this Agreement sets forth a full, complete and
accurate description of all Intellectual Property owned by the Borrower, or
Intellectual Property with respect to which the Borrower has rights of any
nature.
9. Covenants. So long as the Loans or any other Indebtedness remain unpaid
and outstanding, the Obligors covenant and agree that, unless the Bank otherwise
consents in writing:
(a) The Obligors shall comply in all respects with all the terms,
conditions, covenants and undertakings in the Loan Documents executed by them
(as amended and modified by this Agreement) to be observed and performed by the
Obligors, including the financial reporting requirements set forth in the Loan
Agreement.
(b) The Obligors shall provide to the Bank, promptly after receipt,
copies of any complaints, demands, summons or other documents evidencing an
intent by any person or entity to assert any claim or commence any action or
legal proceeding against any of them, or their assets or properties.
(c) The Obligors shall use their best efforts and due diligence with
respect to consummation of the transactions contemplated by the Letter of
Intent, and shall keep the Bank apprised of all actions taken, and all
developments with respect to, their efforts relative to the consummation of the
transactions contemplated by the Letter of Intent, and shall provide all
information as the Bank may from time to time request concerning such efforts.
(d) The Borrower shall maintain all of its deposit and other banking
accounts with the Bank until the Loans are repaid in full.
(e) The Borrower shall at all times maintain a Liquid Collateral
Shortfall of not more than $3,800,000, compliance with this requirement to be
tested effective January 1, 1999, and on a daily basis thereafter. To the extend
required to comply with this covenant, the Borrower shall pay to the Bank, and
maintain on deposit in the Cash Collateral Account, such sums as are necessary
to cause this covenant to be complied with at all times.
(f) The Obligors shall take all steps to insure that, upon consummation
of the transactions contemplated by the Letter of Intent, or any other sale of
all or any portion of the Borrower's assets or stock, that the Net Proceeds of
any such transaction are paid first to the Bank, to repayment in full of the
Indebtedness.
8
<PAGE>
(g) The Borrower shall reimburse the Bank for audit fees incurred by
the Bank in connection with the execution and delivery of this Agreement, and
all related agreements, documents and instruments.
10. Closing Date. The transactions contemplated by this Agreement shall be
consummated on or before 2:00 p.m. on Friday, April __, 1999 (the "Closing
Date"). If for any reason the conditions precedent to closing required to be
performed by the Obligors under this Agreement have not been performed and the
transactions contemplated by this Agreement have not been consummated on or
before the Closing Date, the Bank, at its sole discretion, may by written notice
to the Obligors: (a) extend the Closing Date to a date provided in such written
notice, or (b) terminate all of the obligations of the Bank under this
Agreement, and proceed to exercise or renew the exercise of all of the rights
and remedies held by the Bank under the Loan Documents, applicable law or
otherwise.
11. Conditions Precedent to this Agreement. As conditions precedent to the
Bank's obligations under this Agreement, the Obligors shall deliver or cause to
be delivered to the Bank, in a form and substance satisfactory to the Bank and
its counsel;
(a) Evidence that the Bank has been named as loss payee, mortgagee and
other insured on policies of insurance maintained with respect to the
Collateral.
(b) Evidence that the Borrower is current in the payment of all of its
applicable obligations owing to taxing authorities, and that it has no
liabilities (contingent or otherwise) other than as set forth in the financial
statement referred to in paragraph 11 (g) below.
(c) Updated UCC, judgment and tax lien searches as to all of the
Borrower and the Collateral.
(d) Subsistence certificates, authorization documents and any such
other matters as may be necessary or advisable to evidence the continued
existence and good standing of the Borrower, and all agreements, documents and
instruments executed in connection with this Agreement on behalf of the
Borrower.
(e) (intentionally omitted).
(f) Copies of all agreements, documents and instruments relative to the
consummation of the transactions consummated by the Letter of Intent, including
(even if they are in draft form only) agreements for the sale of all or any
portion of the assets or stock of the Borrower.
(g) The most recently available balance sheet, and statement of profit
and loss, for the Borrower.
(h) Reimbursement to the Bank of $10,555.08 on account of accrued but
unpaid legal fees and disbursements owing for the period from October 5, 1998
through and including
9
<PAGE>
the Closing Date, which reimbursement is to be made directly to Stradley, Ronon,
Stevens Young, LLP, as counsel for the Bank.
(i) Such reaffirmations or modifications to the Surety Agreement as
shall be necessary to confirm the obligation of the Sureties with respect to the
Borrower's obligation to maintain the Liquid Collateral Shortfall, as referred
to in paragraph 9(e) of this Agreement.
(j) The Stock Pledge Agreement.
(k) Such agreements, documents or instruments as may be necessary to
record with the United States Patent and Trademark Office and/or United States
Copyright Office, as applicable, further evidence of the Bank's security
interest in the Intellectual Property.
(l) Such additional agreements, documents or instruments and such
additional approvals and opinions as the Bank or its counsel may have requested
under the terms of this Agreement.
12. Events of Default. The occurrence of any one or more of the following
events shall constitute an "Event of Default" under this Agreement and the Loan
Documents:
(a) The Borrower fails to pay or cause to be paid any principal of, or
interest on the Loans, or any other portions of the Indebtedness, when and as
due under this Agreement or the Loan Documents as amended by this Agreement; or
(b) Any Obligor fails to comply with any other term, condition,
undertaking or covenant contained in this Agreement, or in any documents or
instruments executed or delivered by any Obligor in connection with this
Agreement; or
(c) Any representation or warranty made by any Obligor in this
Agreement, or in any documents or instruments executed or delivered by any
Obligor in connection with this Agreement proves to be false or misleading in
any material respect; or
(d) Any Obligor institutes, commences, joins in or acquiesces in any
action or any legal or equitable proceeding seeking to rescind, amend, alter,
revoke, terminate or otherwise modify the provisions of this Agreement or any
Loan Document, or any documents or instruments executed or delivered by any
Obligor in connection with this Agreement or any Loan Document; or
(e) Any default or event of default, or any event which with notice or
passage of time or both would constitute a default or event of default,
otherwise occurs under any of the Loan Documents (as amended by this Agreement).
Upon the occurrence of an Event of Default, the Bank shall be free to
exercise any and all rights and remedies available to it under this Agreement,
the Loan Documents, at law, in equity or otherwise. Without limiting the general
nature of the foregoing, the Bank shall, upon the occurrence of these events, be
entitled to receive, and shall be free to pursue the collection of
10
<PAGE>
interest at the default rate of the Prime Rate plus five percent (5%) per annum
(which rate of interest shall accrue effective as of the occurrence of an Event
of Default, and continue to accrue before and after judgment), the collection of
late charges on the basis provided for in the Notes, and such other costs, fees
and expenses as may be recoverable under the Loan Documents.
13. No Waiver; Cumulative Remedies. No failure or delay on the part of the
Bank in exercising any right, power or remedy under this Agreement or the Loan
Documents shall operate as a waiver, nor shall any single or partial exercise of
such right, power or remedy preclude any other or further exercise thereof, or
the exercise of any other right, power or remedy. No waiver of any right, power
or remedy under this Agreement or the Loan Documents shall be effective unless
in writing and signed by the Bank. The remedies in this Agreement and the Loan
Documents are cumulative, and not exclusive of any remedies provided by law.
14. Relief from Automatic Stay. The Obligors agree that, if they (or any of
them) should (i) file with any bankruptcy court of competent jurisdiction or be
the subject of any petition under the Bankruptcy Code, (ii) be the subject of
any order for relief issued under the Bankruptcy Code, (iii) file or be the
subject of any petition seeking any reorganization, arrangement; composition,
readjustment, liquidation, dissolution, or similar relief under any present or
future federal or state act or law relating to bankruptcy, insolvency, or other
relief for debtors, (iv) have sought or consented to or acquiesced in the
appointment of any trustee, receiver, conservator, or liquidator, (v) be the
subject of any order, judgment or decree entered by a court of competent
jurisdiction approving a petition filed against them for any reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
relief under any present or future federal or state act or law relating to
bankruptcy, insolvency, or relief for debtors, then the Bank shall be entitled
to an expedited hearing with respect to the Bank's entitlement to relief from
any automatic stay imposed by Section 362 of the Bankruptcy Code, or from any
other stay or suspension of remedies imposed in any other manner with respect to
the exercise of the rights and remedies otherwise available to the Bank under
the Loan Documents, at law, in equity, by virtue of the statute, or otherwise.
15. Indemnity. The Borrower shall indemnify and hold harmless the Bank from
and against any and all losses, claims, damages, liabilities, costs and
expenses, including fees and expenses of counsel, arising out of or in
connection with any default by the Obligors (or any of them) in the performance
or observance of any term, condition, covenant or undertaking in this Agreement
or the Loan Documents.
16. Additional Documents and Cooperation. Upon request from time to time by
the Bank, the Obligors shall execute and deliver, or cause to be executed and
delivered to the Bank, any additional agreements, documents or instruments as
the Bank may request to effectuate this Agreement or to preserve, protect,
maintain or enforce the mortgage liens, security interests and other
encumbrances of the Bank. The Obligors do further agree to cooperate in all
respects with the Bank, to do or cause to be done such other acts or things as
may be necessary or desirable to effectuate the purposes and intentions of this
Agreement, and to assist the Bank in maximizing the value of any Collateral
sold, transferred or otherwise disposed of by the Bank.
11
<PAGE>
17. Amendments and Waivers. The provisions of this Agreement may be
modified or amended only by a written agreement entered into by the Obligors and
the Bank, and may be waived only by a written waiver signed by the Bank. No
waiver, modification or amendment shall extend to or affect any obligation not
expressly waived, modified or amended, or impair any right of the Bank related
to such obligation,
18. Notices. All notices, requests, demands and other communications which
this Agreement requires or permits any party to give any other party shall be in
writing (including telecopier), and shall be given by certified mail, return
receipt not required, by hand delivery or by overnight mail, to such party at
its or their address set forth in the preamble to this Agreement, or at such
other address or telecopier number as shall be designated by such party in a
notice to each other. All notices, requests, demands and other communications
provided for under this Agreement shall be effective (i) if given by certified
mail, when deposited in the United States mails, with postage prepaid, properly
addressed, or (ii) if given by hand delivery or by overnight mail, when
delivered at the proper address; or (iii) if given by telecopier, when sent to
the appropriate telecopy number and upon receipt of confirmation that the
telecopy has been sent.
19. Joint and Several Obligation. With respect to those portions of this
Agreement that refer to the "Obligors", this Agreement shall be construed so
that all terms, conditions, covenants, undertakings, representations and
warranties of the Borrower and the Sureties shall be the joint and several
obligations of all of them, and shall bind each of them as fully as though each
of them were named individually and collectively in this Agreement.
20. Ratification of Loan Documents. This Agreement shall be deemed to amend
and modify the Loan Documents, to the extent inconsistent therewith. Subject to
the foregoing, the Loan Documents are ratified and confirmed and remain in full
force and effect. Without limiting the generality of the foregoing, nothing in
this Agreement shall be construed to: (i) impair the validity, perfection or
priority of any lien, security interest, right of set-off or other encumbrance
securing the Loans or any other Indebtedness; (ii) except as otherwise expressly
provided in this Agreement, waive or impair any rights, remedies or powers of
the Bank under the Loan Documents, or (iii) require the Bank to grant any
additional period of time within which to repay the Loans. For purposes of
determining the liability of the Sureties under the Surety Agreement, the
defined terms Eligible Inventory, Eligible Receivables, Line of Credit Principal
Balance, Liquid Collateral and Liquid Collateral Shortfall shall have the
meaning given to them in this Agreement, and the absence of any Collateral
Deterioration with respect to which the Sureties are obligated to the Bank shall
be determined in accordance with the Liquid Collateral Shortfall definition set
forth in this Agreement, and with respect to which the initial amount of the
Liquid Collateral Shortfall shall be in an amount not greater than $3,800,000,
as more fully set forth in the definition of Liquid Collateral Shortfall.
Therefore, if the Liquid Collateral Shortfall increaser, above the $3,800,000
figure on the "Collateral Deterioration Measurement Date" (as defined in the
Surety Agreement), the Sureties shall be liable to the Bank for this amount,
subject to the $800,000 limitation set forth in the Surety Agreement.
12
<PAGE>
21. Advice of Counsel and Others. The Obligors acknowledge that they have
consulted with, and have had the opportunity to consult with, legal counsel and
such financial other experts and advisors as they have deemed necessary in
connection with the execution, delivery and performance of this Agreement. The
Obligors all specifically acknowledge and agree that they have consulted with
legal counsel of their choice during the course of discussions and negotiations
leading up to the execution and delivery of this Agreement and the documents
required by this Agreement, The Obligors also represent and warrant that they
understand and accept the terms and conditions of this Agreement, and that they
have entered into this Agreement because it is in their best interests under the
circumstances.
22. Integration. This Agreement and the Loan Documents constitute the
entire agreement and understanding among the parties related to the subject
matter of this Agreement, and supersedes all prior proposals, negotiations,
agreements and understandings relating to such subject matter. The Obligors
acknowledge that, in entering into this Agreement, they are not relying on any
statement, representation, warranty, covenant or agreement of any kind made by
the Bank or any employee or agent of the Bank, other than the agreements of the
Bank set forth in this Agreement.
23. No Marshalling. The Obligors waive against the Bank any right which any
of them may have, whether individually or in their capacity as the
representative of any of the Obligors, to compel a marshalling of assets against
the Bank, and acknowledge that, upon the occurrence of an Event of Default, the
Bank is free to pursue, in such order and manner as it may elect, any rights or
remedies available to it under this Agreement, the Loan Documents or otherwise
available under applicable law, in equity or otherwise.
24. Brokerage, The Obligors represent and warrant to the Bank that the
transactions contemplated by this Agreement are made without liability for any
finder's, realtor's, broker's, agent's or other similar commission.
25. Negation of Partnership. The relationship between the Obligors and the
Bank is that of debtors and creditor. Nothing contained in this Agreement will
be deemed to create a partnership or joint venture between the Bank and the
Borrower, between the Bank and the Sureties or between the Bank and any other
party, or to cause the Bank to be liable or responsible in any way for the
actions, liabilities, debts or obligations of the Obligors or any other party.
26. Confidentiality. The Obligors agree to maintain the terms of this
Agreement and all negotiations relating to the subject matter of this Agreement
as confidential among the Obligors and the Bank. Neither the Borrower nor the
Sureties will issue or cause to be issued any announcement or other statement
concerning the subject matter of this Agreement, without the prior written
approval of the Bank.
27. Recision of Payments. If at any time and for any reason any payment
made under or in connection with this Agreement or any of the Loan Documents is
rescinded or must otherwise be returned by the Bank for any reason, including
any Insolvency or Liquidation Proceeding of any of the Obligors, the security
interests and liens of the Bank, and related rights and remedies of the Bank,
shall be reinstated as though payment had not been made.
13
<PAGE>
28. Miscellaneous,
(a) This Agreement shall be governed in all respects by the laws in
effect in the Commonwealth of Pennsylvania (without regard to principles of
conflicts of law), and for all purposes shall be construed in accordance with
such laws.
(b) The headings used in this Agreement are for convenience of
reference only, and shall not control or affect the provisions of this
Agreement. Unless otherwise indicated, all references in this Agreement to
paragraphs and subparagraphs shall be construed as references to paragraphs and
subparagraphs of this Agreement. Use of the words "including", "includes" and
the like are intended to be words of illustration only, and not words of
limitation.
(c) This Agreement shall be binding upon and operate for the benefit of
the Obligors and the Bank, and their respective heirs, executors,
administrators, successors and assigns; provided, however, that none of the
Obligors may assign or delegate any of its or their rights or obligations under
this Agreement, or any documents or instruments executed in connection with this
Agreement, without the prior written consent of the Bank.
(d) This Agreement may be executed and delivered in any number of
counterparts, each of which shall constitute an original but all of which shall
constitute one and the same instrument.
29. CONSENT TO JURISDICTION. EACH OBLIGOR CONSENTS TO THE JURISDICTION
OF THE COURTS OF THE COMMONWEALTH OF PENNSYLVANIA AND THE UNITED STATES DISTRICT
COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA IN CONNECTION WITH ANY CLAIM OR
DISPUTE ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE LOAN
DOCUMENTS. IF ANY ACTION IN CONNECTION WITH ANY SUCH CLAIM OR DISPUTE IS
COMMENCED BY OR AGAINST THE BANK IN ANY SUCH COURT, EACH OBLIGOR AGREES THAT
SERVICE OF PROCESS MAY BE MADE ON THEM BY CERTIFIED OR REGISTERED MAIL (RETURN
RECEIPT NOT REQUIRED) ADDRESSED TO THEM AT THEIR ADDRESSES SPECIFIED IN THE
PREAMBLE TO THIS AGREEMENT, OR AT SUCH OTHER ADDRESSES AS MAY BE DESIGNATED IN A
NOTICE COMPLYING WITH THE TERMS OF THIS AGREEMENT.
30. WAIVER OF JURY TRIAL. EACH OBLIGOR WAIVES TRIAL BY JURY, AND THE
RIGHT TO INTERPOSE ANY DEFENSE BASED ON ANY STATUTE OF LIMITATIONS OR CLAIM OF
LACHES, IN ANY ACTION BY OR AGAINST THEM IN CONNECTION WITH ANY CLAIM OR DISPUTE
ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE LOAN DOCUMENTS.
31. CONFESSION OF JUDGMENT. EACH OBLIGOR AUTHORIZES AND EMPOWERS THE
PROTHONOTARY, CLERK OF COURT, OR ANY ATTORNEY OF ANY COURT OF RECORD WITHIN THE
UNITED STATES OR ELSEWHERE TO APPEAR FOR AND CONFESS JUDGMENT AGAINST THEM, OR
ANY OF THEM, IN FAVOR OF THE BANK, UPON THE OCCURRENCE OF AN EVENT OF DEFAULT,
OR AT ANY TIME THEREAFTER, FOR ALL OR ANY PART OF THE INDEBTEDNESS THEN OWING
TO THE BANK, TOGETHER WITH EXPENSES OCCURRED IN CONNECTION
14
<PAGE>
THEREWITH AND ATTORNEY FEES OF FIFTEEN PERCENT (15%) OF THE TOTAL OF THE
FOREGOING SUMS, BUT IN NO EVENT LESS THAN $10,000,000, WITH RELEASE OF ALL
ERRORS AND WITHOUT STAY OF EXECUTION. THE RIGHT OF INQUISITION UPON ANY LEVY ON
REAL ESTATE IS WAIVED, AND CONDEMNATION AGREED TO, AND NO BENEFIT OF EXEMPTION
SHALL BE CLAIMED UNDER OR BY VIRTUE OF ANY EXEMPTION ALL NOW IN FORCE OR WHICH
MAY BE HEREINAFTER ENACTED. THE AUTHORITY GRANTED TO CONFESS JUDGMENT SHALL NOT
BE EXHAUSTED BY ANY SINGLE OR MULTIPLE EXERCISE THEREOF, BUT SHALL CONTINUE FROM
TIME TO TIME AT ALL TIMES UNTIL FULL AND FINAL PAYMENT OF ALL OF THE
INDEBTEDNESS. IF A COPY OF THIS AGREEMENT SHALL BE FILED IN ANY SUCH ACTION, IT
SHALL NOT BE NECESSARY TO FILE THE ORIGINAL AS A WARRANT OF ATTORNEY, AND ANY
STATUTE OR RULE OF THE COURT TO THE CONTRARY IS EXPRESSLY WAIVED. EACH OBLIGOR
ACKNOWLEDGES AND AGREES THAT THIS WARRANT OF ATTORNEY TO CONFESS JUDGMENT MAY BE
EXERCISED ON ONE OR MORE OCCASIONS, AND AGAINST ANY ONE OR MORE OF THE OBLIGORS.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the day and year first above written.
ATTEST: NUCLEAR RESEARCH CORPORATION
/s/ Dorothy S. Pollock By:/s/ Earl M. Pollock
- ---------------------------- --------------------------
Secretary Earl M. Pollock, President
[Corporate Seal]
/s/ Dorothy S. Pollock By:/s/ Earl M. Pollock
- ---------------------------- --------------------------
WITNESS Earl M. Pollock, President
/s/ Earl M. Pollock By:/s/ Dorothy S. Pollock
- ---------------------------- --------------------------
WITNESS Dorothy S. Pollock, as Surety
[Corporate Seal]
FIRST UNION NATIONAL BANK, successor by merger to
CoreStates Bank, N.A. and Bucks County Bank &
Trust Company
By:/s/ Debbie L. Nemetz, V.P.
--------------------------------
Debbie L. Nemetz, Vice President
15
<PAGE>
EXHIBIT "A"
-----------
FORM OF BORROWING BASE CERTIFICATION
------------------------------------
16
<PAGE>
EXHIBIT "B"
-----------
REPRESENTATIONS AND WARRANTIES THAT ARE NOT REAFFIRMED
BY THIS AGREEMENT
------------------------------------------------------
NONE.
17
<PAGE>
EXHIBIT "C"
-----------
SCHEDULE OF INTELLECTUAL PROPERTY
---------------------------------
18
<PAGE>
INTERIM MANAGEMENT AGREEMENT
This Management Agreement made as of the 16th day of June, 1999.
AMONG:
APTEC INSTRUMENTS LTD.,
a company organized pursuant to the
laws of the Province of Ontario, Canada
(hereinafter referred to as "Aptec")
- and -
EDWARD ZIEBA,
an individual resident in the City in
Aurora, in the Province of Ontario, Canada
(hereinafter referred to as "Zieba")
- and -
NUCLEAR RESEARCH CORPORATION,
a corporation organized pursuant to the laws of the
Commonwealth of Pennsylvania, U. S. A.
(hereinafter referred to as "NRC")
- and -
EARL POLLOCK and DOROTHY POLLOCK,
individuals resident in the Town of Montgomeryville,
in the Commonwealth of Pennsylvania, U. S. A.
(hereinafter respectively referred to as "Pollock" and "Dorothy")
WHEREAS each of Zieba, Aptec, Pollock and NRC executed a Memorandum of
Understanding dated the 26th day of February, 1999 (the "MOU") relating inter
alia, to the proposed merger of the assets and businesses of Aptec and NRC
pursuant to which Pollock and certain of the other shareholders of NRC
(collectively, the "Pollock Group") are to own 32%, and Zieba and/or his
affiliates (collectively, the "Zieba Group") are to own 68% of the number of
issued shares in the resulting entity which is to own (directly and/or
indirectly) the assets and businesses of both Aptec and NRC;
<PAGE>
AND WHEREAS each of Eurisys Mesures, S.A. ("EM"), NRC, Pollock, Aptec (and its
wholly-owned subsidiary, Aptec Instruments, Inc.) and Zieba entered into a
Letter of Intent dated the 26th day of March, 1999 (the "LOI") which essentially
provided that each of the Zieba Group and the Pollock Group is to sell to EM, on
a prorated basis, such number of shares of the resulting entity of the merger
("Mergeco") so as to provide EM with 51% of the issued shares of Mergeco;
AND WHEREAS the MOU provided in clause B under the heading "Interim Period" that
beginning on the date of the execution of the definitive agreement governing the
matters set out in the MOU and terminating with the closing of such
transactions, Pollock is to take such steps so as to permit Zieba to have de
facto management and control over the operations and business of NRC;
AND WHEREAS in section 9 of the LOI, EM acknowledged the provisions of the MOU
referred to in the recital immediately above;
AND WHEREAS certain of the parties hereto have executed an Agreement and Plan of
Merger (the "APM") and a Stock Acquisition Agreement (the "ASA") both dated the
16th day of June, 1999 (collectively, the "Definitive Agreements") this day as
contemplated by the MOU and the LOI and accordingly the parties are desirous of
entering into this Management Agreement (the "Agreement") to more fully document
their understanding with respect to the management and control over the
operations and business of NRC from the date hereof until the closing of
transactions governed by the Definitive Agreements (the "Closing");
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the premises
and for other good and valuable consideration and the payment of two dollars
(USD 2.00) by each party to each of the other parties hereto, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby covenant
and agree each with the others as follows:
1. Appointment of Zieba
Each of NRC and Pollock hereby covenants and agrees to take the necessary steps
to cause the Board of Directors of NRC to appoint Zieba as Interim Chief
Executive Officer ("ICEO") and Interim Chief Operating Officer ("ICOO") of NRC
effective the date hereof. Such appointment shall continue without interruption
until the earliest of the occurrence of any of the following events at which
time his appointment as ICEO and ICOO will automatically terminate without
further action of the Board of Directors of NRC:
(a) November 24, 1999;
(b) The date on which any of the Definitive Agreements is/are terminated in
accordance with its/their terms;
(c) The date of the Closing; or
(d) The date, if any, on which Zieba is terminated for cause by NRC's Board
of Directors. For this purpose "cause" shall occur in the event the
Board of Directors (with Pollock and Dorothy abstaining) determines
that Zieba has violated his duties to NRC either in a willful or
grossly negligent manner or has taken any action outside the scope of
his duties as set forth below.
-2-
<PAGE>
During the term hereof, neither Pollock nor Dorothy shall serve as either chief
executive officer or chief operating officer of NRC nor hold any office of NRC
which is superior to the aforesaid offices.
2. Zieba's Responsibilities as ICEO and ICOO of NRC
Zieba shall, and shall be authorized by the NRC Board to, undertake and execute
the following responsibilities in his capacity as ICEO and ICOO of NRC without
interference from either the Board or any of the senior officers of NRC:
a) To have complete management and control over the day to day affairs and
business of NRC;
b) To have complete and final authority in respect of the undertaking of
any present or future obligation and/or liability by NRC, subject to
the approval of the Board of Directors (with Pollock and Dorothy
refraining from voting) for matters outside of the normal course of
business;
c) To have complete and final authority over any bids or work projects
involving matters under $2 million; in cases of bids or work projects
valued at $2 million or more, decision making authority shall also rest
with Zieba subject to final approval of the Board of Directors of NRC
(with Pollock and Dorothy refraining from voting thereon);
d) To have all senior officers of NRC report, and be accountable, to
Zieba;
e) To have complete and final authority over all hiring and firing
decisions in respect of all NRC personnel (other than himself and
Pollock, who shall be accountable to the Board of Directors) as well as
employee compensation (other than as to Pollock), responsibilities,
accountabilities and evaluation standards; To assist in the planning of
the operational implementation of the proposed merger of NRC and Aptec;
and
g) To create the foundation of a strategic plan for the Aptec/NRC merged
entity.
Prior to undertaking any discussions, meetings or other communications with
NRC's bankers, Zieba shall first consult with Pollock or his personal legal
representative, which until otherwise advised is to be Gary Schildhorn, and
shall provide Pollock or Schildhorn with a summary of the proposed discussions
or meetings. In all cases, no meetings shall be held as between Zieba and NRC's
bankers without first providing Schildhorn with an opportunity to attend such
discussions or meetings. Neither Zieba nor Pollock shall take any actions with
respect to NRC's banking arrangements without first securing the approval of the
other and such approval shall not be unreasonably withheld.
The above listing of responsibilities and authorities shall not necessarily be
considered to be exhaustive nor be considered to in any way limit the scope and
duties of Zieba in his role as ICEO and ICOO of NRC other than as limited in
this Agreement. Each of Pollock, Dorothy and NRC hereby agrees to support, and
work with, Zieba in order to enable Zieba
-3-
<PAGE>
to best carry out his duties hereunder. Pollock shall serve as a key advisor to
Zieba; however, for greater certainty, in the event that Pollock and Zieba
cannot reach agreement in respect of any matter which comes within the domain of
Zieba hereunder, Zieba shall have final authority thereon.
Notwithstanding anything to the contrary above, Zieba shall not discharge or
replace any of NRC's counsel, auditors or KMR Management Inc., or hire any new
firms providing such, services, without the approval of NRC's Board of
Directors.
3. Zieba's Duties
Zieba shall devote a substantial amount of his time (and in no event less than
six (6) days per calendar month attending at NRC's facilities) in order for him
to conduct, operate and manage NRC and he shall use his utmost skill and
endeavour to promote the business of NRC in a diligent and professional manner
solely for the benefit of NRC and its shareholders.
Zieba shall not knowingly undertake any activities which would have the effect
of : (a) Rendering any of the representations and/or warranties of NRC as
contained in either the APM or the SAA untrue or inaccurate insofar as such
representations and warranties were accurate and truthful as at the date hereof;
or (b) Making any of the covenants or conditions of NRC in either of the APM or
SAA unachievable (assuming such covenants or conditions would otherwise be
achievable). Further, Zieba shall not have the authority to bind NRC to any
amendments or modifications to the Definitive Agreements.
4. Other Zieba Responsibilitics
Zieba shall be permitted to carry out his responsibilities and undertakings as
President of Aptec contemporaneous with his duties hereunder, subject to Section
3 above.
5. Zieba's Compensation
As compensation for the full and faithful performance of the duties and services
to be rendered by Zieba to NRC hereunder, during the term hereof, NRC shall pay
to Zieba a monthly salary of USD 10,000.00 payable semi-monthly in equal
installments. As well, Zieba shall be reimbursed in fall for all reasonable
business and travel expenses (including, but not limited to, his accommodation
expenses in the Philadelphia area) directly and/or indirectly incurred in the
execution of the duties and services contemplated herein. NRC shall reimburse
Zieba for all such expenses upon the presentation by Zieba from time to time, of
an itemized account of such expenditures, together with supporting vouchers. NRC
and Zieba hereby agree that Zieba may direct NRC to compensate him through a
mutually acceptable United States vehicle owned directly or indirectly by Zieba.
6. Independent Contractor
Each of Zieba and NRC agrees that Zieba is being retained hereunder as an
independent contractor and not as an employee and accordingly NRC shall not be
entitled,, to effect the
-4-
<PAGE>
usual employee source deductions in respect of this Agreement. Payment of any
income or other taxes which accrue on compensation payable hereunder shall be
the responsibility of Zieba or as may be otherwise mutually agreed upon by the
parties in contemplation of this section 6.
7. Indemnity of Zieba and Aptec by NRC
NRC hereby agrees to be liable for and indemnify and save harmless Zieba and
Aptec of, and from, all manner of actions, causes of action, proceedings,
claims, demands, losses, costs, damages and expenses whatsoever which may be
brought or made against Zieba and/or Aptec or which Zieba and/or Aptec may
sustain, pay or incur by reason of:
(1) Zieba's service as ICEO and ICOO of NRC hereunder; and
(2) Any mistake or any matter or thing done or omitted to be done under or
in relation to this Agreement save for Zieba's wilful and wrongful
neglect or default.
8. Governing Law
This Agreement shall be governed by, and interpreted in accordance with, the
laws of the Commonwealth of Pennsylvania.
9. Partial Invalidity
If any provision of this Agreement is held by a court of competent jurisdiction
to be invalid, void or unenforceable, the remaining provisions shall
nevertheless continue in full force and effect without being impaired or
invalidated in any way.
10. Time of the Essence
Time shall be of the essence of this Agreement.
11. Assignment
This Agreement is personal to Zieba and may not be assigned by Zieba without the
prior written approval of each of the parties hereto.
-5-
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Agreement on the day
and year first above written.
APTEC INSTRUMENTS LTD.
per:
/s/ Edward Zieba
---------------------------------
Edward Zieba, President
/s/ XXXXXXXXXXXXX /s/ Edward Zieba
- ----------------------------- ---------------------------------
Witness EDWARD ZIEBA
NUCLEAR RESEARCH CORPORATION
per:
/s/ Earl Pollock
---------------------------------
Earl Pollock, President
/s/ XXXXXXXXXXXXXX /s/ Earl Pollock
- ------------------------------ ---------------------------------
Witness EARL POLLOCK
/s/ XXXXXXXXXXXXXX /s/ Dorothy Pollock
- ------------------------------ ---------------------------------
Witness DOROTHY POLLOCK
-6-
