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): September 30, 1996
GILBERT ASSOCIATES, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-12588 23-2280922
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organizational) File Number) Identification No.)
P. O. BOX 1498, READING, PENNSYLVANIA 19603
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 856-5500
<PAGE>
Item 2. Other Events.
Gilbert Associates, Inc. ("Gilbert") and SAFCO Corporation have executed the
definitive Asset Purchase Agreement for the acquisition by Gilbert of the
business of SAFCO's Electronic Systems Division. The Electronic Systems
Division designs, manufactures, markets and services a broad range of
products that enables operators to measure and evaluate the performance of
wireless telephone networks. The company also markets products and services
to wireless infrastructure providers to efficiently deploy capital and
optimize service quality. The transaction was consummated on
September 30, 1996, which falls in Gilbert's fourth quarter.
Terms of the acquisition call for Gilbert to assume certain liabilities
and pay SAFCO shareholders approximately $5 million in cash at closing
(subject to certain adjustments), issue approximately $25 million
in notes payable, of which, approximately $15 million will be paid in
early 1997, the remaining $10 million over a 5 year term with a 7%
coupon rate, and issue 7 year warrants to purchase 555,555 shares
of Gilbert common stock at $18 per share. Additional amounts are payable
under incentive agreements if SAFCO achieves certain performance targets for
1996-1999. The targets relate to both revenue and operating income levels.
The cash at closing was paid from Gilbert's current operating cash and
from the acquisition line of credit for which Corestates Bank, N.A. is the
agent.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Audited financial statements for the Electronic Systems Division of
SAFCO Corporation are not available at this time and will be filed
within 60 days after consummation of the acquisition.
(b) Pro forma information for the Electronic Systems Division of SAFCO
Corporation is not available at this time and will be filed within
60 days after consummation of the acquisition.
(c) Exhibit #2. Asset purchase agreement dated as of September 20, 1996
by and among Gilbert Associates, Inc. and SAFCO Corporation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GILBERT ASSOCIATES, INC.
Date: October 10, 1996
/s/Paul H. Synder
Paul H. Snyder
Vice President and
Chief Financial Officer
<PAGE>
<EX-2>
ASSET PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 20, 1996
BY AND AMONG
GILBERT ASSOCIATES, INC.
AND
SAFCO CORPORATION
TABLE OF CONTENTS
DEFINITIONS 1
1.0 TRANSFER OF ASSETS
1.1 Transfer of Assets
1.2 Excluded Assets
2.0 ASSUMPTION OF CERTAIN LIABILITIES
2.1 Assumption of Liabilities
2.2 Excluded Liabilities
3.0 PURCHASE PRICE
3.1 Tangible Asset Purchase Price
3.2 Intangible Asset Purchase Price
3.3 Post Closing Purchase Price Adjustment
3.4 Purchase Price Allocation
4.0 DETERMINATION AND PAYMENT OF EARN-OUT PAYMENTS; RESOLUTION OF DISPUTES
4.1 Annual Financial Statements of STI
4.2 Disputes
5.0 CLOSING
5.1 Time and Place of Closing
5.2 Deliveries by Seller
5.3 Deliveries by Buyer
6.0 REPRESENTATIONS AND WARRANTIES BY SELLER
6.1 Organization of Seller
6.2 Authorization of Agreements
6.3 Effect of Agreement
6.4 Governmental Approvals
6.5 Financial Statements
6.6 Absence of Certain Changes or Events
6.7 Title to Properties, Absence of Liens and Encumbrances
6.8 Tangible Personal Property and Fixtures
6.9 Leases
6.10 Patents, Trademarks and Trade Names
6.11 Employee Compensation
6.12 Litigation
6.13 Labor Matters
6.14 Employee Benefit Plans
6.15 Environmental Matters
6.16 Compliance with Obligations
6.17 Contracts and Commitments
6.18 Title to Assets
6.19 Patents and Trademarks
6.20 Brokers
6.21 Tax Matters
6.22 All Necessary Assets
6.23 Condition of Assets; Limited Warranties
6.24 Knowledge of Seller
6.25 Investigation
6.26 Limitation of Representations and Warranties
7.0 REPRESENTATIONS AND WARRANTIES OF BUYER
7.1 Organization, Corporate Power and Authority
7.2 Authorization of Agreement
7.3 Effect of Agreements
7.4 Governmental Approvals
7.5 Litigation
7.6 Environmental Matters
7.7 Reports
7.8 Compliance with Obligations
8.0 COVENANTS OF SELLER
8.1 Conduct of Division
8.2 Access
8.3 Permits, Consents and Novations
8.4 Remittance to Seller
8.5 Confidentiality
9.0 COVENANTS OF BUYER
9.1 Permits
9.2 Access to Books and Records
9.3 Cooperation in Third-Party Litigation
9.4 Rule 144 Filings
9.5 Future Acquisitions
9.6 Board Seat
10.0 CONDITIONS PRECEDENT
10.1 Conditions Precedent to Obligations of Buyer
10.2 Conditions Precedent to Obligations of Seller
11.0 SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS
11.1 Survival of Representations
11.2 Agreements to Indemnify
11.3 Conditions of Indemnification
12.0 OTHER COVENANTS
12.1 Announcements
12.2 Employees
12.3 Retirement Plans
12.4 Execution of Further Documents
12.5 Non-Competition
12.6 Transfer Taxes
12.7 Cooperation
12.8 Excluded Assets
12.9 Tax Cooperation
12.10 Best Efforts
12.11 Shared Equipment Lease
13.0 MISCELLANEOUS
13.1 Bulk Transfer Laws
13.2 Expenses
13.3 Waivers
13.4 Amendments, Supplements
13.5 Entire Agreement
13.6 Binding Effect, Benefits
13.7 Assignability
13.8 Notices
13.9 Governing Law; Jurisdiction
13.10 Representations and Warranties
13.11 Rules of Construction
13.12 Counterparts
LIST OF SCHEDULES AND EXHIBITS
"x" denotes schedules and exhibits included in this filing. All other schedules
and exhibits will be furnished to the Commission upon request.
Schedules:
2.1 Contracts Assumed
3.3(a) Procedure for Determining Inventory
3.4 Purchase Price Allocation
6.3 Conflicts
6.4 Approvals
6.5 Exceptions to GAAP
6.6 Changes or Events
6.6(i) Post-7/31/96 Contracts
6.7 Encumbrances
6.8 Machinery and Equipment, Furniture and Fixtures
6.9 Leases
6.10 Patents, trademarks and trademark registrations
6.11 Employee Compensation Rates
6.12 Litigation
6.13 Labor Matters
6.14 Employee Benefit Plans
6.15 Environmental Matters
6.17 Contracts and Commitments
7.4 Governmental Approvals
7.5 Proceedings Pending
7.6 Environmental Matters
12.11 Shared Leases
Exhibits:
x 1.1 July 31 Balance Sheet
2.1 Assumption Agreement
3.2(a)(iii) Buyer's Note
3.2(a)(iii)(A) CoreStates Bank N.A. letter of credit
x 3.2(a)(iv) Stock Purchase Warrant
5.2(d) Bruce E. Creger Employment Agreement
5.2(e) CoreStates Bank Intercreditor Agreement
5.2(f) Sublease for 6060 N. Northwest Highway
5.2(g) Seller's Opinion of Counsel
5.2(h) Guaranty
x 5.2(j) Amendment to and Assignment and Assumption of Net Lease
5.3(h) Buyer's Opinion of Counsel
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made as of the 20th
day of September, 1996 by and between GILBERT ASSOCIATES, INC., a Delaware
corporation ("Buyer") and SAFCO CORPORATION, an Illinois corporation
("Seller").
WITNESSETH:
WHEREAS, Seller operates two distinct businesses called the Components
Division and the Electronic Systems Division, each of which utilizes, for the
most part, its own personnel and assets but shares the use of certain
personnel, intellectual property rights, facilities and other assets; and
WHEREAS, the Buyer wishes to purchase from the Seller, for the sum and
upon the terms hereinafter specified, the business of Electronic Systems
Division (the "Division") and certain assets and contracts of the Seller used
in the Division's operation and is willing to assume certain obligations and
liabilities of the Seller pertaining to the Division; and
WHEREAS, the Seller wishes to sell such assets and business as a going
concern for the consideration hereinafter specified and subject to Buyer's
assumption of certain obligations and liabilities of the Seller.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, and in reliance on the
representations and warranties contained herein and subject to the terms and
conditions hereof, the parties hereto hereby agree as follows:
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
definitions hereinafter set forth:
"Annual Earn-Out" shall have the meaning set forth in Section 3.2(c).
"Assumed Liabilities" shall have the meaning set forth in Section 2.1.
"Assumption Agreement" shall have the meaning set forth in Section 2.1.
"Buyer's Note" shall have the meaning set forth in Section 3.2(a)(iii).
"Closing" shall have the meaning set forth in Section 5.1.
"Closing Balance Sheet" shall have the meaning set forth in Subsection
3.3(a).
"Closing Date" shall have the meaning set forth in Section 5.1.
"Creger Agreement" shall mean the Employment Agreement between Bruce E.
Creger, STI and the Buyer in the form set forth as Exhibit 5.2(d).
"Division" shall mean the Electronic Systems Division of Seller.
"Employees" shall have the meaning set forth in Section 12.2(a).
"Excluded Assets" shall have the meaning set forth in Section 1.2.
"Final Earn-Out Payment" shall have the meaning set forth in Section
4.2.
"GAAP" shall mean generally accepted principles of accounting.
"Independent Accounting Firm" shall have the meaning set forth in
Section 3.3(d).
"Intangible Assets" shall have the meaning set forth in Section 3.1.
"Leases" shall have the meaning set forth in Section 6.9.
"Net Tangible Purchase Price" shall have the meaning set forth in
Section 3.1.
"1996 Earn-Out" shall have the meaning set forth in Section 3.2(b).
"Northwest Highway Lease" shall have the meaning set forth in Section
1.1(i).
"Shared Lease" shall have the meaning set forth in Section 12.12.
"STI" shall have the meaning set forth in Section 1.1.
"Sublease" shall have the meaning set forth in Section 5.2(f).
"Tangible Assets" shall have the meaning set forth in Section 3.1.
"Transaction Documents" shall mean those documents described in Sections
5.2 and 5.3.
1.0 TRANSFER OF ASSETS
1.1 Transfer of Assets. Subject to the terms and conditions of
this Agreement, on the Closing Date (as defined in Section 5.1), Seller will
sell, transfer, assign and deliver to Buyer who will immediately transfer to
Safco Technologies, Inc., an Illinois corporation and Buyer's wholly-owned
subsidiary("STI"), and Buyer will purchase from Seller, for the Purchase Price
(as defined in Section 3.0 hereof) all of Seller's right, title and interest,
free and clear of all pledges, liens, security, interests, encumbrances or
other restrictions of any kind or nature except only as specifically referred
to or identified in Section 6.7 hereof or Schedule 6.7 or otherwise permitted
in this Agreement at the Closing Date, in and to every property and asset of
every kind, nature and description, real, personal or mixed, tangible or
intangible, wherever situated, used primarily in the operations of the
Division, except the Excluded Assets as described in Section 1.2 hereof
(exclusive of the Excluded Assets, hereinafter collectively called the
"Assets"). The Assets shall include the assets of the Division shown on the
July 31, 1996 balance sheet, attached hereto as Exhibit 1.1 (the "July 31
Balance Sheet") subject to changes in the ordinary course of business between
August 1, 1996 and the Closing Date and shall include, but not be limited to,
the following assets and properties used primarily in the operation of the
Division, except the Excluded Assets as the same shall exist on the Closing
Date:
(a) Personal Property. All tangible personal property,
including, but not limited to, all machinery and equipment, computers, fax
machines, copiers and office equipment, furniture and furnishings, tools,
molds, tooling, dies, jigs and patterns, lab equipment, supplies and
accessories, automobiles, trucks, vehicles and other tangible assets wherever
located;
(b) Inventories. All inventories of the Division,
wherever located, whether at the Division's facility, with third parties or
otherwise, including, without limitation, all finished goods, work-in-
progress, raw materials, spare parts, packaging and supplies;
(c) Accounts Receivable. All accounts receivable from
customers of the Division existing on the Closing Date;
(d) Intellectual Property. All names, marks, slogans,
caricatures, logos, instruction manuals and promotional graphics and all
patents, patent applications, claims for infringement invention disclosures,
rights in software or other trade secret rights, trademarks (whether
registered or unregistered), trademark applications and registrations,
copyrights (whether registered or unregistered), copyright registrations and
applications, and all other intellectual property, including, without
limitation, artwork, mechanicals, photography, negatives and printer's working
film, wherever located, and technical specifications and manufacturing and
process information, trade secrets including software in whatever state of
development, research and development data, routing sheets, work standards,
formulae (secret or otherwise), inventions, shop rights, know-how,
confidential information, engineering and technical designs and drawings,
discoveries, improvements, production processes, operating rights, other
licenses and other similar intangible property and rights relating to the
products, production processes or business of the Division. Effective as of
the Closing Date, Seller does grant to STI a perpetual, exclusive, assignable
right and license to use the name "SAFCO" but only with respect to products or
services in the wireless telecommunications market presently or in the future
marketed by STI.
(e) Sales Materials. All catalogs, brochures, sales
literature, promotional material and other selling material relating to
products of the Division;
(f) Books and Records. Copies of all books and records
including, without limitation, the Division's personnel records, payroll tax,
social security and other employee wage and benefit records, accounts payable
records (including tax records, financial reports, invoices, correspondence
and all related documents); accounts receivable ledgers; all documents related
to uncollected invoices; all shipping records; supplier, distributor, sales
agent and customer lists; trade correspondence; production and purchase
records (but excluding historical accounting and financial tax return records
other than those located at the facilities of the Division) and the originals
of all titles, registrations, letters patent, documents, papers and agreements
constituting or representing the Assets, subject to Seller retaining access to
such originals or retaining copies thereof.
(g) Contracts. All contracts, agreements, licenses,
leases, sales orders, purchase orders, and other commitments which have been
incurred by Seller in the ordinary course of business of the Division provided
that any such contract, agreement, license, lease, sales order, purchase order
or other commitment which requires the consent to assignment of a party
thereto and for which such consent has not been obtained pursuant to Section
6.3 prior to the Closing shall be assigned by Seller subject to receipt of
such consent; and provided further that prior to receipt of such consent Buyer
or STI shall perform any such obligation as agent for Seller and Seller shall
receive any payments thereunder as agent for STI.
(h) Insurance from Destroyed or Damaged Assets. All
insurance proceeds from any insurance provider, other than any proceeds under
any retroactively rated insurance policy or other self-insurance program, for
any Asset which is destroyed or damaged after the date hereof and until the
Closing, or any replacement property or asset actually acquired for such
destroyed or damaged Asset;
(i) Leasehold Interests. All leasehold interests arising
under leases or rental agreements covering real estate, machinery, equipment,
computer hardware, tools, supplies, furniture and fixtures, automobiles and
trucks, fixed assets and other tangible assets used primarily by Seller in
connection with the business of the Division including but not limited to that
leasehold created under that Net Lease dated December 12, 1991, between Seller
as Lessee and LaSalle National Bank, not personally but as trustee under trust
agreement dated February 2, 1975 and known as trust no. 48560 as Lessor
covering real estate located at 6060 North Northwest Highway, Chicago,
Illinois, as amended by execution of Exhibit 5.2(j) (the "Northwest Highway
Lease"), except subject to the consent to assignment of a party thereto and
for which such consent is required and has not been obtained pursuant to
Section 6.3 prior to the Closing. For any such leasehold interests for which
consent to assignment is required, Buyer shall perform any obligation
thereunder as agent for the Seller prior to receipt of such consent;
(j) Prepaid Items. All prepaid items of Seller relating
primarily to the business of the Division other than prepaid insurance
premiums, any associated insurance coverage and any payroll tax deposits, but
including prepaid rentals, security deposits, taxes (other than prepaid income
taxes) and other deposits relating primarily to the operations of the Division
to the extent included on the Closing Balance Sheet;
(k) Distribution Contracts. All of the rights and
benefits accruing to Seller with respect to the business of the Division under
its agreements, appointment letters and relationships with distributors,
importers, transportation companies, suppliers, public warehouses and others
in the distribution chain for the products of the Division and under any and
all operating, transportation and other licenses and permits of every kind and
variety issued to or relied upon by Seller with respect to the business of the
Division;
(l) Permits and Licenses. All transferable business
licenses, permits and equivalent documents; and
(m) Goodwill. All business goodwill and going concern
value of the Division.
1.2 Excluded Assets. For purposes of this Agreement, the
following are Excluded Assets:
(a) Except for the license to be granted pursuant to the
provisions of Section 1.1(d), Seller shall not transfer nor shall Buyer or STI
obtain any interest in the name "SAFCO" or any trademark or other intellectual
property rights containing the word 'SAFCO" or any derivative thereof,
pertaining to or associated with the name "SAFCO".
(b) Notes receivable from third parties and other choses in
action due from Bruce E. Creger, Richard F. Wharton, Disquis, Inc. or
Northwest Highway Venture.
(c) Those three Shared Leases identified in Schedule 12.11
as Nos. 4352-12, 4352-13 and that lease dated 5/22/95.
2.0 ASSUMPTION OF CERTAIN LIABILITIES
2.1 Assumption of Liabilities. On the Closing Date, Buyer shall
execute and deliver to Seller an assumption agreement (the "Assumption
Agreement") in the form set forth in Exhibit 2.1 pursuant to which Buyer shall
assume and agree to pay, perform and discharge when due all then existing
liabilities and obligations of Seller (i) pertaining to the Division
consisting of the Division's current liabilities and capital lease obligations
of the nature set forth on the July 31 Balance Sheet, if changed, on the
Closing Balance Sheet; (ii) under those contracts described in Section 1.1(g)
and (k) hereof (including but not limited to those contracts listed in
Schedule 2.1); (iii) under those contracts, agreements, sales orders, purchase
orders or other commitments of Seller incurred in the ordinary course of
business following the date hereof and not fully performed before the Closing
Date (the instruments described in (ii) and (iii) hereinafter collectively
referred to as the "Contracts" and the Seller's obligations described in (i),
(ii) and (iii) hereafter collectively referred to as the "Assumed
Liabilities"); and (iv) legally enforceable customer warranty claims
aggregating up to $250,000 for return or otherwise (other than product
liability claims) in respect to defective software or other products of the
Seller, either alleged or actually delivered prior to the Closing Date.
2.2 Excluded Liabilities. Buyer shall assume and be liable for
only those liabilities described in Section 2.1 hereof, and for no other
liabilities, contracts, commitments and other obligations of Seller arising
out of activities prior to the Closing Date, and specifically excluding, but
only if or to the extent not included as a liability in the Closing Balance
Sheet and not listed in Schedule 2.1, the following (hereinafter referred to
as the "Excluded Liabilities"):
(a) Any of Seller's obligations and liabilities under this
Agreement;
(b) Any obligation of Seller to current or former
employees of the Seller (except pursuant to the Employment Agreements of
Harold G. Clampitt and Robert Lee Meek III, each as amended), to the extent
that obligation is a result of Seller's conduct prior to the Closing Date
including any claim asserted by Linda Saunders;
(c) Any obligation of Seller for expenses incurred by it
in connection with this transaction;
(d) Claims or obligations with respect to workers'
compensation, general liability, intellectual property infringements, personal
injury or property damage arising with respect to occurrences prior to the
Closing Date;
(e) Any obligation of Seller for federal, state or local
payroll, excise, franchise, capital or income tax liabilities arising from the
operations of business of the Seller prior to the Closing Date; and
(f) Any liability or obligation of Seller arising by
reason of any violation by Seller of any state, federal or local laws, rules
or regulations prior to the Closing Date;
(g) Any obligation of Seller, not set forth in any
contract, for post-retirement medical benefits of any kind to current or
former employees of the Division;
(h) Any liabilities, including but not limited to any
liabilities resulting from unfunded contributions under any employee benefit
plan (whether or not subject to ERISA)) for any pension, profit-sharing or
welfare benefit plans maintained by Seller or its affiliates ("Plan
Liabilities");
(i) Liabilities of or claims against the Seller for
damages arising from events occurring prior to the Closing Date with respect
to the operation of the business of the Seller, the Division or the Assets,
except claims described in subsection 2.1(iv) and liabilities or claims
specifically identified in this Agreement or any Schedule hereto as an Assumed
Liability;
(j) Claims for damage to person or property arising out
of defects in products manufactured, assembled and shipped, or services
performed, by Seller before the Closing Date except to the extent reserved
against on the Closing Balance Sheet or described in Subsection 2.1(iv);
(k) Liabilities or obligations arising from any violations
of foreign, federal, state or local laws or regulations based upon conditions
existing or events occurring prior to the Closing Date with respect to
environmental protection, including, without limitation, laws or regulations
concerning water pollution, groundwater and soil protection, air pollution,
solid wastes, hazardous wastes, oil or other spills or other releases of toxic
or hazardous substances, transportation of toxic or hazardous substances and
occupational or employee health and safety;
(l) Liabilities or obligations arising from any violations
of foreign, federal, state or local environmental laws or regulations,
including, but not limited to, that item set forth in Schedule 6.15 based upon
any generation, transportation, storage, treatment or disposal, or any spills,
discharges, leaks, emissions, injections, escapes, dumping or any other
"release" (as defined now or in the future under any laws or regulations
referred to in paragraph (l) above), of solid wastes, toxic wastes or
hazardous wastes or other substances by Seller or any of its affiliates
occurring prior to the Closing Date, including, but not limited to, any such
activities which occurred on any property on which Seller currently conducts
or may have in the past conducted activities of any kind, and any such
activities which occurred off such premises with regard to wastes or
substances generated on such premises;
(m) Liabilities or obligations arising from the exposure
of any persons, including, but not limited to, employees of Seller, to any
chemical products, raw materials, intermediates or wastes, processed or
handled at any location at which Seller has conducted activities or sent
wastes, indirectly or directly prior to the Closing Date.
(n) Any amounts payable to Employees (as defined in
Section 12.2(a)) arising out of their termination of employment with Seller.
(o) Any amounts payable to Seller's lending institution on
its line of credit.
3.0 PURCHASE PRICE.
3.1 Tangible Asset Purchase Price. In addition to the assumption by
the Buyer of the Assumed Liabilities, the Buyer shall pay and deliver to
Seller, as the net purchase price ("Net Tangible Purchase Price") for all of
the Assets other than the intellectual property described in Section 1.1(d)
and the goodwill described in Section 1.1(m) (such intellectual property and
goodwill herein called "Intangible Assets" and the Assets, exclusive of the
Intangible Assets, herein called "Tangible Assets") the sum of Five Million
Two Hundred Fifty-Four Thousand Nine Hundred Sixty-Three ($5,254,963) Dollars.
The Net Tangible Purchase Price shall be paid in cash at the Closing.
3.2 Intangible Asset Purchase Price. (a) The Buyer shall pay to
Seller, as the aggregate purchase price for the Intangible Assets:
(i) the 1996 Earn-Out, if any, payable pursuant to and described in
Subsection 3.2(b) hereof;
(ii) the Annual Earn-Out, if any, payable pursuant to and described in
Subsection 3.2(c) hereof;
(iii) the Buyer's promissory note ("Buyer's Note") in the principal
amount of Twenty-Four Million Seven Hundred Forty-Five Thousand Thirty-Seven
($24,745,036) Dollars, payable Fourteen Million Seven Hundred Forty-Five
Thousand Thirty-Seven ($14,745,037) Dollars on January 2, 1997 and Ten
Million ($10,000,000) Dollars on September 30, 2001, in the form set forth in
Exhibit 3.2(a)(iii), the first installment to be secured by a standby letter
of credit issued by CoreStates Bank N.A. in the form set forth on Exhibit
3.2(a)(iii)(A) attached hereto.
(iv) the Buyer's stock purchase warrant covering Five Hundred Fifty-
Five Thousand Five Hundred Fifty-Five (555,555) shares of the Common Stock,
$1.00 par value, of Buyer (the "Stock Purchase Warrant") in the form set forth
in Exhibit 3.2(a)(iv) attached hereto.
(b) 1996 Earn-Out. The 1996 Earn-Out shall be in an amount equal to
forty (40%) per cent of the Operating Income of STI from October 1, 1996
through January 3, 1997 (the "1996 Earn-Out Period"), provided that the
Operating Income for the 1996 Earn-Out Period shall equal or exceed
$2,700,000. As used in this Section, the term "Operating Income" shall mean
the net profit calculated in accordance with those principles previously
employed by Seller in preparing its annual financial statements and before
deduction for federal, state or other income taxes, interest and Buyer's
corporate overhead charges (except to the extent that those charges relate
directly to STI and are paid by Buyer for audit services, casualty insurance
coverage and the like), such charges not to exceed expenses previously
incurred by the Division for similar services, or any other charges extraneous
to the business of the Division purchased by the Buyer hereunder. The
foregoing notwithstanding, Operating Income will be net of an eleven per cent
(11%) per annum cost of capital charge for capital investments (including
acquisitions) made during the period but only to the extent that such capital
investments exceed the recognized depreciation charged from and after the
Closing Date to fixed assets of STI to the date on which the investment is
made. Such charge will be calculated from the date at which each such
investment is made. The 1996 Earn-Out shall be paid by Buyer to Seller within
thirty (30) days following the receipt by the Buyer of its audit report on the
financial statements of STI for the Gilbert fiscal period ending January 3,
1997..
(c) Annual Earn-Out. The Annual Earn-Out shall consist of three (3)
annual payments to be paid by Buyer to Seller within thirty (30) days
following receipt by the Buyer of its audit report on the financial statements
for each of the three fiscal years of STI ending on the Friday nearest to
December 31 in 1997, 1998 and 1999 (each an "Earn-Out Year") based upon sales
and Operating Income of STI during each of the Earn-Out Years, provided that
STI shall achieve the Minimum Operating Income or Minimum Cumulative Operating
Income, as the case may be, for each Earn-Out Year detailed below. Operating
Income shall be as defined in Section 3.2(b).
1997
Minimum Operating Income: $5,215,388
Earn-Out: 8.10% of 1997 sales in excess of $22,310,000 plus 10.60% of 1997
sales in excess of $24,705,900, plus 25% of 1997 Operating Income in excess of
$5,215,388, plus 35% of 1997 Operating Income in excess of $6,184,892.
1998
Minimum Cumulative Operating Income: $11,621,349
Earn-Out: 8.10% of cumulative sales for the two (2) years ending December
31, 1998 in excess of $47,966,500 plus 10.60% of such cumulative sales in
excess of $56,168,864, plus 25% of cumulative Operating Income for the two (2)
years ending December 31, 1998 in excess of $11,621,349, plus 35% of such
cumulative Operating Income in excess of $15,029,101.
1999
Minimum Cumulative Operating Income: $19,444,767
Earn-Out: 8.10% of cumulative sales for the three (3) years ending December
31, 1999 in excess of $77,471,475 plus 10.60% of such cumulative sales in
excess of $96,236,948, plus 25% of cumulative Operating Income for the three
(3) years ending December 31, 1999 in excess of $19,444,767, plus 35% of such
cumulative Operating Income in excess of $27,443,246
The Annual Earn-Out amount payable as above set forth for 1998 and 1999
shall be reduced, dollar for dollar, for all amounts previously paid as an
Annual Earn-Out for the prior year or years.
For purposes of this Section 3.2, the term "sales" shall mean all goods and
services shipped or rendered, as the case may be, in accordance with the
procedures used by the Seller in the operation of the Division.
(d) Buyer agrees to cause, at the Closing, the Assets, business and
personnel of the Division to be transferred to and the Assumed Liabilities to
be assumed and performed by STI, to cause STI to continuously operate the
Division until December 31, 1999 and to retain 100% control of and refrain
from disposing of any ownership interest in STI until January 1, 2000. The
foregoing notwithstanding, the Buyer shall also remain liable for the payment
and/or performance of the Assumed Liabilities by STI.
3.3 Post Closing Purchase Price Adjustment.
(a) Within sixty (60) days after the Closing, Seller shall prepare and
deliver to Buyer a balance sheet of the Division as of the Closing Date (the
"Closing Balance Sheet"), which shall be prepared in accordance with GAAP and
applied consistently with Seller's past practices, and in particular
consistent with the preparation of the July 31 Balance Sheet, provided,
however, that certain adjustments detailed in Schedule 3.3(a) which have
normally been made by the Seller as of its fiscal year end, will be made on
this interim balance sheet and those other principles set forth in Schedule
3.3(a) shall be applied. Buyer will cause STI to cooperate with Seller in the
preparation of the Closing Balance Sheet and provide Seller with such
information and access to information as may be reasonably required in
connection therewith. Buyer will, and will cause STI to, permit Seller and
its accountants to have access to STI's premises, the books, files and records
and employees and to conduct or to observe any inventory taken in connection
with the preparation of the Closing Balance Sheet. Simultaneously with
Seller's deliver of the Closing Balance Sheet to Buyer, Buyer and its
independent accountants shall be afforded the opportunity to review, copy and
to have made available to them all of the working papers and computations used
in the preparation of the Closing Balance Sheet.
(b) The Closing Balance Sheet and the net worth so transferred
determined on the basis thereof shall be deemed accepted by Buyer and shall be
conclusive for the purpose of the payment provided for in Subsection 3.3(e),
unless within thirty (30) days after delivery of the Closing Balance Sheet to
Buyer, Buyer shall propose adjustments to the Closing Balance Sheet for
consideration and shall submit an adjusted Closing Balance Sheet to Seller.
Simultaneously with the delivery of the adjusted Closing Balance Sheet to
Seller, Seller and its independent accountants shall be given the opportunity
to review and have made available to them all of the working papers and
computations used by the Buyer in the preparation of the adjusted Closing
Balance Sheet, and shall be given access to the books, records and personnel
of STI in order to verify the adjusted Closing Balance Sheet. All such
adjustments shall be consistent with GAAP applied in accordance with Seller's
past practices.
(c) The adjusted Closing Balance Sheet and the net worth determined on
the basis thereof shall be deemed to be accepted by Seller and shall be
conclusive for the purposes of the payment provided for in Subsection 3.3(e)
unless Seller shall, within thirty (30) days after the date on which the
adjusted Closing Balance Sheet was delivered, deliver a written notice to
Buyer objecting to the adjusted Closing Balance Sheet.
(d) Buyer and Seller shall attempt to resolve all differences and agree
upon the proper treatment of the item or items subject to such exception on a
mutually acceptable basis. If Buyer and Seller are unable to resolve any
disagreements respecting the treatment of any items relating to the adjusted
Closing Balance Sheet within thirty (30) days after receipt of the notice
referred to in (c) above, the dispute shall be referred for decision to a
mutually agreed third party. If the parties fail to select a third party
within ten (10) days after such thirty (30) day period expires, then the
parties shall submit all items remaining in dispute for resolution to KMPG
Peat Marwick or such other independent accounting firm as may be agreed upon
by the parties (the "Independent Accounting Firm"), which shall, within thirty
(30) days of such submission, determine and report to Seller and Buyer upon
such remaining disputed items. Such report shall have the legal effect of an
arbitral award and shall be final, binding and conclusive on the parties.
Fees and expenses of the Independent Accounting Firm shall be allocated
between Seller and Buyer in the same proportion that the aggregate amount of
such disputed items so submitted to the Independent Accounting Firm which is
unsuccessfully disputed by each such party (as finally determined by the
Independent Accounting Firm) bears to the total amount of all disputed items
so submitted.
(e) Not later than the fifth (5th) day following the final
agreement/determination with respect to the Closing Balance Sheet, Buyer shall
pay to Seller or Seller shall pay to Buyer the excess or deficiency, as the
case may be, by which the net worth as shown on the Closing Balance Sheet is
more or less than the Net Tangible Purchase Price paid by Buyer on the Closing
Date, in either case with interest at the annual rate of seven per cent (7%)
from the Closing Date to the date of payment.
3.4 Purchase Price Allocation. The Tangible Asset Purchase Price and
the Intangible Asset Purchase Price shall be allocated among the Tangible
Assets and the Intangible Assets respectively in the manner and in accordance
with the procedures as set forth in Schedule 3.4 hereto. The allocation
schedule shall be binding upon the Buyer and the Seller for tax accounting and
tax reporting purposes, and Buyer and Seller shall not take a contrary
position on any tax return or the document to file by either of them with any
federal, state or local authorities.
4.0 DETERMINATION AND PAYMENT OF EARN-OUT PAYMENTS; RESOLUTION OF
DISPUTES.
4.1 Annual Financial Statements of STI. The Buyer will deliver to
Seller within forty-five (45) days after the Buyer receives its audited
financial reports for the 1996 Earn-Out Period and for each Earn-Out Year,
statements of income for STI for such Period or Earn-Out Year, prepared with
the assistance of the Buyer's independent public accountants in accordance
with generally accepted accounting principles, consistently applied, together
with a certificate of the Chief Financial Officer of the Buyer (the "Earn-Out
Certificate") containing the calculation of (a) Operating Income for the 1996
Earn-Out Period or Earn-Out Year, (b) Sales for each Earn-Out Year, and (c)
the amount payable under Section 3.2(b) or 3.2(c) with respect thereto. The
Buyer will permit Seller's representative to inspect the books and records of
account of STI upon reasonable advance notice during normal business hours
during each of the Earn-Out Years and for a reasonable period of time after
the third Earn-Out Year (but not later than six (6) months after delivery of
the last Earn-Out Certificate), for the purpose of verifying Sales and
Operating Income. The Earn-Out payment with respect to the 1996 Earn-Out
Period and any Earn-Out Year of STI shall be paid concurrently with the
delivery of the Earn-Out Certificate to Seller by a check from the Buyer in
the amount thereof, such payment and acceptance thereof to be without
prejudice to the rights of Seller under Section 4.2 hereof.
4.2 Disputes. If Seller disputes the amount of any Earn-Out Payment
set forth in any Earn-Out Certificate delivered pursuant to Section 4.1 above,
then Seller shall, upon notice to the Buyer within ninety (90) days after the
date of payment of such Earn-Out Payment, have the right to direct Seller's
independent accountants, at Seller's expense, to review and test the audit of
STI for the 1996 Earn-Out Period or any Earn-Out Year in question. If Seller
fails to timely deliver such notice, Seller will be deemed to have accepted as
accurate the amount of any Earn-Out Payment set forth in the applicable Earn-
Out Certificate and waived its right to conduct a review and test of the audit
of STI for the 1996 Earn-Out Period or such Earn-Out Year. The Buyer shall
give Seller's independent accountants such access to Buyer's books and records
as is reasonably necessary to conduct their review and test. If Seller, after
such review and test, shall dispute the amount of the Earn-Out Payment
proposed by the Buyer and the Buyer does not accept the amount of Seller's
proposed Earn-Out Payment ("Seller's Proposal"), then Seller and the Buyer
shall select and instruct a third nationally-recognized independent accounting
firm (i) to conduct a review and test of the audit of STI for the 1996 Earn-
Out Period or such Earn-Out Year and (ii) to determine the amount of the Earn-
Out Payment for the 1996 Earn-Out Period or such Earn-Out Year (the "Final
Earn-Out Payment"), by selecting as the Final Earn-Out Payment (A) the amount
previously proposed by the Buyer pursuant to Section 4.1(a) above (the
"Buyer's Proposal"), (B) Seller's Proposal, (C) an amount which falls within
the range between the Buyer's Proposal and Seller's Proposal. Each of the
Buyer and Seller shall be bound by such determination of the Final Earn-Out
Payment. The Final Earn-Out Payment for the 1996 Earn-Out Period or Earn-Out
Year, in the amount determined by such third accounting firm, shall be payable
by the Buyer to Seller within ten (10) days after receipt of such third
accounting firm's determination of the Final Earn-Out Payment. Such payment
shall be adjusted to reflect the prior payment by the Buyer of an amount
equal to the Buyer's Proposal. The fees and expenses of such third accounting
firm shall be paid by the Seller and Buyer in the same proportion that the
aggregate amount of such disputed items submitted to the third accounting firm
which is unsuccessfully disputed by each such party (as finally determined by
the third accounting firm) bears to the total amount of all disputed items so
submitted.
5.0 CLOSING
5.1 Time and Place of Closing. The closing of the transactions
to be effected hereunder (the "Closing") shall be held at the offices of
Seller at 10:00 a.m. on September 30, 1996, or at such other date, place or
time as the parties shall otherwise agree upon in writing (the date of the
Closing being referred to herein as the "Closing Date").
5.2 Deliveries by Seller. At the Closing, Seller will deliver
to Buyer (unless delivered previously), the following:
(a) Such bills of sale, endorsements, assignments and
other instruments, in such form as in each case is reasonably satisfactory to
the Buyer and as shall be sufficient to vest in the Buyer, good and valid
title to all the Assets (except to the extent that Buyer's failure to be in
good standing in each required jurisdiction shall adversely affect such good
and valid title), free and clear of all liens, encumbrances, restrictions or
rights of any other party whatsoever except those permitted liens as expressly
set forth in this Agreement or other encumbrances, restrictions or rights
disclosed in the Schedules attached hereto (the deeds, bills of sale, and
other documents referred to herein;
(b) Copies of all the books and records of Seller
pertaining to the Division and the Assets;
(c) The originals of all titles, registrations, letters,
patents, documents, papers and agreements constituting or representing Assets;
(d) The Employment Agreement of Bruce E. Creger ("Creger
Agreement"), executed by Bruce E. Creger, in the form set forth as Exhibit
5.2(d);
(e) The CoreStates Intercreditor Agreement ("CoreStates
Agreement") executed by Seller, in the form set forth in Exhibit 5.2(e);
(f) A sublease (the "Sublease") for a portion of the
premises commonly known as 6060 North Northwest Highway, Chicago, Illinois,
executed by the Seller, as sublessee, in the form set forth in Exhibit 5.2(f);
(g) The opinion of Schoenberg, Fisher & Newman, Ltd..,
counsel to Seller, in the form set forth in Exhibit 5.2(g);
(h) The Guaranty executed by Bruce E. Creger and Richard F.
Wharton, in the form set forth in Exhibit 5.2(h);
(i) Resolutions adopted by the Board of Directors and
shareholders of Seller authorizing the execution of this Agreement and all of
the Transaction Documents to be signed and delivered by Seller, certified to
be accurate and correct by the Secretary of the Seller;
(j) The Amendment to and Assignment and Assumption of Net
Lease in the form set forth in Exhibit 5.2(j), executed by the Lessor and
Seller; and
(k) Payment to Buyer, by check, wire transfer or otherwise,
of the sum of $41,852 to cover the cost of the letter of credit to be
delivered in accordance with the provisions of Sections 3.2(a)(iii) and
5.3(c).
(l) All other documents, instruments and writings required
to be delivered by Seller at or prior to the Closing Date pursuant to this
Agreement or otherwise required in connection herewith or as, in the opinion
of Buyer's counsel, are reasonably necessary to transfer to Buyer good and
valid title to the Assets pursuant to this Agreement.
5.3 Deliveries by Buyer. At the Closing, Buyer will deliver to
Seller (unless previously delivered), the following:
(a) By wire transfer of immediately available funds to
such account or accounts as may be designated by Seller in writing, an amount
equal to the Net Tangible Purchase Price as determined pursuant to Section 3.1
of this Agreement;
(b) Buyer's Note in form set forth in Exhibit 3.2(a)(iii);
(c) Letter of credit issued by CoreStates Bank N.A. in the
form set forth in Exhibit 3.2(a)(iii)(A);
(d) Buyer's Stock Purchase Warrant in form set forth in
Exhibit 3.2(a)(iv);
(e) The Assumption Agreement in form set forth in Exhibit
2.1;
(f) The Sublease executed by Buyer and STI;
(g) The CoreStates Agreement executed by CoreStates Bank
N.A.;
(h) The Creger Agreement executed by Buyer and STI;
(i) An opinion letter of Thomas F. Hafer, counsel to
Buyer, in the form set forth in Exhibit 5.3(h);
(j) A copy of the Buyer's by-laws and resolutions adopted
by the Buyer's Board of Directors authorizing the execution of this Agreement
and all of the Transaction Documents to be signed and delivered by the Buyer,
certified as accurate and correct by the Secretary of the Buyer;
(k) The Amendment to and Assignment and Assumption of Net
Lease in the form set forth in Exhibit 5.2(j) executed by Buyer and STI; and
(l) All other documents, instruments and writings required
to be delivered by Buyer at or prior to the Closing Date pursuant to this
Agreement or otherwise required in connection herewith or as, in the opinion
of Seller's counsel, are reasonably necessary to carry into effect the
transactions contemplated by this Agreement.
5.4 Transaction Documents. For purposes of this Agreement, those
documents described in Sections 5.2 and 5.3 are referred hereinafter,
collectively, as the "Transaction Documents".
6.0 REPRESENTATIONS AND WARRANTIES BY SELLER
As a material inducement to the Buyer to execute and perform its
obligations under this Agreement, the Seller hereby makes the following
representations and warranties, which Buyer agrees are to be qualified to the
extent that Seller will not be considered to be in breach of any such
representation or warranty and therefore shall have no liability for any such
misrepresentation or breach of any such warranty unless the misrepresentation
or breach of warranty materially adversely affects the Buyer's use of or title
to the Assets transferred hereby or any material part thereof.
6.1 Organization of Seller. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Illinois and has all requisite corporate power and authority to own,
operate and lease the Assets, to carry on its business as it is presently
being conducted, to execute this Agreement and the Transaction Documents to be
signed by Seller and to carry out and perform the terms and provisions of this
Agreement. It is duly qualified to do business as a foreign corporation in
the jurisdictions in which it conducts the business of the Division, except
where the failure to so qualify will not have a material adverse effect on the
business of the Division.
6.2 Authorization of Agreements. The execution, delivery and
performance of this Agreement and the Transaction Documents by Seller, and the
consummation by it of the transactions contemplated hereunder and thereunder,
have been duly authorized by all necessary corporate action by Seller. This
Agreement has been duly executed and delivered by Seller and the Transaction
Documents will be duly executed and delivered at the Closing. This Agreement
constitutes and the other Transaction Documents to be executed by Seller when
executed and delivered on the Closing Date will constitute the legal, valid
and binding obligations of Seller, enforceable against Seller in accordance
with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws and equitable
principles relating to or limiting creditors' rights generally.
6.3 Effect of Agreement. Neither the execution and delivery of
this Agreement and the Transaction Documents nor the consummation by Seller of
the transactions contemplated hereunder and thereunder will (a) violate any
statute, or law, rule or regulation applicable to Seller, (b) violate any
order, writ, injunction or decree of any court or governmental authority
applicable to Seller, or (c) violate or conflict with or constitute (with due
notice or lapse of time or both) a default under, or result in the termination
of, accelerate the performance required by, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the Assets under
any term or provision of (i) the Articles of Incorporation or by-laws of
Seller; or (ii) any lease, contract, commitment, understanding, arrangement,
agreement or restriction of any kind or character to which Seller or any of
the assets or properties of the Division is bound except (A) consents which
may be required for assignment of any Contracts including those set forth in
Schedule 6.3; and (B) to the extent that the existence of any such violation,
conflict, default, termination, acceleration of performance or creation of any
lien, security interest, charge or encumbrance would have a de minimis effect
on the business of the Division.
6.4 Governmental Approvals. Except as set forth in Schedule
6.4, no approval, authorization, consent or order or action of or filing with
any court, administrative agency or other governmental authority is required
to be obtained by Seller for the execution and delivery by Seller of this
Agreement and the Transaction Documents or the consummation by it of the
transactions contemplated hereunder and thereunder.
6.5 Financial Statements. Seller has furnished the July 31st
Balance Sheet to Buyer and, except as set forth in Schedule 6.5, the July 31st
Balance Sheet has been prepared in accordance with generally accepted
accounting principles applied in a manner which is consistent with the
accounting practices and procedures of Seller relating to the Division.
Except as set forth in Schedule 6.5, the Closing Balance Sheet when delivered,
will fairly present the financial condition of the Division as of the date
thereof and as of the Closing Date, respectively.
6.6 Absence of Certain Changes or Events. Since July 31, 1996
except as set forth in Schedule 6.6 or as contemplated hereunder, Seller has
not with respect to the Division:
(a) Material Obligations. Incurred any material
obligation or liability (fixed or contingent), except normal trade or business
obligations incurred in the ordinary course of business, and except
obligations arising under this Agreement;
(b) Discharge or Satisfaction of Liens. Discharged or
satisfied any material lien, security interest or encumbrance or paid any
material obligation or liability (fixed or contingent), other than pursuant to
the terms of such obligation, or in the ordinary course of business and
consistent with past practice;
(c) Additional Liens. Mortgaged, pledged or subjected to
any lien, security interest or other encumbrance, any of its assets or
properties (other than mechanic's, materialman's and similar statutory liens
arising in the ordinary course of business and purchase money security
interests);
(d) Acquisition or Disposition of Assets. Transferred,
leased or otherwise disposed of any of its assets or properties or acquired
any assets or properties except in the ordinary course of business and
consistent with past practice;
(e) Compromise of Debts or Claims. Cancelled or
compromised any material debt or claim, except in the ordinary course of
business;
(f) Waiver of Material Rights. Waived or released in
writing any rights of material value;
(g) Rights in Licenses, Trademarks. Transferred or
granted any rights under any intellectual property licenses, inventions,
trademarks, trade names, service marks or copyrights or with respect to any
know-how (other than licenses granted by Seller in the ordinary course of
business and consistent with past practice) transferred hereunder;
(h) Employee Compensation. Granted or promised in writing
any wage or salary increase applicable generally to any group or
classification of employees working for the Division , entered into any
written or oral employment contract with any officer or employee of Seller
working for the Division or made any loan to, or entered into any transaction
that is not of a de minimis nature with, any officer or employee of Seller
working exclusively for the Division;
(i) Material Contracts. Entered into any transaction,
contract or commitment, except for contracts listed in Schedule 6.6(i) or
contracts entered into in the ordinary course of business of the Division or
pursuant to this Agreement; or
(j) Certain Material Transactions. Engaged in any
transaction other than transactions occurring in the ordinary course of
business of the Division and other than the transactions contemplated by this
Agreement.
6.7 Title to Properties, Absence of Liens and Encumbrances.
Seller has, and on the Closing Date will have good and valid title to the
tangible assets included within the Assets and all other assets included in
the Assets, in each case free and clear of all mortgages, liens, charges,
security interests or other encumbrances of any nature whatsoever, other than
(a) liens for taxes not yet due, (b) imperfections in title, if any, not
material in amount and which, individually or in the aggregate, do not
materially interfere with the conduct of the business of the Division or the
use of the Assets, (c) liens arising in the ordinary course of business
consistent with past practice, (d) the encumbrances set forth on Schedule 6.7
hereto.
6.8 Tangible Personal Property and Fixtures. Schedule 6.8
attached hereto contains a listing of all machinery, equipment, furniture and
fixtures (except inadvertent de minimis omissions, if any) used in or relating
to the Division. Except as set forth in this Agreement, Seller makes no
representations or warranties as to the condition of the tangible personal
property, fixtures, machinery and equipment included within the Assets and
such tangible personal property, fixtures, machinery and equipment is being
sold to Buyer "AS IS" and "WHERE IS", except to the extent that any such
tangible personal property is subject to any manufacturer's warranty, in which
event any warranties shall be assigned to Buyer.
6.9 Leases. Schedule 6.9 attached hereto contains a complete
and accurate list of all (i) leases relating to real property used in
connection with the business of the Division and (ii) leases relating to
personal property used in the conduct of the Division whose term is in excess
of one (1) year and which is not cancelable upon thirty (30) or fewer days'
notice without any penalty or premium, other than a nominal cancellation fee
or charge (the "Leases"). Prior to the date hereof, Seller has delivered or
made available to Buyer, true, complete and correct copies of the Leases
including all amendments thereof and all modifications thereto. Seller is not
in default with respect to any material terms or conditions of the Leases and
any such Leases that are included within the Assets are, and upon assignment
to Buyer and receipt of any consents required to be obtained thereunder with
respect to the assignment thereof described in Schedule 6.9, will be in full
force and effect. To Seller's knowledge, Seller has not taken any action or
failed to take any action which would render any Leases included within the
Assets invalid, nonbinding or unenforceable and there are no overdue unpaid
liabilities existing with respect to any Leases included within the Assets.
6.10 Patents, Trademarks and Trade Names. Schedule 6.10 hereto
contains an accurate and complete list of all patents, trademarks, trademark
registrations, and all applications therefor presently owned or held by Seller
which are material to or used primarily in connection with the business of the
Division, and, the use thereof by Seller, to Seller's knowledge, does not
infringe on any patents, trademarks or copyrights or any other rights of any
person. Except as set forth in Schedule 6.10, to Seller's knowledge, Seller
has not received any written notice of any infringement or unlawful use of any
tangible or intangible property identified in Schedule 6.10. Except as set
forth in Schedule 6.10, to Seller's knowledge, there are no pending claims for
past infringement of any patents, trademarks, trade names, assumed names,
copyrights or similar rights of Seller used in or relating to the business of
the Division.
6.11 Employee Compensation. Attached hereto as Schedule 6.11 is
a list setting forth the names and current annual basic compensation rates of
all employees of the Division as of September 9, 1996.
6.12 Litigation. Except as set forth on Schedule 6.12, there are
no actions, judgments, citations, orders or decrees, suits or proceedings
pending or threatened against the Seller, at law or in equity or before any
federal, state, municipal, or other governmental agency or instrumentality,
regulatory body, domestic or foreign, which materially affect any of the
Assets to be sold hereunder or Seller's ability to sell them or Seller's
right, title or interest therein, nor is the Seller aware of any facts which
to its knowledge might result in any such action, suit, or proceeding.
6.13 Labor Matters. Except as set forth on Schedule 6.13, there
are no unfair labor practice or labor arbitration proceedings pending or, to
the knowledge of Seller, overtly threatened against Seller with respect to the
operations of the Division, and to Seller's knowledge, there are not and have
not been any organizational efforts made or overtly threatened involving any
of Seller's employees working for the Division. Since July 31, 1996, Seller
has not received notice of any claim that, with respect to the Division, it
has not complied with any laws relating to the employment of labor, including
any provisions thereof relating to wages, hours, collective bargaining, the
payment of social security and similar taxes, equal employment opportunity,
employment discrimination and employment safety, or that it is liable for any
arrears of wages or any taxes or penalties for failure to comply with any of
the foregoing.
6.14 Employee Benefit Plans. Schedule 6.14 hereto sets forth an
accurate list of each incentive or other bonus, deferred compensation, fringe
benefit, executive compensation, hospitalization or other medical, disability
or accident, vacation, stock purchase, stock option, pension, life or other
insurance, profit-sharing, savings or retirement plan or arrangement, and each
other employee benefit plan, program, agreement or arrangement (other than
employment arrangements terminable at will without liability on the part of
the employer) including, without limitation, any collective bargaining
agreement and any "employee benefit plan" as defined in Section 3(3) of ERISA,
whether formal or informal, maintained, assumed or contributed to for the
benefit of any employee of the Division.
6.15 Environmental Matters. Except as otherwise set forth in
Schedule 6.15:
(a) To the knowledge of Seller, the business and
operations of the Division are not, and none of the assets or properties owned
or leased by Seller and used in the conduct of the business of the Division
is, subject to any outstanding order, decree, judgment, written claim of
injury to persons or property or notice to comply, or to any ongoing judicial
or administrative proceeding, relating to any Environmental Laws or any
release of a Hazardous Material.
(b) To the knowledge of Seller, the business and
operations of the Division are not subject to any outstanding order, decree,
judgment or notice to comply, or to any ongoing judicial or administrative
proceeding, based on or alleging a failure by the Division to comply with the
conditions of any permits, approvals, authorizations, registrations, variances
or other licenses necessary under any Environmental Laws for the continued
conduct of the business and operations of the Division in the manner now
conducted.
(c) To the knowledge of Seller, the Division has not
during the period July 31, 1996 to the date hereof received any written notice
from any governmental authority stating or alleging that the Division is not
in substantial compliance with any occupational, safety or health standard
required by any Environmental Laws or that its employees suffer from any work-
related chronic illness or injury other than accidents accurately reported in
its OSHA 200 Log.
(d) To the knowledge of Seller, the Division has not
received any written notice from any governmental authority stating or
alleging that it is in violation of any requirements of any publicly owned
treatment works or the governmental authority responsible for the operation
thereof relating to the pretreatment or discharge of process wastes through
such publicly owned treatment works.
(e) To the knowledge of Seller, there is no current
condition affecting any real property or any real property subject to any
leasehold interest which constitutes, to the knowledge of Seller, a violation
by Seller of any Environmental Laws.
(f) For purposes of this Agreement, the following terms
have the following meanings:
(i) "Environmental Laws" means all
applicable present and future statutes, regulations, rules, ordinances, codes,
licenses, permits, orders, approvals, plans, authorizations, concessions,
franchises and similar items, of all governmental agencies, departments,
commissions, boards, bureaus or instrumentalities of the United States, states
and political subdivisions thereof and all applicable judicial and
administrative and regulatory decrees, judgments and orders relating to the
protection of human health or the environment, including, without limitation:
(A) all requirements, including but not limited to those pertaining to
reporting, licensing, permitting, investigation and remediation of emissions,
discharges, releases or threatened releases of Hazardous Materials, chemical
substances, pollutants, contaminants or hazardous or toxic substances,
materials or wastes whether solid, liquid or gaseous in nature, into the air,
surface water, groundwater or land, or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of chemical substances, pollutants, contaminants or hazardous or
toxic substances, materials, or wastes, whether solid, liquid or gaseous in
nature; and (B) all requirements pertaining to the protection of the health
and safety of employees or the public.
(ii) "Hazardous Material" means any
substances: (A) the presence of which requires investigation or remediation
under any federal, state or local statute, regulation, ordinance, order,
action, policy or common law, or (B) which is or becomes defined as a
"hazardous waste" or "hazardous substance" under any federal, state or local
statute, regulation or ordinance or amendments thereto including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. ss 9601 et seq.) and/or the Resource Conservation and
Recovery Act (42 U.S.C. ss 6901 et seq.); or (C) which are toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic, or
otherwise hazardous and are or become regulated by any governmental authority,
agency, department, commission, board, agency or instrumentality of the United
States, states or any political subdivision thereof; or (D) the presence of
which on the real property or any leasehold interest causes or threatens to
cause a nuisance upon real property or any leasehold interest or to adjacent
properties or poses or threatens to pose a hazard to the health or safety of
persons on or about real property or any leasehold interest; or (E) without
limitation, which contains gasoline, diesel fuel or other petroleum
hydrocarbons.
6.16 Compliance with Obligations. The Seller is not in violation
of any term or provision of any charter, bylaw, mortgage, indenture, contract,
agreement, instrument, judgment, decree, order, statute, rule or regulation,
which may materially affect the Assets or their sale, and the execution and
delivery of any performance and compliance with this Agreement will not result
in a violation of or be in conflict with or constitute a default under any
such term or provision or result in the creation of any mortgage, lien,
encumbrance, or charge on any of the Assets pursuant to any such term or
provision.
6.17 Contracts and Commitments. Schedule 6.17 attached hereto
contains a complete and accurate list of each contract and each letter of
credit associated with the business of the Division which will be assumed by
Buyer (other than contracts described in Subsection 1.1(g) and (k) and
contracts entered into in the ordinary course of business following the date
of this Agreement) requiring payments in excess of $5,000 per year, or whose
term is in excess of one year and is not cancelable upon thirty (30) or fewer
days' notice without any liability, penalty or premium (other than a nominal
cancellation fee or charge) (such contracts being hereinafter referred to as
the "Executory Contracts"). Prior to the date hereof, Seller has delivered or
otherwise made available to Buyer, true , complete and correct copies of the
Executory Contracts, including all amendments thereof and modifications
thereto.
Except as otherwise set forth in Schedule 6.17:
(a) To Seller's knowledge, Seller is not in default, nor
is there any basis for any valid claim of default, under any Executory
Contracts by either Seller or any other contracting party, except for de
minimis defaults which cannot reasonably be expected to have an adverse effect
on the Division;
(b) Other than pursuant to warranty terms or as may be
required by law, Seller is not under any liability or obligation to return to
any supplier or other person or to receive consignments back from any customer
of a material quantity of any inventory or products used, manufactured or
otherwise produced by the Division.
6.18 Title to Assets. Except for Assets being leased from third
parties, the Seller has good, absolute, and marketable title to all of the
Assets being sold to the Buyer pursuant to this Agreement, held in each case
subject to no lease, mortgage, pledge, lien, charge, security interest,
encumbrance, or restriction whatsoever.
6.19 Patents and Trademarks. The Seller has no knowledge of any
claim or reason to believe that Seller's use of the Assets is or may be
infringing upon or otherwise acting adversely to the rights of any person
under or in respect to any patent, trademark, service mark, tradename,
copyright, license or other similar intangible right. The Seller is not
obligated or under any liability whatsoever to make any payments by way of
royalties, fees, or otherwise to any third party having an interest in any
patent, trademark, trade name, copyright, or other intangible asset included
within the Assets set forth in Schedule 6.10 with respect to the use thereof
or in connection with the conduct of its business or otherwise.
6.20 Brokers. The parties acknowledge that they were introduced
by the R.C. Fuller Company, to whom a brokerage fee is due. Buyer agrees to
pay any and all amounts due to such broker with respect to this transaction
and to hold the Seller harmless from any such claims by such broker against
the Seller. Each party warrants and represents to the other that, except for
the Buyer's agreement with R.C. Fuller Company, neither has executed any
agreement or committed any act that would obligate it or the other party
to a brokerage or finder's fee claim with respect to this transaction.
6.21 Tax Matters.
(a) Seller has filed or caused to be filed (and, following
the Closing Date, Seller will file or cause to be filed) with the appropriate
governmental agencies all Tax Returns (as hereinafter defined) required to be
filed by Seller with respect to the Division and/or the Assets, and Seller
have paid, or caused to be paid in full all Taxes required to be paid by
Seller, if any, attributable to the Division and/or the Assets and either (i)
shown to be due on such Tax Returns, or (ii) otherwise due or claimed to be
due from Seller by any taxing authority for all periods up to and including
the Closing Date, except to the extent that the payment of any such Taxes is
being contested in good faith by Seller.
(b) All Taxes that Seller is required by law to withhold
or collect with respect to the Division through the Closing Date have been or
will be duly withheld or collected and, to the extent required, have been or
will be paid to the proper governmental authorities or properly deposited as
required by applicable laws.
(c) "Taxes" shall mean all taxes, charges, fees, levies or
other assessments, including, without limitation, income, excise, property,
sale and franchise taxes (including any interest, penalties or additions
attributable to or imposed on or with respect to any such assessment) imposed
by the United States or any other jurisdiction, and any state, province,
county, local or other government, taxing authority, or subdivision thereof.
"Tax Return" shall mean any return, report, information return or other
document (including any related or supporting information) filed or required
to be filed with any governmental entity or other authority in connection with
the determination, assessment or collection of any Taxes (whether or not such
Taxes are imposed on Seller) or the administration of any laws, regulations or
administrative requirements relating to any Taxes.
6.22 All Necessary Assets. Except for the Excluded Assets, the
Assets constitute all of the assets and properties necessary to carry on the
business and operations of the Division as presently conducted.
6.23 Condition of Assets; Limited Warranties. Except as
otherwise expressly provided in this Agreement, Seller makes no
representations or warranties whatsoever to Buyer, express, implied or
statutory, concerning the Assets or the Division, including, but not limited
to, any representation or warranty as to value, quality, quantity, condition,
merchantability, design, suitability or use, salability, obsolescence, working
order, validity or enforceability. All personal property included in the
assets is sold "as is, where is". Buyer specifically acknowledges that no
warranties of merchantability or fitness for a particular purpose are made or
should be implied in the transactions.
6.24 Knowledge of Seller. Where any representation or warranty
by Seller is expressly qualified to the "knowledge" of Seller, such knowledge
shall include actual knowledge of Seller after due inquiry as to the matters
that are the subject of such representations or warranties.
6.25 Investigation. Buyer is relying on the representations,
warranties, covenants and conditions set forth herein and not on any other
statements, representations, warranties or assurances of any kind made by
Seller, its representatives or any other person, or any statements made during
any presentations by any employee or representative of Seller or the Division.
The Seller shall not (nor shall any of its officers, employees, agents,
stockholders, affiliates, consultants, investment bankers, legal advisers or
representatives) have any liability or obligation to Buyer in respect of any
such statement, representation, warranty or assurance, except as set forth
herein. Nothing in this Section 6.25 shall be deemed to diminish in any
respect the liabilities and obligations of Seller with respect to any of its
representations, warranties and covenants set forth herein.
6.26 Limitation of Representations and Warranties. Except for
the warranties and representations set forth above, Seller makes no other
warranty or representation, either express or implied by law or otherwise.
7.0 REPRESENTATIONS AND WARRANTIES OF BUYER
7.1 Organization, Corporate Power and Authority. Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and is duly qualified to do business as a
foreign corporation in the jurisdictions in which Buyer conducts its business,
except where the failure so to qualify will not have a material adverse effect
on Buyer's ability to perform its obligations under the Transaction Documents.
Buyer and STI have all requisite corporate power and authority to acquire,
own, lease and operate the Assets, to conduct the business of the Division, to
execute and deliver the Transaction Documents and to perform its obligations
thereunder.
7.2 Authorization of Agreement. The execution, delivery and
performance of this Agreement and the Transaction Documents by Buyer, and the
consummation by it of the transactions contemplated hereunder and thereunder,
have been duly authorized by all necessary corporate action by Buyer. This
Agreement has been duly executed and delivered by Buyer and the Transaction
Documents to be executed by Buyer or STI will be duly executed and delivered
at the Closing. This Agreement constitutes and the Transaction Documents to
be so executed when executed and delivered on the Closing Date will constitute
the legal, valid and binding obligations of Buyer, enforceable against Buyer
in accordance with their respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws and
equitable principles relating to or limiting creditors' rights generally.
7.3 Effect of Agreements. The execution, delivery and
performance by Buyer of this Agreement and the Transaction Documents, and the
consummation by it of the transactions contemplated hereunder and thereunder,
will not (a) violate any statute, law, rule or regulation applicable to Buyer,
(b) violate any order, writ, injunction or decree of any court or governmental
authority applicable to Buyer, or (c) violate or conflict with or constitute
(with due notice or lapse of time or both) a default under, or result in the
termination of, accelerate the performance required by, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
Assets under any term or provision of (i) the Articles of Incorporation or by-
laws of Buyer; or (ii) any lease, contract, commitment, understanding,
arrangement, agreement or restriction of any kind or character to which Buyer
or any assets or properties of Buyer is bound except to the extent that the
existence of any such violation, conflict, default, termination, acceleration
of performance or creation of any lien, charge or encumbrance would not have a
material adverse effect on the business of the Division or the ability of
Buyer to meet its obligations under this Agreement or the Transaction
Documents.
7.4 Governmental Approvals. To the knowledge of Buyer, except
for compliance with the Hart Scott Rodino Act, no approval, authorization,
consent or order or action of or filing with any court, administrative agency
or other governmental authority is required to be obtained by Buyer for the
execution and delivery by Buyer of this Agreement and the Transaction
Documents or the consummation by it of the transactions contemplated hereunder
and thereunder.
7.5 Litigation. Except as set forth in Schedule 7.5, there are
no actions, suits or proceedings pending or threatened against the Buyer, at
law or in equity or before any federal, state, municipal or other governmental
agency or instrumentality, domestic or foreign, which materially affect any of
the assets or business of the Buyer, nor is the Buyer aware of any facts
which, to its knowledge, might result in any such action, suit or proceeding.
7.6 Environmental Matters. Except as otherwise set forth in
Schedule 7.6:
(a) To the knowledge of Buyer, the business and operations
of the Buyer are not, and none of the assets or properties owned or leased by
Buyer and used in the conduct of the business of the Buyer is, subject to any
outstanding order, decree, judgment, written claim of injury to persons or
property or notice to comply, or to any ongoing judicial or administrative
proceeding, relating to any Environmental Laws or any release of a Hazardous
Material.
(b) To the knowledge of Buyer, the business and operations
of the Buyer are not subject to any outstanding order, decree, judgment or
notice to comply, or to any ongoing judicial or administrative proceeding,
based on or alleging a failure by the Buyer to comply with the conditions of
any permits, approvals, authorizations, registrations, variances or other
licenses necessary under any Environmental Laws for the continued conduct of
the business and operations of the Buyer in the manner now conducted.
(c) To the knowledge of Buyer, the Buyer has not during
the period June 30, 1996 to the date hereof received any written notice from
any governmental authority stating or alleging that the Buyer is not in
substantial compliance with any occupational, safety or health standard
required by any Environmental Laws or that its employees suffer from any work-
related chronic illness or injury other than accidents accurately reported in
its OSHA 200 Log.
(d) To the knowledge of Buyer, the Buyer has not received
any written notice from any governmental authority stating or alleging that it
is in violation of any requirements of any publicly owned treatment works or
the governmental authority responsible for the operation thereof relating to
the pretreatment or discharge of process wastes through such publicly owned
treatment works.
(e) To the knowledge of Buyer, there is no current
condition affecting any real property or any real property subject to any
Leasehold Interest which constitutes, to the knowledge of Buyer, a violation
by Buyer of any Environmental Laws.
7.7 Reports. The Buyer's annual report to shareholders for
1995, its proxy statement mailed to shareholders of the Buyer with respect to
its annual meeting of shareholders held on June 26, 1996, and all of its
periodic reports (including forms 10-K and 10-Q) as filed with the Securities
and Exchange Commission and all financial statements referred to in any such
periodic report filed on or after January 1, 1995 are true and correct in all
material respects (subject, as to interim statements, to changes resulting
from audits and year-end adjustments), have been prepared in accordance with
generally accepted accounting principles consistently followed throughout the
periods involved and show all liabilities, direct and contingent, of the
Seller and its subsidiaries required to be shown in accordance with such
principles. There has been no material adverse change in the business,
property or assets, condition (financial or otherwise), operations or
prospects of the Buyer and its subsidiaries taken as a whole since the end of
the most recent fiscal year for which Form 10-K has been filed. No such
report contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements contained therein not false or misleading or necessary in order to
provide a prospective purchaser of shares of stock of the Buyer with proper
and complete information as to the business, condition, operations and
prospects of the Buyer.
7.8 Compliance with Obligations. The Buyer is not in violation
of any term or provision of any charter, bylaw, mortgage, indenture, contract,
agreement, instrument, judgment, decree, order, statute, rule or regulation,
which may materially affect the Buyer and the execution and delivery and
performance and compliance with this Agreement will not result in a violation
of or be in conflict with or constitute a default under any such term or
provision or result in the creation of any mortgage, lien, encumbrance, or
charge on any of the Assets pursuant to any such term or provision.
8.0 COVENANTS OF SELLER
8.1 Conduct of Division. During the period from the date hereof
to the Closing Date, and between the Closing Date and the Effective Closing
Date, unless Buyer consents otherwise in writing, Seller shall:
(a) Ordinary Course. Conduct the business of the Division
only in the ordinary course consistent with past practice except as provided
by this Agreement.
(b) Preservation of Goodwill. Preserve the goodwill of
those of its suppliers, customers, sales representatives, agents and
distributors having business relations with the Division.
(c) Maintain Insurance. Maintain any insurance coverage
existing as of the date hereof against loss or damage to the Assets.
(d) Sale of Assets. Not transfer or encumber any of the
Assets except for any transfer or encumbrance in the ordinary course of
business.
(e) Employment Contracts. Not enter into any employment
contract with any employees working for the Division or increase any Division
employee's compensation.
(f) Maintenance of Assets. Maintain the Assets, in the
aggregate, in a condition comparable to their current condition, reasonable
wear, tear and depreciation excepted, except for Assets disposed of, sold or
consumed in the ordinary course of business.
(g) Executory Contracts. Not amend any executory contract
outside of the ordinary course of business, without the Buyer's written
consent, which consent will not be unreasonably withheld.
8.2 Access. Seller will (a) during ordinary business hours and
upon reasonable notice from Buyer, permit Buyer and its authorized
representatives to have access to the Division and all Assets, (b) furnish, as
soon as reasonably practicable, to Buyer or its authorized representatives
such other information in Seller's possession with respect to the Division as
Buyer may from time to time reasonably request, and (c) otherwise reasonably
cooperate in the examination of the Division by Buyer.
8.3 Permits, Consents and Novations. As promptly as practicable
after the date hereof, Seller will make all required filings with governmental
bodies and other regulatory authorities, and use all reasonable efforts to
obtain all permits, approvals, authorizations and consents of all third
parties reasonably requested by Buyer. Seller and Buyer shall use reasonable
efforts to obtain such consents to the assignment of the Contracts and such
novation agreements as may be required. Notwithstanding anything herein to
the contrary, the parties hereto acknowledge and agree that at the Closing,
Seller's assignment to Buyer of any such Contract which by its terms requires,
prior to such assignment, the consent of any other contracting party thereto
shall be subject to obtaining such consent as soon as practicable after the
Closing Date. With respect to each such Contract not assigned on the Closing
Date, after the Closing Date, Seller shall as Buyer's agent and as directed by
Buyer continue to deal with the other contracting party(ies) to such Contract
as the prime contracting party, and Buyer and Seller shall use reasonable
efforts to obtain the consent of all required parties to the assignment or
novation of such Contract. Such Contract shall be promptly assigned by Seller
to Buyer after receipt of such consent after the Closing Date.
Notwithstanding the absence of any such consent, Buyer shall be entitled to
the benefits of such Contract accruing after the Closing Date. Buyer agrees
to perform at its sole expense all of the obligations of Seller to be
performed under such Contract after the Closing Date and to hold Seller
harmless to the extent Seller act as Buyer's agent as provided herein.
8.4 Remittance to Seller. In the event Seller shall receive,
after the Closing Date, any Accounts Receivable or other Asset received by the
Seller pursuant to this Agreement, Seller shall immediately notify Buyer of
same and remit the check or other Account Receivable payment directly to Buyer
or return any Asset directly to Buyer.
8.5 Confidentiality. Each party hereto will hold and will cause
its directors, officers, employees, agents, consultants and advisors to hold
in strict confidence unless compelled to disclose by judicial or
administrative process or, in the opinion of its counsel, by other
requirements of law, all documents and information stamped "Confidential"
concerning the other party furnished to it by such other party or its
representatives in connection with the transactions contemplated by this
Agreement (except to the extent that such information can be shown to have
been (a) previously lawfully known by the party to which it was furnished, (b)
in the public domain through no fault of such party, or (c) later lawfully
acquired from other sources by the party to which it was furnished, and each
party will not release or disclose such information to any other person,
except its auditors, attorneys, financial advisors, bankers and other
consultants and advisors in connection with this Agreement. If the
transactions contemplated by this Agreement are not consummated, such
confidence shall be maintained except to the extent such information comes
into the public domain through no fault of the party required to hold it in
confidence, and in any event such information shall not be used to the
detriment of, or in relation to any investment in, the other party and all
such documents (including copies thereof and software) shall be returned to
the other party immediately upon the written request of such other party and
with appropriate certificate delivered to such other party certifying to the
complete destruction or return of all such documents.
9.0 COVENANTS OF BUYER
9.1 Permits. As promptly as practicable after the date hereof,
Buyer will make all required filings with governmental bodies and other
regulatory authorities, and use all reasonable efforts to obtain all permits,
approvals, authorizations and consents of all third parties, necessary for
Buyer to consummate the transactions contemplated hereunder or reasonably
requested by Seller in connection with the consummation of such transactions.
9.2 Access to Books and Records. Buyer shall maintain in
accordance with Buyer's record retention practices all retained books, records
and files pertaining to the Assets, the Assumed Liabilities or otherwise to
the business of the Division before the Closing. After the Closing, Buyer
shall provide Seller and its representatives, during ordinary business hours
and upon reasonable notice from Seller, with reasonable access to such
original documents to the extent reasonably required by Seller. If, at any
time, Buyer proposes to dispose of any of such original documents, Buyer shall
first offer in writing to deliver the same to Seller (subject to the
confidentiality obligations set forth in Section 8.5 hereof) at the expense of
Seller. If Seller fails to respond to such offer within ninety (90) days,
Buyer shall be permitted to dispose of such documents.
9.3 Cooperation in Third-Party Litigation. After the Closing,
Buyer shall provide such cooperation as Seller or its counsel may reasonably
request in connection with (a) any proceedings relating to the Division which
is hereafter filed or threatened and to which Seller is a party and (b) any
proceedings for which Buyer is entitled to indemnification from Seller under
Section 9.3 hereof. Such cooperation shall include, but not be limited to,
making employees of Buyer available upon the reasonable request of Seller or
its counsel to consult with and assist Seller and its counsel regarding any
such proceedings and to prepare for and testify truthfully in connection with
any such proceedings, including depositions, trials and arbitration
proceedings. Seller shall reimburse Buyer for all reasonable expenses
incurred by Buyer in providing to Seller the cooperation set forth in this
Section 9.3.
9.4 Rule 144 Filings. Following the Closing, Buyer shall duly
and timely comply with all of its obligations with respect to periodic reports
to be filed with the Securities and Exchange Commission and perform all other
acts and file such other documents required by law of the Buyer, as may be
necessary to permit Seller, or its transferees, to come within the
requirements of with Rule 144 (or any successor to such Rule) promulgated
under the Securities Act of 1933 with respect to the sale of securities of the
Buyer which, but for such Rule, could not be sold without registration under
the Securities Act of 1933.
9.5 Future Acquisitions. Buyer agrees to provide to STI, up to
Twenty Million ($20,000,000) Dollars in additional capital to be used by STI,
over a three (3) year period following the Closing Date to make additional
acquisitions identified by STI meeting Buyer's established financial
performance requirements.
9.6 Board Seat. At such time as STI's annual revenue exceeds
Seventy-Five Million ($75,000,000) Dollars, provided that STI's operating
profits for all full fiscal years of STI equal or exceed twenty per cent (20%)
of the cumulative revenue for such fiscal years, Buyer will use its best
efforts to nominate and use its best efforts to cause the election of a
mutually acceptable employee of STI, as designated by STI, to the Board of
Directors of Buyer.
10.0 CONDITIONS PRECEDENT
10.1 Conditions Precedent to Obligations of Buyer. The
obligations of Buyer under this Agreement are subject, at the option of Buyer,
to the satisfaction or waiver of each of the following conditions on or prior
to the Closing Date:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Seller contained in this Agreement or in any
certificate delivered to Buyer pursuant hereto shall be true and correct when
made and in all material respects on and as of the Closing Date as though made
at and as of that date (except where such representation and warranty is made
as of a date specifically set forth therein).
(b) Compliance with Covenants. Seller shall in all
material respects have performed and complied with all terms, agreements,
covenants and conditions of this Agreement to be performed or complied with by
it at the Closing Date.
(c) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted or overtly threatened by any
governmental agency seeking to restrain, prohibit, invalidate or otherwise
affect the consummation of the transactions contemplated by this Agreement.
(d) Governmental Permits and Approvals. All U. S.
federal, state and local governmental permits and approvals required by law
for consummation of the Closing shall have been obtained.
(e) Litigation. No action, suit or proceeding shall have
been instituted before any court or U. S. or foreign governmental or
regulatory body, or instituted or threatened by any U. S. or foreign
governmental or regulatory body, to restrain, modify or prevent the carrying
out of the sale of the Assets provided for hereunder, or to seek damages or a
discovery order in connection with the transactions contemplated hereunder, or
that has or will be likely to have a material adverse effect on the Assets,
properties, business operations or condition (financial or otherwise) of the
Division.
(f) Delivery of Transaction Documents. Seller shall have
delivered to Buyer at the Closing the Transaction Documents and all additional
documents described in Section 5.2.
(g) No Material Adverse Change. Except as set forth in
the Schedules attached hereto, from July 31, 1996 to the Closing Date, there
shall have been no material adverse change in the business, operations or
financial condition of the Division.
(h) Opinion of Counsel. Seller shall have delivered an
opinion of counsel, dated as of the Closing Date, in the form set forth in
Exhibit 5.2(g).
(i) Bruce E. Creger Employment Agreement. Coincident with
the Closing, Bruce E. Creger shall execute and deliver the Creger Agreement
with STI, in the form set forth in Exhibit 5.2(d).
10.2 Conditions Precedent to Obligations of Seller. The
obligations of Seller under this Agreement are subject, at the option of
Seller, to the satisfaction or waiver of each of the following conditions at
or prior to the Closing Date:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Buyer contained in this Agreement or in any
certificate or document delivered to Seller pursuant hereto shall be true and
correct in all material respects on and as of the Closing Date as though made
at and as of that date (except where such representation and warranty is made
as of a date specifically set forth therein), and Buyer shall have delivered
to Seller a certificate to such effect.
(b) Compliance with Covenants. Buyer shall in all
material respects have performed and complied with all terms, agreements,
covenants and conditions of this Agreement to be performed or complied with by
it at the Closing Date, and Buyer shall have delivered to Seller a certificate
to that effect.
(c) Litigation. No action, suit or proceeding shall have
been instituted before any court of U. S. or foreign governmental or
regulatory body by any person other than the parties hereto, or instituted or
threatened by any U. S. or foreign governmental or regulatory body, to
restrain, modify or prevent the carrying out of the sale of the Assets
provided for hereunder, or to seek damages or a discovery order in connection
with the transactions contemplated hereunder, or that has or will be likely to
have, a material adverse effect on the Assets, properties, business operations
or condition (financial or otherwise) of the Division.
(d) Buyer shall have delivered an opinion of counsel,
dated the Closing Date, in the form set forth in Exhibit 5.3(h).
(e) CoreStates shall have executed and delivered to Seller
the CoreStates Agreement.
(f) Seller or Northwest Highway Venture shall have
received a written consent from the Mortgagee of the property commonly known
as 6060 North Northwest Highway, Chicago, Illinois, to the execution and
delivery of the Amendment to and Assignment and Assumption of Net Lease in the
form set forth in Exhibit 5.2(j).
11.0 SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS
11.1 Survival of Representations. All representations or
warranties contained herein shall survive for a period of two (2) years from
the Closing Date and shall then expire. Upon the expiration of a
representation or warranty pursuant to this Section 11.1, unless written
notice of a claim based on such representation or warranty specifying in
reasonable detail the facts on which the claim is based shall have been
delivered by the party seeking to be indemnified (the "Indemnified Party") to
the party from whom indemnification is sought (the "Indemnifying Party") prior
to the expiration of such representation or warranty, such representation or
warranty shall be deemed to be of no further force or effect, as if never
made, and no action may be brought based on the same, whether for breach of
contract, tort or under any other legal theory. Notwithstanding the
foregoing, nothing herein shall be deemed to prohibit or otherwise prevent
either party from bringing any action or asserting any claim against the other
with respect to covenants or commitments herein contained (other than for
breach of warranty), including actions or claims brought by the Buyer under
Section 11.2(b)(ii) or brought by the Seller under Section 11.2(a)(ii) more
than two years after the Closing Date.
11.2 Agreements to Indemnify.
(a) Seller's Indemnity. Subject to the terms and
conditions of this Section 11, Seller hereby agrees to indemnify, defend and
hold Buyer harmless from and against all demands, claims, actions, causes of
action, assessments, payments, losses, damages, liabilities, costs and
expenses, including, without limitation, interest, penalties and reasonable
expenses, including without limitation, legal fees and expenses required in
investigating or defending any of the following (hereinafter collectively
referred to as "Losses") incurred by Buyer and Buyer's employees, directors,
officers, shareholders and agents resulting from (i) a breach of any
representation or warranty of Seller made pursuant to this Agreement, or (ii)
any liabilities or obligations of, or claims made or asserted against Buyer in
respect of the Excluded Liabilities.
(b) Buyer Indemnity. Subject to the terms and conditions
of this Section 11, Buyer hereby agrees to indemnify, defend and hold Seller
harmless from and against all demands, claims, actions, causes of action,
assessments, payments, losses, damages, liabilities, costs and expenses,
including, without limitation, interest, penalties and reasonable expenses,
including without limitation, legal fees and expenses required in
investigating or defending any of the following (hereinafter collectively
referred to as "Losses") incurred by Seller and Seller's employees, directors,
officers, shareholders and agents resulting from (i) a breach of any
representation or warranty of Buyer made pursuant to this Agreement, or (ii)
the failure of Buyer to pay, perform and discharge when due the Assumed
Liabilities.
11.3 Conditions of Indemnification. The respective obligations
and liabilities of Indemnifying Party to the Indemnified Party under Section
11.2 with respect to claims resulting from the assertion of liability by third
parties shall be subject to the following terms and conditions:
(a) Notice. Within twenty (20) days after receipt of
written notice of commencement of any action or the assertion of any claim by
a third party, the Indemnified Party shall give the Indemnifying Party written
notice thereof together with a copy of such claim, process or other legal
pleading, and the Indemnifying Party shall have the right to undertake the
defense thereof by representatives of its own choosing, subject to the
approval of the Indemnified Party, such approval not to be unreasonably
withheld;
(b) Failure to Assume Defense. In the event that the
Indemnifying Party, by the thirtieth (30th) day after receipt of notice of any
such claim, does not elect to defend against such claim, the Indemnified Party
will (upon further written notice to the Indemnifying Party) have the right to
undertake the defense, compromise or settlement of such claim on behalf of and
for the account and risk of the Indemnifying Party; provided, however, that
the Indemnified Party shall not settle or compromise such claim without the
Indemnifying Party's consent, which consent shall not be unreasonably
withheld; and provided further that, the Indemnifying Party shall have the
right to assume the defense of such claim with counsel of its own choosing at
any time prior to settlement, compromise or final determination thereof;
(c) Claim Adverse to Indemnifying Party. Notwithstanding
anything to the contrary in this Section 11.3, if there is a reasonable
probability that a claim may materially adversely affect the Indemnified Party
other than as a result of money damages or other money payments, the
Indemnified Party shall have the right, at its own cost and expense, to
compromise or settle such claim, but the Indemnified Party shall not, without
the prior written consent of the Indemnifying Party, settle or compromise any
claim or consent to the entry of any judgment which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnifying Party a release from all liability in respect of such claim;
(d) Cooperation. In connection with any such
indemnification, the Indemnified Party will at the expense of the Indemnifying
Party cooperate in all reasonable requests of the Indemnifying Party;
(e) Indemnification Threshold. No claim for
indemnification with respect to any breach of representation or warranty will
be made by an Indemnified Party hereunder unless the aggregate of all losses
incurred by such Indemnified Party with respect to all breaches of
representations and warranties by the Indemnifying Party otherwise indemnified
against hereunder exceed $250,000 and any claim shall be made only for the
amount by which such aggregate Losses exceed $250,000;
(f) Maximum Losses. Notwithstanding anything to the
contrary contained in this Section 12, in no event shall an Indemnifying Party
be required to indemnify an Indemnified Party for Losses in respect of all
breaches of representations and warranties of the Indemnifying Party, in
excess of $10,000,000.
(g) Right of Set-Off. In the event that Buyer is entitled
to recover on a claim of indemnity or otherwise against Seller under the terms
of this Agreement, Buyer shall have the right to set-off the full amount of
such claim against the unpaid principal of the Buyer's Note and, to the extent
such claim is not satisfied by such set-off, against any of the amounts
payable pursuant to the provisions of Sections 3.2(a) or 3.2(b).
12.0 OTHER COVENANTS
12.1 Announcements. Each party agrees not to make, nor cause to
be made, any news releases or other public announcements pertaining to the
transactions contemplated hereunder without first consulting the other party
and attempting to formulate a mutually satisfactory arrangement for such
disclosure, and in any case will make an announcement thereafter without the
consent of the other if required by applicable law.
12.2 Employees.
(a) Employment of Employees. Effective as of the Closing
Date, Buyer shall make offers of employment to all of the employees of the
Division, as of the Closing Date and all such employees who accept such offers
of employment shall be referred to herein as the "Employees". Except as
otherwise provided by this Section 12.2, the compensation of each Employee who
does not sign an Employment Agreement shall not be changed but the other
terms, conditions and policies set forth in such offers of employment shall be
determined and established by Buyer. In the event the Buyer terminates any
Employee after the Closing Date, Buyer agrees to comply with any applicable
terms of the Worker Adjustment and Retraining Notification Act.
(b) Medical Benefits, Workers' Compensation. Seller
agrees that, with respect to workers' compensation claims and all claims under
Seller's medical, dental, life insurance and disability benefit programs made
with respect to events occurring prior to the Closing Date, by persons who are
or were employed by Seller in the Division prior to the Closing Date
(including retirees), and who were participants in the workers' compensation,
medical, dental, life insurance or disability benefit programs covering
employees of the Division, neither Buyer nor STI shall be deemed to have
assumed any obligation with respect thereto except as STI's programs may
commit to such obligation.
Buyer shall cause STI to cause its medical insurance, health care,
medical reimbursement or other group health plan and any other employee
benefit plan (such as pension, profit sharing and 401(k) plans) to credit
Employees with their service with the Division for purposes of determining the
eligibility of such Employees to participate in such medical insurance,
health care, medical reimbursement or other group health plan or employee
benefit plan. Nothing herein shall be deemed to be an assumption by Buyer of
the Seller's obligations arising under the terms of any medical, dental,
prescription drug, vision care, sick pay, life insurance, disability insurance
or other health benefits plan maintained by Seller for employees of the
Division (including retirees). Seller shall continue its medical, dental,
prescription drug, vision care, sick pay, life insurance, disability insurance
and other health benefit plans in effect as of the Closing Date for the
benefit of the Employees and any new employees hired by Buyer for employment
in the operation of the Division, until notification from Buyer to discontinue
such plans, but in no event later than October 31, 1996. The employer's
portion of any premiums and any other out of pocket costs associated with
Seller's continuation of these benefit plans shall be reimbursed by Buyer
promptly upon receipt of periodic invoices from Seller.
(c) Vacation, Holiday and Sick Pay. As soon as
practicable following the Closing Date, Seller shall deliver to Buyer an
accurate and complete accounting of all vacation, holiday and sick pay accrued
and unpaid as of the Closing Date with respect to all persons who are, on the
Closing Date, employed by Seller in the Division, together with a description
of the method by which such accrued vacation, holiday and sick pay has been
earned. Promptly following Seller's delivery to Buyer of the accounting of
accrued and unpaid vacation, holiday and sick pay, Buyer shall pay each
Employee, in accordance with the terms of such plan maintained by Seller for
employees of Division, the vacation, holiday and sick pay accrued by such
Employee as set forth in such accounting to the extent such liabilities are
accrued on the Closing Balance Sheet.
Seller shall be responsible for any and all ramifications legally binding on
Seller resulting from termination of employment of employees of the Division
or other employment-related decisions of Seller.
12.3 Retirement Plans. Coincident with the Closing, Buyer will
adopt such resolutions or execute such documents as may be necessary to cause
each Employee to, effective as of the Closing Date, (a) immediately become
eligible to be a participant under the Buyer's 401(k) Plan and (b) be
credited, for purposes of the Plan, with all years of service of each such
Employee with Seller. Employees being transferred from the employ of Seller
to that of Buyer shall be credited with all years of service credited to such
Employees under Seller's Plan.
12.4 Execution of Further Documents. From and after the Closing
Date, each party hereto shall, from time to time, upon the reasonable request
of the other party and without further cost or expense to the other party,
acknowledge and deliver all such further deeds, bills of sale, assignments,
transfers, conveyances, powers of attorney and assurances the other party may
reasonably request to more effectively consummate the transactions
contemplated by this Agreement.
12.5 Non-Competition. As a part of the inducement to Buyer to
enter into this Agreement, Seller hereby agrees that for a period of two (2)
years from the date hereof, Seller shall not, nor shall any division of Seller
or any corporation which Seller, directly or indirectly controls, or its
successors and assigns (hereinafter referred to as "Seller's Affiliates")
without the prior express written consent of the Buyer own, manage, operate or
control, directly or indirectly, any business, firm or corporation which is
engaged anywhere in the world in the manufacture and sale of any products
manufactured and sold by the Division on the Closing Date.
Nothing contained in this Section 12.5 shall prohibit (i)
Seller or Seller's Affiliates from holding and making investments in
securities of any corporation or limited partnership that has its securities
of any corporation or limited partnership that has its securities traded in a
generally recognized market, provided Seller's or such Seller's Affiliate's
interest therein does not exceed 10% of the outstanding shares or interests in
such corporation or partnership or (ii) the acquisition and subsequent
operation by Seller or Seller's Affiliates of any business not principally
engaged in the manufacture and distribution of products currently manufactured
and distributed by the Division, provided, that a business shall not be
considered to be "principally engaged in the manufacture and distribution of
products currently manufactured and distributed by the Division" if the most
recent annual gross revenues generated by any competing business activity
constitute less than 10% of the most recent annual gross revenues of the
entire business being acquired.
12.6 Transfer Taxes. Seller shall be responsible for and pay or
cause to be paid, any federal, state or local taxes on any gain from the sale
and transfer by Seller of any real property. In addition, Seller shall be
responsible for and pay or cause to be paid, any deed stamp or similar
transfer taxes on the sale of any real property to Buyer. Buyer shall be
responsible for any pay or cause to be paid, any federal, state or local sales
or use taxes arising in connection with the transfer to Buyer of the tangible
personal property of the Division as provided for in this Agreement.
12.7 Cooperation. Each party hereto agrees, both before and
after the Closing, to execute any and all further documents and writings and
perform such other reasonable actions which may be or become necessary or
expedient to effectuate and carry out the transactions contemplated hereunder
(which shall not include any obligation to make payments).
12.8 Excluded Assets. In the event that, after the Closing Date,
Excluded Assets, including, but not limited to, proprietary information of
Seller, shall remain on the premises utilized by or under the control of
Buyer, then Buyer shall at Seller's request take reasonable efforts to deliver
such Excluded Assets to Seller at the expense of Seller and, so long as such
information shall remain on said premises, Buyer shall exercise the same
reasonable degree of care with respect thereto as it does with respect to its
own property.
12.9 Tax Cooperation. After the Closing, the parties shall, and
shall cause their respective affiliates to, cooperate with each other in the
preparation of all tax returns and shall provide, or cause to be provided, to
such other party any records and other information reasonably requested by
such party in connection therewith as well as access to, and the cooperation
of, the auditors of such other party and its affiliates. After the Closing,
the parties shall, and shall cause their respective affiliates to, cooperate
with the other parties in connection with any tax investigation, tax audit or
other tax proceeding relating to the Division. Any information obtained
pursuant to this Section relating to taxes shall be kept confidential by the
other party.
12.10 Best Efforts. Each party will use its best efforts to cause
all conditions to its obligations hereunder to be timely satisfied and to
perform and fulfill all obligations on its part to be performed and fulfilled
under this Agreement to the end that the transactions contemplated hereunder
shall be effected substantially in accordance with the terms of this Agreement
as soon as reasonably practicable.
12.11 Shared Equipment Leases.
Each of the equipment leases listed in Schedule 12.12 ("Share Leases")
(all of which, other than leases no. 4352-12, 4352-13 and the lease dated
5/22/95 will be assigned to and assumed by Buyer at the Closing) cover
multiple items of equipment owned and leased by third party lessors to Seller,
some of which items are used by the Division and some of which are used by the
Components Division. Each Shared Lease requires a monthly rental payment to
the lessor (as described in the Schedule) sets forth various obligations of
the lessee and sets forth certain rights and options for the benefit of the
lessee, including the right to cause the term of the Shared Lease to be
extended and the right to purchase the leased equipment for a nominal sum at
expiration of the term. From and after the Closing Date the party not owning
a Shared Lease shall pay to the party then owning such Shared Lease the non-
owning party's share of the monthly rental (being its percentage as set forth
on the Schedule) by the tenth (10th) day of each calendar month during the
entire term (or extended term) of that Shared Lease. Each party in whose name
the Shared Lease is retained agrees to fulfill all of the obligations of the
lessee, including the obligation to maintain insurance and maintain the
equipment under the Shared Lease for itself and for the benefit of the other
party, without additional cost or charge to the other party. Possession of
the equipment shall remain with the division that has historically used the
equipment. Each party who owns a Shared Lease shall have the right, at its
option and upon not less than thirty (30) days' written notice to the other,
to terminate the Shared Lease with the lessor for an agreed price and the
other party agrees to attend the closing of the transaction and to pay over
its allocate share of the termination fee upon receipt of title, by customary
bill of sale, to such party's equipment under that Shared Lease. Each party
owning a Shared Lease agrees with the other to timely exercise any purchase
option available under its Shared Lease at the expiration of the term and to
direct or cause title to the equipment used by the other party to be
transferred to such other party upon payment by such other party of its share
of the option price.
13.0 MISCELLANEOUS
13.1 Bulk Transfer Laws. Buyer hereby waives compliance with any
applicable bulk transfer laws, including, but not limited to, the bulk
transfer provisions of the Uniform Commercial Code of any state, or any
similar statute, with respect to the transactions contemplated hereby.
13.2 Expenses. Whether or not the transactions contemplated by
this Agreement are consummated, none of the parties hereto shall have any
obligation to pay any of the fees and expenses of any other party incident to
the negotiation, preparation and execution of this Agreement and the
Transaction Documents or the Closing of the transactions contemplated
hereunder and thereunder, including, but not limited to, the fees and expenses
of counsel, accountants, investment bankers and other experts.
13.3 Waivers. Any party may, by written notice to the other
parties, (a) extend the time for the performance of any of the obligations or
other actions of the other parties under this Agreement; (b) waive any
inaccuracies in the representations or warranties of the other parties
contained in this Agreement or in any document delivered pursuant to this
Agreement; (c) waive compliance with any of the conditions or covenants of the
others contained in this Agreement; or (d) waive performance of any of the
obligations of the others under this Agreement. With regard to any power,
remedy or right provided herein or otherwise available to any party hereunder
(x) no waiver or extension of time will be effective unless expressly
contained in a writing signed by the waiving party, and (y) no alteration,
modification or impairment will be implied by reason of any previous waiver,
extension of time, or delay or omission in exercise of rights or other
indulgence.
13.4 Amendments, Supplements. This Agreement may be amended or
supplemented at any time by the mutual written consent of the parties.
13.5 Entire Agreement. This Agreement, its exhibits and
schedules, the documents incorporated by reference and the documents executed
on the Closing Date in connection herewith, constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral and written, between
the parties hereto with respect to the subject matter hereof. No
representation, warranty, promise, inducement or statement of intention has
been made by any party which is not embodied in this Agreement or such other
documents, and no party shall be bound by, or be liable for, any alleged
representation, warranty, promise, inducement or statement of intention not
embodied herein or therein.
13.6 Binding Effect, Benefits. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
permitted successors and assigns. Notwithstanding anything contained in this
Agreement to the contrary, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
13.7 Assignability. Neither this Agreement nor any of the
parties' rights hereunder shall be assignable by any party without the prior
written consent of the others.
13.8 Notices. All notices under this Agreement will be in
writing and will be delivered by personal service or telegram, telecopy or
certified mail (if such service is not available, then by first class mail),
postage prepaid, or overnight courier to such address as may be designated
from time to time by the relevant party, and which will initially be as set
forth below. All notices will be deemed given when received. No objection
may be made to the manner of delivery of any notice actually received in
writing by an authorized agent of a party. Notices will be addressed as
follows or to such other address as the party to whom the same is directed
will have specified in conformity with the foregoing:
(a) If to Buyer:
P. O. Box 1498
Reading, PA 19603
Attention: Paul H. Snyder, Vice President
and Chief Financial Officer
Fax No. (610) 856-5511
(b) If to Seller:
6060 North Northwest Highway
Chicago, IL 60631
Attention: Richard F. Wharton, President
Fax No.: (312) 792-9642
13.9 Governing Law; Jurisdiction. This Agreement has been
negotiated and entered into in the State of Illinois, and all questions with
respect to the Agreement and the rights and liabilities of the parties will be
governed by the laws of that state, regardless of the choice of laws
provisions of Pennsylvania or any other jurisdiction.
13.10 Representations and Warranties.
(a) No investigation by either party of the business or
properties of the other and no notice to or knowledge by either party of the
breach, violation or inaccuracy of any representation, warranty, covenant or
agreement of the other contained herein shall in any way limit any such
representation, warranty, covenant or agreement or each party's right to rely
thereupon or to seek damages or indemnification with respect to the violation
or breach thereof. The disclosure of any information on any Schedule to this
Agreement shall be deemed to constitute the disclosure of such information on
all other schedules to this Agreement applicable to such information.
(b) Disclosure. None of the representations or warranties
of Seller contained in this Agreement contains or will contain an untrue
statement of material fact or omits or will omit to state a material fact
necessary in order to make these statements therein or herein in light of the
circumstances under which they were made, not misleading.
13.11 Rules of Construction.
(a) Headings. The article and section headings in this
Agreement are inserted only as a matter of convenience, and in no way define,
limit, or extend or interpret the scope of this Agreement or of any particular
article or section.
(b) Tense and Case. Throughout this Agreement, as the
context may require, references to any word used in one tense or case shall
include all other appropriate tenses or cases.
(c) Severability. The validity, legality or
enforceability of the remainder of this Agreement will not be affected even if
one or more of the provisions of this Agreement will be held to be invalid,
illegal or unenforceable in any respect.
13.12 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the duly authorized officers of the parties hereto as of the date first above
written.
GILBERT ASSOCIATES, INC.
By: /s/Timothy S. Cobb
President
SAFCO CORPORATION
By: /s/Bruce C. Creger
President
<PAGE>
Exhibit 1.1
EDS Balance Sheet
as of 07/31/96
Current Assets:
Cash $276,045
Accounts Receivable
Trade $4,315,747
Officers and Employees $47,050
Other $118,425
Inventories $1,768,760
Due from Affiliates $0
Accrued Interest Receivable $0
Prepaid Expenses $45,902
----------
$6,571,929
----------
Property and Equipment
Data Processing and Software $543,728
Machinery and Equipment $2,802,803
Furniture and Fixtures $541,677
Leasehold Improvements $414,080
Automobiles $268,266
----------
$4,570,554
Less Accum. Depr. ($2,604,541)
----------
$1,966,013
----------
Other Assets
Notes Receivable Officers $0
Lease Deposits $41,976
Cash Surrender Value $0
Loan Fees $0
Due from NWHV $0
Start-up Costs $5,720
-------
$47,696
-------
Total Assets $8,585,638
==========
Current Liabilitie
Accounts Payable $911,655
Current maturities of long term debt $0
Notes payable other ($5,467
Employees' taxes withheld $3,154
Deferred Service Revenue $187,731
Accrued Liabilities
Replacement Tax $0
Payroll and Sales $25,397
Commissions $21,200
Real Estate $57,885
Salaries $225,622
Other $386,681
----------
$1,813,857
Discquis $0
Long-Term Obligations
Long Term Debt $0
Capital Leases $1,250,667
Deferred Compensation $266,152
----------
Total Liabilities $3,330,676
Stockholders' Equity $5,254,963
----------
Total Liabilities and Equity $8,585,638
==========
<PAGE>
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
1933, AS AMENDED FROM TIME TO TIME, OR UNDER APPLICABLE STATE SECURITIES
LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR QUALIFICATION OR AN EXEMPTION FROM THE REGISTRATION OR QUALIFICATION
REQUIREMENTS OF SAID ACT OR LAWS.
No. 1 Dated: September 30, 1996
STOCK PURCHASE
WARRANT
To Purchase Common Stock of
GILBERT ASSOCIATES, INC.
THIS CERTIFIES THAT, for value received, SAFCO CORPORATION, an
Illinois corporation or registered assigns (the "Holder") is entitled to
purchase, at any time prior to the Expiration Date, from GILBERT ASSOCIATES,
INC., a Delaware corporation (the "Company"), Five Hundred Fifty Five
Thousand Five Hundred Fifty Five (555,555) fully paid and non-assessable
shares of Common Stock, of the Company ("Original Numbered Warrant Shares")
(or any other class of Common Stock described in the definition of "Subject
Common Stock", below) at the Purchase Price (as hereinafter defined). The
Original Number of Warrant Shares and the Purchase Price are subject to
adjustment as hereinafter set forth.
SECTION 1. DEFINITIONS.
As used in this Warrant, the following terms shall have the respective
meanings set forth below:
Additional Shares of Common Stock: shares of Common Stock of the
Company, of whatever class, including treasury shares, issued after the date
of the original issuance hereof, except any shares of Common Stock issued or
issuable upon exercise of this Warrant.
Commission: the Securities and Exchange Commission, or any other
Federal agency at the time administering the Securities Act or the Trust
Indenture Act of 1939, as the case may be.
Common Stock: the Class A Common Stock, $1.00 par value, or Class B
Common Stock, $1.00 par value of the Company.
Convertible Securities: evidences of indebtedness, shares of stock or
other securities which are convertible into or exchangeable for Additional
Shares of Common Stock, either immediately or upon the arrival of a
specified date or the happening of a specified event.
Current Market Price: per share of Common Stock on any date means the
average of the daily market prices of the Class A Common Stock for 30
consecutive business days commencing 45 business days before such date. The
market price for each business day shall be the last sale price on such day
on the National Stock Exchange, if any, upon which the shares may be listed,
or if the Common Stock is not then listed or admitted to trading on a
National Stock Exchange, the market price for each business day shall be the
average of the reported closing bid and asked prices on such day as
published by the NASDAQ National Market System.
Expiration Date: October 1, 2003.
Note: the $10,000,000 Promissory Note payable to Safco Corporation
due September 30, 2001 of the Company.
Number of Warrant Shares: at the time of any exercise of the Warrant
means (a) if no adjustments have theretofore been made pursuant to the
provisions of Section 4 hereof, the Original Number of Warrant Shares and
(b) if any one or more such adjustments have been so made, the amount to
which the Original Number of Warrant Shares has been so adjusted.
Permitted Consideration: means either (i) cash, certified check or
bank check or (ii) the Note in an unpaid principal amount equal to the
Purchase Price of Warrant Shares being purchased upon exercise hereof.
Person: an individual, partnership, corporation, trust or
unincorporated organization, and any government or agency or political
subdivision thereof.
Public Company: a corporation, equity securities of which (i) are
held of record by no fewer than 500 Persons and (ii) are listed on a
national securities exchange or are actively traded in the over-the-counter
market and, in the latter case, the bid and asked prices of such securities
are reported by the NASDAQ, National Market System.
Purchase Price: at the time of any exercise of this Warrant means (a)
if no adjustments have theretofore been made pursuant to the provisions of
Section 4 hereof, $18.00 per Warrant Share (the "Original Purchase Price")
and (b) if any one or more adjustments have been so made, the amount to
which the Original Purchase Price shall have been so adjusted.
Securities Act: the Securities Act of 1933, as amended from time to
time.
Subject Common Stock: the shares of Common Stock of the Company,
issued or issuable upon the exercise of the Warrant, and any securities
issued in exchange for, or in addition to, such common stock by way of stock
dividend or distribution, stock split, combination of shares,
recapitalization, reorganization, merger, consolidation, sale, lease or
exchange of assets or similar transaction.
Warrant Shares: shares of Subject Common Stock purchased or
purchasable by the Holder of this Warrant upon the exercise hereof.
SECTION 2. EXERCISE OF WARRANT.
2.1 Warrant May be Exercised at Any Time. This Warrant may be
exercised at any time in the manner and subject to the requirements
contained in this Section 2.
2.2 Procedure for Exercise of Warrant. To exercise this Warrant in
whole or in part, the Holder shall deliver to the Company, addressed as
required by Section 13 hereof, (i) a Notice of Exercise in the form attached
hereto, and shall deliver to the Company at such office or, at the option of
the Holder, to an escrow agent reasonably acceptable to the Holder and the
Company, (ii) Permitted Consideration in the amount of the Purchase Price of
the shares as to which this Warrant is then being exercised, and (iii) the
manually signed copy of this Warrant. Upon receipt by the Company and/or
said escrow agent thereof, the Holder shall be deemed to be the holder of
record of the Warrant Shares then being purchased even though such Warrant
Shares may not then be actually delivered to such Holder. If the Holder is
an employee or director of the Company or any controlled subsidiary of the
Company such Warrant Shares shall be Class B Common Stock or if the Holder
shall not be an employee, such Warrant Share shall be Class A Common Stock,
provided however, that, in no event, shall the Company be obliged to issue,
in the aggregate, that number of shares of Class B Common Stock as will
exceed twenty-five (25%) per cent of all of the shares of Class B Common
Stock outstanding. The Company shall, as promptly as practicable
thereafter, and in any event within twenty (20) business days, execute and
deliver to the Holder, or Holder's nominee, a certificate or certificates
representing the aggregate number of Warrant Shares issuable upon such
exercise. Each stock certificate so delivered shall be in the denomination
requested by the Holder and shall be registered in the name of the Holder or
such other name as the Holder designates. If this Warrant is exercised in
part, the Company shall, at the time of delivery of said stock certificate
or certificates, deliver to the Holder a new Warrant evidencing the Holder's
right to purchase the remaining Warrant Shares covered by this Warrant. The
Company shall pay all taxes and reasonable expenses incurred by or levied on
the Company in connection with the preparation, execution and delivery of
stock certificates pursuant to this Section, regardless of the name or names
in which such stock certificates are registered. If the Note is tendered in
payment of the Purchase Price and the unpaid principal amount thereof
exceeds the Purchase Price, the Company will (without charge to the Holder)
immediately issue and deliver to the Holder a new Note, in exchange for the
Note so tendered, in a principal amount equal to such excess, issued in the
name of the Holder or its designated nominee and dated the date to which the
Company last paid interest on the Note.
2.3 Transfer Restriction Legend. The Holder agrees that the Warrant
and the shares of Subject Common Stock issuable upon the exercise of the
Warrant may not be sold or transferred except in compliance with the
Securities Act of 1933, as amended, and all applicable state securities
laws, as confirmed by a legal opinion reasonably acceptable to the Company,
and that the certificates issued to evidence such shares, except as
otherwise provided in Section 11.8 hereof, shall bear the following legend:
"[This Warrant and the shares of Common Stock issuable upon the
exercise hereof] [The shares of Common Stock represented by this
certificate] have not been registered or qualified under the
Securities Act of 1933, as amended from time to time, or under
applicable state securities laws and may not be sold or transferred in
the absence of such registration or qualification or an exemption from
the registration or qualification requirements of said Act or laws."
unless in the opinion of counsel for the Holder, addressed to such Holder
and the Company (which counsel shall be reasonably satisfactory to counsel
for the Company) the securities represented by any such certificate are not,
at that time, required by law to bear such legend.
Any certificate issued at any time in exchange or substitution for a
certificate bearing such legends shall also bear such legends.
2.4 Character of Warrant Shares. All shares of Subject Common Stock
issuable upon the exercise of this Warrant shall be duly authorized, validly
issued and, upon payment of the Purchase Price, fully paid and non-
assessable. The Company covenants and agrees that the par value (or, in the
event of any reclassification of the Subject Common Stock, the stated value)
per share of such Subject Common Stock shall at all times be equal to or
less than the Purchase Price at the time in effect.
2.5 Acknowledgment of Continuing Obligation. The Company will, at
the time of any exercise of this Warrant by the Holder, upon request of the
Holder, acknowledge in writing its continuing obligation to the Holder in
respect of the rights (including, without limitation, any right to
registration of the shares of Subject Common Stock issued upon such
exercise) to which the Holder remains entitled after such exercise in
accordance with this Warrant. The failure of any Holder to make any such
request shall not affect the continuing obligation of the Company to the
Holder in respect of the rights.
SECTION 3. OWNERSHIP.
3.1 Ownership of This Warrant. The Company may deem and treat the
Person in whose name this Warrant is registered as the Holder and owner
hereof (notwithstanding any notations of ownership or writing hereon made by
anyone other than the Company) for all purposes and shall not be affected by
any notice to the contrary until presentation of this Warrant for
registration of transfer as provided in this Section.
3.2 Exchange, Transfer and Replacement. This Warrant is
exchangeable, upon the surrender by the Holder to the Company at its office
referred to in Section 13 hereof, for a new Warrant or Warrants of like
tenor and date representing the right to purchase the Number of Warrant
Shares then purchasable hereunder, each of such new Warrants to represent
the right to purchase such number of Warrant Shares as shall be designated
by the Holder at the time of such surrender. Subject to compliance with any
applicable provisions of the Securities Act and state securities laws, this
Warrant, with all rights hereunder, is transferable in whole or in part upon
the books of the Company by the Holder in person or by duly authorized
attorney, and a new Warrant, of the same tenor as this Warrant (but
registered in the name of the transferee) shall be made and delivered by the
Company upon surrender of this Warrant, accompanied by an assignment thereof
substantially in the form attached to this Warrant, at the office of the
Company referred to in Section 13 hereof. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft or destruction of
this Warrant, and of an agreement of indemnity reasonably satisfactory to
it, or upon surrender of this Warrant if it is being exchanged in
consequence of a change in the Company's name or if mutilated, the Company
will make and deliver a new Warrant of like tenor, in lieu of this Warrant.
This Warrant shall be cancelled by the Company promptly upon surrender in
connection with any transfer or replacement.
SECTION 4. ANTIDILUTION PROVISIONS; ADJUSTMENT OF PURCHASE PRICE AND NUMBER
OF WARRANT SHARES.
The Purchase Price and the Number of Warrant Shares shall be adjusted
as hereinafter set forth:
4.1 Stock Dividends, Subdivisions and Combinations. If the Company
(a) takes a record of the holders of any class of its Common
Stock for the purpose of entitling them to receive a dividend payable
in, or other distribution of (whether by way of a dividend, spin-off,
reclassification, recapitalization or similar corporate arrangement)
such Common Stock; or
(b) subdivides the outstanding shares of any class of its
Common Stock into a larger number of shares; or
(c) combines the outstanding shares of any class of its Common
Stock into a smaller number of shares,
then the number of Warrant Shares shall (until such time as a further
adjustment is required hereunder) be adjusted to that Number of Warrant
Shares determined by multiplying the Number of Warrant Shares which could be
purchased hereunder immediately prior to such event by a fraction,
(i) the numerator of which shall be the total number of
shares of Common Stock outstanding immediately after such event,
and
(ii) the denominator of which shall be the total number
of shares of Common Stock outstanding immediately prior to such
event.
4.2 Issuance of Additional Shares of Common Stock When Company is
not a Public Company.
(a) Generally, if the Company, at any time when it is not a
Public Company, issues or sells any Additional Shares of Common Stock
(whether or not such issuance or sale is made pursuant to a contract
in effect on the date hereof), then, forthwith upon such issue or
sale, the Number of Warrant Shares shall (until such time as a further
adjustment is required hereunder) be adjusted to that Number of
Warrant Shares determined by multiplying the Number of Warrant Shares
which could be purchased hereunder immediately prior to such issue or
sale by a fraction.
(i) the numerator of which shall be the total number of
shares of Common Stock outstanding immediately after such issue
or sale, and
(ii) the denominator of which shall be the total number
of shares of Common Stock outstanding immediately prior to such
issue or sale.
For the purpose of this Section 4.2(a), the number of shares of Common
Stock outstanding at any given time shall include shares issuable in respect
of scrip representing fractional interests with respect to Common Stock and
shares deemed to have been issued pursuant to Sections 4.5 and 4.6 hereto,
and the date as of which an adjusted Number of Warrant Shares must be
computed shall be the earlier of (x) the date on which the Company enters
into a firm contract for the issuance of such Additional Shares of Common
Stock (or, in the case of a contract which by its terms is not a firm
contract upon execution and delivery, the date on which such contract
becomes a firm contract) or (y) the date of actual issuance of such
Additional Shares of Common Stock.
(b) Other Adjustments. The provisions of Section 4.2(a) shall not
apply to the issuance of any Additional Shares of Common Stock which are
distributed to holders of Common Stock as a stock dividend or subdivision,
for which an adjustment is provided under Section 4.1 above or to the
issuance of any Additional Shares of Common Stock which are issued pursuant
to the exercise of any warrants (other than the Warrant) or other rights or
any conversion or exchange rights in any Convertible Securities for which an
adjustment is provided under Sections 4.5 or 4.6 hereof.
(c) Adjustments by Board of Directors. In issuing this Warrant, the
Company intends that except as otherwise provided herein the Holder shall at
all times when the Company is not a Public Company have the right, upon the
exercise of the rights represented by this Warrant, to purchase not less
than 5.823% of the Company's Common Stock at any time outstanding, at not
more than the Original Purchase Price (except that the Original Purchase
Price may be increased under Section 4.9 hereof) if the outstanding shares
of Common Stock are combined into a smaller number of shares. Accordingly,
if any event occurs as to which in the good faith opinion of the Board of
Directors the other provisions of this Warrant are not strictly applicable,
or if strictly applicable, would not fairly protect the rights of the Holder
of this Warrant in accordance with the essential intent and principles of
such provisions, then the Board of Directors shall make an adjustment in the
application of such provisions, in accordance with such essential intent and
principles, so as to protect such rights of the Holder as aforesaid.
4.3 Issuance of Additional Shares of Common Stock Upon Again
Becoming a Public Company. If the Company shall cease being a Public
Company and thereafter issues or sells any Additional Shares of Common Stock
in an initial public offering or in otherwise becoming a Public Company,
there shall be no adjustment made in the Number of Warrant Shares by virtue
thereof.
4.4 Issuance of Additional Shares of Common Stock While the Company
is a Public Company.
(a) Generally, if the Company, at any time while it is a Public
Company, issues or sells any Additional Shares of Common Stock
(whether or not such issuance or sales is made pursuant to a contract
in effect on the date hereof) for a consideration which is less than
the greater of the Purchase Price per share or the Current Market
Price per share immediately prior to such issue or sale, then,
forthwith upon such issue or sale, the Number of Warrant Shares shall
(until such time as a further adjustment is required hereunder) be
adjusted to that Number of Warrant Shares determined by multiplying
the Number of Warrant Shares which could be purchased hereunder
immediately prior to such issue or sale by a fraction,
(i) the numerator of which shall be the product of
(x) the total number of shares of Common Stock
outstanding immediately after such issue or sale,
multiplied by
(y) the greater of the Purchase Price per share or
the Current Market Price per share immediately prior to
such issue or sale, and
(ii) the denominator of which shall be the sum of
(x) the product of (1) the total number of shares
of Common Stock outstanding immediately prior to such
issue or sale, multiplied by (2) the greater of the
Purchase Price per share or the Current Market Price per
share immediately prior to such issue or sale, plus
(y) the product of (1) the number of Additional
Shares of Common Stock so issued or sold, multiplied by
(2) the aggregate consideration per share received by the
Company for such Additional Shares of Common Stock.
For the purposes of this Section 4.4(a), the number of shares of
Common Stock outstanding at any given time shall include shares issuable in
respect of scrip representing fractional interests with respect to Common
Stock, and the date as of which an adjusted Number of Warrant Shares must be
computed shall be the earlier of (x) the date on which the Company enters
into a firm contract for the issuance of such Additional Shares of Common
Stock (or, in the case of a contract which by its terms is not a firm
contract upon execution and delivery, the date on which such contract
becomes a firm contact) or (y) the date of actual issuance of such
Additional Shares of Common Stock.
(b) Other Adjustments. The provisions of Section 4.4(a) shall not
apply to the issuance of any Additional Shares of Common Stock which are
distributed to holders of Common Stock as a stock dividend or subdivision,
for which an adjustment is provided under Section 4.1 above or to the
issuance of any Additional Shares of Common Stock which are issued pursuant
to the exercise of any warrants (other than the Warrant) or other rights or
any conversion or exchange rights in any Convertible Securities for which an
adjustment is provided under Sections 4.5 or 4.6 hereof.
4.5 Excluded Issuances. Anything contained in this Section 4 to the
contrary notwithstanding, no adjustment shall be made under this Section 4
on account of any of the following:
(a) The issuance of additional shares of Common Stock upon exercise
of stock options previously or hereafter granted by the Company under
either the Gilbert Associates, Inc. 1989 Stock Option Plan, the Company's
1996 Long-Term Incentive Plan or its Directors' Stock Option Plan;
(b) Restricted stock hereafter issued by the Company under the
Company's 1996 Long-Term Incentive Plan to the extent that, within ninety
(90) days thereafter, the Company shall purchase shares of Common Stock
outstanding; or
(c) The issuance or grant of warrants, options or other rights to
subscribe to or purchase any additional shares of Common Stock or any
convertible securities, or the issuance of convertible securities (provided
that the delivery of Common Stock pursuant to such grants shall not be
deemed an excluded issuance).
4.6 Computation of Consideration. To the extent that any Additional
Shares of Common Stock are issued for a cash consideration, the
consideration received by the Company therefor shall for purposes of
Sections 4.2 and 4.4 hereof be deemed to be the amount of the cash received
by the Company therefor, or, if such Additional Shares of Common Stock are
offered by the Company for subscription, the subscription price, or, if such
Additional Shares of Common Stock are sold to underwriters or dealers for
public offering without a subscription offering, the initial public offering
price, in any such case excluding any amounts paid or receivable for accrued
interest or accrued dividends and before deduction of any compensation,
discounts or expenses paid or incurred by the Company for and in the
underwriting of, or otherwise in connection with, the issue thereof. To the
extent that such issuance is for a consideration other than cash, then,
except as herein otherwise expressly provided, the amount of such
consideration shall be deemed to be the fair value of such consideration at
the time of such issuance as determined in good faith by the Board of
Directors of the Company. The consideration for any Additional Shares of
Common Stock issued pursuant to any warrants or other rights to subscribe
for or purchase the same shall be the consideration received by the Company
for issuing such warrants or other rights, plus the additional consideration
payable to the Company upon the exercise of such warrants or other rights.
The consideration for any Additional Shares of Common Stock issued pursuant
to the terms of any Convertible Securities shall be the consideration
received by the Company for issuing any warrants or other rights to
subscribe for or purchase such Convertible Securities, plus the
consideration paid or payable to the Company in respect of the subscription
for or purchase of such Convertible Securities, plus the additional
consideration paid to the Company upon the exercise of the right of
conversion or exchange in such Convertible Securities. In case of the
issuance at any time of any Additional Shares of Common Stock in payment or
satisfaction of any dividend upon any class of stock other than Common
Stock, the Company shall be deemed to have received for such Additional
Shares of Common Stock a consideration equal to the amount of the dividend
so paid or satisfied.
4.7 Adjustment of Purchase Price. Upon each adjustment in the
number of Warrant Shares, the Purchase Price shall be adjusted to an amount,
not less than the par value per share of the Subject Common Stock on the
date of such adjustment, equal to the quotient of (a) the Number of Warrant
Shares entitled to be purchased upon exercise of this Warrant immediately
prior to the adjustment, multiplied by the Purchase Price in effect
immediately prior to such adjustment, divided by (b) the adjusted Number of
Warrant Shares. Notwithstanding anything to the contrary set forth herein,
in no event will the Company take any act, whether contemplated in this
Section 4 or otherwise, the effect of which would be to prohibit the Company
from issuing fully paid and non-assessable shares of Common Stock upon
payment of the Purchase Price as herein provided.
4.8 Notice of Adjustments. Whenever an adjustment to the Purchase
Price or Number of Warrant Shares purchasable is required by this Section 4,
the Company shall promptly (and in any event within 30 business days
thereof) prepare a certificate signed by the President or a Vice President
of the Company, setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which the adjustment
was calculated (including a description of the basis on which the officers
of the Company made any determination hereunder), and the Purchase Price and
Number of Warrant Shares after giving effect to such adjustment. The
Company shall promptly deliver to the Holder a copy of such certificate at
the address set forth in Section 13 hereof, together, in the case of any
adjustment increasing the number of shares of Common Stock issued pursuant
to Section 2 of this Warrant, a certificate or certificates representing the
aggregate number of additional shares of Common Stock, each such certificate
to be in the denomination requested by the Holder and registered in the name
of the Holder or such other name as shall be designated by the Holder. The
Company shall pay all expenses, taxes and other charges payable in
connection with the preparation, execution and delivery of stock
certificates pursuant to this Section 4.9, regardless of the name or names
in which the stock certificates are registered.
4.9 Minimum Adjustment.
(a) No adjustment of the Purchase Price shall be made if such
adjustment results in a change of the Purchase Price then in effect of less
than $.05. Any adjustments of less than $.05 shall be carried forward and
shall be made at the time of and together with any subsequent adjustment
which, together with the adjustment or adjustments so carried forward,
amounts to $.05 or more of the Purchase Price then in effect. However, upon
the exercise of this Warrant, the Company shall make all necessary
adjustments not theretofore made to the Purchase Price up to and including
the date upon which this Warrant is exercised.
(b) No adjustment of the Number of Warrant Shares shall be made if
such adjustment results in a change of the Number of Warrant Shares then in
effect of less than 0.1% of the shares of Common Stock issued and
outstanding. Any adjustments of less than 0.1% of the number of Common
Shares outstanding shall be carried forward and shall be made at the time of
and together with any subsequent adjustment which, together with the
adjustment or adjustments so carried forward, amounts to 0.1% or more of the
number of Common Shares then outstanding. However, upon exercise of this
Warrant, the Company shall make all necessary adjustments not theretofore
made to the number of Common Shares up to and including the date upon which
this Warrant is exercised.
SECTION 5. MERGERS, CONSOLIDATION, SALES.
In the event of any proposed consolidation or merger of the Company
with another corporation, or the proposed sale of all or substantially all
of its assets to another Person, or any proposed reorganization or
reclassification of the capital stock of the Company (except a transaction
for which provision for adjustment is made in Section 4 hereof), then, as a
condition of such consolidation, merger, sale, reorganization or
reclassification, lawful and adequate provision shall be made whereby the
Holder will thereafter have the right to receive, in lieu of the shares of
the Common Stock of the Company purchasable hereunder immediately prior to
such transaction, such shares of stock, securities or assets as may (by
virtue of such consolidation, merger, sale, reorganization or
reclassification) be issued or payable with respect to or in exchange for
the number of shares of such Common Stock purchasable hereunder immediately
before such consolidation, merger, sale, reorganization or reclassification.
In any such case, appropriate provision shall be made with respect to the
rights and interests of the Holder to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Number of
Warrant Shares) shall thereafter be applicable to any shares of stock,
securities or assets thereafter deliverable upon the exercise of this
Warrant. The Company shall not effect any such consolidation, merger or
sale unless prior to or simultaneously with the consummation thereof the
successor corporation or purchaser, as the case may be, assumes by written
instrument (executed and mailed to the Holder at the last address for the
Holder appearing on the books of the Company) the obligation to deliver to
the Holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, the Holder is entitled to receive upon the
exercise hereof.
SECTION 6. PRIOR NOTICE OF CERTAIN EVENTS.
In case at any time:
(c) the Company declares a cash dividend on its Common Stock;
(d) the Company pays any dividend payable in stock upon its
Common Stock or make any distribution (other than regular cash
dividends) to the holders of its Common Stock;
(e) the Company offers for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any
class or other rights;
(f) there is any capital reorganization, reclassification of
the capital stock of the Company, or consolidation or merger of the
Company with, or sale of all or substantially all of its assets to,
another corporation or (in the case of a sale) any other entity or
person; or
(g) there is a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall give written notice, to the Holder of the date on
which (i) the books of the Company shall close or a record shall be taken
for such dividend, distribution or subscription rights, or (ii) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up will take place, as the case may be. Such notice
shall also specify the date as of which the holders of Common Stock of
record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as the
case may be. Such notice shall be given not less than 30 days nor more than
60 days prior to the record date or the date on which the Company's transfer
books are closed in respect thereto, or the date fixed for determining
shareholders entitled to participate therein, as the case may be.
SECTION 7. FRACTIONAL SHARES.
Fractional shares shall not be issued upon the exercise of this
Warrant but, in lieu thereof, the Company shall, upon the complete exercise
of this Warrant, pay to the Holder a sum in cash equal to the excess of the
value of such fractional share (determined in such reasonable manner as may
be prescribed in good faith by the Board of Directors of the Company), over
the proportional part of the Purchase Price represented by such fractional
share. The Company will not undertake any reorganization, reclassification
or combination concerning its Common Stock if the effect thereof would be to
cause any fractional shares to be covered by this Warrant unless the Holder
shall consent thereto in writing.
SECTION 8. TAXES.
The Company covenants and agrees that it will pay when due and payable
any and all federal and state transfer taxes which may be payable in respect
of the issue of this Warrant, or any Common Stock or certificate therefor
issuable upon the exercise of this Warrant.
SECTION 9. CLOSING OF TRANSFER BOOKS.
The right to exercise this Warrant shall not be suspended during the
period while the stock transfer books of the Company for its Common Stock
are closed and, upon the exercise of this Warrant at any time when the stock
transfer books of the Company for its Common Stock are open, the Company
shall not close such books until such time as the Company shall have
delivered certificates evidencing the Common Stock issuable upon such
exercise. The Company shall not be required, however, to deliver
certificates of the Common Stock issuable upon the exercise of this Warrant
while such books are duly closed for any purpose, but the Company may
postpone the delivery of the certificates for such Common Stock until the
opening thereof, or as soon as practicable thereafter, but in any case
within 10 business days of the earliest day on which such books may be
opened under applicable law.
SECTION 10. SPECIAL AGREEMENTS OF THE COMPANY.
The Company covenants and agrees that:
10.1 Exchange of Class A Common Stock for Class B Common
Stock. The Company agrees that, in the event it shall issue and deliver
shares of its Class A Common Stock as Warrant Shares upon exercise of this
Warrant and all or any part of such shares of Class A Common Stock shall be
transferred to a person who is then an employee or director of the Company
or any controlled subsidiary of the Company, the Company will exchange such
number of shares of Class A Common Stock for an equal number of shares of
Class B Common Stock which share shall be delivered to such transferee,
provided however, in no event shall the Company be obliged to exchange
shares of Class B Common Stock for shares of Class A Common Stock pursuant
to this Section 10.1 in and to the extent such exchange shall cause the
aggregate amount of all shares exchanged pursuant to this Section 10.1 to
exceed twenty-five (25%) per cent of all of the outstanding shares of Class
B Common Stock.
10.2 Will Reserve Shares. The Company will reserve and set
apart and have at all times, free from preemptive rights, restrictions,
dedications, allocations, options, other warrants and other rights, the
number of shares of authorized but unissued Subject Common Stock deliverable
upon the exercise of this Warrant.
10.3 No Adverse Acts. The Company will not take any act, the
effect of which would be to prohibit the Company from issuing fully paid and
non-assessable shares of Subject Common Stock upon payment of the Purchase
Price as herein provided.
10.4 Will Bind Successors. This Warrant shall be binding upon
any corporation succeeding to the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets.
SECTION 11. REGISTRATION RIGHTS, ETC.
The Holder shall have the rights of registration set forth in this
Section 11 with respect to shares of Common Stock of the Company purchasable
or acquired upon exercise of this Warrant.
11.1 Additional Definitions. For purposes of this Section
11, "Registration Statement" shall mean any registration statement (as
defined in the Securities Act) on Form S-1, or any other registration form;
"Holder", in addition to the registered Holder of this Warrant as
hereinbefore defined, shall mean the registered owner of shares of Subject
Common Stock issued upon exercise of this Warrant; "Warrant Shares" shall be
limited to shares of Subject Common Stock of the Company purchasable upon
exercise of this Warrant (i.e., shares not as yet acquired through Warrant
exercise); and "Restricted Stock" shall mean shares of Subject Common Stock
issued upon exercise of this warrant that theretofore had been unregistered
under the Securities Act, or theretofore remained unsold while registered
under said Act.
11.2 Notice of Proposed Transfer; Registration Not Required.
The Holder agrees to give prior written notice to the Company of the
Holder's intention to transfer the Warrant Shares or Restricted Stock (or
any portion thereof), describing briefly, in a form substantially similar to
that attached hereto, the manner and circumstances of the proposed transfer.
Promptly upon receipt of such written notice, the Company shall, at its
option, either (i) request the Holder to select counsel or (ii) present
copies thereto to Company counsel, with a direction to render the opinions
contemplated by this Section 11.2 within 15 days. If in the opinion of such
counsel the proposed transfer may be effected without registration or
qualification under any Federal or state law of such Warrant Shares or
Restricted Stock, the Company, as promptly as practicable, shall notify the
Holder of such opinion and of the terms and conditions, if any, to be
observed. Upon such notice, or upon receiving such an opinion from its own
counsel chosen under (i) above, the Holder shall be entitled to transfer
such Warrant Shares or Restricted Stock in accordance with the terms of such
opinion. If in the opinion of counsel chosen under either (i) or (ii)
above, the proposed transfer may not be effected without registration or
qualification under any Federal or applicable state securities laws of the
Warrant Shares or Restricted Stock, the Holder may refer the matter to
counsel chosen by it of recognized standing in the area of securities laws,
and if in the opinion of such other counsel the proposed transfer may be
effected without registration or qualification, a copy of such opinion,
addressed to the Company and the Holder, shall be provided to the Company
and the Holder thereafter shall be entitled to transfer the Warrant Shares
or Restricted Stock in accordance with such opinion. All reasonable fees
and expenses of counsel (except those of counsel designated by the Holder to
give an opinion after the Holder has received an opinion of counsel selected
by it pursuant to (i) above) in connection with the rendition of the
opinions provided for in this Section 11.2 shall be paid by the Company.
11.3 Required Registration and Notice; Transfer of Notes. If,
in the opinion of counsel for the Company, the proposed transfer described
in the written notice given pursuant to Section 11.2 hereof may not be
effected without registration or qualification under applicable Federal or
state law of such Warrant Shares or Restricted Stock or without compliance
with the conditions or any exemptive regulation of the Commission, and no
further opinion is received as contemplated by Section 11.2 hereof or, if
received, such further opinion confirms the opinion of the Company's
counsel, and if the Company is a Public Company, the Company shall (a) in
the case of a proposed registration, promptly give written notice to the
Holder and to the Holders of all other Warrant Shares and Restricted Stock
of such proposed registration and (b) subject to the conditions of Section
11.4 hereof, as expeditiously as possible, endeavor, in good faith, to
effect any such registration or qualification or filing for exemption of the
resale by the Holder and any holders referred to in Clause (ii) below of:
(i) such Warrant Shares, or such Restricted Stock or both, and
(ii) in the case of any such registration, all other Warrant
Shares and Restricted Stock, the holders of which have advised the
Company in writing within 20 days after the giving of such written
notice by the Company of their desire to have their Warrant or
Restricted Stock registered with, or notification to or approval of,
any governmental authority under Federal or state law, or listing with
any securities exchange, which may be required reasonably to permit
the sale or other disposition of any such Warrant Shares or Restricted
Stock which the holders thereof proposed to make; provided, however,
that, in the case of an underwritten public offering of Common Stock,
if the underwriters or their representative or representatives
determine, reasonably and in good faith, that the inclusion of any of
the Warrant Shares or Restricted Stock described in clause (ii) above,
would unreasonably interfere with the offering of the other Warrant
Shares or Restricted Stock described in clause (i) above, the Company
shall give notice of such determination to the Holder and each other
holder of such other Warrant Shares and Restricted Stock, and the
number of Warrant Shares and shares of Restricted Stock to be offered
by such other holders (but not those to be offered by the Holder)
shall be reduced pro rata on the basis of the amount requested or
proposed to be included by such other holders to aggregate a number,
if any, of shares which said underwriters or their representative or
representatives shall not consider excessive. No shares of Common
Stock proposed to be issued by the Company on its own behalf shall be
included in any registration or qualification or filing for exemption
provided for in this Section 11.3 unless all Warrant Shares and
Restricted Stock described in clauses (i) and (ii) above are included
in such registration, qualification or filing for exemption. All
expenses incurred by the Company and the Holder in complying with all
registration requirements, including, without limitation, filing fees,
fees and disbursements of counsel for the Company and the Holder,
printing and other expenses (but excluding any underwriting discounts
or commissions) in connection with each Registration Statement
required under this Section 11.3 shall be borne by the Company.
11.4 Conditions to Required Registration. The Company shall
not be required to register, or to use its best efforts to effect any
registration of, the Warrant Shares or Restricted Stock under the Securities
Act or any other applicable Federal or state law pursuant to Section 11.3
hereof:
(a) more than once with respect to this Warrant;
(b) on a date which under the General Rules and Regulations of
the Commission, the inclusion therein by incorporation by reference (to the
extent such inclusion is required or permitted under said Rules and
Regulations) of financial statements of the Company contained in the most
recently filed Report of the Company on Forms 10-K and 10-Q would not be
permitted or the inclusion of additional financial statements would be
required; or
(c) at any time prior to October 1, 1999.
The Company shall maintain the effectiveness of any Registration
Statement filed in connection with a registration required under Section
11.3 hereof and, if necessary, amend such Registration Statement and
supplement the prospectus relating thereto, for a period of nine months from
the effective date of such Registration Statement.
The Company may delay any registration or qualification of Registrable
Securities required pursuant to this Section 11.4 for a period not exceeding
60 days, provided the Company shall in good faith determine, as evidenced by
resolution of its Board of Directors, that any such registration would
adversely impact any active negotiations or planning for a proposed or
pending, material, public or private financing, merger, stock or asset
acquisition or sale of all or substantially all of the Company's assets.
11.5 Incidental Registration. If, at any time or times, the
Company proposes to file one or more Registration Statements for the
registration under the Securities Act of any of its equity securities for
public offering whether or not underwritten (excluding the issuance of
shares in connection with an acquisition, merger or exchange of securities
which involves no distribution for cash), it shall give a Notice of
Registration (as defined in Section 11.6 hereof) to the Holder, and shall
include in each Registration Statement referred to in such notice all
Warrant Shares or Restricted Stock, or both, with respect to which the
Holder shall have delivered to the Company a Notice of Intent to Sell (as
defined in Section 11.6 hereof) within 30 days after the Company has given
its Notice of Registration. Such Notice of Registration shall be given not
later than 45 days prior to the filing of any such Registration Statement.
All expenses incurred by the Company and the Holder and other holders in
complying with all registration requirements, including, without limitation,
filing fees, fees and disbursements of counsel for the Company, the Holder
and the other holders, printing and other expenses (but excluding any
underwriting discounts or commissions) in connection with each such
registration shall be borne by the Company. The Company shall have no
obligation to register Warrant Shares or Restricted Stock under this Section
11.5, however, unless the Holder agrees to join in underwriting arrangements
in respect of the Warrant Shares or Restricted Stock being registered which
are, except as otherwise herein provided, on the same terms as other
participants in the distribution. If the underwriters determine, reasonably
and in good faith, that the number of shares of Common Stock to be included
on any such Registration Statement exceeds the number of shares which can be
offered and sold on reasonable terms and price under prevailing market
conditions, then the number of Warrant Shares and/or shares of Restricted
Stock to be included in such Registration Statement and the number of shares
of Common Stock so registered by the Company shall be reduced pro rata to
allow the orderly offering and sale under prevailing market conditions by
the Company of all shares of Common Stock it is requesting to be registered.
If shares of Common Stock held by persons other than the Company and the
Holder are included in the shares covered by such Registration Statement,
such reduction shall be proportionate to the reduction in the number of
shares of Common Stock of the Company which such other persons are required
to make by said underwriters.
The Company shall not be required to maintain the effectiveness of any
Registration Statement filed in connection with the registration which is
the subject of this Section 11.5 or to amend such Registration Statement or
to supplement the prospectus relating thereto after the expiration of nine
months from the effective date of such Registration Statement.
The Company need not include any Warrant Shares or Restricted Stock
owned by the Holder in any Registration Statement provided for under this
Section 11.5 if, in the opinion of counsel for the Company satisfactory to
counsel for the Holder, registration of such shares under the Securities Act
is not necessary to the Holder to dispose of such shares in a public
offering and distribution in the open market in compliance with the
Securities Act; provided in such case, the opinion of such counsel shall be
in writing addressed to the Holder and shall be rendered within 20 days
after the Notice of Intent to Sell is received by the Company, and provided
further that if the Company declines to register any Warrant Shares or
Restricted Stock pursuant to this paragraph, the Company shall indemnify the
Holder against any and all losses, damages, liabilities and expenses,
including counsel fees and liability under the Securities Act, that such
Holder may incur as a result of the aforementioned opinion being incorrect
in its determination that registration of such shares was not necessary.
11.6 Notice of Intent to Sell and Notice of Registration.
(a) "Notice of Intent To Sell" shall mean a written notice signed by
the Holder (i) setting forth the number of Warrant Shares, if any, and the
number of shares of Restricted Stock, if any, which the Holder desires to
have registered for sale, (ii) representing that the Holder has a present
intention to sell the same, (iii) agreeing to execute all consents,
registration statements and other documents reasonably required in order to
permit the applicable Registration Statement to be made effective and to
carry out the distribution.
(b) "Notice of Registration" shall mean a written notice signed by an
officer of the Company, setting forth the approximate date on which it
intends to file a Registration Statement for the registration of its equity
securities pursuant to the Securities Act, and the approximate date on which
it contemplates such Registration Statement will become effective.
11.7 Indemnification. The obligation of the Company to register
Warrant Shares or Restricted Stock for the Holder pursuant to Sections 11.3
and 11.5 hereof shall be subject to the receipt by the Company of an
agreement from the Holder, and each underwriter of any Warrant Shares or
Restricted Stock to be registered for the Holder, in from and substance
satisfactory to the Company, indemnifying the Company against liability
arising out of or based upon any untrue statement or alleged untrue
statement of material fact in the Registration Statement, or the omission or
alleged omission to state therein any material fact required to be stated
therein or necessary in order to make the statements therein not misleading,
if (with respect to the agreement of the Holder) such statement or omission
was made by the Company in reliance upon and in conformity with written
information furnished to the Company specifically for use in such
Registration Statement by or on behalf of the Holder, or (with respect to
the agreement of any underwriter of any Warrant Shares or Restricted Stock
to be registered for the Holder) by or on behalf of such underwriter. In
connection with the registration under the Securities Act of Warrant Shares
or Restricted Stock owned by the Holder, the Company hereby agrees to
indemnify the Holder and each underwriter thereof against liability arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact in a Registration Statement filed by the Company, or the
omission or alleged omission to state in such Registration Statement any
material fact required to be stated therein or necessary in order to make
the statement therein not misleading, other than any such statement included
in, or omitted from, such Registration Statement by the Company in reliance
upon written information furnished to the Company, specifically for use
therein, by or on behalf of the Holder (with respect to the Holder), or by
or on behalf of any underwriter of the securities included therein (with
respect to such underwriter). The Company and the Holder agree to join in
an underwriting agreement having usual and customary terms, including
customary representations, warranties and other agreements (other than
agreements with respect to indemnification, which shall be limited to those
provided in this Section 11.7); provided that no such agreement shall
require the Holder to make any representation or warranty concerning the
Company unless the same be based upon the actual knowledge of the Holder.
Reasonably promptly (but not later than 30 days) after receipt of a party
claiming indemnification under this Section 11.7 receives notice of
commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this
Section 11.7, notify in writing the indemnifying party of the commencement
thereof; and the omission so to notify the indemnifying party will relieve
it from any liability under this Section 11.7 as to the particular item for
which indemnification is then being sought, but not from any other liability
which it may have to any indemnified party. In case any such action is
brought against any indemnified party, and the indemnified party notifies an
indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein, and to the extent that it may wish, to
assume the defense thereof, with counsel who shall be to the reasonable
satisfaction of such indemnified party, and after receipt of actual notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to
such indemnified party under this Section 11.7 for any legal or other
expenses subsequently incurred by such indemnified party in connection with
the defense thereof. The indemnified party shall, however, have the right
to employ separate counsel to represent it in connection with any claim in
respect of which indemnity may be sought hereunder if, in the reasonable
judgment of counsel for the indemnified party, a conflict of interest exists
making it advisable for him to be represented by separate counsel, in which
event the fees and expenses of such separate counsel shall be borne by the
indemnifying party. An indemnifying party shall not be liable to any
indemnified party on account of any settlement of any claim or action
effected without the consent of such indemnifying party.
11.8 Exchange of Certificates. In the event that any of the Warrant
Shares are at any time made the subject of a registration statement pursuant
to the provisions of this Section 11, the Company shall, upon surrender of
the Warrant or certificate or certificates representing such Warrant Shares,
deliver to the Holder a new certificate evidencing such Warrant Shares, such
certificate to be without any legend to the effect that such certificate may
not be transferred without registering under the Securities Act or unless an
exemption from said Act is available.
11.9 Remedies. In the event the Company at any time fails to perform
fully and completely its obligations under this Section 11, the Holder
shall, in addition to all other rights or remedies hereunder, at law or in
equity, have the right to petition any court with jurisdiction in the
premises for an order compelling the Company specifically to perform said
obligations, it being recognized that monetary damages are not adequate
compensation for any such failure.
11.10 Holdback Obligation. The Holder agrees that at any time and
from time to time during the Effective Period (as defined below) that the
Company files a registration statement with the Commission relating to a
primary offering by the Company of equity or equity-related securities
(other than any registration statement filed by the Company (a) pursuant to
Rule 415 under the Securities Act, (b) on Form S-8 (or any successor form),
or (c) in connection with any stock option, stock purchase or other benefit
plan or any dividend reinvestment plan) (a "Company Registration"), the
Holder will not offer, sell, contract to sell or otherwise dispose of any
shares of Common Stock beneficially owned by the Holder until the earlier of
(i) the withdrawal of such Company Registration or (ii) 90 days after the
effective date of such Company Registration; and the Holder agrees to enter
into such further documents and holdback letters as may reasonably be
requested by the Company or any underwriter in connection with such Company
Registration in order to reflect the holdback obligations set forth in this
Section. For purposes of this paragraph, the term "Effective Period" shall
mean the period during which a Registration Statement under with Warrant
Shares or shares of Restricted Stock are registered is effective.
SECTION 12. FINANCIAL STATEMENTS AND INFORMATION.
The Company hereby covenants and agrees that on and after the initial
issuance of this Warrant, so long as it is outstanding, the Company will
deliver to the Holder for each fiscal quarter and fiscal year of the
Company, copies of all financial statements filed, from time to time, with
the Commission on Forms 10-Q and 10-K.
SECTION 13. NOTICES.
Any notice or other document to be given or delivered to the Holder
shall be delivered or sent by certified or registered mail to the Holder at
6060 North Northwest Highway, Chicago, Illinois 60631, Attention: Richard F.
Wharton, President, or to such other address as shall have been furnished to
the Company in writing by the Holder. Any notice or other document to be
given or delivered to the Company shall be delivered or sent by certified or
registered mail to the offices of the Company at Route 10 and Pheasant Road,
Reading, PA 19603, or to any other address that may be designated by either
party in a written notice given to the other pursuant to this Section. Any
notice to a party addressed and mailed by registered or certified mail
(return receipt requested) shall be deemed to be given one (1) day after so
mailed. Any notice so addressed and otherwise delivered shall be deemed to
be given when actually received by the addressee.
SECTION 14. NO RIGHTS AS SHAREHOLDER; LIMITATION OF LIABILITY.
This Warrant shall not entitle the Holder to any of the rights of a
shareholder of the Company. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no
mere enumeration herein of the rights or privileges of the Holder shall give
rise to any liability of the Holder for the Purchase Price or as a
shareholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
SECTION 15. REPRESENTATIONS AND WARRANTIES OF HOLDER.
By accepting this Warrant, the Holder hereby:
A. Represents and warrants that it maintains its principal place of
business in the State of Illinois.
B. Acknowledges that it has received a copy of the Company's most
recent Audited Financial Statements.
C. Represents and warrants that the Warrant and the shares of
Common Stock issuable upon exercise of the Warrant are being acquired for
its own account without a view to public distribution or resale and that it
has no contract, undertaking, agreement or arrangement to sell or otherwise
transfer or dispose of any shares of Common Stock or any portion thereof to
any other person.
D. Represents and warrants that in determining to accept the
warrants referred to hereunder, it has relied solely upon its independent
investigation, including the advice of its legal counsel and accountants or
other financial advisors or purchaser representatives and has, during the
course of discussions concerning the warrants and the opportunity to acquire
the Common Stock issuable upon exercise of the Warrant, been offered the
opportunity to ask such questions and inspect such documents concerning the
Company and its business and affairs as it has requested so as to more fully
understand the nature of the investment and to verify the accuracy of the
information supplied.
E. ACKNOWLEDGE THAT THE PURCHASE OF STOCK INVOLVES A HIGH DEGREE OF
RISK, and represents and warrants that it can bear the economic risk of the
purchase of the Stock, including the total loss of its investment.
F. Understands that no federal or state agency has approved or
disapproved the shares of Common Stock issuable upon exercise of the
Warrant, passed upon or endorsed the merits of the offering of the shares of
Stock hereunder, or made any finding or determination as to the fairness of
the shares of Stock for investment.
SECTION 16. LAW GOVERNING.
This Warrant shall be governed by, and construed and enforced in
accordance with, the last of the State of Pennsylvania.
SECTION 17. MISCELLANEOUS.
This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the
party (or any predecessor in interest thereof) against the enforcement of
the same is sought. The headings in this Warrant are for purposes of
reference only, are not a part of this Warrant and shall not affect the
meaning or construction of any of the provisions hereof.
The payment or prepayment, in whole or in part, of the Note shall not
affect, terminate or modify this Warrant or any of the terms and provisions
hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer in the City of Reading, Pennsylvania, this
30th day of September, 1996.
GILBERT ASSOCIATES, INC.
By
Its President
NOTICE OF EXERCISE
Dated: ____________, ____
The undersigned hereby irrevocably elects to exercise the attached
Warrant to the extent of purchasing ________ shares of Common Stock and
hereby makes payment of $__________ in payment of the Purchase Price
thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name
(Please type or print in block letters)
Address
Signature:
By
ASSIGNMENT FORM
FOR VALUE RECEIVED, _______________________ hereby sells, assigns and
transfers unto _______________________________ the right to purchase
__________ shares of Common Stock represented by this Warrant as to which
such right is exercisable and does hereby irrevocably constitute and appoint
_________________________________, attorney, to transfer the same on the
books of the Company with full power of substitution in the premises.
Signature
Dated: , 19__.
<PAGE>
EXHIBIT 5.2(j)
AMENDMENT TO AND ASSIGNMENT
AND ASSUMPTION OF NET LEASE
THIS INSTRUMENT, made and entered into as of this 30th day of
September, 1996, by and between LaSALLE NATIONAL TRUST, N.A., successor
trustee to LaSALLE NATIONAL BANK, not personally, but as trustee under Trust
Agreement dated February 2, 1975 and known as Trust No. 48560 (hereinafter
referred to as "Lessor"), SAFCO CORPORATION, an Illinois corporation
(hereinafter referred to as "Assignor"), and GILBERT ASSOCIATES, INC., a
Delaware corporation and SAFCO TECHNOLOGIES, INC., an Illinois corporation
(collectively referred to as "Assignee");
W I T N E S S E T H:
WHEREAS, on the 12th day of December, 1991, the Lessor and the
Assignor executed and entered into a Net Lease (hereinafter referred to as
the "Net Lease")pertaining to the premises commonly known as 6010-6060
Northwest Highway, Chicago, Illinois, which Lease, by its terms, expires on
May 31, 2001, subject to an option to extend; and
WHEREAS, coincident with the execution of this instrument, the
Assignor is selling and transferring to the Assignee all of the business and
substantially all of the assets comprising the Assignor's Electronic Systems
Division; and
WHEREAS, incident to the sale of the Electronic Systems Division by
the Assignor to the Assignee, the Assignor and Assignee have agreed that the
Net Lease, as amended hereby, shall be assigned by the Assignor to the
Assignee and the Assignee will assume and agree to perform all of the
obligations of the Assignee thereunder, provided that the Lessor and the
Assignor amend the Net Lease in certain respects;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree as follows:
A. Reference is made to a certain Development Solutions, Inc.
Property Inspection Report prepared on or about September 9, 1996 and
delivered to the Assignor and the Assignee, which report identifies certain
possible building code violations applicable to the premises. The Assignor
and Assignee agree that, notwithstanding the assignment of the Net Lease, in
the event that such violations are ever required, by the municipality, to be
remedied, the Assignor will reimburse the Assignee for all costs incurred in
causing such remediation.
B. Section 2.1 (Original Term) is amended to read as follows:
"Section 2.1 Term. The term of this Lease shall begin on the
date hereof and shall end on the tenth (10th) anniversary of the
date hereof, unless sooner terminated as provided herein."
C. Section 2.2 of the Net Leae (Option to Extend) is deleted in its
entirety.
D. Section 3.3 of the Net Lease (Basic Rent) is amended to read as
follows:
"Section 3.3 Basic Rent. Lessee shall pay as basic rent the
sum of $2,730,000, plus the two (2%) percent annual adjustment
as hereinafter set forth, for the one hundred twenty (120) full
calendar months of the term, which shall be paid in one hundred
twenty (120) monthly installments, each installment for the
first twelve (12) installments to be in the amount of $22,750.
As of the first (1st) and each subsequent anniversaries of the
date of this instrument, the annual rental shall be increased by
two (2%) percent of the annual rental payable during the
preceding year and the monthly installments shall, accordingly,
be increased. All rental shall be paid on or before the fifth
(5th) day of each calendar month."
E. Coincident with the execution of this instrument, the Assignee
shall pay to the Lessor a pro rata portion of the monthly rent for that
portion of the calendar month remaining as of the date of execution.
F. The parties acknowledge that, notwithstanding the assignment
hereinafter set forth, the Assignor's rights to recover the $180,000
security deposit with the Lessor, as described in Article XII, shall not be
assigned and the Assignee shall acquire no rights therein. The Assignee
does hereby deposit with the Lessor, the sum of $22,750 to serve as a
security deposit in accordance with the provisions of Article XII.
G. The Assignor does hereby sell, assign and transfer to the
Assignee all of its rights under the Net Lease, as hereinabove amended, the
Assignee, jointly and severally, does hereby accept the assignment and
assumes and agrees to perform all of the obligations of the "Lessee"
thereunder and the Lessor does hereby consent to the foregoing assignment
and assumption.
IN WITNESS WHEREOF, the parties have executed this instrument all the
day and year first above written.
LESSOR:
LaSALLE NATIONAL TRUST, N.A., successor
trustee to LaSALLE NATIONAL BANK, not
personally, but as trustee under Trust
Agreement dated February 2, 1975 and known as
Trust No. 48560
By: /s/Deborah Carbon
ASSIGNOR:
SAFCO CORPORATION, an Illinois corporation
By: /s/Bruce E. Creger
President
ASSIGNEE:
GILBERT ASSOCIATES, INC., a Delaware corporation
By: /s/Timothy S. Cobb
President
SAFCO TECHNOLOGIES, INC., an Illinois corporation
By: /s/Bruce E. Creger
President
