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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Vertex Industries, Inc.
-----------------------
(Name of Issuer)
Common Stock, $.005 Par Value
------------------------------
(Title of Class of Securities)
925322109
--------------
(CUSIP Number)
Wayne L. Clevenger
MidMark Capital, L.P.
466 Southern Boulevard
Chatham, New Jersey 07928
(973) 822-2999
(Name, address and telephone number of person
authorized to receive notices and communications)
Copy to:
David F. Broderick, Esq.
McCarter & English, LLP
100 Mulberry Street
Newark, New Jersey 07101-0652
(973) 622-4444
September 16, 1999
------------------
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box [ ].
Page 1 of 7 Pages
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SCHEDULE 13D
CUSIP No. 925322109
(1) NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON (Entities only)
MidMark Capital, L.P.
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [x]
(3) SEC USE ONLY
(4) SOURCE OF FUNDS
WC
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF (7) SOLE VOTING POWER
SHARES
5,000,000
BENEFICIALLY (8) SHARED VOTING POWER
OWNED BY
EACH (9) SOLE DISPOSITIVE POWER
5,000,000
REPORTING
PERSON WITH (10) SHARED DISPOSITIVE POWER
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
5,000,000
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
29.6%
(14) TYPE OF REPORTING PERSON
PN
Page 2 of 7 Pages
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INTRODUCTION
This statement on Schedule 13D (the "Statement") constitutes the
initial filing by, MidMark Capital, L.P., a Delaware limited partnership
("MidMark") with respect to the beneficial ownership of shares of common stock,
par value $.005 per share, of Vertex Industries, Inc., a New Jersey corporation.
This Statement is being filed by MidMark.
ITEM 1. SECURITY AND ISSUER
The title of the class of equity securities to which this Statement on
Schedule 13D relates is the common stock, par value $.005 per share (the "Common
Stock"), of Vertex Industries, Inc., a New Jersey corporation (the "Company").
The address of the Company's principal executive office is 23 Carol Street, P.O.
Box 996, Clifton, New Jersey 07014.
ITEM 2. IDENTITY AND BACKGROUND
This Statement is being filed by MidMark (the "Reporting Person").
MidMark is a small business investment company. It's principal executive offices
are located at 466 Southern Boulevard, Chatham, New Jersey 07928. Information
regarding the directors, executive officers and or control persons of the
Reporting Person is set forth on Schedule I attached hereto, which Schedule is
hereby incorporated by reference.
During the last five years, the Reporting Person or, to the best
knowledge of the Reporting Person, any person named in Schedule I has not been
(a) convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (b) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, Federal or
State securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The 5,000,000 shares of Common Stock beneficially owned by the
Reporting Person were acquired pursuant to a Subscription Agreement, dated as of
June 21, 1999 as amended on August 23, 1999 and September 13, 1999, by and among
Edwardstone & Company, Incorporated, a Delaware corporation ("Edwardstone"),
MidMark and the Company (as amended, the "Subscription Agreement"; such
Subscription Agreement is attached as Exhibits 1, 2 and 3, which Exhibits are
hereby incorporated by reference). Such shares were purchased by MidMark with
the working capital of MidMark at an aggregate cost of $5,000,000. To raise the
working capital necessary to fund the acquisition, MidMark called in commitments
from its limited partners, including the Small Business Administration, which is
a preferred limited partner in MidMark.
Page 3 of 7 Pages
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ITEM 4. PURPOSE OF TRANSACTION.
The acquisition of the 5,000,000 shares of Common Stock by the
Reporting Person was made in an effort to gain, along with Edwardstone, a
controlling ownership interest in the Company. Pursuant to the Subscription
Agreement, MidMark purchased 5,000,000 shares of Common Stock from the Company
and Edwardstone purchased 5,449,642 shares of Common Stock from the Company.
As a condition to MidMark's and Edwardstone's purchase of shares of
Common Stock, MidMark, Edwardstone and the Company entered into a Stockholders
Agreement, dated as of September 15, 1999 (the "Stockholders Agreement"; such
Stockholders Agreement is attached as Exhibit 4, which Exhibit is hereby
incorporated by reference), containing certain terms and conditions concerning
the acquisition and disposition of such shares of Common Stock and the corporate
governance of the Company. Other than the Stockholders Agreement, there are no
agreements or understandings between MidMark and Edwardstone with respect to the
Company or its outstanding securities, and MidMark does not believe that it and
Edwardstone constitute a group within the meaning of Section 13(d)(3) of the
Act.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) MidMark beneficially owns 5,000,000 shares of Common
Stock, 29.6% of the Common Stock of the Company.
(b) MidMark has the sole power to vote, direct the voting of,
dispose of and direct the disposition of 5,000,000 shares of Common Stock of the
Company.
(c) Except as described in paragraph (a) above, neither the
Reporting Person nor, to the best knowledge of the Reporting Person, any of the
persons referred to in Schedule I attached hereto, has effected any transactions
in the Common Stock during the past 60 days.
(d) The Reporting Person has the sole right to receive or the
power to direct the receipt of dividends from, or the proceeds from the sale of,
the Common Stock owned by it.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Except as described herein, the Reporting Person nor any other person
referred to in Schedule I attached hereto has any contracts, arrangements,
understandings or relationships (legal or otherwise) with any person with
respect to any securities of the Company, including, but not limited to,
transfer or voting of any of the securities, finder's fees, joint ventures, loan
or option arrangements, puts or calls, guarantees of profits, division of
profits or loss, or the giving or withholding of proxies.
Page 4 of 7 Pages
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ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
1. Subscription Agreement dated as of June 21, 1999,
("Subscription Agreement") by and among MidMark, Edwardstone and the
Company.
2. Amendment No. 1 to Subscription Agreement dated as of
August 23, 1999, by and among MidMark, Edwardstone and the Company.
3. Amendment No. 2 to Subscription Agreement dated as of
September 13, 1999, by and among MidMark, Edwardstone and the Company.
4. Stockholders Agreement dated as of September 15, 1999, by
and among MidMark, Edwardstone and the Company.
Page 5 of 7 Pages
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SIGNATURES
After reasonable inquiry and to the best knowledge and belief of the
Reporting Person, such person or entity certifies that the information set forth
in this Schedule 13D is true, complete and correct and agrees that this
statement is filed on behalf of them.
Dated: September 27, 1999
MIDMARK CAPITAL, L.P.
By its General Partner, MidMark Associates, Inc.
By: /s/ Wayne L. Clevenger
-----------------------
Name: Wayne L. Clevenger
Title: Managing Director
Page 6 of 7 Pages
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE REPORTING PERSONS
The names, present principal occupations and business addresses of the
directors and executive officers of MidMark Associates, Inc., the General
Partner of the Reporting Person, are set forth below. The directors' or
executive officer's business address is that of the Reporting Person. Unless
otherwise indicated, each occupation set forth opposite an individual's name
refers to the Reporting Person.
<TABLE>
<CAPTION>
Directors Office Citizenship
- --------- ------ -----------
<S> <C> <C>
Wayne L. Clevenger Managing Director United States
Denis Newman Managing Director United States
Joseph R. Robinson Managing Director United States
Officers Office Citizenship
- -------- ------ -----------
Denis Newman President United States
Wayne L. Clevenger Secretary United States
Joseph R. Robinson Treasurer United States
Matthew Finlay Vice President United States
</TABLE>
Page 7 of 7 Pages
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SUBSCRIPTION AGREEMENT
dated as of June 21, 1999
by and among
EDWARDSTONE & COMPANY, INCORPORATED,
MIDMARK CAPITAL, L.P.
and
VERTEX INDUSTRIES, INC,
with respect to 65% of the
outstanding capital stock of
VERTEX INDUSTRIES, INC.
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TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which
it is attached but is inserted for convenience only.
<TABLE>
<CAPTION>
Page
No.
----
ARTICLE I
SALE OF SHARES AND CLOSING
<S> <C> <C>
1.01 Purchase and Sale..................................................................................1
1.02 Purchase Price.....................................................................................1
1.03 Closing............................................................................................2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.01 Organization and Qualification.....................................................................2
2.02 Authority..........................................................................................3
2.03 Capital Stock; Indebtedness........................................................................4
2.04 No Conflicts; Approvals and Consents...............................................................5
2.05 SEC Reports and Financial Statements...............................................................6
2.06 Absence of Certain Changes or Events...............................................................7
2.07 Absence of Undisclosed Liabilities.................................................................7
2.08 Legal Proceedings..................................................................................8
2.09 Information Supplied...............................................................................8
2.10 Compliance with Laws and Orders....................................................................9
2.11 Compliance with Agreements; Certain Agreements.....................................................9
2.12 Taxes.............................................................................................10
2.13 Benefit Plans; ERISA..............................................................................11
2.14 Labor Matters.....................................................................................14
2.15 Environmental Matters.............................................................................14
2.17 Affiliate Transactions............................................................................15
2.18 No Vote Required..................................................................................15
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.01 Organization......................................................................................16
3.02 Authority.........................................................................................16
3.03 No Conflicts; Approvals and Consents..............................................................16
3.04 Legal Proceedings.................................................................................17
3.05 Purchase for Investment...........................................................................17
3.06 Financing Commitments.............................................................................18
</TABLE>
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<TABLE>
<S> <C> <C>
3.07 14(f) Information Statement.......................................................................18
ARTICLE IV
COVENANTS
4.01 Covenants of the Company and Purchasers...........................................................18
4.02 No Solicitations..................................................................................22
4.03 Third Party Standstill Agreements.................................................................23
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PURCHASERS
5.01 Representations and Warranties....................................................................24
5.02 Performance.......................................................................................24
5.03 Officers'Certificates.............................................................................24
5.04 Orders and Laws...................................................................................25
5.05 Regulatory Consents and Approvals.................................................................25
5.07 Opinion of Counsel................................................................................26
5.08 Registration Rights Agreement.....................................................................26
5.09 Management Agreement..............................................................................26
5.10 Stockholders Agreement............................................................................26
5.11 SBA Forms.........................................................................................26
5.13 Closing of Acquisitions...........................................................................26
5.14 Financing.........................................................................................26
5.15 Expenses. 26
5.16 Proceedings.......................................................................................26
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE COMPANY
6.01 Representations and Warranties....................................................................26
6.02 Performance.......................................................................................26
6.03 Officers'Certificates.............................................................................26
6.04 Orders and Laws...................................................................................26
6.05 Regulatory Consents and Approvals.................................................................26
6.07 Opinion of Counsel................................................................................26
6.08 Management Agreements.............................................................................26
6.09 Stockholders Agreement............................................................................26
ARTICLE VII
ADDITIONAL AGREEMENTS
7.01 Access to Information; Confidentiality............................................................26
7.02 Regulatory and Other Approvals....................................................................26
7.03 Expenses..........................................................................................26
7.04 Brokers or Finders................................................................................26
</TABLE>
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<TABLE>
<S> <C> <C>
7.05 Use of Proceeds; Technology Transfer..............................................................26
ARTICLE VIII
TERMINATION
8.01 Termination.......................................................................................26
8.02 Effect of Termination.............................................................................26
ARTICLE IX
DEFINITIONS
9.01 Definitions.......................................................................................26
ARTICLE X
MISCELLANEOUS
10.01 Non-Survival of Representations, Warranties, Covenants and Agreements............................26
10.02 Notices. 26
10.03 Entire Agreement.................................................................................26
10.04 Public Announcements.............................................................................26
10.05 Waiver...........................................................................................26
10.06 Amendment........................................................................................26
10.07 No Third Party Beneficiary.......................................................................26
10.08 No Assignment; Binding Effect....................................................................26
10.09 Headings.........................................................................................26
10.10 Arbitration......................................................................................26
10.11 Invalid Provisions...............................................................................26
10.12 Governing Law....................................................................................26
10.13 Counterparts.....................................................................................26
</TABLE>
iii
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EXHIBITS
EXHIBIT A ICS Acquisition Agreement
EXHIBIT B PSS Acquisition Agreement
EXHIBIT C Officer's Certificate of the Company
EXHIBIT D Secretary's Certificate of the Company
EXHIBIT E Registration Rights Agreement
EXHIBIT F Investment Banking, Management and
Monitoring Fee Agreement
EXHIBIT G Stockholders Agreement
EXHIBIT H Officer's Certificate of Edwardstone
EXHIBIT I Officer's Certificate of MidMark
EXHIBIT J Secretary's Certificate of Edwardstone
EXHIBIT K Secretary's Certificate of MidMark
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This SUBSCRIPTION AGREEMENT dated as of June 21, 1999 is made
and entered into by and among Edwardstone & Company, Incorporated, a Delaware
corporation ("Edwardstone"), MidMark Capital, L.P., a Delaware limited
partnership ("MidMark", and together with Edwardstone, "Purchasers")and Vertex
Industries, Inc. a New Jersey corporation (the "Company"). Capitalized terms not
otherwise defined herein have the meanings set forth in Section 9.01.
WHEREAS, Edwardstone wishes to purchase from the Company, and
the Company wishes to sell to Edwardstone four million four hundred forty nine
thousand six hundred forty two (4,449,642) shares (the "Edwardstone Shares") of
the Company's common stock, par value $.005 per share ("VTX Common Stock"), on
the terms and subject to the conditions set forth in this Agreement;
WHEREAS, MidMark wishes to purchase from the Company, and the
Company wishes to sell to MidMark four million (4,000,000)shares (the "MidMark
Shares", and together with the Edwardstone Shares, the "Shares") of VTX Common
Stock, on the terms and subject to the conditions set forth in this Agreement;
and
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
SALE OF SHARES AND CLOSING
1.01 Purchase and Sale. The Company agrees to issue and sell
to Purchasers, and Purchasers agree to purchase from the Company, the Shares at
the Closing on the terms and subject to the conditions set forth in this
Agreement.
1.02 Purchase Price. The aggregate purchase price for the
Shares is $7,500,000 (the "Purchase Price"), payable in immediately available
United States funds at the Closing in the manner provided in Section 1.03
<PAGE>
1.03 Closing. The Closing will take place at the offices of
Milbank, Tweed, Hadley & McCloy, One Chase Manhattan Plaza, New York, New York,
or at such other place as Purchasers and the Company mutually agree, at 10:00
A.M. local time, on the Closing Date. At the Closing, Edwardstone and its
Affiliates will pay $3,750,000 and MidMark will pay $3,750,000, each by wire
transfer of immediately available funds to such account as the Company may
reasonably direct by written notice delivered to Purchasers by the Company at
least two (2) Business Days before the Closing Date. Simultaneously, the Company
will deliver to each Purchaser a certificate or certificates in definitive form,
registered in the name of such Purchaser, representing the Shares being
purchased by such Purchaser pursuant hereto. At the Closing, there shall also be
delivered to the Company and Purchasers the opinions and certificates and other
Contracts, documents and instruments to be delivered under Articles IV and V.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each Purchaser as
follows:
2.01 Organization and Qualification. Each of the Company and
its Subsidiaries is a corporation duly incorporated, validly existing and in
good standing under the Laws of its jurisdiction of incorporation, and has all
requisite corporate power and authority to conduct its business as and to the
extent now conducted and to own, use and lease its Assets and Properties, except
for such failures to be so incorporated, existing and in good standing or to
have such power and authority which, individually or in the aggregate, are not
having and could not be reasonably expected to have a Material Adverse Effect on
the Company and its Subsidiaries taken as a whole. Each of the Company and its
Subsidiaries is duly qualified, licensed or admitted to do business and is in
good standing in New Jersey, which is the only jurisdiction in which the
ownership, use or leasing of its Assets and Properties, or the conduct or nature
of its business, makes such qualification, licensing or admission necessary.
Section 2.01 of the Company Disclosure Schedule sets forth (i) the name and
jurisdiction of incorporation of each Subsidiary of the Company, (ii) its
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authorized capital stock, (iii) the number of issued and outstanding shares of
capital stock and (iv) the record owners of such shares. Except for interests in
the Subsidiaries of the Company and as disclosed in Section 2.01 of the Company
Disclosure Schedule, the Company does not directly or indirectly own any equity
or similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity. The Company
has previously delivered to each Purchaser correct and complete copies of the
certificate or articles of incorporation and bylaws (or other comparable charter
documents) of the Company and each of its Subsidiaries.
2.02 Authority. The Company has the requisite corporate power
and authority to execute and deliver this Agreement and the Operative Agreements
to which it is a party and to perform its obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance by the Company of this Agreement and the
Operative Agreements to which it is a party and the consummation by the Company
of the transactions contemplated hereby and thereby have been duly and validly
approved by the Board of Directors of the Company. In addition, the Board of
Directors of the Company has adopted a resolution substantially in the following
form:
"RESOLVED, that the Company be, and it hereby is, authorized
to engage, from time to time, in any "business combination"
(as defined in Section 14A:10A-3 of the New Jersey Business
Corporation Act) with or otherwise involving or affecting
Edwardstone, MidMark and/or their respective Affiliates,
including, without limitation, repurchases by the Company of
shares of its common stock from such Person(s), loan
transactions, and transactions that may involve the sale or
issuance by the Company of its assets or voting securities (or
securities convertible into, or exchangeable for, its voting
securities), on such terms and conditions as may be agreed
upon by the parties thereto at the time of such
transaction(s), the intent of this resolution being to
constitute advance approval of such transaction(s) as required
by Section 14A:10A-4 of the New Jersey Business Corporation
Act."
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No other corporate proceedings on the part of the Company or its stockholders
are necessary to authorize the execution, delivery and performance by the
Company of this Agreement and the Operative Agreements to which it is a party
and the consummation by the Company of the transactions contemplated hereby and
thereby. This Agreement has been duly and validly executed and delivered by the
Company and constitutes and upon the execution and delivery by the Company of
the Operative Agreements to which it is a party, such Operative Agreements will
constitute legal, valid and binding obligations of the Company enforceable
against the Company in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar Laws affecting the enforcement of creditors' rights generally and by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at Law).
2.03 Capital Stock; Indebtedness. (a) The authorized capital
stock of the Company consists solely of 20,000,000 shares of VTX Common Stock.
As of May 25, 1999, 5,226,979 shares of VTX Common Stock were issued and
outstanding, of which 10,000 shares were held in the treasury of the Company,
and 840,000 shares were reserved for issuance upon the exercise of stock options
granted under the Company employee stock option plans described in Section 2.03
of the Company Disclosure Schedule (the "Company Option Plans"). Since such
date, there has been no change in the number of issued and outstanding shares of
VTX Common Stock or shares of VTX Common Stock held in treasury. All of the
issued and outstanding shares of VTX Common Stock and all shares of VTX Common
Stock reserved for issuance will be, upon issuance in accordance with the terms
specified in the instruments or agreements pursuant to which they are issuable,
duly authorized, validly issued, fully paid and nonassessable. Except pursuant
to this Agreement and as set forth in Section 2.03 of the Company Disclosure
Schedule, there are no outstanding subscriptions, options, warrants, rights
(including "phantom" stock rights), preemptive rights or other contracts,
commitments, understandings or arrangements, including any right of conversion
or exchange under any outstanding security, instrument or agreement (together,
"Options"), obligating the Company or any of its Subsidiaries to issue or sell
any shares of capital stock of the Company or to grant, extend or enter into any
Option with respect thereto.
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(b) Except as disclosed in Section 2.03 of the Company
Disclosure Schedule, all of the outstanding shares of capital stock of each
Subsidiary of the Company are duly authorized, validly issued, fully paid and
nonassessable and are owned, beneficially and of record, by the Company or a
Subsidiary wholly owned, directly or indirectly, by the Company, free and clear
of any Liens. Except as disclosed in Section 2.03 of the Company Disclosure
Schedule, there are no (i) outstanding Options obligating the Company or any of
its Subsidiaries to issue or sell any shares of capital stock of any Subsidiary
of the Company or to grant, extend or enter into any such Option or (ii) voting
trusts, proxies or other commitments, understandings, restrictions or
arrangements in favor of any person other than the Company or a Subsidiary
wholly owned, directly or indirectly, by the Company with respect to the voting
of or the right to participate in dividends or other earnings on any capital
stock of any Subsidiary of the Company.
(c) Except as disclosed in Section 2.03 of the Company
Disclosure Schedule, there are no outstanding contractual obligations of the
Company or any Subsidiary of the Company to repurchase, redeem or otherwise
acquire any shares of VTX Common Stock or any capital stock of any Subsidiary of
the Company or to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any Subsidiary of the Company or
any other person.
2.04 No Conflicts; Approvals and Consents. (a) The execution
and delivery by the Company of this Agreement and the Operative Agreements to
which it is a party do not, and the performance by the Company of its
obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby will not:
(i) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the certificate of incorporation or
by-laws (or other comparable corporate charter document) of the Company;
(ii) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in Section 2.04(a)(ii) of
the Company Disclosure Schedule, conflict with or result in a violation or
breach of any terms or provision of any Law or Order applicable to the Company
or any of its Assets and Properties; or
5
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(iii) except as disclosed in Section 2.04(a)(iii) of the
Company Disclosure Schedule, (w) conflict with or result in a violation or
breach of (x) constitute (with or without notice or lapse of time or both) a
default under, (y) require the Company to obtain any consent, approval or action
of, make any filing with or give any notice to any Person as a result or under
the terms of, or (z) result in the creation or imposition of any Lien upon the
Company or any of its Assets or Properties under, any Contract or License to
which the Company is a party or by which any of its Assets and Properties is
bound.
(b) Except as disclosed in Section 2.04(b) of the Company
Disclosure Schedule, no consent, approval or action of, filing with or notice to
any Governmental or Regulatory Authority or other public or private third party
is necessary or required under any of the terms, conditions or provisions of any
Law or Order of any Governmental or Regulatory Authority or any Contract to
which the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries or any of their respective Assets or Properties is
bound for the execution and delivery of this Agreement by the Company, the
performance by the Company of its obligations hereunder or the consummation of
the transactions contemplated hereby, other than such consents, approvals,
actions, filings and notices which the failure to make or obtain, as the case
may be, individually or in the aggregate, could not be reasonably expected to
have a Material Adverse Effect on the Company and its Subsidiaries taken as a
whole or on the ability of the Company to consummate the transactions
contemplated by this Agreement.
2.05 SEC Reports and Financial Statements. The Company
delivered to each Purchaser prior to the execution of this Agreement a true and
complete copy of each form, report, schedule, registration statement, definitive
proxy statement and other document (together with all amendments thereof and
supplements thereto) filed by the Company or any of its Subsidiaries with the
Securities and Exchange Commission (the "SEC") pursuant to the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder (the
"Exchange Act"), and the Securities Act of 1933, as amended, and the rules and
regulations thereunder (the "Securities Act") since December 31, 1996 (as such
documents have since the time of their filing been amended or supplemented, the
"Company SEC Reports"), which are all the documents (other than preliminary
material) that the
6
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Company and its Subsidiaries were required to file with the SEC since
such date. As of their respective dates, the Company SEC Reports (i) complied as
to form in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim consolidated financial
statements (including, in each case, the notes, if any, thereto) included in the
Company SEC Reports (the "Company Financial Statements") complied as to form in
all material respects with the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with GAAP, except as may be
indicated therein or in the notes thereto and except with respect to unaudited
statements as permitted by Form 10-Q of the SEC, and, as of the respective dates
thereof, fairly presented (subject, in the case of the unaudited interim
financial statements, to year-end audit adjustments) the consolidated financial
position of the Company and its consolidated subsidiaries as at the respective
dates thereof and the consolidated results of their operations and cash flows
for the respective periods then ended.
2.06 Absence of Certain Changes or Events. Except as disclosed
in the Company SEC Reports filed prior to the date of this Agreement or in
Section 2.06 of the Company Disclosure Schedule, (a) since July 31, 1998 there
has not been any change, event or development having, or that could be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company and its Subsidiaries taken as a whole, and (b)
between July 31, 1998 and the date hereof (i) the Company and its Subsidiaries
have conducted their respective businesses only in the ordinary course
consistent with past practice and (ii) neither the Company nor any of its
Subsidiaries has taken any action which, if taken after the date hereof, would
constitute a breach of any provision of clause (ii) of Section 4.01(a).
2.07 Absence of Undisclosed Liabilities. Except for matters
reflected or reserved against in the balance sheet as of January 31, 1999
included in the Company Financial Statements or as disclosed in Section 2.07 of
the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
had at such
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date, or has incurred since that date, any Liabilities of any nature
that would be required by GAAP to be reflected on a consolidated balance sheet
of the Company and its consolidated subsidiaries (including the notes thereto),
except Liabilities (i) which were incurred in the ordinary course of business
consistent with past practice or (ii) which have not been, and could not be
reasonably expected to have, individually or in the aggregate, a Materially
Adverse Effect on the Company and its Subsidiaries taken as a whole.
2.08 Legal Proceedings. Except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement or in Section 2.08 of the
Company Disclosure Schedule, (i) there are no Actions or Proceedings pending or,
to the Knowledge of the Company, threatened against, relating to or affecting,
nor to the Knowledge of the Company are there any Governmental or Regulatory
Authority investigations or audits pending or threatened against, relating to or
affecting, the Company or any of its Subsidiaries or any of their respective
Assets and Properties which, individually or in the aggregate, could be
reasonably expected to have a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole or on the ability of the Company to consummate the
transactions contemplated by this Agreement, and (ii) neither the Company nor
any of its Subsidiaries is subject to any continuing Order of any Governmental
or Regulatory Authority which, individually or in the aggregate, could be
reasonably expected to have a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole or on the ability of the Company to consummate the
transactions contemplated by this Agreement.
2.09 Information Supplied. Any document to be filed by the
Company with the SEC or any other Governmental or Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the requirements of the Exchange Act and the
Securities Act, respectively, and will not, on the date of its filing contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, except that no representation is made by the Company with respect to
information included therein with respect to Purchasers.
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2.10 Compliance with Laws and Orders. The Company and its
Subsidiaries hold all Licenses for the lawful conduct of their respective
businesses, except for failures to hold such Licenses which, individually or in
the aggregate, are not having and could not be reasonably expected to have a
Material Adverse Effect on the Company and its Subsidiaries taken as a whole.
The Company and its Subsidiaries are in compliance with the terms of such
Licenses, except failures so to comply which, individually or in the aggregate,
are not having and could not be reasonably expected to have a Material Adverse
Effect on the Company and its Subsidiaries taken as a whole. Except as disclosed
in the Company SEC Reports filed prior to the date of this Agreement, the
Company and its Subsidiaries are not in violation of or default under any Law or
Order of any Governmental or Regulatory Authority, except for such violations or
defaults which, individually or in the aggregate, are not having and could not
be reasonably expected to have a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole.
2.11 Compliance with Agreements; Certain Agreements. (a)
Except as disclosed in the Company SEC Reports filed prior to the date of this
Agreement or Section 2.11 of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries nor, to the knowledge of the Company, any
other party thereto is in breach or violation of, or in default in the
performance or observance of any term or provision of, and no event has occurred
which, with notice or lapse of time or both, could be reasonably expected to
result in a default under, (i) the certificate of incorporation or bylaws (or
other comparable charter documents) of the Company or any of its Subsidiaries or
(ii) any Contract to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries or any of their respective
assets or properties is bound, except in the case of clause (ii) for breaches,
violations and defaults which, individually or in the aggregate, are not having
and could not be reasonably expected to have a Material Adverse Effect on the
Company and its Subsidiaries taken as a whole.
(b) Except as disclosed in Section 2.11 of the Company
Disclosure Schedule or in the Company SEC Reports filed prior to the date of
this Agreement or as provided for in this Agreement, as of the date hereof,
neither the Company nor any of its Subsidiaries is a party to any oral or
written (i)
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consulting agreement not terminable on thirty (30) days' or less notice, (ii)
union or collective bargaining agreement, (iii) agreement with any executive
officer or other key employee of the Company or any of its Subsidiaries the
benefits of which are contingent or vest, or the terms of which are materially
altered, upon the occurrence of a transaction involving the Company or any of
its Subsidiaries of the nature contemplated by this Agreement, (iv) agreement
with respect to any executive officer or other key employee of the Company or
any of its Subsidiaries providing any term of employment or compensation
guarantee, or (v) agreement or plan, including any stock option, stock
appreciation right, restricted stock or stock purchase plan, any of the benefits
of which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement.
2.12 Taxes. (a) Each of the Company and its Subsidiaries has
filed all material Tax returns and reports required to be filed by it, or
requests for extensions to file such returns or reports have been timely filed
or granted and have not expired, and all such Tax returns and reports are
complete and accurate in all respects, except to the extent that such failures
to file, have extensions granted that remain in effect or be complete and
accurate in all respects, as applicable, individually or in the aggregate, would
not have a Material Adverse Effect on the Company and its Subsidiaries taken as
a whole. The Company and each of its Subsidiaries has paid or accrued (or the
Company has paid on its behalf) all Taxes shown as due on such Tax returns and
reports. The most recent financial statements contained in the Company SEC
Reports reflect an adequate reserve for all Taxes payable by the Company and its
Subsidiaries for all Taxable periods and portions thereof accrued through the
date of such financial statements, and no deficiencies for any Taxes
have been proposed, asserted or assessed against the Company or any of its
Subsidiaries that are not adequately reserved for thereon, except for
inadequately reserved Taxes and inadequately reserved deficiencies that would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company and its Subsidiaries taken as a whole. No requests for waivers of the
time to assess any Taxes against the Company or any of its Subsidiaries have
been granted or are pending, except for requests with respect to such Taxes that
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have been adequately reserved for in the most recent financial statements
contained in the Company SEC Reports, or, to the extent not adequately reserved,
the assessment of which would not, individually or in the aggregate, have a
Material Adverse Effect on the Company and its Subsidiaries taken as a whole.
2.13 Benefit Plans; ERISA. (a) Except as set forth in Section
2.13(a) of the Company Disclosure Schedule, there are no Plans (as defined in
Section 9.01) maintained or contributed to by the Company under which the
Company has any liability, or which cover any employees, former employees,
directors or former directors of the Company or their beneficiaries or provide
benefits to such persons in respect of services provided to the Company. The
Company is not, nor has it ever been, a member of a "control group" as such term
is defined in Section 4001 (a) (14) of ERISA.
(b) Except as set forth in Section 2.13(b) of the Company
Disclosure Schedule, the Company has never sponsored or contributed to, or had
any liability with respect to, a defined benefit pension plan subject to Title
IV of ERISA, including a defined benefit pension plan that is a multiemployer
plan as described in Section 3(37) of ERISA, or any Plan subject to Section 302
of ERISA or Section 412 of the Code.
(c) Except as set forth in Section 2.13(c) of the Company
Disclosure Schedule, no employees or former employees of the Company participate
in any welfare benefit plan which provides health benefits to an employee after
the employee's termination of employment or retirement except as required under
Section 4980B of the Code and Sections 60l through 608 of ERISA or applicable
state Law.
(d) Except as set forth in Section 2.13(d) of the Company
Disclosure Schedule, each Plan which is an "employee benefit plan," as defined
in Section 3(3) of ERISA, has been administered in compliance in all material
respects with its terms and the requirements provided by any and all statutes,
orders or governmental rules or regulations applicable to the Plan, including
but not limited to ERISA and the Code. Each Plan and its related trust that are
intended to qualify under Section 401(a) of the Code and Section 501(a) of the
Code are so qualified. Each Plan that is intended to provide for the deferral of
income, the reduction of salary or other
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compensation, or to afford other income tax benefits, complies with the
requirements of the applicable provisions of the Code and other statutes, orders
or governmental rules or regulations to provide such income tax benefits.
(e) All reports, forms and other documents required to be
filed with any governmental entity with respect to any Plan have been timely
filed and are accurate.
(f) All contributions or other payments for all periods ending
prior to the date of this Agreement (including periods from the first day of the
current plan year to the date of this Agreement) have been made prior to the
date of this Agreement by the Company in accordance with past practice and the
recommended contribution in any applicable actuarial report.
(g) With respect to each Plan required to be disclosed in
Section 2.13(a) of the Company Disclosure Schedule:
(1) no prohibited transactions (as defined in Section
406 or 407 of ERISA or Section 4975 of the Code) have occurred for which an
exemption is not available;
(2) no action or claim (other than routine claims for
benefits made in the ordinary course of Plan administration for which Plan
administrative review procedures have not been exhausted) has been brought, or
is pending, or, to the Knowledge of the Company, is threatened or imminent
against or with respect to the Plan, any employer who is participating (or who
has participated) in the Plan or any fiduciary (as defined in Section 3(21) of
ERISA) of the Plan; and
(3) neither the Company nor any fiduciary with
respect to the Plan has any knowledge of any facts which could give rise to any
such action or claim described in clause (2), above.
(h) The Company has no Liability and, to the Knowledge of the
Company, there exists no condition or set of circumstances that could give rise
to any liability (whether joint or several) (i) for any excise tax imposed by
Section 4975, 4976, 4977 or 4979 of the Code, (ii) for a fine under Section 502
of ERISA, or (iii) for any liability under Section 4062, 4063, 4064, 4069 or
4201 of ERISA, Section 412(c)(11) of the Code or Section 302(c)(11) of ERISA.
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(i) All of the Plans listed in Section 2.13(a) of the Company
Disclosure Schedule, to the extent applicable, are in compliance with the
continuation of group health coverage provisions contained in Section 4980B of
the Code and Section 601 through 608 of ERISA.
(j) Except as set forth in Section 2.13(j) of the Company
Disclosure Schedule, true, correct and complete copies of all documents creating
or evidencing any Plan listed in Section 2.13(a) of the Company Disclosure
Schedule have been delivered to Purchasers, and true, correct and complete
copies of all reports, forms and other documents required to be filed with any
governmental entity have been delivered to Purchasers.
(k) There are no negotiations, demands or proposals which are
pending or have been made which concern matters now covered, or that would be
covered, by the type of plans, agreements, arrangements, policies or programs
required to be listed in Section 2.13(a) of the Company Disclosure Schedule.
(l) All expenses and Liabilities relating to all of the Plans
described in Section 2.13(a) of the Company Disclosure Schedule have been, and
will on the date of this Agreement be, fully and properly accrued on the books
and records of the Company and its subsidiaries and disclosed to Purchasers in
accordance with GAAP and in Plan financial statements.
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2.14 Labor Matters. Except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement or in Section 2.14 of the
Company Disclosure Schedule, (i) there are no material controversies pending or,
to the Knowledge of the Company, threatened between the Company or any of its
Subsidiaries and any representatives of its employees, except such as would not,
individually or in the aggregate, have a Material Adverse Effect on the Company
and its Subsidiaries taken as a whole, (ii) to the Knowledge of the Company,
there are no material organizational efforts presently being made involving any
of the now unorganized employees of the Company or any of its Subsidiaries and
(iii) since December 31, 1996, there has been no work stoppage, strike or other
concerted action by employees of the Company or any of its Subsidiaries except
such as did not, individually or in the aggregate, have a Material Adverse
Effect on the Company and its Subsidiaries taken as a whole.
2.15 Environmental Matters. Neither the Company nor any of its
Subsidiaries is in material violation of any federal, state or local
Environmental Laws applicable to it or its properties, or any material
limitations, restrictions, conditions, standards, obligations or timetables
contained in any Environmental Law or any regulation, code, plan, order, decree,
notice or demand letter issued, entered, promulgated or approved thereunder. No
notice or action alleging such violation is pending or, to the Company's
knowledge, threatened, and no past or present condition or practice of the
business conducted by the Company and its Subsidiaries would prevent continued
compliance with applicable permits or give rise to any common Law or statutory
Liability or otherwise form the basis of any claim, action or proceeding with
respect to the Company or any of its Subsidiaries involving any pollutant or
hazardous or toxic material or waste. Neither the Company nor any of its
Subsidiaries has any Liability, present or past, under CERCLA, including,
without limitation, as the result of their ownership or operation of any
"facility" as defined in CERCLA, or their arrangement for disposal, treatment or
transport of "hazardous substances," also as defined in CERCLA.
2.16 Intellectual Property Rights. The Company and each of its
Subsidiaries owns, or is licensed or otherwise has the full right to use, all
Intellectual Property material to, and used in or necessary for the conduct of,
its business as heretofore conducted. Section 2.16 of the Company Disclosure
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Schedule contains an accurate and complete description of all such Intellectual
Property used or proposed to be used by the Company or any of its Subsidiaries
and indicates whether such Intellectual Property is owned or licensed by the
Company or its Subsidiaries. To the Company's Knowledge, the Company or its
Subsidiaries has the sole and exclusive right to use such Intellectual Property
and the consummation of the transactions contemplated hereby will not alter or
impair any such rights; no claims have been asserted by any Person to the use of
any such Intellectual Property or challenging or questioning the validity or
effectiveness of any license or agreement relating to such Intellectual
Property, and there is no valid basis for any such claim; and the use of such
Intellectual Property by the Company or any of its Subsidiaries does not
infringe on the rights of any Person. The Company or its Subsidiaries has full
right, title and interest in and to, pursuant to existing agreements and/or
applicable Law, all material Intellectual Property developed by or on behalf of
any present or past employee of the Company or any of its Subsidiaries while so
employed, and all such Intellectual Property now used or proposed to be used by
the Company or its Subsidiaries is the property of the Company and its
Subsidiaries.
2.17 Affiliate Transactions. Except as disclosed in the
Company SEC Reports filed prior to the date of this Agreement or in Section 2.17
of the Company Disclosure Schedule, no officer, director or shareholder of the
Company has any interest (other than as a shareholder of the Company) in any
property, real or personal, tangible or intangible, including without limitation
Intellectual Property, used in or pertaining to the business of the Company.
2.18 No Vote Required. The Company, to the best of its
knowledge after due inquiry, believes no vote of the holders of any class or
series of the capital stock of the Company is required to approve the issuance
of the Shares on the Closing Date and the other transactions contemplated by
this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Each Purchaser severally, and not jointly, hereby represents
and warrants to the Company with respect to such Purchaser as follows:
3.01 Organization. Each Purchaser is a corporation or
partnership, as the case may be, duly organized, validly existing and in good
standing under the Laws of its jurisdiction of its incorporation and has the
requisite corporate or partnership power, as the case may be, and authority to
execute and deliver this Agreement and the Operative Agreements to which it is a
party, to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby.
3.02 Authority. The execution, delivery and performance by
each Purchaser of this Agreement and the Operative Agreements to which it is a
party, and the consummation by each Purchaser of the transactions contemplated
hereby and thereby, have been duly and validly approved by the general partners
or the Board of Directors of such Purchaser, as the case may be, no other
corporate action on the part of such Purchaser or its stockholders or partners
being necessary. This Agreement has been duly and validly executed and delivered
by each Purchaser and constitutes, and upon the execution and delivery by such
Purchaser of the Operative Agreements to which it is a party, such Operative
Agreements will constitute, legal, valid and binding obligations of such
Purchaser enforceable against such Purchaser in accordance with their terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar Laws affecting the enforcement of
creditors' rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at Law).
3.03 No Conflicts; Approvals and Consents. (a) The execution
and delivery of this Agreement and the Operative Agreements to which each
Purchaser is a party do not, and the performance by such Purchaser of its
obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby will not:
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(i) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the certificate of incorporation or
by-laws or partnership agreement (or other comparable corporate charter
document) of such Purchaser;
(ii) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in Section 3.03(a)(ii) of
the Purchasers Disclosure Schedule, hereto, conflict with or result in a
violation or breach of any term or provision of any Law or Order applicable to
such Purchaser or any of its Assets and Properties; or
(iii) except as disclosed in Section 3.03(a)(iii) of the
Purchasers Disclosure Schedule hereto, (i) conflict with or result in a
violation or breach of, (ii) constitute (with or without notice or lapse of time
or both) a default under, (iii) require such Purchaser to obtain any consent,
approval or action of, make any filing with or give any notice to any Person as
a result or under the terms of, or (iv) result in the creation or imposition of
any Lien upon such Purchaser or any of its Assets or Properties under, any
Contract or License to which such Purchaser is a party or by which any of its
Assets and Properties is bound.
(b) Except as disclosed in Section 3.03(b) of the Purchasers
Disclosure Schedule, no consent, approval or action of, filing with or notice to
any Governmental or Regulatory Authority on the part of either Purchaser is
required in connection with the execution, delivery and performance of this
Agreement or the Operative Agreements to which any Purchaser is a party or the
consummation of the transactions contemplated hereby or thereby.
3.04 Legal Proceedings. There are no Actions or Proceedings
pending or, to the Knowledge of each Purchaser, threatened against, relating to
or affecting such Purchaser or any of its Assets and Properties which could
reasonably be expected to result in the issuance of an Order restraining,
enjoining or otherwise prohibiting or making illegal the consummation of any of
the transactions contemplated by this Agreement or any of the Operative
Agreements.
3.05 Purchase for Investment. The Shares will be acquired by
each Purchaser (or, if applicable, its assignee pursuant to Section 10.08) for
its own account for the purpose
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of investment, it being understood that the right to dispose of such Shares
shall be entirely within the discretion of such Purchaser (or such assignee, as
the case may be). Each Purchaser (or such assignee, as the case may be) will
refrain from transferring or otherwise disposing of any of the Shares, or any
interest therein, in such manner as to cause the Company to be in violation of
the registration requirements of the Securities Act or applicable state
securities or blue sky Laws.
3.06 Financing Commitments. Purchasers have prior to the
execution of this Agreement delivered to the Company a true and complete copy of
the letter proposal, dated November 11, 1998, from NMB-Heller Limited to
Edwardstone whereby NMB-Heller Limited has offered to provide the Company with
additional loan funds necessary for completion of the Acquisitions (the
"Acquisition Financing").
3.07 14(f) Information Statement. No information provided by
Purchasers to the Company in connection with the preparation of the information
statement to be transmitted to the Company's shareholder's pursuant to Section
14(f) of the Exchange Act and Rule 14f-1 thereunder (the "14(f) Information
Statement")shall contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.
ARTICLE IV
COVENANTS
4.01 Covenants of the Company and Purchasers. At all times
from and after the date hereof until the Closing Date (or earlier termination
hereof), each of the Company and Purchasers covenants and agrees as to itself
and its Subsidiaries that (except as expressly contemplated or permitted by this
Agreement, or to the extent that the other party shall otherwise previously
consent in writing):
(a) Ordinary Course. (i) In the case of the Company, the
Company and each of its Subsidiaries shall conduct their respective businesses
only in, and neither the Company nor
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any of such Subsidiaries shall take any action except in, the ordinary course
consistent with past practice.
(ii) Without limiting the generality of the immediately
preceding paragraph, (x) the Company and its Subsidiaries shall use all
commercially reasonable efforts to preserve intact in all material respects
their present business organizations and reputation, to keep available the
services of their key officers and employees, to maintain their Assets and
Properties in good working order and condition, ordinary wear and tear excepted,
to maintain insurance on their tangible assets and businesses in such amounts
and against such risks and losses as are currently in effect, to preserve their
relationships with customers and suppliers and others having significant
business dealings with them, to make all required payments under the Company
Benefit Plans and to comply in all material respects with all Laws and Orders of
all Governmental or Regulatory Authorities applicable to them, and (y) the
Company shall not, nor shall it permit any of its Subsidiaries to, except as
otherwise expressly provided for in this Agreement:
(A) amend or propose to amend its certificate or
articles of incorporation or bylaws (or other comparable
corporate charter documents);
(B) (w) declare, set aside or pay any dividends on or
make other distributions in respect of any of its capital
stock, except for the declaration and payment of dividends by
a wholly-owned Subsidiary solely to its parent corporation,
(x) split, combine, reclassify or take similar action with
respect to any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock,
(y) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such liquidation or a
dissolution, restructuring, recapitalization or other similar
reorganization or (z) directly or indirectly redeem,
repurchase or otherwise acquire any shares of its capital
stock or any Option with respect thereto;
(C) issue, deliver or sell, or authorize or propose
the issuance, delivery or sale of, any shares
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of its capital stock or any Option with respect thereto (other
than (x) the issuance of VTX Common Stock pursuant to Options
outstanding on the date of this Agreement in accordance with
their present terms, and (y) the issuance by a wholly-owned
Subsidiary of its capital stock to its parent corporation), or
modify or amend any right of any holder of outstanding shares
of capital stock or Options with respect thereto;
(D) except for the Acquisitions, acquire (by merging
or consolidating with, or by purchasing a substantial equity
interest in or a substantial portion of the assets of, or by
any other manner) any business or any corporation,
partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any
assets other than in the ordinary course of its business
consistent with past practice which are material, individually
or in the aggregate, to the Company and its Subsidiaries taken
as a whole;
(E) other than in the ordinary course of its business
consistent with past practice, sell, lease, grant any security
interest in or otherwise dispose of or encumber any material
amount of its Assets or Properties;
(F) except to the extent required by applicable Law,
regulation or GAAP, (x) permit any material change in (A) any
pricing, marketing, purchasing, investment, accounting,
financial reporting, inventory, credit, allowance or Tax
practice or policy or (B) any method of calculating any bad
debt, contingency or other reserve for accounting, financial
reporting or Tax purposes or (y) make any material Tax
election or settle or compromise any material income Tax
Liability with any Governmental or Regulatory Authority;
(G) incur any Indebtedness for borrowed money or
guarantee any such Indebtedness, other than in the ordinary
course of business consistent with past practice;
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(H) except as may be required by applicable Law,
enter into, adopt, amend in any material respect or terminate
any Company Benefit Plan or other agreement, arrangement, plan
or policy between the Company or one of its Subsidiaries and
one or more of its directors, officers or employees, or,
except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not
result in a material increase in benefits or compensation
expense to the Company and its Subsidiaries taken as a whole,
increase in any manner the compensation or fringe benefits of
any director, officer or employee or pay any benefit not
required by any plan or arrangement in effect as of the date
hereof;
(I) enter into any Contract or amend or modify any
existing Contract, or engage in any new transaction outside
the ordinary course of business consistent with past practice
or not on an arm's length basis, with any Affiliate of the
Company or any of its Subsidiaries;
(J) make any capital expenditures or commitments for
additions to plant, property or equipment constituting capital
assets in the aggregate amount exceeding $25,000;
(K) make any change in the lines of business in which
it participates or is engaged; or
(L) enter into any Contract, commitment or
arrangement to do or engage in any of the foregoing.
(b) Advice of Changes. Each party shall confer on a regular
and frequent basis with the other with respect to its business and operations
and other matters relevant to this Agreement, and shall promptly advise the
other, orally and in writing, of any change or event, including, without
limitation, any complaint, investigation or hearing by any Governmental or
Regulatory Authority (or communication indicating the same may be contemplated)
or the institution or threat of litigation, having, or which, insofar as can be
reasonably foreseen, could have, a Material Adverse Effect on the Company or
Purchasers, as the case may be, and its Subsidiaries taken as a whole or on the
ability of the Company or Purchasers, as the case may be, to
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consummate the transactions contemplated hereby; provided that no party shall be
required to make any disclosure to the extent such disclosure would constitute a
violation of any applicable Law.
(c) Notice and Cure. Each of the Purchasers, on the one hand,
and the Company, on the other hand, will notify the other of, and will use all
commercially reasonable efforts to cure before the Closing, any event,
transaction or circumstance, as soon as practicable after it becomes known to
such party, that causes or will cause any covenant or agreement of the
Purchasers or the Company, as the case may be, under this Agreement to be
breached or that renders or will render untrue any representation or warranty of
the Purchasers or the Company, as the case may be, contained in this Agreement.
Each of the Purchasers and the Company also will notify the other in writing of,
and will use all commercially reasonable efforts to cure, before the Closing,
any violation or breach, as soon as practicable after it becomes known to such
party, of any representation, warranty, covenant or agreement made by the
Purchasers or the Company, as the case may be. No notice given pursuant to this
paragraph shall have any effect on the representations, warranties, covenants or
agreements contained in this Agreement for purposes of determining satisfaction
of any condition contained herein, except to the extent any such violation or
breach is cured.
(d) Fulfillment of Conditions. Subject to the terms and
conditions of this Agreement, each of the Purchasers and the Company will take
or cause to be taken all commercially reasonable steps necessary or desirable
and proceed diligently and in good faith to satisfy each condition to the
other's obligations contained in this Agreement and to consummate and make
effective the transactions contemplated by this Agreement, and neither the
Purchasers nor the Company will, nor will it permit any of its Subsidiaries to,
take or fail to take any action that could be reasonably expected to result in
the nonfulfillment of any such condition.
4.02 No Solicitations. Prior to the Closing Date, the Company
agrees (a) that neither it nor any of its Subsidiaries shall, and it shall cause
its respective Representatives not to, initiate, solicit or encourage, directly
or indirectly, any inquiries or the making or implementation of any proposal or
offer (including, without limitation, any
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proposal or offer to its stockholders) with respect to a merger,
consolidation or other business combination including the Company or any of its
Subsidiaries or any acquisition or similar transaction (including, without
limitation, a tender or exchange offer) involving the purchase of all or any
significant portion of the assets of the Company and its Subsidiaries taken as a
whole or any outstanding shares of VTX Common Stock or shares of the capital
stock of any Subsidiary of the Company (any such proposal or offer being
hereinafter referred to as an "Alternative Proposal"), or engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions or enter into any agreements, arrangements or
understandings, whether written or oral, with, any person or group relating to
an Alternative Proposal (excluding the transactions contemplated by this
Agreement), or otherwise facilitate any effort or attempt to make or implement
an Alternative Proposal; (b) that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
with respect to any of the foregoing, and it will take the necessary steps to
inform such parties of its obligations under this Section; and (c) that it will
notify Purchasers immediately if any such inquiries, proposals or offers are
received by, any such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with, it or any of such
Persons.
4.03 Third Party Standstill Agreements. During the period from
the date of this Agreement through the Closing Date (or earlier termination
hereof), neither the Company nor any of its Subsidiaries shall terminate, amend,
modify or waive any provision of any confidentiality or standstill agreement to
which it is a party. During such period, the Company shall enforce, to the
fullest extent permitted under applicable Law, the provisions of any such
agreement, including, but not limited to, by obtaining injunctions to prevent
any breaches of such agreements and to enforce specifically the terms and
provisions thereof in any court having jurisdiction.
4.04 Acquisition Agreements. Immediately following execution
of this Agreement, or as soon thereafter as is practicable, the Company shall
enter into the following +agreements: (i) the Purchase Agreement for Assets,
Claims and Liabilities with ICS, substantially in the form of Exhibit A (the
"ICS Acquisition Agreement"), and (ii) the Share Purchase
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Agreement with the PSS Shareholders, substantially in the form of Exhibit B (the
"PSS Acquisition Agreement").
4.05 14(f) Information Statement. Purchasers shall prepare and
deliver to the Company as promptly as practicable following the date hereof all
information concerning Purchasers' nominees to the Board of Directors of the
Company as is necessary to be included in the 14(f) Information Statement.
Purchasers shall cause the Company to file with the SEC and to transmit to its
shareholders the 14(f) Information Statement as quickly as possible upon receipt
of Purchasers' information.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PURCHASERS
The obligations of each Purchaser hereunder to purchase the
Shares are subject to the fulfillment, at or before the Closing, of each of the
following conditions (all or any of which may be waived in whole or in part by
Purchasers in their sole discretion):
5.01 Representations and Warranties. Each of the
representations and warranties made by the Company in this Agreement (other than
those made as of a specified date earlier than the Closing Date) shall be true
and correct in all material respects on and as of the Closing Date as though
such representation or warranty was made on and as of the Closing Date, and any
representation or warranty made as of a specified date earlier than the Closing
Date shall have been true and correct in all material respects on and as of such
earlier date.
5.02 Performance. The Company shall have performed and
complied with, in all material respects, each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by the Company at
or before the Closing.
5.03 Officers' Certificates. The Company shall have delivered
to Purchasers a certificate, dated the Closing Date and executed in the name and
on behalf of the Company by the Chairman of the Board, the President or any
Executive or Senior Vice President of the Company, substantially in the form and
to
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the effect of Exhibit C hereto, and a certificate, dated the Closing Date and
executed by the Secretary or any Assistant Secretary of the Company,
substantially in the form and to the effect of Exhibit D hereto.
5.04 Orders and Laws. There shall not be in effect on the
Closing Date any Order or Law restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements or which could reasonably be
expected to otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement or any of the Operative Agreements
to Purchasers, and there shall not be pending or threatened on the Closing Date
any Action or Proceeding in, before or by any Governmental or Regulatory
Authority which could reasonably be expected to result in the issuance of any
such Order or the enactment, promulgation or deemed applicability to Purchasers,
the Company, any Subsidiary or the transactions contemplated by this Agreement
or any of the Operative Agreements of any such Law.
5.05 Regulatory Consents and Approvals. All consents,
approvals and actions of, filings with and notices to any Governmental or
Regulatory Authority necessary to permit Purchaser and the Company to perform
their obligations under this Agreement and the Operative Agreements and to
consummate the transactions contemplated hereby and thereby (a) shall have been
duly obtained, made or given, (b) shall be in form and substance reasonably
satisfactory to Purchasers, (c) shall not be subject to the satisfaction of any
condition that has not been satisfied or waived and (d) shall be in full force
and effect, and all terminations or expirations of waiting periods imposed by
any Governmental or Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement and the Operative Agreements shall
have occurred.
5.06 Third Party Consents. Prior to the Closing, the Company
shall have obtained and delivered to Purchasers the approvals and consents
required for the consummation of the transactions contemplated hereby.
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5.07 Opinion of Counsel. Each Purchaser shall have received
the opinion of the Law Offices of Jeffrey D. Marks, P.C., counsel to the
Company, dated the Closing Date, in form and substance reasonably satisfactory
to the Purchasers.
5.08 Registration Rights Agreement. The Company shall have
entered into the Registration Rights Agreement with each of the Purchasers dated
as of the Closing Date, substantially in the form of Exhibit E hereto.
5.09 Management Agreement. The Company shall have entered into
the Investment Banking, Management and Monitoring Fee Agreement with MidMark
Associates, Inc., a New Jersey corporation and the general partner of MidMark,
dated as of Closing Date, substantially in the form of Exhibit F (the "MidMark
Management Agreement").
5.10 Stockholders Agreement. The Company shall have entered
into the Stockholders Agreement with each of the Purchasers dated as of the
Closing Date, substantially in the form of Exhibit G (the "Stockholders
Agreement").
5.11 SBA Forms. The Company shall have executed and delivered:
a Size Status Declaration on Small Business Administration ("SBA") Form 480, an
Assurance of Compliance on SBA Form 652, a Portfolio Financing Report on SBA
Form 1031, and such other forms as may be necessary or desirable under
applicable SBA rules and regulations in order to enable MidMark to complete its
investment in the Company.
5.12 14(f) Information Statement. The Company shall have
complied with all of the terms and provisions of Section 14(f) of the Exchange
Act and Rule 14f-1 thereunder including, without limitation, transmitting the
14(f) Information Statement to the Company's shareholders at least 10 days prior
to the Closing Date.
5.13 Closing of Acquisitions. The closing of the transactions
contemplated by each of the Acquisition Agreements shall have occurred.
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5.14 Financing. Purchasers shall have obtained the Acquisition
Financing for the Company having terms reasonably satisfactory to Purchasers and
in an amount at least equal to $4 million.
5.15 Expenses. Pursuant to Section 7.03, the Company shall
have reimbursed each Purchaser for all costs and expenses of such Purchaser,
incurred in connection with the negotiation, execution and closing of this
Agreement and the Operative Agreements and the transactions contemplated hereby
and thereby.
5.16 Proceedings. All proceedings to be taken on the part of
the Company in connection with the transactions contemplated by this Agreement
and all documents incident thereto shall be reasonably satisfactory in form and
substance to Purchasers, and Purchasers shall have received copies of all such
documents and other evidences as Purchasers may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligations of the Company hereunder to sell the Shares
are subject to the fulfillment, at or before the Closing, of each of the
following conditions (all or any of which may be waived in whole or in part by
the Company in its sole discretion):
6.01 Representations and Warranties. Each of the
representations and warranties made by Purchasers in this Agreement shall be
true and correct in all material respects on and as of the Closing Date as
though such representation or warranty was made on and as of the Closing Date.
6.02 Performance. Each Purchaser shall have performed and
complied with, in all material respects, each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by such Purchaser
at or before the Closing.
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6.03 Officers' Certificates. Edwardstone and MidMark shall
have each delivered to the Company a certificate, dated the Closing Date and
executed in the name and on behalf of such Purchaser by the Chairman of the
Board, the President, any Executive or Senior Vice President or the General
Partner of such Purchaser, substantially in the forms and to the effect of
Exhibits H and I hereto, and a certificate, dated the Closing Date and executed
by the Secretary or any Assistant Secretary of such Purchaser, substantially in
the forms and to the effect of Exhibits J and K hereto.
6.04 Orders and Laws. There shall not be in effect on the
Closing Date any Order or Law that became effective after the date of this
Agreement restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or any of
the Operative Agreements.
6.05 Regulatory Consents and Approvals. All consents,
approvals and actions of, filings with and notices to any Governmental or
Regulatory Authority necessary to permit the Company and Purchasers to perform
their obligations under this Agreement and the Operative Agreements and to
consummate the transactions contemplated hereby and thereby (a) shall have been
duly obtained, made or given, (b) shall not be subject to the satisfaction of
any condition that has not been satisfied or waived and (c) shall be in full
force and effect, and all terminations or expirations of waiting periods imposed
by any Governmental or Regulatory Authority necessary for the consummation of
the transactions contemplated by this Agreement and the Operative Agreements
shall have occurred.
6.06 Third Party Consents. All consents (or in lieu thereof
waivers) to the performance by the Company of its obligations hereunder and to
the consummation of the transactions contemplated hereby (a) shall have been
obtained, (b) shall not be subject to the satisfaction of any condition that has
not been satisfied or waived and (c) shall be in full force and effect.
6.07 Opinion of Counsel. The Company shall have received the
opinions of Milbank, Tweed, Hadley and McCloy LLP counsel to Edwardstone, and
McCarter & English, counsel to MidMark, each dated the Closing Date, in form and
substance reasonably satisfactory to the Company.
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6.08 Management Agreements. MidMark shall have entered into
the MidMark Management Agreement with the Company.
6.09 Stockholders Agreement. Purchasers shall have entered
into the Stockholders Agreement with the Company.
6.10 Proceedings. All proceedings to be taken on the part of
each Purchaser in connection with the transactions contemplated by this
Agreement and all documents incident thereto shall be reasonably satisfactory in
form and substance to the Company, and the Company shall have received copies of
all such documents and other evidences as the Company may reasonably request in
order to establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.01 Access to Information; Confidentiality. (a) Each of the
Company and Purchasers shall, and shall cause each of its Subsidiaries to,
throughout the period from the date hereof to the Closing Date (or earlier
termination hereof), (i) provide the other party and its Representatives with
full access, upon reasonable prior notice and during normal business hours, to
all officers, employees, agents and accountants of the Company or Purchasers, as
the case may be, and its Subsidiaries and their respective assets, properties,
books and records, but only to the extent that such access does not unreasonably
interfere with the business and operations of the Company or Purchasers, as the
case may be, and its Subsidiaries, and (ii) furnish promptly to such persons (x)
a copy of each report, statement, schedule and other document filed or received
by the Company or Purchasers, as the case may be, or any of its Subsidiaries
pursuant to the requirements of federal or state securities Laws and each
material report, statement, schedule and other document filed with any other
Governmental or Regulatory Authority, and (y) all other information and data
concerning the business and operations of the Company or Purchasers, as the case
may be, and its Subsidiaries as the other party or any of such other persons
reasonably may request. No investigation pursuant to this paragraph or otherwise
shall
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affect any representation or warranty contained in this Agreement or any
condition to the obligations of the parties hereto.
(b) Each party hereto will hold, and will use its best efforts
to cause its Affiliates, and in the case of Purchasers, any Person who has
provided, or who is considering providing, financing to the Company to finance
all or any portion of the Acquisition, and their respective Representatives to
hold, in strict confidence from any Person (other than any such Affiliate,
Person who has provided, or who is considering providing, financing or
Representative), unless (i) compelled to disclose by judicial or administrative
process (including without limitation in connection with obtaining the necessary
approvals of this Agreement and the transactions contemplated hereby of
Governmental or Regulatory Authorities) or by other requirements of Law or (ii)
disclosed in an Action or Proceeding brought by a party hereto in pursuit of its
rights or in the exercise of its remedies hereunder, all documents and
information concerning the other party or any of its Affiliates furnished to it
by the other party or such other party's Representatives in connection with this
Agreement or the transactions contemplated hereby, except to the extent that
such documents or information can be shown to have been (a) previously known by
the party receiving such documents or information, (b) in the public domain
(either prior to or after the furnishing of such documents or information
hereunder) through no fault of such receiving party or (c) later acquired by the
receiving party from another source if the receiving party is not aware that
such source is under an obligation to another party hereto to keep such
documents and information confidential; provided that following the Closing the
foregoing restrictions will not apply to Purchasers' use of documents and
information concerning the Company and the Subsidiaries furnished by the Company
hereunder. In the event the transactions contemplated hereby are not
consummated, upon the request of the other party, each party hereto will, and
will cause its Affiliates, any Person who has provided, or who is considering
providing, financing to such party and their respective Representatives to,
promptly (and in no event later than five (5) Business Days after such request)
redeliver or cause to be redelivered all copies of documents and information
furnished by the other party in connection with this Agreement or the
transactions contemplated hereby and destroy or cause to be destroyed all notes,
memoranda, summaries, analyses,
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compilations and other writings related thereto or based thereon prepared by the
party furnished such documents and information or its Representatives.
7.02 Regulatory and Other Approvals. (a) Subject to the terms
and conditions of this Agreement, each of the Company and Purchasers will
proceed diligently and in good faith to, as promptly as practicable, (a) obtain
all consents, approvals or actions of, make all filings with and give all
notices to Governmental or Regulatory Authorities or any other public or private
third parties required of Purchasers, the Company or any of their Subsidiaries
to consummate the transactions contemplated hereby, and (b) provide such other
information and communications to such Governmental or Regulatory Authorities or
other public or private third parties as the other party or such Governmental or
Regulatory Authorities or other public or private third parties may reasonably
request in connection therewith.
7.03 Expenses. Except as otherwise expressly set forth herein,
if the transactions contemplated hereby are not consummated, each party will pay
its own costs and expenses incurred by it or on its behalf in connection with
this Agreement and the Operative Agreements and the transactions contemplated
hereby and thereby. If the transactions contemplated hereby are consummated,
then the Company shall reimburse each Purchaser at the Closing for all costs and
expenses (including, without limitation, attorneys fees) of such Purchaser,
incurred in connection with the negotiation, execution and closing of this
Agreement and the Operative Agreements and the transactions contemplated hereby
and thereby.
7.04 Brokers or Finders. Each of Purchasers and the Company
represents, as to itself and its Affiliates, that no agent, broker, investment
banker, financial advisor or other firm or Person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement, and each of
Purchasers and the Company shall indemnify and hold the other harmless from and
against any and all claims, liabilities or obligations with respect to any other
such fee or commission or expenses related thereto asserted by any person on the
basis of any act or statement alleged to have been made by such party or its
Affiliate.
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7.05 Use of Proceeds; Technology Transfer. The Company
covenants and agrees that (a) the Purchase Price is being used to finance the
closing of the acquisition transactions contemplated by the Acquisition
Agreements; (b) that such acquisitions are being undertaken by the Company in
order to enable the Company to acquire the property rights to the products
currently owned by ICS and PSS in order to, among other things, enable the
Company to begin marketing such products in the United States; and (c) that the
Company shall take concrete steps to commence the marketing of such products in
the United States within twelve months of the Closing Date.
ARTICLE VIII
TERMINATION
8.01 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written
agreement of the Company and Purchasers;
(b) at any time before the Closing, by the Company or
Purchasers, in the event (i) of a material breach hereof by the non-terminating
party if such non-terminating party fails to cure such breach within five (5)
Business Days following notification thereof by the terminating party or (ii)
upon notification of the non-terminating party by the terminating party that the
satisfaction of any condition to the terminating party's obligations under this
Agreement becomes impossible or impracticable with the use of commercially
reasonable efforts if the failure of such condition to be satisfied is not
caused by a breach hereof by the terminating party; or
(c) at any time after September 30, 1999 by the Company or
Purchasers upon notification of the non-terminating party by the terminating
party if the Closing shall not have occurred on or before such date and such
failure to consummate is not caused by a breach of this Agreement by the
terminating party.
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8.02 Effect of Termination. If this Agreement is validly
terminated pursuant to Section 8.01, this Agreement will forthwith become null
and void, and there will be no liability or obligation on the part of the
Company or Purchaser (or any of their respective officers, directors, employees,
agents or other representatives or Affiliates), except as provided in the next
succeeding sentence and except that the provisions with respect to expenses in
Section 7.03 and confidentiality in Section 7.01(b) will continue to apply
following any such termination. Notwithstanding any other provision in this
Agreement to the contrary, upon termination of this Agreement pursuant to
Section 8.01(b) or (c), the Company will remain liable to Purchasers for any
breach of this Agreement by the Company existing at the time of such
termination, and Purchasers will remain liable to the Company for any breach of
this Agreement by Purchasers existing at the time of such termination, and the
Company or Purchasers may seek such remedies, including damages and fees of
attorneys, against the other with respect to any such breach as are provided in
this Agreement or as are otherwise available at Law or in equity.
ARTICLE IX
DEFINITIONS
9.01 Definitions. (a) Defined Terms. As used in this
Agreement, the following defined terms have the meanings indicated below:
"AAA" has the meaning ascribed to it in Section 10.10.
"Acquisition Agreements" means the ICS Acquisition Agreement
and the PSS Acquisition Agreement.
"Acquisitions" means the Company's acquisition of the
companies and/or assets contemplated by the Acquisition Agreements.
"Acquisition Financing" has the meaning ascribed to it in
Section 3.06.
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
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"Affiliate" means any Person that directly, or indirectly
through one of more intermediaries, controls or is controlled by or is under
common control with the Person specified. For purposes of this definition,
control of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by Contract or
otherwise and, in any event and without limitation of the previous sentence, any
Person owning ten percent (10%) or more of the voting securities of another
Person shall be deemed to control that Person.
"Agreement" means this Stock Purchase Agreement and the
Exhibits, the Company Disclosure Schedule and Purchasers Disclosure Schedule
hereto and the certificates delivered in accordance with Sections 5.03 and 6.03,
as the same shall be amended from time to time.
"Alternative Proposal" has the meaning ascribed to it in
Section 4.02.
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, operated, owned or leased by such Person, including without
limitation cash, cash equivalents, investment assets, accounts and notes
receivable, chattel paper, documents, instruments, general intangibles, real
estate, equipment, inventory, goods and Intellectual Property.
"Board of Arbitration" has the meaning ascribed to it in
Section 10.10.
"Business Day" means a day other than Saturday, Sunday or any
day on which banks located in the States of New Jersey and New York are
authorized or obligated to close.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and the rules and
regulations promulgated thereunder.
"Closing" means the closing of the transactions contemplated
by Section 1.03.
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"Closing Date" means (a) the fifth Business Day after the day
on which the last of the consents, approvals, actions, filings, notices or
waiting periods described in or related to the filings described in Sections
5.04 and 5.05 and Sections 6.04 and 6.05 has been obtained, made or given or has
expired, as applicable, or (b) such other date as Purchaser and the Company
mutually agree upon in writing.
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"Company" has the meaning ascribed to it in the forepart of
this Agreement.
"Company Benefit Plan" means any Plan established by the
Company, any of its Subsidiaries, or any predecessor or affiliate of any of the
foregoing, existing at the Closing Date or prior thereto, to which the Company
or any of its Subsidiaries contributes or has contributed, or under which any
employee, former employee or director of the Company or any of its Subsidiaries
or any beneficiary thereof is covered, is eligible for coverage or has benefit
rights.
"Company Disclosure Schedule" means the record delivered to
Purchasers by the Company herewith and dated as of the date hereof, containing
all lists, descriptions, exceptions and other information and materials as are
required to be included therein by the Company pursuant to this Agreement.
"Company Financial Statements" has the meaning ascribed to it
in Section 2.05.
"Company Option Plans" has the meaning ascribed to it in
Section 2.03.
"Company SEC Reports" has the meaning ascribed to it in
Section 2.05.
"Contracts" means any note, bond, mortgage, security
agreement, indenture, license, franchise, permit, concession, contract, lease or
other instrument, obligation or agreement of any kind.
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"Dispose" means to assign, sell, pledge, hypothecate or other
transfer or disposal of shares of capital stock.
"Edwardstone" has the meaning ascribed to it in the forepart
of this Agreement.
"Edwardstone Shares" has the meaning ascribed to it in the
forepart of this Agreement.
"Environmental Law" means any Law or Order relating to the
regulation or protection of human health, safety or the environment or to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, ambient air, soil, surface
water, ground water, wetlands, land or subsurface strata), or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"Exchange Act" has the meaning ascribed to it in Section 2.05.
"14(f) Information Statement" has the meaning ascribed to it
in Section 3.07.
"GAAP" means generally accepted accounting principles,
consistently applied throughout the specified period and in the immediately
prior comparable period.
"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States, any foreign country or any domestic or
foreign state, county, city or other political subdivision.
"ICS" means ICS International Aktiengesellschaft
Identcode-Systems, a German corporation.
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"ICS Acquisition Agreement" has the meaning ascribed to it in
Section 4.04.
"Indebtedness" of any Person means all obligations of such
Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or
similar instruments, (iii) for the deferred purchase price of goods or services
(other than trade payables or accruals incurred in the ordinary course of
business), (iv) under capital leases and (v) in the nature of guarantees of the
obligations described in clauses (i) through (iv) above of any other Person.
"Intellectual Property" means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service mark rights, service names and service name rights, brand
names, inventions, processes, formulae, copyrights and copyright rights, trade
dress, business and product names, logos, slogans, trade secrets, industrial
models, processes, designs, methodologies, computer programs (including all
source codes) and related documentation, technical information, manufacturing,
engineering and technical drawings, know-how and all pending applications for
and registrations of patents, trademarks, service marks and copyrights.
"Knowledge of the Company" or "Known to the Company" means the
knowledge of any officer, director or employee of the Company or any Subsidiary.
"Knowledge of Purchasers" or "Known to Purchasers" means the
knowledge of any officer, director, partner or employee of Purchasers.
"Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the United
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision or of any Governmental or Regulatory Authority.
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due).
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"Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing.
"Material Adverse Effect" with respect to an entity means any
event, change or effect which is materially adverse to the business, financial
condition or results of operations of such entity (or of such group of entities
taken as a whole).
"MidMark" has the meaning ascribed to it in the forepart of
this Agreement.
"MidMark Management Agreement" has the meaning ascribed to it
in Section 5.09.
"MidMark Shares" has the meaning ascribed to it in the
forepart of this Agreement.
"Operative Agreements" means the Registration Rights
Agreement, the MidMark Management Agreement, the Stockholders Agreement, the PSS
Acquisition Agreement, the ICS Acquisition Agreement and any support or other
agreements to be entered into in connection with the transaction.
"Option" has the meaning ascribed to it in Section 2.03(a).
"Order" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in each such case
whether preliminary or final).
"Person" means any natural person, corporation, limited
liability company, general partnership, limited partnership, proprietorship,
other business organization, trust, union, association or Governmental or
Regulatory Authority.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement,
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stock purchase, stock option, stock ownership, stock appreciation rights,
phantom stock, leave of absence, layoff, vacation, day or dependent care, legal
services, cafeteria, life, health, accident, disability, workmen's compensation
or other insurance, severance, separation or other employee benefit plan,
practice, policy or arrangement of any kind, whether written or oral, including,
but not limited to, any "employee benefit plan" within the meaning of Section
3(3) of ERISA.
"PSS Acquisition Agreement" has the meaning ascribed to it in
Section 4.04.
"PSS Shareholders" means the John Kenny Settlement Trust, the
Godfrey Smith Settlement Trust, Bryan J. Maguire, John
Kenny and Godfrey Smith.
"Purchase Price" has the meaning ascribed to it in Section
1.02.
"Purchasers" has the meaning ascribed to it in the forepart of
this Agreement.
"Purchasers Disclosure Schedule" means the record delivered to
the Company by Purchasers herewith and dated as of the date hereof, containing
all lists, descriptions, exceptions and other information and materials as are
required to be included therein by Purchasers pursuant to this Agreement.
"Representatives" means with respect to an entity, such
entity's directors, officers, employees, legal, investment banking and financial
advisors, accountants and any other agents and representatives.
"SBA" has the meaning ascribed to it in Section 5.11.
"SEC" has the meaning ascribed to it in Section 2.05.
"Securities Act" has the meaning ascribed to it in Section
2.05.
"Shares" has the meaning ascribed to it in the forepart of
this Agreement.
"Stockholders Agreement" has the meaning ascribed to it in
Section 5.10.
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"Subsidiary" means any Person in which the Company, directly
or indirectly through Subsidiaries or otherwise, beneficially owns more than
fifty percent (50%) of either the equity interests in, or the voting control of,
such Person.
"Taxes" shall include all federal, state, local and foreign
income, franchise, property, sales, use, excise and other taxes, including
obligations for withholding taxes from payments due or made to any other person
and any interest, penalties or additions to tax.
"Trading Day" shall mean any day on which securities are
traded on the Nasdaq Stock Market and on which a trade in Company stock occurs.
"VTX Common Stock" has the meaning ascribed to it in the
forepart of this Agreement.
(b) Construction of Certain Terms and Phrases. Unless the
context of this Agreement otherwise requires, (i) words of any gender include
each other gender; (ii) words using the singular or plural number also include
the plural or singular number, respectively; (iii) the terms "hereof," "herein,"
"hereby" and derivative or similar words refer to this entire Agreement; (iv)
the terms "Article" or "Section" refer to the specified Article or Section of
this Agreement; and (v) the phrases "ordinary course of business" and "ordinary
course of business consistent with past practice" refer to the business and
practice of the Company or a Subsidiary. Whenever this Agreement refers to a
number of days, such number shall refer to calendar days unless Business Days
are specified. All accounting terms used herein and not expressly defined herein
shall have the meanings given to them under GAAP.
ARTICLE X
MISCELLANEOUS
10.01 Non-Survival of Representations, Warranties, Covenants
and Agreements. The representations, warranties, covenants and agreements
contained in this Agreement or in any instrument delivered pursuant to this
Agreement shall not
40
<PAGE>
survive the Closing Date but shall terminate at the Closing, except for the
agreements contained in Sections 7.01, 7.03, 7.04 and 7.05 and in this Article
X.
10.02 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or mailed (first class postage
prepaid) to the parties at the following addresses or facsimile numbers:
If to Edwardstone, to:
Edwardstone & Company, Inc.
600 Madison Avenue
26th Floor
New York, NY 10022
Facsimile No.: 212-832-3151
Attn: Mr. Nicholas R.H. Toms
with a copy to:
Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, NY 10005
Facsimile No.: 212-530-5219
Attn: John T. O'Connor, Esq.
If to MidMark, to:
MidMark Capital, L.P.
466 Southern Boulevard
Chatham, NJ 07928
Facsimile No.: 973-822-8911
Attn: Mr. Wayne Clevanger
with a copy to:
McCarter & English
Four Gateway Center
100 Mulberry Street
Newark, NJ 07102-4096
Facsimile No.: 973-624-4444
Attn: David Broderick, Esq.
41
<PAGE>
If to the Company, to:
Vertex Industries, Inc.
23 Carol Street
Clifton, NJ 07014
Facsimile No.: 973-472-0814
Attn: Mr. Ronald C. Byer
with a copy to:
Law Offices of Jeffrey Marks, P.C.
415 Clifton Avenue
Clifton, New Jersey 07015
Facsimile No.: 973-253-8858
Attn: Jeffrey D. Marks, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice, request or other communication is to be delivered pursuant
to this Section). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other party hereto.
10.03 Entire Agreement. This Agreement and the Operative
Agreements supersede all prior discussions and agreements between the parties
with respect to the subject matter hereof and thereof, including without
limitation that certain letter of intent agreement between the Company and
Edwardstone dated January 8, 1999, and contain the sole and entire agreement
between the parties hereto with respect to the subject matter hereof and
thereof.
10.04 Public Announcements. At all times at or before the
Closing, the Company and Purchasers will not issue or make any reports,
statements or releases to the public with respect to this Agreement or the
transactions contemplated
42
<PAGE>
hereby without the consent of the other, which consent shall not be unreasonably
withheld. If either party is unable to obtain the approval of its public report,
statement or release from the other party and such report, statement or release
is, in the opinion of legal counsel to such party, required by Law in order to
discharge such party's disclosure obligations, then such party may make or issue
the legally required report, statement or release and promptly furnish the other
party with a copy thereof. The Company and Purchasers will also obtain the other
party's prior approval of any press release to be issued immediately following
the Closing announcing the consummation of the transactions contemplated by this
Agreement.
10.05 Waiver. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof, but no
such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or condition. No waiver
by any party of any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or any
other term or condition of this Agreement on any future occasion. All remedies,
either under this Agreement or by Law or otherwise afforded, will be cumulative
and not alternative.
10.06 Amendment. This Agreement may be amended, supplemented
or modified only by a written instrument duly executed by or on behalf of each
party hereto.
10.07 No Third Party Beneficiary. The terms and provisions of
this Agreement are intended solely for the benefit of each party hereto and
their respective successors or permitted assigns, and it is not the intention of
the parties to confer third-party beneficiary rights upon any other Person.
10.08 No Assignment; Binding Effect. Neither this Agreement
nor any right, interest or obligation hereunder may be assigned by any party
hereto without the prior written consent of the other party hereto and any
attempt to do so will be void, except (a) for assignments and transfers by
operation of Law and (b) that Purchasers may assign any or all of its rights,
interests and obligations hereunder to (i) a wholly-owned subsidiary, provided
that any such subsidiary agrees in writing to be bound by all of the terms,
conditions and provisions contained herein, or (ii) any financial institution
providing
43
<PAGE>
purchase money or other financing to Purchasers or the Company from time to time
as collateral security for such financing, but no such assignment referred to in
clause (i) shall relieve either Purchaser of its obligations hereunder. Subject
to the preceding sentence, this Agreement is binding upon, inures to the benefit
of and is enforceable by the parties hereto and their respective successors and
assigns.
10.09 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
10.10 Arbitration. The parties to this Agreement and the
Operative Agreements agree that any disputes arising out of, or in connection
with, the execution, interpretation, performance or non-performance of this
Agreement and the Operative Agreements (including the validity, scope and
enforceability of this arbitration provision) shall be settled by arbitration,
which shall be conducted in New York, New York pursuant to the then prevailing
rules of the American Arbitration Association ("AAA") by a panel of three
arbitrators of the AAA (the "Board of Arbitration") acceptable to the Company,
on the one hand, and Purchasers, on the other hand. Each of the Company, on the
one hand, and Purchasers, on the other hand, shall select one (1) member and the
third member shall be selected by mutual agreement of the other members. If the
other members fail to reach agreement on a third member within thirty (30) days
after their selection, the parties shall jointly request the AAA to designate,
in accordance with AAA rules, a third member experienced in industries in which
Purchaser does business. The parties agree to facilitate the arbitration by (a)
making available to one another and to the Board of Arbitration for inspection
and extraction all documents, books, records, and personnel under their control
or under the control of a person controlling or controlled by such party if
determined by the Board of Arbitration to be relevant to the dispute, (b)
conducting arbitration hearings to the greatest extent possible on successive
business days and (c) using their best efforts to observe the time periods
established by the rules of the AAA or by the Board of Arbitration for the
submission of evidence and briefs. The decision of the Board of Arbitration
shall be final, binding and not subject to further review, and judgment on the
award of the Board of Arbitration may be entered in and enforced by any court
having jurisdiction over the parties or their assets. Any costs incurred in
44
<PAGE>
conducting the arbitration shall be borne by the non-prevailing (as determined
by the Board of Arbitration) party.
10.11 Invalid Provisions. If any provision of this Agreement
is held to be illegal, invalid or unenforceable under any present or future Law,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (a) such provision will be
fully severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
and (c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom.
10.12 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York applicable to a
Contract executed and performed in such State.
10.13 Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
45
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each party hereto as of the date
first above written.
VERTEX INDUSTRIES, INC.
By: /s/Ronald C. Byer
------------------------------------------
Name: Ronald C. Byer
Title: CEO and President
EDWARDSTONE & COMPANY, INC.
By:/s/Nicholas Toms
------------------------------------------
Name: Nicholas Toms
Title: Chief Executive Officer
MIDMARK CAPITAL, L.P.
by MidMark Associates, Inc.
as General Partner of
MidMark Capital, L.P.
By:/s/Wayne L. Clevenger
------------------------------------------
Name: Wayne L. Clevenger
Title: Managing Director
46
<PAGE>
AMENDMENT NO. 1 TO THE SUBSCRIPTION AGREEMENT
This Amendment No. 1 ("Amendment No. 1") dated as of August
23, 1999, by and among Edwardstone & Company, Incorporated, a Delaware
corporation ("Edwardstone"), MidMark Capital, L.P., a Delaware limited
partnership ("MidMark", and together with Edwardstone, "Purchasers") and Vertex
Industries, Inc. a New Jersey corporation (the "Company"), amends the
Subscription Agreement, dated June 21, 1999, by and among the Company and the
Purchasers (the "Subscription Agreement"). Capitalized terms used and not
otherwise defined herein shall have the meanings assigned them in the
Subscription Agreement.
RECITALS
WHEREAS, the Company and the Purchasers desire to amend
certain provisions of the Subscription Agreement in the manner and as more fully
set forth herein; and
WHEREAS, the Company and the Purchasers have consented to
amending the Subscription Agreement in the manner set forth herein;
NOW, THEREFORE, in consideration of the mutual agreements set
forth herein and in the Subscription Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. The first and second whereas clauses of the Subscription Agreement
are hereby amended and replaced in their entirety to read as follows:
"WHEREAS, Edwardstone wishes to purchase from the Company, and the
Company wishes to sell to Edwardstone five million five hundred
eighteen thousand sixty four (5,518,064) shares (the "Edwardstone
Shares") of the Company's common stock, par value $.005 per share ("VTX
Common Stock"), on the terms and subject to the conditions set forth in
this Agreement;
WHEREAS, MidMark wishes to purchase from the Company, and the Company
wishes to sell to MidMark four million nine hundred thirty one thousand
five hundred seventy eight (4,931,578) shares (the "MidMark Shares",
and together with the Edwardstone Shares, the "Shares") of VTX Common
Stock, on the terms and subject to the conditions set forth in this
Agreement; and"
2. Section 1.02 of the Subscription Agreement is hereby amended and
replaced in its entirety to read as follows:
"Purchase Price. The aggregate purchase price for the Shares is
$10,000,000 (the "Purchase Price), payable in immediately available
United States funds at the Closing in the manner provided in Section
1.03."
<PAGE>
3. The second sentence of Section 1.03 of the Subscription Agreement is
hereby amended and replaced in its entirety to read as follows:
"At the Closing, Edwardstone and its Affiliates will pay $5,000,000 and
MidMark will pay $5,000,000, each by wire transfer of immediately
available funds to such account as the Company may reasonably direct by
written notice delivered to Purchasers by the Company at least two (2)
Business Days before the Closing Date."
4. Section 3.07 of the Subscription Agreement is hereby amended and
replaced in its entirety to read as follows:
"14(f) Information Statement. No information provided by Purchasers to
the Company in connection with the preparation of the information
statement to be transmitted to the Company's shareholder's pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 thereunder (as may be
amended or supplemented from time to time, the "14(f) Information
Statement") shall contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements
contained therein, in light of the circumstances under which they were
made, not misleading."
5. All references to the Subscription Agreement shall be deemed to
refer to the Subscription Agreement as amended by this Amendment No. 1.
6. Except as specifically amended hereby, the original provisions of
the Subscription Agreement remain in full force and effect.
7. This Amendment No. 1 may be executed in counterparts, each of which
shall be deemed as original, but all of which shall constitute the same
instrument.
8. This Amendment No. 1 shall be governed by the laws of the State of
New York.
9. This Amendment No. 1 shall be effective as of the date hereof.
<PAGE>
IN WITNESS WHEREOF, each party hereto has signed this Amendment No. 1,
or caused its duly authorized officer or general partner to sign this Amendment
No. 1, as of the date first above written.
VERTEX INDUSTRIES, INC.
By: /s/ Ronald C. Byer
------------------------
Name: Ronald C. Byer
Title: CEO and President
EDWARDSTONE & COMPANY, INC.
By: /s/ Nicholas Toms
------------------------
Name: Nicholas Toms
Title: Chief Executive Officer
MIDMARK CAPITAL, L.P.
by MidMark Associates, Inc.
as General Partner of
MidMark Capital, L.P.
By: /s/ Wayne L. Clevenger
------------------------
Name: Wayne L. Clevenger
Title: Managing Director
<PAGE>
AMENDMENT NO. 2 TO THE SUBSCRIPTION AGREEMENT
This Amendment No. 2 ("Amendment No. 2") dated as of September
13, 1999, by and among Edwardstone & Company, Incorporated, a Delaware
corporation ("Edwardstone"), MidMark Capital, L.P., a Delaware limited
partnership ("MidMark", and together with Edwardstone, "Purchasers") and Vertex
Industries, Inc. a New Jersey corporation (the "Company"), amends the
Subscription Agreement, dated June 21, 1999, as amended on August 23, 1999, by
and among the Company and the Purchasers (the "Subscription Agreement").
Capitalized terms used and not otherwise defined herein shall have the meanings
assigned them in the Subscription Agreement.
RECITALS
WHEREAS, the Company and the Purchasers desire to amend
certain provisions of the Subscription Agreement in the manner and as more fully
set forth herein; and
WHEREAS, the Company and the Purchasers have consented to
amending the Subscription Agreement in the manner set forth herein;
NOW, THEREFORE, in consideration of the mutual agreements set
forth herein and in the Subscription Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. The first and second whereas clauses of the Subscription Agreement
are hereby amended and replaced in their entirety to read as follows:
"WHEREAS, Edwardstone wishes to purchase from the Company, and the
Company wishes to sell to Edwardstone five million four hundred forty
nine six hundred forty two (5,449,642) shares (the "Edwardstone
Shares") of the Company's common stock, par value $.005 per share ("VTX
Common Stock"), on the terms and subject to the conditions set forth in
this Agreement;
WHEREAS, MidMark wishes to purchase from the Company, and the Company
wishes to sell to MidMark five million (5,000,000) shares (the "MidMark
Shares", and together with the Edwardstone Shares, the "Shares") of VTX
Common Stock, on the terms and subject to the conditions set forth in
this Agreement; and"
2. All references to the Subscription Agreement shall be deemed to
refer to the Subscription Agreement as amended by this Amendment No. 2.
3. Except as specifically amended hereby, the original provisions of
the Subscription Agreement remain in full force and effect.
<PAGE>
4. This Amendment No. 2 may be executed in counterparts, each of which
shall be deemed as original, but all of which shall constitute the same
instrument.
5. This Amendment No. 2 shall be governed by the laws of the State of
New York.
6. This Amendment No. 2 shall be effective as of the date hereof.
<PAGE>
IN WITNESS WHEREOF, each party hereto has signed this Amendment No. 2,
or caused its duly authorized officer or general partner to sign this Amendment
No. 2, as of the date first above written.
VERTEX INDUSTRIES, INC.
By: /s/ Ronald C. Byer
------------------------
Name: Ronald C. Byer
Title: CEO and President
EDWARDSTONE & COMPANY, INC.
By: /s/ Nicholas Toms
------------------------
Name: Nicholas Toms
Title: Chief Executive Officer
MIDMARK CAPITAL, L.P.
by MidMark Associates, Inc.
as General Partner of
MidMark Capital, L.P.
By: /s/ Wayne L. Clevenger
------------------------
Name: Wayne L. Clevenger
Title: Managing Director
<PAGE>
STOCKHOLDERS AGREEMENT
dated as of September 16,1999
by and among
VERTEX INDUSTRIES, INC.
EDWARDSTONE & COMPANY, INCORPORATED
and
MIDMARK CAPITAL, L.P.
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Stockholders
Agreement to which it is attached but is inserted for convenience only.
<TABLE>
<CAPTION>
Page
No.
<S> <C>
ARTICLE I DEFINITIONS...........................................................................................1
1.01 Definitions.......................................................................................1
ARTICLE II BOARD OF DIRECTORS...................................................................................4
2.01 Composition of Board of Directors.................................................................4
2.02 Resignations and Designations.....................................................................5
ARTICLE III TAG-ALONG SALES.....................................................................................6
3.01 General Restrictions on Transfers.................................................................6
3.02 Tag-Along Sale....................................................................................7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF MIDMARK............................................................9
4.01 Formation.........................................................................................9
4.02 Authority.........................................................................................9
4.03 No Conflicts......................................................................................9
4.04 Governmental Approvals and Filings...............................................................10
ARTICLE V REPRESENTATIONS AND WARRANTIES OF EDWARDSTONE........................................................10
5.01 Incorporation....................................................................................10
5.02 Authority........................................................................................11
5.03 No Conflicts.....................................................................................11
5.04 Governmental Approvals and Filings...............................................................11
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................................12
6.01 Incorporation....................................................................................12
6.02 Authority........................................................................................12
6.03 No Conflicts.....................................................................................12
6.04 Governmental Approvals and Filings...............................................................13
ARTICLE VII GENERAL PROVISIONS.................................................................................13
7.01 Survival of Representations, Warranties, Covenants and Agreements...............................13
7.02 Termination......................................................................................14
7.03 Amendment and Waiver.............................................................................14
7.04 Notices..........................................................................................14
7.05 Entire Agreement.................................................................................16
7.06 No Third Party Beneficiary.......................................................................16
7.07 No Assignment; Binding Effect....................................................................16
7.08 Specific Performance; Legal Fees.................................................................17
</TABLE>
<PAGE>
<TABLE>
<S> <C>
7.09 Headings.........................................................................................17
7.10 Invalid Provisions...............................................................................17
7.11 Governing Law....................................................................................17
7.12 Arbitration......................................................................................18
7.13 Counterparts.....................................................................................18
7.14 Expenses.........................................................................................18
7.15 Confidentiality..................................................................................19
</TABLE>
2
<PAGE>
This STOCKHOLDERS AGREEMENT dated as of September 16, 1999 is
made and entered into by and among Vertex Industries, Inc., a New Jersey
corporation (the "Company"), Edwardstone & Company, Incorporated, a Delaware
corporation ("Edwardstone"), and MidMark Capital, L.P., a Delaware limited
partnership ("MidMark", and together with Edwardstone, the "Investors").
WHEREAS, the Company and the Investors have entered into a
Subscription Agreement, dated as of June 21, 1999 (as amended, the "Subscription
Agreement"; terms not defined have the meanings ascribed to them in the
Subscription Agreement), pursuant to which the Investors will purchase 69% of
the issued and outstanding capital stock of the Company upon the terms and
subject to the conditions set forth in the Subscription Agreement;
WHEREAS, at the Closing, pursuant to Section 1.03 of the Subscription
Agreement, the Investors will receive an aggregate of 10,449,642 shares (the
"Initial Shares") of common stock, par value $0.005 per share, of the Company
("VTX Common Stock");
WHEREAS, as a condition to each Investors' willingness to subscribe for
the Initial Shares, the Investors and the Company desire to establish in this
Stockholders Agreement certain terms and conditions concerning the acquisition
and disposition of securities of the Company and the corporate governance of the
Company;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Stockholders Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01 Definitions. (a) Except as otherwise specifically indicated, the
following terms have the following meanings for all purposes of this
Stockholders Agreement:
"Affiliate" shall have the meaning assigned thereto in Rule 405, as
presently promulgated under the Securities Act.
<PAGE>
"beneficially owns" (or comparable variations thereof) has the meaning
set forth in Rule 13d-3 promulgated under the Exchange Act .
"Board of Directors" means the Board of Directors of the Company.
"Equity Securities" means Voting Securities, Convertible Securities and
Rights to Purchase Voting Securities.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any other country or any state, county, city or other
political subdivision.
"Laws" means all laws, statutes, rules, regulations, ordinances and
other pronouncements having the effect of law of the United States, any foreign
country or any domestic or foreign state, county, city or other political
subdivision or of any Governmental or Regulatory Authority.
"Lien" means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale contract, title retention contract or other contract to
give any of the foregoing.
"MidMark Management Agreement" means the Investment Banking, Management
and Monitoring Fee Agreement, dated the date hereof, between the Company and
MidMark Associates, Inc., a New Jersey corporation and the general partner of
MidMark.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization, and other entity or group.
"Registration Rights Agreement" means the registration rights
agreement, date the date hereof, among the Company and the Investors.
2
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Voting Power" means, with respect to any Outstanding Voting
Securities, the highest number of votes that the holders of all such Outstanding
Voting Securities would be entitled to cast for the election of directors or on
any other matter (except to the extent such voting rights are dependent upon
events of default or bankruptcy), assuming, for purposes of this computation,
the conversion or exchange into Voting Securities of Convertible Securities
(whether presently convertible or exchangeable or not) and the exercise of
Rights to Purchase Voting Securities (whether presently exercisable or not), in
either case to the extent that any such action would increase the number of such
votes.
"Voting Securities" means the Common Stock and any other securities of
the Company of any kind or class having power generally to vote for the election
of directors; "Convertible Securities" means securities of the Company which are
convertible or exchangeable (whether presently convertible or exchangeable or
not) into Voting Securities; "Rights to Purchase Voting Securities" means
options and rights issued by the Company (whether presently exercisable or not)
to purchase Voting Securities or Convertible Voting Securities; and "Outstanding
Voting Securities" means at any time the then issued and outstanding Voting
Securities, Convertible Securities (which shall be counted at the maximum number
of Voting Securities for which they can be converted or exchanged) and Rights to
Purchase Voting Securities (which shall be counted at the maximum number of
Voting Securities for which they can be exercised).
(b) In addition, the following terms are defined in the
Sections set forth below:
"AAA" -- Section 7.12
"Amendment No. 1 to Subscription -- Preamble
Agreement
"Board of Arbitration" -- Section 7.12
"Company" -- Preamble
"Dispose" or "Disposition" -- Section 3.01(a)
"Edwardstone" -- Preamble
"Initial Shares" -- Preamble
"Investors" -- Preamble
"MidMark" -- Preamble
"Subscription Agreement" -- Preamble
3
<PAGE>
"Tag-Aong Investor" -- Section 3.02(a)
"Tag-Along Sale" -- Section 3.02(a)
"Tag-Along Seller" -- Section 3.02(a)
"VTX Common Stock" -- Preamble
(c) Unless the context of this Stockholders Agreement otherwise
requires, (i) words of any gender include each other gender; (ii) words using
the singular or plural number also include the plural or singular number,
respectively; (iii) the terms "hereof," "herein," "hereby" and derivative or
similar words refer to this entire Stockholders Agreement; and (iv) the terms
"Article" or "Section" refer to the specified Article or Section of this
Stockholders Agreement. Whenever this Stockholders Agreement refers to a number
of days, such number shall refer to calendar days unless business days are
specified.
ARTICLE II
BOARD OF DIRECTORS
2.01 Composition of Board of Directors. (a) Effective at the Closing
Date, there shall be six (6) vacancies on the Board of Directors by: (i) an
increase in the Board of Directors to include eight (8) members and (ii)director
resignations from James Maloy, Wilbur Highleyman and Irwin Dorros. Effective at
the Closing Date, the Board of Directors shall elect three individuals
designated by Edwardstone and three individuals designated by Midmark to fill
the six vacancies created in accordance with subsections (i) and (ii) of this
Section 2.01(a), to serve from the Closing Date until the end of their
respective terms.
(b) Thereafter, each of the Investors agrees to vote its shares of
Voting Securities to maintain an eight-member Board of Directors and to take
such action as may be necessary to cause the Board of Directors to nominate and
recommend to the stockholders of the Company as the proposed members of the
Board of Directors at any annual or special meeting of stockholders called for
the purpose of voting on the election of directors, three individuals designated
by Edwardstone, three individuals designated by MidMark, and Ron Byer and George
Powch. Each Investor agrees to appear in person or by proxy at any annual or
special meeting of stockholders of the Company for the purpose of obtaining a
quorum and to vote its shares of Voting Securities, either in person or by
proxy, at any such meeting of stockholders called for the purpose of voting on
the election of
4
<PAGE>
directors or by any consensual action with respect to the election of directors,
in favor of the election of the directors nominated in accordance with this
paragraph.
(c) Notwithstanding the foregoing, each Investor shall cease to have
the right to designate, or cause the nomination or election of, (i) more than
two members of the Board of Directors from and after such date as such Investor
beneficially owns Outstanding Voting Securities representing less than 10% of
the Voting Power of all Outstanding Voting Securities or (ii) any member of the
Board of Directors from and after such date as the Investor beneficially owns
Outstanding Voting Securities representing less than 5% of the Voting Power of
all Outstanding Voting Securities. The obligation of each Investor to vote its
Voting Securities in accordance with this Section 2.01 and the obligation of the
Board of Directors hereunder to nominate for election as directors individuals
designated by the other Investor shall be subject to the foregoing limitation.
The obligation of the Board of Directors hereunder to nominate, and the
obligation of each Investor to vote its voting securities in favor of, Ron Byer
and George Powch as directors shall cease on the date that is one year from the
date hereof.
(d) Until such time as an Investor beneficially owns Outstanding Voting
Securities representing less than 5% of the Voting Power of all Outstanding
Voting Securities, if any director designated by such Investor in accordance
with this Section 2.01 shall decline or be unable to serve for any other reason,
the Board of Directors shall promptly upon the request of such Investor nominate
or elect, as the case may be, a qualified person recommended by such Investor to
replace such designee; provided that such Investor shall have such right only if
and to the extent consistent with the foregoing provisions of this Section 2.01.
(e) Each Investor shall promptly provide to the Company, as the Company
may from time to time reasonably request, information regarding such Investor's
designees for the Board of Directors, for inclusion in any form, report,
schedule, registration statement, definitive proxy statement or other documents
required to be filed by the Company with the Securities and Exchange Commission.
2.02 Resignations and Designations. As necessary to establish or
maintain the composition of the Board
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of Directors contemplated by Section 2.01, each Investor will cause the
requisite number of the directors designated by such Investor, as the case may
be, to resign from the Board of Directors.
ARTICLE III
TAG-ALONG SALES
3.01 General Restrictions on Transfers. (a) Restrictions on Certain
Transfers. From the date hereof and until such time as either Investor does not
beneficially own any Equity Securities, no Investor shall directly or
indirectly, assign, sell, pledge, hypothecate or otherwise transfer or dispose
of ("Dispose" or a "Disposition") any shares of Equity Securities beneficially
owned by such Investor, except (A) a Disposition of Equity Securities effected
in accordance with this Article III, (B) a Disposition of Equity Securities to
an Affiliate (provided that such Affiliate shall simultaneously with such
purchase and sale agree in a written instrument in form and substance
satisfactory to the other Investor to be bound by the provisions of this
Agreement), (C) a Disposition of Equity Securities through a bona fide
underwritten public offering registered under the Securities Act effected in
accordance with the provisions of the Registration Rights Agreement, or (D) a
Disposition of Equity Securities in a "brokers transaction" pursuant to Rule
144(f), provided, that, until such time as such Investor beneficially owns
Outstanding Voting Securities representing less than 5% of the Voting Power of
all Outstanding Voting Securities, any sales pursuant to this clause (D) shall
be subject to the volume limitations set forth in Rule 144(e) (regardless of
whether such volume limitations are applicable to such sale), (E) pursuant to a
merger or consolidation of the Company or a recapitalization of any Equity
Securities, or (F) pursuant to a self-tender or exchange offer by the Company or
a third party tender offer recommend by the Board of Directors.
(b) Transfers in Violation of Agreement. Any purported Disposal by an
Investor of all or any of its shares of Equity Securities in contravention of
any of the provisions of this Article III will be null and void ab initio and of
no force or effect.
(c) Legend. Any Disposition of Equity Securities by any Investor shall
also be subject to the terms and conditions
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of this Section 3.01(c). Each certificate representing Equity Securities
beneficially owned by any Investor shall be imprinted with a legend in the
following form until such time (subject to the provisions of the final sentence
of this Section 3.01(c)) as all restrictions on the Disposition of such Equity
Securities hereunder are terminated:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF UNLESS THEY ARE REGISTERED
OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. SUCH SHARES MAY
ONLY BE TRANSFERRED PURSUANT TO THE PROVISIONS OF ARTICLE III OF A
CERTAIN STOCKHOLDERS AGREEMENT DATED AS OF _____ __, 1999, BY AND AMONG
VERTEX INDUSTRIES, INC., A NEW JERSEY CORPORATION, EDWARDSTONE &
COMPANY, INCORPORATED, A DELAWARE CORPORATION, AND MIDMARK CAPITAL,
L.P., A DELAWARE LIMITED PARTNERSHIP, COPIES OF WHICH AGREEMENT ARE ON
FILE AT THE PRINCIPAL OFFICE OF THE COMPANY."
The Company shall not (i) give effect on its books to an attempted Disposition
of any Equity Securities which shall have been Disposed of in violation of any
provision of this Stockholders Agreement, or (ii) treat any transferee who
obtains any Equity Securities in violation of any provision of this Stockholders
Agreement as the owner of such Equity Securities or accord any transferee
thereof the right to vote or to receive dividends in respect of such Equity
Securities. The Company will issue new certificates not imprinted with the
foregoing legend to any holder of Equity Securities not subject to the
restrictions on Disposition contained in this Stockholders Agreement; provided,
that the Company may require an opinion of counsel reasonably satisfactory to it
to the effect that no legend is required under the Securities Act and applicable
state securities Laws.
3.02 Tag-Along Sale. (a) Tag-Along Obligations. If at any time an
Investor or any Affiliate of an Investor ("Tag-Along Seller") shall, in one or
in a series of transactions, enter into an agreement to effect, or effect or
propose to effect, a Disposition to any transferee (a "Tag-Along Sale"), the
other Investor (the "Tag-Along Investor") shall have the right, but not the
obligation, to participate in such Tag-Along Sale by selling up to the number of
shares of VTX Common Stock into which the Equity Securities beneficially owned
by the Tag-Along Investor are convertible and shares of VTX Common
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Stock owned by such Tag-Along Investor equal to the product of (i) the total
number of shares of VTX Common Stock proposed to be sold in the proposed
Tag-Along Sale multiplied by (ii) a fraction, the numerator of which is equal to
the number of shares of VTX Common Stock into which the Equity Securities
beneficially owned by the Tag-Along Investor are convertible and shares of VTX
Common Stock owned by such Tag-Along Investor together with the number of shares
of VTX Common Stock owned by any holder thereof who is entitled to so called
"Tag along" rights and elects to exercise such rights in connection with the
Tag-Along Sale, in each case immediately prior to the Tag-Along Sale, and the
denominator of which is equal to (A) the number of shares of VTX Common Stock
owned by the Tag-Along Seller immediately prior to the Tag-Along Sale plus (B)
the number of shares (on an aggregate basis) of VTX Common Stock into which the
Equity Securities beneficially owned by the Tag-Along Investor are convertible
and shares of VTX Common Stock owned by such Tag-Along Investor together with
the number of shares of VTX Common Stock owned by any holder thereof who is
entitled to so called "Tag along" rights and elects to exercise such rights in
connection with the Tag Along Sale, in each case immediately prior to the
Tag-Along Sale. Any such sales by the Tag-Along Investor shall be on the same
terms and conditions as the proposed Tag-Along Sale by the Tag-Along Seller,
except the Tag-Along Investor shall not be required to make any representations
or warranties except as to (x) its title to the shares of VTX Common Stock to be
sold by it, (y) such holder's power and authority to effect such transfer and
(z) such matters pertaining to compliance with securities law as the transferee
may reasonably require.
(b) Procedures. If a Tag-Along Seller is participating in a Tag-Along
Sale, at least 30 days before the proposed date thereof, the Tag-Along Seller
shall provide the other Investor and the Company with written notice of such
Tag-Along Sale setting forth in reasonable detail the consideration per share to
be paid by the transferee and the other terms and conditions of the Tag-Along
Sale. If the other Investor wishes to participate in the Tag-Along Sale, then it
shall provide written notice to such Tag-Along Seller and to the Company within
15 days of the date the notice specified in the preceding sentence is received
by such holder. Such notice shall set forth the number (on an aggregate basis)
of then exercisable Convertible Securities, Rights to Purchase Voting Securities
and shares of VTX Common Stock, if any, such Investor elects to include in the
Tag-Along Sale. If such notice is not received from the other Investor within
the 15 day period specified
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above, the Tag-Along Seller shall have the right to sell or otherwise transfer
the shares of VTX Common Stock to the proposed transferee without any
participation by the other Investor, but only (i) on the terms and conditions
stated in the notice, and (ii) if the sale or transfer of such shares of VTX
Common Stock is consummated not later than 60 days after the end of such 15 day
period specified above. The provisions of this Section 3.02 shall apply
regardless of whether the consideration received in the Tag-Along Sale is cash,
debt, equity securities, property-in-kind, or any combination thereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MIDMARK
MidMark hereby represents and warrants to Edwardstone and the
Company as follows:
4.01 Formation. MidMark is limited partnership duly organized, validly
existing and in good standing under the Laws of Delaware. MidMark has the
requisite corporate power and authority to execute and deliver this Stockholders
Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby.
4.02 Authority. The execution and delivery by MidMark of this
Stockholders Agreement, and the performance by MidMark of its obligations
hereunder, have been duly and validly authorized by all necessary partnership
actions on the part of MidMark, no other partnership action on the part of
MidMark or its partners being necessary. This Stockholders Agreement has been
duly and validly executed and delivered by MidMark and constitutes a legal,
valid and binding obligation of MidMark enforceable against MidMark in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
4.03 No Conflicts. Neither the execution and delivery by MidMark of
this Stockholders Agreement, nor the performance of its obligations under this
Stockholders Agreement
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and the consummation of the transactions contemplated hereby, will:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the partnership agreement of MidMark;
(b) conflict with or result in a violation or breach of any term or
provision of any Law, order, judgment or decree of any Governmental or
Regulatory Authority applicable to MidMark or any of its properties or assets;
or
(c) (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require MidMark to obtain any consent, approval or action of, make any
filing with or give any notice to any Person as a result or under the terms of,
or (iv) result in the creation or imposition of any Lien upon MidMark or any of
its properties or assets under any contract, agreement, plan, permit or license
to which MidMark is a party.
4.04 Governmental Approvals and Filings. Other than the filings with
the U.S. Small Business Administration which are referred to in Section
4.03(a)(ii) of the Purchasers Disclosure Schedule of the Subscription Agreement,
no consent, approval or action of, filing with or notice to any Governmental or
Regulatory Authority on the part of MidMark is required in connection with the
execution, delivery and performance of this Stockholders Agreement or the
consummation of the transactions contemplated hereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF EDWARDSTONE
Edwardstone hereby represents and warrants to MidMark and the
Company as follows:
5.01 Incorporation. Edwardstone is a corporation duly incorporated,
validly existing and in good standing under the Laws of Delaware. Edwardstone
has the requisite corporate power and authority to execute and deliver this
Stockholders Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated herein.
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<PAGE>
5.02 Authority. The execution and delivery by Edwardstone of this
Stockholders Agreement, and the performance by Edwardstone of its obligations
hereunder, have been duly and validly authorized by all necessary corporate
actions on the part of Edwardstone, no other corporate or other action on the
part of Edwardstone or its stockholders being necessary. This Stockholders
Agreement has been duly and validly executed and delivered by Edwardstone and
constitutes a legal, valid and binding obligation of Edwardstone enforceable
against Edwardstone in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditor's rights generally and by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
5.03 No Conflicts. Neither the execution and delivery of this
Stockholders Agreement by Edwardstone, nor Edwardstone's performance of its
obligations under this Stockholders Agreement and consummation of the
transactions contemplated hereby, will:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the corporate charter documents of
Edwardstone;
(b) conflict with or result in a violation or breach of any term or
provision of any law, statute, rule or regulation or any order, judgment or
decree of any Governmental or Regulatory Authority applicable to Edwardstone or
any of its properties or assets; or
(c) (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require Edwardstone to obtain any consent, approval or action of, make any
filing with or give any notice to any Person as a result or under the terms of,
or (iv) result in the creation or imposition of any Lien upon Edwardstone or any
of its properties or assets under any contract, agreement, plan, permit or
license to which Edwardstone is a party.
5.04 Governmental Approvals and Filings. No consent, approval or action
of, filing with or notice to any Governmental or Regulatory Authority on the
part of Edwardstone
11
<PAGE>
is required in connection with the execution, delivery and performance of this
Stockholders Agreement or the consummation of the transactions contemplated
hereby.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Investor as follows:
6.01 Incorporation. The Company is a corporation duly incorporated,
validly existing and in good standing under the Laws of New Jersey. The Company
has the requisite corporate power and authority to execute and deliver this
Stockholders Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby.
6.02 Authority. The execution and delivery by the Company of this
Stockholders Agreement, and the performance by the Company of its obligations
hereunder, have been duly and validly authorized by the Board of Directors, no
other corporate action on the part of the Company or its stockholders being
necessary. This Stockholders Agreement has been duly and validly executed and
delivered by the Company and constitutes a legal, valid and binding obligation
of the Company in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
6.03 No Conflicts. Neither the execution and delivery by the Company of
this Stockholders Agreement nor the performance by the Company of its
obligations under this Stockholders Agreement and the consummation of the
transactions contemplated hereby, will:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the certificate of incorporation or bylaws of
the Company;
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(b) conflict with or result in a violation or breach of any term or
provision of any Law, order, judgment or decree of any Governmental or
Regulatory Authority applicable to the Company or any of its properties or
asset; or
(c) (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require the Company to obtain any consent, approval or action of, make any
filing with or give any notice to any Person as a result or under the terms of
or (iv) result in the creation or imposition of any Lien upon the Company or any
of its properties or assets under, any contract, agreement, plan, permit or
license to which the Company is a party.
6.04 Governmental Approvals and Filings. No consent, approval or action
of, filing with or notice to any Governmental or Regulatory Authority on the
part of the Company is required, other than the filing of the information
statement to be transmitted to the Company's shareholder's pursuant to Section
14(f) of the Exchange Act and Rule 14f-1 thereunder, in connection with the
execution, delivery and performance of this Stockholders Agreement or the
consummation of the transactions contemplated hereby.
ARTICLE VII
GENERAL PROVISIONS
7.01 Survival of Representations, Warranties, Covenants and Agreements.
Notwithstanding any right of any party (whether or not exercised) to investigate
the accuracy of the representations and warranties of the other party contained
in this Stockholders Agreement, each party has the right to rely fully upon the
representations and warranties of the other parties contained in this
Stockholders Agreement. Except for the covenant set forth in Section 7.15 which
shall not expire and shall remain in full force and effect indefinitely and
except as provided in Section 7.02, the representations, warranties, covenants
and agreements of each party contained in this Stockholders Agreement will
survive until the termination of this Stockholders Agreement.
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7.02 Termination. Except as otherwise provided herein, this
Stockholders Agreement and all rights and obligations of the parties hereunder,
shall automatically terminate, and shall cease to be of any further force and
effect, upon (i) the mutual written agreement of the parties hereto or (ii) the
date on which an Investor and its Affiliates do not beneficially own any Equity
Securities; provided, however, the parties hereto may not mutually agree to
terminate this Agreement for at least one year from the date hereof without the
consent of Ron Byer. Notwithstanding the termination of this Stockholders
Agreement, nothing contained herein shall relieve any party hereto from
liability for breach of any of its representations, warranties, covenants or
agreements contained in this Stockholders Agreement.
7.03 Amendment and Waiver. (a) This Stockholders Agreement may be
amended, supplemented or modified only by a written instrument duly executed by
or on behalf of each party hereto; provided, however, Section 2.01(a) and (b)
shall not be amended without the consent of Ron Byer.
(b) Any term or condition of this Stockholders Agreement may be waived
at any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Stockholders Agreement, in any one or
more instances, shall be deemed to be or construed as a waiver of the same or
any other term or condition of this Stockholders Agreement on any future
occasion. All remedies, either under this Stockholders Agreement or by Law or
otherwise afforded, will be cumulative and not alternative.
7.04 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
If to the Company:
Vertex Industries, Inc.
23 Carol Street
Clifton, NJ 07014
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Attn: Ronald C. Byer
Facsimile No.: 973-472-0814
with a copy to:
Law Offices of Jeffrey Marks, P.C.
415 Clifton Avenue
Clifton, New Jersey 07015
Attn: Jeffrey D. Marks, Esq.
Facsimile No.: 973-253-8858
If to the Edwardstone, to:
Edwardstone & Company Incorporated
600 Madison Avenue
26th Floor
New York, NY 10022
Attn: Nicholas Toms, Esq.
Facsimile No.: 212-832-3151
with a copy to:
Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, NY 10005
Facsimile No.: 212-530-5219
Attn: John T. O'Connor, Esq.
If to MidMark, to:
MidMark Capital, L.P.
466 Southern Boulevard
Chatham, NJ 07928
Facsimile No.: 973-822-8911
Attn: Wayne L. Clevenger
with a copy to:
McCarter & English
Four Gateway Center
100 Mulberry Street
Newark, NJ 07102-4096
Facsimile No.: 973-624-4444
Attn: David Broderick, Esq.
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All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon confirmation of receipt, and
(iii) if delivered by mail in the manner described above to the address as
provided in this Section, be deemed given upon receipt (in each case regardless
of whether such notice, request or other communication is received by any other
person to whom a copy of such notice, request or other communication is to be
delivered pursuant to this Section). Any party from time to time may change its
address, facsimile number or other information for the purpose of notices to
that party by giving notice specifying such change to the other parties hereto.
7.05 Entire Agreement. This Stockholders Agreement supersedes all prior
discussions and agreements among the parties hereto with respect to the subject
matter hereof, and contains, together with the Subscription Agreement, the
Registration Rights Agreement, and the other Operative Agreements (as defined in
the Subscription Agreement) (including, without limitation, the MidMark
Management Agreement) the sole and entire agreement among the parties hereto
with respect to the subject matter hereof.
7.06 No Third Party Beneficiary. The terms and provisions of this
Stockholders Agreement are intended solely for the benefit of each party hereto,
and it is not the intention of the parties to confer third-party beneficiary
rights upon any other Person; provided, however, that Ron Byer is intended to be
a third party beneficiary solely for the purpose of claims he may have against
the parties hereto under Section 7.02 and Section 7.03(a).
7.07 No Assignment; Binding Effect. Neither this Stockholders Agreement
nor any right, interest or obligation hereunder may be assigned by any party
hereto without the prior written consent of the other party hereto and any
attempt to do so will be void; provided, however, the Investors may assign its
rights, interests and obligations hereunder to an Affiliate of such Investor
pursuant to Section 3.01 without the prior written consent of the other Investor
or the Company. Subject to the preceding sentence, this Stockholders Agreement
is binding upon, inures to the benefit of and is enforceable by the parties
hereto and their respective successors and assigns.
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7.08 Specific Performance; Legal Fees. The parties acknowledge that
money damages alone are not an adequate remedy for violations of any provision
of this Stockholders Agreement and that in addition to money damages any party
may, in its sole discretion, apply to a court of competent jurisdiction for
specific performance for injunctive or such other relief as such court may deem
just and proper in order to enforce any such provision or prevent any violation
hereof and, to the extent permitted by applicable Law, each party waives any
objection to the imposition of such relief. The parties hereto agree that, in
the event that any party to this Stockholders Agreement shall bring any legal
action or proceeding to enforce or to seek damages or other relief arising from
an alleged breach of any term or provision of this Stockholders Agreement by the
other party, the prevailing party in any such action or proceeding shall be
entitled to an award of, and the other party to such action or proceeding shall
pay, the reasonable fees and expenses of legal counsel to the prevailing party.
7.09 Headings. The headings used in this Stockholders Agreement have
been inserted for convenience of reference only and do not define or limit the
provisions hereof.
7.10 Invalid Provisions. If any provision of this Stockholders
Agreement is held to be illegal, invalid or unenforceable under any present or
future law, and if the rights or obligations of any party hereto under this
Stockholders Agreement will not be materially and adversely affected thereby,
(i) such provision will be fully severable, (ii) this Stockholders Agreement
will be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof and (iii) the remaining provisions
of this Stockholders Agreement will remain in full force and effect and will not
be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom.
7.11 Governing Law. This Stockholders Agreement shall be governed by
and construed in accordance with the laws of the state of New York applicable to
a contract executed and performed in such country, without giving effect to the
conflicts of laws principles thereof.
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7.12 Arbitration. The parties to this Stockholders Agreement agree that
any disputes arising out of, or in connection with, the execution,
interpretation, performance or non-performance of this Stockholders Agreement
(including the validity, scope and enforceability of this arbitration provision)
shall be settled by arbitration, which shall be conducted in New York, New York
pursuant to the then prevailing rules of the American Arbitration Association
("AAA") by a panel of three arbitrators of the AAA (the "Board of Arbitration")
acceptable to each Investor. Each Investor shall select one (1) member and the
third member shall be selected by mutual agreement of the other members. If the
other members fail to reach agreement on a third member within thirty (30) days
after their selection, the parties shall jointly request the AAA to designate,
in accordance with AAA rules, a third member experienced in industries in which
the Company does business. The parties agree to facilitate the arbitration by
(a) making available to one another and to the Board of Arbitration for
inspection and extraction all documents, books, records, and personnel under
their control or under the control of a person controlling or controlled by such
party if determined by the Board of Arbitration to be relevant to the dispute,
(b) conducting arbitration hearings to the greatest extent possible on
successive business days and (c) using their best efforts to observe the time
periods established by the rules of the AAA or by the Board of Arbitration for
the submission of evidence and briefs. The decision of the Board of Arbitration
shall be final, binding and not subject to further review, and judgment on the
award of the Board of Arbitration may be entered in and enforced by any court
having jurisdiction over the parties or their assets. Any costs incurred in
conducting the arbitration shall be borne by the non-prevailing (as determined
by the Board of Arbitration) party.
7.13 Counterparts. This Stockholders Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
7.14 Expenses. Each party shall bear its own expenses incurred in
connection with this Agreement except as otherwise expressly provided herein or
in the Subscription Agreement.
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7.15 Confidentiality. Each party hereto agrees to keep information
obtained by it pursuant hereto identified as confidential in writing at the time
of delivery confidential in accordance with customary practices and agrees that
it will only use such information in connection with the transactions
contemplated by this Agreement and not disclose any of such information other
than (a) to such party's employees, representatives, directors, attorneys,
auditors, agents or affiliates who are advised of the confidential nature of
such information, (b) to the extent such information presently is or hereafter
becomes available to such party on a non-confidential basis from any source or
such information that is in the public domain at the time of disclosure, (c) to
the extent disclosure is required by the Law (including applicable securities
Laws), regulation, subpoena or judicial order or process (provided that notice
so such requirement or order shall be promptly furnished to the Company unless
such notice is legally prohibited), (d) to transferees or prospective
transferees who agree to be bound by the provisions of this Section 7.15, (e) to
the extent required in connection with any litigation between the parties hereto
with respect to this Agreement or (f) with the other party's prior written
consent.
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IN WITNESS WHEREOF, this Stockholders Agreement has been executed by or
on behalf of each of the parties hereto as of the date first above written.
VERTEX INDUSTRIES, INC.
By: /s/ Ronald C. Byer
------------------
Name: Ronald C. Byer
Title: CEO and President
EDWARDSTONE & COMPANY, INC.
By: /s/ Nicholas Toms
------------------
Name: Nicholas Toms
Title: Chief Executive Officer
MIDMARK CAPITAL, L.P.
by MidMark Associates, Inc.
as General Partner of
MidMark Capital, L.P.
By: /s/Wayne L. Clevenger
---------------------
Name: Wayne L. Clevenger
Title: Managing Director
