U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Date of Report: May 3, 2000
MIKRON INSTRUMENT COMPANY, INC.
(Exact name of issuer as specified in its charter)
New Jersey 0-15486 22-1895668
(State or Other Jurisdiction of (Commission File (IRS Employer
Incorporation or Organization) Number) Identification No.)
16 Thornton Road, Oakland, New Jersey 07436
(Address and Zip Code of Principal Executive Offices)
(201) 405-0900
(Registrant's Telephone Number)
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Item 2. Acquisition or Disposition of Assets
Effective May 1, 2000, we acquired all of the issued and outstanding
shares of the common stock of E Square Technology Corporation ("E2T"), a
privately held California corporation. We purchased all of those shares from The
Earnest and Caroline Emery Family Trust, E2T's sole shareholder, for a total
purchase price of $1,022,000. The amount of the purchase price was determined by
direct negotiations by our management with Earnest M. Emery, E2T's founder and
Chief Executive Officer.
Since 1974, E2T has been developing and manufacturing non-contact infrared
temperature measurement devices for use in many different industries and
applications, such as hazardous waste incinerators, furnaces, rotating kilns,
high temperature reactors, glass plants, pulp mills and steel mills. E2T's line
of industrial infrared temperature sensors and controllers are capable of
measuring temperatures ranging from ambient to 5000 degrees F with response
times as fast as 1 millisecond. For the foreseeable future, we intend to
continue to market E2T's line of process control devices under the various E2T
brand names from E2T's facilities located in Ventura, California. However, we
will manufacture E2T's products, and will conduct all "back-office" and data
processing operations relating to E2T's business at our headquarters in Oakland,
New Jersey.
We borrowed $1,000,000 of the purchase price from Fleet Bank, N.A.
pursuant to a revolving/term loan agreement which provides for the payment of
interest only at Fleet Bank's prime rate until August 14, 2000. Then, we will be
obligated to repay the principal of the loan in 36 equal monthly installments,
together with monthly interest in arrears pegged at 8.85% per annum pursuant to
a fixed rate swap transaction that we have executed. Our indebtedness to the
bank is secured by a first lien on, and security interest in, our accounts,
inventory, equipment, fixtures, books and records, chattel paper, documents,
general intangibles, instruments, machinery, contract rights and furniture.
There are no material relationships between Mr. And Mrs. Emery or their
family trust, on the one hand, and us, any or our affiliates, any of our
directors and officers or any of the associates of such directors and officers,
on the other hand.
Item 7. Financial Statements and Exhibits
The following financial statements, pro forma financial information and exhibits
have been filed as part of this Report:
(a) Financial statements of business acquired.
The financial statements required to be filed with respect to our
acquisition of E2T shall be filed on or before July 10, 2000
pursuant to an amendment to this Report.
(b) Pro forma financial information.
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The pro forma financial information required to be filed with
respect to our acquisition of E2T shall be filed on or before July
10, 2000 pursuant to an amendment to this Report.
(c) Exhibits
Number Description
10.16 Stock Purchase Agreement dated the 3rd day of May, 2000, by and
between Mikron Instrument Company, Inc. and The Earnest M. Emery and
Caroline Emery Family Trust U/D/O 4/8/94
10.17 Revolver/Term Loan Agreement between Mikron Instrument Company, Inc.
and Fleet Bank, N.A.
Signature
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Mikron Instrument Company, Inc.
Dated: May 11, 2000 By: /s/ Gerald D. Posner
------------------------------------
Gerald D. Posner, Chief (Principal)
Executive Officer
Exhibit 10.16
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("Agreement") dated the 3rd day of May, 2000, by
and between MIKRON INSTRUMENT COMPANY, INC., a corporation organized under the
laws of the State of New Jersey (the "Purchaser"), and THE EARNEST M. EMERY AND
CAROLINE EMERY FAMILY TRUST U/D/O 4/8/94 (the "Stockholder"), being the sole
stockholder of E SQUARE TECHNOLOGY CORPORATION, a corporation organized under
the laws of the State of California (the "Company").
WITNESSETH:
WHEREAS, Stockholder owns 1,000 shares of the issued and outstanding
common stock of the Company, no par value per share, which represents 100% of
the issued and outstanding capital stock of the Company (the "Stock"); and
WHEREAS, Stockholder desires to sell the Stock to Purchaser and Purchaser
desires to acquire the Stock from Stockholder, subject to the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, terms and
conditions set forth herein, Purchaser and Stockholder hereby agree as follows:
ARTICLE I
SALE AND PURCHASE OF STOCK
Section 1.1 Sale and Purchase of Stock. Subject to the terms and
conditions set forth in this Agreement, the Stockholder agrees to sell, assign,
transfer, convey and deliver to Purchaser on the Closing Date (as defined in
Section 1.3), and Purchaser agrees to purchase, the Stock from the Stockholder
on the Closing Date. The certificates representing the Stock shall be duly
endorsed in blank, or accompanied by stock powers duly executed in blank by the
Stockholder.
Section 1.2 Purchase Price. (a) In full consideration for the purchase by
the Purchaser of the Stock, Purchaser shall pay to the Stockholder on the
Closing Date $1,022,000, subject to adjustment and the escrow deposit as
hereinafter provided.
(b) Adjustment to the Purchase Price. Notwithstanding anything in Section
1.2(a) to the contrary, the aforesaid purchase price of $1,022,000 is subject to
the following adjustments at the Closing:
(i) Stockholder will deliver to Purchaser at the Closing appropriate
documentation necessary to accurately reflect the aggregate amounts of all
accounts receivable and accounts payable of the Company as of the Closing Date.
If the aggregate amount of the accounts receivable exceeds the aggregate amount
of the accounts payable by more than $176,000, then the purchase price to be
paid by Purchaser shall be increased on a dollar for dollar basis by the amount
of any such excess over $176,000. Conversely, if the aggregate
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amount of the accounts receivable exceeds the aggregate amount of the accounts
payable by less than $156,000, then the purchase price to be paid by Purchaser
shall be reduced on a dollar for dollar basis by the amount any such difference
is less than $156,000. If the aggregate amount of the accounts payable exceeds
the aggregate amount of the accounts receivable, then the purchase price to be
paid by Purchaser shall be reduced on a dollar for dollar basis by the amount of
any such difference plus $156,000.
(ii) If Stockholder prior to the Closing has not personally
discharged the Company's credit card liability in the aggregate amount of
$37,082 as the same appears on the December 31, 1999 Balance Sheet of the
Company, the purchase price shall be reduced by the actual outstanding amount
which has not been discharged on or prior to the Closing.
(iii) If Stockholder prior to the Closing has not personally
discharged the Company's liability with respect to the Wells Fargo Business Line
of Credit in the aggregate amount of $47,138 as the same appears on the December
31, 1999 Balance Sheet of the Company, the purchase price shall be reduced by
the actual outstanding amount which has not been discharged on or prior to the
Closing.
(c) Escrow Agreement. At the Closing, Purchaser, Stockholder and Hall
Dickler Kent Friedman & Wood LLP ("Escrow Agent") will enter into an Escrow
Agreement ("Escrow Agreement") in the form attached hereto as Exhibit A, whereby
$100,000 of the aforesaid purchase price will be delivered to the Escrow Agent
to be held by it in accordance with the terms of the Escrow Agreement.
(d) Section 338(h)(10) Election. At the Purchaser's option, the Company
and Stockholder will join with Purchaser in making an election under Section
338(h)(10) of the Internal Revenue Code of 1986, as amended ("Code") (and any
corresponding election under state, local, and foreign tax law) with respect to
the purchase and sale of the Stock hereunder (a "Section 338(h)(10) Election").
Stockholder will include any income, gain, loss, deduction, or other tax item
resulting from the Section 338(h)(10) Election on his tax returns to the extent
required by applicable law. Stockholder shall also pay any tax imposed on the
Company attributable to the making of the Section 338(h)(10) Election,
including, but not limited to, (i) any tax imposed under Code Section 1374 and
(ii) any tax imposed on the Company's gain, and Stockholder shall indemnify
Purchaser and the Company against any adverse consequences arising out of any
failure to pay any such taxes.
(e) Allocation of Purchase Price. Purchaser and Stockholder agree that the
purchase price and the liabilities of the Company (plus other relevant items)
will be allocated to the assets of the Company for all purposes (including tax
and financial accounting) pursuant to an Allocation Schedule to be agreed upon
by the parties. Purchaser, the Company and Stockholder will file all tax returns
(including amended returns and claims for refund) and information reports in a
manner consistent with such allocation.
Section 1.3 Closing. The closing of the purchase and sale referred to in
Section 1.1 (the "Closing") shall take place at 10:00 a.m. at the offices of
Hall Dickler Kent Friedman & Wood LLP, 909 Third Avenue, New York, New York at
such time and date as the parties hereto
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shall by written instrument designate (but in no event later than May 3, 2000).
The Closing shall be deemed to have occurred on, and to be effective from, May
1, 2000 (the "Closing Date").
Section 1.4 Stockholder's Deliveries at Closing. At the Closing,
Stockholder shall deliver to Purchaser the following:
(a) the Stock with the accompanying signatures and documents set forth
in Section 1.1;
(b) an executed counterpart of the Consulting Agreement to be entered
into between Purchaser and Earnest Emery attached hereto as Exhibit
B ("Consulting Agreement");
(c) a resignation of each member of the Board of Directors of the
Company and each officer of the Company;
(d) executed counterparts of the employment agreement to be entered into
between Purchaser and William Lambert in the form annexed hereto as
Exhibit C ("Employment Agreement");
(e) all original documents (or copies thereof) and other data, if any,
which are in the possession of Stockholder and which are a part of
the corporate or business records of the Company;
(f) the Closing Certificate referenced in Section 7.11;
(g) the legal opinion of Stockholder's counsel required by Section 7.6;
(h) all documents referenced in Section 7.9;
(i) an executed counterpart of the Escrow Agreement;
(j) a Certificate of Stockholder as to (i) the accuracy of the
documentation delivered to Purchaser pursuant to Section 1.2(b)(i),
(ii) the status at the Closing of the Company's credit card
liability as set forth in Section 1.2(b)(ii) and (iii) the status at
the Closing of the Company's Wells Fargo Business Line of Credit as
set forth in Section 1.2(b)(iii); and
(k) such other documents as Purchaser's counsel shall reasonably
request.
Section 1.5 Purchaser's Deliveries at Closing. At the Closing, Purchaser
shall deliver to Stockholder the following:
(a) the purchase price referred to in Section 1.2(a), subject to the
adjustments and the escrow deposit set forth in Section 1.2(b) and Section
1.2(c);
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(b) an executed counterpart of the Consulting Agreement;
(c) executed counterparts of the Employment Agreement;
(d) the legal opinion of Purchaser's counsel required by Section 6.5;
(e) the Closing Certificate referenced in Section 6.9;
(f) an executed counterpart of the Escrow Agreement; and
(g) such other documents as Stockholder's counsel shall reasonably
request.
Section 1.6 Bank Accounts. At the Closing, the signature cards of the
Company's bank accounts shall be changed to the satisfaction of Purchaser's
Chief Financial Officer.
Section 1.7 Further Assurance. Each party covenants and agrees with the
other that it will, whenever and as often as reasonably requested by the other
party, do, execute, acknowledge and deliver any and all such other and further
acts, assignments, transfers, and any instruments of further assurance,
approvals, and consents as may be necessary or proper in order to complete and
perfect the transactions contemplated hereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
Section 2.1 Representations and Warranties of the Stockholder. The
Stockholder represents and warrants to the Purchaser as follows:
Section 2.2 Ownership of Stock. The Stockholder is the lawful owner of the
number of shares of Stock listed in the preamble to this Agreement, which shares
constitute 100% of the issued and outstanding capital stock in the Company.
Stockholder has been the owner of the Stock since the incorporation of the
Company and the initial issuance of the Company's shares. The Stock is free and
clear of all liens, encumbrances, restrictions and claims of every kind. The
delivery to Purchaser of the Stock pursuant to the provisions of this Agreement
will transfer to Purchaser good and marketable title thereto, free and clear of
all liens, encumbrances, restrictions (including voting trust agreements) and
claims of every kind.
Section 2.3 Existence and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. The Company has the full power and authority to own its property and
to carry on its business as it is now being conducted. The Company is not
qualified to do business as a foreign corporation in any other jurisdiction, and
neither the character, nature nor location of the properties owned, leased or
operated, or the business conducted, by the Company makes such corporate
qualification necessary under the foreign corporation qualification statutes of
any other jurisdiction. True and correct copies of the Company's corporate
charter and by-laws, certified as such by the Company's President and Secretary,
have been delivered to Purchaser, and the
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Company's board of directors and Stockholder have taken no action to repeal,
alter, expand or amend such charter and by-laws and the same remain in full
force and effect.
Section 2.4 Authority. The Stockholder has full legal right, power and
authority to make, execute, deliver and perform this Agreement; to sell, assign,
transfer and convey the shares of Stock owned by the Stockholder pursuant to
this Agreement; and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Stockholder
and, assuming due execution and delivery by the Purchaser, constitutes a legal,
valid and binding agreement of the Stockholder enforceable against the
Stockholder in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity.
Section 2.5 Capitalization. The Company has an authorized capitalization
consisting of 1,000,000 shares of common stock, no par value per share, of which
1,000 shares are issued and outstanding and no shares are held in the Company's
treasury. All such outstanding shares have been duly authorized and validly
issued and are fully paid and non-assessable. There are no outstanding options,
warrants, rights, calls, commitments, conversion rights, rights of exchange,
plans or other agreements of any character providing for the purchase, issuance
or sale of any shares of the capital stock of the Company, other than as
disclosed within this Agreement. The Company has not issued any class of stock,
including any preferred stock, other than the Stock.
Section 2.6 No Corporate Subsidiaries or Investment. The Company does not
own, directly or indirectly, any capital stock or other equity or ownership or
proprietary interest in any corporation, limited liability company, partnership,
association, trust, joint venture or any other entity. Stockholder does not own,
directly or indirectly, any capital stock or other equity or ownership or
proprietary interest in any corporation, partnership, limited liability company,
association, trust, joint venture or other entity that competes with the Company
or is otherwise involved in the business of manufacturing and selling
non-contact infrared temperature measurement devices.
Section 2.7 Consents and Approvals; No Violation. (a) Neither the
execution, delivery and performance of this Agreement and the documents and
instruments contemplated hereby by the Stockholder nor the consummation by the
Stockholder of the transactions contemplated herein (i) conflict with or will
result in a breach of any provision of the Certificate of Incorporation or
By-Laws (or other similar governing documents) of the Company; (ii) require any
consent, approval, authorization, license, clearance, order or permit of, or
filing or registration with or notification or declaration to, any person or any
Government Entity (as defined below); (iii) constitute a violation of, or
conflict with, or result in a breach of, or constitute a default under any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, contract, agreement, lease or other instrument or obligation of any
kind to which the Company is a party or by which it may be bound; (iv) create
(or cause the acceleration of the maturity of) any debt, obligation or liability
pursuant to, or result in the creation or imposition of any security interest,
lien, charge or other encumbrance upon any property of the Company under any
agreement or commitment to which the Company is a party or by which the Company
is bound or to which the Company is subject; or (v) violate any order, writ,
injunction,
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judgment, decree, law, statute, rule, regulation or governmental permit or
license applicable to the Company or by which the Company is bound or to which
the Company is subject. For purposes of this Agreement, "Government Entity"
shall mean any court, federal, state or local government or governmental
authority, department, commission, board, bureau, agency or instrumentality,
whether domestic or foreign, or any stock exchange.
(b) Neither the Company nor the Stockholder is subject to, or a party to,
any charter, by-law, mortgage, lien, lease, license, permit, agreement,
contract, instrument, law, rule, ordinance, regulation, order, judgment or
decree, or any other restriction of any kind or character, which (a) materially
and adversely affects, or which might reasonably be expected to materially and
adversely affect, the business, assets, liabilities, condition (financial or
otherwise) or results of operations of the Company, or (b) would prevent
consummation of the transactions contemplated by this Agreement, compliance by
the Stockholder with the terms, conditions and provisions hereof or the
continued operation of the Company's business after the date hereof or the
Closing Date on substantially the same basis as heretofore operated, or (c)
would restrict the ability of the Company to acquire any property or conduct
business in any area.
Section 2.8 Financial Statement. The Stockholder has delivered to
Purchaser the unaudited balance sheet of the Company as of December 31, 1999
("Balance Sheet"), together with the related unaudited statement of operations
for the fiscal years ended December 31, 1999 (collectively referred to as the
"Financial Statements"). Said Financial Statements present fairly and accurately
the financial condition of the Company as of such dates and the results of its
operations for the periods covered thereby, all in conformity with generally
accepted accounting principles applied on a consistent basis.
Section 2.9 Undisclosed Liabilities. Except as set forth on the Balance
Sheet and as otherwise set forth on Schedule 2.9, the Company has no outstanding
claims, liabilities, indebtedness or obligations, fixed or contingent, secured
or unsecured, other than those which were incurred subsequent to the date of the
Balance Sheet in the ordinary course of business and consistent with past
practice not involving borrowings by the Company. There are no dividends
declared but unpaid as of the Closing Date.
Section 2.10 Absence of Certain Changes or Events. (a) Since the date of
the Balance Sheet, the business of the Company has been operated only in the
ordinary course of business consistent with past practice and there has not been
(i) to the Stockholder's knowledge, information or belief, any legislative or
regulatory change which adversely effects the business of the Company, (ii)
revocation of any license or rights to do business, fire, explosion, accident,
casualty, labor trouble or condemnation which negatively impacts the Company or
(iii) any material change in the business, assets, liabilities, condition
(financial or otherwise) or results of operations of the Company; and, to the
best knowledge, information and belief of the Stockholder, no fact or condition
exists or is contemplated or threatened which might cause such a change in the
future.
(b) Since the date of the Balance Sheet, except as expressly contemplated
by this Agreement or as set forth on Schedule 2.10.2, the Company has not (i)
incurred any liability or obligation of any nature (whether accrued, absolute,
contingent or otherwise), except in the
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ordinary course of business, (ii) permitted any of its assets to be subjected to
any mortgage, pledge, lien, security interest, encumbrance, restriction or
charge of any kind (other than Permitted Liens (as defined in Section 2.11)),
(iii) sold, transferred or otherwise disposed of any assets except in the
ordinary course of business, (iv) made any capital expenditure or commitment
therefor, except in the ordinary course of business, (v) declared or paid any
dividend or made any distribution on any shares of its capital stock, (vi)
redeemed, purchased or otherwise acquired any shares of its capital stock, (vii)
granted or issued any option, warrant or other right to purchase, acquire or
vote any shares of its capital stock, (viii) made any bonus or profit sharing
distribution or payment of any kind, (ix) increased its indebtedness for
borrowed money, except current borrowing from banks in the ordinary course of
business, or made any loan to any person, (x) written off as uncollectible any
notes or accounts receivable, except write-offs in the ordinary course of
business charged to applicable reserves, none of which individually or in the
aggregate is material to the Company, (xi) granted any increase in the rate of
wages, salaries, bonuses or other remuneration of any executive employee or
other employees, (xii) canceled or waived any claims or rights of substantial
value, (xiii) made any change in any method of accounting or auditing practice,
(xiv) otherwise conducted its business or entered into any transaction, except
in the usual and ordinary manner and in the ordinary course of business, or (xv)
agreed, whether or not in writing, to do any of the foregoing.
Section 2.11 Title to Properties; Liens. Except for any liens or other
matters disclosed on Schedule 2.11 attached hereto, the Company has good,
marketable and valid title to (i) all of its properties and assets (real and
personal, tangible and intangible), including, without limitation, all of the
properties and assets reflected in the Balance Sheet (except for properties and
assets sold or otherwise disposed of in the ordinary course of business
subsequent to the date of the Balance Sheet), and (ii) all of the properties and
assets purchased by the Company since the date of the Balance Sheet; in each
case free and clear of all mortgages, security interests, liens, claims,
charges, pledges, restrictions, defects or other encumbrances of any nature
whatsoever (collectively, "Liens"), except for (a) Liens reflected in the
Balance Sheet or on Schedule 2.11; (b) Liens for current taxes and assessments
not yet due or which are being contested in good faith; and (c) any workers',
repairmen's, warehousemen's and carriers Liens arising in the ordinary course of
business (Liens described in clauses (a) through (c), inclusive, are hereinafter
referred to as "Permitted Liens").
Section 2.12 Intellectual Property. Unless otherwise set forth on Schedule
2.12, the Company owns no Intellectual Property. As used herein, "Intellectual
Property" means patents, patent rights, licenses, trademarks, trademark rights,
trade names, trade name rights, service marks, service mark rights, copyrights,
know-how, technology, trade secrets, proprietary information or similar rights
which are material to the conduct of the business of the Company. Stockholder,
as an individual, has no right, title or interest in any Intellectual Property
used by the Company or which could be used by the Company in the future. To the
extent that the Company does not own the entire right, title and interest in and
to any item of Intellectual Property, each such item of Intellectual Property is
used pursuant to an agreement or license and, except as may be set forth on
Schedule 2.12, each such agreement or license is valid and enforceable and in
full force and effect, and the Company is not in default under or in breach of
any such license or agreement. The Company is not infringing, or otherwise
acting adversely to, the right of any person under or in respect to, any patent,
license, trademark, trade name, service
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mark, copyright or similar intangible right. Unless otherwise set forth on
Schedule 2.12, (i) no claims have been asserted by any person to the use of any
of the Intellectual Property used or owned by the Company, (ii) no claims have
been asserted by any person challenging or questioning the validity or
effectiveness of any license or agreement relating to the Intellectual Property
to which the Company is a party, and (iii) there are no pending or threatened
proceedings or litigation or other adverse claims affecting or with respect to
the Intellectual Property.
Section 2.13 Insurance. Set forth on Schedule 2.13 attached hereto is a
complete and accurate list of all insurance policies, including the amounts
thereof, maintained by the Company, true and correct copies of which have been
delivered to Purchaser. Such policies are in full force and effect. Such
policies, with respect to their amounts and types of coverage, are adequate to
insure fully against risks to which the Company is normally exposed in the
operation of its business. Since the inception of each of the Company's
liability insurance policies, there has not been any material adverse change in
the Company's relationship with its insurers or in the premiums payable pursuant
to such policies.
Section 2.14 Employee Benefit Plans.
2.14.1 List of Plans. Schedule 2.14.1 to this Agreement lists all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, incentive,
deferred compensation, retiree, medical or life insurance, supplemental
retirement, severance or other benefit plans, programs or arrangements, and all
termination, severance or other benefit plans, programs or arrangements, and all
termination, severance or other contracts or agreements, whether formal or
informal, whether or not set forth in writing, whether covering one person or
more than one person, and whether or not subject to any of the provisions of
ERISA, which are maintained, contributed to or sponsored by the Company for the
benefit of any employee or which otherwise cover any employee or former employee
of the Company (each item so listed on Schedule 2.14.1 being referred to herein
individually, as a "Plan" and collectively, as the "Plans"). The Stockholder has
delivered to Purchaser a complete and accurate copy (where applicable) of (i)
each written Plan and description of any unwritten Plan (including all
amendments thereto whether or not such amendments are currently effective), (ii)
each summary plan description and summary of material modifications relating to
a Plan, (iii) each trust agreement or other funding arrangement with respect to
each Plan, including insurance contracts, (iv) the most recently filed Internal
Revenue Service Form 5500 relating to each Plan (if any), (v) the most recently
received Internal Revenue Service determination letter for each Plan and (vi)
the most recently prepared actuarial reports and the three most recently
prepared financial statements, if applicable, in connection with the Plan.
Except as set forth on Schedule 2.14.1, neither Stockholder nor the Company has
made any express or implied commitment, whether legally enforceable or not, (a)
to create or cause to exist any other employee benefit plan, program or
arrangement or (b) to modify, change or terminate any Plan.
2.14.2 Severance. Except as set forth in Schedule 2.14.2, none of
the Plans, or any employment agreement or other contract to which the Company is
a party or bound, provides for the payment of or obligates the Company to pay
separation, severance, termination or
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similar-type benefits to any person or obligates the Company to pay separation,
severance, termination or similar-type benefits solely as a result of any
transaction contemplated by this Agreement or as a result of a "change in
control," within the meaning of such term under Section 280G of the Code.
2.14.3 Multi-Employer Plans. Neither the Company nor any ERISA
Affiliate (as herein defined) has maintained, contributed to or participated in
a multi-employer plan (within the meaning of Section 3(37) or 4001(a)(3) of
ERISA or a multiple employer plan subject to Sections 4063 and 4064 of ERISA)
nor has any obligations or liabilities, including withdrawal or successor
liabilities, been incurred or will be incurred regarding any such plan. As used
herein, the term "ERISA Affiliate" means any person that, together with the
Company, is considered a "single employer" pursuant to Section 4001(b) of ERISA.
2.14.4 Welfare Benefit Plan. Schedule 2.14.4 sets forth a complete
and accurate list of each Plan which provides or promises retiree medical,
disability or life insurance benefits to any current or former employee, officer
or director of the Company. Except as set forth in Schedule 2.14.4, the Company
has expressly reserved the right, in all Plan documents relating to welfare
benefits provided to employees, former employees, officers, directors and other
participants and beneficiaries, to amend, modify or terminate at any time the
Plans which provide for welfare benefits and Stockholder is not aware of any
fact, event or condition that could reasonably be expected to restrict or impair
such right.
2.14.5 Administrative Compliance. Each Plan is now and has been
operated in all material respect in accordance with the requirements of all
applicable law, including, without limitation, ERISA and the Code, and the
regulations and authorities published thereunder. The Company has performed all
material obligations required to be performed by it under, is not in any respect
in default under or in violation of, and Stockholder has no knowledge of any
default or violation by any party to, any Plan. Except as set forth on Schedule
2.15, no legal action, suit, audit, investigation or claim is pending or to the
best knowledge, information and belief of Stockholder threatened, with respect
to any Plan (other than claims for benefits in the ordinary course) and, to the
best knowledge, information and belief of Stockholder, and except as set forth
on Schedule 2.15, no fact, event or condition exists and would be reasonably
likely to provide a legal basis for any such action, suit, audit, investigation
or claim. All reports, disclosures, notices and filings with respect to such
Plans required to be made to employees, participants, beneficiaries, alternate
payees and government agencies have been timely made or an extension has been
timely obtained.
2.14.6 Tax Qualification. Except as set forth on Schedule 2.14.6,
each Plan which is intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service that
it is so qualified and each trust established in connection with any Plan which
is intended to be exempt from federal income taxation under Section 501(a) of
the Code has received a determination letter from the Internal Revenue Service
that it is so exempt, and to the best knowledge, information and belief of
Stockholder, no fact or event has occurred or condition exists since the date of
such determination letter from the Internal Revenue Service which would be
reasonably likely to adversely affect the qualified status of any such Plan or
the exempt status of any such trust.
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2.14.7 Funding; Excise Taxes. Except as set forth on Schedule
2.14.7, there has been no prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code) with respect to any Plan, subject to
ERISA. The Company has not incurred any liability for any excise tax arising
under Sections 4971, 4972, 4975, 4976, 4977, 4978, 4978B, 4979, 4980 or 4980B of
the Code or any civil penalty arising under Sections 502(i) or 502(I) of ERISA,
and, to the best knowledge, information and belief of Stockholder, no fact,
event or condition exists which could give rise to any such liability. Neither
the Company nor any ERISA Affiliate has incurred any liability under, arising
out of or by operation of Title IV of ERISA (other than liability for premiums
to the Pension Benefit Guaranty Corporation ("PBGC"), or contributions to a
Plan, in either case arising in the ordinary course), including, without
limitation, any liability in connection with the termination of any employee
benefit plan subject to Title IV of ERISA (a "Title IV Plan"); and, to the best
knowledge, information and belief of Stockholder, no fact, event or condition
exists which could give rise to any such liability. No Title IV Plan maintained
by the Company or any ERISA Affiliate had an accumulated funding deficiency
(within the meaning of Section 302 of ERISA or Section 412 of the Code), whether
or not waived, as of the most recently ended year of such Plan. None of the
assets of the Company or any ERISA Affiliate is the subject of any Lien arising
under Section 302(f) of ERISA or Section 412(n) of the Code; neither the Company
nor any ERISA Affiliate has been required to post any security under Section 307
of ERISA or Section 401(a)(29) of the Code; and to the best knowledge,
information and belief of the Stockholder, no fact or event exists which could
give rise to any such Lien or requirement to post any such security.
2.14.8 Tax Deductions. All contributions, premiums or payments
required to be made, paid or accrued with respect to any Plan have been made,
paid or accrued on or before their due dates, including extensions thereof. All
such contributions have been fully deducted for income tax purposes and no such
deduction has been challenged or disallowed by any government entity and to the
best knowledge, information and belief of the Stockholder, no fact or event
exists which could give rise to any such challenge or disallowance.
Section 2.15 Litigation. Except as set forth on Schedule 2.15, there is no
action, suit, proceeding at law or in equity, arbitration or administrative or
other proceeding by or before (or to the best knowledge, information and belief
of the Stockholder, any investigation by) any governmental or other
instrumentality or agency, pending, or, to the best knowledge, information and
belief of the Stockholder, threatened, against or affecting the Stockholder, the
Company or any of its properties or rights; and the Stockholder does not know of
any valid basis for any such actions, proceedings or investigations. The
foregoing representation includes any suit or proceeding in which the Company is
either a plaintiff or a defendant. The Company is not subject to any judgment,
order or decree entered in any lawsuit or proceeding which could have a material
adverse affect on the results of operations or prospects of the Company or could
prevent the consummation of the transactions contemplated by this Agreement.
Section 2.16 Taxes. (a) Definition. For purposes of this Agreement, the
term "Taxes" means all taxes, assessments, charges, duties, fees, levies or
other governmental charges, including, without limitation, all Federal, state,
local, foreign and other income, franchise, profits, capital gains, capital
stock, transfer, sales, use, occupation, property, excise, severance,
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windfall profits, stamp, license, payroll, withholding and other taxes,
assessments, charges, duties, fees, levies or other governmental charges of any
kind whatsoever (whether payable directly or by withholding and whether or not
requiring the filing of a return), and all estimated taxes, deficiency
assessments, additions to tax, penalties, and interest.
(b) Tax Returns. The Company has timely filed or caused to be timely filed
with the appropriate taxing authorities all returns, statements, forms and
reports for Taxes (the "Returns") that are required to be filed by, or with
respect to, the Company on or prior to the Closing Date, and no extensions with
respect to such tax returns have (or as of the Closing Date will have) been
requested or granted. The Returns accurately reflect all liability for Taxes of
the Company for the periods covered thereby.
(c) Payment of Taxes. All Taxes and Tax liabilities of the Company due for
all taxable years or periods that end on or before the Closing Date have been
timely paid or will be timely paid in full.
(d) Other Tax Matters. (i) No audit of the Company or other examination of
Taxes by the appropriate tax authorities of any nation, state or locality is
currently in progress (or scheduled as of the Closing Date to be conducted), or
has ever been requested or performed.
(ii) No notices have been received by the Company from any taxing
authority relating to any issue which could affect the Tax liability of the
Company within the seven (7) year period prior to the execution of this
Agreement.
(iii) Neither the Stockholder nor the Company has, as of the date
hereof or the Closing Date, (A) entered into an agreement or waiver or been
requested to enter into an agreement or waiver extending any statute of
limitations relating to the payment or collection of Taxes of the Company, (B)
applied for and has not yet received a ruling or determination from a taxing
authority regarding a past or prospective transaction of the Company, or (C) is
presently contesting the Tax liability of the Company before any court, tribunal
or agency.
(iv) The Company is not required to be included in any
"consolidated" or "combined" tax return under the law of the United States, any
state or locality with respect to Taxes.
(v) The Company has not applied for, been granted, or agreed to any
accounting method change for which it will be required to take into account any
adjustment under the Code.
(vi) All Taxes relating to the income, properties or operations of
the Company which the Company is required by law to withhold or collect have
been duly withheld or collected, and have been timely paid over to the proper
authorities to the extent due and payable.
(vii) There are no tax sharing or allocation agreements in effect on
the Closing Date as between the Stockholder or any predecessor or affiliate
thereof and the Company with respect to Taxes.
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(viii) Since the incorporation of the Company and the initial
issuance of the Company's shares to Stockholder, there has not been an
"ownership change" within the meaning of Section 382(g) of the Code involving
the Company.
(ix) No property of the Company is "tax-exempt use property" within
the meaning of Section 168(h) of the Code nor property that the Purchaser will
be required to treat as being owned by another person pursuant to Section 168 of
the Code (or any corresponding provision of prior law).
(x) The Stockholder is not a "foreign person" within the meaning of
Section 1445 of the Code.
(xi) The Company is not a party to any agreement that would require
the Company to make any payment that would constitute an "excess parachute
payment" for purposes of Sections 280G and 4999 of the Code.
(xii) The Company is a valid subchapter S corporation and has filed
all required state and federal documentation to make and maintain such election
and further has acted and will act in accordance with all rules and regulations
governing such election at all times up to the Closing, although the parties
acknowledge and agree that the Company's election will end upon the Closing.
(xiii) The Company will not be liable for any Tax under Code Section
1374 in connection with the deemed sale of the Company's assets (including the
assets of any qualified subchapter S subsidiary) caused by the Section
338(h)(10) Election. Neither the Company nor any qualified subchapter S
subsidiary of the Company has, in the past 10 years, (a) acquired assets from
another corporation in a transaction in which the Company's Tax basis for the
acquired assets was determined, in whole or in part, by reference to the Tax
basis of the acquired assets (or any other property) in the hands of the
transferor or (b) acquired the stock of any corporation which is a qualified
subchapter S subsidiary.
Section 2.17 Leases. Attached as Schedule 2.17 is a complete and accurate
list and description of all leases to which the Company is a party (as lessee or
lessor) (true and correct copies of which leases have been delivered or made
available by Stockholder to Purchaser) (each a "Lease" and collectively the
"Leases"). Each Lease is in full force and effect; all rents and additional
rents due to date on each such Lease have been paid; in each case, the lessee
has been in peaceable possession since the commencement of the original term of
such Lease and is not in default thereunder and no waiver, indulgence or
postponement of the lessee's obligations thereunder has been granted by the
lessor; and there exists no default or event of default or event, occurrence,
condition, act or contemplated future event (including the proposed purchase and
sale of the Stock hereunder) which, with the giving of notice or the lapse of
time, or both, would become a default or event of default under such Lease. The
Company has not violated any of the material terms or conditions under any such
Lease and, all of the covenants to be performed by any other party under any
such Lease have been fully performed in all material respects. The property
leased by the Company is in a state of good maintenance and repair and is
adequate and suitable for the purposes for which it is presently being used. No
consent or approval of any
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person is required under any Lease in connection with the consummation of the
transactions contemplated by this Agreement.
Section 2.18 Material Agreements; Employment Agreements. (i) Except as set
forth on Schedule 2.18 attached hereto, the Company neither has nor is bound by
(a) any agreement, contract or commitment relating to the employment of any
person by the Company, or any bonus, deferred compensation, pension, profit
sharing, stock option, employee stock purchase, retirement or other employee
benefit plan (collectively, the "Existing Company Employment Agreements"), (b)
any agreement, indenture or other instrument pursuant to which the Company has
borrowed money or guaranteed indebtedness for borrowed money or contains
restrictions with respect to the payment of dividends or any other distribution
in respect of its capital stock, (c) any agreement, contract or commitment
relating to capital expenditures, (d) any loan or advance to, or investment in,
any person or any agreement, contract or commitment relating to the making of
any such loan, advance or investment, (e) any guarantee or other contingent
liability in respect of any indebtedness or obligation of any person (other than
the endorsement of negotiable instruments for collection in the ordinary course
of business), (f) any management service, consulting or any other similar type
contract, (g) any agreement, contract or commitment limiting the ability of the
Company to engage in any line of business or to compete with any person, (h) any
agreement, contract or commitment not entered into in the ordinary course of
business which involves payment by the Company of $5,000 or more in any calendar
year and is not cancelable by the Company without penalty within 30 days or (i)
any agreement, contract or commitment which could reasonably be expected to have
a material adverse effect on the business, assets, liabilities, condition
(financial or otherwise) or results of operations of the Company (the
agreements, commitments and contracts referred to in clauses (a) through (i),
inclusive, hereinafter sometimes referred to individually as a "Contract" and
collectively as the "Contracts"). Each of the Contracts (true and correct copies
of which have been delivered or made available by the Stockholder to Purchaser)
is in full force and effect, and there exists no default or event of default or
occurrence, condition, act or event contemplated by this Agreement or within the
knowledge of the Stockholder likely or planned (including the proposed purchase
and sale of the Stock hereunder) which, with the giving of notice or the lapse
of time, or both, would become a default or event of default thereunder. The
Company has not violated any of the material terms or conditions of any of the
Contracts, and, to the Stockholder's knowledge, information and belief, all of
the covenants to be performed by any other party thereto have been fully
performed. Except as set forth on Schedule 2.7, no consent or approval of any
person is required under any Contract in connection with the consummation of the
transactions contemplated by this Agreement.
(ii) Except as set forth on Schedule 2.18, all of the Existing
Company Employment Agreements and all oral employment relationships to which the
Company is a party, if any, are "at-will" employment arrangements which may be
terminated at any time and without cost or penalty to the Company. No severance
policies, whether oral or written, exist with respect to any employee of the
Company.
Section 2.19 Compliance with Laws and Export Control Regulations. The
Company is in material compliance with all applicable laws, ordinances,
regulations, orders, judgments and decrees. All governmental approvals, permits
and licenses required for the Company to conduct
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its business as presently conducted have been obtained and are in full force and
effect, and the Company is in compliance with all such permits and licenses.
Except as set forth on Schedule 2.19, none of the Company's products or
underlying information or technology has been exported or otherwise distributed
by the Company(i) into Cuba, Iraq, Iran, Libya, North Korea, Sudan, Syria, or
any other country to which the United States has embargoed goods, or to a
national or resident of any of such countries; or (ii) to anyone on the United
States Treasury Department's list of Specially Designated Nationals or the U.S.
Commerce Department's Table of Deny Orders.
Section 2.20 Books and Records. Records of the proceedings of
incorporators, stockholders, directors and committees of directors of the
Company and stock records and stock ledgers of the Company which are maintained
by the Company have been made available to Purchaser or their representatives.
Except as set forth on Schedule 2.20, the records, books and ledgers maintained
by the Company accurately reflect all proceedings of, and actions taken by, the
stockholders and directors of the Company from the date of its incorporation to
and including the date of this Agreement. Written copies of the minutes of all
actions taken by the stockholders and directors after the date of this Agreement
through and including the Closing Date, duly certified by the Company's
President and Secretary, shall be supplied to the Purchaser prior to the
Closing. The Company does not have any of its business records, systems,
controls, data or information recorded, stored, maintained, operated or
otherwise wholly or partly dependent on or held by any means (including any
electronic, mechanical or photographic process, whether computerized or not)
which (including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control of the Company.
Section 2.21 Employment Relations. (a) The Company is in compliance with
all Federal, state or other applicable laws, domestic or foreign, respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and has not and is not engaged in any unfair labor practice;
(b) no unfair labor practice complaint against the Company is pending before the
National Labor Relations Board; (c) there is no labor strike, dispute, slowdown
or stoppage actually pending or, to the best knowledge, information and belief
of the Stockholder, threatened against or involving the Company; (d) no
representation question exists respecting the employees of the Company; (e) no
grievance exists; (f) no arbitration proceeding arising out of or under any
collective bargaining agreement is pending and no claim therefor has been
asserted; (g) no collective bargaining agreement exists or is currently being
negotiated by the Company; (h) the Company has not experienced any work stoppage
or any other labor difficulty during the last three years; and (i) to the best
knowledge, information and belief of Stockholder, no employee of the company has
filed a complaint with the Company's management or otherwise which alleges that
he or she has been subjected to any form of discrimination, including racial
discrimination, age discrimination, discrimination in violation of the Americans
With Disabilities Act or discrimination in violation of Title VII of the Civil
Rights Act of 1964 (i.e. sexual discrimination). Except for the Purchaser's
limited assumption, pursuant to the provisions of Section 3.6 hereof, of the
Company's obligations to make payment of the accrued vacation pay due to the six
employees identified on Schedule 3.6 hereof, the Company shall be solely
responsible for the payment of any termination, severance or accrued vacation
payments or benefits which may be or become due and owing to all of the
Company's employees. There has not been, and to the best knowledge, information
and belief of
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the Stockholder there will not be, any adverse change in relations with persons
who shall continue as employees of the Company after the Closing as a result of
the announcement or consummation of the transactions contemplated by this
Agreement.
Section 2.22 Customers and Supplier Relations. There has not been, and to
the best knowledge, information and belief of the Stockholder (after due and
careful inquiry) there will not be, any material adverse change in relations
with any of the Company's material customers or suppliers as a result of any
announcement or consummation of the transactions contemplated by this Agreement.
Section 2.23 Interests in Customers, Suppliers, Etc. None of the
Stockholder, the Company or the Company's officers or directors possess,
directly or indirectly, any financial interest in, or is a director, officer or
employee of, any person which is a customer, supplier, lessor, lessee, or
competitor or potential competitor of the Company. Ownership of securities of a
public company not in excess of 1% of any class of such securities shall not be
deemed to be a financial interest for purposes of this Section 2.23.
Section 2.24 Working Capital: Accounts Receivable, Work-in-Progress.
Except as otherwise provided in Schedule 2.24, the amount of all accounts
receivable and other debts due or recorded in the records and books of account
of the Company as being due to the Company as at the Closing Date will be good
and collectible in full within 120 days after the Closing Date; and none of such
accounts receivable or other debts is, or at the Closing Date will be, subject
to any counterclaim or set-off. Except with respect to the accounts receivable
of certain international customers who may take as long as nine months to pay
their obligations to the Company, the amount of all work-in-progress appearing
in the records and books of account of the Company as at the Closing Date will
be good and collectible in full prior to the earlier of (a) 120 days after the
Closing Date, or (b) 120 days after such amounts are billed; and none of the
accounts receivable or other debts arising therefrom will be subject to any
counterclaim or set-off. There has been no material adverse change since the
date of the Balance Sheet in the amount of accounts receivable or other debts
due the Company, or accounts payable of the Company, from that reflected in the
Balance Sheet.
Section 2.25 Bank Accounts, Powers of Attorney; Employees. (a) Set forth
on Schedule 2.25(a) attached hereto is an accurate and complete list showing (i)
the name and address of each bank in which the Company has an account or safe
deposit box, the number of any such account or any such box, and the names of
all persons authorized to draw thereon or to have access thereto, (ii) the names
of all persons, if any, holding powers of attorney from the Company and a
summary statement of the terms thereof.
(b) Set forth in Schedule 2.25(b) is a list of the names of all persons
whose compensation from the Company exceeds an annualized rate of $50,000,
together with the amount of such compensation and the terms thereof.
Section 2.26 Brokers. There is no broker or finder or other person who
would have any valid claim against the Stockholder or the Company for a fee,
commission or brokerage in connection with this Agreement or the transactions
contemplated hereby. The Stockholder shall
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be responsible for any fees and expenses of any broker, finder or other. person
engaged by or on behalf of the Stockholder or the Company or otherwise claiming
through any of them in connection with the transactions contemplated by this
Agreement.
Section 2.27 Environmental, Health, and Safety Matters.
(a) The Company has complied and is in compliance with all environmental,
health, and safety requirements.
(b) Without limiting the generality of the foregoing, the Company has
obtained and complied with, and is in compliance with, all permits, licenses and
other authorizations that are required pursuant to environmental, health, and
safety requirements for the occupation of its facilities and the operation of
its business.
(c) The Company has not received any written or oral notice, report or
other information regarding any actual or alleged violation of environmental,
health, and safety requirements, or any liabilities or potential liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise), including
any investigatory, remedial or corrective obligations, relating to it or its
facilities arising under environmental, health, and safety requirements.
(d) None of the following exists at any property or facility owned or
operated by the Company: (1) underground storage tanks, (2) asbestos-containing
material in any form or condition, (3) materials or equipment containing
polychlorinated biphenyls, or (4) landfills, surface impoundments, or disposal
areas.
(e) The Company has not treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled, or released any substance,
including without limitation any hazardous substance, or owned or operated any
property or facility (and no such property or facility is contaminated by any
such substance) in a manner that has given or would give rise to liabilities,
including any liability for response costs, corrective action costs, personal
injury, property damage, natural resources damages or attorney fees, pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), the Solid Waste Disposal Act, as amended ("SWDA")
or any environmental, health and safety requirements.
(f) Neither this Agreement nor the consummation of the transaction that is
the subject of this Agreement will result in any obligations for site
investigation or cleanup, or notification to or consent of government agencies
or third parties, pursuant to any of the so-called "transaction-triggered" or
"responsible property transfer" environmental, health, and safety requirements.
(g) The Company has not either expressly or by operation of law, assumed
or undertaken any liability, including without limitation any obligation for
corrective or remedial action, of any other person relating to environmental
health and safety requirements.
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(h) No facts, events or conditions relating to the past or present
facilities, properties or operations of the Company will prevent, hinder or
limit continued compliance with environmental, health, and safety requirements,
give rise to any investigatory, remedial or corrective obligations pursuant to
environmental, health, and safety requirements, or give rise to any other
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise)
pursuant to environmental, health, and safety requirements, including without
limitation any relating to onsite or offsite releases or threatened releases of
hazardous materials, substances or wastes, personal injury, property damage or
natural resources damage.
Section 2.28 Year 2000 Compliance. None of the computer software, computer
firmware, computer hardware (whether general or special purpose) or other
similar or related items of automated computerized or software systems that are
used or relied on by the Company in the conduct of its business and none of the
products and services sold, licensed, rendered or otherwise provided by the
Company in the conduct of its business will malfunction, cease to function,
generate incorrect data or produce incorrect results when processing, providing
or receiving (i) date-related data from, into and between the twentieth and
twenty-first centuries or (ii) date-related data in connection with any valid
date in the twentieth and twenty-first centuries.
The Company has not made any representations or warranties regarding
the ability of any product or service sold, licensed, rendered, or otherwise
provided by the Company in the conduct of its business to operate without
malfunction, to operate without ceasing to function, to generate correct data or
to produce correct results when processing, providing or receiving (i)
date-related data from, into and between the twentieth and twenty-first
centuries and (ii) date-related data in connection with any valid date in the
twentieth and twenty-first centuries.
Section 2.29 Disclosure. None of this Agreement, the Financial Statements
or any Exhibit, Schedule, document or certificate delivered in accordance with
the terms hereof, contains any untrue statement of a material fact, or omits any
statement of a material fact necessary in order to make the statements contained
herein or therein not misleading. Except for general economic conditions, there
is no fact known to the Stockholder which materially and adversely affects the
business, results, or operations, prospects or condition, financial or
otherwise, of the Company which has not been set forth in this Agreement, in the
Financial Statements or in the Exhibits, Schedules or certificates or statements
in writing furnished to Purchaser by or on behalf of the Stockholder or by any
of the Company's directors or officers in connection with the transactions
contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 3. Representations and Warranties of Purchaser. The Purchaser
represents and warrants to the Stockholder as follows:
Section 3.1 Organization. The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of New Jersey
and has the full power
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and authority to carry on its business as it is now being conducted and to
engage in the transactions contemplated hereby.
Section 3.2 Purchaser's Authority. The Purchaser has full power and
authority to make, execute, deliver and perform this Agreement and to consummate
the transactions contemplated hereby. All actions necessary to be taken by or on
the part of the Purchaser to make, execute, deliver and perform this Agreement
and consummate the transactions contemplated hereby have been duly authorized
and approved by all required corporate action of the Purchaser and have been
validly taken. This Agreement has been duly and validly executed and delivered
by the Purchaser and, assuming due execution and delivery by the Stockholder,
constitutes a legal, valid and binding agreement of the Purchaser enforceable
against the Purchaser in accordance with its terms, except to the extent that
its enforceability may be subject to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity.
Section 3.3 Consents and Approvals; No Violation. Neither the execution,
delivery and performance of this Agreement and the documents and instruments
contemplated hereby by Purchaser nor the consummation by Purchaser of the
transactions contemplated hereby (i) conflict with or will result in any breach
of any provision of the Certificate of Incorporation or By-Laws (or other
similar governing documents) of Purchaser, (ii) require any approval, except for
the approval of the Boards of Directors of Purchaser, (iii) constitute a
violation of, or conflict with, or result in a breach of, or constitute a
default under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, contract, agreement, lease or other instrument or
obligation of any kind to which Purchaser is a party or by which it may be
bound, or (iv) violate any order, writ, injunction, judgment, decree, law,
statute, rule, regulation or governmental permit or license applicable to
Purchaser or by which it is bound or to which it is subject.
Section 3.4 Acquisition for Investment. Purchaser will acquire the Stock
from the Stockholder for its own account for investment and not with a view
toward any distribution thereof.
Section 3.5 Brokers. Except for the fees owed by Purchaser to Catalyst
Financial Corp. ("Catalyst"), there is no broker or finder or other Person who
would have any valid claim against Purchaser for a fee, commission or brokerage
in connection with this Agreement or the transactions contemplated hereby as a
result of any agreement, understanding or action by Purchaser. Purchaser shall
be responsible for any fees and expenses of Catalyst and any other broker,
finder or other person engaged by or on its behalf or otherwise claiming through
Purchaser in connection with the transactions contemplated by this Agreement.
Section 3.6 Limited Payment of Accrued Vacation Pay to Company Employees.
Schedule 3.6 hereof identifies the six employees of the Company who shall
continue to be employed by the Company, or who shall be employed by the
Purchaser on and after the Closing Date (the "Continuing Employees"). The
Purchaser shall assume, to the extent set forth on Schedule 3.6, the payment of
the vacation pay which has accrued to each of the Continuing Employees during
their employment by the Company. Except for the Purchaser's limited
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assumption and payment of such accrued vacation pay, the Company shall be solely
responsible for the payment of any additional vacation pay which may be due and
owing to the Continuing Employees as a result of their employment by the
Company.
ARTICLE IV
OTHER AGREEMENTS
Section 4.1 Conduct of Business of the Company Prior to Closing. Except as
permitted or required by this Agreement, during the period from the date of this
Agreement to the Closing Date, the Stockholder shall cause the Company to
conduct its business and operations only according to its ordinary and usual
course of business consistent with past practice and to use its best efforts to
preserve intact its business organization, keep available the services of its
employees and to maintain satisfactory relationships with licensors, suppliers,
distributors, customers and others having business relationships with it.
Without limiting the foregoing, pending the Closing Date and except as
contemplated by this Agreement or as may be first approved in writing by
Purchaser, the Stockholder agrees that the Company shall (a) maintain its
Certificate of Incorporation and By-Laws (or other similar governing documents)
in their form on the date of this Agreement, (b) shall not (x) sell, transfer or
otherwise dispose of or abandon any of its assets or properties or (y) purchase
or otherwise acquire any assets or properties, except in the ordinary course of
business (for purposes of this clause (b), the acquisition or disposition of any
single asset having a value of $5,000 or more shall be deemed to be not in the
ordinary course of business), (c) shall not incur any liability or obligation of
any nature (whether accrued, absolute, contingent or otherwise), except in the
ordinary course of business, (d) shall not increase or decrease the compensation
payable or to become payable by the Company to any officer, employee or agent of
the Company other than in the ordinary course of business consistent with past
practice, or increase or decrease the rate or term of any bonus, insurance,
pension or other employee benefit plan, payment, or arrangement made to, for or
with any such officers, employees or agents (unless already accrued), (e) shall
not make any bonus or profit sharing distribution or payment of any kind, (f)
shall not enter into any agreement, contract, commitment or transaction
(including, without limitation, any borrowing, capital expenditure or capital
financing) except agreements, contracts, commitments or transactions entered
into in the ordinary course of business consistent with past practice, (g) shall
not make any capital expenditure or commitment therefor, except in the ordinary
course of business, (h) shall not violate, or commit a breach of or a default
under, any Contract or Lease, (i) shall not write-off as uncollectible any notes
or accounts receivable, except write-offs in the ordinary course of business
charged to applicable reserves, (j) shall not create any security interest or
Lien on any of its assets or properties other than Permitted Liens, (k) shall
not cancel or waive any claims or rights of material value, (l) shall not make
any change in any method of accounting or auditing practice, (m) shall not
create, incur or assume any indebtedness for money borrowed or increase any
indebtedness of the Company for money borrowed, (n) shall not assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any person, (o) shall not
declare or pay any dividend or distributions with respect to the Stock, and (p)
shall not agree, whether or not in writing, to do any of the foregoing. The
Stockholder agrees not to take any action, or omit to take any action, which
would cause the
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representations and warranties contained in Article II to be untrue or
incorrect. During the period from the date of this Agreement to the Closing
Date, the Stockholder shall cause the Company (i) to confer on a regular and
frequent basis with one or more designated representatives of Purchaser to
report material operational matters and to report the general status of the
ongoing operations of the Company, (ii) to notify Purchaser of any unexpected
emergency or other change in the normal course of the business or in the
operation of the business of the Company and of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), adjudicatory proceedings, budget meetings or submissions
involving the Company, and (iii) to keep Purchaser fully informed of such events
and permit its representatives prompt access to all materials prepared in
connection therewith.
Section 4.2 Exclusive Dealing. During the period from the date of this
Agreement to the Closing Date, the Stockholder shall not, and shall cause the
Company to not take any action to, directly or indirectly, encourage, initiate
or engage in discussions or negotiations with, or provide any information to,
any person other than Purchaser and its affiliates and representatives,
concerning any purchase of the Stock or any merger or sale of substantial assets
or similar transaction involving the Company.
Section 4.3 Review of the Company. The Purchaser may, prior to the Closing
Date, either directly or through its representatives, review and investigate the
properties, books and records of the Company and its financial and legal
condition to the extent it deems necessary or advisable to familiarize itself
with the properties and business and other matters of the Company (such review
and investigation is hereinafter referred to as the "Due Diligence Review");
such Due Diligence Review shall not, however, affect the right of Purchaser to
rely upon (i) the representations and warranties made by the Stockholder in this
Agreement, and (ii) all information contained in the Exhibits, Schedules and
certificates or statements in writing furnished prior to or on the Closing Date
to Purchaser by or on behalf of the Stockholder or by any of the Company's
directors or officers in connection with the transactions contemplated by this
Agreement. The Stockholder shall cause the Company to permit Purchaser and its
representatives to have full access (during business hours, upon reasonable
request with notice) to the premises and to all the books and records of the
Company and shall cause the Company to furnish Purchaser with such financial and
operating data and other information with respect to the business and properties
of the Company as Purchaser shall from time to time reasonably request. The
Purchaser's Due Diligence Review shall be conducted in a manner which shall not,
in any way, disrupt the business of the Company. Before the Purchaser may
commence its Due Diligence Review, the Stockholder shall set forth the
reasonable parameters and rules which shall govern Purchaser's conduct of the
Due Diligence Review and Purchaser's requirements of discretion and
confidentiality pertaining thereto. The Purchaser shall strictly follow the
Stockholder's parameters and rules. In the event of termination of this
Agreement, Purchaser shall keep confidential any information obtained from the
Stockholder or the Company concerning the properties, operations and business of
the Company (unless readily ascertainable from public or published information
or trade sources) until the same becomes ascertainable without breach by
Purchaser of its obligations hereunder and shall, upon the written request of
the Stockholder, return to the Company (whether obtained prior to or after
execution of this Agreement) any schedules, statements, documents or other
written information obtained in connection therewith. The Stockholder shall
deliver or cause to be delivered to Purchaser on the
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Closing Date, and at such other times and places as shall be reasonably agreed
upon, such additional instruments, documents, certificates and opinions as
Purchaser and its counsel may reasonably request for the purpose of (a)
verifying the information set forth in this Agreement and (b) consummating or
evidencing the transactions contemplated by this Agreement.
Section 4.4 Public Announcement. Except as otherwise required by law or
regulation and except as may be required under the rules of any self-regulatory
organization with jurisdiction over either party, no party hereto shall issue or
make any press release or any other public disclosure or announcement concerning
the transactions contemplated by this Agreement without the prior written
consent of the other party hereto as to the timing, content and manner of
presentation of such press release or public disclosure, which consent shall not
be unreasonably withheld. The foregoing limitations on public announcements
shall not apply to any public announcement required to be made by applicable law
and no consent for any such announcement shall be required, provided, however,
that the Stockholder shall be entitled to review any such announcement prior to
its issuance or release to the public.
Section 4.5 Tax Matters. The following provisions shall govern the
allocation of responsibility as between Purchaser and Stockholder for certain
tax matters following the Closing Date:
(a) Tax Periods Ending on or Before the Closing Date. Purchaser shall
prepare or cause to be prepared and file or cause to be filed all tax returns
for the Company for all periods ending on or prior to the Closing Date which are
filed after the Closing Date. Purchaser shall permit Stockholder to review and
comment on each such tax return described in the preceding sentence prior to
filing. Stockholder shall reimburse Purchaser for Taxes of the Company with
respect to such periods within fifteen (15) days after payment by Purchaser or
the Company of such Taxes to the extent such Taxes are not reflected in the
reserve for tax liability shown on the face of the Balance Sheet.
(b) Tax Periods Beginning Before and Ending After the Closing Date.
Purchaser shall prepare or cause to be prepared and file or cause to be filed
any tax returns of the Company for tax periods which begin before the Closing
Date and end after the Closing Date. Stockholder shall pay to Purchaser within
fifteen (15) days after the date on which Taxes are paid with respect to such
periods an amount equal to the portion of such Taxes which relates to the
portion of such taxable period ending on the Closing Date to the extent such
Taxes are not reflected in the reserve for tax liability shown on the face of
the Balance Sheet. For purposes of this Section, in the case of any Taxes that
are imposed on a periodic basis and are payable for a taxable period that
includes (but does not end on) the Closing Date, the portion of such Tax which
relates to the portion of such taxable period ending on the Closing Date shall
(x) in the case of any Taxes other than Taxes based upon or related to income or
receipts, be deemed to be the amount of such Tax for the entire taxable period
multiplied by a fraction the numerator of which is the number of days in the
taxable period ending on the Closing Date and the denominator of which is the
number of days in the entire taxable period, and (y) in the case of any Tax
based upon or related to income or receipts be deemed equal to the amount which
would be payable if the relevant taxable period ended on the Closing Date. Any
credits relating to a taxable period that begins before and ends after the
Closing Date shall be taken into account as though the relevant taxable
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period ended on the Closing Date. All determinations necessary to give effect to
the foregoing allocations shall be made in a manner consistent with prior
practice of the Company.
(c) Cooperation on Tax Matters.
(i) Purchaser and Stockholder shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the filing of
tax returns pursuant to this Section and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the retention
and (upon the other party's request) the provision of records and information
which are reasonably relevant to any such audit, litigation or other proceeding
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.
Stockholder agrees (A) to retain all books and records with respect to Tax
matters pertinent to Company relating to any taxable period beginning before the
Closing Date until the expiration of the statute of limitations (and, to the
extent notified by Purchaser or Stockholder, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (B) to give the other party
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if the other party so requests, the Company or
Stockholder, as the case may be, shall allow the other party to take possession
of such books and records.
(ii) Purchaser and Stockholder further agree, upon request, to use
their best efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
(iii) Purchaser and Stockholder further agree, upon request, to
provide the other party with all information that either party may be required
to report pursuant to Section 6043 of the Code and all Treasury Department
Regulations promulgated thereunder.
(d) Tax Sharing Agreements. All tax sharing agreements or similar
agreements with respect to or involving the Company shall be terminated as of
the Closing Date and, after the Closing Date, the Company shall not be bound
thereby or have any liability thereunder.
(e) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such taxes and fees (including any penalties and
interest) incurred in connection with this Agreement and the transactions
contemplated hereunder shall be paid by Stockholder when due, and Stockholder
will, at his own expense, file all necessary tax returns and other documentation
with respect to all such transfer, documentary, sales, use, stamp, registration
and other taxes and fees, and, if required by applicable law, Purchaser and/or
the Company will join in the execution of any such tax returns and other
documentation.
(f) Controversies. Purchaser shall have the sole right to control any
audit or examination or other proceeding by any taxing authority (a
"Proceeding"), initiate any claim for refund or amend any tax return, and
contest, resolve and defend against any assessment for additional taxes, notice
of tax deficiency or other adjustment of taxes of, or relating to, the
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Company; provided, however, that neither Purchaser nor its affiliates shall
enter into any settlement of any such contest or otherwise compromise any issue
that would require payment by the Stockholder of any amount under Section 9.2
with respect to Taxes, without the prior written consent of the Stockholder,
which consent shall not be unreasonably withheld. In the case of a Proceeding
with respect to Taxes for which Stockholder may be liable pursuant to this
Agreement, or as a result of being a Stockholder of the Company prior to the
Closing Date, Purchaser shall promptly inform Stockholder and shall afford
Stockholder, at Stockholder's expense, the opportunity to participate with the
Purchaser in the conduct of such Proceeding. If requested by Purchaser,
Stockholder shall provide to Purchaser an opinion in form and content reasonably
acceptable to Purchaser, that there is substantial authority for Stockholder's
position with respect to such Proceeding.
(g) Procedural Matters. Purchaser shall promptly forward to the
Stockholder all written notifications and other communications from any taxing
authority received by the Company relating to any tax audit or other proceeding
that would, if successful, result in an indemnification payment pursuant to
Section 9.2; provided, however, that the failure to comply with this provision
shall not affect Purchaser's right to indemnification under this Agreement.
Section 4.6 Execution of Various Agreements. At the Closing, Stockholder
and Purchaser will enter into the Consulting Agreement. At the Closing,
Stockholder will cause William Lambert to enter into the Employment Agreement,
and Purchaser hereby agrees to enter into such Employment Agreement.
Section 4.7 Termination of Real Estate Lease. On or before the Closing
Date, the real estate lease between the Company and Stockholder dated February
29, 1990 ("Old Lease") will be terminated and be of no further force and effect
without any further liability on the part of the Company. At the Closing, the
Company, at its option, may enter into a new lease with Stockholder covering the
premises presently occupied by the Company under the Old Lease. After the
Closing, Purchaser shall have the right at any time to transfer the
manufacturing operations of the Company to Purchaser's facilities in Oakland,
New Jersey or elsewhere. Purchaser intends to continue the Company's sales
operations out of the existing premises on an ongoing basis as determined by
Purchaser.
ARTICLE V
RESTRICTIVE COVENANTS
Section 5.1 Restrictive Covenant. For a period of two years from and after
the Closing Date, Stockholder agrees that he will not, directly or indirectly,
on his own behalf or on behalf of any other person, firm, corporation or other
entity, whether as an employee, owner, agent, consultant or otherwise, engage in
any business which is competitive with the business of the Company within the
United States. The provisions of this Section 5.1 will not be deemed breached
merely because the Stockholder owns 1% or less of the outstanding common stock
of a corporation, if, at the time of its acquisition by Stockholder, such stock
is listed on a national securities exchange, is reported on Nasdaq, or is
regularly traded in the over-the-counter market by a member of a national
securities exchange. The Stockholder also owns and operates a
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separate company which specializes in the service of military specification
packaging. Purchaser acknowledges that the business purpose and activities of
Stockholder's military specification packaging company (as it is practiced at
the date of this Agreement) is not competitive with the business of the Company.
Therefore, Stockholder's continued ownership and operation of such business is
not and shall not be a violation of the provisions of this Section 5.1.
Section 5.2 Confidentiality. Stockholder agrees that he will not at any
time disclose to anyone any confidential information or trade secrets of the
Company or utilize such confidential information or trade secrets for his own
benefit, or for the benefit of third parties and all memoranda, notes, records
or other documents compiled by him or made available to him pertaining to the
business of the Company shall be the property of the Company and shall be
delivered to the Company on the termination of his consulting arrangement with
Purchaser, or at any other time, upon request. The term "confidential
information or trade secrets" does not include information which becomes
generally available to the public other than by breach of this provision.
Section 5.3 Remedies.
(a) If Stockholder commits a breach, or Purchaser has reasonable grounds
to believe that Stockholder is about to commit a breach of any of the provisions
of Section 5.1 or Section 5.2, Purchaser and/or the Company shall have the right
to have such provisions specifically enforced by any court having equity
jurisdiction without being required to post bond or other security and without
having to prove the inadequacy of the available remedies at law, it being
acknowledged and agreed that any such breach or threatened breach will cause
irreparable injury to the Purchaser and the Company and that money damages will
not provide an adequate remedy to the Purchaser and the Company. In addition,
the Purchaser and the Company may take all such other actions and shall have all
such other remedies available to either of them under law or in equity and shall
be entitled to such damages as either of them can show it has sustained by
reason of such breach.
(b) The parties acknowledge that the type and periods of restriction
imposed in the provisions of Section 5.1 and Section 5.2 are fair and reasonable
and are reasonably required for the protection of the legitimate interests of
Purchaser and the Company and the confidential information, proprietary property
and goodwill associated with the business of the Company, and that the time,
scope, geographic area and other provisions of this Article V have been
specifically negotiated by the parties. If the covenants in Section 5.1 or
Section 5.2, or any part thereof is hereafter construed to be invalid or
unenforceable, the same shall not affect the remainder of the covenant or
covenants, which shall be given full effect, without regard to the invalid
portions. If the covenants contained in Section 5.1 or Section 5.2, or any part
thereof, is held to be unenforceable because of the duration or geographic area
of such provision, the parties agree that the court making such determination
shall have the power to reduce the duration and/or area of such provision and,
in its reduced form, such provision shall then be enforceable. The parties
hereto intend to and hereby confer jurisdiction to enforce the covenants
contained in Section 5.1 or Section 5.2 upon the courts of any state or other
jurisdiction within the geographical area of such covenants in which a breach or
alleged breach of a covenant has been alleged to have occurred. If the courts of
any one or more of such states or other jurisdictions shall hold such
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covenants unenforceable for any reason, such determination shall not bar or in
any way affect the right of the Purchaser or the Company to the relief provided
above in the courts of any other states or jurisdictions within the geographical
area of such covenants as to breaches of such covenants therein, such covenants
as they relate to each other state or jurisdiction being, for this purpose,
severable into diverse and independent covenants.
ARTICLE VI
CONDITIONS TO THE STOCKHOLDER'S OBLIGATIONS
Section 6.1 Conditions to the Stockholder's Obligations. The sale of the
Stock by the Stockholder on the Closing Date is conditioned upon the
satisfaction or waiver by the Stockholder, at or prior to the Closing, of the
following conditions:
Section 6.2 Truth of Representations and Warranties. The representations
and warranties of Purchaser contained in this Agreement shall be true and
correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date.
Section 6.3 Performance of Agreements. Each and all of the agreements of
Purchaser to be performed at or before the Closing pursuant to this Agreement
shall have been duly performed.
Section 6.4 No Governmental Prohibition; Approvals. No Government Entity
shall have enacted, issued, promulgated or enforced any statute, rule,
regulation or other order which shall then be in effect restraining or
prohibiting the sale of the Stock. All approvals and other consents and
approvals, if any, necessary to permit the consummation of the transactions
contemplated by this Agreement shall have been received.
Section 6.5 Opinion of Purchaser's Counsel. The Stockholder shall have
received an opinion of Hall Dickler Kent Friedman & Wood LLP, counsel to
Purchaser, dated the Closing Date, to the effect set forth in Schedule 6.5
attached hereto.
Section 6.6 No Litigation Threatened. No action or proceedings shall have
been instituted or, to the knowledge of Purchaser, threatened before a court or
other governmental body or by any public authority to restrain or prohibit any
of the transactions contemplated hereby.
Section 6.7 Stockholder Consulting Agreement. The Company shall have
executed and delivered to the Stockholder the Consulting Agreement.
Section 6.8 Employment Agreement. The Purchaser shall have executed and
delivered to William Lambert the Employment Agreement.
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Section 6.9 Closing Certificate. At the Closing, Purchaser shall deliver
to Stockholder a certificate executed on behalf of Purchaser stating that the
conditions set forth in Sections 6.1 and 6.2 of this Agreement have been
satisfied.
ARTICLE VII
CONDITIONS TO PURCHASER'S OBLIGATIONS
Section 7. Conditions to Purchaser's Obligations. The purchase of the
Stock by Purchaser on the Closing Date is conditioned upon the satisfaction or
waiver by Purchaser, at or prior to the Closing, of the following conditions:
Section 7.1 No Material Adverse Change. Prior to the Closing Date, there
shall be no material adverse change in the business, assets, liabilities,
condition (financial or otherwise) or results of operations of the Company,
whether as a result of any legislative or regulatory change, revocation of any
license or rights to do business, fire, explosion, accident, casualty, labor
trouble, flood, drought, riot, storm, condemnation or act of God or other public
force or otherwise.
Section 7.2 Truth of Representations and Warranties. The representations
and warranties of the Stockholder contained in this Agreement shall be true and
correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date.
Section 7.3 Performance of Agreements. Each and all of the agreements of
the Stockholder to be performed at or before the Closing pursuant to the terms
hereof shall have been duly performed.
Section 7.4 No Litigation Threatened. No action or proceedings shall have
been instituted or, to the best knowledge, information and belief of the
Stockholder, threatened before a court or other government body or by any public
authority to restrain or prohibit any of the transactions contemplated hereby.
Section 7.5 No Governmental Prohibition; Approvals. No Government Entity
shall have enacted, issued, promulgated or enforced any statute, rule,
regulation or other order which shall then be in effect restraining or
prohibiting the sale of the Stock. All approvals and other consents and
approvals, if any, necessary to permit the consummation of the transactions
contemplated by this Agreement shall have been received.
Section 7.6 Opinion of Stockholder's Counsel. Purchaser shall have
received the opinion of Stanley J. Yates, Esq., counsel to the Stockholder,
dated the Closing Date, in the form set forth in Schedule 7.6 attached hereto.
Section 7.7 Stockholder Consulting Agreement. Stockholder shall have
executed and delivered to the Company the Consulting Agreement.
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Section 7.8 Employment Agreement. William Lambert shall have executed and
delivered to the Purchaser the Employment Agreement.
Section 7.9 Good Standing and Other Certificates. Stockholder shall have
delivered to Purchaser (a) copies of the Company's Certificate of Incorporation,
including all amendments thereto, certified by the Secretary of State or other
appropriate official of the State of California, (b) a certificate from the
Secretary of State or other appropriate official of the State of California to
the effect that the Company is in good standing and listing all charter
documents of the Company on file, and (c) a copy of the Certificate of
Incorporations and By-Laws of the Company, certified by the Secretary of the
Company as being true and correct and in effect on the Closing Date.
Section 7.10 Leases. The Old Lease shall have been terminated.
Section 7.11 Closing Certificate. At the Closing, Stockholder shall
deliver to Purchaser a certificate executed on behalf of the Company and
Stockholder stating that the conditions set forth in Sections 7.2 and 7.3 have
been satisfied.
ARTICLE VIII
TERMINATION AND DEFAULT
Section 8.1 Termination. This Agreement may be terminated at any time on
or before the Closing Date (a) by mutual written agreement of all of the parties
hereto, (b) by the Stockholder or Purchaser if the Closing Date shall not have
occurred on or before May 3, 2000, (c) by Purchaser, by written notice to the
Stockholder, if there has been a material violation or breach by the Stockholder
of any agreement, representation or warranty contained in this Agreement which
has rendered the satisfaction of any condition to the obligations of Purchaser
specified in Article VII hereof impossible and such violation or breach has not
been waived by Purchaser or cured by the Stockholder within 5 days after written
notice of such violation or breach, or (d) by the Stockholder, by written notice
to Purchaser, if there has been a material violation or breach by Purchaser of
any agreement, representation or warranty contained in this Agreement which has
rendered the satisfaction of any condition to the obligations of the Stockholder
specified in Article VI hereof impossible and such violation or breach has not
been waived by the Stockholder or cured by Purchaser within 5 days after written
notice of such violation or breach.
Section 8.2 Procedure and Effect of Termination. In the event of
termination of this Agreement pursuant to clause (b) of Section 8.1, written
notice thereof shall forthwith be given by the terminating party to the other
party and this Agreement shall terminate; and in the event of termination of
this Agreement pursuant to clause (a), (c), (d) of Section 8.1, this Agreement
shall terminate, and in each case the transactions contemplated hereby shall be
abandoned, without further action by any of the parties hereto, and there shall
be no liability on the part of the Stockholder or the Purchaser, except that the
foregoing shall not relieve any party from liability for damages actually
incurred as a result of a breach by it of this Agreement.
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ARTICLE IX
SURVIVAL OF COVENANTS AND REPRESENTATIONS; INDEMNIFICATION
Section 9.1 Survival of Covenants and Representations. The respective
covenants, representations and warranties of the parties hereto contained in
this Agreement shall survive the purchase and sale of the Stock contemplated
hereby irrespective of any due diligence undertaken by Purchaser with respect to
the business of the Company.
Section 9.2 Indemnification of Purchaser. The Stockholder agrees to
defend, indemnify and hold harmless Purchaser and the Company and their
respective directors, officers and agents (each a "Purchaser Indemnitee") from
and against, and to reimburse any Purchaser Indemnitee with respect to any and
all damage, loss, claim, obligation, liability, costs (including reasonable
attorneys' fees, disbursements and expenses), expenses and deficiency
(collectively, "Loss and Expense") asserted against or incurred by a Purchaser
Indemnitee by reason of, arising out of, or in connection with (i) the failure
of any representation or warranty made in or pursuant to this Agreement by the
Stockholder to be true and correct in all respects as of the date of this
Agreement and as of the Closing Date, and (ii) any breach or nonfulfillment of
any covenant or obligation of the Stockholder under this Agreement.
Section 9.3 Indemnification of the Stockholder. Purchaser agrees to
defend, indemnify and hold harmless the Stockholder from and against, and to
reimburse Stockholder with respect to any and all Loss and Expense suffered by
reason of, arising out of or resulting from (i) the failure of any
representation or warranty made in or pursuant to this Agreement by Purchaser to
be true and correct in all respects as of the date of this Agreement and as of
the Closing Date; (ii) any breach or nonfulfillment of any covenant or
obligation of Purchaser under this Agreement; and (iii) the business conducted
by the Company after the Closing Date, provided, however, that Purchaser's
entitlement to indemnification with respect to any Loss and Expense resulting
from any order for the purchase of any of the Company's products, or for the
performance of any services by the Company which existed prior to the Closing
Date and which shall not have been fulfilled on or prior to the Closing Date
shall be based upon an apportionment of liabilities between the pre-Closing and
post-Closing managements of the Company with respect to the cause or causes of
such Loss and Expense).
Section 9.4 Indemnification Procedures.
9.4.1 Non-Third Party Claims. In the event that any person entitled
to indemnification under this Agreement (an "Indemnified Party") asserts a claim
for indemnification which does not involve a Third Party Claim (as defined in
Section 9.4.2), against which a person is required to provide indemnification
under this Agreement (an "Indemnifying Party"), the Indemnifying Party may
acknowledge and agree by notice to the Indemnified Party in writing to satisfy
such claim within 30 days of receipt of notice of such claim from the
Indemnified Party. In the event that the Indemnifying Party disputes such claim,
the Indemnifying Party shall provide written notice of such dispute to the
Indemnified Party
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within 30 days of receipt of notice of such claim, setting forth a reasonable
basis of such dispute. In the event that the Indemnifying Party shall fail to
provide written notice to the Indemnified Party within 30 days of receipt of
notice from the Indemnified Party that the Indemnifying Party either
acknowledges and agrees to pay such claim or disputes to such claim, the
Indemnifying Party shall be deemed to have acknowledged and agreed to pay such
claim in full and to have waived any right to dispute such claim. Once the
Indemnifying Party has acknowledged and agreed to pay any claim pursuant to this
Section 9.4.1, or once any dispute under this Section 9.4.1 has been finally
resolved in favor of indemnification by a court or other tribunal of competent
jurisdiction, the Indemnifying Party shall pay the amount of such claim to the
Indemnified Party within 10 days of the date of acknowledgment or resolution, as
the case may be, to such account and in such manner as is designated in writing
by the Indemnified Party.
9.4.2 Third Party Claims.
(a) In the event that any Indemnified Party asserts a claim for
indemnification or receives notice of the assertion of any claim or of the
commencement of any action or proceeding by any person who is not a party to
this Agreement or an affiliate of a party to this Agreement (a "Third Party
Claim") against an Indemnifying Party, the Indemnified Party shall give written
notice together with a statement specifying the basis of such Third Party Claim
to the Indemnifying Party within 20 days after learning of such claim (or within
such shorter time as may be necessary to give the Indemnifying Party a
reasonable opportunity to respond to such claim). The Indemnifying Party shall
have the right, upon written notice to the Indemnified Party (the "Defense
Notice") within 20 days after receipt from the Indemnified Party of notice of
such Third Party Claim which notice by the Indemnifying Party shall specify the
counsel it will appoint to defend such claim ("Defense Counsel"), to conduct at
its expense the defense against such Third Party Claim in its own name, or if
necessary in the name of the Indemnified Party; provided, however, that the
Indemnified Party shall have the right to approve the Defense counsel, which
approval shall not be unreasonably withheld or delayed.
(b) In the event that the Indemnifying Party, within such 20 day
period, fails to give the Defense Notice, the Indemnified Party shall have the
right to conduct the defense and to compromise and settle such Third Party
Claim, without prior consent of the Indemnifying Party and the Indemnifying
Party will be liable for any Loss and Expense (including any settlement amounts)
paid or incurred in connection therewith.
(c) In the event that the Indemnifying Party disputes the claim for
indemnification against it, such Indemnifying Party shall notify the Indemnified
Party to such effect within 20 days after learning of such claim (or within such
shorter time as may be necessary to give the Indemnified Party a reasonable
opportunity to respond to such Third Party Claim). In such event the Indemnified
party shall have the right to conduct the defense to compromise and settle such
Third Party Claim, without prior consent of the Indemnifying Party, and, once
such dispute has been finally resolved in favor of indemnification by a court or
other tribunal of competent jurisdiction or by mutual agreement of the
Indemnified and Indemnifying Party, the Indemnifying Party shall within 10 days
of the date of such resolution or agreement, pay to the Indemnified Party any
Loss or Expense (including any settlement amounts) paid or incurred by the
Indemnified Party in connection with such Third Party Claim.
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(d) In the event that the Indemnifying Party does deliver a Defense
Notice and thereby elects to conduct the defense of the Third Party Claim, the
Indemnifying Party shall be entitled to have the exclusive control over the
defense of the Third Party Claim and the Indemnified Party will cooperate in
good faith with and make available to the Indemnifying Party such assistance and
materials as it may reasonably request, all at its expense to participate in the
defense assisted by counsel of its own choosing. The Indemnifying Party will not
settle the Third Party Claim or cease to defend against any Third Party Claim as
to which it has delivered a Defense Notice, without the prior written consent of
the Indemnified Party, and except as set hereinafter set forth such consent will
not be unreasonably withheld or delayed. The Indemnified Party may withhold its
consent if as a result of such settlement or cessation of defense, (i)
injunctive relief or specific performance would be imposed against the
Indemnified Party, or (ii) such settlement or cessation would lead to liability
or create any financial or other obligation on the part of the Indemnified Party
for which the Indemnified Party is not entitled to indemnification hereunder.
(e) If an Indemnified Party refuses to consent to a bona fide offer
of settlement which provides for a full release of the Indemnified Party and its
affiliates relating to the claims underlying the offer of settlement and solely
for a monetary payment which the Indemnifying Party wishes to accept, the
Indemnified Party may continue to pursue such matter, free of any participation
by the Indemnifying Party, at the sole expense of the Indemnified Party. In such
an event, the obligation of the Indemnifying Party shall be limited to the
amount of the offer of settlement which the Indemnified Party refused to accept
plus the reasonable costs and expenses of the Indemnified Party incurred prior
to the date the Indemnifying Party notified the Indemnified Party of the offer
of settlement.
(f) Notwithstanding clause (d) above, the Indemnifying Party shall
not be entitled to control, but may participate in, and the Indemnified Party
shall be entitled to have sole control over, the defense or settlement of any
claim (i) that seeks a temporary restraining order, a preliminary or permanent
injunction or specific performance against the Indemnified Party, (ii) to the
extent such claim involves criminal allegations against the Indemnified Party,
(iii) to the extent such Third Party Claim involves criminal allegations against
the Indemnified Party or (iv) if such Third Party Claim would impose liability
on the part of the Indemnified Party for which the Indemnified Party is not
entitled to indemnification hereunder. In such an event, the Indemnifying Party
will still have all of its obligations hereunder provided that the Indemnified
Party will not settle the subject claim without the prior written consent of the
Indemnifying Party, which consent will not be unreasonably withheld or delayed.
(g) Any final judgment entered or settlement agreed upon in the
manner provided herein shall be binding upon the Indemnifying Party, shall
conclusively be deemed to be an obligation with respect to which the Indemnified
Party is entitled to prompt indemnification hereunder.
(h) A failure by an Indemnified Party to give timely, complete or
accurate notice as provided in this Section 9.4 will not affect the rights or
obligations of any party hereunder except and only to the extent that, as a
result of such failure, any party entitled to received such notice was deprived
of its right to recover any payment under its applicable
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insurance coverage or was otherwise directly and materially damaged as a result
of such failure to give timely notice.
Section 9.5 Adjustments to Purchase Price. Any indemnification payments
made under this Article IX shall be deemed to be adjustments to the purchase
price being paid hereunder.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1 Amendment and Modification. This Agreement may be amended,
modified or supplemented only by written agreement signed by each of the parties
hereto.
Section 10.2 Waiver of Compliance. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party entitled to
the benefits thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
Section 10.3 Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed given if delivered
personally or by facsimile transmission or reputable overnight courier service
(such as Federal Express or UPS) or three days after mailed by registered or
certified mail (return receipt requested), postage prepaid, to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice: provided, however, that notices of a change of address
shall be effective only upon receipt thereof):
(a) if to the Stockholder, to:
Ernest M. Emery
c/o E Square Technology Corporation
4475 Dupont Court
Suite 9
Ventura, California 93003
Phone: (805) 644-9544
Fax: (805) 644-9584
and to:
Stanley J. Yates, Esq.
260 Maple Street
Suite 230
Ventura, California 93003
Phone: (805) 658-1525
Fax: (805) 658-7451
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(b) and if to Purchaser, to:
Mikron Instrument Company, Inc.
16 Thornton Road
Oakland, New Jersey 07436
Attn: Chief Executive Officer
Phone: (201) 405-0900
Fax: (201) 405-0090
and to:
Hall Dickler Kent Friedman & Wood LLP
909 Third Avenue
New York, New York 10022
Attn: Steven D. Dreyer, Esq.
Phone (212) 339-5400
Fax (212) 935-3121
Section 10.4 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors, heirs, executors, administrators and permitted assigns.
Neither this Agreement nor any of the rights, interests or obligations hereunder
may be assigned by any party hereto without the prior written consent of the
other party hereto, nor is this Agreement intended to confer upon any other
person except the parties hereto and their respective successors, heirs,
executors, administrators and permitted assigns any rights, remedies,
obligations or liabilities hereunder.
Section 10.5 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of the
state of New Jersey applicable to contracts executed and to be performed
entirely within the state of New Jersey.
Section 10.6 Jurisdiction. Any judicial proceeding brought by or against
any of the parties to this Agreement or any dispute under or arising out of or
in connection with this Agreement or any matter related hereto will be brought
in the courts of the State of New Jersey, or in the United States District Court
for the District of New Jersey, and by execution and delivery of this Agreement,
each of the parties to this Agreement accepts the exclusive jurisdiction of such
courts, and irrevocably agrees to be bound by any judgment (as finally
adjudicated) rendered thereby in connection with this Agreement. Each party
agrees that service of process in any such action or proceeding may be made by
certified mail or registered mail, return receipt requested, at the address of
such party as set forth above. If any party to this Agreement asserts or alleges
that the other has breached the terms of this Agreement, the asserting/alleging
party shall not commence any litigation proceedings until all of the following
procedures have been reasonably exhausted:
(a) First Priority; Meet and Confer. The parties shall arrange to
meet and confer for the purpose of discussing the assertions/allegations and
attempting to reach a plan of resolution. To attain resolution, the parties
shall deal in good faith and take all reasonable steps necessary to accomplish
resolution.
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(b) Second Priority; Mediation. After the parties meet and confer as
required under 10.6(a) hereof, if the parties are still unable to resolve the
controversy to all parties' satisfaction, the parties shall promptly thereafter
mediate their controversy. The parties shall select a neutral mediator to
conduct the mediation. If the parties are unable to select such mediator, each
shall select one representative and they shall select a third party who shall
serve as mediator. The parties shall divide the cost of mediation equally.
(c) Attorney Fees/Costs Otherwise. No party can waive the
prioritized methods of resolution set forth in subsections (a) and (b) hereof.
In the event that either party commences proceedings in any court before
following the methods of resolution under subsections (a) and (b) hereof, then
the party who commences such proceedings shall have waived its right to
counsel's fees and shall be liable to pay the other party's attorney fees and
costs regardless of who ultimately prevails in such court action.
Section 10.7 "Person" and "Party" Defined. "Person" shall mean and include
an individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or other department or agency
thereof. Except where the context otherwise requires, "party" shall mean
Purchaser and Stockholder.
Section 10.8 "Business Day" Defined. "Business Day" shall mean any day
except Saturday, Sunday and any day which shall be in New York City a legal
holiday or a day on which banking institutions are authorized or required by law
or other government action to close.
Section 10.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which together shall constitute one and the same
instrument.
Section 10.10 Interpretation. The Article and Section headings contained
in this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 10.11 Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall be construed in all respects as if
such invalid or unenforceable provision were omitted. All provisions of this
Agreement shall be enforced to the full extent permitted by law.
Section 10.12 Entire Agreement. This Agreement, including the Exhibits,
Schedules, documents, certificates and instruments referred to herein, embodies
the entire agreement and understanding of the parties hereto in respect of the
transactions contemplated by this Agreement. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such
transactions.
[the balance of this page has been left blank intentionally]
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Section 10.13 Third Party Beneficiaries. Each party hereto intends that
this Agreement shall not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereto, except for the Company's
rights pursuant to Section 5.3 hereof.
Section 10.14 Expenses. The parties hereto shall pay all of their own
expenses relating to the transactions contemplated by this Agreement, including,
without limitation, the fees and expenses of their respective counsel and
financial advisers. However, Purchaser shall be solely responsible for the
payment of any fees due and owing to the Escrow Agent pursuant to the Escrow
Agreement.
In Witness Whereof, the parties have executed this Agreement as of the
date first set forth above.
MIKRON INSTRUMENT COMPANY, INC.
By:_____________________________________
Dennis Stoneman, Vice President
THE EARNEST M. EMERY AND CAROLINE EMERY
FAMILY TRUST U/D/O 4/8/94
By:_____________________________________
Earnest M. Emery, Trustee
By:_____________________________________
Caroline Emery, Trustee
34
Exhibit 10.17
REVOLVER/TERM LOAN AGREEMENT
MIKRON INSTRUMENT COMPANY, INC. of 16 THORNTON ROAD, OAKLAND, NJ 07436-3116,
(jointly and severally if more than one, the "Borrower") and FLEET BANK, N.A., a
national banking association created and existing under the laws of the United
States of America with a principal office located at 30 Montgomery Street,
Jersey City, New Jersey 07303, (the "Bank"), for valuable consideration, the
receipt of which is hereby acknowledged, agree as follows:
I. DEFINITIONS.
Each reference herein to:
a. "Accounts", "Chattel Paper", "Consumer Goods", "Documents",
"Equipment", "Farm Products", "Fixtures", "General Intangibles",
"Goods", "Instruments", "Inventory", "Money", and "Securities" shall
have the meaning assigned to each in the Uniform Commercial Code
from time to time in effect in the State (the "UCC");
b. "Affiliates of Borrower" means any person or entity that, directly
or indirectly, controls, is controlled by or is under common control
with the Borrower or is an inside director or officer of the
Borrower. For purposes of this definition, the term "control"
(including the terms "controlling", "controlled by" and "under
common control with") means the possession, direct or indirect, of
the power to vote five percent (5%) or more of (i) the voting stock
of a corporation, (ii) the partnership interests of a partnership,
or (iii) the membership interests of a limited liability company, or
to direct or cause the direction of the management and policies of
any such entity, whether through the ownership of voting stock,
partnership interests, membership interests, by contract or
otherwise;
c. "Books and Records" shall mean all books, correspondence, credit
files, records and other documents relating directly or indirectly
to the Obligations and the Collateral, including, without
limitation, all tapes, cards, runs, data bases, software programs,
diskettes, and other papers and documents in the possession or
control of the Borrower, any computer service bureau, or other agent
or independent contractor,
d. "Conversion Date" shall be deemed to refer to AUGUST 14, 2000;
e. "Loan Documents" shall mean this Agreement, the Note, any Bank
issued Commitment Letter and any amendments thereto, and any and all
mortgages, pledge agreements, security agreements, financing
statements, guaranties and other documents related to this Agreement
and/or the Loan;
f. "Material Adverse Change" shall mean with respect to the Borrower
and any guarantors and any of their respective properties or
revenues, an event, action or condition that would or is reasonably
likely to (i)
<PAGE>
adversely affect the validity or enforceability of, or the authority
of the Borrower and/or any guarantor to perform their respective
obligations under, the Loan Documents, or (ii) materially adversely
affect the business, operations, assets or condition (financial or
otherwise) of the Borrower and/or any guarantor or the ability of
the Borrower and/or any guarantor to perform their respective
obligations under any of the Loan Documents, or (iii) materially
adversely affect the value of any Collateral;
g. "Prime Rate" shall mean the prime rate designated from time to time
by the Bank as being its "prime rate" of interest, such interest
rate to change on the effective date of each change in the Prime
Rate, which rate of interest may not necessarily be the lowest rate
of interest charged by the Bank to anyone of its customers or any
particular class of customers. Changes in the rate of interest
resulting from changes in the Prime Rate shall take place
immediately without notices or demand of any kind.
h. "State" shall mean the State of New Jersey.
i. "Year 2000 Compliant" shall mean, with regard to the Borrower and/or
its suppliers, vendors and customers, that all software, embedded
microchips, and other processing capabilities utilized by, and
material to the business operations or financial condition of, such
entity are able to interpret and manipulate data on and involving
all calendar dates correctly and without causing any abnormal ending
scenario, including in relation to dates on and after January 1,
2000.
j. "Year 2000 Risk" shall mean the risk that computer applications used
by the Borrower and/or its suppliers, vendors and customers may be
unable to recognize and perform without error date - sensitive
functions involving certain dates prior to and any date after
December 31, 1999.
II. LOAN.
1. Credit Limit. This Agreement evidences a line of credit (with a term
loan conversion feature hereinafter referenced) for the Borrower's
short-term borrowing needs (the "Loan") with a credit limit (the
"Credit Limit") in the maximum principal sum of One Million
Dollar(s) and No Cent(s) ($1,000,000.00).
Within such Credit Limit, until (i) demand by the Bank and/or
termination of the Bank's commitment upon the occurrence of an Event
of Default or (ii) the Conversion Date, the Borrower may borrow
hereunder. All principal repayments shall reduce the Loan and the
Bank's commitment, and principal amounts repaid may not be
re-borrowed.
2. Advances. The Bank agrees to make advances to the Borrower until (i)
demand by the Bank and/or termination of the Bank's commitment upon
the occurrence of an Event of Default or (ii) the Conversion Date,
provided that the aggregate principal amount of the Loan does not
exceed at any one time the Credit Limit.
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<PAGE>
3. "LIBOR Rate" shall mean, as applicable to any interest Period, the
rate per annum, as determined on the basis of the offered rate for
deposits in U.S. dollars, for a period of time comparable to such
Interest Periods, which appears on Telerate Page 3750 as of 11:00
a.m. London time on the day that is two (2) London Banking Days
preceding the first day of such Interest Period; provided however,
if the rate described above does not appear on the Telerate System
on any applicable interest determination date, then the LIBOR Rate
shall be the rate offered for deposits in U.S. dollars in the London
Interbank market for a period substantially equal to the interest
Periods, determined by the Bank in a commercially reasonable manner,
"Banking Day" means, in respect of any city, any date on which
commercial banks are open for business in that city, in the event
that he Board of Governors of the Federal Reserve System shall
impose a Reserve Percentage with respect to LIBOR deposits of the
Bank then for any period during which such Reserve Percentage shall
apply, the LIBOR Rate shall be equal to the amount determined above
divided by an amount equal to one (1) minus the Reserve Percentage.
"Reserve Percentage" shall mean the Maximum aggregate reserve
requirement (including all basic, supplemental, marginal and other
reserves) which is imposed on member banks of the Federal Reserve
System against "Euro-currency Liabilities" as defined in Regulation
D;
4. Minimum Amount of Advance. Each advance under this Agreement shall
be in the minimum amount of One Thousand Dollars ($1,000.00).
5. Direct Deposit of Loan Proceeds. All advances shall be disbursed by
the Bank by deposit of the Loan proceeds to the Borrower's deposit
account with the Bank.
6. Demand Loan. On demand by the Bank prior to the Conversion Date, the
entire outstanding principal balance of the Loan and all accrued
interest shall immediately become due and payable.
7. Term Loan Conversion. If on the Conversion Date (i) the Bank has not
made demand for payment in full of the Loan and/or (ii) no Event of
Default has occurred and is continuing, the demand Loan shall
convert to a term Loan, and the Borrower shall amortize the then
outstanding principal balance of the Loan in accordance with the
payment schedule disclosed in the Borrower's note of even date with
this Agreement (as hereinafter defined).
8. Note; Interest Calculation. The Loan shall be evidenced by the
Borrower's note of even date with this Agreement (which note and all
amendments thereto and any additional and supplementary notes
executed pursuant to this Agreement are herein referred to
collectively as the "Note"). The interest rate initially set forth
in the Note is a variable rate. From and after maturity (including
any accelerated maturity), the interest rate on the Note shall
increase to sixteen percent (16%) per annum. Interest shall be
calculated on the basis of a 360-day year using the actual number of
days
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<PAGE>
elapsed. On maturity, whether scheduled or otherwise, both principal
and all accrued and unpaid interest shall be immediately due and
payable .
9. Late Fee. If the entire amount of any required principal and/or
interest is not paid in full within ten (10) days after the same is
due, the Borrower shall pay to the Bank a late fee equal to five
percent (5%) of the required payment.
10. Prepayment. The Borrower shall have the right at any time and from
time to time to prepay the Loan in whole or in part, without premium
or penalty, but with accrued interest to the day of such prepayment
on the amount prepaid.
III. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants that:
1. Organization and Powers. (a) If a corporate, partnership, limited
liability company or trust Borrower, it is duly organized, validly
existing and in good standing under the laws of the state of its
formation and in every other jurisdiction, except where the failure
to do so qualify would not have a material adverse effect upon the
Borrower, its property, its financial condition, or otherwise, (b)
it has the power and authority to own its properties and to carry on
its business as now being conducted and, if a corporate,
partnership, limited liability company or trust Borrower, is
qualified to do business in every jurisdiction where such
qualification is necessary, (c) it has the power to execute, deliver
and perform the Loan Documents, (d) the execution, delivery and
performance of the Loan Documents have been duly authorized by all
requisite action, (e) the execution, delivery and performance of the
Loan Documents will not violate any provision of law, any order of
any court or other agency of government, the Articles of
Incorporation, Certificate of Incorporation, or By-laws of a
corporate Borrower, the partnership agreement of a partnership,
Borrower, the Articles of Incorporation or Operating Agreement of a
limited liability company Borrower, or the trust agreement of a
trust Borrower, or any indenture, agreement or other instrument to
which it is a party, or by which it is bound, or be in conflict
with, result in a breach of or constitute (with due notice or lapse
of time or both) a default under any such indenture, agreement or
other instrument, or result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of the
property or assets of the Borrower (other than in favor of the Bank)
or the acceleration of any of its outstanding indebtedness.
2. Financial Statements. The Borrower has heretofore furnished to the
Bank accurate and complete financial data and other information
based on its operations in previous years, and said financial data
fairly presents the financial position and the results of operations
for the periods indicated
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<PAGE>
therein. There has been no Material Adverse Change since the date of
the most recent financial statement.
3. Litigation. There is no action, suit or proceeding at law or in
equity or by or before any governmental instrumentality or other
agency now pending or threatened against or affecting the Borrower.
4. No Conflict. The Borrower is not a party to any agreement or
instrument or subject to any restriction materially or adversely
affecting its business, properties or assets, operations or
condition, financial or otherwise. The Borrower has no knowledge
that it is in default in the performance, observance or fulfillment
of any of the obligations, covenants or conditions contained in any
agreement or instrument to which it is a party.
5. Use of Proceeds. No part of the proceeds of the Loan will be used
for consumer purposes or will be used to purchase or carry, directly
or indirectly, any margin stock or margin security (within the
meaning of Regulation U of the Board of Governors of the Federal
Reserve System) or to extend credit to others for the purpose of
purchasing or carrying any such margin stock or margin security. If
requested by the Bank, the Borrower will furnish in connection with
this Agreement a statement in conformity with the requirements of
Federal Reserve Form U-1 referred to in said Regulation U.
6. Year 2000 Plan. The Borrower has reviewed the Year 2000 Risk and is
taking such action as may be necessary to ensure that the Year 2000
Risk will not adversely affect its business operations and/or
financial condition.
IV. CONDITIONS OF LENDING.
The Bank shall be obligated to make the advances under this Agreement only
if on the date such advance is requested:
a. The Bank shall have received, to the extent applicable (i) copies of
the Articles of Incorporation, Certificate of Incorporation,
Certificate of Limited Partnership, or Certificate of a Limited
Liability Company or Partnership, each certified by the secretary of
state of the state of its formation, (ii) copies of partnership,
trust, or operating agreements, each certified to the Bank by a duly
authorized representative of such Borrower, (iii) Good Standing,
Subsistence and/or Existing Certificates of the state of formation
of the Borrower and from all other states where such Borrower
conducts its business or holds property, (iv) duly adopted
resolutions authorizing the execution, delivery and performance
under the Loan Documents certified by an officer of the Borrower.
b. The representations and warranties in Part III hereof are true and
correct;
c. No Event of Default exists;
V. COVENANTS.
The Borrower covenants and agrees that it will:
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<PAGE>
1. (a) Legal Existence; Insurance; Etc. Keep in full force and effect
its legal existence (if a corporation, partnership, limited
liability company or trust), rights, licenses, permits and
franchises and operate its business as conducted prior to the date
hereof; maintain all property used in the conduct of its business
and keep the same in good repair, working order and condition; and
maintain adequate insurance on its properties against fire, theft,
and extended coverage risks and against public liability and
property damage and products liability and such other risks as may
be required by law or as may be reasonably required by the Bank, in
such form, for such periods, and written by such companies as may be
satisfactory to the Bank, such insurance in the case of a secured
loan to name the Bank as additional insured and/or mortgagee/loss
payee. All policies of insurance shall provide for at least twenty
(20) days' written notice to the Bank prior to cancellation or
change in the coverage, scope or amount of any such policy or
policies. Borrower shall furnish the Bank with certificates of
compliance with the foregoing insurance provision.
(b) Compliance with Laws. Comply with all present and future
applicable laws, ordinances, rules, regulations, directives and
other requirements of all governmental instrumentalities, including
without limitation those relating to Hazardous Substances, within
such time periods as required thereby, with time being of the
essence.
2. Operation of Business. Maintain and operate its business in a proper
and efficient manner.
3. Payment of Taxes. Pay and discharge all taxes, assessments, and
governmental charges imposed upon Borrower, its income or its
property before the same shall be in default, as well as all lawful
claims for labor, materials and supplies or otherwise which, if
unpaid, might become a lien upon any such properties.
4. Financial Statements. Furnish to the Bank:
(a) promptly, from time to time as requested by the Bank, and in
all events within one hundred twenty (120) days after the
close of each applicable party's tax year, (i) with respect to
the Borrower and all corporate, partnership or trust
guarantors, financial statements (audited if requested),
balance sheets, profit and loss statements, together with
supporting schedules, signed and in such form as may be
acceptable to the Bank; (ii) with respect to all individual
guarantors, signed personal financial statements; and (iii)
with respect to all entities and individuals referred to in
(i) and (ii), current Federal income tax returns (with all
schedules and exhibits), or in the case of a partnership,
Form1065 (with all schedules and exhibits). In any event, all
the documents referred to in this subparagraph (a), regardless
of when last submitted, must be submitted to the Bank, as
often as the Bank shall deem necessary, if there occurs a
Material Adverse Change.
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<PAGE>
(b) promptly, from time to time, such other information regarding
the operations, assets, business, affairs and financial
condition of the Borrower and all guarantors, as the Bank may
reasonably request; and
(c) with respect to all personal financial statements submitted by
individual guarantors, such statements shall be on forms
prescribed by the Bank.
5. Inspection. Permit agents or representatives of the Bank, at
reasonable hours and upon reasonable notice, to inspect the Books
and Records of the Borrower and to make abstracts or reproductions
thereof, all at the Borrower's expense.
6. Averse Changes. Promptly advise the Bank of any Material Adverse
Change.
7. Accounting System. Maintain a standard system of accounting in
accordance with generally accepted accounting principles.
8. Depository. Maintain the Bank as the Borrower's principal
depository.
9. Indebtedness. Not incur or permit to exist any indebtedness or
liability except indebtedness to the Bank or any Bank affiliate,
indebtedness with respect to warranty, trade obligations and other
liabilities incurred in the ordinary course of business, and any
indebtedness or liability permitted in writing by the Bank.
10. Liens. Not create, assume or suffer to exist any mortgage, security
interest, or lien on any of its assets, now or hereafter owned,
other than liens securing indebtedness to the Bank or any Bank
affiliate, liens securing the payment of taxes not yet due, liens
imposed by law (other than for borrowed money), liens incurred by
the Borrower in good faith in the ordinary course of business, and
other liens permitted in writing by the Bank.
11. Guaranties; Etc. Not guarantee, endorse or otherwise become or be
responsible for obligations of any other person or entity, whether
by agreement to purchase the indebtedness of any other person or
entity or agreement for the furnishing of funds to any other person
or entity through purchase of Goods, supplies or services, or by way
of stock purchase, capital contribution, advance or loan, for the
purpose of paying or discharging any indebtedness or obligation of
such other person or entity, or otherwise, except endorsements of
negotiable instruments for collection in the ordinary course of
business.
12. Investments. Not purchase, invest in or otherwise acquire or hold
Securities including, without limitation, capital stock (including
closely held stock) and evidences of indebtedness of, or make loans
or advances to, or enter into any arrangement for the purpose of
providing funds or credit to, any other person or entity (including,
without limitation, all Affiliates of the Borrower), except
investments in short-term obligations of
7
<PAGE>
the United States and certificates of deposit issued by the Bank or
any Bank Affiliate.
13. Sales of Accounts and Instruments. Not sell, assign, discount or
dispose of any Accounts or Instruments held by the Borrower, with or
without recourse, except for collection (including endorsements) in
the ordinary course of business,
14. Sales and Transfers. Not sell, assign, lease, transfer, sell and
leaseback, or otherwise dispose of all or any material amount of its
assets not in the ordinary course of business to any person or
entity or turn over the management of, or enter into a management
contract with respect to, such assets.
15. Valuation. Not write up (by creating an appraisal surplus or
otherwise) the value of any capital assets above their cost less the
depreciation regularly allowable thereon.
16. Fundamental Changes. Not dissolve, liquidate, consolidate with or
merge with any corporation, limited liability company or other
entity or agree to do any of the foregoing.
17. Distributions. If a corporate Borrower, not declare or pay any
dividends, or make any distribution to holders of shares of its
capital stock, (and on account of such capital stock) of cash,
capital stock or other property, or directly or indirectly, redeem,
purchase or otherwise acquire any shares of its capital stock of any
class; and if a partnership or limited liability company Borrower,
not permit the return or withdrawal of any capital contributions;
provided, however, that if the Borrower is an "S" Corporation under
the Internal Revenue Code, the Borrower may make annually such cash
distributions to its shareholders as shall equal the sum of federal
income taxes which are allocable to such shareholders' income
received or deemed to have been received on account of such
shareholders' capital stock in the Borrower.
18. Additional Covenants. Comply with the additional covenants, if any,
set forth on affixed Exhibit A-1.
VI. SECURITY AGREEMENT AND OTHER SECURITY DOCUMENTS.
1. Security Interest; Collateral; Obligations. The Borrower hereby
grants to the Bank, as security for any and all obligations
whatsoever of the Borrower to the Bank, whether direct, indirect,
absolute or contingent, due or to become due, and whether now
existing or hereafter arising and howsoever evidenced or acquired,
including without limitation all indebtedness and liabilities
evidenced by the Loan, this Agreement, the other Loan Documents,
checking account overdrafts, and letter of credit reimbursement
agreements, excluding, however, indebtedness incurred primarily for
personal, family or household purposes (collectively, the
"Obligations"), a first lien on,
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and, security interest in and agrees and acknowledges that the Bank
has and will continue to have a first lien on, and a perfected
security interest in all of the Collateral described below, both
presently owned and after acquired, together with all proceeds and
products thereof, additions and accessions thereto, and all
replacements and substitutions therefor (collectively, the
"Collateral"), excluding, however, all such Collateral which
constitutes Consumer Goods in the hands of the Borrower: Accounts,
Inventory, Equipment, Fixtures, Books and Records, Chattel Paper,
Documents, General Intangibles, Instruments, Machinery, Contract
Rights and Furniture
2. Borrower hereby warrants, covenants and agrees that:
a. Title; Adverse Liens. Except for prior security interests
disclosed on Exhibit A-2 (if any) and except for the security
interest granted hereby, the Borrower is the owner of
presently owned Collateral and will be the owner of Collateral
hereafter acquired free from any lien or encumbrance (other
than those in favor of Bank), and Borrower will defend the
Collateral against the claims and demands of all persons at
any time claiming the same or any interest therein.
b. Financing Statements. Except for financing statements
evidencing the security interests which may be listed on
Exhibit A-2 (if any), no financing statements covering any
Collateral are on file in any public office. At the request of
the Bank, the Borrower will execute one or more (i) financing
statements pursuant to the UCC; (ii) title certificate lien
application forms; and (iii) other documents necessary or
advisable to perfect the security interests evidenced hereby,
all in form satisfactory to the Bank. Where allowed by law,
the Borrower hereby irrevocably authorizes the Bank to file
financing statements and amendments without the signature of
the Borrower. The Borrower will pay the cost of filing the
aforesaid documents or filing or recording this Agreement in
all public offices wherever filing or recording is deemed by
the Bank to be necessary or desirable.
3. Adverse Liens. The Borrower will keep the Collateral free from any
future adverse liens.
a. Equipment. If the Borrower has granted a security interest in
Equipment:
i. The Equipment is used primarily for business purposes.
ii. The Equipment will be kept at the location listed on
affixed Exhibit A-3. Borrower will promptly notify Bank
of any change in the location of the Equipment, and
Borrower will not remove the Equipment from such
location without the prior written consent of the Bank.
b. Inventory. If the Borrower has granted a security interest in
Inventory:
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i. Inventory is acquired for business purposes. In the
absence of an Event of Default hereunder, the Borrower
may sell the Inventory in the ordinary course of its
business upon terms not exceeding thirty (30) days, or
upon such further terms as the Bank may from time to
time approve. The Borrower shall not without the consent
of the Bank sell the Inventory to any supplier or
employee of the Borrower or to any person to whom the
Borrower is indebted or under circumstances which would
otherwise create a lien or encumbrance (other than those
in favor of Bank), including a right of set-off, against
the Account resulting from such sale.
4. Inventory will be kept at the location listed on affixed Exhibit
A-3. The Borrower will promptly notify the Bank of any change in the
location of the Inventory, and the Borrower will not remove the
Inventory from such location without the prior written consent of
the Bank.
a. Accounts. If the Borrower has granted a security interest in
Accounts:
i. The Borrower will upon demand render to the Bank a
statement indicating the total dollar value of the
Accounts.
ii. The only offices where the Borrower keeps Books and
Records concerning any Accounts is at the location
listed on affixed Exhibit A-3. The Borrower will not
remove any of such Books and Records from said offices
without the prior written consent of the Bank.
iii. During the five years immediately preceding the grant of
the security interest hereby to Bank, Borrower has
maintained its chief executive office at the
address(es), and during the time periods, set forth on
Exhibit A-3. Without the prior written consent of Bank,
Borrower will not change its chief executive office.
iv. The Borrower will at all times keep accurate and
complete Books and Records of its Accounts, and the Bank
or any of its agents shall have the right to inspect the
Borrower's Books and Records relating to said Accounts
or to any other transactions to which the Borrower is a
party and from which an Account might arise and to make
extracts from said Books and Records, all at the
Borrower's expense. The Bank may in its own name or in
the names of others, communicate with account debtors in
order to verify with them, to the Bank's satisfaction,
the existence, amount and terms of any Accounts. The
Borrower shall immediately notify the Bank of any event
causing loss or depreciation in value of any of its
Accounts and the amount of such loss or depreciation.
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v. If any of the Borrower's Accounts arise out of contracts
with the United States or any department, agency or
instrumentality thereof, the Borrower will immediately
notify the Bank thereof in writing and execute any
instruments and take any steps required by the Bank in
order that all moneys due and to become due under such
contracts shall be assigned to the Bank and notice
thereof given to the government under the Federal
Assignment of Claims Act.
vi. If any of the Borrower's Accounts should be evidenced by
Instruments, the Borrower will immediately deliver such
Instruments to the Bank, appropriately endorsed to the
Bank's order and, regardless of the form of such
endorsement, the Borrower hereby waives presentment,
demand or notice of any kind with respect thereto.
5. This Agreement may, but need not be supplemented by separate
assignments of Accounts to the Bank, and if such assignments are
given, the rights given thereby shall be in addition to and not in
limitation of the rights and security interests given by this
Agreement.
a. Fixtures; Farm Products. If the Borrower has granted a
security interest in Fixtures and/or Farm Products, there is
affixed hereto as Exhibit A-4 a description of the applicable
real estate and the name(s) of the record owner.
b. Investment Securities. If the Borrower has granted a security
interest in Investment Securities the Bank may transfer
Collateral into its name or that of its nominee and may
receive the income and any distributions thereon and hold the
same as Collateral for the Obligations, or apply the same to
any Obligation, whether or not an Event of Default has
occurred.
c. Taxes. The Borrower will pay promptly when due all taxes and
assessments upon the Collateral or for its use or operation or
upon this Agreement and any of the other Loan Documents.
d. Insurance. With respect to all required insurance policies and
coverage, the Bank may act either in its name or as attorney
for the Borrower (for that purpose by these presents duly
authorized and appointed with full power of substitution and
revocation) in obtaining, adjusting, settling and canceling
such insurance and endorsing any drafts in payment of any
loss.
e. Preservation of Collateral. The Bank may, at its election,
discharge taxes and liens levied or placed on the Collateral,
pay for insurance on the Collateral and pay for the
maintenance and preservation of the Collateral. The Borrower
agrees to reimburse Bank on demand for any payment made, or
any expense incurred by the Bank pursuant to the foregoing
authorization, and in any event all such
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payments and expenses shall constitute an Obligation
hereunder. If the Borrower fails to insure Collateral as
required by this Agreement or any of the Loan Documents, the
Borrower shall pay to the Bank on the date of such failure a
nonrefundable fee for each such failure equal to the sum of
(i) $100 plus (ii) the amount of the insurance premium cost
incurred by the Bank. Notwithstanding the foregoing, neither
the charging or payment of such fee nor this provision shall
in any way be deemed to waive or imply or constitute a basis
for waiver of any default occasioned by Borrower's failure to
comply with the insurance requirements of this Agreement or
any of the Loan Documents.
f Possession and Use. Other than with respect to Collateral in
which Bank's security interest is perfected by the Bank's
possession thereof, such as instruments, documents, cash, bank
accounts, etc., which so long as any of the Obligations remain
outstanding and unpaid shall remain in the possession of Bank,
until an Event of Default, the Borrower may have possession of
the collateral, provided that the Borrower will not use the
Collateral in any unlawful manner or in a manner in consistent
with this Agreement, the Loan Documents, or any policy of
insurance thereon.
g. Power of Attorney. The Borrower irrevocably designates and
appoints the Bank its true and lawful attorney with full power
of substitution and revocation to execute, deliver, and record
in the name of the Borrower all financing statements,
amendments, continuation statements, title certificate lien
applications and other documents deemed by the Bank to be
necessary or advisable to perfect or to continue the
perfection of the security interests granted hereunder.
h. Reproduction as Financing Statement. A carbon, photographic,
or other reproduction of a security agreement or a financing
statement is sufficient as a financing statement.
i. Remedies. If an Event of Default occurs, the Bank shall have
the rights and remedies provided in this Agreement, including
without limitation in Part VII hereof. In addition, the Bank
may exercise and shall have any and all rights and remedies
accorded it by the UCC. The Bank may require the Borrower to
assemble the Collateral and make it available to the Bank at a
place to be designated by the Bank which is reasonably
convenient to both parties. The requirement of reasonable
notice shall be met, if notice is mailed, postage prepaid, to
the Borrower or other person entitled thereto at least ten
(10) days (including non-business days) before the time of
sale or disposition of the Collateral. The Bank at its option
may have a receiver appointed to take possession of the
Collateral, to use and operate the Collateral, to collect the
profits
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and proceeds therefrom, and to apply the same as the court may
direct. The Borrower agrees that the Bank's legal remedies are
inadequate and that the Bank shall be entitled to obtain
equitable relief upon the occurrence of an Event of Default.
The Borrower shall pay to the Bank on demand all expenses,
including reasonable legal expenses and attorney's fees (which
may include costs allocated by the Bank's internal legal
department), incurred or paid by the Bank in protecting or
enforcing any rights of the Bank hereunder, including its
right to take possession of the Collateral, storing and
disposing of the same or in collecting the proceeds thereof.
j. Notification of Account Debtors. The Bank shall have the right
to demand from the Borrower a list of all Accounts and to
notify any and all account debtors to make payment thereof
directly to the Bank. The Borrower irrevocably designates and
appoints the Bank its true and lawful attorney with full power
of substitution and revocation in its own name or in the name
of the Borrower to demand, collect, receive, receipt for, and
sue for all amounts due and to become due on the Accounts and
to endorse the name of the Borrower on all commercial paper
given in payment or part-payment thereof and in its discretion
to file any claim or take any other action which the Bank may
deem necessary or appropriate to protect and preserve and
realize upon the security interest of the Bank in the Accounts
or the proceeds thereof. The Bank shall also have the right to
(i) open all mail addressed to the Borrower; (ii) change the
Post Office box or mailing address of Borrower; and (iii) use
the Borrower's stationery and billing forms or facsimiles
thereof, for the purpose of collecting Accounts and realizing
upon the Collateral.
Inspection and Appraisal. The Bank and its agents and
representatives (including without limitation appraisers, engineers,
and other professionals) shall, upon reasonable advance notice, have
access to the Borrower's premises for the purpose of inspecting and
appraising the Collateral and/or performing environmental site
assessments. All fees and expenses incurred by the Bank in
connection with such inspections, appraisals and site assessments
shall be payable by the Borrower to the Bank upon demand, and until
paid in full, shall be secured by the Bank's security interests.
VII. EVENTS OF DEFAULT.
THE ITEMIZATION OF THE FOLLOWING EVENTS OF DEFAULT DOES NOT CHANGE THE
PRE-CONVERSION DATE DEMAND NATURE OF THE OBLIGATIONS EVIDENCED BY THIS
AGREEMENT AND THE NOTE
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1. Listing of Events of Default. The happening of any of the following
events or conditions with respect to the Borrower, individually and
collectively, shall constitute an "Event of Default":
a. any representation or warranty made herein or in any report,
certificate, financial statement or other instrument furnished
in connection with this Agreement or the Loan shall prove to
be false or misleading in any material respect;
b. failure to pay the principal of, or interest on, the Note or
any other indebtedness of the Borrower to the Bank, within ten
(10) days from the date the same or any installment thereof
shall become due and payable, whether at the due date thereof
or at a date fixed for prepayment or by acceleration or
otherwise;
c. default in the due observance or performance of any other
covenant, condition or agreement contained in this Agreement,
any of the other Loan Documents, or in any other agreement or
document evidencing or pertaining to Obligations, and such
other default shall remain unremedied for ten (10) days;
d. the acceleration of the maturity of any of the Borrower's
indebtedness other than to the Bank;
e. involvement in financial difficulties as evidenced by:
i. an attachment made on the Borrower's property or assets
which remains unreleased for a period in excess of
forty-five (45) days; or
ii. the inability to pay its debts (including without
limitation taxes) generally as they become due; or
iii. the appointment or authorization of a custodian as
defined in the Bankruptcy Code; provided, however, that
in the case of the appointment of a receiver in an
involuntary proceeding such appointment continues in
effect and undischarged for a period of thirty (30)
days; or
iv. the entry of an order for relief in a voluntary case
under any chapter of the Bankruptcy Code; or
v. the filing of an involuntary petition under any chapter
of the Bankruptcy Code, which petition remains
undismissed for a period of thirty (30) days; or
vi. any other judicial modification or adjustment of the
rights of Borrower's creditors;
f. final judgment for the payment in excess of an aggregate of
Ten Thousand Dollars ($10,000.00) shall be rendered against
the Borrower and the same shall remain undischarged for a
period of thirty (30) consecutive days during which execution
shall not be effectively stayed;
g. any transfer (which shall include, without limitation, by
sale, exchange, gift, pledge, hypothecation, or by other means
except
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transfers by operation of law) to any person who is not
presently a shareholder of a corporate Borrower or the spouse
or child of a shareholder of a corporate Borrower of any
voting capital stock of the Borrower, except any transfers of
such shares upon the death of a shareholder either by will or
by intestacy;
h. any transfer (as defined in (g)) to any person who is not
presently a partner of a partnership Borrower or the spouse or
child of a partner of a partnership Borrower of any
partnership interest in the Borrower, except any transfer of
such interest upon the death of a partner either by will or
intestacy,
i. any transfer (as defined in (g)) to any person who is not
presently a member of a limited liability company Borrower or
the spouse or child of a member of a limited liability company
Borrower of any membership interest in the Borrower, except
any transfer of such interest upon the death of a member
either by will or intestacy;
j. in the case of a trust Borrower, (i) any change in the
beneficiaries of the trust; (ii) any dilution of the
beneficial interest of one or more of the beneficiaries; or
(iii) any change in the trustee or trustees;
k. the suspension of business for cause, other than strike,
casualty or other cause beyond the Borrower's control and in
the event of such suspension for cause beyond the Borrower's
control, failure to resume operations as soon as possible;
l. dissolution or termination of the legal existence of the
Borrower;
m. participation in any illegal activity or in any activity,
whether or not related to the business of the Borrower, that
may subject the assets of the Borrower to (i) a restraining
order or any form of injunction issued by any federal or state
court, or (ii) seizure, forfeiture or confiscation by any
federal or state governmental instrumentality;
n. if the Bank believes in good faith, at any time, that either
(a) the prospect of the Borrower's (i) repayment of the Loan
or payment of any of its other obligations under the Loan
Documents or (ii) performance of its duties thereunder is
impaired or (b) there is any Material Adverse Change; or
o. with respect to any guaranty and/or subordination agreement
included in the Loan Documents, the failure of the same to
remain in full force and effect until the Loan is paid in full
and this Agreement is terminated.
2. Certain Cross-Defaults. The happening of any event or condition set
forth in subsection l(e), (f), (l), or (m) above, with respect to a
general partner of a partnership Borrower or any guarantor of the
Loan shall likewise constitute an Event of Default.
3. Termination of Commitment; Acceleration. If an Event of Default
occurs prior to the Conversion Date, the Bank, at its option, may
(i) make
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demand for payment of the entire outstanding principal balance and
all accrued interest on account of the advances (the Bank having the
right at all times, whether or not an Event of Default has occurred,
to make such demand); and (ii) tenninate the Bank's commitment to
make advances under this Agreement (provided, however, that if the
Bank shall exercise its discretionary right to make demand, such
demand shall also terminate the Bank's commitment to make advances,
whether or not an Event of Default has occurred). If an Event of
Default occurs from and after the Conversion Date, the Bank may
declare all Obligations to be immediately due and payable.
VIII. MISCELLANEOUS.
1. Waiver of Event of Default. No delay in terminating the Bank's
commitment under this Agreement and/or in making demand shall affect
the rights of the Bank later to take such action with respect
thereto, and no waiver as to one Event of Default shall affect
rights as to any other default.
2. Notices. Except as otherwise specifically provided for herein, any
notice, demand or communication hereunder shall be given in writing
(including facsimile transmission or telex) and mailed or delivered
to each party at its address set forth below, or, as to each party,
at such other address as shall be designated by such party by a
prior notice to the other party in accordance with the terms of this
provision. Any notice to the Borrower shall be sent as follows:
MIKRON INSTRUMENT COMPANY, INC., 16 THORNTON ROAD, OAKLAND, NJ
07436-3116. All notices hereunder shall be effective upon the
earliest to occur of (i) five (5) business days after such notice is
mailed, by registered or certified mail, postage prepaid (return
receipt requested), (ii) upon delivery by hand, (iii) upon delivery
if delivered by overnight courier (such delivery to be evidenced by
the courier's records), and (iv) in the case of any notice or
communication by telex or telecopy, on the date when sent.
3. Survival. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates
delivered pursuant hereto shall survive any making by the Bank of
the Loan and the execution and delivery of any Loan Documents and
shall continue in full force and effect until this Agreement is
terminated and all the Obligations are paid in full.
4. Legal Fees and Expenses; Service Fees. The Borrower will pay all
expenses incurred by the Bank in connection with the preparation of
the Loan Documents, the making of the Loan, and the enforcement of
the rights of the Bank in connection with this Agreement, any of the
other Loan Documents and the Loan, including, but not limited to,
the reasonable fees of its counsel (which may include costs
allocated by the Bank's internal legal department), plus the
disbursements of said counsel. Borrower further agrees to pay to the
Bank on demand all reasonable fees,
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costs and expenses incurred by the Bank in connection with the
administration of the Loan, including, without limitation, overnight
courier fees, lien search fees, and filing and recording fees.
The Borrower agrees to pay on demand the Bank's service fees
and charges for administrative costs as in effect from time to time
(including, without limitation, such fees and charges as may be
expressly provided for in this Agreement). Any such fee or charge
may be implemented by the Bank from time to time or, in the case of
any such existing fee or charge, the amount thereof may be increased
by the Bank from time to time, in each instance, in or to such
amount as the Bank in its sole discretion deems reasonable.
5. Choice of Law. This Agreement and all the other Loan Documents shall
be construed in accordance with and governed by the local laws
(excluding the conflict of laws rules, so-called) of the State.
6. Written Modification and Waiver. No modification or waiver of any
provision of this Agreement or of any of the other Loan Documents
nor consent to any departure by the Borrower therefrom shall in any
event be effective unless the same shall be in writing, and then
such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice to or demand
on the Borrower in any case shall entitle the Borrower to any other
or further notice or demand in the same, similar or other
circumstances.
7. Accounting Practice. All matters involving accounting practice are
to be determined both as to classification of items and amounts in
accordance with generally accepted principles of accounting practice
consistently applied by the Borrower's accountants in the
preparation of its previous annual financial statements.
8. Documentation. All documents required hereunder shall be in form and
substance satisfactory to the Bank.
9. Replacement Docs. Upon receipt of an affidavit of an officer of Bank
as to the loss, theft, destruction or mutilation of the Note or any
security document which is not of public record, and, in the case of
any such loss, theft, destruction, mutilation, upon cancellation of
such Note or other security document, Borrower will issue, in lieu
thereof, a replacement note or other security document in the same
principal amount thereof and otherwise of like tenor.
10. Joint and Several Obligations. If this Agreement is signed by more
than one Borrower, all obligations of the Borrowers are their joint
and several obligations, and all references to the Borrower herein
shall be deemed to refer to each of them, either of them, and all of
them.
11. Unenforceability. In the event any term or provision of this
Agreement or the application thereof to any person or circumstance
shall, to any extent, be held invalid or unenforceable, the
remainder of this Agreement or the application of such term or
provision to persons or circumstances other
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than those to which it is held invalid or unenforceable, shall be
valid and enforceable to the fullest extent permitted by law.
12. Cumulative Remedies; Setoff. Borrower and any Guarantor hereby grant
to Bank, a lien, security interest and right of setoff as security
for all liabilities and obligations to Bank, whether now existing or
hereafter arising, upon and against all deposits, credits,
collateral and property, now or hereafter in the possession,
custody, safekeeping or control of Bank or any entity under the
control of Fleet Financial Group, Inc., or in transit to any of
them. At any time, without demand or notice, Bank may set off the
same or any part thereof and apply the same to any liability or
obligation of Borrower and any Guarantor even though unmatured and
regardless of the adequacy of any collateral securing the Loan. ANY
AND ALL RIGHTS TO REQUIRE BANK TO EXCERCISE ITS RIGHTS OR REMEDIES
WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE LOAN, PRIOR
TO EXCERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS,
CREDITS OR OTHER PROPERTY OF THE BORROWER OR ANY GUARANTOR, ARE
HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
13. Assignments and Participations. The Borrower agrees that the Bank
shall have the right at all times to sell all or any portion of the
Loan and all Loan Documents, and to grant one or more participations
in the Loan and in all Loan Documents. In connection therewith, the
Borrower hereby irrevocably authorizes the Bank to deliver to each
such purchaser, participant and prospective purchaser and
prospective participant originals and copies of all Loan Documents
and all financial statements and other credit and factual data from
time to time in the Bank's possession which relate to the Borrower
and/or all guarantors, if any, of the Loan. The Borrower further
agrees that the Bank shall have the right at all times to disclose
and report to credit reporting agencies such information pertaining
to the Borrower and/or all guarantors, if any, as is consistent with
the Bank's policies and practices from time to time in effect.
14. Pledge to Federal Reserve. Bank may at any time pledge all or any
portion of its rights under the loan documents including any portion
of the promissory note to any of the twelve (12) Federal Reserve
Banks organized under Section 4 of the Federal Reserve Act, 12
U.S.C. Section 341. No such pledge or enforcement thereof shall
release Bank from its obligations under any of the loan documents.
15. Maximum Rate of Interest. All provisions of this Agreement are
expressly subject to the condition that in no event, whether by
reason of acceleration of the maturity of the Loan or otherwise,
shall the amount paid or agreed to be paid to the Bank hereunder and
deemed interest under applicable law exceed the maximum rate of
interest on the unpaid principal balance of the Loan allowed by
applicable law (the "Maximum
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Allowable Rate"), which shall mean the law in effect on the date of
this Agreement, except that if there is a change in such law which
results in a higher Maximum Allowable Rate being applicable to this
Agreement, then this Agreement shall be governed by such amended law
from and after its effective date. In the event that fulfillment of
any provision of this Agreement results in the interest rate
hereunder being in excess of the Maximum Allowable Rate, the
obligation to be fulfilled shall automatically be reduced to
eliminate such excess. If, notwithstanding the foregoing, the Bank
receives an amount which under applicable law would cause the
interest rate set forth in this Agreement to exceed the Maximum
Allowable Rate, the portion thereof which would be excessive shall
automatically be applied to and deemed a prepayment of the unpaid
principal balance of the Loan and not a payment of interest.
16. WAIVER OF JURY TRIAL THE BORROWER WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS
AGREEMENT AND ANY OF THE OTHER LOAN DOCUMENTS, AND AGREES THAT ANY
SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
17. Jurisdiction and Venue. The Borrower irrevocably consents that any
legal action or proceeding against it or any of its property with
respect to any matter arising under or relating to this Agreement
and the other Loan Documents may be brought in any court of the
State, or any Federal Court of the United States of America located
in the State, as the Bank may elect, and by execution and delivery
of this Agreement the Borrower hereby submits to and accepts with
regard to any such action or proceeding, for itself and in respect
of its property, generally and unconditionally, the jurisdiction of
the aforesaid courts. The Borrower further irrevocably consents to
the service of process in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage
prepaid, to the Borrower at its address set forth herein. The
foregoing, however, shall not limit the Bank's rights to serve
process in any other manner permitted by law or to bring any legal
action or proceeding or to obtain execution of judgment in any other
jurisdiction. The Borrower irrevocably waives any objection which it
may now or hereafter have to the laying of the venue of any suit,
action or proceeding arising out of or relating to this Agreement
and the other Loan Documents, and further irrevocably waives any
claim that the State is not a convenient forum for any such suit,
action or proceeding.
18. Presentment; Etc. The Borrower waives presentment, notice of
dishonor, protest, notice of non-payment, and (from and after the
Conversion Date) demand and other notice of any kind.
19. Debit. The Borrower hereby irrevocably authorizes the Bank and any
subsequent holder of the Note, both before and after demand, to
debit any
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of the Borrower's business accounts maintained with the Bank (or
subsequent holder for all sums (including without limitation
principal, interest, late fees, and other fees) payable from time to
time under this Agreement and the other Loan Documents. In addition,
if the Borrower has signed a separate authorization, the Bank is
authorized to initiate ACH debit transfers for the Loan payments and
on the business account(s) specified in the authorization. These
provisions shall not obligate the Bank to create or allow any
overdraft, and such authority shall not relieve the Borrower of the
obligation to assure that payments are made when due.
20. Integration. The Loan Documents supersede all prior agreements
between the parties with respect to the Loan, whether oral or
written, including, without limitation, all correspondence between
counsel for the respective parties and commitment letters. The Loan
Documents constitute the entire agreements between the parties with
respect to the Loan, and the rights, duties, and obligations of the
par-ties with respect thereto.
21. Lender Liability. The Bank shall not be liable for any loss
sustained by any party resulting from any action, omission, or
failure to act by the Bank, whether with respect to the exercise or
enforcement of the Bank's rights or remedies under the Loan
Documents, the Loan, or otherwise, unless such loss is caused by the
actual willful misconduct of the Bank conducted in bad faith. IN NO
EVENT SHALL THE BANK EVER BE LIABLE FOR CONSEQUENTIAL OR PUNITIVE
DAMAGES, ANY RIGHT OR CLAIM THERETO BEING EXPRESSLY AND
UNCONDITIONALLY WAIVED.
22. Bank's Decisional Standards. To the extent that applicable laws
require the Bank's actions or decisions under the Loan Documents to
be conducted in good faith, the term "good faith" shall be defined
(using a subjective standard) as honesty in fact with regard to the
conduct or transaction concerned based upon the facts and
circumstances actually known to the individual(s) acting for the
Bank, and such requirement may be satisfied by reliance upon the
advice of attorneys, accountants, appraisers, architects, engineers,
or other qualified professionals.
23. Descriptive Headings; Context. The captions in this Agreement are
for convenience of reference only and shall not define or limit any
provision. Whenever the context requires, reference in this
Agreement to the neuter gender shall include the masculine and/or
feminine gender, and the singular number shall include the plural,
and, in each case, vice versa.
24. Acknowledgment of Copy. The Borrower acknowledges that it has
received a fully executed copy of this Agreement.
IN WITNESS WHEREOF, the Borrower and the Bank, by persons duly authorized, have
executed this Agreement as of _________________, 2000.
WITNESS:
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