SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Astrosystems, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Astrosystems, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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ASTROSYSTEMS, INC.
6 NEVADA DRIVE
LAKE SUCCESS, NEW YORK 11042
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 2, 1996
-------------------
To the Stockholders of
ASTROSYSTEMS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of ASTROSYSTEMS, INC., a Delaware corporation (the "Company"), will
be held at the Marriott Hotel at Nassau Coliseum, 101 James Doolittle Blvd.,
Uniondale, New York on Friday, February 2, 1996 at 10:00 A.M. for the following
purposes:
(1) To act upon a proposal to approve the adoption of a Plan of Complete
Liquidation and Dissolution (the "Plan"). Approval of the adoption of the
Plan shall also constitute approval of the sale of certain assets of the
Company's Industrial Automation Division, as described in the accompanying
Proxy Statement under the heading entitled "Disposition of Certain Assets--
Operating Divisions and Subsidiary."
(2) To act upon a proposal to approve an Asset Purchase Agreement, dated
as of January 11, 1996, among Cabot Court, Inc. ("Orbitsub"), a wholly-owned
subsidiary of Orbit International Corp. ("International"), International,
the Company and Behlman Electronics, Inc. ("Behlman"), a wholly-owned
subsidiary of the Company, pursuant to which, subject to stockholder
approval of the Plan, the Company will sell to Orbitsub certain assets
relating to its Defense Electronics Division and Behlman will sell to
Orbitsub certain of its assets.
(3) To elect a board of five Directors.
(4) To ratify the appointment of Richard A. Eisner & Company, LLP as the
Company's independent auditors for the fiscal year ending June 30, 1996.
(5) To transact such other business as may properly come before the
Meeting.
Only stockholders of record at the close of business on December 5, 1995 are
entitled to notice of, and to vote at, the Meeting or any adjournment thereof.
ELLIOT J. BERGMAN,
Secretary
Lake Success, New York
January 12, 1996
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE, DATE AND SIGN THE
ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY,
AND RETURN IT IN THE PRE-ADDRESSED ENVELOPE PROVIDED FOR THAT PURPOSE. ANY
STOCKHOLDER MAY REVOKE HIS PROXY AT ANY TIME BEFORE THE MEETING BY WRITTEN
NOTICE TO SUCH EFFECT, ATTN: CORPORATE SECRETARY, BY SUBMITTING A SUBSEQUENTLY
DATED PROXY OR BY ATTENDING THE MEETING AND VOTING IN PERSON.
<PAGE>
ASTROSYSTEMS, INC.
6 NEVADA DRIVE
LAKE SUCCESS, NEW YORK 11042
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PROXY STATEMENT
-------------------
This Proxy Statement is being mailed on or about January 12, 1996 to all
stockholders of record of Astrosystems, Inc. (the "Company") at the close of
business on December 5, 1995 (the "Meeting Record Date") in connection with the
solicitation by the Board of Directors of Proxies to be voted at the Annual
Meeting of Stockholders (the "Meeting") to be held on February 2, 1996 or any
adjournment thereof.
All Proxies duly executed and received will be voted on all matters
presented at the Meeting in accordance with the specifications made in such
Proxies. In the absence of specified instructions, Proxies so received will be
voted for the named nominees to the Company's Board of Directors (the "Board")
and in favor of each of the other proposals indicated on the Proxy.
The business to be conducted at the Meeting includes the approval of a Plan
of Complete Liquidation and Dissolution of the Company (the "Plan"), a copy of
which is attached as Exhibit A to this Proxy Statement. Pursuant to the Plan,
the Company will sell such of its assets as are not to be distributed in kind to
its stockholders and, subject to paying or providing for all claims, obligations
and expenses of the Company, will be completely liquidated (i) by cash and
in-kind distributions to stockholders pro rata and (ii) if required by the Plan
or deemed necessary by the Board of Directors, by a final liquidating
distribution of its then remaining assets to a liquidating trust established for
the benefit of the then stockholders. The Board may, in its discretion, also
distribute assets to any such liquidating trust, from time to time, as an
interim distribution of assets. Should the Board determine that a liquidating
trust is required by the Plan or is otherwise necessary, appropriate or
desirable, approval of the Plan will constitute stockholder approval of the
appointment by the Board of one or more liquidating trustees and the execution
of a liquidating trust agreement with the trustees on such terms and conditions
as the Board, in its absolute discretion, shall determine. In addition, approval
of the Plan will constitute stockholder approval of any and all sales of assets
of the Company approved by the Board or, if applicable, the trustees of any
liquidating trust. See "Proposed Plan of Complete Liquidation and Dissolution"
for a complete description of the Plan and "Asset Purchase Agreement" for a
discussion of an agreement to sell certain assets with respect to which separate
stockholder approval is being sought.
A second proposal to be acted upon at the Meeting is the approval of an
Asset Purchase Agreement, dated as of January 11, 1996 (the "Asset Purchase
Agreement"), among Cabot Court, Inc. ("Orbitsub"), a wholly-owned subsidiary of
Orbit International Corp. ("International"), International, the Company and
Behlman Electronics, Inc. ("Behlman"), a wholly-owned subsidiary of the Company.
A copy of the Asset Purchase Agreement is attached as Exhibit B to this Proxy
Statement. Pursuant to the Asset Purchase Agreement, the Company will sell to
Orbitsub certain assets relating to its Defense Electronics Division and Behlman
will sell to Orbitsub certain of its assets. Approval of the Asset Purchase
Agreement is contingent upon stockholder approval of the Plan. However, approval
of the Plan is not contingent upon stockholder approval of the Asset Purchase
Agreement. See "Asset Purchase Agreement."
Except as described in this Proxy Statement, the Board does not know of any
other matters that may be brought before the Meeting nor does it foresee or have
reason to believe that Proxy holders will have to vote for substitute or
alternate nominees. In the event that any other matter should come before the
Meeting or any nominee is not available for election, the persons named in the
enclosed Proxy will have discretionary authority to vote all Proxies not marked
to the contrary with respect to such matters in accordance with their best
judgment. A Proxy may be revoked at any time before being voted by written
notice to such effect received by the Company at the address set forth above,
attn: Corporate Secretary, by delivery of a subsequently dated Proxy or by a
vote cast in person at the Meeting. The
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Company will pay the entire expense of soliciting Proxies, which solicitation
primarily will be by use of the mails, but certain Directors, officers and
employees of the Company may solicit Proxies in person or by telephone,
telecopier or telegram, without special compensation.
The total number of shares of Common Stock of the Company outstanding and
entitled to vote as of December 5, 1995 was 4,586,986. The shares of Common
Stock are the only class of securities of the Company entitled to vote, each
share being entitled to one noncumulative vote. A majority of the shares
outstanding and entitled to vote as of December 5, 1995, or 2,293,494 shares,
must be present at the Meeting in person or by Proxy in order to constitute a
quorum for the transaction of business. Only stockholders of record as of the
close of business on December 5, 1995 will be entitled to vote. With regard to
the election of Directors, votes may be cast in favor or withheld; votes that
are withheld will have no effect as Directors shall be elected by a plurality of
the votes cast in favor. Abstentions and broker non-votes will be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. Abstentions are counted as present in the tabulation of the votes
cast on the proposals presented to stockholders. Since the approval of the
proposed Plan and the approval of the Asset Purchase Agreement each requires the
approval of a majority of the outstanding shares, abstentions will have the
effect of a negative vote. Broker non-votes are not counted as present for
purposes of determining whether a particular proposal has been approved.
Accordingly, they will also have the effect of a negative vote with respect to
the approval of the Plan and the approval of the Asset Purchase Agreement. Since
the proposed ratification of the appointment of Richard A. Eisner & Company, LLP
as the Company's independent auditors for the fiscal year ending June 30, 1996
requires the approval of a majority of the shares present and entitled to vote
at the Meeting, abstentions will have the effect of a negative vote while broker
non-votes will have no effect.
A list of stockholders entitled to vote at the Meeting will be available for
examination by any stockholder, for any purpose germane to the Meeting, during
ordinary business hours, at the Company's offices, 6 Nevada Drive, Lake Success,
New York, for a period of ten days prior to the Meeting and will also be
available at the Meeting. The Company's telephone number is (516) 328-1600.
PROPOSED PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION
GENERAL
The Company is proposing a Plan of Complete Liquidation and Dissolution for
approval by the stockholders at the Meeting. A copy of the Plan is attached as
Exhibit A to this Proxy Statement. The material features of the Plan are
summarized below; this summary does not purport to be complete and is subject in
all respects to the provisions of, and is qualified in its entirety by reference
to, the Plan. STOCKHOLDERS ARE URGED TO READ THE PLAN IN ITS ENTIRETY.
BACKGROUND AND REASONS FOR THE PLAN; DIRECTORS' RECOMMENDATIONS
In furtherance of the Company's objective to maximize values realized by its
stockholders, the Board of Directors of the Company reviewed and considered the
potential liquidation value of the Company in relation to the market trading
value of its Common Stock as well as the Company's financial condition and
results of its operations. It is the view of the Board that the Company's Common
Stock historically has traded at a discount from the net value of the Company's
assets. This view is based upon a comparison of the historical market value of
the Company's Common Stock with the value of the Company's assets. In this
connection, management, with the assistance of the Board, estimated the value of
the Company's liquid assets as set forth below. In addition, management, with
the assistance of the Board and the Company's financial advisor (see
"Disposition of Certain Assets-Financial Advisor"), estimated the asset values
of the Company's two operating divisions and of its wholly-owned subsidiary,
Behlman, as discussed below.
The value of the Company's liquid assets was estimated based on the
Company's balance sheet as of September 30, 1995 as follows:
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<TABLE>
<CAPTION>
<S> <C>
Cash and cash equivalents..................................... $12,329,000
Marketable securities......................................... 11,678,000
Accounts receivable (net of reserve for doubtful accounts).... 2,468,000
U.S. Treasury Notes........................................... 11,924,000
-----------
Total Liquid Assets........................................... $38,399,000
-----------
-----------
</TABLE>
The estimated value of the Company's liquid assets of $38,399,000 was,
therefore, approximately 88% of its total assets of $43,855,000 as of September
30, 1995.
The balance of the Company's assets of approximately $5,456,000 are
primarily associated with the Company's operating divisions and subsidiary
(non-liquid and non-operating assets, consisting of prepaid expenses, long-term
investments, goodwill and other assets, totaled approximately $1,405,000 as of
September 30, 1995). In order to assist management and the Board in determining
the value of the Company's Industrial Automation Division and Behlman
operations, on February 15, 1995, OEM Capital Corp. ("OEM"), an investment
banking firm, was retained as a financial advisor. On August 31, 1995, the
Company retained OEM as a financial advisor in order to assist management and
the Board in determining the value of its Defense Electronics Division. See
"Disposition of Certain Assets-Financial Advisor." At the direction of the
Company and Behlman, OEM undertook to determine the identity of third parties
interested in acquiring any or all of the operations of the divisions and
subsidiary and to estimate the sale values thereof based on asset values and
other factors such as historical and estimated sales, earnings and market
position. Following such action, at the request of the Company and Behlman, OEM
managed a competitive bidding process with respect to the sale of such
operations. Based upon such process, the Company determined that the aggregate
of the purchase prices obtainable with regard to the divisions and subsidiary
was not significantly in excess of the aggregate book value of their operating
assets (approximately $4,051,000 as of September 30, 1995 with regard to
inventory and fixed assets).
As discussed under "Conflict of Interest of Certain Members of the Board of
Directors," three members of the Board may be deemed to have a conflict of
interest in recommending approval of the adoption of the Plan. Notwithstanding
such fact, the Board did not find it necessary to obtain an independent fairness
opinion with regard to the Plan or an appraisal of the Company's assets based
upon the following factors: (i) approximately 88% of the Company's assets are
liquid assets whose value is readily determinable; (ii) the competitive bidding
process managed by OEM satisfactorily established, in the Board's view, the
approximate value of the Company's operations; and (iii) the three Board members
who may be deemed to have a conflict of interest in recommending approval of the
Plan are also the three principal stockholders of the Company and, accordingly,
have an interest in seeking the maximization of stockholder value.
Prior to adopting the Plan, the Board explored various alternatives to the
liquidation of the Company, including the possibility of the Company continuing
its operations. Since its inception, the Company's primary business has been in
defense electronics. The Company's revenues in this area have been declining
since the fiscal year ended June 30, 1992 and, due to a continuing decline in
defense budgets, severe price competition from low cost geographical areas and
corporate consolidations, the prospects for the Company as a stand-alone defense
business are not promising. In addition, high fixed overhead costs necessitated
by defense contracts, coupled with a declining business base, have been tending
to make the Company non-competitive. Although the prospects for some of the
Company's commercial products are promising, the revenues would not be
sufficient in the near future to sustain the Company.
The Board believes that it is in the best interests of the Company's
stockholders to distribute to them the Company's net assets primarily through
cash distributions. Certain assets may be distributed in kind, either directly
or via a liquidating trust. The Board believes that the liquidation value per
share of the Company's Common Stock is likely to exceed its probable trading
value in the foreseeable future
3
<PAGE>
absent the proposed liquidation. No assurances can be given as to the foregoing.
In addition, no assurances can be given that, as a consequence of the
liquidation, holders of the Company's Common Stock will receive aggregate value
which exceeds the prices at which the Company's Common Stock has generally
traded. In the event of insufficient liquidation proceeds, stockholders could be
adversely affected. See "Contingent Liabilities; Contingency Reserve;
Liquidating Trust" and "Pro Forma Liquidating Balance Sheet."
In adopting the Plan, the Board recognized that stockholders, depending on
the tax basis in their shares, may be required to recognize gain for tax
purposes upon receipt of distributions in liquidation and upon the transfer of
the assets to a liquidating trust. See "Certain Federal Income Tax
Consequences."
The high and low sale prices of a share of the Company's Common Stock on
October 31, 1995, the date preceding the public announcement of the proposed
Plan, were $4 1/4 and $4 1/8, respectively.
BASED UPON THE FOREGOING, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
THE STOCKHOLDERS VOTE "FOR" APPROVAL OF THE PLAN. AS INDICATED ABOVE, CERTAIN
MEMBERS OF THE BOARD OF DIRECTORS MAY BE DEEMED TO HAVE A CONFLICT OF INTEREST
IN RECOMMENDING APPROVAL OF THE PLAN. SEE "CONFLICT OF INTEREST OF CERTAIN
MEMBERS OF THE BOARD OF DIRECTORS." SUCH DIRECTORS, WHO, AS OF THE MEETING
RECORD DATE, HAD OR SHARED VOTING POWER WITH RESPECT TO AN AGGREGATE OF
APPROXIMATELY 1,965,518 SHARES OF COMMON STOCK OF THE COMPANY (APPROXIMATELY 43%
OF THE THEN ISSUED AND OUTSTANDING SHARES OF COMMON STOCK), HAVE INDICATED THAT
THEY INTEND TO VOTE "FOR" APPROVAL OF THE PLAN. SEE "RECOMMENDATION AND VOTE"
AND "PRINCIPAL STOCKHOLDERS."
If the Plan is not approved by the stockholders, the Board of Directors will
explore the alternatives then available for the future of the Company.
CONFLICT OF INTEREST OF CERTAIN MEMBERS OF THE BOARD OF DIRECTORS
In connection with their employment as executive officers of the Company,
three Directors (Seymour Barth, Elliot Bergman and Gilbert Steinberg) are
parties to employment agreements (the "Employment Agreements") which do not have
fixed termination dates and which require that the Company give three years'
notice of termination. Depending on the final date of liquidation, these
Directors may be entitled to payments of up to approximately $2,245,000 in the
aggregate over such three year period notwithstanding that their
responsibilities in liquidating and dissolving the Company may be less than
their present responsibilities. Hence, these members of the Board of Directors
may be deemed to have a conflict of interest with respect to approval of the
Plan. See "Executive Compensation and Certain Transactions-Employment
Agreements."
PRINCIPAL PROVISIONS OF THE PLAN; ABANDONMENT OR AMENDMENT
The Plan provides for the following:
(a) The Company will distribute to its stockholders in kind or sell or
otherwise dispose of all its property and assets. The determination of which
assets will be sold and which will be distributed to the Company's stockholders
in kind, and the timing of such sales and distributions, will be based upon
management's judgment as to whether and/or when the sale or distribution of a
particular asset will result in realization of the highest value to the
Company's stockholders. Sales of the Company's assets will be made on such terms
as are approved by the Board. See "Asset Purchase Agreement" with regard to the
proposed sale by the Company of certain assets of its Defense Electronics
Division and by Behlman of certain of its assets. Consummation of the Asset
Purchase Agreement is subject to the approval of the provisions thereof, as well
as of the Plan, by the stockholders of the Company. Also see
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"Disposition of Certain Assets--Operating Divisions and Subsidiary" with regard
to a contemplated sale by the Company of certain assets of its Industrial
Automation Division. Unsold assets, if any (other than property distributed in
kind to stockholders) may be transferred to a liquidating trust at any time in
the discretion of the Board. Unsold and undistributed assets must be transferred
to a liquidating trust by the fourth anniversary of the approval of the Plan by
the Company's stockholders and thereafter would be sold or otherwise disposed of
on terms approved by its trustees. No further stockholder votes will be
solicited with respect to approval of specific terms of sales of assets approved
by the Board of Directors or, if applicable, the trustees of any such
liquidating trust.
(b) Subject to payment or provision for payment of the Company's
indebtedness and other obligations, including tax liabilities, the cash proceeds
of any such sales, together with other available cash, will be distributed from
time to time pro rata to the holders of the Company's Common Stock on record
dates selected by the Board for such distributions. The Company has no current
or long-term indebtedness. The Company may establish a contingency reserve in an
amount determined by the Board to be sufficient to satisfy the liabilities,
expenses and obligations of the Company not otherwise paid, provided for or
discharged (the "Contingency Reserve"). The net balance, if any, of any such
Contingency Reserve remaining after payment, provision or discharge of all such
liabilities, expenses and obligations (including interest earned on cash in the
Contingency Reserve) also will be distributed to the Company's stockholders pro
rata or to the liquidating trust. No assurances can be given that available
cash, amounts received on the sale of assets and interest income will be
adequate to provide for the Company's obligations, liabilities, expenses and
claims and to make cash distributions to stockholders. Furthermore, the Company
may, as authorized by the Board of Directors, repurchase shares of Common Stock
from stockholders in open market purchases. Such purchases would decrease
amounts distributable to remaining stockholders if the Company were to pay
amounts in excess of the per share values ultimately distributable in respect of
the shares purchased and would increase amounts distributable to remaining
stockholders if the Company were to pay amounts less than the per share values
ultimately distributable in respect of such shares. See "Liquidating
Distributions," "Contingent Liabilities; Contingency Reserve; Liquidating Trust"
and "Pro Forma Liquidating Balance Sheet."
(c) As indicated above, if all the Company's assets are not sold or
distributed prior to the fourth anniversary of the approval of the Plan by the
Company's stockholders, the Company must transfer the assets not sold or
distributed (including any Contingency Reserve) to a liquidating trust. Prior to
the fourth anniversary of the approval of the Plan by the Company's
stockholders, the Company may, in its discretion, transfer such of its assets as
have not been previously sold or distributed (including the Contingency Reserve)
to such a liquidating trust. In the event a liquidating trust is established,
the Company would distribute pro rata to the then holders of its Common Stock
beneficial interests in such liquidating trust ("Interests"). It is anticipated
that the Interests will not be freely transferable; hence, although the
recipients of the Interests will be treated for tax purposes as having received
their pro rata share of property transferred to the liquidating trust and will
thereafter take into account for tax purposes their allocable portion of any
income, expense, gain or loss realized by such trust, the recipients of the
Interests will not realize the value thereof unless and until such trust
distributes cash or other assets to them, which will be solely in the discretion
of the trustee.
(d) The Company will close its transfer books on the earlier to occur of the
final liquidating distribution or the date on which the Company ceases to exist
under Delaware law, and thereafter will not record any further transfers of its
Common Stock nor issue any new stock certificates, other than replacement
certificates. See "Listing and Trading of the Common Stock and Interests in the
Liquidating Trust" and "Final Record Date."
(e) A Certificate of Dissolution will be filed with the State of Delaware
completing the liquidation and dissolution process. Except for compliance with
applicable rules and regulations of the Securities and Exchange Commission (the
"SEC") in connection with distribution by the Company to its stockholders of
securities held by the Company, no federal or state regulatory requirements must
be complied with or approvals obtained in connection with the liquidation.
5
<PAGE>
Under the Plan, if the Board of Directors determines that liquidation and
dissolution are not in the best interests of the Company or its stockholders,
the Board may direct that the Plan be abandoned. The Company nevertheless may
cause the performance, without further stockholder approval, of any contract for
the sale of assets theretofore executed which the Board of Directors deems to be
in the best interests of the Company (except that the Company shall not
consummate the Asset Purchase Agreement without stockholder approval thereof).
The Board also may amend or modify the Plan if it determines such action to be
in the best interests of the Company or its stockholders, without the necessity
of further stockholder approval.
LIQUIDATING DISTRIBUTIONS
Although the Board has not established a firm timetable for distributions to
stockholders if the Plan is approved, the Board will, subject to exigencies
inherent in winding up the Company's business, make such distributions as
promptly as practicable consistent with maximizing stockholder value. The
Company anticipates making the first cash distribution in 1996. The Board is,
however, currently unable to predict the precise amount of any distributions of
cash pursuant to the Plan. The actual amount and timing of, and record date for,
all distributions will be determined by the Board of Directors, in its sole
discretion, and will depend in part upon the Board's determination as to whether
particular assets are to be distributed in kind or otherwise disposed of, and
the amounts deemed necessary by the Board to pay or provide for all the
Company's liabilities and obligations. The Company does not plan to satisfy all
of its liabilities and obligations prior to making distributions to its
stockholders, but instead will reserve assets deemed by management to be
adequate to provide for satisfying such liabilities and obligations. See
"Contingent Liabilities; Contingency Reserve; Liquidating Trust." Management
believes that the Company has sufficient cash to pay its current and accrued
obligations without the sale of any of its assets. Uncertainties as to the net
value of assets and the ultimate amount of liabilities make it impracticable to
predict the aggregate net values ultimately distributable to stockholders.
Claims, liabilities and expenses from operations (including operating costs,
salaries, income taxes, payroll, local taxes and miscellaneous office expenses)
will continue to accrue following approval of the Plan, and the Company
anticipates that expenses for professional fees and other expenses of
liquidation will be significant. These expenses will reduce the amount of assets
available for ultimate distribution to stockholders. While the Company does not
believe that a precise estimate of those expenses can presently be made,
management believes that available cash, interest income and the amounts which
will be received on the sale of assets will be adequate to provide for the
Company's obligations, liabilities, expenses and claims (including contingent
liabilities) and to make cash distributions to stockholders. However, no
assurances can be given as to the foregoing. See "Pro Forma Liquidating Balance
Sheet." Also see "Contingent Liabilities; Contingency Reserve; Liquidating
Trust" for a discussion of certain circumstances under which a stockholder could
be held liable to creditors of the Company for the payment of expenses and
liabilities (such obligation to be limited to the amounts received by the
stockholder as distributions from the Company or the liquidating trust).
If securities held by the Company are distributed to stockholders,
applicable rules and regulations of the SEC will be complied with.
DISPOSITION OF CERTAIN ASSETS
The Plan gives to the Board of Directors of the Company the power to sell
all the assets of the Company. As of the date hereof, no sale of any assets of
the Company has been consummated. See, however, "Operating Divisions and
Subsidiary" below for a discussion of a letter of intent entered into by the
Company with respect to the sale of one of its divisions. Any sale, including
the one contemplated by such letter of intent, will only be made after the Board
of Directors has determined that such sale is in the best interest of the
stockholders. In addition, see "Asset Purchase Agreement" for a discussion of an
agreement entered into by the Company and Behlman with respect to the sale of
certain of their assets.
6
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Following are the principal assets of the Company, together with a brief
description of the Company's current plans to sell or distribute them.
MARKETABLE SECURITIES
As of September 30, 1995, the Company had approximately $11,678,000 in
marketable securities (valued at the lower of cost or market). These are
primarily short and intermediate term liquid instruments such as U.S. Treasury
obligations which will be sold or held to maturity to maximize stockholder
value, as determined by the Board of Directors. In addition, as of such date,
the Company had approximately $11,924,000 in long-term U.S. Treasury Notes which
also will be sold or held to maturity, as determined by the Board.
ACCOUNTS RECEIVABLE
As of September 30, 1995, the Company had accounts receivable (net of a
reserve for doubtful accounts) of approximately $2,468,000. Both the letter of
intent referred to above and the Asset Purchase Agreement contemplate that such
accounts receivable will be retained as assets of the Company and Behlman.
Pursuant to the Asset Purchase Agreement, Orbitsub is obligated to collect, on
behalf of the Company and Behlman, all accounts receivable of the businesses to
be acquired. Subject to the terms of the Asset Purchase Agreement, the Company
and Behlman have retained the right to collect any accounts receivable that are
overdue. Pursuant to the Asset Purchase Agreement, Orbitsub shall have the right
to purchase the accounts receivable of the businesses to be acquired on a
dollar-for-dollar basis.
OPERATING DIVISIONS AND SUBSIDIARY
Contemplated Sales
The Company's two operating divisions, Defense Electronics Division
("Defense") and Industrial Automation Division ("Industrial"), and wholly-owned
subsidiary, Behlman, have been offered for sale.
The Company has entered into a letter of intent with North Atlantic
Instruments, Inc. (the "Letter of Intent") with regard to the sale of certain
assets of Industrial, including its inventory and equipment, for a cash purchase
price of approximately $705,000 (subject to certain adjustments based upon a
valuation of the subject assets at closing). The consummation of the transaction
contemplated by the Letter of Intent is subject to a number of conditions,
including the execution of a definitive purchase agreement. No assurances can be
given that the transaction will be completed on the above terms or otherwise.
The consummation of the sale of Industrial's assets, as described above, is
contingent upon stockholder approval of the Plan but not upon approval of any
agreement embodying the terms thereof.
See "Asset Purchase Agreement" for a discussion of the proposed sale of
certain assets of Defense and Behlman. The consummation of the sale of such
assets pursuant to the Asset Purchase Agreement is contingent upon stockholder
approval of the Plan and the Asset Purchase Agreement; however, approval of the
Plan is not contingent upon stockholder approval of the Asset Purchase
Agreement.
In the event the Asset Purchase Agreement and/or Letter of Intent are not
consummated and an alternate sales price is not obtained which, in the opinion
of the Board of Directors and its financial advisor, maximizes stockholder
value, the Board may, in its sole discretion, decide to liquidate the divisions
and subsidiary over a period of time which maximizes stockholder value.
7
<PAGE>
Financial Advisor
The Company has engaged OEM as its exclusive financial advisor with respect
to the possible sale of the divisions and Behlman and has agreed to pay OEM a
graduated percentage (ranging between 5% and 1%) of the sales consideration.
The Company reviewed and interviewed a number of financial advisors and
selected OEM as its exclusive financial advisor primarily due to its expertise
in evaluating small and medium-size high technology electronics companies.
Discussions with a number of OEM's previous clients indicated a high degree of
satisfaction with its expertise and diligence.
The Company has been advised that OEM and its predecessor have operated for
more than ten years, conducting investment banking transactions on behalf of
companies in electronics-related industries. Its principals have all had
extensive experience as investment bankers to these industries. In addition, the
Company has been advised that both principals who are performing services for
the Company have technical degrees as well as experience managing similar
companies.
OEM's services have included financial advice in connection with estimating
the value of the Company's operating divisions and Behlman, preparing
descriptive memoranda of the divisions and subsidiary, developing a list of
prospective bidders, coordinating competitive bidding for the divisions and
subsidiary and assisting the Company in evaluating the bids received. No written
reports were requested or received from OEM with regard to asset values or other
matters relating to the contemplated sales other than weekly status reports with
regard to prospective bidders.
ASTROPOWER, INC.
The Company currently owns 32.3% of the Common Stock of AstroPower, Inc.
("AstroPower"). Assuming certain convertible Preferred Stock is converted into
Common Stock by stockholders of AstroPower other than the Company, the Company's
interest in AstroPower would be reduced to 22.8%. The Company has a zero basis
in its AstroPower Common Stock. As there is currently no public market for the
AstroPower Common Stock and there are certain restrictions on the
transferability of such shares, the Board, in its sole discretion, will consider
placing the Company's AstroPower Common Stock into a liquidating trust or will
seek such alternate method or methods of sale, disposition or distribution as
will maximize stockholder value.
SOLAR CELL LICENSE
In 1983, the Company acquired a 16-year license (the "License") from the
University of Delaware covering a new process for the manufacture of solar
cells. In connection with the acquisition of the License, the Company issued a
$20,000,000 nonrecourse note (the "Note"), originally due in 1993 and bearing
interest at the rate of 14% per year. The Note is secured by the Company's
rights under the License and is to be paid prior to its due date solely on the
basis of 4% of sales of products developed by this process, subject to certain
minimum quarterly payments of $11,250 to $12,500. To date, there have been no
sales of products developed by the solar cell process covered by the License. An
amendment to the license agreement (the "License Agreement") extended its term
to 2006; concurrently, the due date of the Note was extended to May 1999. As
consideration for the amendment, the Company paid $115,000 in cash, which was
charged to operations for the year ended June 30, 1994, and transferred 35,000
shares of Common Stock of AstroPower to the University of Delaware. The Company,
for financial reporting purposes, has not recorded the Note and charges
operations with any payments.
The Board will consider alternative methods of maximizing the value of the
License for the benefit of the Company's stockholders.
At September 30, 1995, $8,193,000 of deferred taxes relating primarily to
the License Agreement was classified as a long-term liability. The Company will
retain an amount in the Contingency Reserve
8
<PAGE>
necessary to satisfy deferred taxes which will fluctuate based on the future
taxable income of the Company. See "Contingent Liabilities; Contingency Reserve;
Liquidating Trust."
CONDUCT OF THE COMPANY FOLLOWING ADOPTION OF THE PLAN
It is anticipated that the present Directors and executive officers of the
Company will continue to serve in such capacities following adoption of the
Plan. Such Directors and officers will receive compensation for the duties then
being performed as determined by the Board of Directors. The Board of Directors
has not established specific guidelines for determination of the compensation to
be paid to Directors and officers of the Company following approval of the Plan.
Such compensation will be determined by an evaluation of all relevant factors,
including, without limitation, the efforts of such individuals in successfully
implementing the Plan and compensation payable in the financial community to
individuals exercising similar authority and bearing similar responsibilities.
Pursuant to the Plan, the Company may, in the absolute discretion of the Board,
pay to the Company's officers, Directors, employees, agents and representatives,
or any of them, compensation or additional compensation above their regular
compensation, in money or other property, in recognition of the extraordinary
efforts they, or any of them, will be required to undertake, or actually
undertake, in connection with the implementation of the Plan. Approval of the
Plan shall also constitute the approval by the Company's stockholders of the
payout of any such compensation. See "Conflict of Interest of Certain Members of
the Board of Directors" with respect to certain Employment Agreements in effect
between the Company and certain executive officers, and certain termination
notice provisions therein.
Following approval of the Plan by the Company's stockholders, the Company's
activities will be limited to winding up its affairs and taking such action as
may be necessary to preserve the value of its assets. The Company will seek to
liquidate all of its assets in such manner and upon such terms as the Board of
Directors determines to be in the best interests of the Company's stockholders.
The prices at which the Company will be able to sell its various assets depend
largely on factors beyond the Company's control, including, without limitation,
the rate of inflation, changes in interest rates, the condition of financial
markets, the availability of financing to prospective purchasers of the assets
and governmental regulatory approvals. The Company may not obtain as high a
price for a particular property as it might secure if the Company were not in
liquidation. See "Disposition of Certain Assets--Operating Divisions and
Subsidiary" and "Pro Forma Liquidating Balance Sheet."
In November 1995, pursuant to the provisions of the Company's lease with
regard to its executive offices and manufacturing operations located at 6 Nevada
Drive, Lake Success, New York, the Company advised the lessor that it was
terminating the lease effective February 29, 1996. In taking such action, the
Company anticipated that the sales contemplated by the Asset Purchase Agreement
and the Letter of Intent will be consummated by such date. No assurances can be
given as to the foregoing. In the event such transactions are not timely
consummated and the Company is unable to negotiate an extension of the lease,
the ability of the Company to sell its operations as a going concern would be
materially adversely affected and/or the Company may find it necessary to incur
substantial relocation costs.
Pursuant to the Plan, the Company shall indemnify its officers, Directors,
employees, agents and representatives for actions taken in connection with the
Plan and the winding up of the affairs of the Company. The Company's obligation
to indemnify such persons may also be satisfied out of assets of any liquidating
trust established.
CONTINGENT LIABILITIES; CONTINGENCY RESERVE; LIQUIDATING TRUST
Under Delaware law, the Company is required, in connection with its
dissolution, to pay or provide for payment of all of its liabilities and
obligations. Following approval of the Plan by the Company's stockholders, the
Company will pay, or set aside as a Contingency Reserve assets which it believes
to be
9
<PAGE>
adequate for payment of, all expenses and fixed and other known liabilities. The
Company is currently unable to estimate with precision the extent of any
Contingency Reserve which may be required, but any such sum (in addition to any
assets contributed to a liquidating trust, if one is utilized) will be deducted
before the determination of amounts available for distribution to stockholders.
See "Disposition of Certain Assets--Solar Cell License" for a discussion of a
certain deferred tax liability of the Company. Also see "Pro Forma Liquidating
Balance Sheet" and "Asset Purchase Agreement."
The actual size of the Contingency Reserve will be based upon estimates and
opinions of management derived from consultations with outside experts and
review of the Company's estimated operating expenses, including, without
limitation, anticipated compensation payments, estimated investment banking,
legal and accounting fees, rent, payroll and other taxes payable, miscellaneous
office expenses and accrued expenses. There can be no assurance that the
Contingency Reserve will be sufficient. Subsequent to its establishment, the
Company will distribute to its stockholders any portions of the Contingency
Reserve which it deems no longer to be required. After the liabilities, expenses
and obligations for which the Contingency Reserve had been established have been
satisfied in full, the Company will distribute to its stockholders any remaining
portion of the Contingency Reserve.
If necessary for any reason in order to complete the liquidation and
distribution of the Company's assets to the Company's stockholders, the Company
may at any time transfer to a liquidating trust, as a final liquidating
distribution or from time to time prior to a final liquidating distribution, any
assets of the Company. If all the Company's assets are not sold or distributed
prior to the fourth anniversary of the approval of the Plan by the Company's
stockholders, pursuant to the provisions of the Plan, the Company must transfer
the assets not sold or distributed (including the Contingency Reserve) to such a
liquidating trust. The sole purpose of the trust will be to liquidate on terms
satisfactory to the liquidating trustees and distribute the proceeds of the
assets formerly owned by the Company, after paying any remaining liabilities of
the Company, to the Company's then stockholders of record. The liquidating trust
will be obligated to pay any expenses and liabilities of the Company which
remain unsatisfied. If the Contingency Reserve transferred to the liquidating
trust is exhausted, such expenses and liabilities will be satisfied out of the
liquidating trust's other unsold assets.
The Plan authorizes the Board of Directors to appoint one or more
individuals or corporate persons to act as trustee or trustees of the
liquidating trust and to cause the Company to enter into a liquidating trust
agreement with such trustee or trustees on such terms and conditions as the
Board of Directors determines. Approval of the Plan will constitute the approval
by the Company's stockholders of any such appointment and liquidating trust
agreement.
In the event the Company fails to create an adequate Contingency Reserve for
payment of its expenses and liabilities, or should such Contingency Reserve and
the assets held by the liquidating trust be exceeded by the amount ultimately
found payable in respect of expenses and liabilities, each stockholder could be
held liable for the payment to creditors of such stockholder's pro rata share of
such excess, limited to the amounts theretofore received by such stockholder
from the Company or the liquidating trust.
If a court holds at any time that the Company has failed to make adequate
provision for its expenses and liabilities or if the amount ultimately required
to be paid in respect of such liabilities exceeds the amount available from the
Contingency Reserve and the assets of the liquidating trust, a creditor of the
Company could seek an injunction against the making of distributions under the
Plan on the ground that the amounts to be distributed are needed to provide for
the payment of the Company's expenses and liabilities. Any such action could
delay or substantially diminish the cash distributions to be made to
stockholders and/or holders of Interests under the Plan.
10
<PAGE>
FINAL RECORD DATE
The stock transfer books of the Company will be closed on the earlier to
occur of (i) the close of business on the record date fixed by the Board for the
final liquidating distribution or (ii) the date on which the Company ceases to
exist under Delaware law (following any post-dissolution continuation period),
and thereafter no further transfers will be recorded on the Company's books, and
no further stock certificates will be issued, other than replacement
certificates. It is anticipated that no further trading of the Company's shares
will occur after such date (the "Final Record Date"). See "Listing and Trading
of the Common Stock and Interests in the Liquidating Trust" below. All
liquidating distributions from the Company on or after the Final Record Date
will be made to stockholders according to their stockholdings as of the Final
Record Date. Prior or subsequent to the Final Record Date, the Company may, at
its election, require stockholders to surrender certificates representing their
shares of the Company's Common Stock in order to receive subsequent
distributions. Stockholders should not forward their stock certificates before
receiving instructions to do so. If surrender of stock certificates should be
required, all distributions otherwise payable by the Company or the liquidating
trust, if any, to stockholders who have not surrendered their stock certificates
may be held in trust for such stockholders, without interest, until the
surrender of their certificates (subject to escheat pursuant to the laws
relating to unclaimed property).
LISTING AND TRADING OF THE COMMON STOCK AND INTERESTS IN THE LIQUIDATING TRUST
The Company currently intends to close its transfer books on the Final
Record Date and at such time cease recording stock transfers and issuing stock
certificates (other than replacement certificates). Accordingly, it is expected
that trading in the shares will cease on such date. Prior to such time, it is
anticipated that the market price of the Company's Common Stock will decline as
distributions are made to stockholders. Such price reduction may have a material
adverse affect upon the marketability of the outstanding shares of Common Stock
as many investors, as a matter of policy, avoid investment in (or, in the case
of institutional investors, are restricted from acquiring) low-priced
securities. In addition, a variety of brokerage house policies and practices
tend to discourage individual brokers within those firms from dealing in
low-priced stocks or recommending such securities to their clients. Further, the
structure of trading commissions tends to have an adverse impact upon holders of
low-priced stocks because the brokerage commission on a sale of such securities
generally represents a higher percentage of the sale price than the commission
on a relatively higher-priced issue. Moreover, as a result of the adoption of
the Plan and/or the resulting reduction in both the market price of the
Company's Common Stock and the Company's assets and stockholders' equity
following stockholder distributions, the Common Stock may no longer satisfy the
requirements for continued listing on the NASDAQ National Market System ("NMS")
(or listing on the NASDAQ Small Cap Market). In the event the listing of the
Company's Common Stock on NASDAQ NMS is terminated and the Company does not meet
the requirements for listing on the NASDAQ Small Cap Market, the marketability
of the shares of Common Stock may be adversely affected to a material degree.
No determination yet has been made whether the Interests in the liquidating
trust, if any, will be transferable. Such determination will be made by the
Board of Directors of the Company prior to the transfer of assets to the
liquidating trust and will be based on, among other things, the Board's estimate
of the value of the assets being transferred to the liquidating trust, tax
matters and the impact of compliance with applicable securities laws. If the
Interests are not transferable, ownership may be assigned only by operation of
law or upon death.
As stockholders will be deemed to have received a liquidating distribution
equal to their pro rata share of the value of the net assets distributed to an
entity which is treated as a liquidating trust for tax purposes (see "Certain
Federal Income Tax Consequences--The Liquidating Trust"), the distribution to
the trust of assets could result in immediate tax liability to the holders of
Interests without their readily being able to realize the value of such
Interests to pay such taxes or otherwise. Should the
11
<PAGE>
Interests be transferable, the Company plans to distribute an information
statement with respect to the liquidating trust at the time of the transfer of
assets and the liquidating trust may be required to comply with the periodic
reporting and proxy requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The costs of compliance with such requirements
would reduce the amount which otherwise could be distributed to holders of
Interests. Even if transferable, the Interests are not expected to be listed on
a national securities exchange or quoted through NASDAQ and the extent of any
trading market therein cannot be predicted. Moreover, the Interests may not be
accepted by commercial lenders as security for loans as readily as more
conventional securities with established trading markets.
ABSENCE OF APPRAISAL RIGHTS
Under Delaware law, the stockholders of the Company are not entitled to
appraisal rights for their shares of the Company's stock in connection with the
transactions contemplated by the Plan or to any similar rights of dissenters
under Delaware law.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material Federal income tax
consequences to the Company and its stockholders relevant to the Plan, but does
not purport to be a complete analysis of all the potential tax effects. The
discussion is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Regulations, Internal Revenue Service (the "IRS") rulings, and
judicial decisions now in effect, all of which are subject to change at any
time; any such changes may be applied retroactively. The following discussion
has no binding effect on the IRS or the courts and assumes that the Company will
liquidate substantially in accordance with the Plan. Distributions pursuant to
the Plan may occur at various times and in more than one tax year. No assurances
can be given that the tax treatment described herein will remain unchanged at
the time of such distributions.
CONSEQUENCES TO THE COMPANY
After the approval of the Plan and until the winding up of its affairs is
completed and the Company ceases to exist, the Company will continue to be
subject to tax on its taxable income. The Company will generally recognize gain
or loss on sales of its property pursuant to the Plan. Upon any distribution of
property to stockholders or to a liquidating trust pursuant to the Plan, the
Company will generally recognize gain or loss as if such property was being sold
to the stockholders at its fair market value.
CONSEQUENCES TO STOCKHOLDERS
Stockholders will recognize gain or loss equal to the difference between (i)
the sum of the amount of cash distributed to them and the fair market value (at
the time of distribution) of property distributed to them, and (ii) their tax
basis for their shares of the Company's Common Stock. A stockholder's tax basis
in his or her shares will depend upon various factors including the method of
acquisition of such shares and the amount and nature of any distributions
received with respect thereto.
Gain or loss will be computed on a "per share" basis. The Company expects to
make more than one liquidating distribution, each of which will be allocated
proportionately to each share of stock owned by a stockholder. Gain will be
recognized by reason of a liquidating distribution only to the extent that the
aggregate value of such distribution and any prior liquidating distribution(s)
received by a stockholder with respect to a share exceeds his or her tax basis
for that share. Any loss will generally be recognized only when the final
distribution from the Company has been received and then only if the aggregate
value of the liquidating distribution with respect to a share is less than the
stockholder's tax basis for that share, as adjusted for prior distributions.
Gain or loss recognized by a stockholder will be capital gain or loss provided
the shares are held as capital assets.
12
<PAGE>
Upon any distribution of property, the stockholder's tax basis in such
property will be the fair market value of such property at the time of
distribution. The gain or loss recognized upon a future sale of that property
will be measured by the difference between the stockholder's tax basis in the
property at the time of such sale and the sales proceeds.
After the close of its taxable year, the Company will provide stockholders
and the IRS with a statement of the amount of cash distributed to the
stockholders and its best estimate as to the value of the property distributed
to them during that year. In the case of property which consists of stock or
other securities which are traded in a public market, the fair market value will
be based on the prices at which such stocks or securities are so traded at the
time of distribution. In the case of other property, the fair market value will
be determined by the Board of Directors. In making such determination, the Board
may rely upon reports by independent appraisers. There is no assurance that the
IRS would not challenge such valuation. As a result of such a challenge, the
amount of gain or loss recognized by stockholders (as well as the Company) might
be changed.
THE LIQUIDATING TRUST
If a liquidating trust is used, stockholders will be treated for tax
purposes at the time of transfer as having received their pro rata share of
property transferred to the liquidating trust, reduced by the amount of known
liabilities assumed by the liquidating trust or to which the property
transferred is subject. The liquidating trust itself should not be subject to
tax. After formation of the trust, the stockholders must take into account for
Federal income tax purposes their allocable portion of any income, expense, gain
or loss recognized by the trust. As a result of the transfer of property to the
trust and the ongoing operations of the trust, stockholders should be aware that
they may be subject to tax, whether or not they have received any actual
distributions from the liquidating trust with which to pay such tax.
TAXATION OF NON-UNITED STATES STOCKHOLDERS
Foreign corporations or persons who are not citizens or residents of the
United States should consult their tax advisors with respect to the U.S. and
non-U.S. tax consequences of the Plan.
STATE AND LOCAL INCOME TAX CONSEQUENCES
Stockholders may also be subject to liability for state and local taxes with
respect to the receipt of liquidating distributions and their Interests in the
liquidating trust.
THE COMPANY RECOMMENDS THAT EACH STOCKHOLDER CONSULT HIS OR
HER OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF THE PLAN.
13
<PAGE>
PRO FORMA LIQUIDATING BALANCE SHEET
ASTROSYSTEMS, INC. AND SUBSIDIARIES
PRO FORMA LIQUIDATING BALANCE SHEET
SEPTEMBER 30, 1995
(UNAUDITED)
The following pro forma unaudited liquidating balance sheet reflects the
financial position of the Company and its subsidiaries as if the Plan was
approved and adopted on September 30, 1995, and carried out through the
estimated liquidation date of June 1999. In addition, it assumes the sale of the
Company's operating divisions and subsidiary as discussed under "Disposition of
Certain Assets-- Operating Divisions and Subsidiary." The pro forma unaudited
liquidating balance sheet assumes no material value for the Company's holdings
of AstroPower, Inc. for which the Company's carrying value at September 30, 1995
is zero. See "Disposition of Certain Assets--AstroPower, Inc." In the opinion of
management of the Company, all adjustments necessary to present fairly such pro
forma unaudited liquidating balance sheet have been made.
The pro forma unaudited liquidating balance sheet should be read in
conjunction with the notes thereto and the Company's financial statements
included in the Company's Annual Report on Form 10-KSB for the year ended June
30, 1995. The pro forma unaudited liquidating balance sheet is not necessarily
indicative of what the actual financial position of the Company would have been
had the transactions contemplated in the Plan occurred at September 30, 1995,
nor does it purport to represent the future financial position of the Company.
The historical condensed balance sheet included within the pro forma
unaudited liquidating balance sheet is extracted from the Company's unaudited
September 30, 1995 financial statements. In management's opinion, it includes
all normal recurring adjustments necessary to a fair presentation.
14
<PAGE>
<TABLE>
ASTROSYSTEMS, INC. AND SUBSIDIARIES
(OOO OMITTED)
(EXCEPT PER SHARE AMOUNTS)
<CAPTION>
HISTORICAL ADJUSTMENTS
CONDENSED TO RECORD PRO FORMA
BALANCE SHEET ESTIMATED LIQUIDATING
SEPTEMBER 30, 1995 REALIZABLE VALUE BALANCE SHEET
------------------ ---------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and securities............................. $ 36,206 $ 7,098(1) $49,452
5,286(2)
862(3)
Accounts receivable............................. 2,468 (2,468)(1) 0
Inventories..................................... 3,874 (3,874)(1) 0
Prepaid expenses and other...................... 564 (564)(3) 0
Fixed assets.................................... 177 (124)(1) 0
(53)(3)
Goodwill........................................ 219 (219)(3) 0
Other assets(5)................................. 347 (347)(3) 0
-------- -------- -------
Total......................................... $ 43,855 $ 5,597 $49,452
-------- -------- -------
-------- -------- -------
LIABILITIES
Accounts payable, accrued expenses and other.... 1,341 (1,341)(4) 0
Deferred income taxes........................... 8,193 (8,193)(4) 0
Contingency reserve............................. 0 12,385(4) 12,385
-------- -------- -------
9,534 2,851 12,385
-------- -------- -------
SHAREHOLDERS' EQUITY
Common stock.................................... 459 164(2) 623
Additional paid-in capital...................... 6,916 5,122(2) 12,038
632(1)
Retained earnings............................... 26,946 (321)(3) 24,406
(2,851)(4)
-------- -------- -------
34,321 2,746 37,067
-------- -------- -------
Total......................................... $ 43,855 $ 5,597 $49,452
-------- -------- -------
-------- -------- -------
ESTIMATED NET ASSETS AVAILABLE FOR
LIQUIDATION................................... $37,067
-------
-------
NUMBER OF SHARES ESTIMATED TO BE OUTSTANDING.... 4,589 1,645(2) 6,234
-------- -------- -------
-------- -------- -------
ESTIMATED NET ASSETS AVAILABLE FOR LIQUIDATION
PER OUTSTANDING SHARE......................... $ 5.95
-------
-------
</TABLE>
15
<PAGE>
ASTROSYSTEMS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA LIQUIDATING BALANCE SHEET
SEPTEMBER 30, 1995
(UNAUDITED)
(1) Adjustment to record management's estimate of the proceeds from the sale and
liquidation of the three operating units.
<TABLE>
<S> <C>
Collection of accounts receivable................................. $2,468
Estimated proceeds from sale of operating units:
Inventory................................................... 3,874
Fixed assets................................................ 124
Gain on sale (net of costs of $350)............................... 632
------
Net estimated cash from sale and liquidation of operating units... $7,098
------
------
</TABLE>
(2) Assumes the exercise of all outstanding options at prices of $2.88 to $4.00
per share.
(3) Net estimated loss on disposition of the assets.
(4) Establishment at September 30, 1995 of a contingency reserve, which the
Company believes will be adequate for payment of all expenses and other
known liabilities and possible contingent obligations, as well as an amount
estimated to be required to carry out the Plan.
<TABLE>
<CAPTION>
INCREASE/(DECREASE)
AMOUNT OF TO
CONTINGENCY RESERVE SHAREHOLDERS' EQUITY
------------------- --------------------
<S> <C> <C>
Existing liabilities at September 30, 1995:
Accounts payable, accrued expenses and other........... $ 1,341
Deferred income taxes.................................. 8,193
Anticipated loss from operations for the period from
September 30, 1995 thru sales of operating units....... 1,790 $ (1,790)
Minimum payments on nonrecourse obligation............... 187 (187)
Shut down costs and estimated operating costs (including
compensation) to administer the Plan through
dissolution............................................ 4,019 (4,019)
Estimated interest income................................ (1,576) 1,576
Estimated tax benefit of losses through dissolution...... (2,744) 2,744
Reserve for other contingencies.......................... 1,175 (1,175)
-------- -------
$12,385 $ (2,851)
-------- -------
-------- -------
</TABLE>
(5) Assumes no material value for the Company's holdings of AstroPower, Inc.
16
<PAGE>
RECOMMENDATION AND VOTE
Approval of the Plan requires the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY, AFTER CAREFUL REVIEW AND
CONSIDERATION OF THE TERMS OF THE PLAN, BELIEVES THAT THE LIQUIDATION IS IN THE
BEST INTEREST OF THE COMPANY'S STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE IN FAVOR OF APPROVAL OF THE ADOPTION OF THE PLAN. CERTAIN
MEMBERS OF THE BOARD OF DIRECTORS MAY BE DEEMED TO HAVE A CONFLICT OF INTEREST
IN RECOMMENDING APPROVAL OF THE PLAN. SEE "CONFLICT OF INTEREST OF CERTAIN
MEMBERS OF THE BOARD OF DIRECTORS." SUCH DIRECTORS, WHO, AS OF THE MEETING
RECORD DATE, HAD OR SHARED VOTING POWER WITH RESPECT TO AN AGGREGATE OF
APPROXIMATELY 1,965,518 SHARES OF COMMON STOCK OF THE COMPANY (APPROXIMATELY 43%
OF THE THEN ISSUED AND OUTSTANDING SHARES OF COMMON STOCK), HAVE INDICATED THAT
THEY INTEND TO VOTE "FOR" APPROVAL OF THE PLAN. SEE "PRINCIPAL STOCKHOLDERS."
ASSET PURCHASE AGREEMENT
GENERAL
The Company is proposing that, at the Meeting, the stockholders approve the
Asset Purchase Agreement, dated as of January 11, 1996, among Orbitsub,
International, the Company and Behlman. Approval of the Asset Purchase Agreement
is also contingent upon stockholder approval of the Plan; however, approval of
the Plan is not contingent upon stockholder approval of the Asset Purchase
Agreement. A copy of the Asset Purchase Agreement is attached as Exhibit B to
this Proxy Statement. The material features of the Asset Purchase Agreement are
summarized below; this summary does not purport to be complete and is subject in
all respects to the provisions of, and is qualified in its entirety by reference
to, the Asset Purchase Agreement. STOCKHOLDERS ARE URGED TO READ THE ASSET
PURCHASE AGREEMENT IN ITS ENTIRETY.
BACKGROUND AND REASONS FOR THE ASSET PURCHASE AGREEMENT; DIRECTORS'
RECOMMENDATIONS
See "Proposed Plan of Liquidation and Dissolution--Background and Reasons
for the Plan; Directors' Recommendations" for a discussion of the background and
reasons for the determination by the Board of Directors of the Company to sell
the operating assets of Defense and Behlman.
As discussed under "Proposed Plan of Liquidation and Dissolution--Financial
Advisor," the Company has engaged OEM as its exclusive financial advisor with
regard to the possible sale of the Company's divisions and Behlman. In
connection with the possible sales of the operating assets of Defense and
Behlman, OEM assisted in the preparation of memoranda describing their
operations. A one page summary of the memoranda (not identifying the Company)
was sent to approximately 150 entities identified by OEM and the Company. Based
on responses and follow-up telephone calls and subject to the receipt of
executed confidentiality agreements, memoranda were sent to interested parties.
Subsequently, plant visits were made by twelve qualified and interested parties,
including International, and bids were received from five of such parties and
negotiated where appropriate. Following a determination by the Boards of
Directors of the Company and Behlman (collectively, the "Sellers") that the
consideration for the assets to be transferred and other terms set forth in the
Asset Purchase Agreement were fair to the Company and Behlman, the Asset
Purchase Agreement was executed and delivered by the respective companies.
BASED UPON THE FOREGOING, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
THE STOCKHOLDERS VOTE "FOR" APPROVAL OF THE ASSET PURCHASE AGREEMENT. CERTAIN
MEMBERS OF THE BOARD OF DIRECTORS MAY BE DEEMED TO
17
<PAGE>
HAVE A CONFLICT OF INTEREST IN RECOMMENDING APPROVAL OF THE ASSET PURCHASE
AGREEMENT. SEE "CONFLICT OF INTEREST OF CERTAIN MEMBERS OF THE BOARD OF
DIRECTORS." SUCH DIRECTORS, WHO, AS OF THE MEETING RECORD DATE, HAD OR SHARED
VOTING POWER WITH RESPECT TO AN AGGREGATE OF APPROXIMATELY 1,965,518 SHARES OF
COMMON STOCK OF THE COMPANY (APPROXIMATELY 43% OF THE THEN ISSUED AND
OUTSTANDING SHARES OF COMMON STOCK), HAVE INDICATED THAT THEY INTEND TO VOTE
"FOR" APPROVAL OF THE ASSET PURCHASE AGREEMENT. SEE "RECOMMENDATION AND VOTE"
AND "PRINCIPAL STOCKHOLDERS."
If the Asset Purchase Agreement is not approved by the stockholders, the
Board of Directors will explore the alternatives then available with respect to
Defense and Behlman. In such event, subject to stockholder approval of the Plan,
no further stockholder approval will be sought with regard to the specific terms
of any dispositions of the assets of Defense and/or Behlman approved by the
Boards of Directors of the Company and/or Behlman or, if applicable, the
trustees of any liquidating trust. Approval of the Plan shall constitute
approval of any and all such dispositions.
CONFLICT OF INTEREST OF CERTAIN MEMBERS OF THE BOARD OF DIRECTORS
For the reasons discussed under "Proposed Plan of Complete Liquidation and
Dissolution-- Conflict of Interest of Certain Members of the Board of
Directors," three Directors (Messrs. Barth, Bergman and G. Steinberg) may be
deemed to have a conflict of interest with respect to approval of the Asset
Purchase Agreement. See "Executive Compensation and Certain
Transactions--Employment Agreements."
PRINCIPAL PROVISIONS OF THE ASSET PURCHASE AGREEMENT; TERMINATION AND AMENDMENT
The Asset Purchase Agreement provides for, among other matters, the
following:
(a) Transfer of Assets. The Company will transfer to Orbitsub certain assets
which are primarily related to, or are primarily used or held in connection
with, the business of Defense. In addition, Behlman will transfer to Orbitsub
certain of its assets. The assets to be transferred include, among other things,
inventory, certain equipment and certain contract rights. The Asset Purchase
Agreement indicates that assets not being transferred include cash, cash
equivalents, accounts receivable and marketable securities, among others.
(b) Assumption of Liabilities. Pursuant to the Asset Purchase Agreement,
Orbitsub shall assume and thereafter pay, perform, satisfy and discharge, among
others, the liabilities and obligations of the Sellers under certain contracts
and permits as well as after-sale and warranty obligations with respect to
products manufactured and sold by Defense and/or Behlman prior to the closing
(see "Warranty Obligations").
(c) Purchase Price. In consideration for the sale and transfer of the assets
and the Sellers' covenant not to compete as set forth below, Orbitsub has agreed
to pay in cash at the closing the sum of $3,706,700 (the "Purchase Price").
(d) Adjustment to Purchase Price. The Asset Purchase Agreement provides for
an adjustment in the Purchase Price based upon the net book value of the fixed
assets, inventory and goodwill of the Sellers as of the closing. The parties
have agreed that the goodwill valuation shall be $1,031,700.
(e) Representations and Warranties. Pursuant to the Asset Purchase
Agreement, the Sellers, Orbitsub and International have made a number of
representations and warranties to each other which are customary in transactions
of this nature.
(f) Covenants Generally. In addition, pursuant to the Asset Purchase
Agreement, the parties have agreed to take, or refrain from taking, certain
actions prior to the closing of the transaction or the
18
<PAGE>
termination of the Asset Purchase Agreement. Such covenants are also customary
in transactions of this nature.
(g) Restrictive Covenants. The Asset Purchase Agreement provides that each
of the Sellers, as well as Messrs. Barth, Bergman and G. Steinberg
(collectively, the "Principal Stockholders"), will not, for a period of three
years following the closing, engage or participate in, directly or indirectly,
or lend its or his name to, any business which is or, as a result of the
Sellers' or Principal Stockholders' engagement or participation would become,
competitive with the business of Defense or Behlman as currently conducted by
the Sellers. The Asset Purchase Agreement, among other matters, also provides
that, during such time period, the Sellers and Principal Stockholders will not
solicit, interfere with or endeavor to entice away from Orbitsub or otherwise
deal, directly or indirectly, in a competitive manner with any customers doing
business with Orbitsub as a successor to the business of Defense and Behlman.
(h) Sales Taxes. Any sales taxes resulting from the transactions
contemplated by the Asset Purchase Agreement shall be borne by Orbitsub.
(i) Occupancy Agreement. Pursuant to the Asset Purchase Agreement, Orbitsub
shall be entitled to use the Lake Success premises of the Sellers, and obtain
certain support services from the Sellers (for which they are entitled to be
compensated), until the lease termination date of February 29, 1996.
(j) Warranty Obligations. The Sellers and Orbitsub have agreed that
Orbitsub, on behalf of the Sellers, shall perform all repairs as required
pursuant to warranty repair obligations with respect to products sold by the
Sellers prior to the closing. In consideration for such services, the Sellers
have agreed to reimburse Orbitsub for its labor and material costs at an agreed
upon rate.
(k) Conditions to Closing. The respective obligations of the parties to
consummate the transactions contemplated by the Asset Purchase Agreement are
subject to a number of conditions, including, among others, approval of the Plan
and Asset Purchase Agreement by the Company's stockholders, the continuing
accuracy of the representations and warranties and compliance with all covenants
and obligations of the respective parties.
(l) Indemnification; Escrow. Each of the Sellers, on the one hand, and
Orbitsub and International, on the other, have agreed to indemnify and hold
harmless the other against and in respect of any and all actions, suits,
proceedings, claims, demands, assessments, judgments, costs, damages, losses,
liabilities, taxes and deficiencies and penalties and interest thereon resulting
from, among other matters, any misrepresentation, breach of warranty or
nonfulfillment of any covenant or agreement on their part. All representations
and warranties of the parties shall survive the execution and delivery of the
Asset Purchase Agreement and shall continue in full force and effect for two
years after the closing date. No indemnity shall be payable based upon, arising
out of or otherwise in respect of any inaccuracy or any breach of representation
or warranty (i) with respect to any loss of less than $2,500 and (ii) unless and
until the aggregate of all losses due Orbitsub or Sellers, as the case may be,
exceed $50,000 at which point all losses so due shall be payable in full.
Pursuant to the Asset Purchase Agreement, the total indemnification obligation
of the Sellers thereunder shall be limited to an amount, in the aggregate, not
to exceed the Purchase Price, as adjusted. In addition, pursuant to the Asset
Purchase Agreement, the Company has agreed that it will maintain its corporate
existence until the expiration of the survival period referred to above and
that, during such period, it shall maintain a net worth (calculated on a non-
liquidation basis) at least equal to the Purchase Price, as adjusted. Further,
as security for their indemnification obligation, pursuant to the Asset Purchase
Agreement, at the closing, the Sellers are to deliver to counsel to Orbitsub, to
be held in escrow, $1,000,000 of the Purchase Price (of which $500,000 shall be
released and delivered to the Sellers one year following the closing, subject to
any pending claims by Orbitsub against the Sellers). The balance of any escrow
amount is to be released to the Sellers two years following the closing, subject
to any such pending claims.
19
<PAGE>
(m) Termination; Amendment. The Asset Purchase Agreement may be terminated
and the transactions contemplated thereby may be abandoned (i) by mutual consent
of the Sellers and Orbitsub; (ii) by Sellers or Orbitsub by notice to the other
if the closing shall not have occurred on or before April 30, 1996; or (iii) by
Sellers if the conditions to the obligation of Orbitsub to consummate the
transaction shall have been satisfied or waived and Orbitsub shall be unable or
unwilling to close on the terms and conditions of the Asset Purchase Agreement
on or before February 15, 1996. In the event of any termination of the Asset
Purchase Agreement, such agreement shall become void and have no further force
and effect and there shall be no liability on the part of any of the parties
except for, among other matters, willful failure to consummate the transactions
contemplated thereby.
If the Board of Directors determines that consummation of the transactions
contemplated by the Asset Purchase Agreement is not in the best interests of the
Company or its stockholders, subject to the provisions of the Asset Purchase
Agreement, the Board may direct that it be terminated. In the event of the
termination of the Asset Purchase Agreement for any reason whatsoever, subject
to stockholder approval of the Plan, no further stockholder approval will be
sought with regard to the specific terms of any dispositions of the assets of
Defense and/or Behlman approved by the Boards of Directors of the Company and/or
Behlman or, if applicable, the trustees of any liquidating trust. Approval of
the Plan shall constitute approval of any and all such dispositions.
Subject to the provisions of the Asset Purchase Agreement, the Board also
may amend or modify the Asset Purchase Agreement if it determines such action to
be in the best interests of the Company or its stockholders, without the
necessity of further stockholder approval.
(n) Expenses. The parties to the Asset Purchase Agreement shall bear their
respective expenses incurred in connection with the preparation, execution and
performance thereof and the transactions contemplated thereby, except that, (i)
in the event that such transactions are not consummated due to the failure of
the Company to obtain the approval of the Asset Purchase Agreement and the Plan
by the Company's stockholders, the Sellers generally shall be obligated to
reimburse Orbitsub for all expenses incurred in connection with the preparation
and negotiation of the Asset Purchase Agreement and the transactions
contemplated thereby and (ii) in the event the conditions to the obligation of
Orbitsub to consummate the transaction shall have been satisfied or waived and
the closing shall not have occurred on or before April 15, 1996 due to the
inability or unwillingness of Orbitsub to close on the terms and conditions of
the Asset Purchase Agreement, Orbitsub generally shall be obligated to reimburse
the Sellers for all expenses incurred in connection with the preparation and
negotiation of the Asset Purchase Agreement and the transactions contemplated
thereby. The Sellers shall bear the fees and expenses of OEM. See "Proposed Plan
of Complete Liquidation and Dissolution--Financial Advisor."
(o) Guarantee. Pursuant to the Asset Purchase Agreement, the performance of
the obligations of Orbitsub thereunder and in connection therewith has been
guaranteed by International.
(p) Bridge Financing. Pursuant to the Asset Purchase Agreement, the parties
have agreed to negotiate in good faith the terms and conditions of a 90-day
bridge loan of up to $500,000 from the Company to Orbitsub, which loan, if
successfully negotiated, would be funded at the closing.
ABSENCE OF APPRAISAL RIGHTS
Under Delaware law, the stockholders of the Company are not entitled to
appraisal rights for their shares of the Company's stock in connection with the
transactions contemplated by the Asset Purchase Agreement or to any similar
rights of dissenters under Delaware law.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material Federal income tax
consequences to the Company relevant to the Asset Purchase Agreement, but does
not purport to be a complete analysis of all the potential tax effects. The
discussion is based upon the Code, Treasury Regulations, IRS rulings,
20
<PAGE>
and judicial decisions now in effect, all of which are subject to change at any
time; any such changes may be applied retroactively. The following discussion
has no binding effect on the IRS or the courts and assumes that the Company will
consummate the Asset Purchase Agreement substantially in accordance with its
terms.
The Company will recognize taxable gain or deductible loss on the sale of
each asset pursuant to the Asset Purchase Agreement. The amount of such gain or
loss will be the difference between the Company's adjusted tax basis for each
asset and the amount of consideration received for that asset (reduced by the
costs of the transaction allocable to that asset).
It is anticipated that the net taxable income recognized by the Company as a
result of the sale of its assets pursuant to the Asset Purchase Agreement will
not create a current regular Federal income tax liability because of (a) the
Company's anticipated level of operating losses and severance expenses for the
year ending June 30, 1996 and (b) the Company's net operating loss carry
forwards.
The Company also anticipates that its level of operating losses and
severance expenses for the year ending June 30, 1996 will cause it to have no
alternative minimum taxable income for such year for purposes of the Federal
alternative minimum tax ("AMT"). Since, under the AMT, only 90% of alternative
minimum taxable income can be reduced by net operating loss carry forwards, if
the Company has alternative minimum taxable income for the year ending June 30,
1996 (without regard to net operating carry forwards), it would have to pay
Federal alternative minimum tax on a portion of the net taxable income
recognized as a result of the sale of its assets pursuant to the Asset Purchase
Agreement. It is anticipated that such tax will not exceed 2% of any such
income.
STATE AND LOCAL INCOME TAX CONSEQUENCES
The Company may also be subject to liability for state and local taxes with
respect to the consummation of the Asset Purchase Agreement.
RECOMMENDATION AND VOTE
Approval of the Asset Purchase Agreement requires the affirmative vote of
the holders of a majority of the outstanding shares of Common Stock of the
Company.
THE BOARD OF DIRECTORS OF THE COMPANY, AFTER CAREFUL REVIEW AND
CONSIDERATION OF THE TERMS OF THE ASSET PURCHASE AGREEMENT, BELIEVES THAT ITS
CONSUMMATION IS IN THE BEST INTEREST OF THE COMPANY'S STOCKHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF APPROVAL OF THE ASSET
PURCHASE AGREEMENT. CERTAIN MEMBERS OF THE BOARD OF DIRECTORS MAY BE DEEMED TO
HAVE A CONFLICT OF INTEREST IN RECOMMENDING APPROVAL OF THE ASSET PURCHASE
AGREEMENT. SEE "CONFLICT OF INTEREST OF CERTAIN MEMBERS OF THE BOARD OF
DIRECTORS." SUCH DIRECTORS, WHO, AS OF THE MEETING RECORD DATE, HAD OR SHARED
VOTING POWER WITH RESPECT TO AN AGGREGATE OF APPROXIMATELY 1,965,518 SHARES OF
COMMON STOCK OF THE COMPANY (APPROXIMATELY 43% OF THE THEN ISSUED AND
OUTSTANDING SHARES OF COMMON STOCK), HAVE INDICATED THAT THEY INTEND TO VOTE
"FOR" APPROVAL OF THE PLAN. SEE "PRINCIPAL STOCKHOLDERS."
21
<PAGE>
ELECTION OF DIRECTORS
Five Directors are to be elected at the Annual Meeting of Stockholders to
serve for a term of one year or until their respective successors have been
elected and have qualified.
The following table sets forth the positions and offices presently held with
the Company by each nominee for election as Director, his age, and the number of
shares of Common Stock of the Company beneficially owned by him, as of December
5, 1995. Proxies not marked to the contrary will be voted in favor of their
election.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY
OWNED
POSITIONS AND OFFICES AND APPROXIMATE
PRESENTLY HELD YEAR BECAME PERCENTAGE OF
NAME AGE WITH THE COMPANY A DIRECTOR CLASS(1)
- ----------------------------------- --- ----------------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Seymour Barth...................... 67 President and Director 1959 1,498,894 (2)(3)
29.5% (2)(3)
Gilbert H. Steinberg............... 64 Vice President, 1964 1,139,789 (2)(4)
Treasurer and 22.5% (2)(4)
Director
Elliot J. Bergman.................. 69 Vice President, 1964 1,039,352 (2)(5)
Secretary and 20.4% (2)(5)
Director
Walter A. Steinberg................ 68 Director 1989 -0-
Elliot D. Spiro.................... 66 Director 1994 10,400
*
</TABLE>
- ------------
* Less than 1%
(1) For purposes of the above table, the number of shares of Common Stock owned
and outstanding for a particular person is deemed to include options held by
such person which are exercisable currently or within sixty days and shares
issuable through December 5, 1995 pursuant to the Company's 401(k) Plan as
discussed below.
(2) Includes for each of Messrs. Barth, G. Steinberg and Bergman 134,775 shares
over which they have voting power as trustees under the Company's 401(k)
Plan (including 6,085, 5,754 and 5,754 shares allocated to the accounts of
Messrs. Barth, G. Steinberg and Bergman, respectively).
(3) Includes 471,607 shares issuable pursuant to options which are currently
exercisable. Also includes 250,000 shares held in trust for the benefit of
Mr. Barth's family, as to which trust Mr. Barth serves as co-trustee.
Excludes 110,000 shares held in trust for the benefit of Mr. Barth's
children, as to which shares Mr. Barth disclaims any beneficial interest.
(4) Includes 474,769 shares issuable pursuant to options which are currently
exercisable.
(5) Includes 490,921 shares issuable pursuant to options which are currently
exercisable. Also includes 225,000 shares held in various trusts for the
benefit of Mr. Bergman's family, as to which trusts Mr. Bergman serves as
co-trustee.
Seymour Barth has served as President of the Company since 1964 and as a
Director of the Company since its inception in 1959.
Gilbert H. Steinberg has served as a Director, Vice President and Treasurer
of the Company since 1964.
Elliot J. Bergman has served as a Director, Vice President and Secretary of
the Company since 1964.
Walter A. Steinberg has been an independent engineering consultant for more
than the past five years.
22
<PAGE>
Elliot D. Spiro has served as Chairman and Chief Executive Officer of Branch
Insurance Agency, a property/casualty and financial services insurance agency,
for more than the past five years.
The Board held four meetings during the fiscal year ended June 30, 1995
("Fiscal 1995"). Each incumbent Director who then served on the Board attended
all four meetings. The Board also acted on one occasion during Fiscal 1995 by
unanimous written consent in lieu of a meeting.
The Audit Committee of the Board is charged with the review of the
activities of the Company's independent auditors, including the fees, services,
and scope of such audit. The Committee is composed of Messrs. G. Steinberg, W.
Steinberg and Spiro. Such Committee did not meet during Fiscal 1995.
The Stock Option Committee of the Board reviews and implements appropriate
action with respect to all matters pertaining to stock options granted under the
Company's Amended and Restated 1981 Stock Option Plan (which expired by its
terms in April 1991, but under which options are still outstanding) and 1991
Stock Option Plan. The Committee, which is currently composed of Messrs. W.
Steinberg and Spiro, did not meet during Fiscal 1995.
The Company has neither a nominating committee, charged with the search for
and recommendation to the Board of potential nominees for Board positions, nor a
compensation committee, charged with periodically reviewing the compensation of
the Company's officers and employees. These functions are performed by the Board
as a whole. The Board will consider stockholder recommendations for Board
positions which are made in writing to the Company's President.
Messrs. W. Steinberg and Spiro are entitled to receive $5,000 per year for
their services as a Director. No other Directors receive compensation for their
services as such.
There is no family relationship among any of the executive officers and
Directors of the Company.
To the Company's knowledge, based solely on a review of the copies of Forms
5 furnished to the Company and written representations that no other reports
were required during Fiscal 1995, all Section 16(a) filing requirements
applicable to the Company's officers, Directors and 10% stockholders were
complied with, except that Messrs. Barth, G. Steinberg and Bergman did not file
their respective Forms 5 timely. Each Form 5 reported the acquisition of shares
of Common Stock of the Company pursuant to its 401(k) Plan.
EXECUTIVE COMPENSATION AND CERTAIN TRANSACTIONS
Summary Compensation Table
The following table sets forth the compensation paid by the Company during
the fiscal years ended June 30, 1995, 1994 and 1993 to each executive officer of
the Company:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------
AWARDS
ANNUAL ---------- PAYOUTS
COMPENSATION SHARES ------------
NAME AND ------------------ UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- -------------------------- ---- -------- ------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Seymour Barth............. 1995 $309,518 -- -- $4,686(1)
President (Chief 1994 $304,116 -- 100,000 $4,571(2)
Executive Officer) 1993 $304,116 $5,848 -- $2,716(3)
Elliot J. Bergman......... 1995 $217,830 -- -- $4,357(1)
Vice President and 1994 $214,008 -- 100,000 $3,209(2)
Secretary 1993 $214,008 $4,116 -- $3,205(3)
Gilbert H. Steinberg...... 1995 $217,830 -- -- $4,357(1)
Vice President and 1994 $214,008 -- 100,000 $3,209(2)
Treasurer 1993 $214,008 $4,116 -- $3,205(3)
</TABLE>
(Footnotes on following page)
23
<PAGE>
(Footnotes for preceding page)
- ------------
(1) Represents 1,079, 1,030 and 1,030 shares contributed by the Company to the
accounts of Messrs. Barth, Bergman and G. Steinberg, respectively, for
Fiscal 1995 pursuant to the terms of its 401(k) Plan.
(2) Represents 1,071, 752 and 752 shares contributed by the Company to the
accounts of Messrs. Barth, Bergman and G. Steinberg, respectively, for
Fiscal 1994 pursuant to the terms of its 401(k) Plan.
(3) Represents 673, 779 and 779 shares contributed by the Company to the
accounts of Messrs. Barth, Bergman and G. Steinberg, respectively, for
Fiscal 1993 pursuant to the terms of its 401(k) Plan.
Option Grants
No options were granted to Mr. Barth, Mr. Bergman or Mr. G. Steinberg during
Fiscal 1995.
Fiscal Year End Option Value Table
The following table sets forth information concerning the values of
unexercised options held by each executive officer of the Company as of June 30,
1995:
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF OPTIONS IN-THE-MONEY OPTIONS
AT JUNE 30, 1995 AT JUNE 30, 1995
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------------------------ ------------------------- -------------------------
<S> <C> <C>
Seymour Barth................................... 371,607/100,000 $ 538,430/$56,300
Elliot J. Bergman............................... 390,921/100,000 $ 626,541/$56,300
Gilbert H. Steinberg............................ 374,769/100,000 $ 552,838/$56,300
</TABLE>
No options were exercised by Mr. Barth, Mr. Bergman or Mr. G. Steinberg
during Fiscal 1995.
Stock Retirement Agreement
The Company and Messrs. Barth, G. Steinberg and Bergman are parties to a
Stock Retirement Agreement which requires the Company, upon the death of any of
such persons, to purchase 30% of all shares of Common Stock of the Company
included in the gross estate of the deceased stockholder at a price equal to the
greater of the average market price of such shares over the six months preceding
the date of death or the book value thereof. At June 30, 1995, the Company
carried term life insurance in the amounts of $2,000,000, $1,250,000 and
$1,000,000 upon the lives of Messrs. Barth, G. Steinberg and Bergman,
respectively.
Employment Agreements
Effective April 18, 1994, the Company entered into Employment Agreements
with each of Messrs. Barth, G. Steinberg and Bergman which provide for, among
other things, the following: (i) minimum annual compensation of $304,116 for Mr.
Barth and $214,008 for each of Messrs. G. Steinberg and Bergman (effective
September 5, 1994, the annual compensation payable to Messrs. Barth, G.
Steinberg and Bergman was increased to $310,807, $218,716 and $218,716,
respectively); (ii) a term ending upon the earliest to occur of the following:
the employee's death or incapacity; "cause", as defined in the Employment
Agreement; at the election of the Company, upon not less than three years prior
written notice to the employee; or at the election of the employee, upon not
less than six months prior written notice to the Company; and (iii) in the event
the employee's employment shall terminate as a result of death or incapacity,
the Company shall be obligated to make annual payments to the employee or his
estate or representative for a period of three years in an amount equal to 50%
of the compensation paid or payable to the employee with respect to the fiscal
year immediately preceding the fiscal year in which his employment terminated.
24
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, to the knowledge of the Company, certain
information regarding the Company's outstanding Common Stock beneficially owned
as of December 5, 1995 (i) by each person who is known by the Company to own
beneficially or exercise voting or dispositive control over more than 5% of the
Company's Common Stock, (ii) by each of the Company's Directors, and (iii) by
all executive officers and Directors as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES APPROXIMATE
NAME AND ADDRESS OF AND NATURE OF PERCENTAGE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING SHARES(1)
- -------------------------------------------------------- -------------------- ---------------------
<S> <C> <C>
Seymour Barth........................................... 1,498,894(2)(3) 29.5%(2)(3)
6 Nevada Drive
Lake Success, New York
Gilbert H. Steinberg.................................... 1,139,789(2)(4) 22.5%(2)(4)
6 Nevada Drive
Lake Success, New York
Elliot J. Bergman....................................... 1,039,352(2)(5) 20.4%(2)(5)
6 Nevada Drive
Lake Success, New York
Morris Barth, trustee of various trusts for the benefit
of the descendants of Seymour Barth................... 300,000 6.5%
c/o Astrosystems, Inc.
6 Nevada Drive
Lake Success, New York
Elliot D. Spiro......................................... 10,400 *
71 South Central Avenue
Valley Stream, New York
All executive officers and Directors as a group (5
persons).............................................. 3,418,885(2)(3) 56.7%(2)(3)
(4)(5) (4)(5)
</TABLE>
- ------------
* Less than 1%
(1) For purposes of the above table, the number of shares of Common Stock owned
and outstanding for a particular person is deemed to include options held by
such person which are exercisable currently or within sixty days and shares
issuable through December 5, 1995 pursuant to the Company's 401(k) Plan as
discussed below.
(2) Includes for each of Messrs. Barth, G. Steinberg and Bergman 134,775 shares
over which they have voting power as trustees under the Company's 401(k)
Plan (including 6,085, 5,754 and 5,754 shares allocated to the accounts of
Messrs. Barth, G. Steinberg and Bergman, respectively).
(3) Includes 471,607 shares issuable pursuant to options which are currently
exercisable. Also includes 250,000 shares held in trust for the benefit of
Mr. Barth's family, as to which trust Mr. Barth serves as co-trustee.
Excludes 110,000 shares held in trust for the benefit of Mr. Barth's
children, as to which shares Mr. Barth disclaims any beneficial interest.
(4) Includes 474,769 shares issuable pursuant to options which are currently
exercisable.
(5) Includes 490,921 shares issuable pursuant to options which are currently
exercisable. Also includes 225,000 shares held in various trusts for the
benefit of Mr. Bergman's family, as to which trusts Mr. Bergman serves as
co-trustee.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Richard A. Eisner & Company,
LLP to serve as the Company's independent auditors for the fiscal year ending
June 30, 1996 ("Fiscal 1996") and proposes ratification by the stockholders of
the selection. Such firm has acted as independent auditors of the Company's
accounts since 1967.
25
<PAGE>
If the stockholders do not ratify the reappointment of Richard A. Eisner &
Company, LLP, the selection of independent auditors will be reconsidered by the
Board.
It is anticipated that a representative of Richard A. Eisner & Company, LLP
will attend the Meeting. Such representative will be afforded the opportunity to
make a statement if he so desires and will be available to respond to
appropriate questions.
RECOMMENDATION AND VOTE
Ratification of the selection of Richard A. Eisner & Company, LLP as the
Company's independent auditors for Fiscal 1996 requires the affirmative vote of
the holders of a majority of the Common Stock present in person or by Proxy at
the Meeting. As of the Meeting Record Date, the three Principal Stockholders of
the Company, who are executive officers and Directors of the Company, had or
shared voting power with respect to an aggregate of approximately 1,965,518
shares of Common Stock of the Company (approximately 43% of the then issued and
outstanding shares of Common Stock). Such persons have indicated that they
intend to vote in favor of the ratification of the selection of Richard A.
Eisner & Company, LLP as the Company's independent auditors for Fiscal 1996. See
"Principal Stockholders."
THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION OF THE SELECTION OF SUCH
FIRM.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the Company's next Annual
Meeting of Stockholders pursuant to the provisions of Rule 14a-8 of the SEC,
promulgated under the Securities Exchange Act of 1934, as amended, must be
received by the Company at its principal executive offices by September 14, 1996
for inclusion in the Company's Proxy Statement and form of Proxy relating to
such meeting.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This Proxy Statement is accompanied by a copy of the Company's Annual Report
to Stockholders for Fiscal 1995 and Quarterly Report on Form 10-QSB for the
period ended September 30, 1995.
The Company hereby incorporates by reference into this Proxy Statement the
following documents as filed with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act:
(i) the Company's Form 10-KSB for Fiscal 1995, as amended; and
(ii) the Company's Quarterly Report on Form 10-QSB for the period ended
September 30, 1995.
FORM 10-KSB
A copy of the Company's Form 10-KSB for Fiscal 1995, as filed with the SEC
(excluding exhibits), will be forwarded, without charge, to any stockholder of
the Company entitled to vote at the Meeting, upon written request to the Company
at 6 Nevada Drive, Lake Success, New York 11042, Attention: Treasurer.
ELLIOT J. BERGMAN,
Secretary
Lake Success, New York
January 12, 1996
26
<PAGE>
EXHIBIT A
PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION OF
ASTROSYSTEMS, INC.
This Plan of Complete Liquidation and Dissolution (the
"Plan") of Astrosystems, Inc., a Delaware corporation (the
"Company"), is intended to accomplish the complete liquidation and
dissolution of the Company in accordance with the Delaware General
Corporation Law and Section 331 of the Internal Revenue Code of
1986, as amended (the "Code"), as follows:
1. The Board of Directors of the Company has adopted
this Plan and called a meeting of the Company's stockholders to
take action on this Plan. If at said meeting of the Company's
stockholders a majority of the outstanding Common Stock, par value
$.10 per share (the "Common Stock"), of the Company votes for the
adoption of this Plan, the Plan shall constitute the adopted Plan
of the Company as of the date on which such stockholder approval
is obtained (the "Adoption Date").
2. After the Adoption Date, the Company shall not
engage in any business activities except to the extent necessary
to preserve the values of its assets, wind up its business and
affairs, and distribute its assets in accordance with this Plan.
No later than thirty (30) days following the Adoption
Date, the Company shall file Form 966 with the Internal Revenue
Service.
3. From and after the Adoption Date, the Company shall
complete the following corporate actions:
(a) The Company shall collect, sell, exchange or
otherwise dispose of all of its property and assets
in one or more transactions upon such terms and
conditions and for such consideration, which may
consist in whole or in part of money or other
property, as the Board of Directors, in its
absolute discretion, deems expedient and in the
best interests of the Company and its stockholders.
In connection with such collection, sale, exchange
and other disposition, the Company shall marshall
its assets and collect or make provision for the
collection of all accounts receivable, debts and
claims owing to the Company. As part of the
foregoing, the Company shall cause its wholly-owned
subsidiaries to liquidate and dissolve in a manner
consistent with this Plan.
(b) The Company shall pay or, as determined by the
Board of Directors, make reasonable provision to
pay, all claims and obligations of the Company,
including all contingent, conditional or unmatured
<PAGE>
claims known to the Company and all claims which
are known to the Company but for which the identity
of the claimant is unknown.
(c) The Company shall distribute pro rata to the
Company's stockholders all its remaining property
and assets, including the proceeds of any sale,
exchange or disposition, except such property or
assets as are required for paying or making
provision for the claims and obligations of the
Company. Such distribution may occur all at once
or in a series of distributions and may be in cash
or in kind, in such manner, and at such time or
times, as the Board of Directors, in its absolute
discretion, may determine. If and to the extent
deemed necessary, appropriate or desirable by the
Board of Directors, in its absolute discretion, the
Company may establish and set aside a reasonable
amount (the "Contingency Reserve") to satisfy
claims against the Company (other than claims of a
stockholder in its capacity as such), including,
without limitation, tax obligations, and all
expenses of the sale of the Company's property and
assets, of the collection and defense of the
Company's property and assets, and of the
liquidation and dissolution provided for in this
Plan. The Contingency Reserve may consist of cash
and/or property.
4. The distributions to the Company's stockholders
pursuant to Section 3 hereof shall be in complete redemption and
cancellation of all of the outstanding Common Stock of the
Company. As a condition to receipt of any distribution to the
Company's stockholders, the Board of Directors, in its absolute
discretion, may require stockholders to (i) surrender their
certificates evidencing the Common Stock to the Company or its
agent for recording of such distributions thereon or (ii) furnish
the Company with evidence satisfactory to the Board of Directors
of the loss, theft or destruction of their certificates evidencing
the Common Stock, together with such surety bond or other security
or indemnity as may be required by and satisfactory to the Board
of Directors ("Satisfactory Evidence and Indemnity"). As a
condition to receipt of any final distribution to the Company's
stockholders, the Board of Directors, in its absolute discretion,
may require stockholders to (i) surrender their certificates
evidencing the Common Stock to the Company or its agent for
cancellation or (ii) furnish the Company with Satisfactory
Evidence and Indemnity.
The Company will finally close its stock transfer books
and discontinue recording transfers of Common Stock on the earlier
to occur of (i) the close of business on the record date fixed by
the Board of Directors for the final liquidating distribution, or
2
<PAGE>
(ii) the date on which the Company ceases to exist under the
Delaware General Corporation Law (following any post-dissolution
continuation period thereunder), and thereafter certificates
representing Common Stock will not be assignable or transferable
on the books of the Company except by will, intestate succession,
or operation of law.
5. If any distribution to a stockholder cannot be made,
whether because the stockholder cannot be located, has not
surrendered its certificates evidencing the Common Stock as
required hereunder or for any other reason, the distribution to
which such stockholder is entitled (unless transferred to the Trust
established pursuant to Section 6 hereof) shall be transferred, at
such time as the final liquidating distribution is made by the
Company, to the official of such state or other jurisdiction
authorized by applicable law to receive the proceeds of such
distribution. The proceeds of such distribution shall thereafter
be held solely for the benefit of and for ultimate distribution to
such stockholder as the sole equitable owner thereof and shall be
treated as abandoned property and escheat to the applicable state
or other jurisdiction in accordance with applicable law. In no
event shall the proceeds of any such distribution revert to or
become the property of the Company.
6. If deemed necessary, appropriate or desirable by the
Board of Directors, in its absolute discretion, in furtherance of
the liquidation and distribution of the Company's assets to the
Company's stockholders, as a final liquidating distribution or from
time to time, the Company shall transfer to one or more liquidating
trustees, for the benefit of the Company's stockholders (the
"Trustees"), under a trust (the "Trust"), any assets of the Company
which are (i) not reasonably susceptible to distribution to the
Company's stockholders, including assets held on behalf of the
Company's stockholders (a) who cannot be located or who do not
tender their certificates evidencing the Common Stock to the
Company or its agent as hereinabove required or (b) to whom
distributions may not be made based upon restrictions under
contract or law, including, without limitation, restrictions of the
federal securities laws and regulations promulgated thereunder or
(ii) held as the Contingency Reserve.
The Board of Directors is hereby authorized to appoint
one or more individuals, corporations, partnerships or other
persons, or any combination thereof, including, without limitation,
any one or more officers, directors, employees, agents or
representatives of the Company, to act as the Trustee or Trustees
for the benefit of the Company's stockholders and to receive any
assets of the Company. Any Trustees appointed as provided in the
preceding sentence shall succeed to all right, title and interest
of the Company of any kind and character with respect to such
transferred assets and, to the extent of the assets so transferred,
shall assume all of the liabilities and obligations of the Company,
3
<PAGE>
including, without limitation, any unsatisfied claims and
unascertained or contingent liabilities. Further, the Trustees
shall have the full power to liquidate, deal with, give receipt for
and manage all of the property and assets conveyed to the Trustees
by the Company, to the exclusion of the Company and its officers
and directors, and any conveyance of assets to the Trustees shall
be deemed to be a distribution of property and assets by the
Company to its stockholders for the purposes of Section 3 of this
Plan. Any such conveyance to the Trustees shall be in trust for
the stockholders of the Company (who shall be considered the owners
of the Trust within the meaning of Subpart E of Subchapter J of the
Code) and not for the use or benefit of the Trustees or any other
person and any assumption of liabilities and obligations of the
Company by the Trustees shall be solely in their capacity as
Trustee. The Company, subject to this Section 6 and as authorized
by the Board of Directors, in its absolute discretion, may enter
into a liquidating trust agreement with the Trustees, on such terms
and conditions as the Board of Directors, in its absolute
discretion, may deem necessary, appropriate or desirable. Adoption
of this Plan by a majority of the outstanding Common Stock shall
constitute the approval of the Company's stockholders of any such
appointment and any such liquidating trust agreement as their act
and as a part hereof as if herein written.
7. Whether or not a Trust shall have been established
pursuant to Section 6, in the event it should not be feasible for
the Company to make the final distribution to stockholders of all
assets and properties of the Company prior to the date which is
four years after the Adoption Date, then, on or before such date,
the Company shall be required to establish a Trust pursuant to
Section 6 and transfer any remaining assets and properties
(including, without limitation, any uncollected claims, contingent
assets and the Contingency Reserve) to the Trustees as set forth in
Section 6.
8. After the Adoption Date, the officers of the Company
shall, at such time as the Board of Directors, in its absolute
discretion, deems necessary, appropriate or desirable, obtain any
certificates required from the Delaware tax authorities and, upon
obtaining such certificates, the Company shall file with the
Secretary of State of the State of Delaware a certificate of
dissolution (the "Certificate of Dissolution") in accordance with
Section 275 of the Delaware General Corporation Law.
9. Adoption of this Plan by a majority of the
outstanding Common Stock shall constitute the approval of the
Company's stockholders of the sale, exchange or other disposition
in liquidation of all of the property and assets of the Company not
otherwise distributed to the stockholders in kind, whether such
sale, exchange or other disposition occurs in one transaction or a
series of transactions, and shall constitute ratification of all
4
<PAGE>
contracts for sale, exchange or other disposition which are
conditioned on adoption of this Plan.
10. In connection with and for the purpose of
implementing and assuring completion of this Plan, the Company may,
in the absolute discretion of the Board of Directors, pay any
brokerage, agency, professional and other fees and expenses of
persons rendering services to the Company in connection with the
collection, sale, exchange or other disposition of the Company's
property and assets and the implementation of this Plan.
11. In connection with and for the purpose of
implementing and assuring completion of this Plan, the Company may,
in the absolute discretion of the Board of Directors, pay to the
Company's officers, directors, employees, agents and representa-
tives, or any of them, compensation or additional compensation
above their regular compensation, in money or other property, in
recognition of the extraordinary efforts they, or any of them, will
be required to undertake, or actually undertake, in connection with
the implementation of this Plan. Adoption of this Plan by a
majority of the outstanding Common Stock shall constitute the
approval of the Company's stockholders of the payment of any such
compensation.
12. The Company shall continue to indemnify its
officers, directors, employees, agents and representatives in
accordance with its certificate of incorporation, as amended, and
by-laws and any contractual arrangements, for actions taken in
connection with this Plan and the winding up of the affairs of the
Company. The Company's obligation to indemnify such persons may be
satisfied out of the assets of the Trust. The Board of Directors
and the Trustees, in their absolute discretion, are authorized to
obtain and maintain insurance as may be necessary to cover the
Company's obligations hereunder.
13. Notwithstanding authorization or consent to this
Plan and the transactions contemplated hereby by the Company's
stockholders, the Board of Directors may modify, amend or abandon
this Plan and the transactions contemplated hereby without further
action by the Company's stockholders to the extent permitted by the
Delaware General Corporation Law.
14. The Board of Directors of the Company is hereby
authorized, without further action by the Company's stockholders,
to do and perform or cause the officers of the Company, subject to
approval of the Board of Directors, to do and perform, any and all
acts, and to make, execute, deliver or adopt any and all
agreements, resolutions, conveyances, certificates and other
documents of every kind which are deemed necessary, appropriate or
desirable, in the absolute discretion of the Board of Directors, to
5
<PAGE>
implement this Plan and the transactions contemplated hereby,
including, without limiting the foregoing, all filings or acts
required by any state or federal law or regulation to wind up its
affairs.
6
<PAGE>
EXHIBIT B
ASSET PURCHASE AGREEMENT
among
ORBIT INTERNATIONAL CORP.,
CABOT COURT, INC.,
ASTROSYSTEMS, INC.
and
BEHLMAN ELECTRONICS, INC.
-----------------------------
As of January 11, 1996
-----------------------------
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
ASSET PURCHASE AGREEMENT made as of the 11th day of January, 1996 by and
among Astrosystems, Inc., a Delaware corporation ("Astrosystems"), Behlman
Electronics, Inc., a New York corporation and wholly-owned subsidiary of
Astrosystems ("Behlman" and collectively with Astrosystems, the "Sellers"),
Orbit International Corp. ("Orbit"), a Delaware corporation, and Cabot Court,
Inc., a Delaware corporation ("Buyer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Sellers are engaged, among other things, in the manufacture of
power supplies, AC power sources, frequency converters, UPS and associated
analytical equipment and other electronic equipment;
WHEREAS, upon the terms and conditions set forth herein, Sellers desire to
sell and Buyer desires to purchase certain of the assets, and to assume certain
of the liabilities, of each of the Sellers, as specified herein; and
WHEREAS, Orbit has agreed to guarantee Buyer's obligations.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto do
hereby agree as follows:
1. Certain Definitions. The following terms, as used herein, have the
-------------------
following meanings:
"Affiliate" means any individual, corporation, partnership or other
---------
entity directly or indirectly controlling, controlled by or under common control
with a party.
"Business Day" means any day excluding Saturday, Sunday and any day
------------
which is a legal holiday under the laws of the State of New York on which
banking institutions located in such state are closed.
"Closing Date" shall have the meaning set forth in Section 5 hereof.
------------
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Contract" means all executory contracts, commitments, agreements or
--------
arrangements, leases, licenses, notes, purchase orders, letters of credit,
instruments, obligations, commitments, purchase and sales orders, options and
quotations (whether any of the foregoing shall be written or oral, express or
implied) relating primarily to the Acquired Businesses (as hereinafter defined),
to which either Seller is a party and pursuant to which any of the Assets (as
hereinafter defined) is bound.
"ERISA" means the Employee Retirement and Income Security Act of 1974,
-----
<PAGE>
as amended.
"Governmental Authority" means administrative agency, bureau, board,
----------------------
commission, office, authority, department or other governmental body or agency.
"Liens" means any mortgage, pledge, security interest, title defect or
-----
objection, lien, charge or encumbrance of any kind, including, without
limitation, any lease, license or other right of occupancy, possession or use,
or any conditional sales contract or other title or interest retention
arrangement.
"Permits" means all permits, licenses, franchises, approvals, consents
-------
or orders of, filings with, or notifications to, all governmental authority,
whether federal, state, local or foreign or any other person relating primarily
to the Acquired Businesses.
"Permitted Liens" means Liens for current Taxes (as hereinafter
---------------
defined) not yet due.
"Required Consents" means (i) the Shareholder Approval (as defined in
-----------------
Section 6.3 hereof), and (ii) the consent to the assignment of such Contracts,
if any, as are listed on the "Required Consents" section of Schedule 6.3 hereof.
2. Purchase and Sale of Assets.
---------------------------
2.1 Purchase and Sale of Assets. Upon the terms and subject to the
---------------------------
conditions set forth in this Agreement, at the closing (the "Closing") of the
transactions contemplated hereby on the Closing Date:
(a) Astrosystems shall sell, transfer, convey, assign and deliver to
Buyer, and Buyer shall purchase and acquire from Astrosystems, free and clear of
any and all Liens (other than Permitted Liens), certain of the assets of
Astrosystems relating to its Military division (the "Military Division"), as set
forth below as the same shall exist on the Closing Date (collectively, the
"Military Assets"). The Military Assets shall include all of Astrosystems'
right, title and interest in and to the following items to the extent that such
items primarily relate to, or are primarily used or held in connection with, the
business of the Military Division:
(i) Fixtures, Furniture, Equipment, etc. All fixtures,
------------------------------------
furniture, furnishings, machinery, accessories, computers and peripheral
devices, testing equipment and office and other equipment, whether fully or
partially depreciated, appliances, vehicles and any replacement and spare parts
for any such assets, other than any of the foregoing identified on Schedule 2.2
hereof (collectively, "Military Fixed Assets");
(ii) Inventory and Supplies. All (A) raw materials, work in
----------------------
process and finished products, (B) stock in trade, goods, supplies and other
products, (C) office supplies and similar materials, and (D) wrapping, supply
and packaging items, promotional materials and similar items, wherever located
(collectively, "Military Inventory");
2
<PAGE>
(iii) Permits. All of Astrosystems' rights under all
-------
Permits, including, without limitation, the Permits listed on Schedule 6.12
hereof (to the extent transfer is permitted by law and by the terms of such
Permits);
(iv) Contracts and Agreements, etc. The Contracts entered into
-----------------------------
by Astrosystems which primarily relate to the Military Division which are set
forth on Schedule 2.1(a)(iv) attached hereto.
(v) Claims Against Third Parties. All claims against third
----------------------------
parties for inventory sold on or after the Closing Date under any manufacturer's
or vendor's warranties and insurance claims and proceeds;
(vi) Goodwill. All of the goodwill and going concern value
--------
relating to the Military Division or any of the Military Assets;
(vii) Copyrights, Patents and Trademarks. All Intellectual
----------------------------------
Property (as defined in Section 6.15 hereof) relating to the Military Division;
(viii) Drawings. All drawings ("Military Drawings") and bills of
--------
material ("Military Bills of Material") relating to products manufactured by the
Military Division; and
(ix) Other Assets. All other intangible and tangible assets of
------------
Astrosystems primarily relating to the Military Division and relevant to Buyer's
continued operation of the Military Division following the Closing (other than
the Excluded Assets, as hereinafter defined), including, without limitation, all
computer software and software codes and electronic data; all supplier
information; all customer lists and customer correspondence; all sales records;
all research, statistical, production, marketing and promotional materials,
records, files, reports and other documents and data; all distribution records;
all business post office boxes and business telephone listings; all research
results and other know-how; and all other materials, records, files and data, in
whatever form contained.
(b) Behlman shall sell, transfer, convey, assign and deliver to
Buyer, and Buyer shall purchase and acquire from Behlman, free and clear of any
and all Liens, other than Permitted Liens, certain of its assets as set forth
below, as the same shall exist on the Closing Date (collectively, the "Behlman
Assets" and together with the Military Assets, the "Assets"). The Behlman
Assets shall include all of Behlman's right, title and interest in and to the
following:
(i) Fixtures, Furniture, Equipment, etc. All fixtures,
------------------------------------
furniture, furnishings, machinery, accessories, computers and peripheral
devices, testing equipment and office and other equipment, whether fully or
partially depreciated, appliances, vehicles and any replacement and spare parts
for any such assets, other than any of the foregoing identified on Schedule 2.2
hereof (collectively, the "Behlman Fixed Assets", and together with the Military
Fixed Assets, the "Fixed Assets");
(ii) Inventory and Supplies. All (A) raw materials, work in
----------------------
process and finished products, (B) stock in trade, goods, supplies and other
products, (C) office supplies and similar materials, and (D) wrapping, supply
3
<PAGE>
and packaging items, promotional materials and similar items, wherever located
(collectively, the "Behlman Inventory", and together with the Military
Inventory, the "Inventory");
(iii) Permits. All of Behlman's rights under all Permits,
-------
including, without limitation, the Permits listed on Schedule 6.12 hereof (to
the extent transfer is permitted by law and by the terms of such Permits);
(iv) Contracts and Agreements, etc. The Contracts entered into
-----------------------------
by Behlman which are set forth on Schedule 2.1(a)(iv) attached hereto.
(v) Claims Against Third Parties. All claims against third
----------------------------
parties for inventory sold on or after the Closing Date under any manufacturer's
or vendor's warranties and insurance claims and proceeds;
(vi) Name. The name "Behlman", and any rights relating thereto;
----
(vii) Goodwill. All of the goodwill and going concern value
--------
relating to the business of Behlman or any of the Behlman Assets;
(viii) Copyrights, Patents and Trademarks. All Intellectual
----------------------------------
Property (as defined in Section 6.15 hereof) relating to Behlman; and
(1) Drawings. All drawings (together with the Military
--------
Drawings, the "Drawings") and bills of material (together with the Military
Bills of Material, the "Bills of Material") relating to products manufactured by
Behlman; and
(2) Other Assets. All other intangible and tangible assets
------------
relevant to Buyer's continued operation of the business of Behlman following the
Closing, including, without limitation, all computer software and software codes
and electronic data; all supplier information; all customer lists and customer
correspondence; all sales records; all research, statistical, production,
marketing and promotional materials, records, files, reports and other documents
and data; all distribution records; all business post office boxes and business
telephone listings; all research results and other know-how; and all other
materials, records, files and data, in whatever form contained.
2.2 Excluded Assets. Notwithstanding any other provision of this
---------------
Agreement, Sellers shall not sell, assign or transfer to Buyer, and Buyer shall
not purchase from Sellers, any of the following assets (collectively, the
"Excluded Assets"):
(a) This Agreement. All rights of Sellers under this Agreement and
--------------
any documents delivered or received in connection herewith;
(b) Corporate Records. (i) All books, records and other assets of
-----------------
Sellers relating primarily to corporate level activities, including, without
limitation, those relating to filings with the SEC and the IRS and those
relating to accounting and tax functions, (ii) any corporate minute books, stock
ledgers and other corporate books and records of either Seller, (iii) all books
and records relating to the Industrial Products Division of Astrosystems, and
4
<PAGE>
(iv) all books and records not relating to the Assets or the Assumed
Liabilities;
(c) Name. The name "Astrosystems", and any rights thereto,
----
including, without limitation, any trademark registrations, subject to the
provisions of Section 8.16 hereof;
(d) Third Party Claims. All claims against third parties for
------------------
inventory sold prior to the Closing, including, without limitation, rights under
any manufacturer's or vendor's warranties and insurance claims and proceeds with
respect to such inventory, and all other claims against third parties arising
from or in connection with the Acquired Businesses or the Assets prior to the
Closing Date;
(e) Cash, Accounts Receivable, and Cash Equivalents All of the cash,
-----------------------------------------------
funds on deposit with financial institutions and in checking accounts,
marketable and other securities, accounts receivable and other cash equivalents
of either Seller;
(f) Tax Refunds. All federal, state and local income tax refunds due
-----------
either Seller;
(g) Real Property. Title to any real property owned by Sellers and
-------------
all buildings and other structures located on such real property, and leasehold
interests in and to any real property;
(h) Security Deposits and Bonds. Sellers' right in and to all
---------------------------
security deposits with third parties and all security bonds;
(i) Prepaid Expenses, etc. All prepaid expenses and rentals;
----------------------
(j) Equipment. Sellers' right, title and interest in and to certain
---------
furniture, fixtures and equipment identified on Schedule 2.2 hereof;
(k) Industrial Products Division. Astrosystems' right, title and
----------------------------
interest in and to all of its intangible and tangible assets that primarily
relate to, or are primarily used or held in connection with, the business of its
Industrial Products Division;
(l) AstroPower. Astrosystems' right, title and interest in and to
----------
all intangible and tangible assets that primarily relate to AstroPower, Inc.,
including, without limitation, its shares of Common Stock therein and its right,
title and interest in and to a certain License Agreement with the University of
Delaware and a certain Sublicense Agreement with AstroPower, Inc.
3. Assumption of Liabilities.
-------------------------
3.1 Assumption of Liabilities by Buyer. At the Closing, Buyer shall
----------------------------------
assume and thereafter pay, perform, satisfy and discharge only the following
obligations and liabilities of Sellers (collectively, the "Assumed
Liabilities"):
(a) Obligations Under Certain Agreements. The liabilities and
------------------------------------
obligations of Sellers under (i) the Contracts and Permits that are listed on
5
<PAGE>
Schedules 2.1(a)(iv) and 6.12 hereof, and (ii) the Contracts and Permits that
are entered into in the ordinary course of the business of the Military Division
and the business of Behlman (such businesses, collectively, the "Acquired
Businesses") in accordance with past practice or not required to be so listed on
the aforesaid Schedules, to the extent that such Contracts are wholly or
partially executory on the Closing Date ((i) and (ii) collectively referred to
herein as the "Assumed Contracts");
(b) Employee Obligations. The liabilities and obligations assumed
---------------------
by Buyer pursuant to Section 8.11 hereof; and
(c) Liabilities After Closing. All liabilities and obligations
-------------------------
arising from or in connection with the Acquired Businesses or the Assets on or
after the Closing Date as a result of the conduct of the business of the
Acquired Businesses after such date. Buyer will develop and implement a
procedure for marking or otherwise identifying (e.g., by serial number) products
to facilitate identification of such products as sold on or after the Closing
Date.
(d) Warranty Obligations. All after-sale and warranty obligations
--------------------
with respect to products manufactured and sold by the Acquired Businesses prior
to the Closing Date.
3.2 Excluded Liabilities. Buyer is not assuming or agreeing to pay,
--------------------
perform, assume or discharge, or otherwise be responsible for, any liabilities
of Sellers, fixed or contingent, known or unknown, accrued or unaccrued other
than the Assumed Liabilities, whether arising before or after the Closing Date
(collectively, the "Excluded Liabilities").
3.3 Novation. Buyer shall use its reasonable efforts in cooperating with
--------
Sellers to cause all third parties to those Contracts set forth on Schedule
2.1(a)(iv) to enter into novation or similar agreements pursuant to which
Sellers will be relieved from all liability thereunder.
4. Consideration for Transfer of the Assets.
----------------------------------------
4.1 Purchase Price. In consideration for the sale and transfer of the
--------------
Assets and Sellers' covenant not to compete set forth in Section 8.14(a) hereof,
on the terms and subject to the conditions set forth in this Agreement, Buyer
agrees to (i) pay in cash to Sellers by wire transfer of immediately available
funds, at Closing, the sum of $3,706,700 subject to adjustment pursuant to
Section 8.24 hereof (the "Purchase Price") and (ii) assume the Assumed
Liabilities. A portion of the Purchase Price equal to $1,000,000 (the "Escrowed
Amount") shall be delivered by Sellers to the Escrow Agent (as hereinafter
defined) pursuant to Section 4.2 hereof.
4.2 Escrow. At the Closing, Sellers shall deliver the Escrowed Amount to
------
Squadron, Ellenoff, Plesent & Sheinfeld, LLP, as escrow agent (the "Escrow
Agent") pursuant to an Escrow Agreement (the "Escrow Agreement"), in form and
substance reasonably satisfactory to the parties. Upon the first anniversary of
the Closing Date, the Escrow Agent, pursuant to the terms of the Escrow
Agreement, shall release to Sellers $500,000 (subject to the terms of the Escrow
Agreement). The remainder of the Escrowed Amount shall be released to Sellers
6
<PAGE>
on the second anniversary of the Closing Date (subject to the terms of the
Escrow Agreement). The Escrowed Amount shall be held by the Escrow Agent
pursuant to the terms of the Escrow Agreement. The fees of the Escrow Agent
shall be borne equally by Sellers, on the one hand, and Buyer and Orbit, on the
other hand.
4.3 Closing Adjustment. On the day immediately prior to the Closing Date,
------------------
a physical inventory of the Inventory shall be taken by the employees of Sellers
in accordance with past practices and mutually agreed upon procedures, subject
to the supervision of Sellers and Buyer and their respective accountants. A
final statement (the "Final Statement") shall be prepared by Sellers and
Sellers' accountants based upon and from the results of such physical inventory
and the books and records of Sellers as of 11:59 p.m., New York time, on the day
prior to the Closing Date. Such Final Statement shall set forth (a) the net
book value of (i) the Fixed Assets (the "Final Fixed Assets Valuation"), and
(ii) the Inventory ("Final Inventory Valuation Amount" and, together with the
Final Fixed Assets Valuation and the "Goodwill Valuation" (as hereinafter
defined), the "Final Valuation Amount") as of 11:59 p.m., New York time, on the
day prior to the Closing Date and (b) the location of each item of Inventory as
of such time. The Final Statement shall be prepared in accordance with
generally accepted accounting principles applied on a basis consistent with the
Financial Statements (as hereinafter defined) heretofore delivered to Buyer and
Sellers' past practices. The reserves for damaged, obsolescent and excess
inventory set forth on the Final Statement shall be determined consistent with
past practices utilized in connection with the preparation of such Financial
Statements. Sellers and Buyer hereby acknowledge that the "Goodwill Valuation"
is $1,031,700. Sellers shall deliver to Buyer the Final Statement not later
than thirty (30) days after the Closing Date. In the event of a dispute between
Buyer and Sellers as to the proper treatment or reporting of any matters set
forth in the Final Statement, within five Business Days following delivery of
such Final Statement to Buyer, such dispute shall be referred for determination
in New York, New York by a third party nationally recognized firm of independent
public accountants mutually acceptable to Buyer and Sellers. In connection with
its review, such third party accounting firm shall have the right to undertake
such auditing procedures as it may deem appropriate and to examine all work
papers utilized in connection with the accounting and preparation of the Final
Statement. Upon delivery to Buyer and Sellers of a statement in writing setting
forth the conclusions of the third party accounting firm's opinion of the
disputed item or items and the effect of such conclusions on the Final
Statement, such determinations (in the absence of manifest error) shall be final
and binding upon Buyer and Sellers without any further right of appeal. Costs
and fees of such third party accounting firm shall be borne equally by Buyer, on
the one hand, and Sellers, on the other hand.
When the Final Valuation Amount is finally determined pursuant to this
Section 4.3, the Purchase Price shall be adjusted in the following manner:
(i) If the Final Valuation Amount is greater than the Purchase
Price, Buyer shall pay an amount equal to such excess to Sellers in accordance
with Section 4.4 hereof;
(ii) If the Final Valuation Amount is less than the Purchase
Price, Sellers shall pay an amount equal to the difference to Buyer in
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accordance with Section 4.4 hereof.
For purposes of this Agreement, the "Adjusted Purchase Price" shall
mean the Purchase Price minus any shortfall amount paid by Sellers to Buyer or
plus any excess amount paid by Buyer to Sellers, as the case may be.
4.4 Adjustment Payments.
-------------------
Amounts to be paid by Sellers to Buyer or Buyer to Sellers, as the
case may be, pursuant to Section 4.3 hereof (the "Adjustment Payment") shall be
paid by delivery of a certified or official bank check or wire transfer of
immediately available funds within 15 days of delivery to Buyer of the Final
Statement or settlement of any disputes with regard to the Final Statement. Any
Adjustment Payment not made within such period shall bear interest at the rate
of two percent (2%) above the prime rate as reported from time to time in The
---
Wall Street Journal (the "Default Rate"); provided, however, that in the event
- ---- ------ -------
that there is a dispute with regard to the Final Statement which is resolved in
accordance with Section 4.3 hereof, the Adjustment Payment shall bear interest
at the rate of six percent (6%) from the date of the Final Statement until the
15th day following the resolution of the dispute and thereafter at the Default
Rate.
4.5 Allocation of Purchase Price. The parties to this Agreement agree to
----------------------------
allocate the Purchase Price and the Adjusted Purchase Price in accordance with
the rules under Section 1060 of the Code, and the Treasury Regulations
promulgated thereunder, and in accordance with the Final Statement (as adjusted
pursuant to the provisions of Section 4.3 hereof) and no party shall take a
position inconsistent therewith.
5. Closing. Upon the terms and conditions set forth herein, the Closing shall
-------
take place at the offices of Squadron, Ellenoff, Plesent & Sheinfeld LLP,
551 Fifth Avenue, New York, New York 10176, at 10:00 a.m. local time on the
Business Day following the day on which all conditions to each party's
obligation to close hereunder shall have been satisfied or waived or such later
date as mutually agreed to by the parties. The parties agree that time is of
the essence and will take all actions reasonably necessary to effectuate the
Closing at the earliest practicable date. The date upon which the Closing
occurs is referred to herein as the "Closing Date."
6. Representations and Warranties of Sellers. Sellers hereby jointly and
-----------------------------------------
severally represent and warrant to Buyer and Orbit as follows:
6.1 Sellers' Organization and Authority. Each Seller is a corporation
-----------------------------------
duly organized, validly existing and in good standing under the laws of the
state of its incorporation and has all requisite corporate power and lawful
authority to carry on its business as it is currently being conducted and all
necessary licenses and permits material to its business as it is currently being
conducted, and to own, operate and lease the Assets. Each Seller is duly
qualified or licensed to do business as a foreign corporation and is in good
standing as a foreign corporation in each jurisdiction in which the ownership,
operation or lease of the Assets or the conduct of its business or location of
its properties requires qualification or licensing to do business as a foreign
corporation and in which the failure so to qualify could have a material adverse
8
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effect on either Seller or the Assets.
6.2 Authorization. Each Seller has all requisite corporate power and
-------------
authority to execute and deliver this Agreement, to consummate the transactions
contemplated hereby and to perform fully its obligations hereunder except for
the approval of the Plan of Complete Liquidation and Dissolution of Astrosystems
(the "Plan") and this Agreement by the holders of a majority of all outstanding
shares of Astrosystems entitled to vote thereon ("Shareholder Approval"). The
execution, delivery and performance of this Agreement by each Seller and the
consummation by each Seller of the transactions contemplated hereby have been
duly authorized by all necessary corporate action of each Seller except for the
Shareholder Approval, and no other board of directors, shareholder or other
corporate proceeding by or on behalf of either Seller is necessary to authorize
the execution, delivery or performance of this Agreement, or the consummation of
the transactions contemplated hereby. This Agreement constitutes, and each
document and instrument contemplated by this Agreement to be executed by either
Seller, when executed and delivered in accordance with the provisions hereof,
shall constitute, the valid and legally binding obligations of Sellers,
enforceable against each of them in accordance with its terms, subject to (i)
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or similar laws affecting creditors' rights generally; (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding at law or in equity); and (iii) the Shareholder Approval.
6.3 Freedom to Contract. Subject to receipt of the consents and approvals
-------------------
described in Schedule 6.3 hereto, the execution, delivery and performance of
this Agreement by each Seller and the consummation by each Seller of the
transactions contemplated hereby will not: (i) violate or conflict with any
provision of the certificate of incorporation or by-laws of either Seller, (ii)
violate any of the terms, conditions or provisions of any law, rule, statute,
regulation, order, writ, injunction, judgment or decree of any court,
governmental authority or regulatory agency, or (iii) conflict with or result in
a violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, any of the terms, conditions or provisions of any note,
bond, indenture, debenture, security agreement, trust agreement, Lien, mortgage,
lease, agreement, license, franchise, permit, guaranty, joint venture agreement
or other agreement, instrument or obligation, oral or written, to which either
Seller is a party (whether as an original party or as an assignee or successor)
or by which it or any of its properties is bound. Except as set forth on
Schedule 6.3 hereto, no authorization, approval, order, license, permit,
franchise or consent, and no registration, declaration or filing with any court
or Governmental Authority, is required in connection with either Seller's
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby.
6.4 Financial Statements.
--------------------
(a) The consolidated balance sheets of Sellers as at June 30, 1993,
1994 and 1995, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended June 30, 1993, 1994, and
1995, including the footnotes thereto, certified by Richard A. Eisner & Co.,
9
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independent certified public accountants to Sellers, which have been delivered
to Buyer (the "Financial Statements") have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis,
and fairly present in all material respects the financial condition, results of
operations and cash flows of Sellers as of the dates thereof and for the periods
presented.
(b) The accounting and financial records of Sellers have been
prepared and maintained in accordance with sound bookkeeping practices. Sellers
maintain systems of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability by division, (iii) access to assets is
permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability by division for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
6.5 Absence of Undisclosed Liabilities. Neither Seller has any direct or
----------------------------------
indirect material indebtedness, liability, claim, loss, damage, deficiency,
obligation or responsibility, known or unknown, fixed or unfixed, choate or
inchoate, liquidated or unliquidated, secured or unsecured, accrued or
unaccrued, absolute, contingent or otherwise, relating to the Acquired
Businesses, including, without limitation, liabilities on account of Taxes,
other governmental charges or lawsuits brought, whether or not of a kind
required by GAAP to be set forth on a financial statement ("Liabilities"), other
than Liabilities that (i) were fully and adequately reflected on the Financial
Statements or (ii) were incurred since June 30, 1995 in the ordinary course of
business. Neither Seller has any knowledge of any circumstances, conditions,
events or arrangements which may hereafter give rise to any Liabilities of
either Seller or any successor to the Acquired Businesses except in the ordinary
course of the Acquired Businesses, which may affect the Acquired Businesses
following the Closing.
6.6 No Material Adverse Change. Since June 30, 1995, except as described
--------------------------
in the SEC Documents (as hereinafter defined), there has been no material
adverse change in the assets, properties, business or condition, financial or
otherwise, of either the Military Division or Behlman, and neither Seller knows
of any such change which is threatened, nor has there been any damage,
destruction or loss materially affecting the assets, properties, business or
condition of either the Military Division or Behlman whether or not covered by
insurance.
6.7 Title to and Condition of Assets; Encumbrances, etc. Sellers have
---------------------------------------------------
good title to all of the Assets, free and clear of all Liens, except for
Permitted Liens. The instruments of transfer required to be executed and
delivered by Sellers at the Closing pursuant to Section 9.1 hereof will be
effective to vest in Buyer good title to the Assets, free and clear of any and
all Liens, other than Permitted Liens. Schedule 6.7(b) hereto sets forth a true
and complete listing of each of the Assets, other than Inventory and
Intellectual Property, owned by (a) Astrosystems and used in its Military
Division and (b) Behlman, having a net book value as of June 30, 1995 in excess
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of $1,000. Schedule 6.7(c) sets forth, as of a recent date, the locations where
Inventory is located and the approximate amount at each such location. All such
Assets are the property of Sellers, except as disclosed on Schedule 6.7(c). No
third party has any rights to purchase any of the Assets, or any interest
therein or portion thereof, including rights of first offer or first refusal.
6.8 Absence of Certain Changes. Except as set forth on Schedule 6.8
--------------------------
hereto, since June 30, 1995:
(a) Astrosystems has operated the business of the Military Division
and Behlman has operated its business in the ordinary course consistent with
past practice;
(b) Neither Seller has entered into any transaction, commitment,
contract or agreement relating to the Acquired Businesses except in the ordinary
course of business consistent with past practice;
(c) Neither Seller has been engaged in a dispute with (i) any third
party with regard to any Contract or (ii) a material customer.
(d) There has not been any event that would materially impair
Sellers' ability to perform their respective obligations under this Agreement;
(e) Neither Seller has entered into any transaction affecting the
Acquired Businesses with any director, officer or 5% shareholder of either
Seller or with any Affiliate.
(f) Neither Seller has sold, assigned, leased or transferred any
Assets, other than the sale of inventory in the ordinary course of business
consistent with past practice;
(g) Neither Seller has (i) incurred any severance or termination pay
liability to any employee of the Military Division or Behlman except as set
forth in Schedule 6.8 hereof; (ii) entered into any employment, deferred
compensation or other similar agreement (or any amendment to any such existing
agreement) with any employee of the Military Division or Behlman or (iii)
granted any increase in compensation, bonus or other benefits payable to any
employee of the Military Division or Behlman;
(h) There has not been any material damage, destruction or other
casualty loss (whether or not covered by insurance) affecting the Acquired
Businesses or the Assets;
(i) Neither Seller has written down the value of any tangible assets
of the Acquired Businesses or made any other write-downs or write-offs with
respect to the Acquired Businesses, except write-downs and write-offs in the
ordinary course of business in accordance with GAAP and consistent with past
practice, as reflected on the Financial Statements, or made any change in its
accounting methods or practices with respect to the Acquired Businesses, or made
any change in depreciation or amortization policies or rates adopted by it;
(j) Neither Seller has cancelled, waived or released any right or
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claim relating to the Acquired Businesses;
(k) Neither Seller has mortgaged, pledged or encumbered any Asset;
(l) Neither Seller has materially changed any of its business
policies with respect to the Acquired Businesses, including, without limitation,
advertising, marketing, pricing, purchasing, personnel, sales, returns or
product acquisition policies; and
(m) Neither Seller has agreed to do any of the foregoing.
6.9 Contracts, etc.
--------------
(a) Schedule 6.9 hereto contains a complete and accurate list of the
following Contracts, in each case, to which either Astrosystems, on behalf of
the Military Division, or Behlman is a party and which primarily relate to the
Acquired Businesses:
(i) Contracts for the purchase or sale of goods or other
personal or intangible property, or for the furnishing or receipt of services,
involving in any individual Contract or a group of related Contracts more than
$10,000 in connection with the purchase or sale of Inventory and $5,000 for any
other goods or services;
(ii) Contracts for the lease of any personal property involving
in any individual Contract or a group of related Contracts rental obligations in
excess of $1,000 per month;
(iii) Contracts involving a license with third parties;
(iv) Contracts directly or indirectly restricting the ability of
Seller to compete in any line of business with any person or entity;
(v) Contracts with distributors, agents, salesmen and sales
representatives or involving the payment of commissions or other consideration
or discounts with respect to the sale of Sellers' products;
(vi) Contracts with any Governmental Authority;
(vii) Contracts with an advertising or public relations agency,
as well as any Contracts relating to marketing or co-marketing or tie-ins with
other products or services;
(viii) Contracts containing any exclusive arrangements which (A)
are in favor of either Seller, or (B) restricting either Seller;
(ix) Contracts containing secrecy, non-competition or similar
arrangements between either Seller and any of its current or former employees or
consultants;
(x) Contracts between either Seller and any Affiliate thereof;
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(xi) Contracts with importers, customs or other brokers,
warehouse operators, designers and manufacturers; and
(xii) Contracts not entered into the ordinary course of the
Acquired Businesses in accordance with past practice.
Sellers have heretofore delivered or made available to Buyer true and
complete copies of all written Contracts listed on Schedule 6.9, and a summary
of the material terms of each oral Contract listed on such Schedule.
(b) Each Seller has complied with and performed in all material
respects all of its obligations required to be performed under all of the
Contracts listed on Schedule 6.9 hereof to which it is a party, and is not in
default in any material respect under any of them; and no event has occurred
which, with or without the giving of notice, lapse of time or both, would
constitute a default thereunder in any material respect. Neither Seller has
received written notice cancelling, terminating or repudiating or exercising any
option under any Contract to which it is a party and has no knowledge that any
party has failed to comply with or perform all of its obligations required to be
performed under any such Contract or that an event has occurred which, with or
without the giving of notice, lapse of time or both, would constitute a default
by such party thereunder, in any case which would have a material adverse effect
on the Acquired Businesses. Neither Seller has any knowledge that the award or
validity of any Contract is being contested by a third party. In addition,
neither Seller has any knowledge (i) that the products and services called for
by an unfinished contract having material value cannot be supplied by or to the
Seller who is a party to such Contract in accordance with the time
specifications of such Contract and (ii) of any facts or circumstances which
make a default by any party to any such Contract likely to occur subsequent to
the date hereof.
(c) Except to the extent that third-party consents are required for
the assignment of any Contract to Buyer, as disclosed on Schedule 6.3 hereto,
all Contracts listed on Schedule 6.9 hereof are currently enforceable and shall
be enforceable after the Closing by Buyer in accordance with their respective
terms, subject to (i) bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium or similar laws affecting creditors' rights
generally; and (ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in equity).
6.10 Employee Matters.
----------------
(a) Except as set forth on Schedule 6.10(a) hereto, neither Seller
currently, or has within the last two years, for the benefit of current or
former employees of the Military Division or Behlman, maintains, administers or
contributes to any: (i) "employee benefit plans" ("Benefit Plans") within the
meaning of Section 3(3) of ERISA; (ii) employment contracts (and any related
agreements); (iii) severance arrangements, (iv) bonus or other incentive
compensation arrangements; (v) fringe benefit or perquisite plans or
arrangements; (vi) deferred compensation arrangements; (vii) non-competition
arrangements; and (viii) other material remunerative arrangements, and Seller
has provided Buyer copies or descriptions of such plans, contracts and
arrangements. All Benefit Plans set forth on Schedule 6.10(a) are and have been
13
<PAGE>
maintained in full compliance with their terms and all requirements of
applicable law.
(b) There are no collective bargaining or other agreements between
either Seller and any union or other employee organizations relating to
employees of the Military Division or Behlman (collectively, the "Companies").
(c) Except as set forth in Schedule 6.10(c) hereof, neither Seller
nor any member of Sellers' Group has, within the preceding six years,
contributed to, or had an obligation to contribute to, any "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA which is subject to
Title IV of ERISA. As used in the preceding sentence, "Sellers' Group" includes
any person who is, or was at the relevant time, a member of the same "controlled
group of corporations" as either Seller (within the meaning of Section 414(b) of
the Code), or under "common control" with either Seller (within the meaning of
Section 414(c) of the Code). Neither Seller has, within the preceding six
years, maintained or contributed to a multiemployer pension plan, as defined in
Section 3(37) of ERISA, is not liable for any withdrawal or partial withdrawal
liability with respect to any multiemployer or pension plan and neither Seller
nor Buyer will become liable therefor as a result of the transactions
contemplated by this Agreement.
(d) (i) Each Seller is in compliance in all material respects with
all applicable laws relating to the employment practices, terms and conditions
of employment and wages and hours with respect to the current employees of each
of the Military Division and Behlman (the "Employees"); (ii) there are no
material controversies pending or, to Seller's knowledge, threatened, between
either Seller and any employees, prospective employees, former employees or
retirees of the Military Division or Behlman, except as set forth on Schedule
6.10(d) hereto; (iii) no unfair labor practice complaints have been filed
against either Seller or with the National Labor Relations Board (the "NLRB")
relating to Employees, and neither Seller has received any notice or
communication reflecting an intention or a threat to file any such complaint;
(iv) there is no labor strike, dispute, slow-down or stoppage pending or, to
Sellers' knowledge, threatened against either Seller relating to Employees; (v)
no representation petition is pending or threatened with the NLRB against either
Seller relating to Employees; (vi) except as disclosed on Schedule 6.10(d)
attached hereto, each Seller has paid in full to all Employees all wages,
salaries, commissions, bonuses, benefits and other compensation due and payable
to such employees, including those arising under any policy, practice,
agreement, program, statute or other law; and (vii) except as set forth on
Schedule 6.10(d) hereto, neither Seller has closed any facility, effectuated any
layoffs of employees or implemented any early retirement, separation or window
program within its past three fiscal years, in each case with respect to
Employees, nor has either Seller planned or announced any such action or program
for the future.
(e) Schedule 6.10(e) hereto contains a correct and complete list of
(i) the names and current annual salary rates of all Employees; (ii) the names
and amounts, if any, paid, accrued or to be paid to Employees under any bonus,
incentive or similar plans on and after January 1, 1995; and (iii) all vacation
and sick pay accrued or anticipated to be accrued in respect of obligations of
Sellers to Employees up to and including the Closing Date. Except as disclosed
on Schedule 6.10(e) hereto no Employee will be entitled to any severance or
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other payments under any plan, agreement or arrangement maintained, administered
or contributed to by Sellers solely as a result of the transactions contemplated
hereby.
6.11 Litigation. Except as set forth in Schedule 6.11 hereto, there is no
----------
action, suit, inquiry, litigation or proceeding by or before any referee,
mediator or arbitrator, or any court or governmental or other regulatory or
administrative agency or commission, pending or, to either Seller's knowledge,
threatened, nor, to either Seller's knowledge, is any investigation pending by
or before any such Governmental Authority, against either Seller or relating to
the Assets or the Acquired Businesses nor, to either Seller's knowledge, are
there any facts which would provide a basis for any such action, suit, inquiry,
litigation, proceeding or investigation, which, in each case if adversely
determined, could have a material adverse effect on the Acquired Businesses or
the Assets or which in any manner challenges or seeks injunctive or other non-
monetary relief or seeks to prevent, enjoin, alter or delay any of the
transactions contemplated hereby. Neither Seller is subject to any judgment,
order or decree entered in any lawsuit or proceeding that might adversely affect
Buyer's ability to conduct the business of the Acquired Businesses or Buyer's
rights in the Assets after the Closing Date. Except as set forth on Schedule
6.11 attached hereto, neither Seller has any knowledge that a third party is
contesting any Contract to which either Seller is a party nor is either Seller
contesting the award of a contract to a third party.
6.12 Permits. Schedule 6.12 hereto lists all Permits necessary or required
-------
in connection with the Acquired Businesses as presently conducted and the
ownership by Sellers of the Assets. Sellers have obtained each such Permit and
each such Permit is in full force and effect. Neither Seller has received
notice that revocation is being considered with respect to any such Permit.
Each Seller has made all filings with, or notifications to, all Governmental
Authorities necessary or required in connection with the Acquired Businesses as
presently conducted and the ownership by Sellers of the Assets.
6.13 Compliance with Law. To the best knowledge of Sellers, neither
-------------------
Seller is in violation, with respect to the Acquired Businesses, of any
applicable federal, state, local or foreign law, rule, regulation, or ordinance,
or any judgment, writ, decree, injunction, order or any other requirement of any
court, Governmental Authority or arbitral or other dispute resolution body or
agency, in each case which would have a material adverse effect on the Acquired
Businesses, and no notice has been received by either Seller alleging any such
violation.
6.14 SEC Filings. Securities and Exchange Commission Documents.
-----------
Astrosystems has furnished to Buyer a true and complete copy of each statement,
report and registration statement filed by Astrosystems with the Securities and
Exchange Commission ("SEC") since January 1, 1994 (the "SEC Documents"), which
are all of the documents (other than preliminary material) that Astrosystems was
required to file with the SEC during such period. As of their respective filing
dates, with respect to the Acquired Businesses, none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
15
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misleading in any material respect, except to the extent corrected by a
subsequently filed SEC Document.
6.15 Intellectual Property. Schedule 6.15 hereto lists or describes, with
---------------------
respect to the Acquired Businesses: (a) all unexpired United States and foreign
copyright registrations and pending applications; (b) all unexpired United
States and foreign patents and patent applications; (c) all United States and
foreign trademarks, service marks, imprints, logos, trade dress, corporate,
trade, assumed and other names, including those at common law and all
registrations or applications to register the foregoing; and (d) all know-how,
processes or trade secrets susceptible of legal protection; which (with respect
to (a) through (d) above) (A) are owned by either Seller; or (B) are licensed to
or by either Seller (collectively, the "Intellectual Property"). Except as set
forth on Schedule 6.15 hereto, Sellers own or, in the case of any licenses,
Sellers possess adequate, enforceable and assignable licenses or other rights to
use all of the Intellectual Property, and all Drawings, including all part
numbers designated by the United States government, free and clear of all Liens,
without any conflict with the rights of others. Except as set forth on Schedule
6.15, all registrations for the Intellectual Property are valid and subsisting
and in full force and effect. There are no existing or, to either Seller's
knowledge, threatened, claims of any third party for infringement of the
copyrights, patents or trademarks of others by either Seller, or unfair
competition based on the use by, or challenging the ownership of or the right to
use by, either Seller of any of the Intellectual Property. None of the
Intellectual Property has been abandoned by Sellers or is subject to any
outstanding order, decree, judgment, stipulation, injunction, written
restriction or agreement restricting the scope or use thereof. To the Sellers'
knowledge, there are no material infringing or diluting uses of the Intellectual
Property.
6.16 Tax Matters.
-----------
(a) For purposes of this Agreement, (i) "Taxes" shall mean all
foreign, federal, state and local income, profits, franchise, gross receipts,
payroll, sales, employment, use, property, transfer, excise, estimated, stamp,
alternative or add-on minimum, environmental, withholding and any other taxes,
duties, assessments, governmental charges or levies, together with all interest,
penalties and other additions imposed with respect to such amounts; and (ii)
"Tax Return" shall mean any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
(b) All Tax Returns required to be filed on or before the Closing
Date by either Seller or any member of an affiliated group (within the meaning
of Section 1504 of the Code) or other combined group of which either Seller is,
or has been or will be a member on or before the Closing Date (an "Affiliated
Group Member") have been or shall be timely filed (taking into account all
properly granted extensions), and all Taxes indicated as due on such returns
have been or shall be paid or accrued within the prescribed period or any
extension thereof.
(c) There are no Liens for taxes upon any property of Seller except
for Liens for current Taxes not yet due. All amounts required to be withheld by
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Sellers from employees for income taxes, social security and other payroll Taxes
have been collected and withheld, and paid to the respective governmental
agencies, or set aside in accounts for such purpose or accrued, reserved against
and entered upon the books and records of the employer.
(d) Neither Seller nor any Affiliated Group Member has executed or
filed with any taxing authority any agreement extending the period for the
assessment or collection of any Taxes, is a party to or has received any notice
with respect to any threatened or pending action by any taxing authority for
assessment or collection of Taxes, or is a party to any dispute or threatened
dispute, in which an adverse determination would have a material adverse effect
upon the Assets of the Acquired Businesses, and no such claim for assessment or
collection of Taxes has been made upon Sellers or any Affiliated Group Member.
6.17 Plant and Equipment. The Fixed Assets are adequate and suitable for
-------------------
the uses to which they are being put and constitute all of the fixed assets
including, without limitation, equipment, necessary for the operation of the
Acquired Businesses as they are currently being operated. To either Seller's
knowledge, no condition exists with respect to any such Fixed Assets which would
prevent, or require repair or modification thereof as a prerequisite to, Buyer's
use thereof in the ordinary conduct of the Acquired Businesses except with
respect to ordinary wear and tear and scheduled maintenance and repair that are
not in the aggregate material in nature or in cost.
6.18 Brokers. Except as set forth on Schedule 6.18, Sellers have not,
-------
directly or indirectly, employed or utilized the services of any investment
banker, broker, finder, consultant or other intermediary in connection with this
Agreement or the transactions contemplated hereby.
6.19 Insurance. Each Seller maintains insurance coverage and performance
---------
bonds on its properties and assets and with respect to the Employees and
operations, covering risks which are customarily insured against by businesses
similar to the Acquired Businesses. Schedule 6.19 hereto contains a correct and
complete description of all such performance bonds, policies or binders of
insurance with respect to the Acquired Businesses held by or on behalf of
Sellers, or providing coverage for any of their respective properties or assets
(in each case specifying the insurer, the amount of coverage, the type of
insurance, the risks insured, the expiration date, and the policy number). To
Sellers' knowledge, no state of fact exists and no event has occurred which
reasonably might form the basis of any claim against either Seller or relating
to the Acquired Business which might substantially increase the insurance
premiums payable under or result in the cancellation or nonrenewal of any of the
policies or binders listed on Schedule 6.19 hereto.
6.20 Advertising, etc. To Sellers' knowledge, neither the advertising nor
----------------
the promotional material used at any time by either Seller contained or contains
any material untrue or misleading statements or claims.
6.21 Transactions with Affiliates. Neither Seller nor any of their
----------------------------
Affiliates owns, directly or indirectly, or has an interest, either of record or
beneficially, in, any business, corporate or otherwise, which is a party to any
agreement, business arrangement or course of dealing with either Seller relating
17
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to the Acquired Businesses, or any property or asset which is the subject of any
agreement, business arrangement or course of dealing with either Seller relating
to the Acquired Businesses.
6.22 Restrictions. Neither Seller nor any of their Affiliates is party to
------------
any agreement, commitment or arrangement which would, following the Closing,
directly or indirectly restrict Buyer from carrying on the Acquired Businesses
or any aspect thereof as is conducted immediately prior to Closing anywhere in
the world.
6.23 Full Disclosure. All documents and other papers delivered by or on
---------------
behalf of Sellers in connection with this Agreement and the transactions
contemplated hereby are true and complete in all material respects and
authentic. The information furnished by or on behalf of Sellers to Buyer in
connection with this Agreement and the transactions contemplated hereby does not
contain any untrue statement of a material fact and does not omit to state any
material fact necessary to make the statements made, in the context in which
made, not false or misleading. Except as described in the SEC Documents, there
is no fact which Sellers have not disclosed to Buyer which adversely affects, or
to the knowledge of Sellers is likely to adversely affect, the business or
condition (financial or other) of the Acquired Businesses or the ability of
Sellers to perform this Agreement.
6.24 Prohibited Payments. Neither Sellers nor any of Sellers' respective
-------------------
officers, directors, employees, agents or Affiliates has, directly or
indirectly, (a) offered, paid or given, or agreed to pay or to give, to any
person or entity, including any governmental official, employee, or agent or
solicited, received or agreed to receive from any such person or entity,
directly or indirectly, any money or anything of value (however characterized)
for the purpose of or with the intent of obtaining or maintaining business or
otherwise affecting, or in any manner relating to, the business, assets,
condition (financial or otherwise), operations or prospects of either Seller or
(b) established or maintained any unrecorded fund or asset for any purpose or
made any false entry on the books and records of Sellers for any reason, made or
agreed to make, a reimbursement of any political gift or contribution made by
any other person, to any candidate for federal, state, local or foreign office,
which, with respect to both (a) and (b) above, is in violation of any law, or
any rule, regulation or ordinance thereunder, of any federal, state local or
foreign jurisdiction or not properly and correctly recorded or disclosed on the
Financial Statements.
6.25 Environmental Matters.
---------------------
(a) To the best knowledge of Sellers, each of Behlman and
Astrosystems with respect to the Military Division is in material compliance
with all Environmental Laws (as hereinafter defined). Neither Seller has
received any written communication from a governmental authority, citizens'
group, employee or otherwise, that alleges that the Miliary Division or Behlman
is not in such material compliance, and to Sellers' knowledge, there are no
circumstances that are reasonably likely to prevent or interfere with such
material compliance in the future. All material permits and other governmental
authorizations required pursuant to the Environmental Laws relating to any
property currently owned or operated by Sellers relating to the Acquired
18
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Businesses ("Sellers' Facilities") have been obtained and are currently in
force, and all such material permits and other governmental authorizations are
identified in Schedule 6.25.
(b) There are no Environmental Claims (as hereinafter defined)
relating to any of Sellers' Facilities pending or, to either Seller's knowledge,
threatened against or involving Sellers or, to either Seller's knowledge,
against any person or entity whose liability for any Environmental Claim
relating to any of Sellers' Facilities either Seller has retained or assumed
either contractually or by operation of law.
(c) True and correct copies of the Environmental Reports (as
hereinafter defined) have been made available to Buyer and a list of all such
reports, audits and assessments is set forth on Schedule 6.25.
(d) "Environmental Laws" shall mean all applicable federal, state,
district and local laws, all rules or regulations promulgated thereunder, and
all orders, consent orders or judgments issued, promulgated or entered pursuant
thereto, relating to pollution or protection of the environment (including,
without limitation, ambient air, surface water, ground water, land surface, or
subsurface strata), including, without limitation, (i) laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, industrial materials, wastes or other hazardous or
toxic substances into the environment and (ii) laws relating to the
identification, generation, manufacture, processing, distribution, use,
treatment, storage, disposal, recovery, transport or other handling of
pollutants, contaminants, chemicals, industrial materials, wastes or other
hazardous or toxic substances.
(e) "Environmental Claims" shall mean all accusations, allegations,
notices of violation, Liens, claims, demands, suits, or causes of action for any
damage, including, without limitation, personal injury, property damage
(including, without limitation, any depreciation or diminution of property
values), lost use of property or consequential damages, based upon Environmental
Laws or principles of common law relating to pollution or exposure to hazardous
substances.
(f) "Environmental Reports" shall mean any and all written analyses,
summaries or explanations, in the possession or control of Sellers, of (a) the
condition of the environment on or about Sellers' Facilities or (b) the
compliance by the Acquired Businesses with Environmental Laws.
6.26 Accounts Receivable, etc. Schedule 6.26 hereto accurately sets forth
------------------------
the aging of the accounts receivable with respect to the Acquired Businesses as
of November 30, 1995.
6.27 Suppliers and Customers.
-----------------------
(a) Schedule 6.27(a) hereto sets forth a list of the ten largest
customers of Behlman by dollar volume of revenues and each customer of the
Military Division who, individually, constituted 10% or more of the Military
Division's revenues, for the fiscal years ended June 30, 1995, 1994 and 1993 and
for the three months ended September 30, 1995. Schedule 6.27(a) also sets forth
a list of the ten largest suppliers of the Acquired Businesses by dollar volume
19
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of purchases for the fiscal year ended June 30, 1995 and for the three months
ended September 30, 1995. Except as set forth on Schedule 6.27(b) attached
hereto, since June 30, 1995, there has not been any material adverse change in
the business relationship of Seller with respect to any such customer.
(b) Except as set forth on Schedule 6.27(b) attached hereto, no
single supplier or customer is of material importance to the business of the
Acquired Businesses. Except as set forth on Schedule 6.27(b) attached hereto,
the relationships of Sellers with the suppliers and customers of the Acquired
Businesses are good commercial working relationships and during the last 12
months no supplier or customer of the Acquired Businesses has cancelled or
otherwise terminated, or threatened in writing to cancel or otherwise terminate,
its relationship with either Seller or has decreased materially, or threatened
to decrease or limit materially, its services, supplies or materials to Sellers
or its usage of Sellers' services or products, as the case may be. Except as
set forth on Schedule 6.27(b) attached hereto, neither Seller has any notice
that any such supplier or customer intends to cancel or otherwise modify its
relationship with Sellers or to decrease materially or limit its services,
supplies or materials to Sellers or its usage of the services or products of
Sellers, and the acquisition of the Acquired Businesses by Buyer will not, to
either Seller's knowledge, adversely affect the relationship of Buyer with any
such supplier or customer.
6.28 Orders and Commitments. The backlog as at November 30, 1995 for all
----------------------
accepted and unfulfilled orders of the Acquired Businesses and anticipated
delivery dates are set forth in Schedule 6.28 annexed hereto. Except as set
forth on Schedule 6.28, there is no merchandise in the hands of Sellers'
customers under a specific understanding with either Seller that such
merchandise would be returnable.
6.29 Correspondence. Schedule 6.29 accurately set forth a list of all
--------------
correspondence since January 1, 1994 between either Seller and any federal,
state or local Governmental Authority or lobbyist which relates to the Acquired
Businesses (other than invoices and correspondence with regard to Sellers'
fulfillment of their respective obligations under existing contracts with any
federal, state or local governmental Authority).
7. Representations and Warranties of Buyer and Orbit. Buyer and Orbit,
-------------------------------------------------
jointly and severally, represent and warrant to, and covenant and agree with,
Sellers as follows:
7.1 Organization and Authority. Each of Buyer and Orbit is a corporation
--------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the full corporate power and lawful authority to
execute and deliver this Agreement, to consummate the transactions contemplated
hereby and to perform its obligations under this Agreement.
7.2 Authorization of Agreement. The execution, delivery and performance
--------------------------
of this Agreement by each of Buyer and Orbit and the consummation by Buyer and
Orbit of the transactions contemplated hereby have been duly authorized by all
necessary corporate action by or on behalf of Buyer and Orbit, and no other
board of directors, stockholder or other corporate proceedings by or on behalf
20
<PAGE>
of Buyer or Orbit is necessary to authorize the execution, delivery or
performance of this Agreement or the performance of the transactions
contemplated hereby. This Agreement constitutes, and each document and
instrument contemplated by this Agreement to be executed by Buyer and Orbit,
when executed and delivered in accordance with the provisions hereof shall be,
the valid and legally binding obligations of each of Buyer and Orbit,
enforceable against each of Buyer and Orbit in accordance with its terms,
subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium or similar laws affecting creditors' rights generally; and
(ii) general principles of equity (regardless of whether such enforceability is
considered in a proceeding at law or in equity).
7.3 Brokers. Neither Buyer nor Orbit has, directly or indirectly,
-------
employed or utilized the services of any investment banker, broker, finder,
consultant or other intermediary, in connection with this Agreement or the
transactions contemplated hereby.
7.4 Freedom to Contract. The execution, delivery and performance of this
-------------------
Agreement by each of Buyer and Orbit and the consummation by each of Buyer and
Orbit of the transactions contemplated hereby will not (i) violate or conflict
with any provisions of the certificate of incorporation or by-laws, each as
amended, of each of Buyer and Orbit, (ii) violate any of the terms, conditions
or provisions of any law, rule, statute, regulation, order, writ, injunction,
judgment or decree of any court, governmental authority or regulatory agency, or
(iii) conflict with or result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, indenture, debenture, security
agreement, trust agreement, Lien, mortgage, lease, agreement, license,
franchise, permit, guaranty, joint venture agreement or other agreement,
instrument or obligation, oral or written, to which either Buyer or Orbit is a
party (whether as an original party or as an assignee or successor) or by which
it or any of its properties is bound. No authorization, approval, order,
license, permit, franchise or consent, and no registration, declaration or
filing with any court or Governmental Authority is required in connection with
either Buyer's or Orbit's execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby.
8. Further Agreements of the Parties.
---------------------------------
8.1 Conduct of Business Pending Closing. From the date hereof until the
-----------------------------------
Closing Date or earlier termination of this Agreement, each Seller will:
(a) maintain its existence in good standing:
(b) maintain the general character of the business of the Acquired
Businesses and conduct such business in the ordinary and usual manner;
(c) maintain proper business and accounting records;
(d) maintain the properties used in the business of the Acquired
Businesses in good repair and condition, subject to normal wear and use; and
21
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(e) use its reasonable commercial efforts to preserve the business of
the Acquired Businesses intact, to keep available to Sellers the services of
their respective present officers and employees and to preserve the goodwill of
their respective suppliers, customers and others having business relations with
the Acquired Businesses.
8.2 Prohibited Actions Pending Closing.
----------------------------------
(a) Unless otherwise provided for herein or approved by Buyer in
writing, from the date hereof until the Closing Date or earlier termination of
this Agreement, neither Seller will:
(i) amend or otherwise change its certificate of incorporation,
By-Laws or other governing documents;
(ii) mortgage, pledge or subject to Lien any of its material
properties owned or used in connection with the business of the Acquired
Businesses, or agree to do so;
(iii) enter into or agree to enter into any agreement,
contract or commitment (other than purchase and sale orders and other
agreements, contracts and commitments incurred in the ordinary course of
business which are consistent with historical business and pricing practices and
which have a value of less than $10,000) with respect to the business of the
Acquired Businesses;
(iv) increase, or agree to increase, the compensation of any of
its officers, directors or employees primarily engaged in the business of the
Acquired Businesses by means of salary increase, bonus or otherwise (other than
annual cost of living increases consistent with past practice);
(v) sell or otherwise dispose of, or agree to sell or dispose
of, any of its material assets or properties with respect to the business of the
Acquired Businesses (other than purchase and sale orders incurred in the
ordinary course of business); or
(vi) amend or terminate any Contract to which either Seller is a
party (other than in the ordinary course of business) or take action or fail to
take any action, constituting any event of default thereunder.
(b) From the date hereof through the Closing Date or earlier
termination of this Agreement, neither Seller nor Buyer shall permit any of
their respective officers, directors or employees to make any public statement
or issue any press release with respect to (i) Sellers or their operations with
respect to the business of the Acquired Businesses without the prior written
approval of each party hereto, or (ii) the transactions contemplated hereby,
unless such statement or release shall be jointly issued by Sellers and Buyer or
such statements are required by law, rule or regulation (provided that the other
party shall, to the extent practicable, be given an opportunity to review and
consent to such statement or release).
8.3 Insurance. From the date hereof through the Closing Date or earlier
---------
termination of this Agreement, Sellers shall maintain in force (including
22
<PAGE>
necessary renewals thereof) the insurance policies listed on any Schedule hereto
relating to the Acquired Businesses, except to the extent that they may be
replaced with equivalent policies appropriate to insure the assets, properties
and business of Seller to the same extent as currently insured at the same or
lower rates or at rates approved by Buyer.
8.4 Continued Effectiveness of Representations and Warranties of Sellers.
--------------------------------------------------------------------
From the date hereof through the Closing Date or earlier termination of this
Agreement, each Seller shall conduct its business in such a manner so that the
representations and warranties contained in Section 6 shall continue to be true
and correct on and as of the Closing Date as if made on and as of the Closing
Date, and Buyer shall promptly be given notice of any event, condition or
circumstance occurring from the date hereof through the Closing Date that would
constitute a violation or breach of this Agreement.
8.5 Authorization. Sellers will use their respective best efforts to
-------------
obtain, and shall deliver to Buyer at Closing evidence satisfactory to Buyer as
to, the authorization of its shareholders (with respect to Astrosystems) and
Board of Directors with respect to the execution, delivery and performance of
this Agreement by Sellers, including, without limitation, the transfer to Buyer
of the Assets upon the terms and conditions set forth in this Agreement. In
connection therewith, Astrosystems shall, as soon as practicable following the
execution of this Agreement, prepare and file with the SEC any necessary amended
proxy materials in connection with a special or annual meeting of the
shareholders of Astrosystems to be called to approve, among other matters, this
Agreement and the transactions contemplated hereby. Buyer acknowledges receipt
of the preliminary proxy materials of Astrosystems filed with the SEC on January
3, 1996. Astrosystems shall provide Buyer with a draft of any such further
preliminary versions of such amended proxy materials as promptly as possible,
but in no event later than the date of their submission to the SEC and, with
respect to the drafts of any final amended versions thereof, not later than the
Business Day prior to their submission to the SEC. Such proxy materials shall
comply as to form in all material respects with the Securities and Exchange Act
of 1934, as amended, and subject to the fiduciary duties of the Board of
Directors of Astrosystems, include a statement that (i) the Board of Directors
of Astrosystems recommends to its shareholders approval of the transaction
provided for by the terms of this Agreement, and (ii) to Astrosystems'
knowledge, shares owned beneficially and of record by the directors and
executive officers of Astrosystems will be voted for the proposal relating to
the approval of this Agreement and the transactions contemplated hereby.
Astrosystems shall diligently pursue clearance of such preliminary proxy
materials by the SEC and, as soon as practicable after such clearance is
obtained, hold such shareholders' meeting.
8.6 Corporate Examinations and Investigations. Prior to the Closing Date
-----------------------------------------
or earlier termination of this Agreement, Buyer shall be entitled, through its
employees and representatives, including, without limitation, Squadron,
Ellenoff, Plesent & Sheinfeld, LLP and Richard A. Eisner & Co. to make such
investigation of the Assets, properties, business and operations of Astrosystems
and Behlman, and such examination of the books, records and financial condition
of Sellers relating to the Acquired Businesses as Buyer reasonably requests.
Any such investigation and examination shall be conducted at reasonable times
23
<PAGE>
and under reasonable circumstances, and Sellers shall cooperate fully therein.
Buyer shall reimburse Sellers for any reasonable professional (legal and
accounting) fees incurred by Sellers in connection with such investigation;
provided, however, that Buyer shall not be responsible for fees and expenses of
Sellers' internal legal and accounting staff. No investigation by Buyer shall
diminish or obviate any of the representations, warranties, covenants or
agreements of Sellers under this Agreement. In order that Buyer may have full
opportunity to make such business, accounting and legal review, examination or
investigation as it may wish of the business and affairs of Sellers, Sellers
shall furnish to the representatives of Buyer during such period all such
information and copies of such documents concerning the affairs of the Acquired
Businesses as such representatives may reasonably request and cause its
officers, employees, consultants, agents, accountants and attorneys to cooperate
fully with such representatives in connection with such review and examination
and to make full disclosure to Buyer of all material facts affecting the
financial condition and business operations of the Acquired Businesses.
8.7 Consent to Jurisdiction and Service of Process. Subject to the
----------------------------------------------
provisions of Section 12.10 hereof, any legal action, suit or proceeding arising
out of or relating to this Agreement or the transactions contemplated hereby may
be instituted in any state or federal court located in New York County, State of
New York, and each party agrees not to assert, by way of motion, as a defense,
or otherwise, in any such action, suit or proceeding, any claim that it is not
subject personally to the jurisdiction of such courts, that its property is
exempt or immune from attachment or execution, that the action, suit or
proceeding is brought in an inconvenient forum, that the venue of the action,
suit or proceeding is improper or that this Agreement or the subject matter
hereof may not be enforced in or by such court, and hereby waives any offsets or
counterclaims in any such action, suit or proceeding. Each party further
irrevocably submits to the jurisdiction of any such court in any such action,
suit or proceeding. Any and all service of process and any other notice in any
such action, suit or proceeding shall be effective against any party if given
personally or by registered or certified mail, return receipt requested, or by
any other means of mail that requires a signed receipt, postage prepaid, mailed
to such party as herein provided, or by personal service on such party with a
copy of such process mailed to such party by first class mail or registered or
certified mail, return receipt requested, postage prepaid. Nothing herein
contained shall be deemed to affect the right of any party to serve process in
any manner permitted by law or to commence legal proceedings or otherwise
proceed against any other party in any jurisdiction other than New York in
connection with actions initiated by third parties in such other jurisdictions.
8.8 Expenses. The parties to this Agreement shall bear their respective
--------
expenses incurred in connection with the preparation, execution and performance
of this Agreement and the transactions contemplated hereby, including, without
limitation, all fees and expenses of agents, representatives, counsel and
accountants. Sellers shall bear all fees and expenses of OEM Capital.
8.9 Indemnification for Fees of Brokers and Finders. Buyer, on the one
-----------------------------------------------
hand, and Sellers, on the other, agree to indemnify and save the other harmless
from any claim or demand for commission or other compensation by any broker,
finder, agent or similar intermediary claiming to have been employed by or on
24
<PAGE>
behalf of Buyer, on the one hand, or Sellers, on the other, and to bear the cost
of legal expenses incurred in defending against any such claim.
8.10 Consents; Terminated Agreements.
-------------------------------
(a) Sellers and Buyer shall use their respective best efforts to
obtain at the earliest practicable date, by instruments in form and substance
reasonably satisfactory to Buyer, all consents and approvals referred to in
Schedule 6.3 hereto (Buyer hereby acknowledging that the Shareholder Approval
process is provided for in Section 8.5 hereof). If any consent is not obtained,
Sellers shall, to the extent reasonably possible, keep the agreement in effect
and shall give Buyer the benefit of the agreement to the same extent as if
Sellers had not been excluded from assigning such agreement to Buyer, and Buyer
shall perform the obligations and assume the Liabilities under the agreement
relating to the benefit obtained by Buyer. Nothing in this Agreement shall be
construed as an attempt to assign any agreement or other instrument that is by
its terms not assignable without the consent of the other party.
(b) Buyer hereby acknowledges and agrees that all sales
representative agreements and commission agreements between either Seller, on
the one hand, and third parties, on the other hand, as such relate to the
Acquired Businesses, have been, or will be, terminated by Sellers prior to or
following the Closing.
8.11 Employment Matters.
------------------
(a) Between the date of this Agreement and the Closing Date, Buyer
shall offer employment, at base salaries comparable to their present base
salaries, to all persons listed on Schedule 6.10(e) who are Employees on the
Closing Date none of whom are employees governed by a collective bargaining
agreement, except any such Employees who are on lay-off, leave of absence (other
than maternity or family leave, sick leave or short-term disability) or long-
term disability ("Eligible Employees"). Such employment would commence on the
Closing Date, except with respect to any such Employees on maternity or family
leave, sick leave or short-term disability, in which case the employment with
Buyer would commence on the date such person returns to work. Those employees
of Sellers accepting an offer and commencing employment with Buyer are herein
referred to as "Transferred Employees."
(b) Sellers shall assume, retain responsibility for and continue to
pay, in accordance with the terms of the applicable employer plans, any
hospital, medical or other health care, life insurance, short and long term
disability, travel accident or other plan benefits and expenses for each
employee or former employee of Sellers (including each Transferred Employee)
with respect to claims incurred by such employee or his or her covered
dependents prior to the Closing Date or other costs in respect of any such plan
coverage for periods prior to the Closing Date (including, without limitation,
any residual deficits due Blue Cross, Blue Shield or otherwise), and, with
respect to such employees who are not Transferred Employees (and their covered
dependents), claims incurred whether before, on or after the Closing Date to the
extent provided under the terms of the applicable plans or by law. Buyer shall
be responsible for and pay, in accordance with the terms of any applicable
25
<PAGE>
employer plan (to the extent, if any, Buyer maintains any such plans after the
Closing Date) any hospital, medical or other health care, life insurance, short
and long term disability, travel accident or other plan benefits and expenses
for each Transferred Employee with respect to claims incurred by such
Transferred Employee or his or her covered dependents on or after the Closing
Date. For purposes of this Section 8.11(b), any hospital, medical or other
health care or dental claim will be deemed incurred when the services giving
rise to the claim are first performed and any other claim will be deemed
incurred when the event that is the basis of the claim first occurred. With
respect to any employee of Sellers or his or her covered dependent who is on
short or long term disability or hospitalized on the Closing Date, Sellers shall
assume, retain responsibility for and pay, in accordance with the terms of the
applicable plan, all salary continuation benefits and expenses of such person
until the end of any such disability and all benefits and expenses incurred by
such employee or covered dependent in connection with such hospitalization, as
the case may be. Notwithstanding the foregoing provisions of this Section
8.11(b), Sellers shall cooperate upon Buyer's request to provide for Buyer to
assume any employer welfare benefit plan (and any underlying insurance policy
used to fund such plan) applicable to Transferred Employees as in Buyer's sole
discretion it deems appropriate.
(c) Sellers shall be liable for any amounts to which any employee of
Sellers becomes entitled under any severance policy, plan, agreement,
arrangement or program (whether or not covered by ERISA) maintained by Sellers
which exists or arises or may be deemed to exist or arise under the terms
thereof or any applicable law in respect of the period prior to and on the
Closing Date. Buyer shall be solely responsible for the payment of any
severance amounts due to Transferred Employees.
(d) Sellers shall assume, retain responsibility for and shall make
payments of any vacation or sick pay or compensatory pay in respect of Employees
for the period up to and including the Closing Date, whether or not such
Employees are Transferred Employees. Specifically, all payments for any accrued
vacation time for the Transferred Employees prior to the Closing Date shall be
satisfied by Sellers prior to the Closing.
(e) Nothing in this Agreement shall be construed as creating an
express or implied contract of employment or a guarantee of employment with
Buyer or any of its affiliates for any period of time after the Closing Date,
nor shall anything in this Agreement confer upon any Transferred Employee any
right to continue in the employ of Buyer or any of its affiliates after the
Closing Date or interfere with, or restrict in any way, the rights of Buyer,
which are hereby expressly reserved, to terminate the employment of any employee
at any time for any reason whatsoever.
(f) Sellers shall be responsible for all obligations and liabilities
under the Workers Adjustment and Retirement Notification Act of 1988, as
amended, and each similar state law ("WARN"), with respect to Employees by
reason of their severance or other termination of employment prior to the
Closing Date and Buyer shall be responsible for all such obligations and
liabilities under WARN with respect to Employees by reason of their severance or
other termination of employment on or after the Closing Date.
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(g) Buyer shall establish medical and dental plans which will, or
cause its existing medical and dental plans to, (i) immediately, and without any
waiting period, be available to cover each Transferred Employee (and dependents
and beneficiaries thereof) as of the Closing Date, and (ii) waive any limitation
on coverage due to pre-existing conditions for Transferred Employees (and
dependents and beneficiaries thereof) who previously participated in Sellers'
medical plan or any HMO offered by Sellers.
(h) Sellers shall remain obligated to offer COBRA continuation
coverage to its covered employees (other than the Transferred Employees), former
employees and their qualified beneficiaries to the extent required by applicable
law, and Sellers agree to jointly and severally indemnify and hold Buyer
harmless from any claims for COBRA continuation coverage made by or on behalf of
such employees and their qualified beneficiaries who are (i) receiving COBRA
continuation coverage at the Closing, or (ii) with respect to whom a qualifying
event occurred prior to the Closing and for which the applicable election period
for COBRA continuation coverage has not expired as of the Closing Date or (iii)
with respect to whom a qualifying event occurs as a result of the Closing of the
transaction contemplated by this Agreement; in each case, other than claims for
COBRA continuation coverage under Buyer's group health plans arising in
connection with any termination of a Transferred Employee's employment with
Buyer or its Affiliates after the Closing Date.
8.12 Further Assurances. The parties shall cooperate and use reasonable
------------------
efforts to cause all conditions to the Closing hereunder to be satisfied as
promptly as practicable. From and after the Closing, Sellers, on the one hand,
and Buyer, on the other hand, agree to execute and deliver such further
documents and instruments and to do such other acts and things as Buyer or
Sellers, as the case may be, may reasonably request in order to effectuate the
transactions contemplated by this Agreement. In the event any party shall be
involved in litigation, threatened litigation or government inquiries with
respect to a matter involving either Seller, the other parties shall also make
available to such first party, at reasonable times and subject to the reasonable
requirements of its or his own business, such of its or his personal information
relevant to the matters, provided such first party shall reimburse the providing
party for its or his reasonable costs for employee time incurred in connection
therewith if more than one business day is required. Following the Closing, the
parties will cooperate with each other in connection with tax audits and in the
defense of any legal proceedings, consistent with the other provisions for
defense of claims provided in Article 10 to the extent such cooperation does not
cause unreasonable expense, unless such expense is borne by the requesting
party.
8.13 Notices of Certain Events.
-------------------------
(a) Sellers and Buyer shall promptly notify the other of:
(i) any notice or other communication of which any party has
knowledge from any person alleging that the consent of such person is or may be
required in connection with this Agreement and the transactions contemplated
hereby;
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(ii) any notice or other communication of which any party has
knowledge from any governmental or regulatory agency or authority in connection
with this Agreement and the transactions contemplated hereby;
(iii) any actions, suits, charges, complaints, claims,
investigations or proceedings commenced or, to any party's knowledge, threatened
against, relating to, involving or otherwise affecting, the Assets or the
business of the Acquired Businesses which, if pending on the date of this
Agreement, would have been required to be disclosed pursuant to Section 6.13
hereof or which relate to the consummation of the transactions contemplated
hereby;
(iv) any material adverse change in the Assets or the Acquired
Businesses or of any event that would materially impair either Seller's ability
to perform its obligations under this Agreement; and
(v) any notice of termination, voiding or reduction of any
insurance policy, as described in Section 8.3 hereof, or any written notice
regarding any material insurance claim.
(b) Sellers shall promptly notify Buyer of any adverse change in
order backlog or sales prospects of either Seller.
8.14 Noncompetition; Nondisclosure.
-----------------------------
(a) Noncompetition. Each of the Sellers and Seymour Barth, Elliot
--------------
Bergman and Gilbert Steinberg (collectively, the "Principal Stockholders") will
not, for a period of three years following the Closing (the "Noncompetition
Period"), (i) engage or participate in, directly or indirectly (whether as a
lender, investor, shareholder, consultant or partner, or in any other manner or
capacity), or lend its name (or any part or variant thereof) to, any business
which is, or as a result of Sellers' or Principal Stockholders' engagement or
participation would become, competitive with the business of the Acquired
Businesses as currently conducted by Sellers, including, in any event, any
business involving the manufacture or sale of power supplies, AC power sources,
frequency converters, UPS and associated analytical equipment or other
electronic equipment which are the same as or similar to those manufactured by
the Acquired Businesses; provided, however, that Astrosystems may continue to
engage in any business (other than the business of the Acquired Businesses)
conducted by Astrosystems prior to the date hereof; (ii) solicit, interfere
with or endeavor to entice away from Buyer or otherwise deal, directly or
indirectly, in a competitive manner with any customers doing business with Buyer
as the successor to the business of the Acquired Businesses; (iii) employ, hire,
solicit, be associated with or otherwise interfere with or endeavor to entice
away any officer, director, employee, or agent of Buyer; (iv) engage in or
participate in, directly or indirectly, any business conducted under any name
that shall be the same as or similar to any trade name used by Buyer (including
the name "Behlman"); or (v) materially interfere with the operation by Buyer of
the Acquired Businesses or engage in any act that would be injurious to Buyer's
business reputation or detract from the goodwill acquired pursuant hereto.
Notwithstanding the foregoing, it is expressly understood and agreed that
ownership for investment of less than 5% of the outstanding shares of capital
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stock of a corporation listed on a national securities exchange or actively
traded in the over-the-counter market that would otherwise be prohibited by
clause (i) above shall not be deemed to constitute a breach of such provision,
provided that Seller shall not be in a control position with regard to any
corporation described in clause (i) above. Sellers and Principal Stockholders
are entering into the foregoing covenant to assure Buyer of the transfer of the
goodwill of the business of the Acquired Businesses and in order to induce Buyer
to consummate the transactions contemplated by this Agreement.
(b) Nondisclosure. Neither Sellers nor any of their respective
-------------
officers or directors shall, at any time after the date of this Agreement,
divulge, furnish or make accessible to anyone the following information
("Proprietary Information"): any confidential knowledge or information with
respect to confidential plans, ideas or know-how of the Acquired Businesses or
any other confidential or secret aspects of the business of the Acquired
Businesses (including, without limitation, customer lists, lists of suppliers,
or any pricing or commission arrangements); provided, however, that the
foregoing provision shall not apply to any information which is or becomes
generally available to the public through no breach of this Agreement or which,
in the opinion of counsel, is required by law, rule or regulation to be
disclosed. If at any time Sellers or any of their respective officers,
directors or employees is requested or required (by oral questions,
interrogatories, requests for information or documents, subpoenas or similar
legal process) to disclose any Proprietary Information, Sellers shall promptly
notify Buyer and shall refrain from making such disclosure so that Buyer may, at
its own expense, seek an appropriate protective order in a prompt manner and/or
waive compliance with the provisions hereof. If, in the absence of a protective
order or the receipt of a waiver hereunder, in the reasonable written opinion of
counsel to Sellers, disclosure of Proprietary Information to any tribunal or any
governmental agency is required to avoid liability for contempt or any other
penalty, then Sellers or their respective officers, directors or employees, as
applicable, may disclose such Proprietary Information to such tribunal or agency
without liability hereunder; provided, however, that Buyer shall promptly be
notified of such decision. Sellers are aware that material and irreparable
injury would be done to Buyer if either such party would divulge Proprietary
Information to competitors of Buyer. Sellers recognize and acknowledge that the
Proprietary Information constitutes a valuable, special and unique asset of the
business of the Acquired Businesses.
(c) If either Seller breaches, or threatens to commit a breach of,
any of the provisions of Sections 8.14(a) or 8.14(b) (the "Restrictive
Covenants"), Buyer shall have the following rights and remedies, each of which
rights and remedies shall be independent of the others and severally
enforceable, and each of which is in addition to, and not in lieu of, any other
rights and remedies available to Buyer under law or in equity:
(i) The right and remedy to have the Restrictive Covenants
specifically enforced by any court of competent jurisdiction, it being agreed
that any breach or threatened breach of the Restrictive Covenants would cause
irreparable injury to Buyer and that money damages would not provide an adequate
remedy to Buyer.
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<PAGE>
(ii) The right and remedy to require Sellers to account for and
pay over to Buyer all compensation, profits, monies, accruals, increments or
other benefits derived or received by Sellers as the result of any transactions
constituting a breach of the Restrictive Covenants.
(d) Sellers acknowledge and agree that the Restrictive Covenants are
reasonable and valid in geographical and temporal scope and in all other
respects. If any court determines that any of the Restrictive Covenants, or any
part thereof, is invalid or unenforceable, the remainder of the Restrictive
Covenants shall not thereby be affected and shall be given full effect, without
regard to the invalid portions.
8.15 Access to Records. After the Closing Date, Buyer, on the one hand,
-----------------
and Sellers, on the other hand, shall give, or cause to be given, to the other
party, during normal business hours at their premises, reasonable access to the
personnel, properties, contracts, books, records, files and documents of or
relating to Sellers (with respect to the Acquired Businesses), on the one hand,
and the Acquired Businesses, on the other hand, and shall allow the other party
(at the expense of the other party) to make copies of all titles, contracts,
books, records, files and documents, as is reasonably necessary for the other
party's legitimate business purposes. No party will destroy any such contracts,
books, records, files or documents without first notifying the other parties in
writing and providing them with the opportunity to take possession thereof.
8.16 Use of "Astrosystems" Name. Astrosystems hereby grants to Buyer the
--------------------------
personal, nontransferable, non-exclusive right to use the name "Astrosystems" in
connection with Buyer's operation of the Acquired Businesses for a period of one
year following the Closing Date.
8.17 Bulk Sales Law. The transactions contemplated hereby shall be
--------------
consummated without compliance with Bulk Sales Laws. If by reason of any
applicable Bulk Sales Law, any claims are asserted by creditors of Sellers, such
claims shall be the responsibility of Buyer in the case of claims arising under
any of the Assumed Liabilities, or the responsibility of Sellers in the case of
claims arising under any other liabilities other than the Assumed Liabilities.
8.18 SEC Filings. Prior to the Closing Date or earlier termination of this
-----------
Agreement, Astrosystems shall, to the extent practicable, deliver to Buyer, not
later than the Business Day prior to the filing thereof, any document proposed
to be filed with the SEC.
8.19 Accounts Receivable. Following the Closing, Buyer shall collect, on
-------------------
Sellers' behalf, all accounts receivable of Sellers. Buyer shall remit to
Sellers all such amounts it collects on Sellers' behalf within 10 days following
receipt thereof. The foregoing shall not be construed to limit Sellers' right
to collect any and all accounts receivable that are overdue; provided, however,
that with regard to any accounts receivable which are disputed, for a period of
one year following the date of the invoice related to the disputed receivable,
Sellers shall not turn over such receivable to a collection agency without the
consent of Buyer. Buyer shall have the option, exercisable up to the first
anniversary of the date of the invoice relating to a receivable, to purchase, on
a dollar-for-dollar basis, Sellers' then outstanding accounts receivable which
30
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relate to the Acquired Businesses. Sellers and Buyer hereby agree that with
regard to invoices relating to the accounts receivable which may be billed by
Sellers between the date hereof and the Closing Date, such accounts receivable
shall be for the account of Buyer if the inventory relating to such receivable
is not shipped prior to the Closing Date. Sellers represent that, as of the
date hereof, there are no outstanding accounts receivable for which inventory
has not been shipped. In such event, if any such receivables are collected
prior to the Closing Date, the Purchase Price shall be reduced dollar-for-dollar
by an amount equal to such collected receivables. If such accounts receivable
are collected following the Closing Date, Sellers shall promptly remit any such
amounts to Buyer.
8.20 Exclusivity. Prior to the earlier of termination of this Agreement or
-----------
February 15, 1996, neither Seller shall, directly or indirectly, through any
officer, director, employee, agent or otherwise (including through any
investment banker, attorney or accountant retained by any of the foregoing),
solicit, initiate any discussions or negotiations regarding, or furnish to any
other person or entity any information with respect to, or otherwise cooperate
in any way with, any proposal or offer from any such person or entity (including
any agents or representatives thereof) relating to any acquisition of all or a
portion of the Acquired Businesses (including any acquisition structured as a
stock purchase, merger, consolidation or share exchange).
8.21 Sales Taxes. Any sales taxes resulting from the transactions
-----------
contemplated hereby shall be borne by Buyer.
8.22 Shared Space Arrangement. Following the Closing Date and through
------------------------
February 29, 1996 (the "Period"), Astrosystems agrees that it shall permit Buyer
to use the premises located at 6 Nevada Drive, Lake Success, New York (the
"Premises") on the following terms and conditions:
(a) During the Period, Astrosystems agrees to:
(i) maintain telephone, heat, light and janitorial services;
(ii) provide work space to all Transferred Employees in a manner
consistent with that currently provided to them; and
(iii) use its best efforts to retain the Astrosystems support
staff employees listed on Schedule 8.22 attached hereto (the "Support
Employees") (such best efforts obligation not to include the granting of any
additional remuneration or other benefits).
The Support Employees shall perform such services for the benefit
of Buyer as are related to the department in which they are a member, as set
forth on Schedule 8.22. Schedule 8.22 also reflects the weekly salary for each
Support Employee as well as the anticipated percentage of time that each Support
Employee shall perform services for the benefit of Buyer. Astrosystems' best
efforts obligation as set forth above shall continue throughout the Period with
regard to each Support Employee until such time as a particular Support Employee
voluntarily leaves Astrosystems' employment or Astrosystems is notified by the
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Buyer that retention of the particular Support Employee is no longer required.
(b) In consideration for the foregoing, if Buyer elects to use the
Premises, Buyer agrees as follows:
(i) Buyer promptly will pay to Astrosystems the sum of $10,000
per week in advance for as long as any Transferred Employee uses the Premises.
A proportionate amount thereof shall be due and payable for any partial week of
use.
(ii) Buyer promptly will reimburse Astrosystems for all direct
pay of Support Employees and will, in addition, pay to Astrosystems a sum equal
to 25% of all direct pay due. The parties acknowledge and agree that the
percentages set forth on Schedule 8.22 are estimates only and, accordingly,
shall not be determinative of the amount due from Buyer to Astrosystems
hereunder. For the purpose of determining the amount due from Buyer hereunder,
Astrosystems shall supply to Buyer on a weekly basis copies of the time cards of
the Support Employees for the preceding week. Any time spent by Support
Employees on matters not relating to either of the Acquired Businesses will be
excluded from the calculation of amounts due.
(iii) Buyer will be liable for and will pay all wages, payroll
benefits, payroll taxes and other employment costs and obligations attributable
to the employment of Transferred Employees.
(iv) Buyer will vacate the Premises promptly upon expiration of
the Period.
8.23 Maintenance of Existence. For a period of two years following the
------------------------
Closing Date, Astrosystems shall maintain its corporate existence in good
standing. During such period, Astrosystems shall also maintain a net worth
(computed on a non-liquidation basis) equal to no less than the Adjusted
Purchase Price (it being acknowledged and agreed that, in calculating net worth,
the Escrowed Amount, together with interest thereon, shall be a part thereof).
8.24 Progress Payments. Set forth on Schedule 8.24 attached hereto are all
-----------------
progress payments heretofore received by either Seller with respect to any
Contract assumed by Buyer pursuant to Section 3.1(a) hereof. Sellers and Buyer
hereby agree that the Purchase Price shall be decreased, on a dollar-for-dollar
basis, by the aggregate amount of such progress payments.
8.25 Warranty Obligations. For a period of one year following the Closing
--------------------
Date, with respect to the fulfillment by Buyer of the warranty obligations being
assumed by Buyer pursuant to Section 3.1(d) hereof, Sellers shall reimburse
Buyer, within 10 business days following receipt of a written invoice from
Buyer, for any materials at cost and for labor at the rate of $40 per hour,
which are incurred by Buyer in connection with such warranty obligations. Buyer
shall perform all warranty obligations in accordance with generally accepted
commercial warranty practice.
8.26 Orbit Guaranty. Subject to Orbit's right to assert any defenses,
--------------
counterclaims or setoffs which Buyer may have against Sellers, Orbit hereby
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unconditionally, absolutely and irrevocably guarantees to Sellers (the "Orbit
Guaranty"), and their successors and assigns, the full and prompt payment,
performance, satisfaction and discharge of each agreement, indebtedness,
liability and obligation of Buyer (collectively, the "Buyer's Obligations")
under this Agreement and the Escrow Agreement, including, without limitation,
the following: (a) the payment of the Adjusted Purchase Price; (b) the
payment, performance, satisfaction and discharge of Assumed Liabilities and any
liabilities and obligations arising out of the Assumed Contracts; (c) the
payment of any amounts due from Buyer to Astrosystems pursuant to Section 8.22
and Section 11.4 hereof; and (d) the payment of any amounts due from Buyer to
Sellers as indemnification under this Agreement.
Orbit guarantees that Buyer's Obligations will be paid and performed
strictly in accordance with the terms and provisions of this Agreement. Nothing
herein is intended to create any obligation or liability on the part of Orbit if
no such obligation or liability exists on the part of Buyer. Nothing herein
shall be construed to eliminate or adversely affect the availability to Orbit of
any defenses, counterclaims or setoffs which Buyer may have against Sellers.
Sellers, in their sole discretion, may proceed against Orbit in the
first instance to collect or enforce any or all of Buyer's Obligations, without
first proceeding against Buyer or resorting to any other remedies at the same or
at different times, provided that Sellers will consent to the joinder of Buyer,
at Orbit's or Buyer's request, in any action brought to enforce its right under
the Orbit Guaranty. The liability of Orbit hereunder shall not be affected by
an acceptance by Sellers of any security for, or other guarantees upon, any of
Buyer's Obligations, or by an act, delay or omission of Sellers in enforcing
Buyer's Obligations or right hereunder. This Orbit Guaranty is a continuing
guaranty which may be enforced before, after or concurrently with proceeding
against Buyer. This Orbit Guaranty is a guaranty of payment and performance and
not of collectability and, except as herein provided, is in no way conditioned
or contingent.
Orbit hereby consents that Sellers, from time to time, before or after
any default by Buyer, with or without any further notice to Orbit, may, without
affecting the liability of Orbit, and upon such terms and conditions as Sellers
may deem advisable: (1) extend in whole or in part (by renewal or otherwise),
modify, accelerate, change or release any of Buyer's Obligations, or waive any
default with respect thereto; or (2) settle or compromise any claim of Sellers
against Buyer. Orbit hereby ratifies any such action, agrees that the same
shall be binding upon Orbit and waives any defenses, counterclaims or offsets
which Orbit may have by reason thereof, except such defenses, counterclaims and
offsets as may be available to Buyer.
8.27 Bridge Financing. Between the date hereof and the Closing Date, the
----------------
parties agree to negotiate in good faith the terms and conditions of a 90-day
bridge loan (the "Bridge Loan") of up to $500,000 from Astrosytems to Buyer,
which Bridge Loan, if successfully negotiated, will be funded at the Closing.
Any such Bridge Loan shall bear interest and shall be fully secured by certain
assets of Orbit and Buyer. The rate of interest and the nature of the
collateral shall be negotiated in good faith by the parties.
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9. Conditions to Closing.
---------------------
9.1 Conditions Precedent to Obligations of Buyer and Orbit. The
------------------------------------------------------
obligations of Buyer and Orbit to consummate the transactions contemplated
hereby are subject to the fulfillment, prior to or at the Closing, of each of
the following conditions (any or all of which may be waived by Buyer or Orbit):
(a) all representations and warranties of Sellers and contained
herein or in any list, certificate, document or statement furnished by Sellers
to Buyer in connection with the negotiation, execution or performance of this
Agreement shall, in each case, be true and correct in all material respects at
and as of the Closing Date with the same effect as though those representations
and warranties had been made at and as of that time;
(b) Sellers shall have performed and complied with, in all material
respects, all obligations and covenants required by this Agreement to be
performed or complied with by any such party prior to or at the Closing;
(c) Buyer shall have been furnished with a certificate from each
Seller (dated the Closing Date and in form and substance reasonably satisfactory
to Buyer) executed by the Chairman of the Board of Directors, the President or a
Vice President of each Seller certifying to the fulfillment of the conditions
specified in Sections 9.1(a) and 9.1(b) hereof;
(d) Buyer shall have been furnished with an opinion of Certilman
Balin Adler & Hyman, LLP, counsel to Sellers, in form and substance reasonably
satisfactory to Buyer;
(e) there shall be no judgment, decree, injunction, rule or order of
any court, governmental department, commission, agency, instrumentality or
arbitrator outstanding which prohibits, restricts or delays consummation of the
transactions contemplated by this Agreement; there shall be no pending lawsuit,
claim or legal action relating to the transactions contemplated hereby which
would materially adversely affect such transactions or Buyer or Orbit;
(f) Buyer shall have received from Sellers copies of all Required
Consents or Sellers shall confirm their agreement to act in accordance with
Section 8.10 hereof;
(g) Buyer shall have received a copy of resolutions adopted by the
Board of Directors and, if required, the shareholders, of each Seller
authorizing the execution, delivery and performance of this Agreement by each
such Seller, and a certificate of the Secretary or an Assistant Secretary of
each Seller, dated the Closing Date, stating that such resolutions were duly
adopted and are in full force and effect at such date and setting forth the
incumbency of each person executing this Agreement or any other document
delivered pursuant to this Agreement on behalf of each Seller;
(h) Sellers shall have executed and delivered to Buyer a Bill of Sale
in form and substance reasonably satisfactory to Buyer (the "Bill of Sale");
(i) each Seller shall have executed and delivered to Buyer an
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Assignment of Intellectual Property in form and substance reasonably
satisfactory to Buyer (the "Assignments of Intellectual Property");
(j) subject to the provisions of Section 8.10 hereof, each Seller
shall have executed and delivered to Buyer an Assignment of Contracts in form
and substance reasonably satisfactory to Buyer (the "Assignments of Contracts");
(k) Sellers shall deliver to Buyer evidence satisfactory to Buyer
that all Liens (other than Permitted Liens) on the Assets have been cancelled,
terminated and extinguished;
(l) this Agreement and the transactions contemplated hereby as well
as the Plan, shall have been approved and adopted by the affirmative vote of
holders of the majority of all outstanding shares of Astrosystems entitled to
vote for the transactions contemplated by this Agreement; and
(m) Sellers shall have executed and delivered to Buyer and Orbit the
Escrow Agreement.
9.2 Conditions Precedent to Obligations of Sellers. The obligations of
----------------------------------------------
Sellers to consummate the transactions contemplated by this Agreement are
subject to the fulfillment, prior to or at the Closing, of each of the following
conditions (any or all of which may be waived by Sellers):
(a) all representations and warranties of Buyer and Orbit to Sellers
shall be true and correct in all material respects at and as of the Closing Date
with the same effect as though those representations and warranties had been
made at and as of that time;
(b) Buyer and Orbit shall have performed, and complied in all
material respects with, all obligations and covenants required by this Agreement
to be performed or complied with by them, respectively, prior to or at the
Closing;
(c) Sellers shall have been furnished with certificates dated the
Closing Date and in form and substance reasonably satisfactory to the Sellers
executed by the Chairman of the Board of Directors, the President or a Vice
President of each of Buyer and Orbit and certifying to the fulfillment of the
conditions specified in Sections 9.2(a) and 9.2(b) hereof;
(d) Sellers shall have been furnished with an opinion of Squadron,
Ellenoff, Plesent & Sheinfeld, LLP, counsel to Buyer and Orbit, in form and
substance reasonably satisfactory to Sellers:
(e) there shall be no judgment, decree, injunction, rule or order of
any court, governmental department, commission, agency, instrumentality or
arbitrator outstanding which prohibits, restricts or delays consummation of the
transactions contemplated by this Agreement; there shall be no pending lawsuit,
claim or legal action relating to the transactions contemplated by this
Agreement which would materially adversely affect such transactions or Sellers;
(f) Sellers shall have received a copy of resolutions adopted by the
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Board of Directors of each of Buyer and Orbit authorizing the execution,
delivery and performance of this Agreement by each of Buyer and Orbit, and a
certificate of the Secretary or an Assistant Secretary of Buyer, dated the
Closing Date, stating that such resolutions were duly adopted and are in full
force and effect at such date, and setting forth the incumbency of each person
executing this Agreement, or any other documents delivered pursuant to this
Agreement on behalf of each of Buyer and Orbit;
(g) Buyer shall have executed and delivered to Sellers an Assumption
Agreement in form and substance reasonably acceptable to Sellers (the
"Assumption Agreement");
(h) this Agreement and the transactions contemplated hereby, as well
as the Plan, shall have been approved and adopted by the affirmative vote of
holders of a majority of all outstanding shares of Astrosystems entitled to vote
for the transactions contemplated hereby;
(i) the Required Consents shall have been obtained; and
(j) Buyer and Orbit shall have executed and delivered to Sellers the
Escrow Agreement.
10. Indemnification.
---------------
10.1 Indemnification by Sellers. Sellers shall jointly and severally
---------------------------
indemnify Buyer and hold it harmless at all times from and after the Closing
Date against and in respect of any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs, damages, losses, liabilities, taxes and
deficiencies and penalties and interest thereon and costs and expenses,
including reasonable attorneys' fees (collectively, "Losses") resulting from (a)
any misrepresentation, breach of warranty, or nonfulfillment of any covenant or
agreement of either Seller in this Agreement, or (b) the Excluded Liabilities.
10.2 Indemnification by Buyer.
------------------------
(a) Buyer shall indemnify Sellers and hold each of them harmless at
all times from and after the Closing Date against and in respect of any and all
Losses resulting from (i) any misrepresentation, breach of warranty or
nonfulfillment of any covenant (including the provisions of Section 8.22 hereof)
or agreement of Buyer in this Agreement, (ii) the Assumed Liabilities; or (iii)
any Losses resulting from Buyer's actual use of the Premises during the Period
and which were not caused by either Seller.
(b) Orbit shall indemnify Sellers and hold each of them harmless at
all times from and after the Closing Date against and in respect of any and all
Losses resulting from any misrepresentation or breach of warranty in this
Agreement.
10.3 Period of Indemnity. All representations and warranties of the
-------------------
parties contained in this Agreement or in any document delivered pursuant to
this Agreement, shall survive the execution and delivery of this Agreement and
shall continue in full force and effect for two years after the Closing Date and
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thereafter shall terminate; provided, however, that if at the expiration of the
appropriate period any claim for indemnification has been asserted but not fully
determined, such period will be extended as to such claim until it is finally
determined. All covenants or agreements which by their terms are to be
performed after the Closing Date shall survive until fully discharged.
10.4 Limitations. No indemnity shall be payable to the Buyer with respect
-----------
to any claim under Section 10.1(a), or to the Sellers with respect to any claim
under Sections 10.2(a)(i) or 10.2(b), based upon, arising out of or otherwise in
respect of any inaccuracies in or any breach of any representation or warranty
(i) with respect to any Loss of less than $2,500, and (ii) unless and until the
aggregate of all Losses due from Buyer and Orbit or Sellers, as the case may be,
exceed $50,000, at which point all Losses so due shall be paid in full by
Sellers or Buyer and Orbit, as the case may be. In addition, the total
indemnification to which Buyer shall be entitled under this Agreement shall be
limited to an amount, in the aggregate, not to exceed the Adjusted Purchase
Price.
10.5 Notice to the Indemnitor. Promptly after the assertion of any claim
------------------------
by a third party or occurrence of any event which may give rise to a claim for
indemnification from an indemnitor (the "Indemnitor") under this Section, an
indemnified party (the "Indemnified Party") shall notify the Indemnitor in
writing of such claim (the "Claims Notice"). The Claims Notice shall describe
the asserted liability in reasonable detail, and shall indicate the amount
(estimated, if necessary and to the extent feasible) of the Loss that has been
or may be suffered by the Indemnified Party. Failure by the Indemnified Party
to give a Claims Notice to the Indemnitor in accordance with the provisions of
this Section 10.5 shall not relieve the Indemnitor of its obligations hereunder
except to the extent that the Indemnitor has been actually prejudiced by such
failure.
10.6 Rights of Parties to Settle or Defend. The Indemnitor may elect to
-------------------------------------
compromise or defend, at its own expense, by its own counsel and to the extent
an election with respect to such compromise or defense is available to the
Indemnified Party, any asserted liability. If the Indemnitor elects to
compromise or defend such asserted liability, it shall within 30 calendar days
(or sooner, if the nature of the asserted liability so requires) notify the
Indemnified Party of its intent to do so, and the Indemnified Party shall
cooperate, at the expense of the Indemnitor, in the compromise of, or defense
against, such asserted liability. If the Indemnitor elects to defend any claim,
the Indemnified Party shall make available to the Indemnitor any books, records
or other documents within its control that are necessary or appropriate for such
defense. If the Indemnitor elects not to compromise or defend the asserted
liability, fails to notify the Indemnified Party of its election as herein
provided or contests its obligation to indemnify under this Agreement, the
Indemnified Party may pay, compromise or defend (at the expense of the
Indemnitor) such asserted liability as the Indemnified Party considers
appropriate. The parties agree to cooperate fully with one another in the
defense, settlement or comprise of any asserted liability. Notwithstanding the
foregoing, neither the Indemnitor nor the Indemnified Party may settle or
compromise any claim over the objection of the other; provided that consent to
--------
settlement or compromise shall not be unreasonably withheld. In any event, the
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Indemnified Party and the Indemnitor may participate, at their own expense, in
the defense of such asserted liability.
10.7 Exclusive Remedies. The parties hereto acknowledge that the indemnity
------------------
rights set forth in Article 10 and in Section 8.9 hereof are intended to be
their exclusive monetary remedies in connection with this Agreement and the
transactions contemplated hereby; provided that nothing in this Section 10.7
--------
shall limit in any way the availability of specific performance, injunctive
relief or other equitable remedies to which a party may otherwise be entitled.
11. Termination.
-----------
11.1 Termination. This Agreement may be terminated and the transactions
-----------
contemplated herein may be abandoned (a) by mutual consent of Sellers and Buyer;
or (b) by Sellers or Buyer by notice to the other parties if the Closing shall
not have occurred on or before April 30, 1996, or (c) by Sellers if the
conditions to the obligation of Buyer to consummate the transactions
contemplated hereby, as set forth in Section 9.1, shall have been satisfied or
waived and Buyer shall be unable or unwilling to close on the terms and
conditions provided for in this Agreement on or before February 15, 1996.
11.2 No Liabilities in Event of Termination. In the event of any
--------------------------------------
termination of this Agreement as provided in Section 11.1 above, this Agreement
shall forthwith become wholly void and of no further force and effect, and,
except as provided in Sections 11.3 and 11.4 hereof, there shall be no liability
on the part of any of the parties hereto or their respective affiliates,
officers or directors by reason of the execution hereof; provided that such
termination shall not preclude any party from suing another party for material
breach of any covenant or agreement contained in the last sentence of Section
8.2 hereof or in Section 8.5 hereof or the willful failure to consummate the
transactions contemplated hereby.
11.3 Lack of Shareholder Approval. In the event that the transactions
----------------------------
contemplated hereby are not consummated due to Astrosystems' failure to obtain
Shareholder Approval, Sellers shall reimburse Buyer for all legal, accounting
and other expenses incurred by Buyer in connection with the preparation and
negotiation of this Agreement and the transactions contemplated hereby. Buyer
shall use its reasonable efforts to ensure that any such expenses are
commercially reasonable. The foregoing shall not be deemed a limitation on the
right of Buyer to recover damages for the breach of any provision of this
Agreement.
11.4 Failure of Buyer to Close. In the event that (a) the conditions to
-------------------------
the obligation of Buyer to consummate the transactions contemplated hereby, as
set forth in Section 9.1, shall have been satisfied or waived and (b) the
Closing shall not have occurred on or before April 10, 1996 due to the inability
or unwillingness of Buyer to close on the terms and conditions provided for in
this Agreement, Buyer shall reimburse Sellers for all legal, accounting and
other expenses incurred by Sellers in connection with the preparation and
negotiation of this Agreement and the transactions contemplated hereby. Sellers
shall use its reasonable efforts to ensure that any such expenses are
commercially reasonable. The foregoing shall not be deemed a limitation on the
38
<PAGE>
right of Sellers to recover damages for the breach of any provision of this
Agreement.
12. Miscellaneous.
-------------
12.1 Entire Agreement. This Agreement (together with the Schedules hereto)
----------------
contains, and is intended as, a complete statement of all of the terms of the
arrangements between the parties with respect to the matters provided for, and
supersedes any previous agreements and understandings between the parties with
respect to those matters. Notwithstanding the foregoing, the provisions of that
certain confidentiality agreement, dated July 17, 1995, between Astrosystems and
Orbit shall continue in full force and effect and all information and documents
provided pursuant to this Agreement shall be covered by the terms of such
confidentiality agreement.
12.2 Governing Law. This Agreement shall be governed by, and construed and
-------------
enforced in accordance with the laws of the State of New York, without regard to
its principles of conflicts of law.
12.3 Headings. The section headings of this Agreement are for reference
--------
purposes only and are to be given no effect in the construction or
interpretation of this Agreement.
12.4 Notices. All notices and other communications under this Agreement
-------
shall be in writing and shall be deemed given when delivered personally, mailed
by registered mail, return receipt requested, sent by recognized overnight
delivery service or, to the extent receipt is confirmed, by telecopy, telefax,
or other electronic transmission service to the parties at the following
addresses (or to such other address as a party may have specified by notice
given to the other party pursuant to this provision):
If to Buyer or to Orbit, to such party in care of
Orbit International Corp.
80 Cabot Court
Hauppauge, New York 11788
Attention: Dennis Sunshine
Telecopy No.: (516) 435-8458
Confirmation No.: (516) 435-8300
with a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Michael R. Kleinerman, Esq.
Telecopy No.: (212) 697-6686
Confirmation No.: (212) 661-6500
39
<PAGE>
If to Sellers, to:
Astrosystems, Inc.
6 Nevada Drive
Lake Success, NY 11042
Attention: Gilbert Steinberg
Telecopy no.: (516) 328-1658
Confirmation no.: (516) 328-1600
with a copy to:
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, NY 11554
Attention: Fred S. Skolnik, Esq.
Telecopy no.: (516) 296-7111
Confirmation no.: (516) 296-7000
12.5 Separability. If at any time any of the covenants or the provisions
------------
contained herein shall be deemed invalid or unenforceable by the laws of the
jurisdiction wherein it is to be enforced, by reason of being vague or
unreasonable as to duration, geographic scope, scope of activities restricted or
for any other reason, such covenants or provisions shall be considered divisible
as to such portion and such covenants or provisions shall become and be
immediately amended and reformed to include only such covenants or provisions as
are enforceable by the court or other body having jurisdiction of this
Agreement; and the parties agree that such covenants or provisions, as so
amended and reformed, shall be valid and binding as though the invalid or
unenforceable portion had not been included herein.
12.6 Amendment; Waiver. No provision of this Agreement may be amended or
-----------------
modified except by an instrument or instruments in writing signed by the parties
hereto. Any party may waive compliance by another with any of the provisions of
this Agreement. No waiver of any provision hereof shall be construed as a
waiver of any other provision. Any waiver must be in writing.
12.7 Assignment and Binding Effect. None of the parties hereto may assign
-----------------------------
any of its or his rights or delegate any of its or his duties under this
Agreement without the prior written consent of the others; provided, that Buyer
may assign any of its rights or delegate any of its duties to any entity
controlled by Buyer. Any such delegation shall not relieve Buyer of its
obligations under this Agreement. All of the terms and provisions of this
Agreement shall be binding on, and shall inure to the benefit of, the respective
successors and permitted assigns of the parties.
12.8 No Benefit to Others. The representations, warranties, covenants and
--------------------
agreements contained in this Agreement are for the sole benefit of the parties
hereto and their respective successors and assigns and they shall not be
construed as conferring and are not intended to confer any rights on any other
persons.
40
<PAGE>
12.9 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, and each party thereto
may become a party hereto by executing a counterpart hereof. This Agreement and
any counterpart so executed shall be deemed to be one and the same instrument.
12.10 Arbitration.
-----------
(a) Except with regard to Section 4.2 hereof and any other matters
that are not a proper subject of arbitration, all disputes between the parties
hereto concerning the performance, breach, construction or interpretation of
this Agreement or any portion thereof, or in any manner arising out of this
Agreement or the performance thereof, shall be submitted to binding arbitration,
in accordance with the rules of the American Arbitration Association, which
arbitration shall be carried out in the manner hereinafter set forth.
(b) Within twenty (20) days after written notice by one party to the
other of its demand for arbitration, which demand shall set forth the name and
address of its arbiter, the other party shall select its arbiter and so notify
the demanding party. Within twenty (20) days thereafter, the two arbiters so
selected shall select the third arbiter. The dispute shall be heard by the
arbiters within sixty (60) days after selection of the third arbiter. The
decision of the arbiters shall be rendered within thirty (30) days after the
hearing. The decision of any two (2) arbiters shall be binding upon the
parties. In default of either side naming its arbiter as aforesaid or in
default of the selection of the said third arbiter as aforesaid, the American
Arbitration Association shall designate such arbiter upon the application of
either party. The arbitration proceeding shall take place at a mutually
agreeable location.
(c) A party who files a notice of demand for arbitration must assert
in the demand all claims then known to that party on which arbitration is
permitted to be demanded. When a party fails to include a claim through
oversight, inadvertence or excusable neglect, or when a claim has matured or
been acquired subsequently, the arbiters may permit amendment. No demand for
arbitration shall be made after the date when institution of legal or equitable
proceedings based on such claim would be barred by the applicable statute of
limitations.
(d) The award rendered by the arbiters shall be final, binding and
conclusive, and judgment may be entered upon it in accordance with applicable
law in the appropriate court in the State of New York.
(e) Each party shall pay its own expenses of arbitration, and the
expenses of the arbiters and the arbitration proceeding shall be equally shared;
provided, however, that, if, in the opinion of a majority of the arbiters, any
claim or defense was unreasonable, the arbiters may assess, as part of their
award, all or any part of the arbitration expenses of the other party (including
reasonable attorneys' fees) and of the arbiters and the arbitration proceeding
against the party raising such unreasonable claim or defense.
12.11 Schedules. Any information, data or other disclosure given or
---------
made pursuant to a particular schedule to this Agreement shall be deemed given
and made in each and every other schedule to this Agreement.
41
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Asset Purchase
Agreement as of the date first above written.
ASTROSYSTEMS, INC.
By: /s/ Seymour Barth
-----------------------
Name: Seymour Barth
Title: President
BEHLMAN ELECTRONICS, INC.
By: /s/ Seymour Barth
-----------------------
Name: Seymour Barth
Title: President
ORBIT INTERNATIONAL CORP.
By: /s/ Dennis Sunshine
------------------------
Name: Dennis Sunshine
Title: President
CABOT COURT, INC.
By: /s/ Dennis Sunshine
------------------------
Name: Dennis Sunshine
Title: President
For Purposes of Section 8.14
/s/ Seymour Barth
- -----------------------------
Seymour Barth
/s/ Elliot Bergman
- -----------------------------
Elliot Bergman
/s/ Gilbert Steinberg
- -----------------------------
Gilbert Steinberg
42
<PAGE>
ASTROSYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints SEYMOUR BARTH and ELLIOT J. BERGMAN as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them, and each of them, to represent and vote, as designated below, all the
Common Stock of Astrosystems, Inc. (the "Company") held of record by the
undersigned at the close of business on December 5, 1995 at the Annual Meeting
of Stockholders to be held on February 2, 1996 or any adjournment thereof.
1. Proposal to approve the adoption of a Plan of Complete Liquidation and
Dissolution.
FOR / / AGAINST / / ABSTAIN / /
2. Proposal to approve the Asset Purchase Agreement dated as of January 11,
1996 among Cabot Court, Inc., Orbitsub International Corp., the Company and
its wholly-owned subsidiary, Behlman Electronics, Inc.
FOR / / AGAINST / / ABSTAIN / /
3. Election of Directors
FOR all nominees listed below WITHHOLD AUTHORITY to vote for all
(except as marked to the nominees listed below. / /
contrary below). / /
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
SUCH NOMINEE'S NAME FROM THE LIST BELOW.)
Seymour Barth Gilbert H. Steinberg Elliot J. Bergman
Walter A. Steinberg Elliot D. Spiro
4. Proposal to ratify the appointment of Richard A. Eisner & Company, LLP as
the Company's independent auditors for the fiscal year ending June 30,
1996.
FOR / / AGAINST / / ABSTAIN / /
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Continued and to be Signed on Reverse)
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2, 3 AND 4 AND IN FAVOR OF ANY PROPOSAL TO ADJOURN
THE MEETING IN ORDER TO ALLOW THE COMPANY ADDITIONAL TIME TO OBTAIN SUFFICIENT
PROXIES WITH REGARD THERETO.
Dated: , 1996
Please sign exactly as
name appears below. When
shares are held by joint
tenants, both should sign.
When signing as attorney,
executor, administrator,
trustee or guardian,
please give full title as
such. If a corporation,
please sign in full
corporate name by the
President or other
authorized officer. If a
partnership, please sign
in full partnership name
by authorized person.
..........................
Signature
..........................
Signature, if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE
