SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) April 3, 1996
TRANSMATION, INC.
(Exact Name of Registrant as Specified in Charter)
Ohio 0-3905 16-0874418
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
10 Vantage Point Drive, Rochester, New York 14624
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (716) 352-7777
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On April 3, 1996, the Registrant acquired all of the outstanding shares
of Altek Industries Corp., a New York corporation ("Altek"), from E. Lee
Garelick ("Garelick") and James N. Wurtz ("Wurtz"). The acquisition was made
pursuant to a Stock Purchase Agreement dated March 28, 1996 among the
Registrant, Garelick and Wurtz (the "Purchase Agreement").
The consideration for the stock acquisition was negotiated at arms
length and consisted of: (i) cash in the aggregate amount of $1,700,000; (ii)
unsecured promissory notes in an aggregate principal amount of $3,100,000; and
(iii) the issuance of an aggregate of 300,000 shares of Common Stock of the
Registrant, of which 100,000 shares were delivered at the closing of the
acquisition and the balance will be issued over the next two years. In addition,
at closing the Registrant paid off Altek's bank debt in the aggregate principal
amount of approximately $806,000. The Registrant also entered into three-year
Employment Agreements with Garelick and Wurtz.
The source of the cash payments made at closing, together with payment
of other costs and expenses of the transaction, was financing provided under the
Registrant's existing $7,000,000 Revolving Credit Facility (the "Revolving
Credit Facility") with Manufacturers and Traders Trust Company ("M&T"). In
connection with the acquisition and the Revolving Credit Facility, and in
addition to existing security interests in the Registrant's assets, M&T was
given security interests in the accounts receivable and personal property and
fixtures, including inventory and equipment, of Altek.
Prior to the acquisition, the assets of Altek were used in the
manufacture of precision industrial calibrators. The Registrant intends to
continue such use.
The foregoing information contained in this Form 8-K with respect to the
acquisition and the financing thereof is qualified in its entirety by reference
to the complete text of the Purchase Agreement and the Revolving Credit
Facility, copies of which are filed herewith or incorporated by reference to
previously filed Exhibits.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired.
INDEX TO FINANCIAL STATEMENTS OF ALTEK INDUSTRIES CORP.
Year Ended December 31, 1993
Report of Independent Accountant
Statements of Financial Position as of December 31, 1993 (Audited)
Statements of Cash Flows for Twelve Months Ended December 31, 1993
(Audited)
Statements of Income, Expense and Retained Earnings for Twelve
Months Ended December 31, 1993 (Audited)
Notes to the Financial Statements for Twelve Months
Ended December 31, 1993
Year Ended December 31, 1994
Report of Independent Accountant
Statements of Financial Position as of December 31, 1994 (Audited)
Statements of Cash Flows for Twelve Months Ended December 31, 1994
(Audited)
Statements of Income, Expense and Retained Earnings for Twelve
Months Ended December 31, 1994 (Audited)
Notes to the Financial Statements
Year Ended December 31, 1995
Report of Independent Accountant
Statements of Financial Position as of December 31, 1995 (Audited)
Statements of Cash Flows for Twelve Months Ended December 31, 1995
(Audited)
Statements of Income, Expense and Retained Earnings for Twelve
Months Ended December 31, 1995 (Audited)
Notes to the Financial Statements
<PAGE>
Altek Industries Corporation
210 Commerce Drive
Rochester, New York 14623
To the Shareholders of Altek Industries Corporation:
I have examined the statement of financial position of Altek Industries
Corporation as of December 31, 1993 and the related statements of income and
retained earnings and statements of cash flows for the year then ended. My
examination was made in accordance with generally accepted auditing standards
and accordingly included such tests of the accounting records and such other
auditing procedures as I considered necessary in the circumstances.
In my opinion, except for the limitation on the scope of the audit due to there
being no observation of inventory, the financial statements present fairly the
financial position of Altek Industries Corporation at December 31, 1993 and the
results of its operations and cash flows for the year then ended, in conformity
with generally accepted accounting principles applied on a basis consistent with
that of the preceding year.
/s/ Ronald E. Rothstein
Ronald E. Rothstein
Certified Public Accountant
March 1, 1994
Rochester, New York
<PAGE>
Altek Industries Corporation
Statements of Financial Position
As of December 31, 1993
Audited
Assets
1993
Current Assets:
Cash $ 67,495
Accounts Receivable 452,903
Inventory 396,189
Total Current Assets 916,587
Fixed Assets:
Shop Equipment 122, 059
Office Equipment 76,891
Leasehold Improvements 265,642
464,592
Accumulated Depreciation and Amortization 170,794
Total Fixed Assets 293,798
Total Assets $1,210,385
The accompanying notes are an integral part of these financial statements.
<PAGE>
Altek Industries Corporation
Statements of Financial Position
As of December 31, 1993
Audited
Liabilities and Shareholders Equity
1993
Current Liabilities:
Line of Credit $ 64,000
Current Portion of Mortgage Payable 30,000
Accounts Payable 55,344
Payroll Taxes Withheld and Accrued 2,569
Accrued Payroll 22,419
Accrued P/S Pension Contribution 141,047
Accrued Federal Income Tax 2,581
Accrued NYS Franchise Tax 4,420
Total Current Liabilities 322,380
Long Term Liabilities
Mortgage Payable 124,426
Loan Payable - Officers 300,000
Total Long Term Liabilities 424,426
Total Liabilities 746,806
Shareholders Equity:
Common Stock 30,000
Retained Earnings 433,579
Total Shareholders Equity 463,579
Total Liabilities and Shareholders Equity $1,210,385
The accompanying notes are an integral part of these financial statements.
<PAGE>
Altek Industries Corporation
Statements of Cash Flows
Twelve Months Ended December 31, 1993
Audited
Cash Flows From Operating Activities 1993
Net Income $ 88,240
Adjustments to Reconcile Net Income to Net Cash
Provided by Operations:
Depreciation and Amortization 44,436
(Increase) in Accounts Receivable (41,247)
(Increase) Decrease in Inventory (52,370)
(Increase) Decrease in Prepaid Expenses 0
(Increase) Decrease in Prepaid Federal Income Tax (17,381)
Decrease in Prepaid NYS Franchise Tax (2,465)
Increase (Decrease) in Accounts Payable 24,729
(Decrease) in Taxes Withheld and Accrued 2,510
Increase in Accrued Payroll 22,419
(Decrease) in Pension & Profit Sharing Payable (5,207)
Increase in NYS & Federal Income Tax Payable (12,211)
Increase in Dividends Paid (1,500)
Net Cash Provided by Operating Activities 49,953
Cash Flows From Investing Activities:
Purchase of Fixed Assets (85,973)
Net Cash Used by Investing Activities (85,973)
Cash Flows From Financing Activities:
Proceeds from Line of Credit 14,000
Proceeds from Mortgage (40,285)
Proceeds from Due Officers 64,000
Net Cash Provided by Financing Activities 37,715
Net Increase in Cash 1,695
Cash Beginning of Year 65,800
Cash End of Year $ 67,495
The accompanying notes are an integral part of these financial statements.
<PAGE>
Altek Industries Corporation
Statements of Income, Expense and Retained Earnings
Twelve Months Ended December 31, 1993
Audited
1993
Sales:
Sales $ 3,512,051
Returns and Allowances 0
Net Sales 3,512,051 100.0%
Cost of Goods Sold:
Total Cost of Goods Sold - See Schedule I 1,660,955 47.3%
Gross Profit on Sales 1,851,096 52.7%
General and Admin. Expenses:
See Schedule II 1,642,579 46.8%
Income From Operations 208,517 5.9%
Other Expense:
Pension Plan Contribution 118,699 3.4%
Income Before Taxes 89,818 2.6%
Provision for Income Taxes:
Federal Income Tax 18,955 0.5%
NYS Franchise Tax 9,476 0.3%
Total Provision for Taxes 28,431 0.8%
Net Income (Loss) 61,387 1.7%
Retained Earnings Beginning 374,237
Prior Period Adjustment 5,451
Dividends Paid (7,500)
Retained Earnings Ending $ 433,575
The accompanying notes are an integral part of these financial statements.
<PAGE>
Altek Industries Corporation
Notes to the Financial Statement
Twelve Months Ended December 31, 1993
Cash
Cash is comprised of cash on hand, in bank, and money market accounts.
Accounts Receivable
Accounts receivable are recorded at gross amount. No provision for bad debt is
calculated. The direct write-off method is used when management deems necessary.
Inventory
Inventory is valued at the lower of first-in, first-out cost or market methods.
Inventory at December consists of:
1993
Finished Goods $ 177,643
Raw Materials 218,546
Total Inventory $ 396,189
Prepaid Federal Income Tax and Prepaid New York State Franchise Tax
These represent payments of estimated taxes for 1993.
Fixed Assets
Fixed assets are recorded at original cost less accumulated depreciation and
amortization computed on the straight-line, ACRS and MACRS methods. Expenditures
for maintenance and repairs and other non-durable expenses are charged to
earnings as incurred.
Accounts Payable
Accounts payable represent the normal trade obligations that are paid within the
normal operating cycle.
Payroll Taxes Withheld and Accrued
Payroll taxes withheld and accrued represent the current liabilities for the tax
period ended December 31, 1993.
Commissions Payable
Commissions payable represent commission expense incurred but not paid in the
periods ended December 31, 1993. These commissions will be paid within the
current operating cycle.
These notes are an integral part of these financial statements.
<PAGE>
Accrued Payroll
This represents gross payroll expense incurred prior to and including December
31, 1993, but not paid until January.
Accrued Profit Sharing Contribution
This represents the estimated profit sharing contribution not yet funded. The
profit sharing plan was established in 1985.
Accrued Pension Plan Contribution
This represents the estimated defined benefit pension plan contribution not yet
funded. Both are fully funded with no prior period arrearages.
Loan Payable - Officers
This represents amounts advanced by the officers of the Corporation.
Shareholders' Equity - Common Stock
There is one class of common stock; no par value, 200 shares authorized, 60
shares issued and outstanding.
These notes are an integral part of these financial statements.
<PAGE>
Altek Industries Corporation
210 Commerce Drive
Rochester, New York 14623
To the Shareholders of Altek Industries Corporation:
I have examined the statement of financial position of Altek Industries
Corporation as of December 31, 1994 and the related statements of income and
retained earnings and statements of cash flows for the year then ended. My
examination was made in accordance with generally accepted auditing standards
and accordingly included such tests of the accounting records and such other
auditing procedures as I considered necessary in the circumstances.
In my opinion, except for the limitation on the scope of the audit due to there
being no observation of inventory, the financial statements present fairly the
financial position of Altek Industries Corporation at December 31, 1994 and the
results of its operations and cash flows for the year then ended, in conformity
with generally accepted accounting principles applied on a basis consistent with
that of the preceding year.
/s/ Ronald E. Rothstein
Ronald E. Rothstein
Certified Public Accountant
March 1, 1995
Rochester, New York
<PAGE>
Altek Industries Corporation
Statements of Financial Position
As of December 31, 1994
Audited
Assets
1994
Current Assets:
Cash $ 68,267
Accounts Receivable 455,560
Inventory 536,021
Total Current Assets 1,059,848
Fixed Assets:
Shop Equipment 203,953
Office Equipment 87,939
Leasehold Improvements 270,867
562,759
Accumulated Depreciation and Amortization 229,137
Total Fixed Assets 333,622
Total Assets $1,393,470
The accompanying notes are an integral part of these financial statements.
<PAGE>
Altek Industries Corporation
Statements of Financial Position
As of December 31, 1994
Audited
Liabilities and Shareholders Equity
1994
Current Liabilities:
Current Portion of Mortgages Payable $ 44,677
Accounts Payable 197,017
Accrued P/S Pension Contribution 143,335
Accrued Federal Income Tax 13,692
Total Current Liabilities 398,721
Long Term Liabilities:
Mortgage Payable 87,498
Loan Payable - Officers 400,000
Total Long Term Liabilities 487,498
Other Liabilities
Accrued Dividend Payable 9,000
Total Other Liabilities 9,000
Total Liabilities 895,219
Shareholders Equity
Common Stock 30,000
Retained Earnings 468,251
Total Shareholders Equity 498,251
Total Liabilities and Shareholders Equity $1,393,470
The accompanying notes are an integral part of these financial statements.
<PAGE>
Altek Industries Corporation
Statements of Cash Flows
Twelve Months Ended December 31, 1994
Audited
Cash Flows From Operating Activities: 1994
Net Income $ 43,673
Adjustments to Reconcile Net Income to Net Cash
Provided by Operations:
Depreciation and Amortization 58,344
(Increase) in Accounts Receivable (2,657)
(Increase) Decrease in Inventory (139,832)
Increase (Decrease) in Accounts Payable 141,673
(Decrease) in Taxes Withheld and Accrued (2,569)
Increase in Accrued Payroll (22,419)
(Decrease) in Pension & Profit Sharing Payable 2,288
Increase in NYS & Federal Income Tax Payable 6,691
Net Cash Provided by Operating Activities 85,192
Cash Flows From Investing Activities:
Purchase of Fixed Assets (98,167)
Net Cash Used by Investing Activities (98,167)
Cash Flows From Financing Activities:
Proceeds from Line of Credit (64,000)
Proceeds from Mortgage (36,928)
Proceeds from Due Officers 100,000
Other Financing 14,679
Net Cash Provided by Financing Activities 13,747
Net Increase in Cash 772
Cash Beginning of Year 67,495
Cash End of Year $ 68,267
The accompanying notes are an integral part of these financial statements.
<PAGE>
Altek Industries Corporation
Statements of Income, Expense and Retained Earnings
Twelve Months Ended December 31, 1994
Audited
1994
Sales:
Sales $ 3,948,570
Returns and Allowances 609
Net Sales 3,947,961 100.0%
Cost of Goods Sold:
Total Cost of Goods Sold - See Schedule I 2,019,076 51.1%
Gross Profit on Sales 1,928,885 48.9%
General and Admin. Expenses:
See Schedule II 1,761,320 44.6%
Income From Operations 167,565 4.2%
Other Expense:
Pension Plan Contribution 100,857 2.6%
Directors Fees 2,250 0.1%
Total Other Expense 103,107 2.6%
Income Before Taxes 64,458 1.6%
Provision for Income Taxes:
Federal Income Tax 13,695 0.3%
NYS Franchise Tax 7,087 0.2%
Total Provision for Taxes 20,782 0.5%
Net Income (Loss) 43,676 1.1%
Retained Earnings Beginning 433,575
Prior Period Adjustment 0
Dividends Paid (9,000)
Retained Earnings Ending $ 468,251
The accompanying notes are an integral part of these financial statements.
<PAGE>
Altek Industries Corporation
Notes to the Financial Statement
Twelve Months Ended December 31, 1994
Cash
Cash is comprised of cash on hand, in bank, and money market accounts.
Accounts Receivable
Accounts receivable are recorded at gross amount. No provision for bad debt is
calculated. The direct write-off method is used when management deems necessary.
Inventory
Inventory is valued at the lower of first-in, first-out cost or market method.
Inventory at December consists of:
1994
Finished Goods $ 221,404
Raw Materials 314,617
Total Inventory $ 536,021
Prepaid Federal Income Tax and Prepaid New York State Franchise Tax
These represent payments of estimated taxes for 1994.
Fixed Assets
Fixed assets are recorded at original cost less accumulated depreciation and
amortization computed on the straight-line, ACRS and MACRS methods. Expenditures
for maintenance and repairs and other non-durable expenses are charged to
earnings as incurred.
Accounts Payable
Accounts payable represent the normal trade obligations that are paid within the
normal operating cycle.
Payroll Taxes Withheld and Accrued
Payroll taxes withheld and accrued represent the current liabilities for the tax
period ended December 31, 1994.
Commissions Payable
Commissions payable represent commission expense incurred but not paid in the
periods ended December 31, 1994. These commissions will be paid within the
current operating cycle.
These notes are an integral part of these financial statements.
<PAGE>
Accrued Payroll
This represents gross payroll expense incurred prior to and including December
31, 1994, but not paid until January.
Accrued Profit Sharing Contribution
This represents the estimated profit sharing contribution not yet funded. The
profit sharing plan was established in 1985.
Accrued Pension Plan Contribution
This represents the estimated defined benefit pension plan contribution not yet
funded. Both are fully funded with no prior period arrearages.
Loan Payable - Officers
This represents amounts advanced by the officers of the Corporation.
Shareholders' Equity - Common Stock
There is one class of common stock; no par value, 200 shares authorized, 60
shares issued and outstanding.
These notes are an integral part of these financial statements.
<PAGE>
Altek Industries Corporation
210 Commerce Drive
Rochester, New York 14623
To the Shareholders of Altek Industries Corporation:
In my opinion the enclosed statement of financial position and the related
statements of income and retained earnings present fairly, in all material
respects the financial positions of Altek Industries Corporation at December 31,
1995 and the results of their operations and their cash flows for the period
ended December 31, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Corporations Management; my responsibility is to express an opinion on the
financial statements based on my audit. I conducted my audit of these statements
in accordance with generally accepted auditing standards which require that I
plan and preform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit included
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. I believe that my audit provides a reasonable basis for
the opinion expressed above.
/s/ Ronald E. Rothstein
Ronald E. Rothstein
Certified Public Accountant
February 28, 1996
Rochester, New York
<PAGE>
Altek Industries Corporation
Statements of Financial Position
As of December 31, 1995
Audited
Assets
1995
Current Assets:
Cash $ 159,869
Accounts Receivable 610,382
Inventory 722,654
Prepaid Federal Income Tax 434
Total Current Assets 1,493,339
Fixed Assets:
Shop Equipment 267,123
Office Equipment 87,939
Leasehold Improvements 272,387
627,449
Accumulated Depreciation and Amortization 295,282
Total Fixed Assets 332,167
Other Assets:
Refundable Deposits 111
Cash Surrender Value of Life Insurance 26,904
Total Other Assets 27,015
Total Assets $1,852,521
The accompanying notes are an integral part of these financial statements.
<PAGE>
Altek Industries Corporation
Statements of Financial Position
As of December 31, 1995
Audited
Liabilities and Shareholders Equity
Current Liabilities:
Line of Credit $ 200,000
Chase Term Loan 500,000
Current Portion of Mortgages and Loans Payable 48,000
Accounts Payable 331,294
Taxes Withheld and Accrued 21
Accrued Payroll and Earned Vacation Leave 105,714
Accrued P/S Pension Contribution 109,164
Accrued NYS Franchise Tax 558
Total Current Liabilities 1,294,751
Long Term Liabilities:
Mortgage Payable 73,506
Total Long Term Liabilities: 73,506
Other Liabilities:
Warranty Liability 52,500
Total Other Liabilities 52,500
Total Liabilities 1,420,757
Shareholders Equity
Common Stock 30,000
Retained Earnings 401,764
Total Shareholders Equity 431,764
Total Liabilities and Shareholders Equity $1,852,521
The accompanying notes are an integral part of these financial statements.
<PAGE>
Altek Industries Corporation
Statements of Cash Flows
Twelve Months Ended December 31, 1995
Audited
Cash Flows From Operating Activities:
Net Income $ (90,744)
Adjustments to Reconcile Net Income to Net Cash
Provided by Operations:
Depreciation and Amortization 66,146
(Increase) in Accounts Receivable (154,822)
(Increase) Decrease in Inventory (186,633)
(Increase in Prepaid Taxes) (434)
(Increase) Decrease in Refundable Deposits (111)
(Increase) Decrease in Cash Surrender Value of Ins. (26,904)
Increase (Decrease) in Accounts Payable 134,276
(Decrease) in Taxes Withheld and Accrued 21
Increase in Accrued Payroll and Vacation Leave 105,714
(Decrease) in Pension & Profit Sharing Payable (34,171)
(Decrease) in NYS & Federal Income Tax Payable (13,134)
Increase in Warranty Liability 52,500
(Decrease) in Dividend Payable (9,000)
Increase in Prior Period Adjustment 24,257
Net Cash Provided by Operating Activities (133,039)
Cash Flows From Investing Activities:
Purchase of Fixed Assets (64,690)
Net Cash Used by Investing Activities (64,690)
Cash Flows From Financing Activities:
Proceeds from Lines of Credit 700,000
Decrease in Mortgage Payable (58,319)
Repayment of Due Officers (400,000)
Proceeds from Three Year Term Loan (Net) 47,650
Net Cash Provided by Financing Activities 289,331
Net Increase in Cash 91,602
Cash Beginning of Year 68,267
Cash End of Year $ 159,869
The accompanying notes are an integral part of these financial statements.
<PAGE>
Altek Industries Corporation
Statements of Income, Expense and Retained Earnings
Twelve Months Ended December 31, 1995
Audited
1995
Sales:
Sales $ 4,940,890
Returns and Allowances 3,990
Net Sales 4,936,900 100.0%
Cost of Goods Sold:
Total Cost of Goods Sold - See Schedule I 2,013,345 40.8%
Gross Profit on Sales 2,923,555 59.2%
General and Admin. Expenses -
See Schedule II 2,803,581 56.8%
Income From Operations 119,974 2.4%
Other Expense:
Pension Plan Contribution 62,539 1.3%
Directors Fees 2,000 0.0%
Warranty and Misc Expense 52,500 1.1%
Deduction for Accrued Vacation 75,000 1.5%
Total Other Expense 192,039 3.9%
Income Before Taxes (72,065) -1.5%
Provision for Income Taxes:
Federal Income Tax 12,613 0.3%
NYS Franchise Tax 6,066 0.1%
Total Provision for Taxes 18,679 0.4%
Net Income (Loss) (90,744) -1.8%
Retained Earnings Beginning 468,251
Prior Period Adjustment 24,257
(Officer Life Insurance Adjustment)
Retained Earnings Ending $ 401,764
The accompanying notes are an integral part of these financial statements.
<PAGE>
Altek Industries Corporation
Notes to the Financial Statement
Twelve Months Ended December 31, 1995
Cash
Cash is comprised of cash on hand, in bank, and money market accounts.
Accounts Receivable
Accounts receivable are recorded at gross amount. No provision for bad debt is
calculated. The direct write-off method is used when management deems necessary.
These assets are pledged as collateral against a $200,000 line of credit, a
three year term loan in the amount of $60,000 and a $500,000 term loan.
Inventory
Inventory is valued at the lower of first-in, first-out cost or market method.
Inventory at year end consists of:
1995
Finished Goods $ 229,396
Raw Materials 492,958
Total Inventory $ 722,654
These assets are pledged as collateral against a $200,000 line of credit, a
three year term loan in the amount of $60,000 and a $500,000 term loan.
Fixed Assets
Fixed assets are recorded at original cost less accumulated depreciation and
amortization computed on the straight-line, ACRS and MACRS methods. Expenditures
for maintenance and repairs and other non-durable expenses are charged to
earnings as incurred. These assets are pledged as collateral against a $200,000
line of credit, a three year term loan in the amount of $60,000 and a $500,000
term loan.
Cash Surrender Value of Life Insurance
These represent cash surrender value of officer's insurance in the amount of
policy M140288 $12,316 and M149976 $2,521 on Mr. Garelick, and policy M139850
$9,364 and policy M149779 $2,703 on Mr. Wurtz.
These notes are an integral part of these financial statements.
<PAGE>
Line of Credit, Chase Term Loans and Mortgage Payable
Line of credit is a confirmed offering line of credit with Chase Manhattan Bank,
NA in the amount of $200,000 at Chase prime plus 1%, with a first lien on
accounts receivable, inventory, and equipment with an unlimited guarantee of Eli
L. Garelick and James N. Wurtz. The principal balance at 12/31/95 is $200,000.
A five year term loan (mortgage) with a date issue of September 24, 1992,
bearing interest at Chase prime plus 1.25%. There is a collateral security
mortgage on 210 Commerce Drive, Rochester, NY guaranteed by Eli L. Garelick and
James N. Wurtz. The outstanding balance on 12/31/95 is $73,855.
A three year term loan in the amount of $60,000 issued May 9, 1995, with a fixed
rate of interest at 9.39% is has a first lien of accounts receivable, inventory,
and equipment with a limited guarantee of Eli L. Garelick in the amount of
$33,600 and James N. Wurtz in the amount of $26,400. The balance at 12/31/95 is
$47,650.
A five year term loan in the amount of $500,000 issued 12/19/95 with interest at
LIBOR plus 3.6%, a current rate 9.4125% is collateralized with a first lien on
accounts receivable, inventory and equipment with a limited guarantee of Eli L.
Garelick in the amount of $280,000 and James N. Wurtz in the amount of $220,000.
The balance at 12/31/95 is $500,000.
Accounts Payable
Accounts payable represent the normal trade obligations that are paid within the
normal operating cycle.
Taxes Withheld and Accrued
Taxes withheld and accrued represent the current liabilities for the tax period
ended December 31, 1995 and will be paid in the next operating cycle.
Accrued Payroll and Vacation Leave
This represents gross payroll expense incurred prior to and including December
31, 1995 but not paid until January 1996. The accrued vacations are calculated
and accrued for the calendar year 1996 is $75,000.
Accrued Profit Sharing Contribution
This represents the estimated profit sharing contribution not yet funded. The
profit sharing plan was established in 1985.
Accrued Pension Plan Contribution
Accrued Pension is a money purchase plan. The plan is currently fully funded
with no prior period arrearage.
These notes are an integral part of these financial statements.
<PAGE>
Accrued NYS Franchise Tax
This represents taxes which are due for the previous calendar year.
Warranty Liability
Management has determined that the worst case scenario for warranty liability
from the inception of the corporation to 12/31/95 is represented by this amount.
Shareholders' Equity - Common Stock
There is one class of common stock; no par value, 200,000 shares authorized,
60,000 shares issued and outstanding.
Subsequent Events
Management has informed me and I have not become aware of any significant
changes which will effect these financial statements. The acquisition of Altek
Industries Corporation by Transmation is still underway and as of this date yet
unfinished.
These notes are an integral part of these financial statements.
<PAGE>
(b) Pro Forma Financial Information.
INDEX TO PRO FORMA FINANCIAL STATEMENTS OF TRANSMATION, INC.
Unaudited Pro Forma Combined Balance Sheet - March 31, 1995
Unaudited Pro Forma Combined Balance Sheet - December 31, 1995
Unaudited Pro Forma Combined Statement of Income for Year Ended March 31, 1995
Unaudited Pro Forma Combined Statement of Income for Year Ended December 31,
1995
Notes to Unaudited Pro Forma Combined Financial Statements
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Transmation, Inc. and Altek Industries Corp.
Unaudited Pro-Forma Combined Balance Sheet
March 31, 1995
Transmation Altek
3/31/95 12/31/94 Pro
Pro Forma Forma
Historical Historical Adjustments Combined
---------------------------------------------------------------------------------
Assets:
Current Assets:
Cash 607,763 68,267 676,030
Accounts Receivable 5,524,244 455,560 5,979,804
Inventories 6,747,036 536,021 7,283,057
Prepaid Expenses 1,270,833 1,270,833
Deferred Tax Assets 132,026 132,026
---------------------------------------------------------------------------------
Current Assets 14,281,902 1,059,848 15,341,750
---------------------------------------------------------------------------------
Property, Plant & Equipment 1,500,498 333,622 1,834,120
Deferred Charges 146,161 146,161
Deferred Income Taxes 154,926 154,926
Other Assets 209,920 209,920
Goodwill 6,139,249 6,139,249
---------------------------------------------------------------------------------
16,293,407 1,393,470 6,139,249 23,826,126
=================================================================================
Liabilities and Stockholders' Equity:
Current Liabilities:
Current Portion Mortgages &
Notes Payable 44,677 44,677
Accounts Payable 3,655,934 197,017 3,852,951
Accrued Liabilities 1,187,992 152,335 1,340,327
Income Taxes Payable 2,610 13,692 16,302
Stock Payable Former Owners 612,500 612,500
Current Portion Loans Payable
Former Owners 1,700,000 1,700,000
---------------------------------------------------------------------------------
Current Liabilities 4,846,536 407,721 2,312,500 7,566,757
---------------------------------------------------------------------------------
Stock Payable Former Owners 612,500 612,500
Loan Payable Former Owners 400,000 1,000,000 1,400,000
Long-Term Debt 4,064,426 87,498 2,100,000 6,251,924
Deferred Compensation 780,880 780,880
---------------------------------------------------------------------------------
9,691,842 895,219 6,025,000 16,612,061
---------------------------------------------------------------------------------
Stockholders' Equity:
Common Stock 1,190,320 30,000 20,000 1,240,320
Capital in Excess of Par 849,829 562,500 1,412,329
Accumulated Translation Adjust (109,513) (109,513)
Retained Earnings 4,670,929 468,251 (468,251) 4,670,929
---------------------------------------------------------------------------------
6,601,565 498,251 114,249 7,214,065
---------------------------------------------------------------------------------
16,293,407 1,393,470 6,139,249 23,826,126
=================================================================================
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Transmation, Inc. and Altek Industries Corp.
Unaudited Pro-Forma Combined Balance Sheet
December 31, 1995
Transmation Altek
12/31/95 9/30/95 Pro
Pro Forma Forma
Historical Historical Adjustments Combined
---------------------------------------------------------------------------------
Assets:
Current Assets:
Cash 468,071 176,685 644,756
Accounts Receivable 5,181,607 612,461 5,794,068
Inventories 6,652,040 591,731 7,243,771
Prepaid Expenses 1,117,227 13,463 1,130,690
Deferred Tax Assets 131,175 131,175
---------------------------------------------------------------------------------
Current Assets 13,550,120 1,394,340 14,944,460
---------------------------------------------------------------------------------
Property, Plant & Equipment 1,745,897 291,113 2,037,010
Deferred Charges 128,427 128,427
Deferred Income Taxes 153,926 153,926
Other Assets 224,297 224,297
Goodwill 5,794,677 5,794,677
---------------------------------------------------------------------------------
15,802,667 1,685,453 5,794,677 23,282,797
=================================================================================
Liabilities and Stockholders' Equity:
Current Liabilities:
Current Portion Mortgages &
Notes Payable 114,112 114,112
Accounts Payable 3,364,152 190,172 3,554,324
Accrued Liabilities 1,142,968 184,420 1,327,388
Income Taxes Payable 478,401 478,401
Stock Payable Former Owners 612,500 612,500
Current Portion Loans Payable
Former Owners 1,700,000 1,700,000
---------------------------------------------------------------------------------
Current Liabilities 4,985,521 488,704 2,312,500 7,786,725
---------------------------------------------------------------------------------
Stock Payable Former Owners 612,500 612,500
Loan Payable Former Owners 270,000 1,130,000 1,400,000
Long-Term Debt 2,432,100 83,926 1,970,000 4,486,026
Deferred Compensation 715,090 715,090
---------------------------------------------------------------------------------
8,132,711 842,630 6,025,000 15,000,341
---------------------------------------------------------------------------------
Stockholders' Equity:
Common Stock 1,211,154 30,000 20,000 1,261,154
Capital in Excess of Par 1,009,747 562,500 1,572,247
Accumulated Translation Adjust. (89,919) (89,919)
Retained Earnings 5,538,974 812,823 (812,823) 5,538,974
---------------------------------------------------------------------------------
7,669,956 842,823 (230,323) 8,282,456
---------------------------------------------------------------------------------
15,802,667 1,685,453 5,794,677 23,282,797
=================================================================================
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Transmation, Inc. and Altek Industries Corp.
Unaudited Pro-Forma Combined Statement of Income
Year Ended March 31, 1995
Transmation Altek
3/31/95 12/31/94 Pro
Pro Forma Forma
Historical Historical Adjustments Combined
---------------------------------------------------------------------------------
Net Sales 37,293,872 3,947,961 (800,000) 40,441,833
---------------------------------------------------------------------------------
Costs & Expenses
Cost of Product Sold 23,525,472 2,019,076 (800,000) 24,744,548
Operating Costs, Including Int'st 13,282,865 1,864,427 277,125 15,424,417
---------------------------------------------------------------------------------
36,808,337 3,883,503 (522,875) 40,168,965
---------------------------------------------------------------------------------
Income Before Taxes 485,535 64,458 (277,125) 272,868
Income Tax 103,750 20,782 97,318 221,850
---------------------------------------------------------------------------------
Net Income 381,785 43,676 (374,443) 51,018
=================================================================================
Pro
Transmation Forma
Historical Combined
------------------- ---------------
Earnings Per Share:
Net Income 381,785 51,018
=================== ===============
Average Common Shares
Outstanding 2,430,329 2,730,329
=================== ===============
Income Per Share $.16 $.02
=================== ===============
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Transmation, Inc. and Altek Industries Corp.
Unaudited Pro-Forma Combined Statement of Income
Nine Months Ended December 31, 1995
Transmation Altek
9 Mo. End. 9 Mo. End. Pro
12/31/95 9/30/94 Pro Forma Forma
Historical Historical Adjustments Combined
---------------------------------------------------------------------------------
Net Sales 28,584,813 3,708,154 (700,000) 31,592,967
---------------------------------------------------------------------------------
Costs & Expenses:
Cost of Product Sold 18,045,464 1,577,216 (700,000) 18,922,680
Operating Costs, Including Int'st 9,191,004 1,892,296 252,617 11,335,917
---------------------------------------------------------------------------------
27,236,468 3,469,512 (447,383) 30,258,597
---------------------------------------------------------------------------------
Income Before Taxes 1,348,345 238,642 (252,617) 1,334,370
Income Tax 480,300 85,000 (6,900) 558,400
---------------------------------------------------------------------------------
Net Income 868,045 153,642 (245,717) 775,970
=================================================================================
Pro
Transmation Forma
Historical Combined
------------------------- ---------------------
Earnings Per Share:
Net Income 868,045 775,970
========================= =====================
Average Common Shares
Outstanding 2,541,917 2,841,917
========================= =====================
Income Per Share $.34 $.27
========================= =====================
</TABLE>
<PAGE>
TRANSMATION, INC.
NOTES TO UNAUDITED PRO-FORMA COMBINED FINANCIAL STATEMENTS
Note 1: Basis of Presentation
The unaudited pro-forma combined statements of income and balance sheet reflect
the acquisition of Altek Industries Corp which is to be accounted for under the
purchase method of accounting, as of the beginning of the most recent fiscal
year. The unaudited proforma combined statements also reflect combined results
for the most recent interim period (12/31/95).
Transmation's management believes the assumptions used in preparing the
unaudited proforma combined financial statements provide a reasonable basis for
presenting all of the significant effects of its transactions, that the proforma
adjustments give appropriate effect to those adjustments and that the proforma
adjustments are properly applied in the unaudited proforma financial statements.
Note 2: Proforma Adjustments
Unaudited Proforma Adjustments consist of the following:
Transmation, Inc. will exchange 300,000 shares of stock, payable in 3
installments, $1,700,000 of cash and $3,100,000 of notes for 10% of the
outstanding stock of Altek Industries Corp. This transaction will be accounted
for using the purchase method of Accounting.
The purchase price is allocated to the net assets acquired using the assumption
that the net book basis of the long-term assets is reflective of their fair
value. Goodwill is calculated as the difference between the purchase price and
the fair value of the net assets acquired and is amortized over 20 years.
The proforma adjustments to operating expenses in the statement of income for
the year ended March 31, 1995 and nine months ended December 31, 1995 represent
the amortization of goodwill in addition to the reduction in income and pensions
attributable to the former owners which has been reduced to a total of $300,000
per year in accordance with terms of the purchase agreement. As Transmation did
not have enough cash as of March 31, 1995 or December 31, 1995 to complete the
transaction without incurring additional debt, the proforma adjustment to
operating expenses also assumes additional bank borrowings at Transmation's
8.25% borrowing rate and interest on the $3,100,000 notes payable to the former
owners at the contractual rate of 8%.
Sales and Costs of Products Sold are reduced by $800,000 in the year ended March
31, 1995 and $700,000 in the nine months ended December 31, 1995 which
represents the approximate intercompany sales between Altek and Transmation
during those periods.
Transmation's statutory tax rate of 38% is used to calculate the tax effect of
unaudited proforma combined statement of income adjustments, excluding the
impact of non-deductible goodwill.
<PAGE>
(c) Exhibits. See Index to Exhibits.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
TRANSMATION, INC.
April 16, 1996 By: /s/ Robert G. Klimasewski
-------------------------
Robert G. Klimasewski
President
April 16, 1996 By: /s/ John A. Misiaszek
---------------------
John A. Misiaszek
Vice President-Finance
<PAGE>
INDEX TO EXHIBITS
(1) Underwriting Agreement
Not applicable.
(2) Plan of acquisition, reorganization, arrangement, liquidation or succession
*(a) Stock Purchase Agreement dated March 28, 1996 among Transmation, Inc.,
E. Lee Garelick and James N. Wurtz, together with a brief identification of the
contents of all omitted exhibits and schedules thereto, is included herein as
Exhibit 2(a). Upon written request, the Registrant will provide to security
holders copies of any of the referenced omitted exhibits and schedules.
(4) Instruments defining the rights of security holders, including indentures
(a) Articles of Incorporation, as amended, are incorporated herein by
reference to Exhibit 4(a) to the Registrant's Registration Statement on Form S-8
(Registration No. 33-61665) as filed on August 8, 1995.
(b) Code of Regulations, as amended, is incorporated herein by reference to
Exhibit 3 to the Registrant's Annual Report on Form 10-K for the fiscal year
ended March 31, 1988.
(c) Revolving Credit Agreement between the Registrant and Manufacturers and
Traders Trust Company is incorporated herein by reference to Exhibit 4 to the
Registrant's Form 10-Q for the quarter ended September 30, 1994.
(d) Agreement and Amendment No. 1 to an Existing Revolving Credit Facility
Agreement between the Registrant and Manufacturers and Trades Trust Company
dated September 8, 1995 is incorporated herein by reference to Exhibit 4(c) to
the Registrant's Form 10-Q for the quarter ended September 30, 1995.
(e) Agreement and Amendment No. 2 to an Existing Revolving Credit Facility
Agreement between the Registrant and Manufacturers and Traders Trust Company
dated December 15, 1995, is incorporated herein by reference to Exhibit 4(d) to
the Registrant's Form 10-Q for the quarter ended December 31, 1995.
(16) Letter re change in certifying accountant
Not applicable.
(17) Letter re director resignation
Not applicable.
(20) Other documents or statements to security holders
Not applicable.
*(23) Consents of experts and counsel
Consent of Ronald E. Rothstein, CPA is included herein as Exhibit 23.
(24) Power of attorney
<PAGE>
Not applicable.
(27) Financial Data Schedule
Not Applicable.
(99) Additional Exhibits
Not applicable.
- -----------------
* Exhibit filed with this Report.
EXHIBIT 2(a)
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT dated March 28, 1996 is made by and among
TRANSMATION, INC., an Ohio corporation ("Buyer"), and E. LEE GARELICK and JAMES
N. WURTZ (collectively, "Sellers").
The parties agree as follows:
ARTICLE 1. DEFINITIONS
Section 1.1 Definitions. In addition to the other definitions contained
in this Agreement, the following terms will, when used in this Agreement, have
the following respective meanings:
"Agreement" means this Stock Purchase Agreement, together with all
Exhibits and Schedules hereto.
"Altek" means Altek Industries Corp., a New York corporation.
"Altek Shares" means an aggregate of 60,000 shares of the common stock,
par value $.10 per share, of Altek, that being all of the capital stock of Altek
issued and outstanding.
"Buyer's Common Stock" means the Common Stock, par value $.50 per share,
of Buyer.
"Closing" means the closing of the purchase and sale hereunder.
"Closing Date" means the date of the Closing, as defined in Section 9.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contracts" means and includes all contracts, subcontracts, agreements,
leases, options, notes, bonds, mortgages, indentures, deeds of trust, collateral
assignments of lease and rights, guarantees, licenses, franchises, permits,
purchase orders, arrangements, transactions, commitments, undertakings and
understandings of every kind, written or oral.
"Employment Agreement" means each Employment Agreement, dated the
Closing Date, between Buyer and a Seller, in the form of Exhibit C.
"Encumbrances" means and includes the following, whether written or
oral: (a) all interests securing obligations owed to any Person, whether based
on common law, statute or Contract, including those arising from mortgages,
indentures, deeds of trust, leases,
<PAGE>
collateral assignments of lease and rights, liens, pledges, conditional sales
contracts, consignments and bailments; (b) all reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
charges, claims, leases and other similar title exceptions and encumbrances; (c)
all liens of any taxing authority; (d) all landlords', mechanics',
materialmen's, warehousemen's, carriers' and similar liens; and (e) all
judgments and other burdens and charges of every kind.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Financial Statements" means the following: (a) the audited balance sheets
of Altek as at December 31, 1995, 1994 and 1993, and the related audited
statements of income and cash flows for the respective fiscal years then ended,
as certified by Ronald E. Rothstein, CPA, certified public accountant, including
the notes and schedules thereto; and (b) a true, correct and complete list of
Altek's accounts receivable and accounts payable as of March 26, 1996.
"GAAP" means, at any time, generally accepted accounting principles,
methods and practices (a) then set forth in the opinions and pronouncements of
the Accounting Principles Board and the American Institute of Certified Public
Accountants, and statements and pronouncements of the Financial Accounting
Standards Board or of such other entity as may then be approved by a significant
segment of the accounting profession, which are (b) consistently maintained and
applied throughout the periods referenced.
"Lease Amendment" means the Amendment No. 1 to Lease, dated the Closing
Date, between Altek and Lessor, in the form of Exhibit F.
"Lessor" means 210 Commerce Drive, Inc., a New York corporation.
"Market Price" has the meaning given it by Section 3.5.
"M&T" means Manufacturers and Traders Trust Company.
"Note" means each promissory note of Buyer, dated the Closing Date, in
favor of a Seller, in the form of Exhibit A.
"Permitted Encumbrances" means those Encumbrances listed in Schedule 1.
"Person" means and includes any individual, partnership, corporation,
trust, unincorporated organization or other entity, and any government or
governmental authority, agency or political subdivision thereof.
"Purchase Price" means the aggregate purchase price to be paid for the
Altek Shares, as set forth in Section 2.2.
"Securities Act" means the Securities Act of 1933, as amended.
<PAGE>
Subordination Agreement" means the Subordination Agreement, dated the
Closing Date, among M&T, Buyer and Sellers, in the form of Exhibit F.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, joint venture, trust or other entity of which such Person, directly
or indirectly, owns an amount of voting securities, or possesses other ownership
interests, having the power, direct or indirect, to elect a majority of the
Board of Directors or other governing body thereof.
"Transmation Shares" has the meaning given it by Section 2.2.
Section 1.2 Accounting Terms. As used in this Agreement and, unless the
context requires otherwise, in each other agreement, document or instrument
delivered under or in connection with this Agreement, all accounting terms not
otherwise defined herein or therein will have the meanings assigned to them in
accordance with GAAP.
Section 1.3 Other Definitional Provisions. Unless the context requires
otherwise, references herein to "Articles" and "Sections" are to the Articles or
Sections of this Agreement, and references to "Exhibits" and "Schedules" are to
the Exhibits and Schedules annexed hereto. Any of the terms defined in this
Article 1 may, unless the context requires otherwise, be used in the singular or
the plural depending on the reference. Wherever used herein, the masculine
pronoun will include the feminine and the neuter, as appropriate in the context.
With respect to any matter or thing, "including" or "includes" means including
but not limited to such matter or thing.
ARTICLE 2. PURCHASE AND SALE
Section 2.1 Transfer of Shares. Subject to all of the terms and
conditions of this Agreement, at Closing Sellers will sell, transfer, convey,
assign and deliver the Altek Shares to Buyer, and Buyer will purchase and accept
the Altek Shares from Sellers, in the respective amounts set forth on Exhibit A.
Section 2.2 Purchase Price. The Purchase Price will be the sum of (a)
$4,800,000 and (b) an aggregate of 300,000 shares of Buyer's Common Stock (the
"Transmation Shares").
Section 2.3 Payment of Purchase Price. Subject to all of the terms and
conditions of this Agreement, Buyer will pay the Purchase Price to Sellers as
follows:
(a) at Closing Buyer will deliver to each Seller, in immediately
available funds, the cash amount set forth opposite his name on Exhibit A; and
(b) at Closing Buyer will deliver to each Seller a Note in the
principal amount set forth opposite his name on Exhibit A, duly executed by
Buyer; and
(c) at Closing Buyer will issue and deliver to each Seller the number
of Transmation Shares set forth opposite his name on Exhibit A; and
<PAGE>
(d) subsequent to Closing Buyer will issue and deliver to each Seller,
on each of the two installment dates set forth in the Notes, the respective
number of Transmation Shares set forth opposite his name on Exhibit A.
ARTICLE 3. CERTAIN MATTERS CONCERNING THE TRANSMATION SHARES
Section 3.1 Certain Representations and Acknowledgements.
(a) Each Seller acknowledges that he has been provided with copies of
the disclosure documents of Buyer listed in Section 5.4. Each Seller represents
and warrants to Buyer as of the Closing Date that he has read such disclosure
documents of Buyer, he has had the opportunity to ask questions of, and receive
answers from, representatives of Buyer concerning the information presented
therein, he desires no further information regarding Buyer or its financial or
business affairs, and he has evaluated the risks of receiving the Transmation
Shares as partial consideration for the transactions contemplated hereby. Each
Seller further represents and warrants to Buyer that either:
(i) he is an "accredited investor" as defined by Regulation D
promulgated by the Securities and Exchange Commission (i.e., he (A)
has a net worth, or a joint net worth with his spouse, in excess of
$1,000,000, or (B) has had individual income in excess of $200,000
during each of the two most recent years, or joint income with his
spouse in excess of $300,000 in each of those years, and he has a
reasonable expectation of reaching the same income level in the
current year); or
(ii) he has such knowledge and experience in financial and business
matters that he is capable of evaluating the risks of receiving the
Transmation Shares hereunder and is able to bear the economic risk of
holding unregistered securities.
(b) Each Seller understands and acknowledges that the Transmation
Shares have not been registered under the Securities Act. Each Seller represents
and warrants to Buyer that he is acquiring the Transmation Shares hereunder for
his own account, for investment, and not with a view to, or for resale in
connection with, any distribution thereof, and that he has no present intention
of selling or otherwise transferring the Transmation Shares or any interest
therein. Each Seller acknowledges and agrees that the Transmation Shares may not
be sold, transferred, pledged or otherwise disposed of except: (i) pursuant to
an effective registration statement under the Securities Act covering the
Transmation Shares (and in compliance with applicable state securities laws); or
(ii) in accordance with Rule 144 of the Rules and Regulations promulgated under
the Securities Act ("Rule 144"); or (iii) pursuant to another available
exemption from registration under the Securities Act and applicable state
securities laws. Buyer will use its best efforts to make Rule 144 available for
use by Sellers in accordance with its terms, but each Seller understands and
acknowledges that at any given time an exemption from registration under the
Securities Act, whether pursuant to Rule 144 or otherwise, may not be available
with respect to the Transmation Shares. Each Seller understands and agrees that:
(A) any transfer of the Transmation Shares is subject to Buyer
<PAGE>
receiving an opinion of counsel satisfactory to it that such transfer will be in
full compliance with all applicable laws; (B) each certificate representing the
Transmation Shares will bear a legend referring to such restrictions on
transferability and sale of the Transmation Shares; and (C) Buyer may cause
customary stop transfer orders to be placed against his account with Buyer's
Transfer Agent.
Section 3.2 Registration Rights. If at any time within ten years after
the Closing Date Buyer proposes to register under the Securities Act any shares
of Buyer's Common Stock for sale to the public in an underwritten transaction
for Buyer's own account, it will each such time give written notice to each
Seller of its intention so to do and, upon the written request of a Seller
received within 20 days after the date of such notice, Buyer will use its best
efforts to cause such Transmation Shares then owned by such Seller as such
Seller requests to be included in the proposed registration statement; provided,
however, that:
(a) Buyer will not be required to give notice of or include any
Transmation Shares in any registration statement in respect of (i) employee
benefit, stock option, stock purchase or similar plans, or (ii) securities other
than Buyer's Common Stock;
(b) Buyer will not be required to include any Transmation Shares of a
Seller in such registration statement if any managing underwriter with respect
thereto in good faith objects to the inclusion therein of such Transmation
Shares; and if such underwriter requires a reduction in the number of
Transmation Shares to be so included, then such reduction will be shared pro
rata by Sellers and any other shareholders of Buyer having registration rights,
in proportion to the number of shares proposed to be sold by each (subject,
however, to the prior rights of William J. Berk under a certain Stock
Registration and Repurchase Agreement between him and Buyer dated April 1, 1979,
as amended);
(c) as a consequence of including any Transmation Shares of a Seller,
Buyer will not be required to use or prepare a registration statement on a form
other than that which it initially proposed to use, nor will it be required to
comply with the registration or exemption provisions of any state "blue sky" law
which it reasonably believes to be burdensome or involve costs which it
determines to be disproportionate to the number of Transmation Shares being sold
in such state or which require Buyer to file any general consent to service of
process, or to qualify as a foreign corporation or as a dealer in securities, or
to subject itself to taxation in respect of doing business in any jurisdiction
in which it is not otherwise so subject;
(d) each Seller will offer and sell his Transmation Shares pursuant to
such registration statement and the prospectus forming a part thereof on the
terms and conditions, including price, and at such times, as will be agreed upon
by Buyer and the managing underwriter with respect to all of the shares being
offered thereby, and each Seller will, subject only to his rights to withdraw
his Transmation Shares prior thereto, enter into such underwriting agreement as
may be required, which agreement may include a standard form of indemnification
of the underwriters and/or a contribution agreement with respect thereto from
each Seller; and each Seller will, if requested, sign
<PAGE>
a power of attorney in favor of Buyer's officers and counsel, which
power of attorney will contain such provisions as may be reasonable and
necessary to accomplish the purposes of this Section 3.2;
(e) each Seller will provide Buyer with any information or responses
which might be necessary to make the registration statement correct, accurate
and complete in all respects with respect to such Seller; provided, however,
that such obligation will not be deemed to limit any disclosure obligation
arising out of a Seller's relationship (if any) to Buyer as an officer, director
or control person;
(f) in the event that by reason of the inclusion of any Transmation
Shares of a Seller in a registration statement, the effective date of such
registration statement is unduly delayed, Buyer may amend any such registration
statement to remove therefrom any or all of the Transmation Shares of such
Seller;
(g) in lieu of including any Transmation Shares of a Seller under the
proposed registration, Buyer may elect to effect a separate registration, and in
such event Buyer may delay the effective date of such separate registration
statement until a date acceptable to any underwriter of the proposed
registration; and in the event Buyer so elects to effect a separate
registration, it will use its best efforts (subject to approval of such
underwriters) to cause such separate registration to become effective not later
than 120 days after the effectiveness of the proposed registration;
(h) at any time prior to the time any registration statement for its
securities which it proposes to register has become effective, Buyer may, to the
extent then permitted by the Securities Act, determine not to effect such
registration, in which event Buyer will have no further obligation under this
Section 3.2 to register any Transmation Shares of a Seller in connection with
such proposed registration; and
(i) with respect to any registration statement in which a Seller
elects to participate, such Seller will pay all of the fees and expenses of his
own counsel, applicable underwriting discounts or commissions, applicable stock
transfer taxes and any other expenses incurred by him and arising out of or
related to the inclusion of his Transmation Shares in such registration
statement.
To the extent that any Transmation Shares of either Seller remain unsold, then
Buyer will continue to be obligated under this Section 3.2 with respect to
subsequent proposed registrations occurring within ten years after the Closing
Date.
Section 3.3 Repurchase Option. If at any time within 30 months following
the Closing Date the Market Price of Buyer's Common Stock falls below $4.00 per
share for 20 of 30 consecutive trading days, then each Seller will have the
right and option (the "Repurchase Option") to require Buyer to repurchase all or
a specified number of the Transmation Shares then owned by such Seller at the
price of $4.00 per share, payable in cash within 90 days following such Seller's
exercise of the Repurchase Option, subject, however, to the following
conditions:
<PAGE>
(a) in the event that the number of outstanding shares of Buyer's
Common Stock is increased or decreased, whether through reorganization, merger,
consolidation, liquidation, recapitalization, tender offer, acquisition, stock
split, reverse split, combination of shares, stock dividend or otherwise, the
$4.00 per share Market Price and $4.00 per share repurchase price referred to in
this Section 3.3 will be proportionately adjusted, so that the Repurchase Option
will become exercisable, and the respective economic positions of each Seller
and Buyer upon any exercise of the Repurchase Option will be the same, as if
such change in the number of outstanding shares of Buyer's Common Stock had not
occurred;
(b) each Seller's Repurchase Option will be exercisable by him (or by
his estate) by notice given to Buyer within 15 days following the 20th trading
day referred to in this Section 3.3, specifying the number of Transmation Shares
such Seller desires Buyer to repurchase, and once so exercised, such Seller's
Repurchase Option may not be revoked; and
(c) notwithstanding the foregoing, Buyer will not be obligated to
repurchase any Transmation Shares, nor will it have any liability to a Seller
for failure to repurchase Transmation Shares, unless M&T has given its prior
written consent to such repurchase, as contemplated by the Subordination
Agreement.
If the event giving rise to the Repurchase Option occurs on more than one
occasion during the 30-month period following the Closing Date, then each Seller
may exercise the Repurchase Option (subject to the foregoing conditions) on each
such occasion, until he no longer owns any Transmation Shares.
Section 3.4 Right of First Refusal. In the event that a Seller at any time
proposes to sell or otherwise dispose of any of his Transmation Shares, he will
first give to Buyer notice thereof, which notice will include the name and
address of the proposed transferee and the purchase price, proposed effective
date and other material terms of the proposed disposition. Buyer will then have
the right, exercisable by notice given to such Seller within 30 days following
receipt of his notice, to purchase any or all of the Transmation Shares proposed
to be disposed of, at a price, payable in cash, equal to the average of the
Market Prices of Buyer's Common Stock for the five trading days immediately
preceding the effective date of the proposed disposition; provided, however,
that notwithstanding the foregoing, Buyer may not exercise its right of first
refusal unless M&T has given its prior written consent thereto, as contemplated
by the Subordination Agreement. If Buyer, for any reason, does not so exercise
its right of first refusal, then Seller may dispose of his Transmation Shares,
but only to the transferee, and on substantially all of the terms (including
number of shares and purchase price) stated in his original notice to Buyer.
Notwithstanding the foregoing, the provisions of this Section 3.4 will not apply
to: (a) any sale of Transmation Shares in a registered public offering; (b) any
sale of Transmation Shares pursuant to Rule 144; (c) any sale of Transmation
Shares in a tender offer, merger or similar transaction in which substantially
all of Buyer's shareholders participate; or (d) any gift or bequest of
Transmation Shares by a Seller without consideration therefor.
<PAGE>
Section 3.5 Market Price. For purposes hereof, the "Market Price" per
share of Buyer's Common Stock on any date will be the closing price of Buyer's
Common Stock on the principal national securities exchange (including The Nasdaq
Stock Market) on which Buyer's Common Stock is then traded, and the closing
price will be the last reported sale price regular way (or, if no sale takes
place on such date, the last reported sale price regular way on the next
preceding day on which a sale took place), as reported by such exchange. If
Buyer's Common Stock is not then traded on a national securities exchange, then
the Market Price will be the closing price of Buyer's Common Stock in the
over-the-counter market as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ"), and the closing price will be the
last reported sale price regular way (or, if no sale takes place on such date,
the last reported sale price regular way on the next preceding day on which a
sale took place), as reported by NASDAQ. If the closing price of Buyer's Common
Stock is not then reported by NASDAQ, then the Market Price will be the average
of the closing bid and closing asked prices of Buyer's Common Stock in the
over-the-counter market as reported by NASDAQ. If the bid and asked prices of
Buyer's Common Stock are not then reported by NASDAQ, then the Market Price will
be the quote furnished by any member of the National Association of Securities
Dealers, Inc. mutually selected by Buyer and Sellers.
3.6 Rights Not Transferable. The rights provided each Seller by this
Article 3 are personal to them, and in no event may any such rights be assigned
or transferred to any transferee of Sellers' Transmation Shares other than the
respective estates of Sellers.
ARTICLE 4. SELLERS' REPRESENTATIONS AND WARRANTIES
Each Seller hereby jointly and severally represents and warrants to
Buyer, as of the date hereof and as of the Closing Date, as follows:
Section 4.1 Organization, Standing and Power of Altek. Altek is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New York. Altek has all necessary corporate power and authority
to own, use and transfer its properties and assets and to transact its business
as now being conducted. Except as set forth in Schedule 4.1, there is no other
jurisdiction in which the character or use of Altek's assets or the nature of
Altek's business makes necessary the licensing or qualification of Altek to do
business as a foreign corporation, and Altek is duly licensed or qualified and
in good standing in each jurisdiction set forth in Schedule 4.1. Except as set
forth in Schedule 4.1, Altek has no Subsidiaries, and all of the capital stock
of each Subsidiary listed in Schedule 4.1 is owned by Altek. Sellers have
heretofore delivered to Buyer true, correct and complete copies of the
Certificate of Incorporation and By-Laws of Altek and of each Subsidiary of
Altek, as currently in effect, and there have been no changes in such
Certificates of Incorporation or By-Laws since the delivery of copies thereof to
Buyer.
Section 4.2 Capitalization. The total authorized capital stock of Altek
consists of 200,000 shares of common stock, par value $.10 per share, of which
60,000 shares are issued and outstanding and no shares are held in the treasury
of Altek. All of the issued and outstanding shares of the capital stock of Altek
are owned by Sellers in the respective
<PAGE>
amounts set forth on Exhibit A. All of the Altek Shares have been duly
authorized and validly issued and are fully paid and non-assessable. There are
no outstanding options, warrants, convertible securities or other rights or
commitments of any character obligating either Seller, Altek or any Subsidiary
of Altek to issue, deliver or sell, or cause to be issued, delivered or sold,
any shares of the capital stock or other securities of Altek or of any
Subsidiary of Altek, or obligating any of them to grant, extend or enter into
any such agreement or commitment.
Section 4.3 Sellers' Title and Authority. Each Seller is a citizen of
the United States. Each Seller owns all right, title and interest in and to the
Altek Shares set forth opposite his name on Exhibit A, free and clear of all
Encumbrances, and no Person other than such Seller has any right, title or
interest therein or thereto. Each Seller has full and exclusive right, power and
authority to execute and deliver this Agreement, to comply with the provisions
hereof and to consummate the transactions contemplated hereby, and this
Agreement is valid and binding upon each Seller in accordance with its terms.
Lessor's execution and delivery of the Lease Amendment, its compliance with the
provisions thereof and the consummation of all of the transactions contemplated
thereby have been duly and validly authorized by all necessary corporate action
on the part of Lessor, and the Lease Amendment is valid and binding upon Lessor
in accordance with its terms.
Section 4.4 Altek's Assets. All of Altek's assets (including the capital
stock of each Subsidiary of Altek) are reflected on its books and records or the
Financial Statements. Altek owns no real property, and neither Altek nor Buyer
will have any liability, whether as a result of the consummation of the
transactions contemplated hereby or otherwise, under Article 31-B of the New
York Tax Law, pertaining to the real property transfer gains tax. Altek has good
and marketable title to all of its assets, free and clear of all Encumbrances
except Permitted Encumbrances.
Section 4.5 No Conflict. Neither the execution and delivery of this
Agreement by either Seller, nor compliance by either Seller with any of the
provisions hereof, nor the consummation of the transactions contemplated hereby,
will: (a) conflict with or result in a breach of any provision of the
Certificates of Incorporation or By-laws of Altek or any of its Subsidiaries;
(b) result in a default, or give rise to any right of termination, cancellation
or acceleration, under any term, condition or provision of any Contract,
Encumbrance or other instrument or obligation to which Altek, any Subsidiary of
Altek or either Seller is a party or by which they or any of their respective
properties or assets may be bound, except for such Contracts, Encumbrances,
instruments and obligations set forth in Schedule 4.5; or (c) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Altek, any
Subsidiary of Altek or either Seller, or any of their respective properties or
assets. Except as set forth in Schedule 4.5, no consent, waiver or approval by,
notice to or filing with any Person is required in connection with the execution
and delivery of this Agreement by either Seller, compliance by either Seller
with any of the provisions hereof or the consummation of the transactions
contemplated hereby.
Section 4.6 Financial Statements. Schedule 4.6 is a description of the
Financial Statements, true, correct and complete copies of all of which have
previously been delivered
<PAGE>
to Buyer. The Financial Statements are in accordance with the books of account
and records of Altek and have been prepared in accordance with GAAP. The
Financial Statements present fairly and accurately Altek's financial position as
at the dates thereof and the results of Altek's operations, changes in Altek's
financial position and other information of Altek included therein for the
periods or as at the dates therein set forth. The Financial Statements show all
assets and liabilities of any kind or nature, direct or indirect, absolute or
contingent, existing as of the dates indicated and required to be disclosed in
accordance with GAAP.
Section 4.7 No Undisclosed Liabilities. Except as disclosed in this
Agreement, in the Financial Statements or in Schedule 4.8, and except for
liabilities or obligations incurred since December 31, 1995 in the ordinary
course of business, Altek does not have, nor are any of its assets or properties
subject to, any debt, liability, obligation or commitment of any kind or nature,
direct or indirect, whether accrued, absolute, contingent or otherwise. To each
Seller's best knowledge, there are no facts which could serve as the basis for
any material debt, liability, obligation or commitment of Altek not so
disclosed.
Section 4.8 Absence of Certain Changes. Except as disclosed in Schedule
4.8, since December 31, 1995, there has not been any material adverse change in
the condition (financial or otherwise), assets, liabilities or business of
Altek, or any damage, destruction or loss, whether or not covered by insurance,
adversely affecting its properties or business. Except as disclosed in Schedule
4.8, and except for the transactions contemplated by this Agreement, since
December 31, 1995, Altek has not:
(a) created, assumed or permitted to exist any Encumbrance, other than
a Permitted Encumbrance, on any of its assets;
(b) sold, leased or otherwise transferred any of its assets, or
canceled any of its rights or claims, other than in the ordinary course of
business for fair and adequate consideration in money or money's worth;
(c) sold, assigned or transferred any patent, trademark, trade name,
copyright or other intangible asset;
(d) incurred any other liability or obligation, whether absolute or
contingent, other than current liabilities in an aggregate amount not exceeding
$25,000, incurred in the ordinary course of business;
(e) paid, prepaid or discharged any liability or obligation except as
required pursuant to the terms thereof;
(f) lost, surrendered or had revoked or limited any license, permit or
other right granted by any governmental authority to operate any asset in the
manner in which it was intended to be operated;
<PAGE>
(g) entered into any Contract not in the ordinary course of business,
or canceled, modified adversely, assigned, encumbered, waived any rights under
or in any way discharged or terminated (other than by performance) any Contract;
(h) received any notice of termination of or default under any
Contract;
(i) allowed to occur or exist any event of default under any Contract
to which it is a party;
(j) made any loan or advance, acquired any accounts receivable or
otherwise extended any credit, except to customers in the ordinary course of
business pursuant to established credit policies, or acquired the securities or
obligations of any Person;
(k) made capital expenditures, or any commitments therefor, in excess
of $25,000 in the aggregate;
(l) made any material change in the rate of compensation payable or to
become payable by Altek to any of its officers, employees or agents or in the
formula for determining any such compensation, or entered into or amended in any
material respect any Contract providing for compensation or benefits;
(m) made any commitment (through negotiations or otherwise) or
incurred any liability to any labor organization or became aware of any material
threat of strike or other interruption of work arising from labor difficulties;
(n) reduced or failed to carry insurance in at least the respective
amounts carried prior to December 31, 1995;
(o) experienced any adverse change in its relationship with any of its
suppliers, distributors, dealers or customers;
(p) experienced any other change in its business which could have an
adverse effect on the future ongoing operations or financial condition of Altek
or Buyer after consummation of the transactions contemplated hereby;
(q) altered or revised any of its accounting principles, procedures,
methods or practices; or
(r) agreed to do any of the things described in this Section 4.8.
Section 4.9 Compliance with Laws. Altek is in full compliance in all
material respects with all applicable laws, rules, ordinances, orders and
regulations and, to each Seller's best knowledge, there is no basis for any
action, suit or proceeding arising out of or in connection therewith. Altek has
not received any notice of any violation of any such law, rule, ordinance, order
or regulation, and Altek is not subject to any settlement agreement or consent
decree with continuing obligations or restrictions on Altek. All of Altek's
assets and
<PAGE>
business and the current uses thereof conform in all material respects to all
such laws, rules, ordinances, orders and regulations, and all franchises,
permits, licenses and other documents necessary for Altek to own, use and
transfer its assets and operate its business have been obtained and are in full
force and effect, and will, immediately after Closing, be in full force and
effect for the benefit of Altek.
Section 4.10 Equipment. Schedule 4.10 is an accurate and complete
listing of all equipment, machinery, furniture, fixtures, leasehold
improvements, vehicles and supplies owned by Altek (collectively, the
"Equipment"). All of the Equipment is in good condition and repair, ordinary
wear and tear excepted, and has been maintained in accordance with the
recommendations of the manufacturers thereof and in accordance with good
practice prevailing in the industry. No extraordinary expenditures either for
repair or replacement of any of the Equipment is now foreseeable. Without
limiting the foregoing, Sellers will cause Altek to perform all normal repair
and maintenance with respect to all the Equipment, and take all necessary steps
to maintain all existing warranties thereon, through and including the Closing
Date.
Section 4.11 Inventory. Sellers have previously delivered to Buyer a
portfolio containing an accurate and complete listing of all inventory owned by
Altek, which is summarized in Schedule 4.11. All of such inventory: (a) has been
properly valued at the lower of cost (first-in, first-out) or market (net
realizable value) in accordance with GAAP; (b) was paid for in full or liability
for the unpaid purchase price thereof was fully recognized in the Financial
Statements; (c) consists of inventories of the kind, quality and quantity
regularly and currently used in its business; and (d) is in good and saleable
condition and fit for the purposes intended. None of such inventory has been
consigned to others.
Section 4.12 Accounts Receivable. All of the accounts receivable
(including the accounts, obligations, Contracts and instruments which underlie
such accounts receivable) set forth on the Financial Statements or in Schedule
4.12, and those accounts receivable arising subsequent to December 31, 1995 and
prior to the Closing Date, will be good and collectible on the Closing Date at
their respective full amounts. Except as set forth in Schedule 4.12, all of such
accounts receivable are owned by Altek free of all claims and Encumbrances.
Except as set forth in Schedule 4.8, since December 31, 1995 Altek has not
rescinded, canceled, settled, modified or otherwise compromised any accounts
receivable, or any indebtedness due thereunder, or any guarantee or repurchase
obligation related thereto, except in the ordinary course of business in
accordance with prior practices.
Section 4.13 Contracts. Schedule 4.13 is an accurate and complete
listing of each Contract to which Altek is a party and there is no Contract
material to Altek, its assets or its business which is not so listed. Altek has
heretofore delivered to Buyer true, correct and complete copies of each Contract
listed in Schedule 4.13. Each of such Contracts is valid and binding, in full
force and effect and, except for obtaining any consents, waivers or approvals or
giving any notice listed in Schedule 4.5, will remain in full force and effect
for Altek's benefit immediately after Closing. There has not been under any such
Contract any default by Altek or, to each Seller's best knowledge, by any other
party thereto, nor any event which, after notice or lapse of time, or both,
would constitute any such default or
<PAGE>
result in a right to accelerate against or a loss of rights by Altek. All
options to renew or extend the term of any lease listed in Schedule 4.13 which
are exercisable by Altek no later than the date hereof have been duly exercised,
and all such options which are exercisable no later than the Closing Date will
have been duly exercised. Altek is not subject to any renegotiation or price
redetermination relating to any government Contract listed in Schedule 4.13.
Section 4.14 Intellectual Property. Schedule 4.14 is an accurate and
complete listing of all patents, applications for patents, copyrights or license
agreements used or owned by or granted to Altek, and all assumed names, trade
names, trademark and service mark registrations, applications for trademark or
service mark registrations, trademarks or service marks relating to Altek's
business. Neither Seller nor any of the past or present employees, officers,
directors or shareholders of Altek has any rights in any of such intellectual
property, or in any of the inventions, whether or not patented, which have been
or are used by Altek or which pertain to its business. Altek has not granted any
outstanding licenses or other rights to know-how or other intellectual property
owned by or licensed to it. Altek is not liable, nor has it made any Contract
whereby it may become liable, to any Person for any royalty or other
compensation for the use of any invention, whether or not patented, trademark,
trade name or copyright. None of the rights of Altek in, to or under the trade
secrets, inventions, copyrights, trademarks, service marks, trade names, and any
applications and registrations therefor, know-how and other intellectual
property set forth in Schedule 4.14 will be adversely affected by consummation
of the transactions contemplated by this Agreement, and immediately after the
Closing Altek will be entitled to the full benefits thereof. Altek has not
received any notice or claim of infringement of any patent, invention right,
trademark, trade name or copyright set forth in Schedule 4.14, and to each
Seller's best knowledge, there is no substantial basis for any such claim if
made hereafter. To each Seller's best knowledge, there is no patent, technical
development or invention owned by any other Person which could materially
adversely affect Altek's business. Except as set forth in Schedule 4.14, Altek
has the unrestricted right to use the name "Altek Industries Corp." and all
variants thereof, and all other names and marks set forth in Schedule 4.14.
Section 4.15 Legal Proceedings, Etc. Except as set forth in Schedule
4.15, there is no legal, equitable, administrative or arbitration action, suit,
proceeding or known investigation pending or, to each Seller's best knowledge,
threatened against or affecting Altek, any Subsidiary of Altek or either Seller
or any of their respective assets which, if adversely determined, could
adversely affect the business, operations or assets, or the condition, financial
or otherwise, of Altek or such Subsidiary immediately after the Closing, or the
ability of Sellers to consummate the transactions contemplated hereby. Except as
set forth in Schedule 4.15, there is no judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency, instrumentality
or arbitrator outstanding against Altek or any Subsidiary of Altek and, to each
Seller's best knowledge, there is no basis for any action, suit, proceeding or
investigation against Altek or any Subsidiary of Altek. Except as set forth in
Schedule 4.15, no such action, suit, proceeding, known investigation, judgment,
decree, injunction, rule or order arises out of the employment of labor, equal
employment opportunity, occupational health and safety, economic stabilization
or environmental protection. Neither Altek nor any Subsidiary of Altek nor
either Seller is in default
<PAGE>
with respect to any order, injunction or decree of any court or governmental
department, commission, board or agency, and no such order, injunction or decree
is now in effect which restrains the operations or the use of the properties of
Altek or of any Subsidiary of Altek.
Section 4.16 Tax Matters. The provisions for taxes set forth on the
Financial Statements are in the aggregate adequate to cover any and all accrued
and unpaid taxes of Altek for the period ended on December 31, 1995 and all
prior periods. All returns or reports concerning taxes of any kind required to
be filed by Altek and any and all taxes, interest and penalties which are
disclosed by such returns or reports to be due to any taxing authority or which
may be required to be paid to any taxing authority, whether or not disclosed by
such returns or reports, with respect to any period up to December 31, 1995 have
been duly paid or are set forth on the Financial Statements. No such return or
report for any period ending after December 31, 1990 has been examined by any
taxing authority, nor has Altek received any notice of the intention of any
taxing authority to conduct an examination thereof.
Section 4.17 Insurance. Schedule 4.17 contains a true, correct and
complete description of all fire, theft, casualty, products liability, general
liability, life, hospitalization, medical reimbursement and other insurance
coverage insuring Altek and its personnel, assets, properties and business
operations, specifying, with respect to each such insurance coverage, the risk
insured against, the limits of coverage, the deductible amount (if any) and the
premium rate. All of such policies, plans and programs are maintained by Altek
except as disclosed in Schedule 4.17. The insurance described in Schedule 4.17
will remain outstanding and duly in force, and the specific coverages thereof
will be fully maintained, through and including the Closing Date.
Section 4.18 Labor Relations and Employment Matters.
(a) Except as set forth in Schedule 4.18: (i) Altek has not entered
into any collective bargaining agreement or other Contract with any employee,
union, labor organization or other employee representative or group of employees
and, to each Seller's best knowledge, no such organization or Person has made or
is making any attempt to organize or represent employees of Altek; (ii) there is
no pending grievance or arbitration and no unsatisfied or unremedied grievance
or arbitration award against Altek or any employee of Altek and, to each
Seller's best knowledge, there is no basis for any such grievance or
arbitration; (iii) there is no unfair labor practice charge, pending trial of
unfair labor practice charges, unremedied unfair labor practice finding or
adverse decision of the National Labor Relations Board or the New York State
Department of Labor, or any hearing officer or administrative law judge thereof,
against Altek or any agent, representative or employee of Altek and, to each
Seller's best knowledge, there is no basis for any such unfair labor practice
charge; and (iv) there is not pending or, to each Seller's best knowledge,
threatened with respect to Altek or its employees any labor dispute, strike or
work stoppage.
(b) Without limiting the generality of Section 4.9, to each Seller's
best knowledge Altek is in full compliance with all applicable laws, rules,
regulations, standards and Contracts relating to employment, including those
relating to wages, hours, working
<PAGE>
conditions, hiring, promotion, occupational health and safety (including those
dealing with employee handling or use of or exposure to hazardous or toxic
substances and the training of employees with respect to such substances), and
the payment and withholding of taxes and other similar obligations, and Altek
has not received any notice of any violation of any such law, rule, regulation,
standard or Contract. Altek is in full compliance with all applicable
affirmative action and equal employment opportunity obligations arising under
any state or Federal law, regulation, executive order or ordinance or any
Contract or subcontract with any governmental entity or other Person. Altek has
withheld from the wages and salaries of its employees as is required by law and
is not liable for any arrears of wages or any tax or penalty in connection
therewith.
(c) Without limiting the generality of Section 4.15, except as set
forth in Schedules 4.15 or 4.18, there is no employment-related claim, cause of
action, grievance, judgment or other adverse charge or decision of any kind
(including any in the nature of employment discrimination of any type, breach of
contract, wrongful discharge, retaliation, health, safety or right-to-know
violations, child labor violations or non-payment of wages, benefits or wage
supplements), under any law, rule, regulation, standard, collective bargaining
agreement or other Contract, pending against Altek or any of its officers,
employees or agents and, to each Seller's best knowledge, there is no basis for
any such claim, cause of action, grievance, judgment or other adverse charge or
decision.
(d) No current or former employee of Altek has any claim against Altek
or any of its officers, employees or agents under any law, rule, regulation,
standard or Contract on account of or for: (i) wages or salary for any period
other than the current payroll period; (ii) overtime pay for any period other
than the current payroll period; (iii) vacation, holiday or other time off or
pay in lieu thereof (other than time off or pay in lieu thereof earned in
respect of 1996); or (iv) any violation of any law, rule, regulation, standard
or Contract relating to the payment of wages, fringe benefits, wage supplements
or hours of work; and all liability for vacation, holiday and other time off or
pay in lieu thereof has been recorded in the Financial Statements.
(e) Neither Altek nor Buyer is, nor immediately after the Closing will
be, liable for severance pay or any other payment of monies to any employee of
Altek as a result of the execution of this Agreement or the parties' performance
of its terms, or for any other reason in any way related to the consummation of
the transactions contemplated hereby.
Section 4.19 Employee Benefit Plans.
(a) Except as set forth in Schedule 4.19, Altek does not now maintain,
administer or contribute to, and has never maintained, administered or
contributed to:
(i) any "employee pension benefit plan" as such term is defined in
section 3(2) of ERISA (a "Pension Plan");
(ii) any "employee welfare benefit plan" as such term is defined in
section 3(1) of ERISA (a "Welfare Plan"), whether insured or
otherwise;
<PAGE>
(iii) any "voluntary employee benefits association" as such term is
defined in section 501(c)(9) of the Code, which provides or is
intended to provide any Welfare Plan benefits (a "VEBA"), whether
insured or otherwise; or
(iv) any Contract, plan, arrangement or practice providing for
insurance coverage (including any self-insured arrangements),
supplemental unemployment benefits, deferred compensation, bonuses,
stock options, stock purchases, "parachute payments" (within the
meaning of section 280G of the Code), or other form of incentive or
post-employment compensation or benefits which (A) is not a Pension
Plan or a Welfare Plan, and (B) covers or may provide benefits to any
employee or prior employee of Altek or any Person with which Altek is
a member of the same controlled group or affiliated service group
within the meaning of sections 414(b), 414(c) or 414(m) of the Code
(an "Affiliate") (collectively, "Benefit Arrangements").
Each Pension Plan, Welfare Plan, VEBA and Benefit Arrangement listed in Schedule
4.19 is now and has heretofore operated in full compliance with all applicable
provisions of ERISA, the Code, all other applicable laws, orders, rules and
regulations, the terms and provisions of such Pension Plan, Welfare Plan, VEBA
or Benefit Arrangement, and all amendments thereto. With respect to each Pension
Plan, Sellers have, or will promptly apply for and take all steps necessary to
receive, current determination letters from the Internal Revenue Service to the
effect that such Pension Plan complies with all relevant provisions of the Code.
(b) The present value of all accrued benefits, whether or not vested,
under each Pension Plan which is not an "individual account plan" as such term
is defined in section 3(34) of ERISA (a "Defined Benefit Pension Plan") listed
in Schedule 4.19, as of the latest valuation date of such Defined Benefit
Pension Plan, does not exceed the value of the assets of such Defined Benefit
Pension Plan or the projected benefit obligations for such Plan under GAAP.
Altek has heretofore furnished to Buyer the three most recent actuarial reports
prepared in connection with such Defined Benefit Pension Plan, together with
current and complete age, salary, service and related data for employees and
prior employees covered under each such Defined Benefit Pension Plan. No Defined
Benefit Pension Plan has, since September 2, 1974, been completely or partially
terminated, nor has there occurred any "reportable event", as such term is
defined in section 4043(b) of ERISA, with respect to any such Defined Benefit
Pension Plan since the effective date of said section 4043(b), except that the
Altek Industries Corporation Defined Benefit Plan (also known as the Altek
Industries Corp. Employees' Retirement Plan) (Plan Identification Number 002)
("Plan 002") has been terminated, effective March 1, 1996. With respect to such
termination of Plan 002, Sellers will take all steps necessary promptly to
secure from the Internal Revenue Service a determination letter to the effect
that such termination does not disqualify Plan 002, and Sellers will take all
steps necessary to terminate Plan 002 and liquidate the trust thereunder in
compliance with the requirements of the Pension Benefit Guaranty Corporation
("PBGC") for a standard termination, as set forth in PBGC Regulation 2617. No
event has occurred and no condition exists which could constitute grounds for
termination of any Defined Benefit Pension Plan under section 4042 of ERISA. No
amendment has been made to any Defined Benefit Pension Plan which requires or
could require the posting of security to such Plan
<PAGE>
under section 401(a)(29) of the Code. All PBGC premiums due for each Defined
Benefit Pension Plan with respect to every plan year commencing prior to the
Closing Date have or will have been paid in full by Altek prior to the Closing
Date. No provision of any Defined Benefit Pension Plan nor any amendment
thereto, nor the absence of any such provision, would result in any limitation
on the sponsoring employer's right to terminate such Plan and receive residual
amounts from such Plan under section 4044 of ERISA, including section 4044(d)(2)
of ERISA.
(c) The present value of all accrued benefits under each VEBA does not
exceed the value of the assets of such VEBA. Altek has heretofore furnished to
Buyer the three most recent actuarial reports prepared in connection with each
VEBA, together with current and complete age, salary, service and related data
for employees covered under each such VEBA.
(d) Except as set forth in Schedule 4.19, none of the terms of any
VEBA, Welfare Plan or Benefit Arrangement requires such VEBA, Welfare Plan or
Benefit Arrangement, or Altek or any Affiliate, to provide or pay the cost of
any benefits to any individual after retirement or other termination of
employment with Altek or such Affiliate. No provision of any Pension Plan, VEBA,
Welfare Plan or Benefit Arrangement, nor any amendment thereto, nor the absence
of any such provision, would result in any limitation on the sponsoring
employer's right to terminate such Pension Plan, VEBA, Welfare Plan or Benefit
Arrangement.
(e) No Pension Plan has ever incurred any "accumulated funding
deficiency", as such term is defined in section 412 of the Code, whether or not
waived. With respect to each Pension Plan, Altek has timely applied for and
received from the Internal Revenue Service a determination letter to the effect
that such Pension Plan, as adopted by Altek, is qualified under section 401(a)
of the Code, and there has been no occurrence, whether by action or inaction,
which could adversely affect the qualified status of any such Pension Plan.
Copies of all such determination letters have been furnished to Buyer.
(f) Each Welfare Plan and VEBA which is (or is in part) a "group
health plan" within the meaning of section 607 of ERISA has fully complied in
each and every instance with the provisions of section 601 of ERISA and section
4980B(f) of the Code, relating to continuation coverage requirements. Each
Welfare Plan which is intended to meet the requirements for tax-favored
treatment under subchapter B of chapter 1 of the Code meets such requirements,
and there is no disqualified benefit (within the meaning of section 4976(b) of
the Code) which would give rise to any tax liability under section 4976(a) of
the Code.
(g) No Pension Plan, Welfare Plan, VEBA or Benefit Arrangement, nor
any trust created thereunder, now holds or has heretofore held as assets any
stock or securities issued by Altek or any Affiliate. No Pension Plan, VEBA,
Welfare Plan or Benefit Arrangement, nor any trust created thereunder, nor any
trustee, administrator or fiduciary thereof, has engaged in a "prohibited
transaction" within the meaning of section 4975 of the Code or any transaction
which could give rise to any civil penalty imposed by section 502 of ERISA. No
event has occurred and no condition exists with respect to any Pension Plan,
<PAGE>
Welfare Plan, VEBA or Benefit Arrangement which would give rise to any tax
liability under sections 4971, 4972, 4977, 4979 or 6652 of the Code, or to any
fine under section 502(c) of ERISA.
(h) All insurance premiums, contributions and payments accrued under
each Pension Plan, Welfare Plan, VEBA and Benefit Arrangement, determined in
accordance with prior funding and accrual practices, as adjusted to include
proportional insurance premiums, contribution and payment accruals for the
period from December 31, 1994 to the Closing Date, will be discharged and paid
on or prior to the Closing Date, except to the extent that any such contribution
or payment accrual is set forth in Schedule 4.19. There has been no amendment to
any Pension Plan, Welfare Plan, VEBA or Benefit Arrangement which could
materially increase the expense of maintaining such Pension Plan, Welfare Plan,
VEBA or Benefit Arrangement above the level of the expense incurred in respect
thereof for the year ended December 31, 1994, and to each Seller's best
knowledge, there is no other event or condition which could result in such an
increase in expense.
(i) All forms, reports and documents which have been required to be
filed with the Internal Revenue Service, the United States Department of Labor
or the PBGC, and/or distributed to participants, with respect to each Pension
Plan, VEBA, Welfare Plan and Benefit Arrangement, including annual reports (Form
5500), summary annual reports and summary plan descriptions, have been timely
filed and/or distributed, as the case may be. Altek has heretofore furnished to
Buyer a complete copy of (i) the most recent determination letter issued by the
Internal Revenue Service with respect to each Pension Plan and any outstanding
application for a determination, (ii) the most recent ruling letter issued by
the Internal Revenue Service with respect to the tax exempt status of each VEBA
and any outstanding application for a ruling letter, (iii) the Plan, trust
documents and summary plan description relating to each Pension Plan, Welfare
Plan and VEBA, (iv) the three most recent annual reports, certified financial
statements, attorney's response to an auditor's request for information and
summary annual reports for each Pension Plan and Welfare Plan, and (v) all
documents relating to each Benefit Arrangement. The Financial Statements reflect
all Pension Plan, Welfare Plan, VEBA and Benefit Arrangement liabilities in
accordance with GAAP.
(j) Without limiting the generality of Section 4.15, except as set forth in
Schedules 4.15 or 4.19: (i) there is no legal, equitable, administrative or
arbitration action, suit, proceeding or known investigation pending or, to each
Seller's best knowledge, threatened against or affecting any Pension Plan, VEBA,
Welfare Plan or Benefit Arrangement, any fiduciary thereof or any assets of any
trust, insurance or annuity contract thereunder, and to each Seller's best
knowledge, there is no basis for any such action, suit, proceeding or
investigation; and (ii) there is no judgment, decree, injunction, rule or order
of any court, governmental department, commission, agency, instrumentality or
arbitrator outstanding against or affecting any Pension Plan, VEBA, Welfare Plan
or Benefit Arrangement, any fiduciary thereof or any assets of any trust,
insurance or annuity contract thereunder.
<PAGE>
Section 4.20 Environmental Matters.
(a) As used herein, the term "Environmental Laws or Regulations" means
and includes regulatory programs involving: air emissions; liquid discharges to
streams, ponds, ditches or other surface waters; liquid discharges to ground
waters; liquid discharges to publicly-owned treatment works; disposal of solid
and/or hazardous wastes; marking, maintenance and/or removal of electrical
equipment containing PCBs; manufacture and/or construction (including
renovation) involving asbestos materials; activities in or adjacent to fresh
water wetlands, flood hazard areas, coastal zone management areas and/or
historic preservation areas; registration, operation, testing and/or removal or
replacement of storage tanks for petroleum products and/or hazardous substances;
and emergency, planning and community right-to-know laws, including submission
of hazardous substance inventory information to Federal, state or local
authorities.
(b) Altek is in full compliance with all applicable Environmental Laws
or Regulations, and all orders and directives of Federal, state or local
governments or governmental authorities relating to Environmental Laws or
Regulations. Altek has never disposed of hazardous or toxic substances,
hazardous wastes or petroleum (collectively, "Hazardous Substances") on any of
the premises on which its business is or has been conducted and, to each
Seller's best knowledge, there has been no such disposal by any other Person,
including any current or prior owner or operator of any of such premises. There
is no asbestos or asbestos-containing material in any of the premises on which
Altek's business is or has been conducted.
(c) Except as set forth in Schedule 4.20: (i) there are no underground
Hazardous Substance storage tanks located on the premises on which Altek's
business is conducted; (ii) Altek has never received any requests for
information from federal, state or local agencies concerning the alleged
disposal, spill or release of Hazardous Substances; and (iii) Altek has never
been or alleged to be a "potentially responsible party" under the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, or any
corresponding state statute. From the date hereof through and including the
Closing Date, Sellers will immediately provide Buyer with a copy of any notice,
citation, complaint or other directive from any Person whereby Altek's or
Sellers' compliance with Environmental Laws or Regulations is called into
question.
Section 4.21 Related Party Transactions. Lessor, which is the owner and
lessor of the premises on which Altek's business is conducted, is a corporation
owned by the children of Sellers. Except for the lease relationship between
Lessor and Altek, and except as set forth in Schedule 4.21, Altek is not
indebted in any amount whatsoever to, nor is there any business relationship,
whether under any Contract or otherwise, between Altek and any person who is an
officer, director or shareholder of Altek, or any of their respective spouses,
children or affiliated Persons, nor is any of such Persons indebted to Altek in
any amount whatsoever. No officer, director or shareholder of Altek, nor any
spouse, child or Person affiliated therewith, has any interest in any
competitor, supplier or customer of Altek, except for immaterial interests in
publicly held companies.
<PAGE>
Section 4.22 Product Warranties. Sellers have heretofore delivered to
Buyer copies of all forms of product warranties and guarantees utilized by Altek
with respect to its products or services. There are no outstanding claims or
liabilities with respect to the products or services of Altek under any product
warranty or guaranty or with respect to any product sold or service rendered by
Altek in the ordinary course of business.
Section 4.23 Brokers and Finders. Neither Altek nor either Seller nor
any of their respective officers, directors, employees or agents has employed
any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
hereby.
Section 4.24 Material Misstatements or Omissions. No representation or
warranty of either Seller made in this Agreement, nor any Schedule or Closing
certificate furnished or to be furnished to Buyer by or on behalf of either
Seller pursuant hereto or in connection with the transactions contemplated
hereby, contains (or will when furnished contain) any untrue statement of a
material fact, or omits (or will then omit) to state a material fact necessary
in order to make the statement of facts made therein not misleading.
ARTICLE 5. BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to each Seller, as of the date hereof and
as of the Closing Date, as follows:
Section 5.1 Organization, Standing and Power. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Ohio. Buyer is duly qualified to do business as a foreign corporation
and is in good standing under the laws of the State of New York. Buyer has all
necessary corporate power and authority to execute and deliver this Agreement,
to comply with the provisions hereof and to consummate the transactions
contemplated hereby.
Section 5.2 Authority for Transaction. Buyer's execution and delivery of
this Agreement, its compliance with the provisions hereof and the consummation
of all of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Buyer, and this
Agreement is valid and binding upon Buyer in accordance with its terms. Without
limiting the generality of the foregoing, the approval of Buyer's shareholders
is not required for Buyer's valid execution and delivery of this Agreement, its
compliance with the provisions hereof and the consummation of all of the
transactions contemplated hereby.
Section 5.3 No Conflict. Neither the execution and delivery of this
Agreement by Buyer, nor compliance by Buyer with any of the provisions hereof,
nor the consummation of the transactions contemplated hereby will: (a) conflict
with or result in a breach of any provision of Buyer's Certificate of
Incorporation or Code of Regulations; (b) result in a default, or give rise to
any right of termination, cancellation or acceleration, under any term,
condition or provision of any Contract, Encumbrance or other instrument or
obligation to which Buyer is a party or by which it or any of its properties or
assets may be bound, except
<PAGE>
for certain credit agreements between Buyer and M&T; or (c) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Buyer or any
of its properties or assets. Except for the consent of M&T, no consent, waiver
or approval by, notice to or filing with any Person is required in connection
with the execution and delivery of this Agreement by Buyer, compliance by Buyer
with any of the provisions hereof or the consummation of the transactions
contemplated hereby.
Section 5.4 Disclosure. Buyer has heretofore furnished to Sellers true
and complete copies (including Exhibits) of the following:
(a) Buyer's Annual Reports on Form 10-K for the fiscal years ended
March 31, 1993, 1994 and 1995;
(b) Buyer's Annual Reports to Shareholders for the fiscal years ended
March 31, 1993, 1994 and 1995;
(c) Buyer's Quarterly Reports on Forms 10-Q and 10-Q/A for the fiscal
quarters ended June 30, 1995, September 30, 1995 and December 31, 1995;
(d) Buyer's Current Reports on Form 8-K dated August 23, 1993, June
30, 1994, and August 4, 1994;
(e) Buyer's Notification on Form 12b-25 dated June 28, 1994;
(f) Buyer's definitive proxy statements issued in connection with its
1993, 1994 and 1995 Annual Meetings of Stockholders; and
(g) Buyer's Registration Statement on Form S-8 (Registration No.
33-61665);
that being each and every document filed by Buyer with the Securities and
Exchange Commission under the Securities Act or the Securities Exchange Act of
1934, as amended, since April 1, 1993. Buyer will promptly furnish to Sellers
true and complete copies (including Exhibits) of all additional such documents
which may be so filed by Buyer on or before the Closing Date. As of the date it
was filed, no such document (other than any such document expressly amended by
subsequent filings) 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 misleading.
Section 5.5 Transmation Shares. When issued to Sellers in accordance
with the terms of this Agreement, the Transmation Shares will have been duly
authorized and validly issued and will be fully paid and non-assessable.
Section 5.6 Legal Proceedings, Etc. There is no legal, equitable,
administrative or arbitration action, suit, proceeding or known investigation
pending or, to Buyer's best knowledge, threatened against or affecting Buyer or
any of its assets which, if adversely
<PAGE>
determined, would adversely affect the ability of Buyer to consummate the
transactions contemplated hereby.
Section 5.7 Brokers and Finders. Neither Buyer nor any of its officers,
directors, employees or agents has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby.
Section 5.8 Material Misstatements or Omissions. No representation or
warranty of Buyer made in this Agreement, nor any Closing certificate to be
furnished to either Seller by or on behalf of Buyer pursuant hereto or in
connection with the transactions contemplated hereby, contains (or will when
furnished contain) any untrue statement of a material fact, or omits (or will
then omit) to state a material fact necessary in order to make the statement of
facts made therein not misleading.
ARTICLE 6. SELLERS' COVENANTS
Section 6.1 Indemnification.
(a) Each Seller will be responsible for, and hereby jointly and
severally indemnifies Buyer and Altek and holds them and their agents,
successors and assigns harmless, at all times from and after the Closing Date,
from, against and in respect of:
(i) all losses, damages and deficiencies resulting from any failure or
breach of any representation or warranty made in this Agreement based
on facts within the best knowledge of either Seller, or any breach or
nonfulfillment of any covenant or agreement of either Seller made in
this Agreement; and
(ii) all losses, damages and deficiencies resulting from any failure
or breach of any representation or warranty made in this Agreement
based on facts not within the best knowledge of Sellers, but only to
the extent that the aggregate of such losses, damages and deficiencies
exceeds $100,000; and
(iii) all losses, damages and deficiencies arising in connection with
taxes on income or capital gains (including penalties and interest, if
any) payable, or determined to be payable, by Altek or by either
Seller, for any period through and including the Closing Date, or with
respect to the transactions contemplated by this Agreement; and
(iv) all losses, damages and deficiencies arising in connection with
(A) Plan 002 at any time, or (B) the Altek Industries Corp. Profit
Sharing Plan with respect to its operations through the date of
receipt of the favorable determination letter referenced in Section
4.19(a); and
(v) all losses, damages and deficiencies arising within three years
after the Closing Date in respect of products liability and warranty
liability of Altek,
<PAGE>
but only to the extent that the aggregate of such losses, damages and
deficiencies exceeds $75,000; and
(vi) all losses, damages and deficiencies arising in connection with
any violation by or on behalf of Altek, on or before the Closing Date,
of any law, rule, ordinance, order or regulation; and
(vii) all actions, suits, proceedings, claims, demands, assessments,
judgments, fines, penalties, amounts paid in settlement, costs and
expenses (including reasonable attorneys' fees and expenses) incident
to any of the foregoing, including actions, suits, proceedings, claims
and demands asserted by Buyer or Altek against either Seller;
provided, however, that as between Sellers, their indemnification obligations
hereunder will be borne 56.6667 percent by E. Lee Garelick, and 43.3333 percent
by James N. Wurtz.
(b) Buyer will give prompt notice to Sellers of any demand for
indemnification under this Section 6.1, stating in reasonable detail the nature
thereof. If any such demand arises out of a claim made against Buyer or Altek by
any Person other than a Seller (or an affiliated Person of a Seller), Sellers
will promptly (so as not to prejudice Buyer's or Altek's rights thereby) notify
Buyer whether Sellers intend to defend against the claim. If Sellers so
undertake to defend against the claim, Buyer will cooperate in all reasonable
respects with Sellers in such defense, will make available to them all records
and other materials reasonably required by them in such defense, and will have
the right (at its own expense) to participate in such defense, but Sellers will
at all times control such defense. If Sellers do not so undertake to defend
against the claim, then Buyer may defend against the claim, in which case
Sellers will cooperate in all reasonable respects with Buyer in such defense,
will make available to Buyer all records and other materials reasonably required
by Buyer in such defense, and will have the right to participate in such
defense, but Buyer will at all times control such defense.
Section 6.2 Right of Set-Off. Each Seller agrees that any payments which
may be due to him from Buyer, whether under the Note or otherwise, will be used
by Buyer to satisfy any demands for indemnification asserted against such Seller
under Section 6.1, and that if so used by Buyer, such will be and constitute a
complete and absolute set-off against any such payments which may become due to
such Seller from Buyer. Buyer will exhaust the right of set-off herein provided,
to the extent of the amount of any such payments that may be due to either
Seller from Buyer, prior to otherwise proceeding against such Seller to satisfy
any demands for indemnification. Notwithstanding the foregoing, if there is any
disagreement between Buyer and a Seller concerning the validity of any claim
asserted under Section 6.1, then such disagreement may, on demand of either
party, be referred to arbitration in the City of Rochester, New York. In such
event, a panel of three arbitrators will be appointed: one arbitrator will be
appointed by Buyer, one will be appointed by Sellers, and one will be appointed
by the two so appointed. The determination in writing of such arbitrators,
signed by at least two of them, will be final and binding on the parties. Such
determination will be made as soon as practicable after the reference of the
claim to
<PAGE>
arbitration. The arbitrators will be governed by the Commercial Arbitration
Rules of the American Arbitration Association then in effect, and will have full
power to make such regulations and to give such orders and directions in all
respects as they will deem expedient, as well as with respect to the claims and
differences referred to them, and also with respect to the mode and times of
executing and performing any of the acts or things which may be awarded or
directed to be done. Buyer (on the one hand) and Sellers (on the other) will
each bear one-half of the fees and expenses of such arbitrators.
Section 6.3 Affirmative Covenants of Sellers Prior to Closing. During
the period from the date hereof to the Closing Date, Sellers will, and will
cause Altek to:
(a) afford representatives of Buyer free access during reasonable
business hours to Altek's offices, buildings, equipment, records, files, books
of account and tax returns, furnish Buyer with all information concerning
Altek's business as Buyer may reasonably request, and permit representatives of
Buyer to make extracts from and copies of all of Altek's agreements, tax
returns, appraisals, reports, records, books of account and files;
(b) conduct Altek's business and operations in the same manner in
which the same have heretofore been conducted, and maintain Altek's books of
account in the same manner as heretofore maintained;
(c) maintain and preserve Altek's business intact and preserve Altek's
relationships with its customers, employees and others having business relations
with it so that its business will be unimpaired on the Closing Date;
(d) maintain each Contract listed in Schedule 4.13 in full force and
effect in accordance with its terms;
(e) promptly notify Buyer orally and in writing of any change in
Altek's business, results of operations, financial condition, assets,
liabilities or prospects which may be materially adverse, either singly or in
the aggregate, to Altek or to its business; and
(f) promptly notify Buyer orally and in writing if any representation
or warranty of either Seller made in this Agreement, or any Schedule or Closing
certificate furnished or to be furnished to Buyer by or on behalf of either
Seller pursuant hereto or in connection with the transactions contemplated
hereby, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statement of facts made therein not
misleading.
Section 6.4 Negative Covenants of Sellers Prior to Closing. During the
period from the date hereof to the Closing Date, unless Buyer has given its
consent thereto in writing, Sellers will not permit Altek to:
<PAGE>
(a) create, assume or permit to exist any Encumbrance, other than a
Permitted Encumbrance, on any of its assets;
(b) sell, lease or otherwise transfer any of its assets, or cancel any
of its rights or claims, other than in the ordinary course of business for fair
and adequate consideration in money or money's worth;
(c) sell, assign or transfer any patent, trademark, trade name,
copyright or other intangible asset;
(d) incur any other liability or obligation, whether absolute or
contingent, other than current liabilities incurred in the ordinary course of
business;
(e) pay, prepay or discharge any liability or obligation except as
required pursuant to the terms thereof or otherwise in the ordinary course of
business;
(f) lose, surrender or have revoked or limited any license, permit or
other right granted by any governmental authority to operate any asset in the
manner in which it was intended to be operated;
(g) enter into any Contract not in the ordinary course of business, or
cancel, modify adversely, assign, encumber, waive any rights under, or in any
way discharge or terminate (other than by performance) any Contract;
(h) allow to occur or exist any event of default under any Contract to
which it is a party;
(i) make any loan or advance, acquire any accounts receivable or
otherwise extend any credit, except to customers in the ordinary course of
business pursuant to established credit policies, or acquire the securities or
obligations of any Person;
(j) make any capital expenditure or any commitment therefor;
(k) make any material change in the rate of compensation payable or to
become payable by Altek to any of its officers, employees or agents or in the
formula for determining any such compensation, or enter into or amend in any
material respect any Contract providing for compensation or benefits;
(l) make any commitment (through negotiations or otherwise) or incur
any liability to any labor organization;
(m) fail to carry insurance in at least the respective amounts set
forth in Schedule 4.17;
(n) alter or revise any of its accounting principles, procedures,
methods or practices; or
<PAGE>
(o) agree to do any of the things described in this Section 6.4.
Section 6.5 Notices to and Consents of Third Parties. Sellers will in a
timely fashion give all notices to and make all filings with all governmental
authorities and other Persons required to be given or made by Altek or by either
Seller under any license, authorization, Contract or other instrument or
otherwise in connection with the transactions contemplated by this Agreement.
Sellers will use their best efforts to obtain, as soon as practicable after the
date hereof but in any event prior to the Closing Date, all written consents or
waivers of all governmental authorities and other Persons required to be
obtained by Altek or by either Seller under any license, authorization, Contract
or other instrument or otherwise in connection with the transactions
contemplated by this Agreement.
Section 6.6 Other Proposals. Neither Seller will, nor will they permit
Altek or any of Altek's directors, officers, employees or agents to, directly or
indirectly solicit or entertain any inquiries or proposals or participate in any
discussions, negotiations or agreements relating to the merger or consolidation
of Altek prior to the Closing Date with, or the acquisition of any of Altek's
voting securities prior to the Closing Date by, or the direct or indirect
acquisition or disposition of a significant amount of the assets of Altek
otherwise than in the ordinary course of business to or from, any Person other
than Buyer, or provide any assistance or any information to or otherwise
cooperate with any Person in connection therewith. Sellers will promptly
disclose to Buyer any such inquiry or proposal which either of them or Altek may
receive.
Section 6.7 Non-Disclosure and Non-Competition. Each Seller acknowledges
that Buyer and Altek are engaged in a highly competitive industry, that each
Seller has knowledge of the operations of Altek's business, and that details of
the operations of Altek's business constitute valuable confidential information,
the disclosure of which to a competitor would diminish the value of the Altek
Shares being purchased hereunder. Each Seller further acknowledges that the
usual and natural territory of Altek's business is and has been that of
customers worldwide who purchase electronic calibration instrumentation, and
that the value of the Altek Shares being purchased hereunder would be seriously
diminished if either Seller were to compete with Altek or Buyer in such
territory. Therefore, each Seller covenants that, except for actions taken on
behalf of or at the direction of Buyer:
(a) he will not at any time disclose, either directly or indirectly,
to any Person other than Buyer and its employees and agents, any information
concerning the customers, suppliers, price lists, catalogs, products,
operations, sales techniques or other business-related information of Altek to
any Person not specifically authorized in writing by Buyer to have such
information;
(b) for a period of three years from and after the Closing Date, he
will not, directly or indirectly, solicit in any manner the business of any
Person which is a customer of Altek on the date hereof; and/or
(c) for a period of three years from and after the Closing Date, he
will not, directly or indirectly, compete with Altek or Buyer or become an
interested party, as
<PAGE>
shareholder, director, employee, partner, investor or otherwise, in any Person
which competes with Altek or Buyer within the territory described in this
Section 6.7, for any business purpose competitive with the business of Altek or
Buyer; provided, however, that the ownership of less than 5 percent of the
outstanding stock of any such Person the shares of which are publicly traded
will not constitute a violation of this Section 6.7(c).
Each Seller acknowledges that the foregoing restrictive covenants are necessary
to preserve the value of the Altek Shares being purchased hereunder, are
essential elements of this Agreement and are reasonable notwithstanding the
expense or hardship they may impose on him, and each Seller agrees that he has
received fair and adequate consideration for making such restrictive covenants.
Each Seller agrees that if any of the provisions of this Section 6.7 are or
become unenforceable, the remainder of this Section 6.7 will nevertheless remain
binding to the fullest extent possible, taking into consideration the purposes
and spirit hereof. Each Seller further acknowledges and agrees that in the event
of any breach or threatened breach by him of any of the provisions of this
Section 6.7, Buyer would have no adequate remedy at law and would suffer
substantial and irrevocable damage. Accordingly, each Seller agrees that in such
event, upon demonstrating to the court's satisfaction such Seller's breach or
threatened breach of any such provision, Buyer will be entitled to temporary
and/or permanent injunctive relief, without the necessity of proving damage, to
enforce the provisions of this Section 6.7, all without prejudice to any and all
other remedies which Buyer may have at law or in equity.
ARTICLE 7. BUYER'S COVENANTS
Section 7.1 Indemnification.
(a) Buyer will be responsible for, and hereby indemnifies each Seller
and holds each of them and their respective agents, successors and assigns
harmless, at all times from and after the Closing Date, from, against and in
respect of:
(i) all losses, damages and deficiencies resulting from any failure or
breach of any representation or warranty, or any breach or
nonfulfillment of any covenant or agreement, of Buyer made in this
Agreement; and
(ii) all obligations and liabilities of Altek, whether incurred before
or after the Closing Date, except for (A) any losses, damages or
deficiencies contemplated by Sections 6.1(a)(iii), 6.1(a)(iv),
6.1(a)(v) or 6.1(a)(vi), and (B) any losses, damages or deficiencies
with respect to which there was a failure or breach of any
representation or warranty, or a breach or nonfulfillment of any
covenant or agreement, of either Seller made in this Agreement; and
(iii) all actions, suits, proceedings, claims, demands, assessments,
judgments, fines, penalties, amounts paid in settlement, costs and
expenses (including reasonable attorneys' fees and expenses) incident
to any of the foregoing, including
<PAGE>
actions, suits, proceedings, claims and demands asserted by Sellers
against Buyer.
(b) Sellers will give prompt notice to Buyer of any demand for
indemnification under this Section 7.1, stating in reasonable detail the nature
thereof. If any such demand arises out of a claim made against either Seller by
any Person other than Buyer (or an affiliated Person of Buyer), Buyer will
promptly (so as not to prejudice Sellers' rights thereby) notify Sellers whether
Buyer intends to defend against the claim. If Buyer so undertakes to defend
against the claim, Sellers will cooperate in all reasonable respects with Buyer
in such defense, will make available to Buyer all records and other materials
reasonably required by Buyer in such defense, and will have the right (at their
own expense) to participate in such defense, but Buyer will at all times control
such defense. If Buyer does not so undertake to defend against the claim, then
Sellers may defend against the claim, in which case Buyer will cooperate in all
reasonable respects with Sellers in such defense, will make available to them
all records and other materials reasonably required by them in such defense, and
will have the right to participate in such defense, but Sellers will at all
times control such defense.
Section 7.2 Notices to and Consents of Third Parties. Buyer will in a
timely fashion give all notices to and make all filings with all governmental
authorities and other Persons required to be given or made by Buyer under any
license, authorization, Contract or other instrument or otherwise in connection
with consummation of the transactions contemplated by this Agreement. Buyer will
use its best efforts to obtain, as soon as practicable after the date hereof but
in any event prior to the Closing Date, all written consents or waivers of all
governmental authorities and other Persons required to be obtained by Buyer
under any license, authorization, Contract or other instrument or otherwise in
connection with consummation of the transactions contemplated by this Agreement.
Section 7.3 Buyer's Board of Directors. For so long as the Notes remain
outstanding, each Seller will be invited to attend each regular and special
meeting of Buyer's Board of Directors. In addition, Buyer's Board of Directors
will (a) elect E. Lee Garelick to fill the first vacancy on the Board occurring
subsequent to the Closing Date, or (b) if sooner, nominate him for election to
Buyer's Board of Directors at the 1996 Annual Meeting of Shareholders.
Section 7.4 Certain Tax Refunds. In the event that at any time after
Closing Altek receives any refund of any of the taxes referred to in Section
6.1(a)(iii), Buyer will cause Altek promptly to pay over the same to Sellers.
ARTICLE 8. CONDITIONS TO PARTIES' OBLIGATIONS
Section 8.1 Conditions to Buyer's Obligations. The obligations of Buyer
to complete the transactions provided for herein are subject, at its election,
to satisfaction on or before the Closing Date of each of the following
conditions:
<PAGE>
(a) Representations and Warranties: all representations and warranties
of Sellers contained in this Agreement will be true and correct in all respects
as of the date hereof and as of the Closing Date as though made on and as of the
Closing Date (except as may be otherwise provided in this Agreement), and Buyer
will have received a certificate to that effect, dated the Closing Date, signed
by each Seller;
(b) Pre-Closing Obligations: Sellers will have performed all
obligations required to be performed by them on or before the Closing Date, the
performance of which has not been waived by Buyer, and Buyer will have received
a certificate to that effect, dated the Closing Date, signed by each Seller;
(c) Sellers' Consents, Etc.: all notices, filings, consents, waivers
and approvals set forth in Section 4.5 or in Schedule 4.5 will have been given,
made or obtained, as the case may be, by Sellers, and Buyer will have received a
true copy of each thereof;
(d) Buyer's Consents, Etc.: all notices, filings, consents, waivers
and approvals set forth in Section 5.3 will have been given, made or obtained,
as the case may be, by Buyer;
(e) No Bar: there will not be in effect any judgment, decree or order
of, or position taken by, any court or administrative body of competent
jurisdiction, nor will there have been any action, suit, proceeding or known
investigation instituted or threatened, nor will any law or regulation have been
enacted or any action taken thereunder, which would, in Buyer's reasonable
judgment, restrain or prohibit, make illegal, or subject Buyer to material
damage as a result of, the consummation of the transactions contemplated hereby;
(f) Stock Certificates: Sellers will have delivered to Buyer stock
certificates representing all of the Altek Shares, properly endorsed for
transfer;
(g) Further Closing Documents: Sellers will have delivered to Buyer
the following documents and instruments in form reasonably satisfactory to
counsel to Buyer:
(i) a copy of the Certificate of Incorporation of Altek and of all
amendments thereto, certified as of a date reasonably proximate to the
Closing Date by the Secretary of State of New York;
(ii) certificates of the Secretaries of State of New York and of each
jurisdiction listed in Schedule 4.1, each attesting to the good
standing of Altek in such jurisdiction as of a date reasonably
proximate to the Closing Date;
(iii) an estoppel certificate duly executed by the lessor of each
lease listed in Schedule 4.13, stating that as of the Closing Date,
Altek is not in default under such lease;
<PAGE>
(iv) an estoppel certificate duly executed by the mortgagee of each
mortgage listed in Schedule 4.13, stating that as of the Closing Date
Altek is not in default under such mortgage and indicating the
principal balance then outstanding;
(v) a personal property search made by a search agency acceptable to
Buyer stating to the effect that as of the Closing Date there are no
Encumbrances or judgments of record against Altek or any of its
assets, except for Permitted Encumbrances; and
(vi) resignations, dated as of the Closing Date, of each of the
directors and officers of Altek.
(h) Opinion of Counsel: Buyer will have received an opinion addressed
to Buyer, dated the Closing Date, of Hodgson, Russ, Andrews, Woods & Goodyear,
counsel to Sellers, in the form of Exhibit D;
(i) Employment Agreements: each Seller will have executed and
delivered to Buyer the Employment Agreement of such Seller;
(j) Lease Amendment: Sellers will have delivered to Buyer the Lease
Amendment, duly executed by Lessor;
(k) Subordination Agreement: Sellers will have delivered to M&T the
Subordination Agreement, duly executed by Sellers; and
(l) Other Matters: Buyer will have received such other instruments and
documents as have been reasonably requested by counsel to Buyer on or before the
Closing Date.
Section 8.2 Conditions to Sellers' Obligations. The obligations of
Sellers to complete the transactions provided for herein will be subject, at
their election, to satisfaction on or before the Closing Date of each of the
following conditions:
(a) Representations and Warranties: all representations and warranties
of Buyer contained in this Agreement will be true and correct in all respects as
of the date hereof and as of the Closing Date as though made on and as of the
Closing Date (except as may be otherwise provided in this Agreement), and
Sellers will have received a certificate to that effect, dated the Closing Date,
signed by the President or a Vice President of Buyer;
(b) Pre-Closing Obligations: Buyer will have performed all obligations
required to be performed by it on or before the Closing Date, the performance of
which has not been waived by Sellers, and Sellers will have received a
certificate to that effect, dated the Closing Date, signed by the President or a
Vice President of Buyer;
<PAGE>
(c) Due Authorization: Buyer's execution and delivery of this
Agreement, its compliance with the provisions hereof and the consummation of all
of the transactions contemplated hereby will have been duly and validly
authorized by all necessary corporate action on the part of Buyer, and Sellers
will have received a duly certified copy of all actions taken by Buyer's Board
of Directors effecting the same;
(d) Sellers' Consents, Etc.:all notices, filings, consents, waivers
and approvals set forth in Section 4.5 or in Schedule 4.5 will have been given,
made or obtained, as the case may be, by Sellers;
(e) Buyer's Consents, Etc.: all notices, filings, consents, waivers
and approvals set forth in Section 5.3 will have been given, made or obtained,
as the case may be, by Buyer, and Sellers will have received a true copy of each
thereof;
(f) No Bar: there will not be in effect any judgment, decree or order
of, or position taken by, any court or administrative body of competent
jurisdiction, nor will there have been any action, suit, proceeding or known
investigation instituted or threatened, nor will any law or regulation have been
enacted or any action taken thereunder, which would, in Sellers' reasonable
judgment, restrain or prohibit, make illegal, or subject Sellers to material
damage as a result of, the consummation of the transactions contemplated hereby;
(g) Notes: Buyer will have delivered to Sellers the Notes, each duly
executed by Buyer;
(h) Employment Agreements: Buyer will have executed and delivered to
Sellers the Employment Agreement of each Seller;
(i) Loan Repayment: Buyer will have caused Altek's outstanding
indebtedness to Chase Manhattan Bank, N.A. in the aggregate principal amount of
approximately $805,866 (as set forth in a certain letter dated March 12, 1996
from Chase Manhattan Bank, N.A. to Dan Fagan) to have been repaid;
(j) Further Closing Documents: Buyer will have delivered to Sellers
the following documents and instruments:
(i) a copy of the Certificate of Incorporation of Buyer and of all
amendments thereto, certified as of a date reasonably proximate to the
Closing Date by the Secretary of State of Ohio; and
(ii) certificates of the Secretaries of State of Ohio and New York,
attesting to the good standing of Buyer in such jurisdictions as of a
date reasonably proximate to the Closing Date;
<PAGE>
(k) Opinion of Counsel: Sellers will have received an opinion
addressed to them, dated the Closing Date, of Harter, Secrest & Emery, counsel
to Buyer, in the form of Exhibit E; and
(l) Other Matters: Sellers will have received such other instruments
and documents as have been reasonably requested by counsel to Sellers on or
before the Closing Date.
ARTICLE 9. CLOSING
Section 9.1 Closing. The Closing will take place at the offices of
Harter, Secrest & Emery, 700 Midtown Tower, Rochester, New York at 9:00 a.m.,
local time, on April 3, 1996, or at such other time and place as the parties may
agree (the "Closing Date"). The parties agree that they will take such actions,
including the delivery of documents in escrow, in order to facilitate completion
on the Closing Date of all of the transactions contemplated hereby.
Section 9.2 Failure to Close; Termination. This Agreement may be
terminated at any time prior to the Closing Date, as follows:
(a) by Buyer, upon notice to Sellers on or before April 2, 1996, if
the results of Buyer's due diligence of Altek are unsatisfactory to Buyer; or
(b) by Sellers, upon notice to Buyer on or before April 2, 1996, if
the results of Sellers' due diligence of Buyer are unsatisfactory to Sellers; or
(c) by the mutual consent of Buyer and Sellers; or
(d) by Buyer, upon notice to Sellers, if events occur which, without
any breach by Buyer of its obligations hereunder, render impossible compliance
with one or more of the conditions set forth in Section 8.1 (and such failure of
compliance is not waived by Buyer); or
(e) by Sellers, upon notice to Buyer, if events occur which, without
any breach by either Seller of their respective obligations hereunder, render
impossible compliance with one or more of the conditions set forth in Section
8.2 (and such failure of compliance is not waived by Sellers); or
(f) by Buyer, upon notice to Sellers, if between the date hereof and
the Closing Date (i) there has occurred (or been discovered) any event,
condition or change in the operations, financial condition, assets, liabilities
(contingent or otherwise), income or business of Altek, or any damage,
destruction or loss, whether or not covered by insurance, that adversely impairs
the use or value of Altek's assets or business, and (ii) the cost to Buyer of
correcting all of such events, conditions and changes exceeds $250,000 in the
aggregate (or, in the reasonable opinion of Buyer, any of such events,
conditions and changes is not susceptible of correction); or
<PAGE>
(g) by Buyer or by Sellers, upon notice to the other, at any time
after May 31, 1996.
In the event of any termination as provided by this Section 9.2, this Agreement
will thereupon become void and of no effect, without any liability on the part
of any party.
ARTICLE 10. FURTHER COVENANTS
Section 10.1 Taxes on Transaction. All sales or use taxes and all stock
transfer taxes payable by reason of the sale and transfer of the Altek Shares
hereunder will be paid by Buyer.
Section 10.2 Expenses of the Parties. Except as otherwise expressly
provided in this Agreement, all expenses involved in the preparation,
negotiation, authorization and consummation of this Agreement and the
transactions contemplated hereby, including all fees and expenses of agents,
representatives, counsel and accountants, will be borne solely by the party who
has incurred the same, and no other party will have any responsibility with
respect thereto. Without limiting the generality of the foregoing, Altek will
not bear any such fees or expenses in connection with the transactions
contemplated hereby in excess of $30,000.
Section 10.3 Confidentiality. Except for (a) necessary disclosure to
such party's directors, officers, employees, counsel, accountants, bankers and
other agents, (b) the disclosure contemplated by Sections 6.5 and 7.2, and (c)
disclosures deemed appropriate by Buyer, upon the advice of counsel, under
Federal securities laws and regulations, each party will keep the provisions of
this Agreement confidential both prior and subsequent to the Closing Date.
Without limiting the generality of the foregoing, no party will make any press
release or advertisement with respect to the transactions contemplated hereby
without the prior consent of the other parties, unless such party determines,
upon the advice of counsel, that such action is required by law.
Section 10.4 Further Assurances. Each party will cooperate with the
others, take such further action, and execute and deliver such further
documents, as may be reasonably requested by any other party in order to carry
out the terms and purposes of this Agreement. Without limiting the generality of
the foregoing, from and after the Closing Date, on the request of Buyer, Sellers
will take such action and deliver to Buyer such powers of attorney and further
instruments of assignment, conveyance or transfer and other documents of further
assurance as in the opinion of counsel to Buyer may be reasonably desirable to
assure, complete and evidence the full and effective transfer, conveyance and
assignment of the Altek Shares and the business of Altek to Buyer, its
successors and assigns, and the performance of this Agreement by Sellers in all
respects.
ARTICLE 11. IN GENERAL
Section 11.1 Survival of Representations, Warranties and Covenants. The
several representations, warranties and covenants of the parties herein
contained, and the provisions hereof which by their terms are to be performed
after the Closing Date, will
<PAGE>
survive the Closing Date and will be effective regardless of any investigation
which may have been or may be made at the time by or on behalf of the party to
whom such representations, warranties, covenants and agreements are made.
Section 11.2 Amendment and Waiver. This Agreement may be amended only by
a writing executed by each of the parties hereto. No waiver of compliance with
any provision or condition hereof, and no consent provided for herein, will be
effective unless evidenced by an instrument in writing duly executed by the
party sought to be charged therewith. No failure on the part of any party to
exercise, and no delay in exercising, any of its rights hereunder will operate
as a waiver thereof, nor will any single or partial exercise by any party of any
right preclude any other or future exercise thereof or the exercise of any other
right.
Section 11.3 Assignment. Buyer will not assign or attempt to assign any
of its rights or obligations under this Agreement without the prior written
consent of each Seller, and neither Seller will assign or attempt to assign any
of his rights or obligations under this Agreement without the prior written
consent of Buyer.
Section 11.4 Notices, Etc. Each notice, report, demand, waiver, consent
and other communication required or permitted to be given hereunder will be in
writing and will be sent either by registered or certified first-class mail,
postage prepaid and return receipt requested, or by facsimile machine (if a
facsimile number is listed below), addressed as follows:
If to Buyer: Transmation, Inc.
10 Vantage Point Drive
Rochester, New York 14624
Attention: Robert G. Klimasewski, President
Facsimile: (716) 352-7788
with a copy to: Harter, Secrest & Emery
700 Midtown Tower
Rochester, New York 14604-2070
Attention: Susan Mascette Brandt, Esq.
Facsimile: (716) 232-2152
If to Sellers: E. Lee Garelick
12 Birchstone Hill
Rush, New York 14543
<PAGE>
and
James N. Wurtz
3 Landing View Lane
Fairport, New York 14450
with a copy to: Hodgson, Russ, Andrews, Woods & Goodyear
400 East Avenue
Rochester, New York 14607
Attention: Donald R. Fox, Esq.
Facsimile: (716) 454-4698
Each such notice and other communication given by mail will be deemed to have
been given when it is deposited in the United States mail in the manner
specified herein, and each such notice and other communication given by telex or
facsimile will be deemed to have been given when it is so transmitted and the
appropriate answerback is received. Any party may change its address for the
purpose hereof by giving notice in accordance with the provisions of this
Section 11.4.
Section 11.5 Binding Effect. Subject to the provisions of Section 11.3,
this Agreement will be binding upon and will inure to the benefit of the parties
and their respective successors and assigns. This Agreement creates no rights of
any nature in any Person not a party hereto.
Section 11.6 Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State.
Section 11.7 Effect of Agreement. This Agreement sets forth the entire
understanding of the parties, and supersedes any and all prior agreements,
arrangements and understandings, written or oral, relating to the subject matter
hereof.
Section 11.8 Headings; Counterparts. The Article and Section headings
of this Agreement are for convenience of reference only and do not form a part
hereof and do not in any way modify, interpret or construe the intention of the
parties. This Agreement may be executed in one or more counterparts, each of
which will be deemed an original, but all of which together will constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the date first written above.
<PAGE>
TRANSMATION, INC.
By: /s/ Robert G. Klimasewski
-------------------------
Robert G. Klimasewski
President and Chief Executive Officer
/s/ E. Lee Garelick
-------------------
E. LEE GARELICK
/s/ James N. Wurtz
------------------
JAMES N. WURTZ
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Exhibit A
Sellers' Altek Shares Ownership, Etc.
Number of Number of Trans-
Number of Total Number Transmation mation Shares to
Altek Shares Cash Amount Principal of Transmation Shares be Received in
Owned and Received at Amount of Shares to be Received at Each of Two
Seller Sold to Buyer Closing Note Received Received Closing Annual Installments
E. Lee 34,000 $ 963,333 $1,756,666(A) 170,000 56,666 56,667
Garelick
James N. 26,000 $ 736,667 $1,343,334(B) 130,000 43,334 43,333
Wurtz ------ ---------- ---------- ------- ------ ------
TOTAL 60,000 $1,700,000 $3,100,000 300,000 100,000 100,000
(A) first principal installment: $963,333
second principal installment: $793,333
(B) first principal installment: $736,667
second principal installment: $606,667
</TABLE>
<PAGE>
Exhibit B
FORM OF
PROMISSORY NOTE
$______________ Rochester, New York
FOR VALUE RECEIVED, TRANSMATION, INC., an Ohio corporation having its
principal place of business at 10 Vantage Point Drive, Rochester, New York 14624
("Maker"), hereby promises to pay to , residing at ("Payee"), the principal sum
of ___________________ Dollars ($_________), together with interest on the
unpaid principal balance of this Note, from time to time outstanding, at the
rate of eight percent (8%) per annum, all in lawful money of the United States
of America, upon the following terms:
1. The principal amount of this Note will be paid in two consecutive
annual installments as set forth below:
installment payment date principal amount due
April 1, 1997 $___________________
April 1, 1998 $___________________
Interest, calculated on the unpaid principal balance of this Note outstanding
during the period for which such interest is accruing, will be paid quarterly,
on the first day of each July, October, January and April after the date hereof
until April 1, 1998, when the unpaid principal balance of this Note, together
with all accrued and unpaid interest thereon, will be paid in full.
2. Maker will have the right to prepay any part of the outstanding
principal amount of this Note at any time without the prior written consent of
Payee.
3. Upon the occurrence of any of the following events of default, the
entire indebtedness evidenced by this Note, including principal, interest and
expenses of collection (including reasonable attorneys' fees), will immediately
become due and payable without notice, presentation or demand:
(a) the non-payment of any installment of principal or interest due
hereunder for a period of 30 days after its due date;
(b) the filing by Maker of a petition under the provisions of any
state insolvency law, or the Bankruptcy Code, as now in effect or hereafter
amended; the filing against Maker of a petition under the provisions of any
state insolvency law, or the Bankruptcy Code, as now in effect or hereafter
amended, which petition is not stayed or dismissed within 90 days after its
filing; the appointment of a receiver or liquidator, whether voluntary or
<PAGE>
involuntary, for Maker or for any of its properties; the making by Maker of an
assignment for the benefit of creditors; the institution by Maker of any other
type of insolvency proceeding (under bankruptcy laws or otherwise) or proceeding
for the settlement of claims against Maker; or the institution against Maker of
any other type of insolvency proceeding (under bankruptcy laws or otherwise) or
proceeding for the settlement of claims against Maker, which proceeding is not
stayed or dismissed within 90 days after its filing;
(c) the taking of any judgment against Maker, which judgment is
not paid, discharged, stayed or bonded within 90 days from the entry thereof;
(d) the failure of Maker to pay or discharge any material taxes,
assessments or governmental charges upon it or upon its income or properties
prior to the date on which penalties are assessed thereon, unless and to the
extent only that such taxes, assessments or governmental charges are contested
in good faith and by appropriate proceedings by Maker;
(e) the institution of any formal or informal proceeding for the
dissolution or liquidation, or the winding up of the affairs, of Maker; or
(f) the acquisition by any party other than Maker, E. Lee Garelick or
James N. Wurtz of more than 50 percent of the voting shares of Maker.
4. This Note evidences an indebtedness referred to in and is subject to
the provisions of a certain Stock Purchase Agreement among Maker, Payee and
another dated March ___, 1996, the terms of which are hereby incorporated in
this instrument by reference. Without limiting the generality of the foregoing,
payments due under this Note are subject to certain rights of set-off of Maker
provided by Section 6.2 of such Stock Purchase Agreement.
5. MAKER'S PAYMENT AND PERFORMANCE OF THIS NOTE IS SUBORDINATE TO
PAYMENT OF ALL OBLIGATIONS, WHENEVER ARISING, OF MAKER TO MANUFACTURERS AND
TRADERS TRUST COMPANY ("BANK"), PURSUANT TO THE TERMS OF A SUBORDINATION
AGREEMENT ENTERED INTO BY MAKER, PAYEE, BANK AND ANOTHER ON OR ABOUT THE DATE
HEREOF.
6. This Note will be governed by and construed in accordance with the
laws of the State of New York without regard to principles of conflict of laws.
IN WITNESS WHEREOF, Maker has caused this Note to be executed and
delivered as of the date set forth below.
Dated: [Closing Date] TRANSMATION, INC.
By: ---------------------
Robert G. Klimasewski
President and Chief Executive Officer
<PAGE>
Exhibit C
FORM OF
EMPLOYMENT AGREEMENT
THIS AGREEMENT has been made as of [Closing Date] by and between TRANS-
MATION, INC., an Ohio corporation (the "Corporation"), and ________________ (the
"Employee").
The parties hereby agree as follows:
1. Mutual Agreement of the Parties. The Corporation hereby agrees to employ
the Employee in such senior executive capacity or capacities as the Board of
Directors of the Corporation (the "Board of Directors") may from time to time
determine, and the Employee hereby agrees to accept such employment, for the
period and on the terms and conditions set forth in this Agreement.
2. Term of Employment.
(a) Initial Term. The term of this Agreement and of the Employee's
employment hereunder (the "Term") will commence on the date hereof and will
expire on March 31, 1999 (the "Initial Termination Date"), subject to the
further provisions of Section 2(b) and in all cases subject to earlier
termination as provided by Section 9. As used herein, the term "Year" means any
period during the Term commencing on April 1 (or, in the case of the first Year,
the date hereof) and ending on the next succeeding March 31.
(b) Renewal. From and after the Initial Termination Date, the Term will
automatically renew for successive one-Year periods unless either party gives
the other, on or before February 1 of any Year, written notice that the Term
will not renew, in which case the Term will expire on the next succeeding
anniversary of the Initial Termination Date.
3. Authority and Duties. During the Term, the Employee will report and be
responsible to the President and Chief Executive Officer of the Corporation (the
"President"). As a minimum, the Employee will: (a) not be asked to travel,
without his mutual agreement, except to attend one domestic major trade show per
Year, for a minimum of three days per Year; (b) attend all meetings of the Board
of Directors except in the case of illness or religious observance (it being
understood that the Board of Directors customarily meets approximately five
times per Year); (c) attend quarterly divisional review meetings, which are
noticed six weeks in advance; (d) work on special projects, and review new
product strategies and plans, product promotions and the like, all of which may
be performed off site; and (e) participate in planning and strategy sessions.
The Employee will devote a significant portion of his business time, attention
and energies to the affairs of the Corporation, and will use his best efforts to
promote its best interests. It is the parties' expectation that the Employee
will contribute to the success of the Corporation, particularly in matters of
transition of the business operations of Altek Industries Corp. ("Altek") to the
ownership and
<PAGE>
control of the Corporation. Accordingly, it is anticipated that during the first
Year, the Employee will devote to the performance of his duties hereunder, on
average, more than one week per month but less than three weeks per month, and
that during subsequent Years the Employee will devote less time to the
performance of his duties hereunder.
4. Compensation. During the Term, the Corporation will pay to the Employee,
and the Employee will accept, as compensation for his services rendered under
this Agreement, a salary at the annual rate of $150,000 per Year. Such salary
will be payable at such intervals as the Corporation pays the salaries of its
senior executives during the Term.
5. Benefits. During the Term:
(a) Vacation. The Employee will be entitled to the same amount of paid
vacation time per annum as the Corporation provides its senior executives.
(b) Other Benefits. The Corporation will, at its expense, provide in the
name and for the benefit of the Employee and his designated beneficiaries all
fringe benefit plans and programs which the Corporation then provides for its
senior executives, except if and to the extent that the Employee waives his
rights thereto. Nothing contained herein will be deemed to restrict or limit the
right of the Corporation at any time to modify, amend or terminate any or all
such fringe benefit plans and programs.
(c) Auto Lease. Until the Initial Termination Date, the Corporation will,
at its expense, provide the Employee with the lease of [Garelick: the automobile
provided to the Employee by Altek immediately prior to the date hereof] [Wurtz:
an automobile comparable to that provided to the Employee by Altek immediately
prior to the date hereof, on comparable lease terms].
6. Business Expenses. The Corporation will pay or reimburse the Employee
for all reasonable travel and other expenses incurred or paid by him in
connection with the performance of his duties under this Agreement, upon
presentation to the Corporation of expense statements or vouchers and such other
supporting documentation as it may, from time to time, reasonably require;
provided, however, that the amount available for such expenses may, at any time
or from time to time, be fixed in advance by the President.
7. Confidentiality. The Employee acknowledges that in the course of his
employment by the Corporation he will have access to confidential information
relating to the business and affairs of the Corporation, including without
limitation information relating to business ideas, trade secrets, product
development, secret processes, plans and/or materials, statistical information
and customer lists. The Employee agrees that he will not, either during the Term
or after its expiration, without the prior express written consent of the
Corporation, disclose, divulge, furnish, release or otherwise make available to
any person or entity any of such confidential information, except for
disclosures of information which, through no breach of the Employee's
obligations under this Section 7, is no longer confidential. The Employee hereby
acknowledges and agrees that in the event of any breach or threatened breach by
him of any of the provisions of this Section 7, the Corporation would
<PAGE>
have no adequate remedy at law and would suffer substantial and irrevocable
damage. Accordingly, the Employee hereby agrees that in such event, upon
demonstrating to the court's satisfaction the Employee's breach or threatened
breach of any such provisions, the Corporation will be entitled to temporary
and/or permanent injunctive relief, without the necessity of proving damage, to
enforce the provisions of this Section 7, all without prejudice to any and all
other remedies which the Corporation may have at law or in equity.
8. Termination; Severance.
(a) Termination. This Agreement and the Employee's employment hereunder
will terminate at the close of business on the earliest of the following dates:
(i) the applicable date of expiration of the Term provided by Section
2; or
(ii) the thirtieth day following the date on which the Corporation
receives written notice of the Employee's termination of this
Agreement; or
(iii)the date on which the Employee receives written notice of the
Board of Directors' termination of this Agreement for "Cause" (as
defined in Section 8(b)); or
(iv) the thirtieth day following the date on which the Employee
receives written notice of the Corporation's termination of this
Agreement without Cause; or
(v) the date of the Employee's death; or
(vi) the effective date of any permanent disability of the Employee
within the meaning of the disability insurance policy then maintained
by the Corporation for the benefit of its employees.
(b) Cause for Termination. For purposes of this Agreement, the term "Cause"
means a reasonable determination by vote of a majority of the members of the
Board of Directors then holding office (other than the Employee if he is then a
director) that one of the following conditions exists or one of the following
events has occurred:
(i) the willful misconduct or gross negligence of the Employee in
connection with the performance of his duties hereunder; or
(ii) the persistent and continued refusal by the Employee to perform
such services as may be reasonably delegated or assigned to him,
consistent with his position and with the terms of this Agreement; or
(iii) the breach by the Employee of any provision of this Agreement,
or of any provision of a certain covenant against competition
contained in Section 6.7
<PAGE>
of that certain Stock Purchase Agreement dated March ___, 1996 among
the Corporation, the Employee and another; or
(iv) the Employee's conviction of any crime or offense involving
money, property or personnel of the Corporation, or of any other crime
which constitutes a felony; or
(v) the Employee's theft of any money or other property of the
Corporation; or
(vi) the Employee's use, possession or being under the influence of
any narcotic or controlled substance while at work, or his being under
the influence of any alcoholic beverage while at work.
(c) Severance Payments Under Certain Circumstances. In the event that the
Employee's employment is terminated prior to the Initial Termination Date under:
(i) Section 8(a)(iv) (termination by the Corporation without Cause),
or
(ii) Section 8(a)(v) (termination upon death), or
(iii) Section 8(a)(vi) (termination upon defined disability)
(but only in any such event), then as severance the Corporation will continue to
pay to the Employee, until the Initial Termination Date, salary in the amount
and at the times of payment provided by Section 4; provided, however, that the
amount of severance payable by the Corporation under this Section 8(c) will be
reduced by the amount of all disability insurance proceeds received by the
Employee.
9. In General.
(a) Binding Obligation. This Agreement will be binding upon and will inure
to the benefit of the parties hereto and their respective personal
representatives, successors and assigns; provided, however, that this Agreement
is personal to the Employee and may not be assigned by him.
(b) Notices. Any notice required or permitted by this Agreement will be
given by hand or by certified mail, return receipt requested, addressed to the
Corporation at its then principal office, or to the Employee at his then
residence address, or to either party at such other address as it or he may from
time to time specify for the purpose in a notice similarly given to the other
party.
(c) Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely within such State.
<PAGE>
(d) Interpretation. Unless the context requires otherwise, references
herein to "Sections" are to the Sections of this Agreement. The Section headings
of this Agreement are for convenience of reference only and do not form a part
hereof and do not in any way modify, interpret or construe the intention of the
parties.
(e) Entire Agreement, Etc. This Agreement contains the entire understanding
of the parties relating to the subject matter hereof, and supersedes all prior
agreements, arrangements and understandings, written or oral, between the
parties with respect to the subject matter hereof. No modification of this
Agreement will be valid unless it is in writing and signed by the Corporation
and by the Employee. A waiver of the breach of any term or condition of this
Agreement will not be deemed to constitute a waiver of any subsequent breach of
the same or any other term or condition.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the day and year first above written.
TRANSMATION, INC.
By: ---------------------
Robert G. Klimasewski
President and Chief Executive Officer
<PAGE>
Identification of Omitted Exhibits and Schedules
Exhibit D Form of Opinion of Sellers' Counsel
Exhibit E Form of Opinion of Buyer's Counsel
Exhibit F Lease Amendment
Exhibit G Subordination Agreement
Schedule 1 Permitted Encumbrances
Schedule 4.1 Foreign Qualifications; Subsidiaries
Schedule 4.5 Conflicts; Required Consents, Notices, Etc.
Schedule 4.6 Financial Statements
Schedule 4.8 Changes Since December 31, 1995
Schedule 4.10 Equipment
Schedule 4.11 Inventory
Schedule 4.12 Accounts Receivable
Schedule 4.13 Contracts
Schedule 4.14 Intellectual Property
Schedule 4.15 Legal Proceedings, Etc.
Schedule 4.17 Insurance
Schedule 4.18 Labor Relations; Employment Matters
Schedule 4.19 Employee Benefit Plans
Schedule 4.20 Environmental Matters
Schedule 4.21 Related Party Transactions
The foregoing exhibits and schedules to this Stock Purchase Agreement have been
omitted from this Exhibit 2(a). Upon written request, the Registrant will
provide to security holders copies of any of the omitted exhibits and schedules.
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
I consent to the inclusion in the Current Report on Form 8-K, dated
approximately April 3, 1996, of Transmation, Inc., of my reports dated March 1,
1994, March 1, 1995 and February 28, 1996 with respect to the financial
statements of Altek Industries Corp., and to the incorporation of such reports
by reference in the Registration Statement on Form S-8 (Registration No.
33-61665) of Transmation, Inc.
/s/ Ronald E. Rothstein
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Ronald E. Rothstein, CPA
Rochester, New York
April 11, 1996
