STOCK PURCHASE OPTION AGREEMENT
This Stock Purchase Option Agreement is made and entered into by and
among ▇▇▇▇▇▇▇ RESEARCH CORPORATION, a Delaware corporation ("NRC"), TXEN,
INC., an Alabama corporation (the "Company") and all of the current
shareholders of the Company, namely, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇
AND ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (collectively referred to as the "Shareholders").
W I T N E S S E T H:
The authorized capital stock of the Company consists of one share of
$.002 par value convertible preferred stock (the "Preferred Stock"),
5,000,000 shares of $.002 par value Class A Common Stock (the "Class A
Common Stock") and 1,250,000 shares of $.002 par value Class B Common Stock
(the "Class B Common Stock"). NRC owns the one share of Preferred Stock
and the Shareholders own 5,000,000 shares of Class A Common Stock which
represents all of the issued and outstanding capital stock of the Company.
None of the shares of Class B Common Stock is outstanding and all of such
shares have been reserved for issuance upon conversion of the Preferred
Stock into shares of Class B Common Stock. This Agreement is executed and
delivered by the parties as a condition concurrent to the purchase by NRC
of such Preferred Stock from the Company pursuant to that certain
Convertible Preferred Stock Purchase Agreement of even date herewith.
Capitalized terms not otherwise defined herein shall have the meanings
ascribed to such terms in the Convertible Preferred Stock Purchase
Agreement.
The Shareholders desire to grant NRC an option to purchase all of the
issued and outstanding Class A Common Stock owned by them presently or
subsequently issued to the Shareholders and other persons. NRC desires to
obtain such an option, subject to the terms and conditions set forth
herein. Upon exercise of such option and the purchase of the Class A
Common Stock pursuant to such option, NRC will own all of the issued and
outstanding capital stock of the Company.
Therefore, in consideration of the mutual covenants herein contained,
and for other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows:
1. NRC OPTION TO PURCHASE. As used herein the term "Shareholders"
shall include not only the persons identified above, but also all persons
who subsequently acquire any capital stock of the Company. Provided NRC
has converted the Preferred Stock to Class B Common Stock, NRC shall have
the option for a period of 30 days after release and delivery to NRC of the
Company's audited financial statements for the period ending June 30, 1998
to elect to purchase from the Shareholders all outstanding shares of
Class A Common Stock of the Company at a price per share determined as
follows:
First, determine the average of the high and low price to
earnings ("PE") ratios of the NRC stock as quoted by the National
Association of Securities Dealers Automated Quotation System
("NASDAQ") for the eight NRC fiscal quarters ended during the two
year period ended June 30, 1998. Next, multiply the average NRC
PE ratio as thus determined by the "Applicable Percentage" as
defined below. The number resulting from such multiplication
shall be known as the "Multiplier" and it shall be not less than
11 (thus establishing a minimum price) nor more than 14 (thus
establishing a maximum price). To arrive at the per share
purchase price, the product of the Multiplier times the average
annual net after tax earnings of the Company for its fiscal years
ended June 30, 1997 and 1998 shall be divided by the total number
of shares of capital stock of the Company then outstanding
(including Class B Common Stock owned by NRC).
The Applicable Percentage shall mean 90%, except that it shall
mean 85% if the Management Shareholders sell Class A Common Stock
to the employees pursuant to Section 5.15 of the Convertible
Preferred Stock Purchase Agreement. Notwithstanding the
foregoing, if the average net after tax earnings of the Company
for the two years ended June 30, 1997 and June 30, 1998 exceed
$1,680,000, the Applicable Percentage shall mean 95% and the
Multiplier shall be not less than 11 (thus establishing a minimum
price) nor more than 14 1/2 (thus establishing a maximum price),
even though the Management Shareholders may have sold Class A
Common Stock to employees pursuant to Section 5.15 of the
Convertible Preferred Stock Purchase Agreement.
The net after tax earnings of the Company for purposes of this
Agreement shall be the net income of the Company as shown on the
audited financial statements of the Company as prepared by the
independent accounting firm referred to in Section 5.1 of the
Convertible Preferred Stock Purchase Agreement. There shall be
added to such net income bonuses not in excess of $100,000 in any
fiscal year paid to employees of the Company which are to repay
employee loans, the proceeds of which were used to purchase Class
A Common Stock of the Company, except that no bonus adjustment
shall be made to net income when determining whether or not
average net after tax earnings for the years ending June 30, 1997
and 1998 exceeds $1,680,000.
The closing of the sale shall occur at the offices of the Company in
Birmingham, Alabama not more than 60 days after the election to purchase,
at which time NRC shall pay the Shareholders the per share price. The per
share price shall be paid by NRC at the closing as follows:
1.1 to each Shareholder who owns 1% or less of the then
outstanding capital stock of the Company, NRC shall pay the per share
price in immediately available funds; and
1.2 to every other Shareholder, NRC shall pay the per share
purchase in unregistered and restricted shares of NRC common stock,
and for the purpose of this exchange, the NRC shares of common stock
shall have a value equal to the average of the daily weighted sale
price of such stock as quoted by NASDAQ for the 10 day period
immediately preceding the closing; and
1.3 in no event shall NRC be required to issue its Common Stock
under 1.2 above to more than 35 Shareholders of the Company, and if
there are more than 35 Shareholders who own or have the option to
purchase more than 1% of the capital stock of the Company, those
Shareholders with the lowest percentage ownership may be required by
NRC to accept cash or immediately available funds as provided in 1.1
until NRC reduces the number of Shareholders entitled to receive NRC
Common Stock to 35.
Notwithstanding Section 1.2 above, the parties may agree that the
purchase price shall be paid wholly or partly in cash. Furthermore, if the
price is to be paid in stock of NRC, NRC shall deliver to the Shareholders
its most recent Form 10-K, Annual Report and Forms 10-Q filed since the
last Form 10-K. Each such Shareholder shall sign an investment letter
acknowledging that the Shareholder is not acquiring the NRC Common Stock
with a view toward subsequent resale or distribution, the NRC Shares are
unregistered under applicable securities laws and may not be transferred
absent registration or an exemption from registration, the share
certificates will bear a restrictive securities legend, the investment in
the shares represents an illiquid investment and the Shareholder is able to
bear the risk of loss of his investment in the securities. In the event a
transfer of the NRC Common Stock would, in the opinion of counsel to NRC,
violate any applicable securities laws, NRC may pay the purchase price in
cash.
The transaction may be structured as a reverse triangular merger with
a wholly owned subsidiary of NRC. If the parties agree to structure the
transaction as a reverse triangular merger, the parties shall adopt a Plan
of Merger and take such other actions as may be reasonably necessary to
effect such merger.
The option herein granted NRC shall be irrevocable during its term.
If the option is not exercised by NRC within 30 days after release and
delivery to NRC of the Company's audited financial statements for the
fiscal year ending June 30, 1998, the option granted NRC herein shall lapse
and become null and void.
2. CONDITIONS TO EXERCISE OF NRC PURCHASE OPTION. Notwithstanding
any of the foregoing, the Shareholders will not be required to sell their
stock to NRC if the aggregate purchase price to all of the Shareholders
(other than NRC) is less than $7,000,000, provided, however, that:
2.1 NRC may elect to pay $7,000,000 even if the formula price is
less; or
2.2 If the Shareholders who own 90% or more of all outstanding Class
A Common Stock desire to accept a price of less than $7,000,000, such
Shareholders may enforce a mandatory take-along obligation on the other
Shareholders and in such event the other Shareholders shall sell their
capital stock to NRC.
3. PIGGYBACK REGISTRATION RIGHTS OF SHAREHOLDERS. The rights
provided for in this section (the "Piggyback Rights") shall apply to those
Shareholders who receive NRC unregistered and restricted common stock in
exchange for their stock pursuant to the NRC purchase option. As used in
this section, the term "NRC Stock" shall mean the common stock of NRC
outstanding as of the date of the execution of the definitive agreements
and shall not include any preferred stock or other special class of stock
that may be registered under the Securities Act of 1933 (the "Act"). If
(but without any obligation to do so) NRC proposes to register any NRC
Stock under the Act in connection with the public offering of such NRC
Stock solely for cash (other than a registration relating solely to the
sale of securities to employees of NRC pursuant to a stock option, stock
purchase or similar plan, relating to a Rule 145 transaction, relating to a
merger or other NRC acquisition, or a registration on any form which does
not include substantially the same information as would be required to be
included in a registration statement covering the sale of the NRC Stock
owned by the Shareholders), NRC shall, at such time, promptly give each
Shareholder who owns NRC Stock pursuant to an exchange under NRC's purchase
option written notice of such registration. Upon NRC's receipt of the
written request of each such Shareholder given within 20 days after NRC's
mailing of such notice, NRC shall, subject to the other provisions of this
section, cause to be registered under the Act all of the NRC Stock that
each such Shareholder has requested to be registered, provided, however,
that each such Shareholder may only request registration for those shares
of NRC Stock acquired in exchange for stock pursuant to the NRC purchase
option (the "Registerable Securities"). NRC shall pay all costs for
registering the Registerable Securities. When required under the terms of
this section to effect the registration of the Registerable Securities, NRC
shall, as expeditiously as reasonably possible:
3.1 prepare and file with the Securities and Exchange Commission (the
"Commission") a registration statement with respect to such Registerable
Securities and use its best efforts to cause such registration statement to
become effective.
3.2 prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement.
3.3 furnish to the Shareholders who acquired NRC Stock pursuant to
NRC's purchase option such number of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Act, and
such other documents as they may reasonably request in order to facilitate
the distribution of the Registerable Securities owned by them.
3.4 use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue
Sky Laws of such jurisdictions as shall be reasonably requested by the
underwriters, provided, however, that the holders of the Registerable
Securities shall not be required to cause NRC to register and qualify the
Registerable Securities under any particular security or Blue Sky Law of
any particular state or jurisdiction.
3.5 in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement with terms
generally satisfactory to the managing underwriter of such offering. Each
holder of Registerable Securities participating in the underwriting shall
also enter into and perform his or her respective obligations, as
reasonably requested by the managing underwriter, under such an agreement.
It shall be a condition precedent to the obligations of NRC to register the
Registerable Securities that the holders of the Registerable Securities
shall furnish to NRC such information regarding themselves, the
Registerable Securities held by them, and the intended method of
disposition of such Registerable Securities as shall be required to effect
the registration of such Registerable Securities. Notwithstanding any of
the foregoing, NRC shall have the right, in its sole discretion, to
terminate the registration of the Registerable Securities and the
registration of the other NRC Stock which triggered the Piggyback Rights
if, at such time, the underwriters are of the opinion that a registration
at such time would not be advisable, or if there has been a material
adverse change in the condition, business or prospects of NRC or if, for
any good and sufficient reason, NRC determines to terminate the
registration causing the existence of the Piggyback Rights.
The holders of the Registerable Securities must bear and pay their
prorata portion of any underwriting discounts and commissions. In
connection with any offering involving an underwriting, NRC shall not be
required to include any of the holders of Registerable Securities in such
underwriting unless such holders accept the terms of the underwriting as
agreed upon between NRC and the underwriters selected by NRC, and then only
in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by NRC or the NRC Shareholders
demanding such registration. If the total amount of Registerable
Securities that all Shareholders with Piggyback Rights under this section
request to be included in such offering exceeds (when combined with the
securities being offered by NRC or its other shareholders) the amount of
securities that the underwriters reasonably believe compatible with the
success of the offering, then NRC shall be required to include in the
offering only that number of Registerable Securities which the underwriters
believe will not jeopardize the success of the offering and the
Registerable Securities so included shall be apportioned, prorata, among
the Shareholders in accordance with their respective ownership percentages
or in such other proportions as they shall mutually agree. However, in no
event shall the amount of Registerable Securities of the Shareholders
included in an offering by NRC of its shares under this section be reduced
below 20% of the total amount of securities included in such offering. The
definitive agreements shall contain such other provisions as the parties
may require and agree in connection with the Piggyback Rights, to include
provisions requiring the Shareholders to indemnify NRC or any underwriter
in connection with any untrue statement of material fact or the omission to
state material facts committed or omitted by the Shareholders in connection
with the offering.
The Piggyback Rights may be assigned by a Shareholder owning
Registerable Securities to any proper transferee or assignee of the
Registerable Securities owned by the Shareholder, provided that such
assignment or transfer relates to all and not less than all of the
Registerable Securities owned by such Shareholder and NRC is, within five
days after the transfer, furnished with written notice of the name and
address of the transferee or assignee who will acquire the Piggyback Rights
and the securities with respect to which such Piggyback Rights are being
assigned. The assignment shall be effective only if immediately following
such transfer the further disposition of the Registerable Securities is
restricted under the Act and such Piggyback Rights may not be assigned to
any person or entity which, in NRC's reasonable judgment, is a competitor
of NRC.
Each Shareholder with Piggyback Rights will agree that he or she will
not, to the extent requested by NRC and/or any underwriter, sell, make any
short sale of, loan, grant any option for the purchase of or otherwise
transfer or dispose of any Registerable Securities (other than those
included in the pending registration) without the prior written consent of
NRC and/or such underwriter, as the case may be, during the 90 day period
following the effective date of the Registration Statement of NRC filed
under the Act. In order to enforce the foregoing covenant, NRC may impose
stop-transfer instructions with respect to the Registerable Securities
until the end of such 90 day period.
These Piggyback Rights under this section shall terminate two years
after the exercise of the purchase option by NRC, and thereafter, no
Shareholder shall have any right to require registration of his or her
Registerable Securities.
4. SUBSEQUENT STOCK ISSUED BY COMPANY. In the event the Company
issues any additional shares of capital stock (other than to NRC) such
stock shall be subject to the purchase option herein granted NRC set forth
in Section 1 above and share certificates evidencing such stock shall bear
the restrictive legend set forth in Section 7 hereof. In the event any
Shareholder transfers his capital stock, whether voluntarily or
involuntarily, the transferee shall take such capital stock subject to the
purchase option herein granted NRC and the restrictive legend set forth in
Section 7 hereof shall be placed on any new stock certificate evidencing
the transferred stock. Any person not presently a Shareholder who
subsequently becomes a Shareholder shall agree to be bound by this
Agreement by executing and delivering an instrument in form reasonably
satisfactory to NRC and shall have all of the rights and duties hereunder
of a Shareholder without any further consent by TXEN or the other
Shareholders. Any additional shares of capital stock of TXEN acquired by a
Shareholder shall be subject to all of the terms and provisions of this
Agreement.
5. CONSENT TO TRANSFER. Prior to the expiration of the option
granted NRC under Section 1 hereof, no Shareholder shall transfer his
capital stock of the Company without the prior written consent of NRC which
consent may be withheld in its sole discretion.
6. NO IMPAIRMENT. The Company will not, by amendment of its
Articles of Incorporation or by-laws or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in
carrying out all of the provisions of this Agreement and in taking all of
the action that may be reasonably necessary or appropriate in order to
protect the preferences and rights of the holder of the Preferred Stock and
the holders of the Class B Common Stock, including but not limited to the
purchase option set forth in Section 1, against impairment unless the same
is approved by NRC. The Company shall not issue or grant any stock
options, warrants or other rights to acquire any of its capital stock.
7. LEGEND. The certificates evidencing the shares of capital stock
of the Company (except for the certificates issued to NRC) shall bear the
following restrictive legend:
"The shares of stock evidenced by this certificate may not be transferred
without the prior written consent of ▇▇▇▇▇▇▇ Research Corporation and are
subject to a purchase option in favor of ▇▇▇▇▇▇▇ Research Corporation, a
copy of which is available for inspection at the offices of the Company."
8. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS. Each Shareholder
represents and warrants as to the capital stock of the Company owned by him
on the date hereof, as of the date any new shareholder becomes a party to
this Agreement and as of the date NRC purchases such stock pursuant to
exercise of the option in Section 1 hereof that:
8.1 He has good and marketable title to such stock and the stock is
free and clear of any encumbrance, mortgage, lien, pledge, charge or claim
or restriction on or condition to transfer or assignment of any nature
whatsoever. Delivery of the stock by such Shareholder to NRC in accordance
with this Agreement will vest good and marketable title to the stock in NRC
free and clear of any encumbrance, mortgage, lien, pledge, claim or
restriction on or condition to transfer or assignment of any nature
whatsoever.
8.2 He has full legal power and capacity to execute, deliver and
perform this Agreement and has full legal power to sell his capital stock
to NRC pursuant to exercise of NRC's option in accordance with this
Agreement. This Agreement constitutes a valid and legally binding
obligation of the Shareholder.
8.3 The Shareholder is not a party to any contract or agreement,
including without limitation, subscriptions, options, warrants or rights
other than this Agreement, whereby the Shareholder has granted to any
person or entity an absolute or contingent right to purchase, obtain or
acquire any rights or interest in any of such stock.
8.4 The Shareholder does not have any subscriptions, options,
warrants or rights to acquire any common stock of the Company.
9. CLOSING. The Closing of the sale pursuant to the exercise of
NRC's exercise of the option granted in Section 1 hereof, shall occur at
the offices of the Company at a date and time mutually convenient, but in
no event later than 30 days after notice of exercise is given by NRC. At
the Closing, NRC shall deliver the purchase consideration to the
Shareholders and the Shareholders shall deliver to NRC their certificates
evidencing their capital stock properly endorsed for transfer to NRC. At
the Closing, the Shareholders shall be deemed to have made the
representations and warranties of Section 8.
10. NOTICES. All notices, including the exercise of NRC's purchase
option herein granted, and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered personally,
transmitted by facsimile or sent by regular certified mail (return receipt
requested) postage prepaid, to the parties to this Agreement at the
following addresses or at such other address for a party as shall be
specified by like notice:
If to the Company: TXEN, Inc.
Attention: President
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Facsimile #205/980-3648 or 995-8640
If to the Shareholders: TXEN, Inc.
Attention: President
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Facsimile #205/980-3648 or 995-8640
If to NRC: ▇▇▇▇▇▇▇ Research Corporation
Attention: President
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Facsimile #205/880-0367
Notices shall be deemed effective on the date of delivery or on the
date of transmission by facsimile. The parties may change the address to
which notices are to be sent by use of this section.
11. APPOINTMENT OF SHAREHOLDER REPRESENTATIVE. For purposes of
giving notices to the Shareholders pursuant to this Agreement and for
purposes of acting as a liaison between NRC and the Shareholders, the
Shareholders hereby appoint the Company as their representative. Upon
receipt of any notice from NRC pursuant to the terms and provisions of this
Agreement, the Company shall communicate such notice to the Shareholders at
their addresses as appearing on the books and records of the Company.
Failure of the Company to communicate such notices to the Shareholders
shall not affect the validity of any notice given by NRC pursuant to the
terms and provisions of this Agreement duly given to the Company as the
representative of the Shareholders.
12. SURVIVAL OF COVENANTS, EFFECT. This Agreement and the
representations, warranties, covenants and promises of the parties herein
shall survive the consummation of the transaction contemplated herein and
shall survive the execution and delivery of the documents and instruments
referenced herein or executed by the parties.
13. APPLICABLE LAW JURISDICTION. This Agreement has been negotiated
and executed in the State of Alabama, and it shall be governed by,
construed and enforced in accordance with the internal substantive laws and
not the choice of law rules of the State of Alabama.
14. SEVERABILITY. If any of the articles, sections, paragraphs,
clauses or provisions of this Agreement shall be held by a court of last
resort to be invalid, the remainder of this Agreement shall not be affected
thereby.
15. ENTIRE AGREEMENT. The foregoing contains the entire agreement
between the parties relating to the subject matter of this Agreement, and
may not be altered or amended except by an instrument in writing approved
by the Company and NRC and signed by the parties hereto, and this Agreement
supersedes all prior understandings and agreements. The parties
acknowledge that any prior oral or written agreements between the parties,
if any, are hereby terminated. The parties have also entered into a
separate Convertible Preferred Stock Purchase Agreement which shall be in
addition to and not in lieu of the provisions of this Agreement.
IN WITNESS WHEREOF, NRC and the Company have caused this Agreement to
be executed by their duly authorized officers and the Shareholders have
hereunto set their hands as of the 16 day of December, 1994.
▇▇▇▇▇▇▇ RESEARCH CORPORATION
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Its: Vice President Acquisitions
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TXEN, INC.
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Its: President
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SHAREHOLDERS:
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