Exhibit 10.1
EXECUTION VERSION
STOCK PURCHASE AND SHARE EXCHANGE AGREEMENT
by and among
ACORN HOLDING CORP.
a Delaware Corporation
and
VALENTEC SYSTEMS, INC.
a Delaware Corporation
and
THE STOCKHOLDERS OF VALENTEC SYSTEMS, INC.
STOCK PURCHASE AND SHARE EXCHANGE AGREEMENT
THIS STOCK PURCHASE AND SHARE EXCHANGE AGREEMENT (this "Agreement"), made
and entered into this 27th day of May, 2005, by and among Acorn Holding Corp., a
Delaware corporation with its principal place of business located at 00 Xxxxxx
Xxxxxx, Xxx Xxxxxx, XX 00000 ("Acorn"), and Valentec Systems, Inc., a Delaware
corporation with its principal place of business at 0000 Xxxx Xxxxxx, Xxxxxx, XX
00000 ("Valentec"), and all of the stockholders of Valentec, each of whom is
listed on the signature pages hereof (the "Valentec Stockholders") (the Valentec
Stockholders, Valentec and Acorn being referred to herein collectively as the
"Parties").
PREMISES
A. This Agreement provides for the acquisition of Valentec by Acorn whereby
Valentec shall become a wholly-owned subsidiary of Acorn.
B. The boards of directors of Acorn and Valentec and the Valentec
Stockholders have determined, subject to the terms and conditions set forth in
this Agreement, that the transaction contemplated hereby is desirable and in the
best interests of the respective companies and their stockholders. This
Agreement is being entered into for the purpose of setting forth the terms and
conditions of the proposed acquisition.
AGREEMENT
NOW, THEREFORE, on the stated premises and for and in consideration of the
mutual covenants and agreements hereinafter set forth and the mutual benefits to
the parties to be derived herefrom, it is hereby agreed as follows:
ARTICLE I
THE TRANSACTION
SECTION 1.1 SALE AND EXCHANGE OF SHARES. At the Closing (as defined in Section
4.3 hereof), subject to the satisfaction of the terms and conditions herein, the
Valentec Stockholders shall sell to Acorn and Acorn shall purchase from the
Valentec Stockholders all of the shares of common stock, par value $ 0.01 per
share of Valentec (the "Valentec Common Stock"), that are outstanding on and as
of the Closing Date (as defined in Section 4.3 hereof) (the "Valentec Shares").
SECTION 1.2 PURCHASE PRICE. In payment for the Valentec Shares delivered to it
in proper form for transfer, and subject to the satisfaction of the other terms
and conditions herein, on the Closing Date, Acorn shall deliver to the Valentec
Stockholders, on a pro rata basis, a total of 5,423,130 newly-issued shares of
Acorn's common stock, par value $0.01 per share (the "Acorn Common Stock"),
representing, on an aggregate basis and after giving effect to the newly-issued
Acorn Common Stock on the Closing Date, 77.47% of the aggregate of the number of
shares of Acorn Common Stock then issued and outstanding plus the number of
shares of Acorn Common Stock into which any other securities, warrants, options,
rights or other instruments of Acorn that are outstanding on and as of the
Closing Date are or may be convertible into or exchangeable for on an
as-converted basis as of the Closing Date (the "Acorn Stock").
Set forth on Schedule 1 is a list of the Valentec Stockholders setting forth
opposite each of their names the number of Valentec Shares owned by such
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Valentec Stockholder and the percentage interest in Valentec represented by such
Valentec Shares.
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES OF
ACORN
Except as set forth on the disclosure schedules attached hereto as Schedule
A (the "Acorn Schedules") or as disclosed or incorporated by reference in the
documents (the "SEC Reports") filed by Acorn with the Securities and Exchange
Commission in 2003 and 2005, as such documents may have been amended or
supplemented, pursuant to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), Acorn hereby represents and
warrants as follows:
SECTION 2.1 ORGANIZATION. Acorn is a corporation duly incorporated, validly
existing, and in good standing under the laws of Delaware and has the corporate
power to own all of its properties and assets and to carry on its business in
all material respects as it is now being conducted. Acorn is duly qualified to
do business as a foreign corporation in the jurisdictions in which the character
and location of the assets owned by it or the nature of the business transacted
by it requires qualification. Included in the Acorn Schedules attached hereto
are complete and correct copies of the certificate of incorporation and bylaws
and amendments thereto as in effect on the date hereof. The execution and
delivery of this Agreement does not and the consummation of the transactions
contemplated by this Agreement in accordance with the terms hereof will not
violate any provision of Acorn's certificate of incorporation or bylaws. Acorn
has full power and authority and has taken all action required by law, its
certificate of incorporation, its bylaws or otherwise to authorize the execution
and delivery of this Agreement.
SECTION 2.2 CAPITALIZATION. The authorized capitalization of Acorn consists
of 7,000,000 shares of Acorn Common Stock. As of the date hereof, Acorn has
1,573,942 shares of Acorn Common Stock issued and outstanding. All such issued
and outstanding shares have been duly authorized, validly issued, fully paid and
non-assessable, are not subject to any right of rescission, are not subject to
preemptive rights by statute, the Certificate of Incorporation or Bylaws of
Acorn, or any agreement or document to which Acorn is a party or by which it is
bound and have been offered, issued, sold and delivered by Acorn in compliance
with all registration or qualification requirements (or applicable exemptions
therefrom) of applicable federal and state securities laws. Acorn is not under
any obligation to register under the Securities Act, as amended (the "Act"), any
of its presently outstanding securities or any securities that may be
subsequently issued. There is no liability for dividends accrued but unpaid with
respect to Acorn's outstanding securities.
SECTION 2.3 SUBSIDIARIES. Except for Recticon Enterprises, Inc. and AI
Liquidating Corp., each of which is a wholly-owned subsidiary of Acorn, Acorn
does not have any subsidiaries or any interest, direct or indirect, in any
corporation, partnership, joint venture or other business entity.
SECTION 2.4 TAX MATTERS: BOOKS AND RECORDS.
(a) The books and records, financial and others, of Acorn are in all
material respects complete and correct;
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(b) Acorn and each of its subsidiaries has filed all federal, state, local
and foreign tax returns required to be filed, has paid all taxes
required to be paid in respect of all periods for which returns have
been filed or has filed extensions for the filing and/or payment
therefor. Acorn has established an adequate accrual or reserve for the
payment of all taxes payable in respect of the periods subsequent to
the periods covered by the most recent applicable tax returns, has made
all necessary estimated tax payments, and has no material liability for
taxes in excess of the amount so paid or accruals or reserves so
established. No tax return of Acorn or any subsidiary has ever been
audited by the Internal Revenue Service or any state taxing agency or
authority. For the purposes of this section, the terms "tax" and
"taxes" include all federal, state, local and foreign income, gains,
franchise, excise, property, sales, use, employment, license, payroll,
occupation, recording, value added or transfer taxes, governmental
charges, fees, levies or assessments (whether payable directly or by
withholding) and, with respect to such taxes, any estimated tax,
interest and penalties or additions to tax and interest on such
penalties and additions to tax; and
(c) On the Closing Date, Acorn shall have no outstanding liabilities other
than legal fees and disbursements, the fees and expenses, if any,
related to the issuance of the Acorn Common Stock (e.g. transfer agent
and blue sky fees and expenses) accounting fees and other incidental
costs incurred in its ordinary course of business (including accrued
and unpaid taxes, if any) or in connection with the transactions
contemplated hereby (the "Closing Costs") and shall have cash on hand
after the payment of legal and accounting fees accrued to that date in
the amount of $150,000.
SECTION 2.5 LITIGATION AND PROCEEDINGS. There are no actions, suits,
proceedings or investigations pending or, to its knowledge, threatened by or
against or affecting Acorn or its properties, at law or in equity, before any
court or other governmental agency or instrumentality, domestic or foreign or
before any arbitrator of any kind that would have a material adverse affect on
the business, operations, financial condition or income of Acorn. Acorn is not
in default with respect to any judgment, order, writ, injunction, decree, award,
rule or regulation of any court, arbitrator or governmental agency or
instrumentality and has not received any written notice of such a default. There
is, to Acorn's knowledge, no basis for any stockholder or former stockholder of
Acorn, or any other person, firm, corporation, or entity, to assert a claim
against Acorn based upon: (a) ownership or rights to ownership of any shares of
Acorn Stock, (b) any rights as an Acorn Stockholder, including any option or
preemptive rights or rights to notice or to vote, or (c) any rights under any
agreement among Acorn and its stockholders.
SECTION 2.6 MATERIAL CONTRACT DEFAULTS. Acorn is not in default in any
material respect under the terms of any outstanding contract, agreement, lease
or other commitment which is material to the business, operations, properties,
assets or condition of Acorn and there is no potential material default known to
Acorn thereunder in respect of which Acorn has not taken adequate steps to
prevent such default from occurring.
SECTION 2.7 INFORMATION. The information concerning Acorn as set forth in
this Agreement and in the attached Acorn Schedules is accurate in all material
respects and does not contain any untrue statement of a material fact or omit to
state a material fact required to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 2.8 TITLE AND RELATED MATTERS. Acorn has good and marketable title
to and is the sole and exclusive owner of all of its properties, inventory,
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interest in properties and assets, real and personal free and clear of all
liens, pledges, charges or encumbrances. No third party has any right to, and
Acorn has not received any notice of infringement of or conflict with asserted
rights of other with respect to any product, technology, data, trade secrets,
know-how, proprietary techniques, trademarks, service marks, trade names or
copyrights which, singly on in the aggregate, if the subject of an unfavorable
decision ruling or finding, would have a materially adverse affect on the
business, operations, financial conditions or income of Acorn or any material
portion of its properties, assets or rights.
SECTION 2.9 CONTRACTS.
(a) There are no material contracts, agreements franchises, license
agreements, or other material commitments to which Acorn is a party or
by which it or any of its properties are bound.
(b) Acorn is not a party to any contract, agreement, commitment or
instrument or subject to any charter or other corporate restriction or
any judgment, order, writ, injunction, decree or award which materially
and adversely affects, or in the future may (as far as Acorn can now
foresee) materially and adversely affect, the business, operations,
properties, assets or condition of Acorn; and
(c) Acorn is not a party to any material oral or written: (i) contract for
the employment of any officer or employee; (ii) profit sharing, bonus,
deferred compensation, stock option, severance pay, pension benefit or
retirement plan, agreement or arrangement covered by Title IV of the
Employee Retirement Income Security Act, as amended; (iii) agreement,
contract or indenture relating to the borrowing of money; (iv) guaranty
of any obligation for the borrowing of money or otherwise, excluding
endorsements made for collection and other guaranties, of obligations,
which, in the aggregate exceeds $1,000; (v) consulting or other
contracts with an unexpired term of more than one year or providing for
payments in excess of $1,000 in the aggregate; (vi) collective
bargaining agreement; or (vii) contract, agreement or other commitment
involving payments by it for more than $1,000 in the aggregate
exclusive of contracts, agreements or commitments relating to Closing
Costs.
SECTION 2.10 COMPLIANCE WITH LAWS AND REGULATIONS. To the best of Acorn's
knowledge and belief, Acorn has complied with all applicable statutes and
regulations of any federal, state or other governmental entity or agency
thereof, except to the extent that noncompliance would not materially and
adversely affect the business, operations, properties, assets or condition of
Acorn or would not result in Acorn incurring material liability.
SECTION 2.11 APPROVAL OF AGREEMENT; ENFORCEABILITY. The directors of Acorn
have authorized the execution and delivery of this Agreement and have approved
the transactions contemplated hereby. This Agreement is the valid and binding
agreement of Acorn, enforceable against Acorn in accordance with its terms.
SECTION 2.12 MATERIAL TRANSACTIONS OR AFFILIATIONS. There are no material
contracts or agreements or arrangements between Acorn and any person, who was at
the time of such contract, agreement or arrangement an officer, director or
person owning of record, or known to beneficially own, ten percent (10%) or more
of the issued and outstanding shares of Acorn Common Stock and which are to be
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performed in whole or in part after the date hereof. Acorn has no commitment,
whether written or oral, to lend any funds to, borrow any money from or enter
into material transactions with any such affiliated person.
SECTION 2.13 NO CONFLICT WITH OTHER INSTRUMENTS. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed of
trust or other material contract, agreement or instrument to which Acorn is a
party or to which any of its properties or operations are subject.
SECTION 2.14 GOVERNMENTAL AUTHORIZATIONS. Acorn has all licenses,
franchises, permits or other governmental authorizations legally required to
enable it to conduct its business in all material respects as conducted on the
date hereof. Except for compliance with federal and state securities and
corporation laws, no authorization, approval, consent or order of, or
registration, declaration or filing with, any court or other governmental body
is required in connection with the execution and delivery by Acorn of this
Agreement and the consummation of the transactions contemplated hereby.
SECTION 2.15 EXCHANGE ACT REGISTRATION. As of the date hereof, (a) the Acorn
Common Stock is registered under Section 12(g) of the Exchange Act and (b) Acorn
has not filed all reports required to be filed by it under the Exchange Act.
ARTICLE III
REPRESENTATIONS, COVENANTS AND WARRANTIES
OF VALENTEC AND THE VALENTEC STOCKHOLDERS
Except as set forth on the disclosure schedules attached hereto as Schedule
B (the "Valentec Schedules"), Valentec and each of the Valentec Stockholders
hereby represents and warrants as follows:
SECTION 3.1 ORGANIZATION; LEGAL CAPACITY. Valentec is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware
and has the corporate power to own all of its properties and assets and to carry
on its business in all material respects as it is now being conducted. Valentec
is duly qualified to do business as a foreign entity in the jurisdictions in
which the character and location of the assets owned by it or the nature of the
business transacted by it requires qualification. Included in the attached
Valentec Schedules are complete and correct copies of the certificate of
incorporation, bylaws and amendments thereto as in effect on the date hereof.
The execution and delivery of this Agreement does not and the consummation of
the transactions contemplated by this Agreement in accordance with the terms
hereof will not, violate any provision of Valentec's certificate of
incorporation or bylaws. Valentec has full power and authority and has taken all
action required by law, its articles of incorporation, bylaws or otherwise to
authorize the execution and delivery of this Agreement.
Each of the Valentec Stockholders has the legal capacity to execute this
Agreement and consummate the transactions contemplated hereby.
SECTION 3.2 CAPITALIZATION; TITLE TO SECURITIES. The authorized
capitalization of Valentec consists of 100 shares of Valentec Common Stock,
$0.01 par value per share and no preferred shares. As of the date hereof, there
are 100 shares of Valentec Common Stock issued and outstanding.
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All such issued and outstanding shares have been legally issued, fully paid,
are non-assessable and not issued in violation of the preemptive or other rights
of any person. Valentec has no other securities, warrants or options authorized
or issued other than as described above. Valentec has no agreements
contemplating the issuance of any additional securities, warrants or options by
Valentec, other than the letter dated March 31, 2005 with Acorn and this
Agreement.
Each of the Valentec Stockholders is the registered and beneficial owner of
and has good and marketable title to, the securities of Valentec set forth on
Schedule 1 hereto, free and clear of all liens, pledges, charges or
encumbrances.
SECTION 3.3 SUBSIDIARIES. Valentec has no subsidiaries.
SECTION 3.4 TAX MATTERS; BOOKS & RECORDS
(a) The books and records, financial and others, of Valentec are in all
material respects complete and correct and have been maintained in
accordance with good business accounting practices;
(b) Valentec has no liabilities with respect to the payment of any country,
federal, state, county, local or other taxes (including any
deficiencies, interest or penalties) except as defined as current
accrued liabilities incurred in the normal course of business.
SECTION 3.5 INFORMATION. The information concerning Valentec and the
Valentec Stockholders set forth in this Agreement and in the attached Valentec
Schedules is accurate in all material respects and does not contain any untrue
statement of a material fact or omit to state a material fact required to make
the statements made, in light of the circumstances under which they were made,
not misleading.
SECTION 3.6 TITLE AND RELATED MATTERS. Valentec has good and marketable
title to and is the sole and exclusive owner of all of its properties,
inventory, interests in properties and assets, real and personal (collectively,
the "Assets") free and clear of all liens, pledges, charges or encumbrances.
Except as set forth in the Valentec Schedules attached hereto, Valentec owns
free and clear of any liens, claims, encumbrances, royalty interests or other
restrictions or limitations of any nature whatsoever, all such Assets including
all procedures, techniques, marketing plans, business plans, methods of
management or other information utilized in connection with Valentec's business.
Except as set forth in the attached Valentec Schedules, no third party has any
right to, and Valentec has not received any notice of infringement of or
conflict with asserted rights of others with respect to any product, technology,
data, trade secrets, know-how, proprietary techniques, trademarks, service
marks, trade names or copyrights which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a materially
adverse affect on the business, operations, condition (financial or other) or
income of Valentec or any material portion of its properties, assets or rights.
SECTION 3.7 LITIGATION AND PROCEEDINGS. There are no actions, suits or
proceedings pending or, to its knowledge, threatened by or against or affecting
Valentec, at law or in equity, before any court or other governmental agency or
instrumentality, domestic or foreign or before any arbitrator of any kind that
would have a material adverse effect on the business, operations, condition
(financial or other), income or business prospects of Valentec. Valentec is not
in default with respect to any judgment, order, writ, injunction, decree, award,
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rule or regulation of any court, arbitrator or governmental agency or
instrumentality and has not received any written notice of such a default.
SECTION 3.8 CONTRACTS. Valentec is not and on the Closing Date will not be a
party to any contract, agreement, commitment or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ, injunction,
decree or award which materially and adversely affects, or in the future may (as
far as Valentec can now foresee) materially and adversely affect, the business,
operations, properties, assets, business prospects or condition (financial or
other) of Valentec.
SECTION 3.9 NO CONFLICT WITH OTHER INSTRUMENTS. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed of
trust or other material contract, agreement or instrument to which Valentec is a
party or to which any of its properties or operations are subject.
SECTION 3.10 MATERIAL CONTRACT DEFAULTS. Valentec is not in default in any
material respect under the terms of any outstanding contract, agreement, lease
or other commitment which is material to the business, operations, properties,
assets or condition (financial or other) of Valentec and there is no potential
material default known to Valentec thereunder in respect of which Valentec has
not taken adequate steps to prevent such a default from occurring.
SECTION 3.11 GOVERNMENTAL AUTHORIZATIONS. Valentec has all licenses,
franchises, permits and other governmental authorizations that are legally
required to enable it to conduct its business operations in all material
respects as conducted on the date hereof. Except for compliance with federal and
state securities or corporation laws, no authorization, approval, consent or
order of, or registration, declaration or filing with, any court or other
governmental body is required in connection with the execution of this Agreement
or the consummation by Valentec of the transactions contemplated hereby.
SECTION 3.12 COMPLIANCE WITH LAWS AND REGULATIONS. To the best of Valentec's
knowledge, Valentec has complied with all applicable statutes and regulations of
any federal, state or other governmental entity or agency thereof, except to the
extent that noncompliance would not materially and adversely affect the
business, operations, properties, assets or condition (financial or other) of
Valentec and would not result in Valentec's incurring any material liability.
SECTION 3.13 INSURANCE. All of the insurable properties of Valentec are
insured for Valentec's benefit under valid and enforceable policy or policies
containing coverage in such amounts as management of Valentec believes to be
prudent and customary in the businesses in which Valentec and its subsidiaries
are engaged, and will be outstanding and in full force at the Closing Date.
SECTION 3.14 APPROVAL OF AGREEMENT; ENFORCEABILITY. The directors of
Valentec and the Valentec Stockholders have each authorized the execution and
delivery of Agreement and have approved the transactions contemplated hereby.
This Agreement is the valid and binding agreement of Valentec and each of the
Valentec Stockholders, enforceable against each of them in accordance with its
terms.
SECTION 3.15 FILINGS. Based upon Valentec's and the Valentec Stockholders'
review of Valentec's material contracts, Acorn will be in a position to file
such material contracts with the SEC as required by the Exchange Act within the
applicable time periods required under the Exchange Act upon and following the
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consummation of the transactions contemplated hereby and Valentec and each
Valentec Stockholder will use its best efforts to assist Acorn in the
preparation of all filings required by the Exchange Act in a timely manner,
including but not limited to, the filing of a Current Report on Form 8-K under
Section 13 or 15(d) of the Exchange Act within four (4) days after the execution
of this Agreement and the delivery of the audited financial statements for
Valentec in sufficient time to allow for the filing of an amended Current Report
on Form 8-K with the audited financial statements within sixty (60) days
thereafter.
SECTION 3.16 INVESTMENT INTENT. Each of the Valentec Stockholders
understands that (a) the shares of Acorn Common Stock to be received by it at
the Closing have not been registered under the Act, in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and (b) that Acorn is relying in part upon the truth and
accuracy of, and such stockholder's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such stockholder
set forth herein in order to determine the availability of such exemptions and
the eligibility of such stockholder to acquire such Acorn Common Stock and (c)
that such shares of Acorn Common Stock are restricted securities within the
meaning of the Act and may not be sold, pledged or otherwise transferred unless
they are registered under the Act or an exemption from such registration is
available. Each of the Valentec Stockholders is entering into this Agreement and
acquiring the shares of Acorn Common Stock hereunder for its own account for
investment only and not with a view to any distribution thereof, and it has no
present intent to sell, pledge or to otherwise transfer any of such shares to or
through any person; provided that this representation shall not be construed as
an undertaking to hold any shares of Acorn Common Stock for any minimum or other
specific term, and each of the Valentec Stockholders reserves the right to
dispose of its shares of Acorn Common Stock at any time in accordance with or
pursuant to an effective registration statement covering such shares of Acorn
Common Stock or an available exemption under the Act.
SECTION 3.17 SOPHISTICATION. Each of the Valentec Stockholders is an
"accredited investor", as defined in Rule 501 under the Act and has such
experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in the Acorn Common Stock. The Valentec
Stockholders acknowledge that an investment in the Acorn Common Stock is
speculative and involves a high degree of risk.
SECTION 3.18 ACCESS TO INFORMATION. Each of the Valentec Stockholders and
its advisors, if any, has received or had access to all documents, records and
other information pertaining to the business, finances and operations of Acorn
and other information it deemed material to making an informed investment
decision regarding its investment in the Acorn Common Stock that it has
requested, including documents filed by Acorn under the Exchange Act, and has
been given the opportunity to meet or have telephonic discussions with
representatives of Acorn to ask questions of them, to receive answers concerning
the terms and conditions of this investment and to obtain information that it
deems is necessary to verify the accuracy of the information provided to it.
Each of the Valentec Stockholders has sought such accounting, legal and tax
advice as it has considered necessary to make an informed investment decision
with respect to its acquisition of the Acorn Common Stock.
SECTION 3.19 MANNER OF SALE. At no time were the Valentec Stockholders
presented with or solicited by or through any leaflet, article, notice or other
communication published in any newspaper, magazine, website, or similar media,
or public promotional meeting, television advertisement, or any other form of
general solicitation or advertising.
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SECTION 3.20 LEGEND. Each of the Valentec Stockholders understands that the
certificates or other instruments representing the Acorn Common Stock shall bear
a restrictive legend in substantially the following form (and a stop transfer
order may be placed against transfer of such stock certificates): THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARD
RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
ARTICLE IV
EXCHANGE PROCEDURE AND OTHER CONSIDERATION
SECTION 4.1 SHARE EXCHANGE/DELIVERY OF VALENTEC SECURITIES. On the Closing
Date, the Valentec Stockholders shall deliver to Acorn certificates or other
documents evidencing all of the issued and outstanding Valentec Shares, free and
clear of all liens, pledges, charges or encumbrances and duly endorsed in blank
or with executed power attached thereto in transferable form.
SECTION 4.2 ISSUANCE OF ACORN COMMON STOCK. In exchange for the Valentec
Shares tendered pursuant to Section 4.1, Acorn shall issue to the Valentec
Stockholders on a pro rata basis in accordance with Schedule 1 hereto, a total
of 5,423,130 shares of Acorn Common Stock equal to seventy seven point forty
seven (77.47%) percent of the Acorn Stock.
SECTION 4.3 CLOSING. The closing ("Closing") of the transactions
contemplated by this Agreement shall be on or about May 31, 2005 ("Closing
Date") and shall take place at the offices of Xxxxxxxxxxx & Xxxxxxxx Xxxxxxxxx
Xxxxxx LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, XX 00000, at 10:00 a.m., local time.
SECTION 4.4 TERMINATION.
(a) This Agreement may be terminated by the board of directors of either
Acorn or Valentec, respectively, at any time prior to the Closing if:
(i) terminated by the mutual written consent of each of the
parties hereto; or
(ii) there shall be any action or proceeding before any court
or any governmental body which shall seek to restrain,
prohibit or invalidate the transactions contemplated by
this Agreement and which, in the judgment of such board
of directors, made in good faith and based on the advice
of its legal counsel, makes it inadvisable to proceed
with the exchange contemplated by this Agreement; or
(iii) any of the transactions contemplated hereby are
disapproved by any regulatory authority whose approval
is required to consummate such transactions.
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(b) This Agreement may be terminated at any time prior to the Closing Date
by action of the board of directors of Acorn if Valentec shall fail to
comply in any material respect with any of its covenants or agreements
contained in this Agreement or if any of the representations or
warranties of Valentec contained herein shall be inaccurate in any
material respect, which noncompliance or inaccuracy is not cured within
5 days after written notice thereof is given to Valentec or waived by
Acorn.
(c) This Agreement may be terminated at any time prior to the Closing Date
by action of the board of directors of Valentec if Acorn shall fail to
comply in any material respect with any of its covenants or agreements
contained in this Agreement or if any of the representations or
warranties of Acorn contained herein shall be inaccurate in any
material respect, which noncompliance or inaccuracy is not cured within
5 days after written notice thereof is given to Acorn or waived by
Valentec.
SECTION 4.5 DIRECTORS OF ACORN AFTER CLOSING. Effective upon the Closing,
the existing members of the board of directors of Acorn shall have (i) resigned
in all capacities served with Acorn and (ii) appointed as new members of the
board of directors of Acorn Xx. Xxxxxx Xxxxx and Xx. Xxxx Gilat. The existing
members of the board acknowledge they have no claims against Acorn for any
compensation, in any form whatsoever.
SECTION 4.6 OFFICERS OF ACORN. All officers of Acorn shall resign in all
capacities effective immediately after the Closing and execute a release
acknowledging that they are not owed any compensation or payment by Acorn.
ARTICLE V
SPECIAL COVENANTS
SECTION 5.1 ACCESS TO PROPERTIES AND RECORDS. Prior to the Closing, Acorn
and Valentec will each provide to the officers and authorized representatives of
the other, full access to the properties, books and records of each other, in
order that each may have full opportunity to make such reasonable investigation
as it shall desire to make of the affairs of the other and each will furnish the
other with such additional financial and operating data and other information as
to the business and properties of each other, as the other shall from time to
time reasonably request. Acorn and Valentec shall also make available to each
other such officers, employees, consultants and advisors as reasonably requested
for meetings, questions and discussions concerning each other and in order to
give Acorn and the Valentec Stockholders an opportunity to ask questions in
connection with the transaction contemplated hereby.
SECTION 5.2 THIRD PARTY CONSENTS. Acorn, Valentec and the Valentec
Stockholders agree to cooperate with each other in order to obtain any required
third party consents to this Agreement and the transactions herein contemplated.
SECTION 5.3 ACTIONS PRIOR AND SUBSEQUENT TO CLOSING.
(a) From and after the date of this Agreement until the Closing Date,
except as permitted or contemplated by this Agreement, Acorn and Valentec will
each:
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(i) maintain and keep its properties in states of good
repair and condition as at present, except for depreciation due to
ordinary wear and tear and damage due to casualty;
(ii) maintain in full force and effect insurance comparable
in amount and in scope of coverage to that now maintained by it;
(iii) perform in all material respects all of its obligations
under material contracts, leases and instruments relating to or
affecting its assets, properties and business; and
(iv) conduct its operations in the ordinary course of
business consistent with past practice.
(b) From and after the date of this Agreement until the Closing Date,
neither Acorn nor Valentec will, without the prior consent of the other Party:
(i) except as otherwise specifically set forth herein, make
any change in its certificate of incorporation or bylaws;
(ii) issue or enter into any agreements for the future
issuance of any of its capital stock or confer or award any options,
warrants, conversion rights or other rights not existing on the date
hereof to acquire any securities, or make or declare any
distributions, dividends or other payments with respect to its
capital stock other than as permitted by this Agreement;
(iii) pay any bonus, increased salary or special remuneration
to any officer, employee or consultant or enter into or amend any
employment, severance or other agreements or arrangements with any
directors or officers;
(iv) declare, set aside or pay any cash or stock dividend or
other distribution in respect of capital stock, purchase or redeem or
otherwise acquire any of its capital stock;
(v) borrow any money;
(vi) enter into any transaction not in the ordinary course of
business;
(vii) encumber or permit to be encumbered any of its assets
except in the ordinary course of its business consistent with past
practice and to an extent which is not material;
(viii) dispose of any of its assets except in the ordinary
course of business consistent with past practice;
(ix) enter into any material lease or contract for the
purchase or sale of any property, real or personal, except in the
ordinary course of business consistent with past practice;
(x) fail to maintain its equipment and other assets in good
working condition and repair according to the standards it has
maintained to the date of this Agreement, subject only to ordinary
wear and tear;
(xi) change accounting methods;
(xii) amend or terminate any contract, agreement or license to
which it is a party except those amended or terminated in the
ordinary course of business, consistent with past practice, and which
are not material in amount or effect;
(xiii) lend any amount to any person or entity, other than
advances for travel and expenses which are incurred in the ordinary
course of business consistent with past practice, not material in
amount and documented by receipts for the claimed amounts;
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(xiv) guarantee or act as a surety for any obligation except
for the endorsement of checks and other negotiable instruments in the
ordinary course of business, consistent with past practice, which are
not material in amount;
(xv) waive or release any material right or claim except in
the ordinary course of business, consistent with past practice;
(xvi) split or combine the outstanding shares of its capital
stock of any class or enter into any recapitalization affecting the
number of outstanding shares of its capital stock of any class or
affecting any other of its securities;
(xvii) merge, consolidate or reorganize with, or acquire any
entity, except as contemplated hereby;
(xviii) license any of its technology or intellectual property
except in the ordinary course of business consistent with past
practice;
(xix) agree to any audit assessment by any tax authority or
file any federal or state income or franchise tax return unless
copies of such returns have been delivered to other party for its
review prior to filing;
(xx) change any insurance coverage or issue any certificates
of insurance; or
(xxi) agree to do, or permit any Subsidiary to do or agree to
do, any of the things described in the preceding clauses 5.3(b)(i)
through 5.3(b)(xx).
SECTION 5.4 INDEMNIFICATION.
(a) Acorn hereby agrees to indemnify Valentec, each of its officers, agents
and directors and the Valentec Stockholders against any loss,
liability, claim, damage or expense (including, but not limited to, any
and all expense whatsoever reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened
or any claim whatsoever), to which it or they may become subject to or
rising out of or based on any breach or misrepresentation by Acorn in
this Agreement.
(b) Valentec and the Valentec Stockholders, jointly and severally, hereby
agree to indemnify Acorn, each of the officers, agents, directors and
current shareholders of Acorn as of the Closing Date against any loss,
liability, claim, damage or expense (including, but not limited to, any
and all expense whatsoever reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened
or any claim whatsoever), to which it or they may become subject
arising out of or based on any breach or misrepresentation by any of
them in this Agreement.
SECTION 5.5 ANTI-DILUTION. Valentec and the Valentec Stockholders each agree
that Acorn stockholders of record as of the business day immediately preceding
the Closing (the "Acorn Stockholders of Record") shall have the following
anti-dilution rights for 180 days from the Closing Date:
(a) subject to clause (b) below, if at any time during the 180-day period
following the Closing Date, the Company shall issue any additional shares of
Common Stock below fair market value, then the Acorn Stockholders of Record
shall be entitled to receive, without payment of additional consideration,
additional registered shares of the Company's Common Stock on a pro rata basis
such that the collective percentage ownership of Acorn held by the Acorn
Stockholders of Record, calculated on a fully diluted basis (without giving
effect to any sales or purchases by such stockholders from and after the Closing
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Date and without giving effect to any shares issuable pursuant to the Standby
Equity Distribution Agreement referred to below), does not fall below 10% of the
total issued and outstanding shares of Common Stock of Acorn at such time (the
"Anti-Dilution Right");
(b) notwithstanding subparagraph (a) above, the Anti-Dilution Right shall
not apply
(A) in connection with the anticipated issuances of Common Stock
post-closing in connection with the recapitalization of Acorn (the
"Recapitalization") as follows:
(i) the issuance of additional authorized shares of Acorn
Common Stock to the Valentec Stockholders (in the amount
of 7,786,089 shares) such that, after taking into
account the issuance of shares pursuant to clauses (ii)
and (iii) below, the total percentage ownership of the
Valentec Stockholders shall be 85%;
(ii) the issuance of 70,000 shares of Acorn Common Stock to
Xxxxxx Xxxxxx; and
(iii) the issuance of 685,015 shares of Common Stock to
Knightsbridge Capital; or
(B) in connection with the issuance of shares of Acorn Common
Stock pursuant to the Standby Equity Distribution Agreement dated as of May 5,
2005 between Valentec and Cornell Capital Partners LP.
For purposes of clarification, assuming the occurrence of (b)(A)(i), (ii)
and (iii) but without taking into account (b)(B) above, and assuming the
exercise of warrants held by Cornell Capital Partners, LP for 200,000 shares of
Common Stock immediately following the Closing, the percentage interests of
Acorn, Valentec Stockholders, Xx. Xxxxxx and Knightsbridge Capital shall be
10.147%, 85.000%, 0.445% and 4.408%, respectively.
Acorn shall provide written notice to the Acorn Stockholders of Record
within five (5) business days following the date of an event triggering their
Anti-Dilution Rights which provides the calculation of the number of additional
shares to be issued. Such shares shall be issued and delivered within twenty
(20) days after the issuance that triggered the Anti-Dilution Right.
The expenses of registering and issuing additional shares of Acorn Common
Stock to the Acorn Stockholders of Record and all other expenses related to the
exercise of the Anti-Dilution Right shall be borne solely by the Company.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF VALENTEC AND THE VALENTEC STOCKHOLDERS
The obligations of Valentec and the Valentec Stockholders under this
Agreement are subject to the satisfaction, at or before the Closing Date, of the
following conditions:
SECTION 6.1 ACCURACY OF REPRESENTATIONS. The representations and warranties
made by Acorn in this Agreement shall be true in all material respects (other
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than representations and warranties which contain materiality standards, which
representations and warranties shall be true and correct in all respects) at the
Closing Date with the same force and effect as if such representations and
warranties were made at the Closing Date (except for changes therein permitted
by this Agreement), and Acorn shall have performed or complied in all material
respects with all covenants and conditions required by this Agreement to be
performed or complied with by Acorn on or prior to the Closing Date. Valentec
shall be furnished with a certificate, signed by a duly authorized officer of
Acorn and dated the Closing Date, to the foregoing effect.
SECTION 6.2 DIRECTOR APPROVAL. The Board of Directors of Acorn shall have
approved this Agreement and the transactions contemplated herein.
SECTION 6.3 AUDITED FINANCIALS. Intentionally Omitted
SECTION 6.4 NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date, there
shall not have occurred any material adverse change in the financial condition,
business or operations of Acorn nor shall any event have occurred which, with
the lapse of time or the giving of notice, may cause or create any material
adverse change in the business, management, results of operations or financial
condition, of Acorn. Prior to the Closing Date, Acorn shall conduct its business
in the ordinary course consistent with past practice.
SECTION 6.5 OTHER ITEMS. Valentec shall have received such further
documents, certificates or instruments relating to the transactions contemplated
hereby as Valentec may reasonably request.
SECTION 6.6 NO DEFAULT. There shall be no material default under any of the
terms hereof by Acorn, which default has not been waived by Valentec or cured on
or prior to the Closing Date.
SECTION 6.7 Intentionally Omitted
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF ACORN
The obligations of Acorn under this Agreement are subject to the
satisfaction, at or before the Closing Date (unless otherwise indicated herein),
of the following conditions:
SECTION 7.1 ACCURACY OF REPRESENTATIONS. The representations and warranties
made by Valentec and the Valentec Stockholders in this Agreement shall be true
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in all material respects (other than representations and warranties which
contain materiality standards, which representations and warranties shall be
true and correct in all respects) as of the Closing Date (except for changes
therein permitted by this Agreement) with the same force and effect as if such
representations and warranties were made at and as of the Closing Date, and
Valentec and the Valentec Stockholders shall each have performed and complied in
all material respects with all covenants and conditions required by this
Agreement to be performed or complied with by them on or prior to the Closing
Date. Acorn shall have been furnished with a certificate, signed by a duly
authorized executive officer of Valentec and the Valentec Stockholders and dated
the Closing Date, to the foregoing effect.
SECTION 7.2 APPROVALS. The Board of Directors of Valentec shall have
approved this Agreement and the transactions contemplated herein and all
consents and approvals related to or by the Valentec Stockholders shall have
been received or made.
SECTION 7.3 NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date, there
shall not have occurred any material adverse change in the financial condition,
business, management or operations of Valentec nor shall any event have occurred
which, with the lapse of time or the giving of notice, may cause or create any
material adverse change in the financial condition, business, management or
results of operations of Valentec. In addition, all information, representations
and warranties of Valentec in the Cornell Capital Partners, LLC Promissory Note
and Stand By Equity Distribution Agreement (copies of which shall have been
provided to Acorn prior to the Closing Date) shall, as of the Closing Date
remain accurate and valid.
SECTION 7.4 AUDITED FINANCIALS. Valentec shall have its consolidated balance
sheets and related statements of income and retained earnings, stockholders'
equity and cash flows for Target as at December 31, 2004 and 2003, and for the
fiscal years then ended, certified by a PCAOB registered accounting firm (which
financial statements must conform to all SEC reporting requirement applicable to
a public company under the Act ) and who consent to the use of such certified
financial statements in filings with the SEC after the consummation of the
transaction.
SECTION 7.5 FINANCING AGREEMENTS. Valentec shall have executed definitive
documentation with Cornell Capital Partners, LLC ("Cornell") or Xxxxxxxxxx
Equity Partners, Ltd. ("Xxxxxxxxxx") for a One Million Dollar Bridge Financing
and a Fifteen Million Dollar Equity Line (including all ancillary agreements and
documents, the "Financing Agreements"), copies of which shall have been provided
to Acorn prior to the Closing Date, and such agreements shall be in full force
and effect at the Closing. Valentec shall have entered into such amendments to
the Financing Agreements (including, but not limited to, (i) the Standby Equity
Distribution Agreement between Cornell and Valentec; (ii) any warrant or
promissory note issued by Valentec to Cornell or Xxxxxxxxxx; and (iii) any
pledge or security agreement entered into between Valentec and Cornell or
Xxxxxxxxxx as deemed necessary by Acorn, in its sole discretion, to reflect that
any agreement by Valentec to issue shares of its, or a surviving entity's,
capital stock (or warrants or other securities exercisable or convertible into
shares of Valentec's, or a surviving entity's, capital stock) to Cornell or
Xxxxxxxxxx shall, in fact, constitute an agreement for the issuance of shares of
Acorn Common Stock.
SECTION 7.6 EVIDENCE OF MARKETABLE TITLE. Valentec shall have delivered to
Acorn evidence satisfactory to Acorn that the Valentec Stockholders are the
registered and beneficial owners of, and have good and marketable title to, the
Fully-Diluted Valentec Shares, free and clear of all liens, pledges, charges or
encumbrances.
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SECTION 7.7 NO DEFAULT. There shall be no material default under any of the
terms hereof by Valentec or the Valentec Stockholders which default has not been
waived by Acorn or cured on or prior to the Closing Date.
SECTION 7.8 VALID PRIVATE PLACEMENT. Acorn shall have determined, based upon
the advice of counsel, that the issuance of the Acorn Common Stock to the
Valentec Stockholders shall qualify as a valid private placement satisfying the
conditions of Rule 506 of Regulation D under the Act.
SECTION 7.9 OTHER ITEMS. Acorn shall have received such further documents,
certificates or instruments relating to the transactions contemplated hereby as
Acorn may reasonably request.
SECTION 7.10 FINANCIAL STATEMENTS. Complete and accurate copies of the
audited consolidated balance sheet, consolidated statements of operations,
consolidated statements of stockholders' equity and consolidated statements of
cash flows (together with any supplementary information thereto) of Valentec
shall have been provided to Acorn for each of the last two years (the "Valentec
Financial Statements"). The Valentec Financial Statements fairly present, in all
material respects, the consolidated financial position of Valentec, as of and
for the respective dates thereof, and the consolidated results of its operations
and its consolidated cash flows for the respective periods then ended. Since
December 31, 2004, Valentec has not made any change in the accounting practices
or policies applied in the preparation of its financial statements, except as
may be required by United States generally accepted accounting principles.
SECTION 7.11 KNIGHTSBRIDGE AND PAPIRI AGREEMENTS. Acorn and Valentec shall
have received (a) an executed final agreement from Knightsbridge Capital
acknowledging and agreeing and otherwise in form and substance satisfactory to
Acorn and Valentec, that its total and complete compensation for all of its
engagements in any capacity with Valentec, whether pursuant to that certain
letter dated March 18, 2005 or otherwise, shall consist only of a cash fee in
the amount of $150,000 payable subsequent to the Closing and 685,015 shares of
Acorn Common Stock to be issued in connection with the Recapitalization and (b)
and executed and final agreement with Xxxxxx Xxxxxx acknowledging and agreeing
and otherwise in form and substance satisfactory to Acorn and Valentec, that his
total and complete compensation for all of his engagements in any capacity with
Valentec, whether pursuant to that certain consulting agreement dated in March
2005 or otherwise, shall consist only of a cash fee in the amount of $20,000
payable subsequent to the Closing and 70,000 shares of Acorn Common Stock to be
issued in connection with the Recapitalization.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 BROKERS AND FINDERS. Acorn represents and warrants to Valentec
that there are no brokers or finders entitled to any compensation with respect
to the transaction based upon arrangements made on or behalf of Acorn, and
agrees to indemnify and hold Valentec, its directors and officers and the
Valentec Stockholders harmless from and against any expenses or damages incurred
as a result of a breach of this representation and warranty. Valentec and the
Valentec Stockholders represent and warrant to Acorn that, other than those
listed below, there are no brokers or finders entitled to any compensation with
respect to the transaction based upon arrangements made by or on behalf of
Valentec and/or the Valentec Stockholders, and agree to indemnify and hold
Acorn, its stockholders, directors and officers, harmless from and against any
expenses or damages incurred as a result of a breach of this representation and
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warranty. Valentec agrees that it shall be directly and solely responsible for
and pay all broker and finder fees and expenses relating to the brokers and/or
finders listed below with respect to the transaction.
Anetta Budha
Xxxxxx Xxxxxx
Knightsbridge Capital
SECTION 8.2 GOVERNING LAW; JURISDICTION; SERVICE OF PROCESS; WAIVER OF JURY
TRIAL. The terms of this Agreement will be governed by the internal laws of the
State of New York without regard to provisions thereof relating to conflicts of
law. The Parties agree that any and all actions or proceedings seeking to
enforce any provision of, or based on any rights arising out of this Agreement
shall be brought in the courts of the State of New York, County of New York,
including the Federal Courts located therein, should Federal jurisdiction
requirements exist. Each of the Parties consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world. The Parties specifically waive any right to a jury trial
with respect to any matter arising under this Agreement.
SECTION 8.3 NOTICES. Any notices or other communications required or
permitted hereunder shall be sufficiently given if personally delivered to it or
sent by registered mail or certified mail, postage prepaid, or by prepaid
telegram addressed as follows:
If to Acorn: 00 Xxxxxx Xxxxxx
Xxx Xxxxxx, XX 00000
If to Valentec: 0000 Xxxx Xxxxxx
Xxxxxx, XX 00000
If to the Valentec Stockholders at such address as shall appear beneath
their signatures on the signature pages hereof.
or such other addresses as shall be furnished in writing by any Party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given as of the date so delivered, mailed or telegraphed.
SECTION 8.4 CONFIDENTIALITY. Each party hereto agrees with the other party
that, unless and until the transactions contemplated by this Agreement have been
consummated, they and their representatives will hold in strict confidence all
data and information obtained with respect to another party or any subsidiary
thereof or from any representative, officer, director or employee, or from any
books or records or from personal inspection, of such other party, and shall not
use such data or information or disclose the same to others, except: (i) to the
extent such data is a matter of public knowledge or is required by applicable
securities laws or as otherwise required by law to be published; and (ii) to the
extent that such data or information must be used or disclosed in order to
consummate the transactions contemplated by this Agreement.
SECTION 8.5 SCHEDULES; KNOWLEDGE. Each party is presumed to have full
knowledge of all information set forth in the other party's Schedules delivered
pursuant to this Agreement.
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SECTION 8.6 THIRD PARTY BENEFICIARIES. This contract is solely between
Acorn, Valentec and the Valentec Stockholders and except as specifically
provided, no other person or entity shall be deemed to be a third party
beneficiary of this Agreement.
SECTION 8.7 ENTIRE AGREEMENT. This Agreement represents the entire agreement
between the Parties relating to the subject matter hereof. This Agreement alone
fully and completely expresses the agreement of the Parties relating to the
subject matter hereof. There are no other courses of dealing, understanding,
agreements, representations or warranties, written or oral, except as set forth
herein.
SECTION 8.8 SURVIVAL. The representations, warranties and covenants of the
respective Parties shall not survive the Closing Date and the consummation of
the transactions herein contemplated other than Sections 3.15, 5.4, 5.5, 8.1,
8.2, 8.3, 8.4, 8.5, 8.11 and 8.14.
SECTION 8.9 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
SECTION 8.10 AMENDMENT OR WAIVER. Every right and remedy provided herein
shall be cumulative with every other right and remedy, whether conferred herein,
at law, or in equity, and may be enforced concurrently herewith, and no waiver
by any Party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to the Closing Date, this
Agreement may be amended by a writing signed by all Parties, with respect to any
of the terms contained herein, and any term or condition of this Agreement may
be waived or the time for performance hereof may be extended by a writing signed
by the Party or Parties for whose benefit the provision is intended.
SECTION 8.11 EXPENSES. Valentec shall bear all of Acorn's Closing Costs
incurred in connection with the negotiation of this Agreement and in the
consummation of the transactions provided for herein and the preparation thereof
if (1) the transaction is consummated or (2) the transaction is not consummated
due to other than Acorn's uncured breach of the terms hereof. Valentec's
responsibility for Acorn's legal and accounting expenses should the transaction
not consummate shall not exceed Fifty Thousand Dollars.
SECTION 8.12 HEADINGS; CONTEXT. The headings of the sections and paragraphs
contained in this Agreement are for convenience of reference only and do not
form a part hereof and in no way modify, interpret or construe the meaning of
this Agreement.
SECTION 8.13 BENEFIT. This Agreement shall be binding upon and shall inure
only to the benefit of the parties hereto, and their permitted assigns
hereunder. This Agreement shall not be assigned by any party without the prior
written consent of the other party.
SECTION 8.14 PUBLIC ANNOUNCEMENTS. No Party will make any public disclosure
concerning the matters set forth in this letter of intent or the negotiation of
the transactions contemplated hereby without the prior approval of the other
Parties, such approval not to be unreasonably withheld. If and when a Party
desires to make such public disclosure, the disclosing Party will give the other
Parties an opportunity to review and comment on any such disclosure in advance
of public release. Notwithstanding the above, to the extent that either Party is
19
advised by counsel that disclosure of the matters set forth in this letter of
intent is required by applicable securities laws or to the extent that such
disclosure is ordered by a court of competent jurisdiction or is otherwise
required by law, then such disclosing Party will provide the other Parties, if
reasonably possible under the circumstances, prior notice of such disclosure as
well as an opportunity to review and comment on such disclosure in advance of
the public release.
SECTION 8.15 SEVERABILITY. In the event that any particular provision or
provisions of this Agreement or the other agreements contained herein shall for
any reason hereafter be determined to be unenforceable, or in violation of any
law, governmental order or regulation, such unenforceability or violation shall
not affect the remaining provisions of such agreements, which shall continue in
full force and effect and be binding upon the respective parties hereto.
SECTION 8.16 NO STRICT CONSTRUCTION. The language of this Agreement shall be
construed as a whole, according to its fair meaning and intendment, and not
strictly for or against either party hereto, regardless of who drafted or was
principally responsible for drafting the Agreement or terms or conditions
hereof.
SECTION 8.17 EXECUTION KNOWING AND VOLUNTARY. In executing this Agreement,
the parties severally acknowledge and represent that each: (a) has fully and
carefully read and considered this Agreement; (b) has been or has had the
opportunity to be fully apprized by its attorneys of the legal effect and
meaning of this document and all terms and conditions hereof; (c) is executing
this Agreement voluntarily, free from any influence, coercion or duress of any
kind.
[signature pages immediately follow]
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IN WITNESS WHEREOF, the corporate Parties hereto have caused this Agreement
to be executed and entered into as of the date first above written.
ACORN HOLDING CORP.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
--------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
VALENTEC SYSTEMS, INC.
By: /s/ Xxxxxx Xxxxx
--------------------------------------
Name: Xxxxxx Xxxxx
--------------------------------------
Title: Chairman and Chief Executive Officer
--------------------------------------
VALENTEC SHAREHOLDERS
Global Systems, Inc.
/s/ Xxxxxx Xxxxx
--------------------------------------------
By Xxxxxx Xxxxx
President
Armament Systems International, Inc.
/s/ Xxxx Xxxxx
--------------------------------------------
By Miko Gilat
President
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