AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ELTRAX SYSTEMS, INC.,
HI-TECH ACQUIRING CORP.,
HI-TECH CONNECTIONS, INC.
AND
XXXXXX X. XXXXXXX,
XXXXXX X. XXXXXXX, AND
XXXXX X. XXXXXXXXX
EFFECTIVE AS OF
AUGUST 1, 1997
TABLE OF CONTENTS
PAGE
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ARTICLE 1. THE MERGER 1
1.1. The Merger. 1
1.2. Surviving Corporation. 1
1.3. Merger Consideration. 1
1.4. Conversion of Shares. 3
1.5. Closing. 3
1.6. Articles of Incorporation. 4
1.7. Bylaws. 4
1.8. Directors and Officers. 4
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF HI-TECH AND
THE SHAREHOLDERS 4
2.1. Corporate Organization. 4
2.2. Capitalization. 5
2.3. Authorization. 5
2.4. Non-Contravention. 6
2.5. Financial Statements. 6
2.6. Accounts Receivable. 6
2.7. Liabilities. 6
2.8. Investigations; Litigation. 6
2.9. Absence of Certain Changes. 7
2.10. Title to Property; Condition. 7
2.11. Tax Returns. 7
2.12. Insurance. 7
2.13. Benefit Plans. 8
2.14. Contracts and Commitments; No Default. 8
2.15. Labor Matters. 8
2.16. Intellectual Property Rights. 9
2.17. Hazardous Substances and Hazardous Wastes. 9
2.18. Brokers. 10
2.19. Shareholders' Representations. 10
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF PARENT 11
3.1. Organization. 11
3.2. Authority and Validity of Agreement. 11
3.3. Consents and Approvals. 12
3.4. Capitalization. 12
3.5. Non-Contravention. 12
ARTICLE 4. COVENANTS 12
4.1. Hi-Tech's Agreements as to Specified Matters. 12
4.2. Confidentiality. 12
4.3. Further Assurances; Cooperation; Notification. 13
4.4. Registration Rights. 13
4.5. Conversion of Xxxxxxx Option. 13
4.6. Xxxxxx Debenture 13
ARTICLE 5. CONDITIONS TO OBLIGATION OF PARENT AND HI-
TECH ACQUISITION SUB 14
ARTICLE 6. CONDITIONS TO THE OBLIGATIONS OF HI-TECH AND
SHAREHOLDERS 14
ARTICLE 7. TERMINATION AND ABANDONMENT 15
7.1. Methods of Termination. 15
7.2. Procedure Upon Termination. 15
ARTICLE 8. SURVIVAL AND INDEMNIFICATION 15
8.1. Survival. 15
8.2. Indemnification by Parent. 15
8.3. Indemnification by Principal Shareholders. 16
8.4. Limitation on Indemnification. 16
8.5. Indemnification De Minimis Threshold. 16
8.6. Claims for Indemnification. 17
8.7. Shareholder Payment of Indemnification Claims of
Parent. 17
ARTICLE 9. MISCELLANEOUS PROVISIONS 18
9.1. Expenses. 18
9.2. Amendment and Modification. 18
9.3. Waiver of Compliance; Consents. 18
9.4. No Third Party Beneficiaries. 18
9.5. Notices. 18
9.6. Assignment. 19
9.7. Governing Law. 20
9.8. Counterparts. 20
9.9. Headings. 20
9.10. Entire Agreement. 20
9.11. Injunctive Relief. 20
9.12. Arbitration. 20
9.13. Attorneys Fees. 21
9.14. Venue; Jurisdiction. 21
9.15. Knowledge of Hi-Tech and Principal Shareholders. 21
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of August 15,
1997, but effective as of August 1, 1997 (the "Agreement"), is by
and among ELTRAX SYSTEMS, INC., a Minnesota corporation (the
"Parent"), HI-TECH ACQUIRING CORP., a Pennsylvania corporation
and a wholly owned subsidiary of Parent ("Hi-Tech Acquiring
Sub"), and HI-TECH CONNECTIONS, INC., a Pennsylvania corporation
("Hi-Tech"), Xxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxx, and Xxxxx X.
Xxxxxxxxx, the principal shareholders of Hi-Tech (collectively,
the "Principal Shareholders").
RECITALS
A. The Boards of Directors of Parent, Hi-Tech Acquiring
Sub and Hi-Tech each have approved the merger of Hi-Tech
Acquiring Sub with and into Hi-Tech, upon the terms and subject
to the conditions set forth herein (the "Merger") and deem it
advisable and in the best interests of their respective
shareholders that the foregoing merger be consummated; and
B. For federal income tax purposes, it is intended that
the Merger will qualify as a reorganization within the meaning of
Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as
amended (the "Code").
NOW, THEREFORE, in consideration of the mutual
representations, warranties and covenants contained herein, the
parties hereto agree as follows:
ARTICLE
1.
THE MERGER
1.1. THE MERGER.
Simultaneously with the Closing (defined below), the parties
hereto will effect the Merger by filing the required number of
originals of the Articles of Merger in the form of Exhibit 1.1.
The Merger will become effective at the time specified in the
Articles of Merger (the "Effective Time").
1.2. SURVIVING CORPORATION.
At the Effective Time, Hi-Tech Acquiring Sub will be merged with and
into Hi-Tech, in accordance with the applicable provisions of the
Pennsylvania Business Corporation Law of 1988, as amended, 15 Pa CSA
Section 1101 ET. SEQ. (the "PBCL"), whereupon the separate existence of
Hi-Tech Acquiring Sub will cease and Hi-Tech will continue as the
surviving corporation (the "Surviving Corporation"). The identity,
existence, rights, privileges, powers, franchises, properties and
assets of Hi-Tech shall continue unaffected and unimpaired by the Merger,
and all of the rights, privileges, powers, franchises, properties, and
assets of Hi-Tech Acquiring Sub shall be vested in the Surviving
Corporation.
1.3. MERGER CONSIDERATION.
The consideration payable to the shareholders of Hi-Tech
(the "Shareholders") shall consist of the following (the "Merger
Consideration"):
(a) At the Closing, the Shareholders shall collectively receive
One Hundred Fifty Thousand (150,000) shares of Parent common
stock, par value $.01 per share (the "Initial Consideration");
and
(b) On March 25, 1998 (the "Distribution Date"), the
Shareholders shall collectively be entitled to receive One
Hundred Fifty (150,000) shares of Parent common stock, par value
$.01 per share, (the "Deferred Consideration"), subject to the
following adjustments:
(i) To the extent that Hi-Tech's Profit (defined below) for the
six month period ending December 31, 1997 is less than, or
greater than One Hundred Eighty Thousand ($180,000) Dollars, then
the Deferred Consideration shall be reduced by, or increased by,
two shares of Parent common stock for each dollar of Profit less
than, or greater than, One Hundred Eighty Thousand ($180,000)
Dollars (the "Adjusted Deferred Consideration"); and
(ii) If the Distribution Date Price (as defined below) is either
greater than $8.50/share or less than $4.50/share, then the
Adjusted Deferred Consideration will be modified (the "Modified
Adjusted Deferred Consideration"), by multiplying the Adjusted
Deferred Consideration by a fraction, the numerator of which, in
the event the Distribution Date Price is greater than
$8.50/share, shall be $8.50, and the denominator of which shall
be the Distribution Date Price. In the event the Distribution
Date Price is less than $4.50/share, the numerator of such
fraction shall be $4.50, and the denominator shall equal the
Distribution Date Price. By way of example only, assuming the
Adjusted Deferred Consideration equals 150,000 shares, and the
Distribution Date Price equals $9.00, the Modified Adjusted
Deferred Consideration would equal: 150,000 x $8.50/$9.00 or
141,667 shares of Parent common stock. If alternatively in
this example the Distribution Date Price equaled $4.00, the
Modified Adjusted Deferred Consideration would equal: 150,000 x
$4.50/$4.00 or 168,750 shares of Parent common stock.
(c) For purposes of this Section 1.3, Hi-Tech Profit shall mean
net income computed in accordance with GAAP, but exclusive of the
following expenses: (i) any charge for federal income taxes, (ii)
costs directly related to adjustments to the opening balance
sheet of the Surviving Corporation, such as amortization of
goodwill; (iii) all administrative costs of the Parent such as
officers' salary and rent and (iv) any cost or fee related to the
Merger. The following costs shall be taken into account for
purposes of computing the Hi-Tech Profit: (i) interest
expense owed to Parent by the Surviving Corporation, which shall
be charged at cost, (ii) the Surviving Corporation's allocable
share (determined on a reasonable basis) of Consolidated Non-
Administrative Parent Costs, (defined below) and (iii) any
expense (charged at cost) arising from Parent's assumption of a
function or operation previously conducted by Hi-Tech; provided,
however, that the expense arising from such assumption shall not
exceed the costs previously incurred by Hi-Tech in providing such
function or operation. By way of example only, such expense
would include Parent's costs arising out of its assumption of the
accounts payable operations formerly conducted at Hi-Tech.
Consolidated Non-Administrative Parent Costs shall include the
expense of Parent benefits and insurance which can be directly
traced to particular subsidiaries, such as health care or
retirement plan costs; provided, however, that if the Surviving
Corporation can provide substantially similar benefits at costs
lower than Parent's expense (the "Lower Cost Option"), the
Surviving Corporation's share of such
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Consolidated Non-Administrative Parent Costs shall not exceed
the Lower Cost Option.
(d) For the period July 1, 1997 through December 31, 1997, the
Hi-Tech Profit shall be determined by mutual agreement between
Xxxxxx X. Xxxxxxx and the Parent's chief financial officer, or in
the absence of mutual agreement, by the Company's independent
auditors, Coopers and Xxxxxxx, PLLC.
(e) For purposes of this Section 1.3, the Distribution Date
Price shall mean the average closing trade price of Parent's
common stock on the five business days preceding March 25, 1998,
as reported by the Wall Street Journal.
1.4. CONVERSION OF SHARES.
At the Effective Time:
(a) Each share of Hi-Tech Common Stock outstanding immediately
prior thereto will, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into: (i)
75.2634 shares of Parent common stock (the Initial
Consideration), adjusted to the nearest whole number and (ii) the
right to receive the shares of Parent common stock, adjusted to
the nearest whole number, equal to each Shareholder's
Distribution Percentage multiplied by the Modified Adjusted
Deferred Consideration (collectively, the "Parent Common Stock"),
as set forth below:
Distribution
Shareholder Initial Consideration Percentage
----------- --------------------- ------------
Xxxxxx X. Xxxxxxx 89,187 shares 59.4581%
Xxxxxx X. Xxxxxxx 13,246 shares 8.8309%
Xxxxx X. Xxxxxxxxx 5,268 shares 3.5123%
Xxxxx X. Xxxxx 22,579 shares 15.0527%
Xxxxxxx X. Xxxxxxx Xx. 16,182 shares 10.7878%
Xxxxxxx X. Xxxxxx 3,537 shares 2.3583%
(b) Each share of common stock of Hi-Tech Acquiring Sub, no par
value, issued and outstanding immediately prior thereto will, by
virtue of the Merger and without any action on the part of the
holder thereof, be converted into one share of the common stock
of the Surviving Corporation, no par value.
(c) The Shareholders will cease to have any rights as
shareholders of Hi-Tech, except such rights, if any, as they may
have pursuant to the PBCL.
1.5. CLOSING.
The closing of the Merger (the "Closing") will be held on or
prior to August 15, 1997, as determined by Parent, or on such
later date as Parent may decide (the "Closing Date"), but not
later than August 31, 1997 (the "Termination Date"). The Closing
will be held at the offices of Hi-Tech, 0000X XxxXxxxxx Xxxx,
Xxxxxxx, XX 00000, or at such other location as Parent may
decide.
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1.6. ARTICLES OF INCORPORATION.
The articles of incorporation of Hi-Tech as in effect
immediately prior to the Effective Time will be the articles of
incorporation of the Surviving Corporation until further amended
in accordance with applicable law.
1.7. BYLAWS.
The bylaws of Hi-Tech as in effect immediately prior to the
Effective Time will be the bylaws of the Surviving Corporation
until amended or repealed in accordance with the articles of
incorporation of the Surviving Corporation and applicable law.
1.8. DIRECTORS AND OFFICERS.
Immediately after the Effective Time of the Merger, the
directors and officers of the Surviving Corporation will be as
set forth below, and will serve in such capacities until their
respective successors are duly elected and qualified:
Directors Officers
--------- --------
Clunet X. Xxxxx Xxxxxx X. Xxxxxxx - President
Clunet X. Xxxxx - Secretary,
Xxxxxxxx X. Xxxxx - Treasurer,
Vice President and Chief
Financial Officer
ARTICLE
2.
REPRESENTATIONS AND WARRANTIES
OF HI-TECH AND THE PRINCIPAL SHAREHOLDERS
Hi-Tech and each of the Principal Shareholders, jointly and
severally, represent and warrant to Parent and to Hi-Tech
Acquiring Sub that the following statements are true, complete
and correct as of the date hereof and shall be true, complete and
correct as of the Closing Date:
2.1. CORPORATE ORGANIZATION.
Hi-Tech is a corporation duly organized, validly existing
and in good standing under the laws of Pennsylvania, has full
corporate power and authority to carry on its business as it is
now being conducted and to own, lease and operate its properties
and assets. Hi-Tech has heretofore delivered to Parent complete
and correct copies of its articles or certificate of
incorporation and bylaws, as presently in effect. Except as set
forth on Schedule 2.1, Hi-Tech is duly qualified or licensed to
do business as a foreign corporation and is in good standing in
every jurisdiction in which the character or location of the
properties and assets owned, leased or operated by it or the
nature of the business conducted by it
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requires such qualification or licensing, except where the failure to be
so qualified, licensed or in good standing in such other
jurisdiction could not, individually or in the aggregate, have a material
adverse effect on the business of Hi-Tech taken as a whole. Copies of
such good standing and licensing certificates, dated within twenty (20)
days of the Closing Date, have been delivered to Parent. Hi-Tech does
not own or control any interest in any corporation, partnership, joint
venture or other business association or entity.
2.2. CAPITALIZATION.
The authorized capital stock of Hi-Tech consists of 10,000
shares of common stock, no par value, of which One Thousand Nine
Hundred Ninety Three (1,993) will be issued and outstanding on or
prior to the Closing. All issued and outstanding shares of
capital stock of Hi-Tech are (or will be on the Closing Date)
duly authorized, validly issued, fully paid and nonassessable and
have not been issued in violation of, any preemptive rights. As
of the Closing Date: (i) all agreements among the Shareholders
and Hi-Tech, if any, shall be validly terminated, and Hi-Tech
shall have no liability, of any kind whatsoever, under such
agreements; (ii) the only options outstanding under the Hi-Tech
Cable Connection, Inc. Incentive Stock Option Plan dated October
1, 1989 or any other option plan, shall be the option granted to
Xxxxxx X. Xxxxxxx for the purchase of Ninety-Six (96) shares of
Hi-Tech at $905 per share, which expires (unless exercised) on
October 1, 1999 (the "Xxxxxxx Option") and (iii) the following
convertible debenture shall have been properly converted into the
shares of Hi-Tech set forth below (the "Convertible Debenture"),
and Hi-Tech shall have no further liability, of any kind
whatsoever, under such Convertible Debenture:
Date of
Debenture Holder Face Amount Issuance Hi-Tech Shares
---------------- ----------- --------- ---------------
Xxxxx X. Xxxxxxxxx $67,500 November 18, 1994 100
Other than the Xxxxxxx Option, the Convertible Debenture and that
certain debenture held by Xxxxxx X. Xxxxxx, Trustee of the Xxxxx
X. Xxxxxx Trust, dated November 29, 1994 in the amount of One
Hundred Thousand ($100,000) Dollars (the "Xxxxxx Debenture),
there are no outstanding options, warrants, conversion privileges
or other rights to purchase or acquire any shares of capital
stock or other equity securities of Hi-Tech or any outstanding
securities that are convertible into or exchangeable for such
shares, securities or rights; and there are no contracts,
commitments, understandings, arrangements or restrictions by
which Hi-Tech or any of its Shareholders are bound to issue or
acquire any additional shares of its capital stock or other
equity securities or any options, warrants, conversion privileges
or other rights to purchase or acquire any capital stock or other
equity securities of Hi-Tech or any securities convertible into
or exchangeable for such shares, securities or rights.
2.3. AUTHORIZATION.
The Shareholders and the Board of Directors of Hi-Tech have
taken all action required by law, the articles or certificate of
incorporation and bylaws of Hi-Tech and otherwise to authorize
the execution, delivery and performance of this Agreement and the
consummation of the transactions described herein (the
"Transactions"). No other consent or approval from any party is
necessary to validly complete the Transactions. This Agreement
has been duly and validly executed and delivered by the Principal
Shareholders and Hi-Tech, and is the valid and binding legal
obligation of the Principal Shareholders and Hi-Tech, enforceable
against each of them in accordance with its terms, subject to the
affect of applicable bankruptcy, reorganization, insolvency,
moratorium, fraudulent conveyance and
5
other laws affecting the rights of creditors generally (the
"Enforceability Exceptions"), or the availability of specific performance,
injunctive relief and other equitable remedies and to general principles of
equity (regardless of whether such principles are considered in a
proceeding in equity or at law).
2.4. NON-CONTRAVENTION.
Except as set forth on Schedule 2.4, neither the execution,
delivery and performance of this Agreement nor the consummation
of the transactions contemplated herein will: (i) violate or be
in conflict with any provision of the articles or certificate of
incorporation or bylaws of Hi-Tech; or (ii) be in conflict with,
constitute a default under, or accelerate any provision of any
instrument, agreement or obligation to which Hi-Tech is a party.
2.5. FINANCIAL STATEMENTS.
Hi-Tech has furnished to Parent the audited financial
statements (balance sheets and statements of earnings and
statements of cash flows) for Hi-Tech as of and for the fiscal
years ended September 30, 1995 and September 30, 1996, the
unaudited balance sheet of Hi-Tech as of July 31, 1997 (the
"Latest Balance Sheet"), and the statement of earnings for the
ten (10) month period ended July 31, 1997 (collectively, the
"Financial Statements"). As of the Closing Date there will be no
liability whatsoever for dividends payable to Hi-Tech
Shareholders (or any related amounts), and such previously stated
amounts shall be converted into equity. Except as set forth on
Schedule 2.5, the Financial Statements: (i) are in accordance
with the books and records of Hi-Tech; (ii) fairly present the
financial position and the results of operations of Hi-Tech; and
(iii) accurately state the various account balances.
2.6. ACCOUNTS RECEIVABLE.
Except as set forth on Schedule 2.6, the accounts receivable
which are reflected in the Latest Balance Sheet or which arose subsequent
thereto (i) were validly obtained in the ordinary course of business of
Hi-Tech; and (ii) constitute valid and enforceable claims arising from
bona fide arms-length transactions, and Hi-Tech has not received any
written or oral claims, defenses, or refusals to pay, or granted any
rights of set-off with respect to any receivables.
2.7. LIABILITIES.
Except as set forth on Schedule 2.7, Hi-Tech has no liability or
obligation of any nature, that is required to be set forth in
accordance with generally accepted accounting principles, whether
asserted or unasserted, accrued, absolute or contingent or otherwise, and
whether due or to become due, that is not reflected or reserved against on
the Latest Balance Sheet, except those that may have been incurred after the
date of the Latest Balance Sheet in the ordinary course of business
and consistent with past practices.
2.8. INVESTIGATIONS; LITIGATION.
Except as described on Schedule 2.8, there are no claims or
actions by anyone against or affecting Hi-Tech that are pending
or, to the knowledge of Hi-Tech or any of the Principal
Shareholders, have been threatened. To the knowledge of Hi-Tech
or any of the Principal Shareholders, there is no basis for any
such claim or action.
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2.9. ABSENCE OF CERTAIN CHANGES.
Except as set forth on Schedule 2.9, since July 31, 1997,
Hi-Tech has not suffered any adverse change in its condition
(financial or otherwise), working capital, assets, properties,
liabilities, obligations, reserves or businesses, or experienced
any event or failed to take any action which could reasonably be
expected to have a material adverse effect on the business of Hi-
Tech.
2.10. TITLE TO PROPERTY; CONDITION.
Except as set forth on Schedule 2.10:
(a) Hi-Tech has good and marketable title in and to all of the
assets reflected in the Latest Balance Sheet and all of the
assets purchased or otherwise acquired since July 31, 1997
(except for such assets as may have been sold or otherwise
disposed of in the ordinary course of business), subject to no
lien of any kind;
(b) Hi-Tech owns no real property; and
(c) All inventory of Hi-Tech consists of a quality and quantity
usable and salable in the ordinary course of business.
2.11. TAX RETURNS.
To the knowledge of Hi-Tech and each of the Principal
Shareholders, proper and accurate amounts have been and will be
withheld by Hi-Tech from its employees and properly deposited in
appropriate accounts, for all periods up to and through the
Closing Date in full and complete compliance with the tax
withholding, deposit and payment provisions of applicable
federal, state and local laws. Hi-Tech has filed all federal,
state and local, as well as other returns and reports that were
required to be filed for all periods for which returns were due
up to and through the Closing Date, and Hi-Tech has made timely
payments of all governmental taxes, levies, duties, license and
registration fees, charges or withholdings of any nature
whatsoever ("Taxes") shown to be due and payable in respect of
such returns and reports. To the knowledge of Hi-Tech and each of
the Principal Shareholders, all such returns are true, correct
and complete in all material respects. Hi-Tech has had in effect
a valid election under Code Section 1362 to be treated as an "S
corporation" for each taxable year beginning on April 1, 1989.
Neither Hi-Tech nor any of the Principal Shareholders have taken
any action to revoke that election. Neither Hi-Tech nor any of
the Principal Shareholders are aware of any basis or the
existence of any facts that would permit the Internal Revenue
Service to revoke that election for any period prior to the
Closing Date. Since the effective date of Hi-Tech's election as
an S corporation to and including the Closing Date, Hi-Tech will
not have incurred or become liable for the payment of any
corporate-level income tax, or any related penalties or interest.
Except as disclosed on Schedule 2.11, Hi-Tech does not owe any
deficiency for any Taxes, and no tax returns are presently under
audit or examination by any federal, state or local tax
authority, and no adjustments have been proposed or asserted by
the Internal Revenue Service or any other agency in respect of
any liability for Taxes arising out of or relating to such
returns.
2.12. INSURANCE.
Schedule 2.12 contains an accurate and complete list of all
policies of fire and other casualty, general liability, theft,
life, workers' compensation, health, directors and officers
liability, business
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interruption and other forms of insurance owned or held by Hi-Tech,
specifying the insurer, the policy number, the term of the coverage and,
in the case of any "claims made" coverage, the same information as to
predecessor policies for the previous five years. All present policies
are in full force and effect and all premiums that are due as of the
date hereof and as of the Closing Date with respect thereto have been paid.
Neither Hi-Tech nor any of the Principal Shareholders has been denied any
form of insurance and no policy of insurance has been revoked or rescinded
during the past three years, except as described under Schedule 2.12.
2.13. BENEFIT PLANS.
Except as disclosed on Schedule 2.13, Hi-Tech does not
maintain, is not a party to, bound by or a contributor to, or
required to contribute to, (a) any employee pension benefit plans
whether or not qualified under Section 401(a) of the Code, (b)
any employee welfare benefit plans, or (c) any other
compensation, fringe or welfare plan or program, policy,
understanding or arrangement providing plan benefits or welfare,
with respect to its employees or employees of others
(collectively, the "Employee Plans"). As used in this Section,
the terms "employee pension benefit plan" and "employee welfare
benefit plan" will have the respective meanings assigned to such
terms in Section 3 of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). To the knowledge of Hi-Tech and
each of the Principal Shareholders, each Employee Plan described
on Schedule 2.13 meets all applicable requirements of ERISA, and
has been operated and administered in accordance with the Code,
ERISA and the plan document. To the knowledge of Hi-Tech and each
of the Principal Shareholders, all required government filings
and disclosures have been timely and fully made, are true,
correct and complete in all material respects, and no prohibited
transaction or other act or omission which could result in the
imposition of an excise tax has occurred.
2.14. CONTRACTS AND COMMITMENTS; NO DEFAULT.
Schedule 2.14 sets forth a complete and accurate list of all
agreements or other binding commitments or proposals involving a
possible liability or obligation of Hi-Tech or the other party of
at least $25,000 or which are not terminable without penalty at
the option of Hi-Tech upon no more than 30 days' notice (the
"Contracts"). The aggregate amount of the liabilities or
obligations of Hi-Tech or the other parties under agreements or
other binding commitments or proposals not listed on Schedule
2.14 does not exceed $100,000. Hi-Tech has made available to
Parent true and accurate copies of the Contracts. To the
knowledge of Hi-Tech and each of the Principal Shareholders, the
Contracts are valid, binding and in full force and effect, and
are enforceable in accordance with their respective terms
(subject to the Enforceability Exceptions). Hi-Tech is not in
default under any of the Contracts, nor has any notice of default
been received by Hi-Tech. To the knowledge of Hi-Tech and the
Principal Shareholders, all other parties to the Contracts have
performed or are performing all obligations required to be
performed by them and are not in default thereunder.
2.15. LABOR MATTERS.
Schedule 2.15 sets forth a list of all employees of Hi-Tech
and includes their position, current salary, and 1997 wage
information for each person. Except as set forth on Schedule
2.15 and except as are not material to the business of Hi-Tech:
(i) to the knowledge of Hi-Tech and each of the Principal
Shareholders, Hi-Tech is and has at all times been in compliance
with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and
hours, including without limitation any such laws respecting
employment discrimination and occupational safety and health
requirements, and has not and is not engaged in any unfair labor
practice; (ii) there is no unfair labor practice complaint
against either Hi-Tech or any of the Principal Shareholders
pending or, to
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the knowledge of Hi-Tech and each of the Principal Shareholders, threatened
before the National Labor Relations Board or any other comparable
government authority; (iii) there is no labor strike, dispute, slowdown
or stoppage actually pending or, to the knowledge of Hi-Tech and each of
the Principal Shareholders, threatened against or directly affecting
Hi-Tech; (iv) no collective bargaining agreement is binding and in force
against either Hi-Tech or any of the Principal Shareholders or currently
being negotiated by either Hi-Tech or any of the Principal
Shareholders; (v) Hi-Tech is not delinquent in payments to any person for
any wages, salaries, commissions, bonuses or other direct or indirect
compensation for any services performed by them or amounts required to be
reimbursed to such persons, including without limitation any amounts due
under any Pension Plan, Welfare Plan or compensation plan; and (vi) within
the 12 month period prior to the date hereof there has not been any
expression of intention to Hi-Tech by any officer or key employee to
terminate such employment.
2.16. INTELLECTUAL PROPERTY RIGHTS.
Except as disclosed on Schedule 2.16, Hi-Tech does not own
or use any patents, trade names, service names, trademarks,
service marks, copyrights, or any other intellectual or
intangible property or applications therefor and has not
conducted business under any corporate, trade or fictitious name
other than its current corporate name. There are no pending or,
to the knowledge of Hi-Tech and the Principal Shareholders,
threatened claims of infringement upon the rights to any
intellectual or intangible property of others or, except as set
forth on Schedule 2.16, any agreements or undertakings with
respect to any such rights.
2.17. HAZARDOUS SUBSTANCES AND HAZARDOUS WASTES.
Except as set forth on Schedule 2.17:
(a) To the knowledge of Hi-Tech and each Principal Shareholder,
there is not now, nor has there ever been, any disposal, release
or threatened release of Hazardous Materials (as defined below)
on, from or under properties now or ever owned or leased by or to
Hi-Tech (the "Properties"). There has not been generated by or
on behalf of Hi-Tech any Hazardous Material. To the knowledge of
Hi-Tech and each of Principal Shareholder, no Hazardous Material
has been disposed of or allowed to be disposed of on or off any
of the Properties during the period that Hi-Tech owned or leased
the property which may give rise to a clean-up responsibility,
personal injury liability or property damage claim against Hi-
Tech or Hi-Tech being named a potentially responsible party for
any such clean-up costs, personal injuries or property damage or
create any cause of action by any third party against Hi-Tech.
For purposes of this subsection, the terms "disposal," "release,"
and "threatened release" shall have the definitions assigned
thereto by the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, and the term "Hazardous
Material" means any hazardous or toxic substance, material or
waste or pollutants, contaminants or asbestos containing material
which is or becomes regulated by any Authority in any
jurisdiction in which any of the Properties is located. The term
"Hazardous Material" includes without limitation any material or
substance which is (i) defined as a "hazardous waste" or a
"hazardous substance" under applicable law, (ii) designated as a
"hazardous substance" pursuant to Section 311 of the Federal
Water Pollution Control Act, (iii) defined as a "hazardous waste"
pursuant to Section 1004 of the Federal Resource Conservation and
Recovery Act, or (iv) defined as a "hazardous substance" pursuant
to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
9
(b) To the knowledge Hi-Tech and each Principal Shareholder,
none of the Properties is (or, with respect to past Properties
and Properties of former subsidiaries, was at the time of
disposition) in violation of any law (with respect to past
Properties and Properties of former subsidiaries, laws in effect
at the time of disposition) relating to industrial hygiene or to
the environmental conditions on, under or about such Properties,
including without limitation soil and ground water condition and
there are (or at the time of disposition were) no underground
tanks or related piping, conduits or related structures. During
the period that Hi-Tech owned or leased the Properties, neither
Hi-Tech nor, to the knowledge of each Principal Shareholder, any
third party used, generated, manufactured or stored on, under or
about such Properties or transported to or from such Properties
any Hazardous Materials and there has been no litigation brought
or threatened against Hi-Tech or any settlements reached by Hi-
Tech with any third party or third parties alleging the presence,
disposal, release or threatened release of any Hazardous
Materials on, from or under any of such Properties.
2.18. BROKERS.
Other than the fee of 20,000 shares of the common stock of
Parent owing Xxxx Xxxxxxxxx Xxxxxx & Co. ("RCW") (the "Fee"),
neither the Principal Shareholders nor Hi-Tech or any of its
directors, officers or employees has employed any broker, finder,
or financial advisor or incurred any liability for any brokerage
fee or commission, finder's fee or financial advisory fee, in
connection with the transactions contemplated hereby, nor is
there any basis known to either Hi-Tech or any of the Principal
Shareholders for any such fee or commission to be claimed by any
person or entity. The Fee shall satisfy all unpaid obligations
of Hi-Tech, the Principal Shareholders or Parent to RCW, whether
accrued, contingent, known or unknown and whether or not related
to the Transactions or otherwise.
2.19. SHAREHOLDERS' REPRESENTATIONS.
In addition to the foregoing representations of each of the
Principal Shareholders, each of the Shareholders executing this
Agreement, as well as RCW (collectively, the "Investors"),
individually represents and warrants to Parent as follows:
(a) The Investors are acquiring the shares of Parent's common
stock pursuant to the Merger for such Investor's sole account
(and such Investors will be the sole beneficial owners thereof)
for the purpose of investment and not with a view to distribution
thereof within the meaning of the Securities Act of 1933, as
amended and the rules and regulations thereunder (the "1933
Act"), nor with any present intention of distribution or selling
such shares of Parent common stock in connection with any such
distribution, and such Investors understand that such shares have
not been registered under the 1933 Act and therefore cannot be
resold unless they are registered under the 1933 Act or unless an
exemption from registration is available.
(b) The Investors have received or had access to the reports,
proxy statements and registration statements listed on Schedule
2.19 (the "Eltrax Reports"), and have had sufficient time to
review and consider such Eltrax Reports. The Investors have been
afforded an opportunity to ask questions of and receive answers
from representatives of Parent concerning the terms and
conditions of the Transactions and to obtain any additional
information as such Investors have requested in writing to verify
the accuracy of the Eltrax Reports and copies of any exhibits
identified in such documents that such Investors have requested.
(c) The Investors have accurately, truthfully and completely
executed the Investor
10
Questionnaire, in the form of Exhibit 2.19.
(d) The Investors have consented to the following legend on the
certificate or certificates for shares of Parent common stock to
be issued in connection with the Merger:
THE SHARES OF COMMON STOCK REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR
APPLICABLE STATE SECURITIES LAWS AND MAY BE
SOLD, PLEDGED, ASSIGNED OR OTHERWISE
TRANSFERRED ONLY IF A REGISTRATION STATEMENT
WITH RESPECT TO SUCH TRANSACTION IS IN EFFECT
PURSUANT TO THE PROVISIONS OF SUCH LAWS OR
IF, IN THE OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER, AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF SUCH LAWS IS
AVAILABLE.
ARTICLE
3.
REPRESENTATIONS AND WARRANTIES
OF PARENT
The Parent represents and warrants to the Principal
Shareholders that the following statements are true, complete and
correct as of the date hereof and shall be true, complete and
correct as of the Closing Date:
3.1. ORGANIZATION.
Each of Parent and Hi-Tech Acquiring Sub is a corporation
duly organized, validly existing and in good standing under the
laws of the state of its incorporation and each has all requisite
corporate power and authority to own, lease and operate its
respective properties and to carry on its business as it is now
being conducted. Hi-Tech Acquiring Sub is a recently-formed
Pennsylvania corporation that has not conducted, and will not
conduct prior to the Closing, any activities other than those
incident to its formation and in connection with the consummation
of the Merger. Each of Parent and Hi-Tech Acquiring Sub is duly
qualified and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such
qualification necessary and where the failure to qualify could
have a material adverse effect on the business, results of
operations or financial condition of the Parent and its
subsidiaries taken as a whole.
3.2. AUTHORITY AND VALIDITY OF AGREEMENT.
The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
duly and validly authorized and approved by the Boards of
Directors of Parent and Hi-Tech Acquiring Sub and by Parent as
the sole shareholder of Hi-Tech Acquiring Sub, and no other
corporate proceedings on the part of Parent or Hi-Tech Acquiring
Sub are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been
duly
11
and validly executed by each of Parent and Hi-Tech Acquiring Sub and
constitutes valid and binding obligations of Parent and Hi-Tech Acquiring
Sub, enforceable against each of them in accordance with their terms,
subject to the Enforceability Exceptions.
3.3. CONSENTS AND APPROVALS.
The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not,
except for any applicable requirements of the 1993 Act and state
securities laws, and the filing and recordation of appropriate
merger documents as required by the PBCL, require any filing with
or permit, consent or approval of any authority.
3.4. CAPITALIZATION.
The authorized capital stock of the Parent consists of
50,000,000 shares of common stock and 970,000 shares of
undesignated preferred stock, of which there were 8,173,126
shares of Parent common stock issued and outstanding on August 1,
1997. All shares of Parent common stock to be issued and
delivered in the Merger will be, at the time of issuance and
delivery, validly issued, fully paid, nonassessable and free of
preemptive rights.
3.5. NON-CONTRAVENTION.
Neither the execution, delivery and performance of this
Agreement nor the consummation of the transactions contemplated
herein will: (i) violate or be in conflict with any provision of
the articles or certificate of incorporation or bylaws of the
Parent or Hi-Tech Acquiring Sub; or (ii) be in conflict with, or
constitute a default under, any instrument or other agreement or
obligation to which the Parent or Hi-Tech Acquiring Sub is a
party.
ARTICLE
4.
COVENANTS
4.1. HI-TECH'S AGREEMENTS AS TO SPECIFIED MATTERS.
Except as agreed to in writing by Parent, from the date
hereof until the Closing Date, Hi-Tech will operate its business
only in the ordinary course consistent with past practice. Hi-
Tech will use and the Principal Shareholders will cause it to use
its best efforts to preserve intact its business organizations,
existing business relationships, goodwill and going concern
value.
4.2. CONFIDENTIALITY.
The parties hereto will not use, or permit the use of, any
of the information relating to any other party hereto furnished
to it in connection with the transactions contemplated herein
("Information") in a manner or for a purpose detrimental to such
other party or otherwise than in connection with the transaction,
and they will not disclose, divulge, provide or make accessible
(collectively, "Disclose"), or permit the Disclosure of, any of
the Information to any person or entity, other than their
responsible directors, officers, employees, investment advisors,
accountants, counsel and other authorized representatives and
agents, except as may be required by judicial or administrative
process or, in the opinion of such party's regular counsel, by
other requirements of law, unless the disclosing party first
12
obtains the prior written consent of the other parties hereto.
The parties hereto also will promptly return to the party from
whom originally received all original and duplicate copies of
written materials containing Information should the transactions
contemplated herein not occur. This Section 4.2 survives Closing
and any termination of this Agreement.
4.3. FURTHER ASSURANCES; COOPERATION; NOTIFICATION.
(a) Each party hereto will, before, at and after Closing,
execute and deliver such instruments and take such other actions
as the other party or parties, as the case may be, may reasonably
require in order to carry out the intent of this Agreement,
including, but not limited to, any securities filings.
(b) At all times from the date hereof until the Closing, each
party will promptly notify the other in writing of the occurrence
of any event which it reasonably believes will or may result in a
failure by such party to satisfy the conditions specified in
Article 5 and Article 6 hereof.
(c) Hi-Tech and the Principal Shareholders shall promptly notify
Parent of any change or event which could have a materially
adverse effect on the assets, operations, business, or condition
of Hi-Tech.
(d) Parent shall promptly notify the Principal Shareholders of
any change or event which could have a materially adverse effect
on the assets, operations, business, or condition of Parent.
4.4. REGISTRATION RIGHTS.
Parent agrees to provide the Shareholders with the
registration rights with respect to Parent Common Stock they
receive as Merger Consideration as set forth on Exhibit 4.4
hereto.
4.5. CONVERSION OF XXXXXXX OPTION.
Effective on the Closing Date, in substitution of the
Xxxxxxx Option, Xxxxxx X. Xxxxxxx shall become entitled to
incentive stock options under the Eltrax 1997 Stock Incentive
Plan, which in accordance with Section 424(a) of the Code, shall
grant him equivalent rights to acquire shares of Parent common
stock (the "Options"). The issuance of such Options shall occur
as soon as practicable following the Distribution Date. The
formula for determination of the shares of Parent common stock
which may be acquired by exercising the Options shall be:
Number of Shares ("X") = 96 x Hi-Tech Common Stock
----------------------
Parent Common Stock
The formula for determination of the exercise price for such
Options shall be: $86,880
-------
X
4.6. XXXXXX DEBENTURE
Xxxxxx X. Xxxxxx, as Trustee of the Xxxxx X. Xxxxxx Trust,
holder of the Xxxxxx Debenture, (the "Holder") covenants that:
(i) upon the conversion, if ever, of the Xxxxxx Debenture into
shares of Parent
13
common stock, that the formula for such conversion shall be 125
multiplied by a fraction, the numerator of which shall equal 1993, and
the denominator of which shall equal the number of shares of Parent
Common Stock as finally determined under Section 1.4(a); (ii) the Holder
will agree to undertake whatever action is requested by Parent's lenders
to subordinate the Xxxxxx Debenture to all other indebtedness of the Parent;
and (iii) such Holder will waive his right to accelerate any payment of the
Xxxxxx Debenture, if any, which may arise out of or in connection with the
Merger.
ARTICLE
5.
CONDITIONS TO OBLIGATION OF PARENT AND HI-TECH ACQUIRING SUB
The following are conditions to the obligations of the
Parent and Hi-Tech Acquiring Sub to close the Transactions:
(a) The truth of the representations and warranties of Hi-Tech
and the Principal Shareholders contained in this Agreement;
(b) The full performance of all obligations of each of Hi-Tech
and the Shareholders contained in this Agreement;
(c) Parent's receipt of the opinion of Baskin, Leisawitz, Xxxxxx
and Abramowitch, P.C., counsel for Hi-Tech, dated on the Closing
Date, in the form reasonably agreed to by counsel for Parent; and
(d) Parent's receipt of the employment and non-competition
agreements of the Principal Shareholders, in a form reasonably
agreed to by and among the Parent and Principal Shareholders.
ARTICLE
6.
CONDITIONS TO THE OBLIGATION OF HI-TECH AND PRINCIPAL SHAREHOLDERS
The following are conditions to the obligations of Hi-Tech
and the Principal Shareholders to close the Transactions:
(a) The truth of the representations and warranties of Parent
contained in this Agreement;
(b) The full performance of all obligations of the Parent
contained in this Agreement;
(c) Parent's receipt of the opinion of Jaffe, Raitt, Heuer &
Xxxxx, P.C., counsel for Parent, dated on the Closing Date, in
the form reasonably agreed to by counsel for Hi-Tech; and
(d) The receipt by each of the Principal Shareholders of
employment and non-competition agreements with Parent, in a form
reasonably agreed to by and among each such Principal Shareholder
and the Parent.
14
ARTICLE
7.
TERMINATION AND ABANDONMENT
7.1. METHODS OF TERMINATION.
This Agreement may be terminated and the transactions
contemplated herein may be abandoned in accordance with the
following:
(a) By mutual written consent of Parent, Hi-Tech Acquiring Sub,
Hi-Tech and the Principal Shareholders;
(b) By the Parent and Hi-Tech Acquiring Sub, if any of the
conditions provided for in Article 5 have not been satisfied or
waived in writing by Parent prior to Closing; or
(c) By Hi-Tech and the Principal Shareholders, if any of the
conditions provided for in Article 6 have not been satisfied or
waived in writing by Hi-Tech and Principal Shareholders prior to
Closing; and
(d) On August 31, 1997, if the Transactions have not already
closed.
7.2. PROCEDURE UPON TERMINATION.
In the event of termination and abandonment pursuant to
Section 7.1(a), written notice thereof will forthwith be given to
the other party or parties, and the provisions of this Agreement
(except to the extent provided in Section 9.1) will terminate,
and the transactions contemplated herein will be abandoned,
without further action by any party hereto. If this Agreement is
terminated as provided herein: (i) each party will, upon
request, redeliver all documents, work papers and other material
of any other party (and all copies thereof) relating to the
transactions contemplated herein, whether so obtained before or
after the execution hereof, to the party furnishing the same;
(ii) the confidentiality obligations of Section 4.2 will continue
to be applicable; and (iii) except as provided in this Section,
no party will have any liability for a breach of any
representation, warranty, agreement, covenant or other provision
of this Agreement, unless such breach was due to a willful or bad
faith action or omission of such party or any representative,
agent, employee or independent contractor thereof.
ARTICLE
8.
SURVIVAL AND INDEMNIFICATION
8.1. SURVIVAL.
The representations, warranties and covenants of each of the
parties hereto will survive the Closing until one (1) year after
the Closing Date.
8.2. INDEMNIFICATION BY PARENT.
Parent agrees to indemnify each of the Shareholders from and
against any and all loss, liability or
15
damage suffered or incurred by them including any and all costs and
expenses, including without limitation reasonable legal fees and expenses
incurred, in connection with enforcing the indemnification rights of
Principal Shareholders pursuant to this Section 8.2 by reason of (i) any
untrue representation of or breach of warranty set forth in Article 3,
and (ii) any and all loss, liability or damage suffered or incurred by the
Shareholders by reason of any nonfulfillment of any covenant, agreement
or undertaking of Parent in this Agreement
8.3. INDEMNIFICATION BY PRINCIPAL SHAREHOLDERS.
The Principal Shareholders jointly and severally agree to
indemnify Parent and Hi-Tech Acquiring Sub, their directors,
officers, employees and agents, from and against any and all
loss, liability or damage suffered or incurred by them including
any and all costs and expenses, including without limitation
reasonable legal fees and expenses incurred, in connection with
enforcing the indemnification rights of Parent or Hi-Tech
Acquiring Sub pursuant to this Section 8.3 by reason of (i) any
untrue representation of or breach of warranty set forth in
Article 2, and (ii) any and all loss, liability or damage
suffered or incurred by Parent or Hi-Tech Acquiring Sub by reason
of any nonfulfillment of any covenant, agreement or undertaking
of Hi-Tech or any Shareholders contained in this Agreement.
8.4. LIMITATION ON INDEMNIFICATION.
Except as provided in Section 8.5(b), the Principal
Shareholders' aggregate indemnification obligations under this
Article 8 will be limited to the Merger Consideration multiplied
by the trading price of Parent's stock on the Closing Date.
8.5. INDEMNIFICATION DE MINIMIS THRESHOLD.
(a) Except as expressively provided otherwise herein, and
subject to the provisions of Section 8.5(b), neither of the
Shareholders nor the Parent, as the case may be, will be entitled
to indemnification under this Agreement unless the aggregate of
all claims with respect to matters arising hereunder is more than
One Hundred Thousand Dollars ($100,000) (the "Threshold Amount").
When the aggregate amount of all such indemnification claims
hereunder equals or exceeds the Threshold Amount, the Parent or
the Shareholders, as the case may be, will be entitled to full
indemnification of all claims, including the One Hundred Thousand
Dollars ($100,000) that amounted to the Threshold Amount. Once
the aggregate amount of all indemnification claims hereunder
equal or exceed the Threshold Amount, the Shareholders or the
Parent, as the case may be, will be entitled to full
indemnification for all claims. The parties hereto agree that
the Threshold Amount is not a deductible amount, nor will the
Threshold Amount be deemed to be a definition of "material" for
any purpose in this Agreement.
(b) Notwithstanding the foregoing, in the case of any untrue
representation with respect to which any party had actual
knowledge or had actual knowledge of the potential or probable
loss, liability or damage (based on actual knowledge of the facts
and circumstances giving rise to such loss, liability or damage)
without disclosing such information on or prior to the Closing
Date, such party shall pay the full indemnification claim without
regard to the Threshold Amount set forth in this Section, the
overall limitation on amount as set forth in Section 8.4 or the
time limitation set forth in Section 8.1.
16
8.6. CLAIMS FOR INDEMNIFICATION.
The parties intend that all indemnification claims hereunder
be made as promptly as practicable by the party seeking
indemnification (the "Indemnified Party"). Whenever any claim
arises for indemnification hereunder the Indemnified Party will
promptly notify the party from whom indemnification is sought
(the "Indemnifying Party") of the claim and, when known, the
facts constituting the basis for such claim. In the case of any
such claim for indemnification hereunder resulting from or in
connection with any claim or legal proceedings of a third party
(a "Third Party Claim"), the notice to the Indemnifying Party
will specify, if known, the amount or an estimate of the amount
of the liability arising therefrom. The Indemnifying Party shall
have the right to dispute and defend all Third Party Claims and
thereafter so defend and pay any adverse final judgment or award
or settlement amount in regard thereto. Such defense shall be
controlled by the Indemnifying Party, and the cost of such
defense shall be borne by the Indemnifying Party, except that the
Indemnified Party shall have the right to participate in such
defense at its own expense, and PROVIDED, HOWEVER that the
Indemnifying Party must first acknowledge that the claim is a
bona fide indemnification claim under this Agreement. The
Indemnified Party shall cooperate in all reasonable respects in
the defense of any such claim, including making personnel, books,
and records relevant to the claim available to the Indemnifying
Party, without charge, except for reasonable out-of-pocket
expenses. If the Indemnifying Party fails to take action within
thirty (30) days as set forth above, then the Indemnified Party
shall have the right to pay, compromise or defend any Third Party
Claim and to assert the amount of any payment on the Third Party
Claim plus the reasonable expenses of defense or settlement as
the claim. The Indemnified Party shall also have the right,
exercisable in good faith, to take such action as may be
necessary to avoid a default prior to the assumption of the
defense of the Third Party Claim by the Indemnifying Party, and
any reasonable expenses incurred by Indemnified Party so acting
shall be paid by the Indemnifying Party. Except as otherwise
provided herein, the Indemnified Party will not settle or
compromise any Third Party Claim for which it is entitled to
indemnification hereunder without the prior written consent of
the Indemnifying Party, which will not be unreasonably withheld.
If the Indemnifying Party is of the opinion that the Indemnified
Party is not entitled to indemnification, or is not entitled to
indemnification in the amount claimed in such notice, it will
deliver, within ten (10) business days after the receipt of such
notice, a written objection to such claim and written
specifications in reasonable detail of the aspects or details
objected to, and the grounds for such objection. If the
Indemnifying Party filed timely written notice of objection to
any claim for indemnification, the validity and amount of such
claim will be determined by arbitration pursuant to Section 9.12
hereof. If timely notice of objection is not delivered or if a
claim by an Indemnified Party is admitted in writing by an
Indemnifying Party or if an arbitration award is made in favor of
an Indemnified Party, the Indemnified Party, as a non-exclusive
remedy, will have the right to set-off the amount of such claim
or award against any amount yet owed, whether due or to become
due, by the Indemnified Party or any subsidiary thereof to any
Indemnifying Party by reason of this Agreement or any agreement
or arrangement or contract to be entered into at the Closing.
8.7. SHAREHOLDER PAYMENT OF INDEMNIFICATION CLAIMS OF PARENT.
In the discretion of each of the Principal Shareholders,
any payment on a claim made pursuant to Section 8.6, may be made
in cash or shares of Parent Common Stock, with the surrender
value of such shares, for purposes of satisfying any such claim,
equal to the trading price of Parent's stock in effect on the
Closing Date.
17
ARTICLE
9.
MISCELLANEOUS PROVISIONS
9.1. EXPENSES.
Each of the parties hereto will bear its own costs, fees and
expenses in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, including
without limitation fees, commissions and expenses payable to
brokers, finders, investment bankers, consultants, exchange or
transfer agents, attorneys, accountants and other professionals,
whether or not the Transactions are consummated; provided
however, that Parent shall pay the Fee to Ross, Crossland, Weston
& Co., and subject to the review of invoices and approval of
Parent, the reasonable legal expenses of Hi-Tech, accrued after
August 1, 1997 and directly related to the Merger, but only if
the Transactions close.
9.2. AMENDMENT AND MODIFICATION.
Subject to applicable law, this Agreement may be amended or
modified by the parties hereto at any time prior to the Closing
with respect to any of the terms contained herein; provided,
however, that all such amendments and modifications must be in
writing duly executed by all of the parties hereto.
9.3. WAIVER OF COMPLIANCE; CONSENTS.
Any failure of a party to comply with any obligation,
covenant, agreement or condition herein may be expressly waived
in writing by the party entitled hereby to such compliance, but
such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition will not operate as
a waiver of, or estoppel with respect to, any subsequent or other
failure. No single or partial exercise of a right or remedy will
preclude any other or further exercise thereof or of any other
right or remedy hereunder. Whenever this Agreement requires or
permits the consent by or on behalf of a party, such consent will
be given in writing in the same manner as for waivers of
compliance.
9.4. NO THIRD PARTY BENEFICIARIES.
Nothing in this Agreement will entitle any person or entity
(other than a party hereto and his, her or its respective
successors and assigns permitted hereby) to any claim, cause of
action, remedy or right of any kind.
9.5. NOTICES.
All notices, requests, demands and other communications
required or permitted hereunder will be made in writing and will
be deemed to have been duly given and effective: (i) on the date
of delivery, if delivered personally; (ii) on the earlier of the
fourth (4th) day after mailing or the date of the return receipt
acknowledgment, if mailed, postage prepaid, by certified or
registered mail, return receipt requested; or (iii) on the date
of transmission, if sent by facsimile, telecopy, telegraph, telex
or other similar telegraphic communications equipment:
18
If to either Hi-Tech or the Principal Shareholders:
To: Hi-Tech Connections, Inc.
0000X XxxXxxxxx Xxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Fax: (000) 000-0000
With a copy to:
Baskin, Leisawitz, Xxxxxx & Abramowitch, P.C.
0000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Xx., Esq.
Fax: (000) 000-0000
or to such other person or address as either Hi-Tech or the
Principal Shareholders will furnish to the other parties hereto
in writing in accordance with this Section.
If to Parent or the Acquiring Sub:
To: Eltrax Systems, Inc.
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: Clunet X. Xxxxx
Fax: (000) 000-0000
With a copy to:
Jaffe, Raitt, Heuer & Xxxxx, P.C.
Xxx Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
or to such other person or address as either Parent or Acquiring
Sub will furnish to the other parties hereto in writing in
accordance with this Section.
9.6. ASSIGNMENT.
This Agreement and all of the provisions hereof will be
binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither
this Agreement nor any of the rights, interests or obligations
hereunder may be assigned (whether voluntarily, involuntarily, by
operation of law or otherwise) by any of the parties hereto
without the prior written consent of the other parties, provided,
however, that Parent may assign this Agreement upon notice to Hi-
Tech and each of the Principal Shareholders, in whole or in any
part, and from time to time, to a wholly-owned, direct or
indirect, subsidiary of Parent, if Parent remains bound hereby.
19
9.7. GOVERNING LAW.
This Agreement and all legal relations among the parties
hereto will be governed by and construed in accordance with the
substantive laws of the State of Michigan (without regard to
principles of conflict of laws that might otherwise apply) as to
all matters, including without limitation matters of validity,
construction, effect, performance and remedies.
9.8. COUNTERPARTS.
This Agreement may be executed simultaneously 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.
9.9. HEADINGS.
The table of contents and the headings of the sections and
Articles of this Agreement are inserted for convenience only and
will not constitute a part hereof.
9.10. ENTIRE AGREEMENT.
The Schedules and the Exhibits and other writings referred
to in this Agreement, together with this Agreement embody the
entire agreement and understanding of the parties hereto in
respect of the transactions contemplated by this Agreement and
together they are referred to as "this Agreement" or the
"Agreement". This Agreement supersedes all prior and
contemporaneous oral and written agreements and understandings
between the parties with respect to the transaction or
transactions contemplated by this Agreement (including without
limitation the letter of intent dated March 17, 1997 between
Parent, Hi-Tech, and Principal Shareholders and all amendments
and extensions thereof).
9.11. INJUNCTIVE RELIEF.
It is expressly agreed among the parties hereto that
monetary damages would be inadequate to compensate a party hereto
for any breach by any other party of its covenants in
Section 4.2. Accordingly, the parties agree and acknowledge that
any such violation or threatened violation will cause irreparable
injury to the other and that, in addition to any other remedies
which may be available, such party will be entitled to injunctive
relief against the threatened breach of Section 4.2 hereof or the
continuation of any such breach without the necessity of proving
actual damages and may seek specific enforcement of the terms
thereof.
9.12. ARBITRATION.
With the sole exception of the injunctive relief
contemplated by Section 9.11 hereof, any controversy or claim
arising out of or relating to this Agreement, or the making,
performance or interpretation hereof, including without
limitation alleged fraudulent inducement hereof, will be settled
by binding arbitration in Southfield, Michigan by a panel of
three arbitrators in accordance with the Commercial Arbitration
Rules of the American Arbitration Association. Judgment upon any
arbitration award may be entered in any court having jurisdiction
thereof and the parties consent to the jurisdiction of the courts
of the State of Michigan for this purpose.
20
9.13. ATTORNEYS FEES.
If any arbitration, litigation or similar proceedings are
brought by any party to enforce any obligation or to pursue any
remedy under this Agreement, the party prevailing in any such
arbitration, litigation or similar proceedings will be entitled
to costs of collection, if any, and reasonable attorneys fees
incurred in connection with such proceedings and in collecting or
enforcing any award granted therein.
9.14. VENUE; JURISDICTION.
The parties agree that all actions or proceedings arising in
connection with this Agreement and the instruments, agreements
and documents executed pursuant to the terms of this Agreement
shall be tried, litigated and arbitrated only in the courts of
the United States located in the Eastern District of Michigan,
the Michigan state courts, or the office of the American
Arbitration Association located nearest Southfield, Michigan. Hi-
Tech, each Shareholder and Parent irrevocably accept for itself
or himself and in respect of its or his property, generally and
unconditionally, the jurisdiction of such courts. Hi-Tech,
Shareholders and Parent irrevocably consent to the service of
process out of any such courts in any such action or proceeding
by the mailing of copies thereof by registered or certified mail,
postage prepaid, to such party, at its address as set forth in
this Agreement, or in the records of the Surviving Corporation,
such service to become effective ten (10) days after such
mailing. Nothing in this Section 9.14 shall affect the right of
any party to serve process in any other manner permitted by law.
Hi-Tech, each Shareholder and Parent irrevocably waive any right
it or he may have to assert the doctrine of FORUM NON CONVENIENS
or to object to venue to the extent any proceeding is brought in
accordance with this Section 9.14.
9.15. KNOWLEDGE OF HI-TECH AND PRINCIPAL SHAREHOLDERS.
Where any representation or warranty contained in this
Agreement is expressly qualified by reference to the knowledge of
Hi-Tech and the Principal Shareholders, such phrase will include
the actual present knowledge of either one or all of the
Principal Shareholders assuming that such Principal Shareholders
have made reasonable diligent inquiry as to the matters that are
the subject of the representations and warranties.
21
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written.
PARENT: HI-TECH:
Eltrax Systems, Inc. Hi-Tech Connections, Inc.
By: /s/ Xxxxxx Xxxxx By: /s/ Xxxxxx X. Xxxxxxx
------------------- --------------------------
Xxxxxx Xxxxx Xxxxxx X. Xxxxxxx
Its: Secretary Its: President
HI-TECH ACQUIRING SUB:
Hi-Tech Acquiring Corporation
By: /s/ Clunet X. Xxxxx
----------------------
Clunet X. Xxxxx
Its: President
PRINCIPAL SHAREHOLDERS:
/s/ Xxxxxx X. Xxxxxxx
-----------------------
Xxxxxx X. Xxxxxxx
/s/ Xxxxxx X. Xxxxxxx
-----------------------
Xxxxxx X. Xxxxxxx
/s/ Xxxxx X. Xxxxxxxxx
-----------------------
Xxxxx X. Xxxxxxxxx
WITH RESPECT TO SECTIONS 2.18 AND 2.19 ONLY:
Xxxx Xxxxxxxxx Weston & Co.
By: /s/ Xxxxx Xxxx
-------------------
Its: Chairman
WITH RESPECT TO SECTION 4.6 ONLY:
Xxxxx X. Xxxxxx Trust u/a/d November 29, 1994
By: /s/ Xxxxxx X. Xxxxxx
---------------------------
Xxxxxx X. Xxxxxx, Trustee
22
WITH RESPECT TO SECTION 2.5, 2.19 AND
9.14 ONLY:
/s/ Xxxxx X. Xxxxx
----------------------
Xxxxx X. Xxxxx
/s/ Xxxxxxx X. Xxxxxxx
------------------------
Xxxxxxx X. Xxxxxxx, Xx.
/s/ Xxxxxx X. Xxxxxx
------------------------
Xxxxxxx X. Xxxxxx
23
EXHIBITS and SCHEDULES
Exhibit 1.1 Articles of Merger - Hi-Tech Acquiring Sub into Hi-Tech
Schedule 2.1 Hi-Tech Disclosure Regarding Corporate Organization
Schedule 2.4 Hi-Tech Disclosure Regarding Non-Contravention
Schedule 2.5 Hi-Tech Disclosure Regarding Financials
Schedule 2.6 Hi-Tech Disclosure Regarding Accounts Receivable
Schedule 2.7 Hi-Tech Disclosure Regarding Liabilities
Schedule 2.8 Hi-Tech Disclosure Regarding Litigation
Schedule 2.9 Hi-Tech Disclosure Regarding Adverse Changes
Schedule 2.10 Hi-Tech Disclosure Regarding Title to Assets
Schedule 2.11 Hi-Tech Disclosure Regarding Taxes
Schedule 2.12 Hi-Tech Disclosure Regarding Insurance
Schedule 2.13 Hi-Tech Disclosure Regarding Benefit Plans
Schedule 2.14 Hi-Tech Disclosure Regarding Contracts
Schedule 2.15 Hi-Tech Disclosure Regarding Labor Matters
Schedule 2.16 Hi-Tech Disclosure Regarding Intellectual Property
Schedule 2.17 Hi-Tech Disclosure Regarding Hazardous Substances
Schedule 2.19 Parent Disclosure of Eltrax Reports
Exhibit 2.19 Investor Questionnaire
Exhibit 4.4 Registration Rights of Shareholders
In accordance with Item 601(b)(2) of Regulation S-K, the
exhibits and schedules described in the List of Exhibits and
Schedules of this Agreement have not been filed with the Current
Report on Form 8-K to which this Agreement is an exhibit. The
Registrant hereby agrees to furnish supplementally copies of such
exhibits and schedules to the Commission upon request.
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