EXHIBIT 2.1
EXHIBIT "A-1"
FORM OF ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of __________, 1995, by and between ALL
AMERICAN ADDED VALUE, INC., a corporation organized and existing under the laws
of the State of California (hereinafter referred to as "Employer"), and ▇▇▇▇▇▇
▇. ▇▇▇▇▇ (hereinafter referred to as "Employee").
W I T N E S S E T H:
WHEREAS, Employer is a California corporation engaged in the
distribution of electronic components and the performance of certain services
related thereto;
WHEREAS, Employer desires to employ Employee upon the terms and
conditions set forth below and Employee desires to accept employment upon such
terms and conditions; and
WHEREAS, Employer and Employee desire to set forth in writing the terms
and conditions of their agreements and understandings with respect to Employee's
employment by Employer.
NOW, THEREFORE, the parties agree as follows:
1. EMPLOYMENT
Employer hereby employs Employee, and Employee hereby accepts
employment by Employer, upon all the terms and conditions set forth in this
Employment Agreement. All capitalized terms used herein, which are not defined
herein, shall have the respective meanings ascribed to them in that certain
Merger Purchase Agreement pursuant to which this Employment Agreement is being
executed (the "Purchase Agreement").
2. TERM
Subject to the provisions for earlier termination set forth in
Section 9 hereof, this Employment Agreement shall commence on the date hereof
and shall continue until the close of business of the day preceding the second
anniversary of the date hereof (the "Employment Term").
3. EMPLOYEE'S REPRESENTATIONS AND WARRANTIES
Employee represents and warrants to Employer that he is free
to accept employment with Employer as contemplated herein and has no other
written or oral obligations or commitments of any kind or nature which would in
any way interfere with his acceptance of employment pursuant to the terms hereof
or the full performance of his obligations hereunder or the exercise of his best
efforts in his employment hereunder or which would otherwise pose any conflict
of interest.
4. DUTIES AND EXTENT OF SERVICES
A. DUTIES. Employee's duties and responsibilities hereunder
shall be those reasonably assigned to him from time to time by Employer. Such
duties may, in Employer's discretion, consist of certain duties similar to those
performed by Employee for Added Value and/or Rocky Mountain prior to the
Mergers, and such other duties and responsibilities as may be reasonably
requested from time to time by Employer's President, Chief Executive Officer,
Executive Vice President, or Board of Directors. Employee agrees to devote his
full and exclusive time, skill, attention and energy diligently and competently
to perform the duties and responsibilities assigned to him hereunder, or
pursuant hereto.
B. RULES AND REGULATIONS. Employee agrees to abide by
the rules and regulations of Employer promulgated by Employer from time to
time with
respect and applicable to Employer's employees generally, which are all hereby
incorporated by reference and made a part of this Employment Agreement.
C. PLACE OF SERVICE. Employee shall render his
services generally in, and shall not be obligated to maintain his office in
any place other than, Orange County, California.
5. COMPENSATION
A. BASE COMPENSATION. Subject to the provisions of Section 9
of this Employment Agreement, Employer shall pay salary to Employee ("Salary")
based upon the rate of $150,000 per annum, or $12,500 per calendar month (the
first month's Salary to be prorated accordingly, if necessary). Salary shall be
payable in accordance with Employer's normal payroll practices for its employees
and shall be subject to payroll deductions and tax withholdings in accordance
with Employer's usual practices and as required by law. Presently, payroll is
made on a semi-monthly basis.
B. BONUS COMPENSATION. In order to induce Employee to
execute and deliver this Employment Agreement, in addition to the other
compensation herein provided for, Employer shall pay to Employee concurrently
with the execution and delivery of this Agreement incentive bonus compensation
in the amount of $180,000.
6. FRINGE BENEFITS AND EXPENSES
A. EMPLOYEE BENEFITS. Employee shall not be entitled to any
benefits or fringe benefits except as specifically set forth in this Employment
Agreement and except for those, if any, made available by Employer from time to
time, in Employer's sole discretion, to all of its other employees generally.
B. EXPENSES. Employer shall reimburse Employee for his
reasonable out-of-pocket costs and expenses in connection with the performance
of his duties and responsibilities hereunder, subject to the specific prior
written approval thereof by the President of Employer or Employer's Board of
Directors for any item of expense or any items of related expenses in excess of
$500.
C. CAR ALLOWANCE. In order to defray Employee's
automobile expenses incurred in connection with his duties, Employer shall pay
to Employee a monthly car allowance of $500. Employer has no obligation to
provide an automobile to Employee.
D. INCENTIVE STOCK OPTIONS. Concurrently with the execution
and delivery of this Agreement, Employer shall cause Purchaser to grant to
Employee options to acquire 10,000 All American Shares ("Incentive Stock
Options") pursuant to Purchaser's Employees', Officers', Directors' Stock Option
Plan (the "Plan"). The price at which Employee may exercise any of the Incentive
Stock Options shall be the fair market value of an All American Share at the
time such Incentive Stock Options are granted, as same shall be fixed by the
compensation committee of Purchaser's Board of Directors on or about such time.
The Incentive Stock Options shall vest over six years from the date granted,
1/6th at the end of each such year, and shall be exercisable within the
seven-year period immediately following the date granted, provided that all
unvested and vested and unexercised Incentive Stock Options shall expire
automatically on the date that Employee voluntarily or involuntarily leaves the
employ of Employer, and provided further, that, in the event Employee is
Disabled, Employee shall have the right until the earlier of the one-year
anniversary of the disability and the expiration date of the Incentive Stock
Options to exercise all Incentive Stock Options vested and unexercised as of the
date of disability. All other terms and conditions of the Incentive Stock
Options shall be as set forth in the Plan or shall conform to policies and
guidelines with respect to options pursuant to the Plan granted to employees of
similar status.
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7. VACATIONS
Employee shall be entitled to a total of four weeks of
vacation and six sick days during each full year of the Employment Term with
full compensation (provided, however, that Employee shall not be entitled to be
compensated for any unused vacation or sick days upon termination of this
Employment Agreement). The periods during which Employee will be absent from
work shall be at the reasonable discretion of Employer.
8. FACILITIES
Employer shall provide and maintain (or cause to be provided
and maintained) such facilities, equipment, supplies and personnel as it deems
necessary in its sole discretion for Employee's performance of his duties and
responsibilities under this Employment Agreement.
9. TERMINATION OF EMPLOYMENT
A. TERMINATION EVENTS. Notwithstanding any provisions of this
Employment Agreement to the contrary, this Employment Agreement may be
terminated only as follows: by Employer with or without Cause (as hereinafter
defined), effective upon the delivery of written notice to Employee; upon
Employee's death; or upon Employee becoming Disabled (as later defined) and
receiving written notice of termination from Employer to that effect.
B. DEFINITIONS OF CAUSE AND DISABLED. For purposes of this
Employment Agreement, "Cause" shall mean and include: (i) fraud; (ii) dishonesty
in performance of employment duties; (iii) commission of a felony; (iv) habitual
drunkenness during business hours or at Employer's premises; (v) drug addiction
or use during business hours or at Employer's premises; (vi) gross negligence in
the performance of employment duties; (vii) abandonment of employment duties;
(viii) repeated insubordination; (ix) conduct on the part of Employee relating
to Employer's business or his employment duties (which is not authorized,
directed or approved by Employer) which results in governmental sanctions being
imposed on Employer or Employee; (x) material breach by Employee of this
Employment Agreement or any other written agreement between Employer and
Employee governing Employee's conduct or employment whether now existing or
hereafter created which, if curable, is not cured by Employee within 30 days
following his receipt of written notice thereof (such notice shall specify in
reasonable detail the nature of the material breach and the curative steps, if
curable, required to be taken); or (xi) material breach by Added Value or Rocky
Mountain or any Key Employee of any of its or his representations, warranties,
covenants or obligations under the Purchase Agreement or the Guaranty and
Agreement with respect to which Employee had personal involvement or knowledge
and which, if curable, is not cured within 30 days following notice to Employee
thereof (such notice shall specify in reasonable detail the nature of the
material breach and the curative steps, if curable, required to be taken).
Employee shall be deemed "Disabled" if, in Employer's reasonable judgment,
Employee is unable, due to mental, emotional or physical injury or illness, to
perform substantially all of his employment duties for a period of 90
consecutive days. Termination of this Employment Agreement for disability will
be effective on the later of (x) the 90th day following the disability event and
(y) the date Employer gives notice of termination by reason of disability to
Employee.
C. EFFECT OF TERMINATION FOR CAUSE OR EMPLOYEE'S
RESIGNATION. In the event that this Employment Agreement is terminated by
Employer with Cause, or because Employee resigns from or quits his employment,
Employer shall pay to Employee, within thirty (30) days following the date of
such termination, the Salary, if any, and amounts payable under Section 6, if
any, accrued and unpaid through the date of such termination; and Employee shall
not be entitled to any other compensation, remuneration or other sums provided
for in this Employment Agreement or to which Employee might otherwise be
entitled hereunder or at law or in equity.
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D. COMPENSATION UPON DEATH OR DISABILITY. Upon the death of
Employee, or termination because Employee is Disabled, Employer shall pay to
Employee, his legal guardian or the legal representative of Employee's estate
(or heir as designated by the legal representative of Employee's estate at such
time), within thirty (30) days following the date of Employee's death or
termination, the Salary, if any, and amounts payable under Section 6, if any,
accrued and unpaid through the date of death or termination; and Employee (or
such legal guardian, legal representative or any heirs) shall not be entitled to
any other compensation, remuneration or other sums provided for in this
Employment Agreement or to which Employee might otherwise be entitled hereunder
or at law or in equity.
E. COMPENSATION UPON TERMINATION WITHOUT CAUSE. In the event
that Employer terminates this Employment Agreement without Cause prior to the
second anniversary of the date hereof, Employee's sole and exclusive
compensation and remedy hereunder shall be to receive from Employer severance
pay equal to (i) the amount of Salary and amounts payable under Section 6, if
any, accrued and unpaid through the date of termination, and (ii) as and when
payable (as if Employee had remained an employee of Employer), the Salary and
amounts payable under Section 6 that Employee would have received during the
period following termination until the second anniversary of the date of this
Employment Agreement.
F. KEY-MAN INSURANCE. In the event that Employer has obtained
a key-man term insurance policy (the "Policy") on the life of Employee, all
proceeds payable in respect thereof shall be the property solely of Employer. In
the event that Employee's employment terminates for any reason other than
Employee's death, Employee may request that the Policy be assigned to Employee
by giving written notice to Employer to that effect. Subject to obtaining any
requisite consent from the insurer, Employer shall, if Employee has so
requested, assign the Policy to Employee subject to Employee's reimbursement to
Employer of any premiums paid by Employer which relate to any period following
the date of termination of Employee's employment, and the cash value, if any, of
the Policy. In the event that Employer desires to obtain any such Policy,
Employee shall fully cooperate in Employer's efforts, including submitting to
medical exams and tests and executing and delivering applications and
information statements.
10. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
A. CONFIDENTIAL INFORMATION. Employee acknowledges that
Employee has been informed by Employer of Employer's policy to maintain as
secret and confidential all information and materials relating to (i) the
financial condition, businesses and interests of Employer and its Affiliates,
(ii) the systems, Know-how and Records, products, services, costs, inventions,
computer software programs, marketing and sales techniques and/or programs,
methods, methodologies, manuals, lists and other trade secrets heretofore or
hereafter acquired, sold, developed, maintained and/or used by Employer and its
Affiliates and (iii) the nature and terms of Employer's and its Affiliates'
relationships with their respective customers, suppliers, lenders, underwriters,
vendors, consultants, independent contractors, attorneys, accountants and
employees (all such information and materials being hereinafter collectively
referred to as "Confidential Information"). Employee further acknowledges that
such Confidential Information is of great value to Employer and its Affiliates
and, as a result of Employee's employment by Employer, Employee will be making
use of, acquiring and/or adding to such Confidential Information. Therefore,
Employee understands that it is reasonably necessary to protect Employer's and
its Affiliates' good will and business interests that Employee agree and,
accordingly, Employee does hereby agree, that Employee will not directly or
indirectly (except where authorized by the President of Employer for the benefit
of Employer and/or its Affiliate(s) and/or as required in the course of his
employment) at any time hereafter divulge or disclose for any purpose whatsoever
to any persons, firms, corporations or other entities other than Employer or its
Affiliates (hereinafter referred to collectively as "Third Parties"), or use or
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cause or authorize any Third Parties to use, any such Confidential Information,
except as otherwise required by law.
B. EMPLOYER'S MATERIALS. In accordance with the foregoing,
Employee furthermore agrees that (i) Employee will at no time retain or remove
from the premises of Employer or its Affiliates any products, prototypes,
drawings, notebooks, software programs or discs or similar containers of
software, manuals, data, books, records, materials or documents of any kind or
description for any purpose unconnected with the strict performance of
Employee's duties with Employer and (ii) upon the cessation or termination of
Employee's employment with Employer for any reason, Employee shall forthwith
deliver or cause to be delivered up to Employer any and all drawings, notebooks,
software programs or discs or similar containers of software, manuals, data,
books, records, materials and other documents and materials in Employee's
possession or under Employee's control relating to any Confidential Information
or any other material or thing which is otherwise the property of Employer or
its Affiliates.
11. COVENANT-NOT-TO-COMPETE
In view of (a) the Confidential Information known to and to be
obtained by or disclosed to Employee (including, without limitation, Employee's
knowledge of, and familiarity and relationships with, Employer's other employees
and Employer's customers and suppliers), (b) the know-how acquired and to be
acquired by Employee, (c) the substantial consideration paid and payable to
Employee under the Purchase Agreement, and to Employee under this Employment
Agreement, and (d) the sale of the good will of the business embodied in the
Purchase Agreement, and as a material inducement to Employer to enter into this
Employment Agreement and to employ Employee and to pay to Employee the
substantial compensation Employee will be receiving, Employee covenants and
agrees that, for as long as Employee is employed by Employer and for a period of
two (2) years after the later of (i) the date Employee ceases for any reason to
be employed by Employer and (ii) the date Employee ceases to receive any Salary
(as severance pay or otherwise) from Employer, Employee shall not, directly or
indirectly, (A) sell any products or services sold or offered by Employer or its
Affiliates (including either of the Corporations) to any customer or former
customer of Employer or its Affiliates (including either of the Corporations),
(B) obtain for resale from any supplier of Employer or its Affiliates (including
either of the Corporations) any products of the type Employer or its Affiliates
(including either of the Corporations) purchases or has purchased for resale,
(C) solicit the services of, or hire, directly or indirectly, whether on his own
behalf or on behalf of others, any managerial or executive employee or
salesperson of Employer or its Affiliates (including either of the Corporations)
or who was employed by Employer or any of Employer's Affiliates (including
either of the Corporations) at any time during the period commencing one year
prior to the commencement of the Employment Term and ending on the date of
termination of Employee's employment, (D) obtain any interest in, any employment
with, or any right to participate in, directly or indirectly, any enterprise
competitive with the business of Employer or its Affiliates (including either of
the Corporations) anywhere within the continental United States which provides
goods or services to customers located in any county or city in which either
Corporation has provided goods or services to customers during the one-year
period ending on the date hereof or located in any county or city in which
either Surviving Corporation has provided goods or services to customers during
the Employment Term (the "Geographical Territory"), or (E) otherwise assist any
person or entity in so competing, or in any capacity engage in any activity or
business, passively or actively, as an owner, participant, employee or agent,
competitive with the business of Employer or its Affiliates (including either of
the Corporations) in any county or city within the continental United States
which provides goods or services to customers located in the Geographical
Territory (provided that the restrictions in (D) and (E) shall not in any event
continue, with respect to any county or city within the Geographical Territory,
beyond the time that Employer or any of its Affiliates ceases to carry on a like
business therein). The foregoing restriction shall not prevent Employee from
accepting employment as a
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manufacturer's representative at any time following December 31, 1997 if such
manufacturer is not a major supplier of Employer or its Affiliates (including
either of the Corporations) and Employee's termination of employment occurred
for a reason other than Cause. A major supplier of Employer or its Affiliates
(including either of the Corporations) is one whose products account for 5% or
more of the sales of Employer or of any Affiliate of Employer or of Employer and
its Affiliates viewed as a group. Employee acknowledges that the business of
Employer and its Affiliates is national in scope, that one can effectively
compete with such business in the Geographical Territory from anywhere in the
continental United States, and that, therefore, such geographical area of
restriction is reasonable in the circumstances to protect Employer's legitimate
business interests. The covenants and restrictions contained in this Section 11
are intended to be separate and divisible from, and operate concurrently with,
the similar covenants and restrictions contained in the Restrictive Covenant and
are each intended to be separately enforceable. Any differences between the
covenants and restrictions contained herein and therein, such as with respect to
time period restrictions, are intentional.
12. EMPLOYER'S REMEDIES FOR BREACH OF SECTIONS 10 AND 11
Employee covenants and agrees that if Employee shall violate
or breach any of Employee's covenants or agreements provided for in Sections 10
or 11 hereof, Employer and/or its Affiliates shall be entitled to an accounting
and repayment of all profits, compensation, commissions, remunerations and
benefits which Employee directly or indirectly has realized and realizes as a
result of, growing out of or in connection with any such violation or breach. In
addition, in the event of a breach or violation or threatened or imminent breach
or violation of any provisions of Sections 10 or 11 hereof, Employer and/or its
Affiliates shall be entitled to a temporary and permanent injunction or any
other appropriate decree of specific performance or equitable relief (without
being required to post bond or other security) from a court of competent
jurisdiction in order to prevent, prohibit or restrain any such breach or
violation or threatened or imminent breach or violation by Employee, by
Employee's partners, agents, representatives, servants, employers or employees
and/or by any Third Parties. Employer shall be entitled to such injunctive or
other equitable relief in addition to any damages which are suffered, together
with reasonable attorneys' and paralegals' fees and costs and other costs
incurred in connection with any such litigation, both before and at trial and at
all tribunal levels. It is understood that resort by Employer and/or its
Affiliates to such injunctive or other equitable relief shall not be deemed to
waive or to limit in any respect any other rights or remedies which Employer or
its Affiliates may have with respect to such breach or violation. Employer's
Affiliates may enforce these provisions directly in their own names and right.
13. REASONABLENESS OF RESTRICTIONS
A. REASONABLENESS. Employee acknowledges that any breach or
violation of Section 10 or 11 hereof will cause irreparable injury and damage
and incalculable harm to Employer and its Affiliates and that it would be very
difficult or impossible to measure all of the damages resulting from any such
breach or violation. Employee further acknowledges that Employee has carefully
read and considered the provisions of Sections 10, 11 and 12 hereof and, having
done so, agrees that the restrictions and remedies set forth in such Sections
(including, but not limited to, the time period, geographical and types of
restrictions imposed) are fair and reasonable and are reasonably required for
the protection of the business, trade secrets, interests and good will of
Employer and its Affiliates. Employee further acknowledges that Employee's
covenants in Sections 10 and 11 have been made to induce Employer to complete
the Merger to which it was a party pursuant to the Purchase Agreement, but for
which this Employment Agreement would not have been possible.
B. SEVERABILITY. Employee understands and intends that
each provision and restriction agreed to by Employee in Sections 10, 11 and 12
hereof
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shall be construed as separate and divisible from every other provision and
restriction. In the event that any one of the provisions of, or restrictions in,
Sections 10, 11 and/or 12 hereof shall be held to be invalid or unenforceable,
and is not reformed by a court of competent jurisdiction, the remaining
provisions thereof and restrictions therein shall nevertheless continue to be
valid and enforceable as though the invalid or unenforceable provisions or
restrictions had not been included. In the event that any such provision
relating to time period, geographical and/or type of restriction shall be
declared by a court of competent jurisdiction to exceed the maximum or
permissible time period, geographical or type of restriction such court deems
reasonable and enforceable, said time period, geographical and/or type of
restriction shall be deemed to become and shall thereafter be the maximum time
period, geographical area and/or type of restriction which such court deems
reasonable and enforceable.
C. SURVIVABILITY. The restrictions, acknowledgements,
covenants and agreements of Employee set forth in Sections 10, 11, 12 and 13 of
this Employment Agreement shall survive any termination of this Employment
Agreement or of Employee's employment (for any reason, including expiration of
the Employment Term).
14. LAW APPLICABLE
This Employment Agreement shall be governed by and construed
pursuant to the laws of the State of California.
15. NOTICES
Any notices required or permitted to be given pursuant to this
Employment Agreement shall be sufficient, if in writing and sent in the manner
required and/or permitted in the Purchase Agreement.
16. SUCCESSION
This Employment Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective legal representatives,
heirs, assignees and/or successors in interest of any kind whatever; provided,
however, that Employee acknowledges and agrees that he cannot assign or delegate
any of his rights, duties, responsibilities or obligations hereunder to any
other person or entity. Employer shall have the right to assign its rights and
delegate its duties under this Employment Agreement.
17. ENTIRE AGREEMENT
This Employment Agreement constitutes the entire final
agreement between the parties with respect to, and supersedes any and all prior
agreements between the parties hereto both oral and written concerning, the
subject matter hereof and may not be amended, modified or terminated except by a
writing signed by the parties hereto.
18. SEVERABILITY
If any provision of this Employment Agreement shall be held to
be invalid or unenforceable, and is not reformed by a court of competent
jurisdiction, such invalidity or unenforceability shall attach only to such
provision and shall not in any way affect or render invalid or unenforceable any
other provision of this Employment Agreement, and this Employment Agreement
shall be carried out as if such invalid or unenforceable provision were not
herein contained.
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19. NO WAIVER
A waiver of any breach or violation of any term, provision or
covenant herein contained shall not be deemed a continuing waiver or a waiver of
any future or past breach or violation. No oral waiver shall be binding.
20. ATTORNEYS' FEES
In the event that either of the parties to this Employment
Agreement institutes suit against the other party to this Employment Agreement
to enforce or declare any of his or its rights hereunder, the prevailing party
in such action shall be entitled to recover from the other party all reasonable
costs thereof, including reasonable attorneys' and paralegals' fees and costs
incurred before and at trial and at all tribunal levels, and whether or not suit
or any other proceeding is instituted.
21. COUNTERPARTS
This Employment Agreement may be executed in counterparts,
each of which shall be an original, but both of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands on
the day and year first above written.
EMPLOYER:
ALL AMERICAN ADDED VALUE, INC., a
California corporation
By:_____________________________
Title:__________________________
EMPLOYEE:
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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EXHIBIT "A-2"
FORM OF ▇▇▇▇▇ ▇▇▇▇▇▇ EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of __________, 1995, by and between ALL
AMERICAN A.V.E.D., INC., a corporation organized and existing under the laws of
the State of Colorado (hereinafter referred to as "Employer"), and ▇▇▇▇▇ ▇▇▇▇▇▇
(hereinafter referred to as "Employee").
W I T N E S S E T H:
WHEREAS, Employer is a Colorado corporation engaged in the distribution
of electronic components and the performance of certain services related
thereto;
WHEREAS, Employer desires to employ Employee upon the terms and
conditions set forth below and Employee desires to accept employment upon such
terms and conditions; and
WHEREAS, Employer and Employee desire to set forth in writing the terms
and conditions of their agreements and understandings with respect to Employee's
employment by Employer.
NOW, THEREFORE, the parties agree as follows:
1. EMPLOYMENT
Employer hereby employs Employee, and Employee hereby accepts
employment by Employer, upon all the terms and conditions set forth in this
Employment Agreement. All capitalized terms used herein, which are not defined
herein, shall have the respective meanings ascribed to them in that certain
Merger Purchase Agreement pursuant to which this Employment Agreement is being
executed (the "Purchase Agreement").
2. TERM
Subject to the provisions for earlier termination set forth in
Section 9 hereof, this Employment Agreement shall commence on the date hereof
and shall continue until the close of business of the day preceding the second
anniversary of the date hereof (the "Employment Term").
3. EMPLOYEE'S REPRESENTATIONS AND WARRANTIES
Employee represents and warrants to Employer that he is free
to accept employment with Employer as contemplated herein and has no other
written or oral obligations or commitments of any kind or nature which would in
any way interfere with his acceptance of employment pursuant to the terms hereof
or the full performance of his obligations hereunder or the exercise of his best
efforts in his employment hereunder or which would otherwise pose any conflict
of interest.
4. DUTIES AND EXTENT OF SERVICES
A. DUTIES. Employee's duties and responsibilities hereunder
shall be those reasonably assigned to him from time to time by Employer. Such
duties may, in Employer's discretion, consist of certain duties similar to those
performed by Employee for Added Value and/or Rocky Mountain prior to the
Mergers, and such other duties and responsibilities as may be reasonably
requested from time to time by Employer's President, Chief Executive Officer,
Executive Vice President, or Board of Directors. Employee agrees to devote his
full and exclusive time, skill, attention and energy diligently and competently
to perform the duties and responsibilities assigned to him hereunder, or
pursuant hereto.
B. RULES AND REGULATIONS. Employee agrees to abide
by the rules and regulations of Employer promulgated by Employer from time to
time with
respect and applicable to Employer's employees generally, which are all hereby
incorporated by reference and made a part of this Employment Agreement.
C. PLACE OF SERVICE. Employee shall render his
services generally in, and shall not be obligated to maintain his office in any
place other than, Wheat Ridge or the greater Denver metropolitan area, Colorado.
5. COMPENSATION
A. BASE COMPENSATION. Subject to the provisions of Section 9
of this Employment Agreement, Employer shall pay salary to Employee ("Salary")
based upon the rate of $135,000 per annum, or $11,250 per calendar month (the
first month's Salary to be prorated accordingly, if necessary). Salary shall be
payable in accordance with Employer's normal payroll practices for its employees
and shall be subject to payroll deductions and tax withholdings in accordance
with Employer's usual practices and as required by law. Presently, payroll is
made on a semi-monthly basis.
B. BONUS COMPENSATION. In order to induce Employee
to execute and deliver this Employment Agreement, in addition to the other
compensation herein provided for, Employer shall pay to Employee concurrently
with the execution and delivery of this Agreement incentive bonus compensation
in the amount of $200,000.
6. FRINGE BENEFITS AND EXPENSES
A. EMPLOYEE BENEFITS. Employee shall not be entitled to any
benefits or fringe benefits except as specifically set forth in this Employment
Agreement and except for those, if any, made available by Employer from time to
time, in Employer's sole discretion, to all of its other employees generally.
B. EXPENSES. Employer shall reimburse Employee for his
reasonable out-of-pocket costs and expenses in connection with the performance
of his duties and responsibilities hereunder, subject to the specific prior
written approval thereof by the President of Employer or Employer's Board of
Directors for any item of expense or any items of related expenses in excess of
$500.
C. CAR ALLOWANCE. In order to defray Employee's
automobile expenses incurred in connection with his duties, Employer shall pay
to Employee a monthly car allowance of $500. Employer has no obligation to
provide an automobile to Employee.
D. INCENTIVE STOCK OPTIONS. Concurrently with the execution
and delivery of this Agreement, Employer shall cause Purchaser to grant to
Employee options to acquire 10,000 All American Shares ("Incentive Stock
Options") pursuant to Purchaser's Employees', Officers', Directors' Stock Option
Plan (the "Plan"). The price at which Employee may exercise any of the Incentive
Stock Options shall be the fair market value of an All American Share at the
time such Incentive Stock Options are granted, as same shall be fixed by the
compensation committee of Purchaser's Board of Directors on or about such time.
The Incentive Stock Options shall vest over six years from the date granted,
1/6th at the end of each such year, and shall be exercisable within the
seven-year period immediately following the date granted, provided that all
unvested and vested and unexercised Incentive Stock Options shall expire
automatically on the date that Employee voluntarily or involuntarily leaves the
employ of Employer, and provided further, that, in the event Employee is
Disabled, Employee shall have the right until the earlier of the one-year
anniversary of the disability and the expiration date of the Incentive Stock
Options to exercise all Incentive Stock Options vested and unexercised as of the
date of disability. All other terms and conditions of the Incentive Stock
Options shall be as set forth in the Plan or shall conform to policies and
guidelines with respect to options pursuant to the Plan granted to employees of
similar status.
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7. VACATIONS
Employee shall be entitled to a total of four weeks of
vacation and six sick days during each full year of the Employment Term with
full compensation (provided, however, that Employee shall not be entitled to be
compensated for any unused vacation or sick days upon termination of this
Employment Agreement). The periods during which Employee will be absent from
work shall be at the reasonable discretion of Employer.
8. FACILITIES
Employer shall provide and maintain (or cause to be provided
and maintained) such facilities, equipment, supplies and personnel as it deems
necessary in its sole discretion for Employee's performance of his duties and
responsibilities under this Employment Agreement.
9. TERMINATION OF EMPLOYMENT
A. TERMINATION EVENTS. Notwithstanding any provisions of this
Employment Agreement to the contrary, this Employment Agreement may be
terminated only as follows: by Employer with or without Cause (as hereinafter
defined), effective upon the delivery of written notice to Employee; upon
Employee's death; or upon Employee becoming Disabled (as later defined) and
receiving written notice of termination from Employer to that effect.
B. DEFINITIONS OF CAUSE AND DISABLED. For purposes of this
Employment Agreement, "Cause" shall mean and include: (i) fraud; (ii) dishonesty
in performance of employment duties; (iii) commission of a felony; (iv) habitual
drunkenness during business hours or at Employer's premises; (v) drug addiction
or use during business hours or at Employer's premises; (vi) gross negligence in
the performance of employment duties; (vii) abandonment of employment duties;
(viii) repeated insubordination; (ix) conduct on the part of Employee relating
to Employer's business or his employment duties (which is not authorized,
directed or approved by Employer) which results in governmental sanctions being
imposed on Employer or Employee; (x) material breach by Employee of this
Employment Agreement or any other written agreement between Employer and
Employee governing Employee's conduct or employment whether now existing or
hereafter created which, if curable, is not cured by Employee within 30 days
following his receipt of written notice thereof (such notice shall specify in
reasonable detail the nature of the material breach and the curative steps, if
curable, required to be taken); or (xi) material breach by Added Value or Rocky
Mountain or any Key Employee of any of its or his representations, warranties,
covenants or obligations under the Purchase Agreement or the Guaranty and
Agreement with respect to which Employee had personal involvement or knowledge
and which, if curable, is not cured within 30 days following notice to Employee
thereof (such notice shall specify in reasonable detail the nature of the
material breach and the curative steps, if curable, required to be taken).
Employee shall be deemed "Disabled" if, in Employer's reasonable judgment,
Employee is unable, due to mental, emotional or physical injury or illness, to
perform substantially all of his employment duties for a period of 90
consecutive days. Termination of this Employment Agreement for disability will
be effective on the later of (x) the 90th day following the disability event and
(y) the date Employer gives notice of termination by reason of disability to
Employee.
C. EFFECT OF TERMINATION FOR CAUSE OR EMPLOYEE'S
RESIGNATION. In the event that this Employment Agreement is terminated by
Employer with Cause, or because Employee resigns from or quits his employment,
Employer shall pay to Employee, within thirty (30) days following the date of
such termination, the Salary, if any, and amounts payable under Section 6, if
any, accrued and unpaid through the date of such termination; and Employee shall
not be entitled to any other compensation, remuneration or other sums provided
for in this Employment Agreement or to which Employee might otherwise be
entitled hereunder or at law or in equity.
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D. COMPENSATION UPON DEATH OR DISABILITY. Upon the death of
Employee, or termination because Employee is Disabled, Employer shall pay to
Employee, his legal guardian or the legal representative of Employee's estate
(or heir as designated by the legal representative of Employee's estate at such
time), within thirty (30) days following the date of Employee's death or
termination, the Salary, if any, and amounts payable under Section 6, if any,
accrued and unpaid through the date of death or termination; and Employee (or
such legal guardian, legal representative or any heirs) shall not be entitled to
any other compensation, remuneration or other sums provided for in this
Employment Agreement or to which Employee might otherwise be entitled hereunder
or at law or in equity.
E. COMPENSATION UPON TERMINATION WITHOUT CAUSE. In the event
that Employer terminates this Employment Agreement without Cause prior to the
second anniversary of the date hereof, Employee's sole and exclusive
compensation and remedy hereunder shall be to receive from Employer severance
pay equal to (i) the amount of Salary and amounts payable under Section 6, if
any, accrued and unpaid through the date of termination, and (ii) as and when
payable (as if Employee had remained an employee of Employer), the Salary and
amounts payable under Section 6 that Employee would have received during the
period following termination until the second anniversary of the date of this
Employment Agreement.
F. KEY-MAN INSURANCE. In the event that Employer has obtained
a key-man term insurance policy (the "Policy") on the life of Employee, all
proceeds payable in respect thereof shall be the property solely of Employer. In
the event that Employee's employment terminates for any reason other than
Employee's death, Employee may request that the Policy be assigned to Employee
by giving written notice to Employer to that effect. Subject to obtaining any
requisite consent from the insurer, Employer shall, if Employee has so
requested, assign the Policy to Employee subject to Employee's reimbursement to
Employer of any premiums paid by Employer which relate to any period following
the date of termination of Employee's employment, and the cash value, if any, of
the Policy. In the event that Employer desires to obtain any such Policy,
Employee shall fully cooperate in Employer's efforts, including submitting to
medical exams and tests and executing and delivering applications and
information statements.
10. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
A. CONFIDENTIAL INFORMATION. Employee acknowledges that
Employee has been informed by Employer of Employer's policy to maintain as
secret and confidential all information and materials relating to (i) the
financial condition, businesses and interests of Employer and its Affiliates,
(ii) the systems, Know-how and Records, products, services, costs, inventions,
computer software programs, marketing and sales techniques and/or programs,
methods, methodologies, manuals, lists and other trade secrets heretofore or
hereafter acquired, sold, developed, maintained and/or used by Employer and its
Affiliates and (iii) the nature and terms of Employer's and its Affiliates'
relationships with their respective customers, suppliers, lenders, underwriters,
vendors, consultants, independent contractors, attorneys, accountants and
employees (all such information and materials being hereinafter collectively
referred to as "Confidential Information"). Employee further acknowledges that
such Confidential Information is of great value to Employer and its Affiliates
and, as a result of Employee's employment by Employer, Employee will be making
use of, acquiring and/or adding to such Confidential Information. Therefore,
Employee understands that it is reasonably necessary to protect Employer's and
its Affiliates' good will and business interests that Employee agree and,
accordingly, Employee does hereby agree, that Employee will not directly or
indirectly (except where authorized by the President of Employer for the benefit
of Employer and/or its Affiliate(s) and/or as required in the course of his
employment) at any time hereafter divulge or disclose for any purpose whatsoever
to any persons, firms, corporations or other entities other than Employer or its
Affiliates (hereinafter referred to collectively as "Third Parties"), or use or
4
cause or authorize any Third Parties to use, any such Confidential Information,
except as otherwise required by law.
B. EMPLOYER'S MATERIALS. In accordance with the foregoing,
Employee furthermore agrees that (i) Employee will at no time retain or remove
from the premises of Employer or its Affiliates any products, prototypes,
drawings, notebooks, software programs or discs or similar containers of
software, manuals, data, books, records, materials or documents of any kind or
description for any purpose unconnected with the strict performance of
Employee's duties with Employer and (ii) upon the cessation or termination of
Employee's employment with Employer for any reason, Employee shall forthwith
deliver or cause to be delivered up to Employer any and all drawings, notebooks,
software programs or discs or similar containers of software, manuals, data,
books, records, materials and other documents and materials in Employee's
possession or under Employee's control relating to any Confidential Information
or any other material or thing which is otherwise the property of Employer or
its Affiliates.
11. COVENANT-NOT-TO-COMPETE
In view of (a) the Confidential Information known to and to be
obtained by or disclosed to Employee (including, without limitation, Employee's
knowledge of, and familiarity and relationships with, Employer's other employees
and Employer's customers and suppliers), (b) the know-how acquired and to be
acquired by Employee, (c) the substantial consideration paid and payable to
Employee under the Purchase Agreement, and to Employee under this Employment
Agreement, and (d) the sale of the good will of the business embodied in the
Purchase Agreement, and as a material inducement to Employer to enter into this
Employment Agreement and to employ Employee and to pay to Employee the
substantial compensation Employee will be receiving, Employee covenants and
agrees that, for as long as Employee is employed by Employer and for a period of
two (2) years after the later of (i) the date Employee ceases for any reason to
be employed by Employer and (ii) the date Employee ceases to receive any Salary
(as severance pay or otherwise) from Employer, Employee shall not, directly or
indirectly, (A) sell any products or services sold or offered by Employer or its
Affiliates (including either of the Corporations) to any customer or former
customer of Employer or its Affiliates (including either of the Corporations),
(B) obtain for resale from any supplier of Employer or its Affiliates (including
either of the Corporations) any products of the type Employer or its Affiliates
(including either of the Corporations) purchases or has purchased for resale,
(C) solicit the services of, or hire, directly or indirectly, whether on his own
behalf or on behalf of others, any managerial or executive employee or
salesperson of Employer or its Affiliates (including either of the Corporations)
or who was employed by Employer or any of Employer's Affiliates (including
either of the Corporations) at any time during the period commencing one year
prior to the commencement of the Employment Term and ending on the date of
termination of Employee's employment, (D) obtain any interest in, any employment
with, or any right to participate in, directly or indirectly, any enterprise
competitive with the business of Employer or its Affiliates (including either of
the Corporations) anywhere within the continental United States which provides
goods or services to customers located in any county or city in which either
Corporation has provided goods or services to customers during the one-year
period ending on the date hereof or located in any county or city in which
either Surviving Corporation has provided goods or services to customers during
the Employment Term (the "Geographical Territory"), or (E) otherwise assist any
person or entity in so competing, or in any capacity engage in any activity or
business, passively or actively, as an owner, participant, employee or agent,
competitive with the business of Employer or its Affiliates (including either of
the Corporations) in any county or city within the continental United States
which provides goods or services to customers located in the Geographical
Territory (provided that the restrictions in (D) and (E) shall not in any event
continue, with respect to any county or city within the Geographical Territory,
beyond the time that Employer or any of its Affiliates ceases to carry on a like
business therein). The foregoing restriction shall not prevent Employee from
accepting employment as a
5
manufacturer's representative at any time following December 31, 1997 if such
manufacturer is not a major supplier of Employer or its Affiliates (including
either of the Corporations) and Employee's termination of employment occurred
for a reason other than Cause. A major supplier of Employer or its Affiliates
(including either of the Corporations) is one whose products account for 5% or
more of the sales of Employer or of any Affiliate of Employer or of Employer and
its Affiliates viewed as a group. Employee acknowledges that the business of
Employer and its Affiliates is national in scope, that one can effectively
compete with such business in the Geographical Territory from anywhere in the
continental United States, and that, therefore, such geographical area of
restriction is reasonable in the circumstances to protect Employer's legitimate
business interests. The covenants and restrictions contained in this Section 11
are intended to be separate and divisible from, and operate concurrently with,
the similar covenants and restrictions contained in the Restrictive Covenant and
are each intended to be separately enforceable. Any differences between the
covenants and restrictions contained herein and therein, such as with respect to
time period restrictions, are intentional.
12. EMPLOYER'S REMEDIES FOR BREACH OF SECTIONS 10 AND 11
Employee covenants and agrees that if Employee shall violate
or breach any of Employee's covenants or agreements provided for in Sections 10
or 11 hereof, Employer and/or its Affiliates shall be entitled to an accounting
and repayment of all profits, compensation, commissions, remunerations and
benefits which Employee directly or indirectly has realized and realizes as a
result of, growing out of or in connection with any such violation or breach. In
addition, in the event of a breach or violation or threatened or imminent breach
or violation of any provisions of Sections 10 or 11 hereof, Employer and/or its
Affiliates shall be entitled to a temporary and permanent injunction or any
other appropriate decree of specific performance or equitable relief (without
being required to post bond or other security) from a court of competent
jurisdiction in order to prevent, prohibit or restrain any such breach or
violation or threatened or imminent breach or violation by Employee, by
Employee's partners, agents, representatives, servants, employers or employees
and/or by any Third Parties. Employer shall be entitled to such injunctive or
other equitable relief in addition to any damages which are suffered, together
with reasonable attorneys' and paralegals' fees and costs and other costs
incurred in connection with any such litigation, both before and at trial and at
all tribunal levels. It is understood that resort by Employer and/or its
Affiliates to such injunctive or other equitable relief shall not be deemed to
waive or to limit in any respect any other rights or remedies which Employer or
its Affiliates may have with respect to such breach or violation. Employer's
Affiliates may enforce these provisions directly in their own names and right.
13. REASONABLENESS OF RESTRICTIONS
A. REASONABLENESS. Employee acknowledges that any breach or
violation of Section 10 or 11 hereof will cause irreparable injury and damage
and incalculable harm to Employer and its Affiliates and that it would be very
difficult or impossible to measure all of the damages resulting from any such
breach or violation. Employee further acknowledges that Employee has carefully
read and considered the provisions of Sections 10, 11 and 12 hereof and, having
done so, agrees that the restrictions and remedies set forth in such Sections
(including, but not limited to, the time period, geographical and types of
restrictions imposed) are fair and reasonable and are reasonably required for
the protection of the business, trade secrets, interests and good will of
Employer and its Affiliates. Employee further acknowledges that Employee's
covenants in Sections 10 and 11 have been made to induce Employer to complete
the Merger to which it was a party pursuant to the Purchase Agreement, but for
which this Employment Agreement would not have been possible.
B. SEVERABILITY. Employee understands and intends
that each provision and restriction agreed to by Employee in Sections 10,
11 and 12 hereof
6
shall be construed as separate and divisible from every other provision and
restriction. In the event that any one of the provisions of, or restrictions in,
Sections 10, 11 and/or 12 hereof shall be held to be invalid or unenforceable,
and is not reformed by a court of competent jurisdiction, the remaining
provisions thereof and restrictions therein shall nevertheless continue to be
valid and enforceable as though the invalid or unenforceable provisions or
restrictions had not been included. In the event that any such provision
relating to time period, geographical and/or type of restriction shall be
declared by a court of competent jurisdiction to exceed the maximum or
permissible time period, geographical or type of restriction such court deems
reasonable and enforceable, said time period, geographical and/or type of
restriction shall be deemed to become and shall thereafter be the maximum time
period, geographical area and/or type of restriction which such court deems
reasonable and enforceable.
C. SURVIVABILITY. The restrictions, acknowledgements,
covenants and agreements of Employee set forth in Sections 10, 11, 12 and 13 of
this Employment Agreement shall survive any termination of this Employment
Agreement or of Employee's employment (for any reason, including expiration of
the Employment Term).
14. LAW APPLICABLE
This Employment Agreement shall be governed by and construed
pursuant to the laws of the State of Colorado.
15. NOTICES
Any notices required or permitted to be given pursuant to this
Employment Agreement shall be sufficient, if in writing and sent in the manner
required and/or permitted in the Purchase Agreement.
16. SUCCESSION
This Employment Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective legal representatives,
heirs, assignees and/or successors in interest of any kind whatever; provided,
however, that Employee acknowledges and agrees that he cannot assign or delegate
any of his rights, duties, responsibilities or obligations hereunder to any
other person or entity. Employer shall have the right to assign its rights and
delegate its duties under this Employment Agreement.
17. ENTIRE AGREEMENT
This Employment Agreement constitutes the entire final
agreement between the parties with respect to, and supersedes any and all prior
agreements between the parties hereto both oral and written concerning, the
subject matter hereof and may not be amended, modified or terminated except by a
writing signed by the parties hereto.
18. SEVERABILITY
If any provision of this Employment Agreement shall be held to
be invalid or unenforceable, and is not reformed by a court of competent
jurisdiction, such invalidity or unenforceability shall attach only to such
provision and shall not in any way affect or render invalid or unenforceable any
other provision of this Employment Agreement, and this Employment Agreement
shall be carried out as if such invalid or unenforceable provision were not
herein contained.
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19. NO WAIVER
A waiver of any breach or violation of any term, provision or
covenant herein contained shall not be deemed a continuing waiver or a waiver of
any future or past breach or violation. No oral waiver shall be binding.
20. ATTORNEYS' FEES
In the event that either of the parties to this Employment
Agreement institutes suit against the other party to this Employment Agreement
to enforce or declare any of his or its rights hereunder, the prevailing party
in such action shall be entitled to recover from the other party all reasonable
costs thereof, including reasonable attorneys' and paralegals' fees and costs
incurred before and at trial and at all tribunal levels, and whether or not suit
or any other proceeding is instituted.
21. COUNTERPARTS
This Employment Agreement may be executed in counterparts,
each of which shall be an original, but both of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands on
the day and year first above written.
EMPLOYER:
ALL AMERICAN A.V.E.D., INC., a Colorado
corporation
By:_____________________________
Title:__________________________
EMPLOYEE:
---------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
8
EXHIBIT "A-3"
FORM OF ▇▇▇▇ ▇. ▇▇▇▇▇▇ EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of __________, 1995, by and between ALL
AMERICAN ADDED VALUE, INC., a corporation organized and existing under the laws
of the State of California (hereinafter referred to as "Employer"), and ▇▇▇▇ ▇.
▇▇▇▇▇▇ (hereinafter referred to as "Employee").
W I T N E S S E T H:
WHEREAS, Employer is a California corporation engaged in the
distribution of electronic components and the performance of certain services
related thereto;
WHEREAS, Employer desires to employ Employee upon the terms and
conditions set forth below and Employee desires to accept employment upon such
terms and conditions; and
WHEREAS, Employer and Employee desire to set forth in writing the terms
and conditions of their agreements and understandings with respect to Employee's
employment by Employer.
NOW, THEREFORE, the parties agree as follows:
1. EMPLOYMENT
Employer hereby employs Employee, and Employee hereby accepts
employment by Employer, upon all the terms and conditions set forth in this
Employment Agreement. All capitalized terms used herein, which are not defined
herein, shall have the respective meanings ascribed to them in that certain
Merger Purchase Agreement pursuant to which this Employment Agreement is being
executed (the "Purchase Agreement").
2. TERM
Subject to the provisions for earlier termination set forth in
Section 9 hereof, this Employment Agreement shall commence on the date hereof
and shall continue until the close of business of the day preceding the second
anniversary of the date hereof (the "Employment Term").
3. EMPLOYEE'S REPRESENTATIONS AND WARRANTIES
Employee represents and warrants to Employer that he is free
to accept employment with Employer as contemplated herein and has no other
written or oral obligations or commitments of any kind or nature which would in
any way interfere with his acceptance of employment pursuant to the terms hereof
or the full performance of his obligations hereunder or the exercise of his best
efforts in his employment hereunder or which would otherwise pose any conflict
of interest.
4. DUTIES AND EXTENT OF SERVICES
A. DUTIES. Employee's duties and responsibilities hereunder
shall be those reasonably assigned to him from time to time by Employer. Such
duties may, in Employer's discretion, consist of certain duties similar to those
performed by Employee for Added Value and/or Rocky Mountain prior to the
Mergers, and such other duties and responsibilities as may be reasonably
requested from time to time by Employer's President, Chief Executive Officer,
Executive Vice President, or Board of Directors. Employee agrees to devote his
full and exclusive time, skill, attention and energy diligently and competently
to perform the duties and responsibilities assigned to him hereunder, or
pursuant hereto.
B. RULES AND REGULATIONS. Employee agrees to abide
by the rules and regulations of Employer promulgated by Employer from time to
time with
respect and applicable to Employer's employees generally, which are all hereby
incorporated by reference and made a part of this Employment Agreement.
C. PLACE OF SERVICE. Employee shall render his
services generally in, and shall not be obligated to maintain his office in any
place other than, Orange County, California.
5. COMPENSATION
A. BASE COMPENSATION. Subject to the provisions of Section 9
of this Employment Agreement, Employer shall pay salary to Employee ("Salary")
based upon the rate of $150,000 per annum, or $12,500 per calendar month (the
first month's Salary to be prorated accordingly, if necessary). Salary shall be
payable in accordance with Employer's normal payroll practices for its employees
and shall be subject to payroll deductions and tax withholdings in accordance
with Employer's usual practices and as required by law. Presently, payroll is
made on a semi-monthly basis.
B. BONUS COMPENSATION. In order to induce Employee
to execute and deliver this Employment Agreement, in addition to the other
compensation herein provided for, Employer shall pay to Employee concurrently
with the execution and delivery of this Agreement incentive bonus compensation
in the amount of $180,000.
6. FRINGE BENEFITS AND EXPENSES
A. EMPLOYEE BENEFITS. Employee shall not be entitled to any
benefits or fringe benefits except as specifically set forth in this Employment
Agreement and except for those, if any, made available by Employer from time to
time, in Employer's sole discretion, to all of its other employees generally.
B. EXPENSES. Employer shall reimburse Employee for his
reasonable out-of-pocket costs and expenses in connection with the performance
of his duties and responsibilities hereunder, subject to the specific prior
written approval thereof by the President of Employer or Employer's Board of
Directors for any item of expense or any items of related expenses in excess of
$500.
C. CAR ALLOWANCE. In order to defray Employee's
automobile expenses incurred in connection with his duties, Employer shall pay
to Employee a monthly car allowance of $500. Employer has no obligation to
provide an automobile to Employee.
D. INCENTIVE STOCK OPTIONS. Concurrently with the execution
and delivery of this Agreement, Employer shall cause Purchaser to grant to
Employee options to acquire 10,000 All American Shares ("Incentive Stock
Options") pursuant to Purchaser's Employees', Officers', Directors' Stock Option
Plan (the "Plan"). The price at which Employee may exercise any of the Incentive
Stock Options shall be the fair market value of an All American Share at the
time such Incentive Stock Options are granted, as same shall be fixed by the
compensation committee of Purchaser's Board of Directors on or about such time.
The Incentive Stock Options shall vest over six years from the date granted,
1/6th at the end of each such year, and shall be exercisable within the
seven-year period immediately following the date granted, provided that all
unvested and vested and unexercised Incentive Stock Options shall expire
automatically on the date that Employee voluntarily or involuntarily leaves the
employ of Employer, and provided further, that, in the event Employee is
Disabled, Employee shall have the right until the earlier of the one-year
anniversary of the disability and the expiration date of the Incentive Stock
Options to exercise all Incentive Stock Options vested and unexercised as of the
date of disability. All other terms and conditions of the Incentive Stock
Options shall be as set forth in the Plan or shall conform to policies and
guidelines with respect to options pursuant to the Plan granted to employees of
similar status.
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7. VACATIONS
Employee shall be entitled to a total of four weeks of
vacation and six sick days during each full year of the Employment Term with
full compensation (provided, however, that Employee shall not be entitled to be
compensated for any unused vacation or sick days upon termination of this
Employment Agreement). The periods during which Employee will be absent from
work shall be at the reasonable discretion of Employer.
8. FACILITIES
Employer shall provide and maintain (or cause to be provided
and maintained) such facilities, equipment, supplies and personnel as it deems
necessary in its sole discretion for Employee's performance of his duties and
responsibilities under this Employment Agreement.
9. TERMINATION OF EMPLOYMENT
A. TERMINATION EVENTS. Notwithstanding any provisions of this
Employment Agreement to the contrary, this Employment Agreement may be
terminated only as follows: by Employer with or without Cause (as hereinafter
defined), effective upon the delivery of written notice to Employee; upon
Employee's death; or upon Employee becoming Disabled (as later defined) and
receiving written notice of termination from Employer to that effect.
B. DEFINITIONS OF CAUSE AND DISABLED. For purposes of this
Employment Agreement, "Cause" shall mean and include: (i) fraud; (ii) dishonesty
in performance of employment duties; (iii) commission of a felony; (iv) habitual
drunkenness during business hours or at Employer's premises; (v) drug addiction
or use during business hours or at Employer's premises; (vi) gross negligence in
the performance of employment duties; (vii) abandonment of employment duties;
(viii) repeated insubordination; (ix) conduct on the part of Employee relating
to Employer's business or his employment duties (which is not authorized,
directed or approved by Employer) which results in governmental sanctions being
imposed on Employer or Employee; (x) material breach by Employee of this
Employment Agreement or any other written agreement between Employer and
Employee governing Employee's conduct or employment whether now existing or
hereafter created which, if curable, is not cured by Employee within 30 days
following his receipt of written notice thereof (such notice shall specify in
reasonable detail the nature of the material breach and the curative steps, if
curable, required to be taken); or (xi) material breach by Added Value or Rocky
Mountain or any Key Employee of any of its or his representations, warranties,
covenants or obligations under the Purchase Agreement or the Guaranty and
Agreement with respect to which Employee had personal involvement or knowledge
and which, if curable, is not cured within 30 days following notice to Employee
thereof (such notice shall specify in reasonable detail the nature of the
material breach and the curative steps, if curable, required to be taken).
Employee shall be deemed "Disabled" if, in Employer's reasonable judgment,
Employee is unable, due to mental, emotional or physical injury or illness, to
perform substantially all of his employment duties for a period of 90
consecutive days. Termination of this Employment Agreement for disability will
be effective on the later of (x) the 90th day following the disability event and
(y) the date Employer gives notice of termination by reason of disability to
Employee.
C. EFFECT OF TERMINATION FOR CAUSE OR EMPLOYEE'S
RESIGNATION. In the event that this Employment Agreement is terminated by
Employer with Cause, or because Employee resigns from or quits his employment,
Employer shall pay to Employee, within thirty (30) days following the date of
such termination, the Salary, if any, and amounts payable under Section 6, if
any, accrued and unpaid through the date of such termination; and Employee shall
not be entitled to any other compensation, remuneration or other sums provided
for in this Employment Agreement or to which Employee might otherwise be
entitled hereunder or at law or in equity.
3
D. COMPENSATION UPON DEATH OR DISABILITY. Upon the death of
Employee, or termination because Employee is Disabled, Employer shall pay to
Employee, his legal guardian or the legal representative of Employee's estate
(or heir as designated by the legal representative of Employee's estate at such
time), within thirty (30) days following the date of Employee's death or
termination, the Salary, if any, and amounts payable under Section 6, if any,
accrued and unpaid through the date of death or termination; and Employee (or
such legal guardian, legal representative or any heirs) shall not be entitled to
any other compensation, remuneration or other sums provided for in this
Employment Agreement or to which Employee might otherwise be entitled hereunder
or at law or in equity.
E. COMPENSATION UPON TERMINATION WITHOUT CAUSE. In the event
that Employer terminates this Employment Agreement without Cause prior to the
second anniversary of the date hereof, Employee's sole and exclusive
compensation and remedy hereunder shall be to receive from Employer severance
pay equal to (i) the amount of Salary and amounts payable under Section 6, if
any, accrued and unpaid through the date of termination, and (ii) as and when
payable (as if Employee had remained an employee of Employer), the Salary and
amounts payable under Section 6 that Employee would have received during the
period following termination until the second anniversary of the date of this
Employment Agreement.
F. KEY-MAN INSURANCE. In the event that Employer has obtained
a key-man term insurance policy (the "Policy") on the life of Employee, all
proceeds payable in respect thereof shall be the property solely of Employer. In
the event that Employee's employment terminates for any reason other than
Employee's death, Employee may request that the Policy be assigned to Employee
by giving written notice to Employer to that effect. Subject to obtaining any
requisite consent from the insurer, Employer shall, if Employee has so
requested, assign the Policy to Employee subject to Employee's reimbursement to
Employer of any premiums paid by Employer which relate to any period following
the date of termination of Employee's employment, and the cash value, if any, of
the Policy. In the event that Employer desires to obtain any such Policy,
Employee shall fully cooperate in Employer's efforts, including submitting to
medical exams and tests and executing and delivering applications and
information statements.
10. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
A. CONFIDENTIAL INFORMATION. Employee acknowledges that
Employee has been informed by Employer of Employer's policy to maintain as
secret and confidential all information and materials relating to (i) the
financial condition, businesses and interests of Employer and its Affiliates,
(ii) the systems, Know-how and Records, products, services, costs, inventions,
computer software programs, marketing and sales techniques and/or programs,
methods, methodologies, manuals, lists and other trade secrets heretofore or
hereafter acquired, sold, developed, maintained and/or used by Employer and its
Affiliates and (iii) the nature and terms of Employer's and its Affiliates'
relationships with their respective customers, suppliers, lenders, underwriters,
vendors, consultants, independent contractors, attorneys, accountants and
employees (all such information and materials being hereinafter collectively
referred to as "Confidential Information"). Employee further acknowledges that
such Confidential Information is of great value to Employer and its Affiliates
and, as a result of Employee's employment by Employer, Employee will be making
use of, acquiring and/or adding to such Confidential Information. Therefore,
Employee understands that it is reasonably necessary to protect Employer's and
its Affiliates' good will and business interests that Employee agree and,
accordingly, Employee does hereby agree, that Employee will not directly or
indirectly (except where authorized by the President of Employer for the benefit
of Employer and/or its Affiliate(s) and/or as required in the course of his
employment) at any time hereafter divulge or disclose for any purpose whatsoever
to any persons, firms, corporations or other entities other than Employer or its
Affiliates (hereinafter referred to collectively as "Third Parties"), or use or
4
cause or authorize any Third Parties to use, any such Confidential Information,
except as otherwise required by law.
B. EMPLOYER'S MATERIALS. In accordance with the foregoing,
Employee furthermore agrees that (i) Employee will at no time retain or remove
from the premises of Employer or its Affiliates any products, prototypes,
drawings, notebooks, software programs or discs or similar containers of
software, manuals, data, books, records, materials or documents of any kind or
description for any purpose unconnected with the strict performance of
Employee's duties with Employer and (ii) upon the cessation or termination of
Employee's employment with Employer for any reason, Employee shall forthwith
deliver or cause to be delivered up to Employer any and all drawings, notebooks,
software programs or discs or similar containers of software, manuals, data,
books, records, materials and other documents and materials in Employee's
possession or under Employee's control relating to any Confidential Information
or any other material or thing which is otherwise the property of Employer or
its Affiliates.
11. COVENANT-NOT-TO-COMPETE
In view of (a) the Confidential Information known to and to be
obtained by or disclosed to Employee (including, without limitation, Employee's
knowledge of, and familiarity and relationships with, Employer's other employees
and Employer's customers and suppliers), (b) the know-how acquired and to be
acquired by Employee, (c) the substantial consideration paid and payable to
Employee under the Purchase Agreement, and to Employee under this Employment
Agreement, and (d) the sale of the good will of the business embodied in the
Purchase Agreement, and as a material inducement to Employer to enter into this
Employment Agreement and to employ Employee and to pay to Employee the
substantial compensation Employee will be receiving, Employee covenants and
agrees that, for as long as Employee is employed by Employer and for a period of
two (2) years (with respect to the matters described in (A), (B) and (C) below),
and for a period of one year (with respect to the matters described in (D) and
(E) below), after the later of (i) the date Employee ceases for any reason to be
employed by Employer and (ii) the date Employee ceases to receive any Salary (as
severance pay or otherwise) from Employer, Employee shall not, directly or
indirectly, (A) sell any products or services sold or offered by Employer or its
Affiliates (including either of the Corporations) to any customer or former
customer of Employer or its Affiliates (including either of the Corporations),
(B) obtain for resale from any supplier of Employer or its Affiliates (including
either of the Corporations) any products of the type Employer or its Affiliates
(including either of the Corporations) purchases or has purchased for resale,
(C) solicit the services of, or hire, directly or indirectly, whether on his own
behalf or on behalf of others, any managerial or executive employee or
salesperson of Employer or its Affiliates (including either of the Corporations)
or who was employed by Employer or any of Employer's Affiliates (including
either of the Corporations) at any time during the period commencing one year
prior to the commencement of the Employment Term and ending on the date of
termination of Employee's employment, (D) obtain any interest in, any employment
with, or any right to participate in, directly or indirectly, any enterprise
competitive with the business of Employer or its Affiliates (including either of
the Corporations) anywhere within the continental United States which provides
goods or services to customers located in any county or city in which either
Corporation has provided goods or services to customers during the one-year
period ending on the date hereof or located in any county or city in which
either Surviving Corporation has provided goods or services to customers during
the Employment Term (the "Geographical Territory"), or (E) otherwise assist any
person or entity in so competing, or in any capacity engage in any activity or
business, passively or actively, as an owner, participant, employee or agent,
competitive with the business of Employer or its Affiliates (including either of
the Corporations) in any county or city within the continental United States
which provides goods or services to customers located in the Geographical
Territory (provided that the restrictions in (D) and (E) shall not in any event
continue, with respect to any county or city within the Geographical Territory,
beyond the time that Employer
5
or any of its Affiliates ceases to carry on a like business therein). The
foregoing restriction shall not prevent Employee from accepting employment as a
manufacturer's representative at any time following December 31, 1997 if such
manufacturer is not a major supplier of Employer or its Affiliates (including
either of the Corporations) and Employee's termination of employment occurred
for a reason other than Cause. A major supplier of Employer or its Affiliates
(including either of the Corporations) is one whose products account for 5% or
more of the sales of Employer or of any Affiliate of Employer or of Employer and
its Affiliates viewed as a group. Employee acknowledges that the business of
Employer and its Affiliates is national in scope, that one can effectively
compete with such business in the Geographical Territory from anywhere in the
continental United States, and that, therefore, such geographical area of
restriction is reasonable in the circumstances to protect Employer's legitimate
business interests. The covenants and restrictions contained in this Section 11
are intended to be separate and divisible from, and operate concurrently with,
the similar covenants and restrictions contained in the Restrictive Covenant and
are each intended to be separately enforceable. Any differences between the
covenants and restrictions contained herein and therein, such as with respect to
time period restrictions, are intentional.
12. EMPLOYER'S REMEDIES FOR BREACH OF SECTIONS 10 AND 11
Employee covenants and agrees that if Employee shall violate
or breach any of Employee's covenants or agreements provided for in Sections 10
or 11 hereof, Employer and/or its Affiliates shall be entitled to an accounting
and repayment of all profits, compensation, commissions, remunerations and
benefits which Employee directly or indirectly has realized and realizes as a
result of, growing out of or in connection with any such violation or breach. In
addition, in the event of a breach or violation or threatened or imminent breach
or violation of any provisions of Sections 10 or 11 hereof, Employer and/or its
Affiliates shall be entitled to a temporary and permanent injunction or any
other appropriate decree of specific performance or equitable relief (without
being required to post bond or other security) from a court of competent
jurisdiction in order to prevent, prohibit or restrain any such breach or
violation or threatened or imminent breach or violation by Employee, by
Employee's partners, agents, representatives, servants, employers or employees
and/or by any Third Parties. Employer shall be entitled to such injunctive or
other equitable relief in addition to any damages which are suffered, together
with reasonable attorneys' and paralegals' fees and costs and other costs
incurred in connection with any such litigation, both before and at trial and at
all tribunal levels. It is understood that resort by Employer and/or its
Affiliates to such injunctive or other equitable relief shall not be deemed to
waive or to limit in any respect any other rights or remedies which Employer or
its Affiliates may have with respect to such breach or violation. Employer's
Affiliates may enforce these provisions directly in their own names and right.
13. REASONABLENESS OF RESTRICTIONS
A. REASONABLENESS. Employee acknowledges that any breach or
violation of Section 10 or 11 hereof will cause irreparable injury and damage
and incalculable harm to Employer and its Affiliates and that it would be very
difficult or impossible to measure all of the damages resulting from any such
breach or violation. Employee further acknowledges that Employee has carefully
read and considered the provisions of Sections 10, 11 and 12 hereof and, having
done so, agrees that the restrictions and remedies set forth in such Sections
(including, but not limited to, the time period, geographical and types of
restrictions imposed) are fair and reasonable and are reasonably required for
the protection of the business, trade secrets, interests and good will of
Employer and its Affiliates. Employee further acknowledges that Employee's
covenants in Sections 10 and 11 have been made to induce Employer to complete
the Merger to which it was a party pursuant to the Purchase Agreement, but for
which this Employment Agreement would not have been possible.
6
B. SEVERABILITY. Employee understands and intends that each
provision and restriction agreed to by Employee in Sections 10, 11 and 12 hereof
shall be construed as separate and divisible from every other provision and
restriction. In the event that any one of the provisions of, or restrictions in,
Sections 10, 11 and/or 12 hereof shall be held to be invalid or unenforceable,
and is not reformed by a court of competent jurisdiction, the remaining
provisions thereof and restrictions therein shall nevertheless continue to be
valid and enforceable as though the invalid or unenforceable provisions or
restrictions had not been included. In the event that any such provision
relating to time period, geographical and/or type of restriction shall be
declared by a court of competent jurisdiction to exceed the maximum or
permissible time period, geographical or type of restriction such court deems
reasonable and enforceable, said time period, geographical and/or type of
restriction shall be deemed to become and shall thereafter be the maximum time
period, geographical area and/or type of restriction which such court deems
reasonable and enforceable.
C. SURVIVABILITY. The restrictions, acknowledgements,
covenants and agreements of Employee set forth in Sections 10, 11, 12 and 13 of
this Employment Agreement shall survive any termination of this Employment
Agreement or of Employee's employment (for any reason, including expiration of
the Employment Term).
14. LAW APPLICABLE
This Employment Agreement shall be governed by and construed
pursuant to the laws of the State of California.
15. NOTICES
Any notices required or permitted to be given pursuant to this
Employment Agreement shall be sufficient, if in writing and sent in the manner
required and/or permitted in the Purchase Agreement.
16. SUCCESSION
This Employment Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective legal representatives,
heirs, assignees and/or successors in interest of any kind whatever; provided,
however, that Employee acknowledges and agrees that he cannot assign or delegate
any of his rights, duties, responsibilities or obligations hereunder to any
other person or entity. Employer shall have the right to assign its rights and
delegate its duties under this Employment Agreement.
17. ENTIRE AGREEMENT
This Employment Agreement constitutes the entire final
agreement between the parties with respect to, and supersedes any and all prior
agreements between the parties hereto both oral and written concerning, the
subject matter hereof and may not be amended, modified or terminated except by a
writing signed by the parties hereto.
18. SEVERABILITY
If any provision of this Employment Agreement shall be held to
be invalid or unenforceable, and is not reformed by a court of competent
jurisdiction, such invalidity or unenforceability shall attach only to such
provision and shall not in any way affect or render invalid or unenforceable any
other provision of this Employment Agreement, and this Employment Agreement
shall be carried out as if such invalid or unenforceable provision were not
herein contained.
7
19. NO WAIVER
A waiver of any breach or violation of any term, provision or
covenant herein contained shall not be deemed a continuing waiver or a waiver of
any future or past breach or violation. No oral waiver shall be binding.
20. ATTORNEYS' FEES
In the event that either of the parties to this Employment
Agreement institutes suit against the other party to this Employment Agreement
to enforce or declare any of his or its rights hereunder, the prevailing party
in such action shall be entitled to recover from the other party all reasonable
costs thereof, including reasonable attorneys' and paralegals' fees and costs
incurred before and at trial and at all tribunal levels, and whether or not suit
or any other proceeding is instituted.
21. COUNTERPARTS
This Employment Agreement may be executed in counterparts,
each of which shall be an original, but both of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands on
the day and year first above written.
EMPLOYER:
ALL AMERICAN ADDED VALUE, INC., a
California corporation
By:_____________________________
Title:__________________________
EMPLOYEE:
---------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
8
EXHIBIT "A-4"
FORM OF ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of __________, 1995, by and between ALL
AMERICAN ADDED VALUE, INC., a corporation organized and existing under the laws
of the State of California (hereinafter referred to as "Employer"), and ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇ (hereinafter referred to as "Employee").
W I T N E S S E T H:
WHEREAS, Employer is a California corporation engaged in the
distribution of electronic components and the performance of certain services
related thereto;
WHEREAS, Employer desires to employ Employee upon the terms and
conditions set forth below and Employee desires to accept employment upon such
terms and conditions; and
WHEREAS, Employer and Employee desire to set forth in writing the terms
and conditions of their agreements and understandings with respect to Employee's
employment by Employer.
NOW, THEREFORE, the parties agree as follows:
1. EMPLOYMENT
Employer hereby employs Employee, and Employee hereby accepts
employment by Employer, upon all the terms and conditions set forth in this
Employment Agreement. All capitalized terms used herein, which are not defined
herein, shall have the respective meanings ascribed to them in that certain
Merger Purchase Agreement pursuant to which this Employment Agreement is being
executed (the "Purchase Agreement").
2. TERM
Subject to the provisions for earlier termination set forth in
Section 9 hereof, this Employment Agreement shall commence on the date hereof
and shall continue until the close of business of the day preceding the second
anniversary of the date hereof (the "Employment Term").
3. EMPLOYEE'S REPRESENTATIONS AND WARRANTIES
Employee represents and warrants to Employer that he is free
to accept employment with Employer as contemplated herein and has no other
written or oral obligations or commitments of any kind or nature which would in
any way interfere with his acceptance of employment pursuant to the terms hereof
or the full performance of his obligations hereunder or the exercise of his best
efforts in his employment hereunder or which would otherwise pose any conflict
of interest.
4. DUTIES AND EXTENT OF SERVICES
A. DUTIES. Employee's duties and responsibilities hereunder
shall be those reasonably assigned to him from time to time by Employer. Such
duties may, in Employer's discretion, consist of certain duties similar to those
performed by Employee for Added Value and/or Rocky Mountain prior to the
Mergers, and such other duties and responsibilities as may be reasonably
requested from time to time by Employer's President, Chief Executive Officer,
Executive Vice President, or Board of Directors. Employee agrees to devote his
full and exclusive time, skill, attention and energy diligently and competently
to perform the duties and responsibilities assigned to him hereunder, or
pursuant hereto.
B. RULES AND REGULATIONS. Employee agrees to abide
by the rules and regulations of Employer promulgated by Employer from time to
time with
respect and applicable to Employer's employees generally, which are all hereby
incorporated by reference and made a part of this Employment Agreement.
C. PLACE OF SERVICE. Employee shall render his
services generally in, and shall not be obligated to maintain his office in any
place other than, Orange County, California.
5. COMPENSATION
A. BASE COMPENSATION. Subject to the provisions of Section 9
of this Employment Agreement, Employer shall pay salary to Employee ("Salary")
consisting of a fixed amount and a variable amount, as follows: The fixed amount
shall be based upon the rate of $130,000 per annum, or $10,833.33 per calendar
month (the first month's amount to be prorated accordingly, if necessary); the
variable amount shall be an annual amount (commencing with the 1996 calendar
year) equal to 2% of the aggregate gross profit (determined in accordance with
GAAP) derived by Employer and its Affiliates nationwide from the sale of memory
modules. Salary shall be payable in accordance with Employer's normal payroll
practices for its employees and shall be subject to payroll deductions and tax
withholdings in accordance with Employer's usual practices and as required by
law. Presently, payroll is made on a semi-monthly basis (with respect to the
fixed portion of the Salary). The variable portion of the Salary shall be
payable within 30 days following completion of Purchaser's audited financial
statements for the year in question.
B. BONUS COMPENSATION. In order to induce Employee to
execute and deliver this Employment Agreement, in addition to the other
compensation herein provided for, Employer shall pay to Employee concurrently
with the execution and delivery of this Agreement incentive bonus compensation
in the amount of $105,000.
6. FRINGE BENEFITS AND EXPENSES
A. EMPLOYEE BENEFITS. Employee shall not be entitled to any
benefits or fringe benefits except as specifically set forth in this Employment
Agreement and except for those, if any, made available by Employer from time to
time, in Employer's sole discretion, to all of its other employees generally.
B. EXPENSES. Employer shall reimburse Employee for his
reasonable out-of-pocket costs and expenses in connection with the performance
of his duties and responsibilities hereunder, subject to the specific prior
written approval thereof by the President of Employer or Employer's Board of
Directors for any item of expense or any items of related expenses in excess of
$500.
C. CAR ALLOWANCE. In order to defray Employee's
automobile expenses incurred in connection with his duties, Employer shall pay
to Employee a monthly car allowance of $500. Employer has no obligation to
provide an automobile to Employee.
D. INCENTIVE STOCK OPTIONS. Concurrently with the execution
and delivery of this Agreement, Employer shall cause Purchaser to grant to
Employee options to acquire 10,000 All American Shares ("Incentive Stock
Options") pursuant to Purchaser's Employees', Officers', Directors' Stock Option
Plan (the "Plan"). The price at which Employee may exercise any of the Incentive
Stock Options shall be the fair market value of an All American Share at the
time such Incentive Stock Options are granted, as same shall be fixed by the
compensation committee of Purchaser's Board of Directors on or about such time.
The Incentive Stock Options shall vest over six years from the date granted,
1/6th at the end of each such year, and shall be exercisable within the
seven-year period immediately following the date granted, provided that all
unvested and vested and unexercised Incentive Stock Options shall expire
automatically on the date that Employee voluntarily or involuntarily leaves the
employ of Employer, and provided further, that, in the event Employee is
Disabled, Employee shall have the right
2
until the earlier of the one-year anniversary of the disability and the
expiration date of the Incentive Stock Options to exercise all Incentive Stock
Options vested and unexercised as of the date of disability. All other terms and
conditions of the Incentive Stock Options shall be as set forth in the Plan or
shall conform to policies and guidelines with respect to options pursuant to the
Plan granted to employees of similar status.
7. VACATIONS
Employee shall be entitled to a total of four weeks of
vacation and six sick days during each full year of the Employment Term with
full compensation (provided, however, that Employee shall not be entitled to be
compensated for any unused vacation or sick days upon termination of this
Employment Agreement). The periods during which Employee will be absent from
work shall be at the reasonable discretion of Employer.
8. FACILITIES
Employer shall provide and maintain (or cause to be provided
and maintained) such facilities, equipment, supplies and personnel as it deems
necessary in its sole discretion for Employee's performance of his duties and
responsibilities under this Employment Agreement.
9. TERMINATION OF EMPLOYMENT
A. TERMINATION EVENTS. Notwithstanding any provisions of this
Employment Agreement to the contrary, this Employment Agreement may be
terminated only as follows: by Employer with or without Cause (as hereinafter
defined), effective upon the delivery of written notice to Employee; upon
Employee's death; or upon Employee becoming Disabled (as later defined) and
receiving written notice of termination from Employer to that effect.
B. DEFINITIONS OF CAUSE AND DISABLED. For purposes of this
Employment Agreement, "Cause" shall mean and include: (i) fraud; (ii) dishonesty
in performance of employment duties; (iii) commission of a felony; (iv) habitual
drunkenness during business hours or at Employer's premises; (v) drug addiction
or use during business hours or at Employer's premises; (vi) gross negligence in
the performance of employment duties; (vii) abandonment of employment duties;
(viii) repeated insubordination; (ix) conduct on the part of Employee relating
to Employer's business or his employment duties (which is not authorized,
directed or approved by Employer) which results in governmental sanctions being
imposed on Employer or Employee; (x) material breach by Employee of this
Employment Agreement or any other written agreement between Employer and
Employee governing Employee's conduct or employment whether now existing or
hereafter created which, if curable, is not cured by Employee within 30 days
following his receipt of written notice thereof (such notice shall specify in
reasonable detail the nature of the material breach and the curative steps, if
curable, required to be taken); or (xi) material breach by Added Value or Rocky
Mountain or any Key Employee of any of its or his representations, warranties,
covenants or obligations under the Purchase Agreement or the Guaranty and
Agreement with respect to which Employee had personal involvement or knowledge
and which, if curable, is not cured within 30 days following notice to Employee
thereof (such notice shall specify in reasonable detail the nature of the
material breach and the curative steps, if curable, required to be taken).
Employee shall be deemed "Disabled" if, in Employer's reasonable judgment,
Employee is unable, due to mental, emotional or physical injury or illness, to
perform substantially all of his employment duties for a period of 90
consecutive days. Termination of this Employment Agreement for disability will
be effective on the later of (x) the 90th day following the disability event and
(y) the date Employer gives notice of termination by reason of disability to
Employee.
C. EFFECT OF TERMINATION FOR CAUSE OR EMPLOYEE'S
RESIGNATION. In the event that this Employment Agreement is terminated by
Employer with Cause,
3
or because Employee resigns from or quits his employment, Employer shall pay to
Employee, within thirty (30) days following the date of such termination, the
Salary, if any, and amounts payable under Section 6, if any, accrued and unpaid
through the date of such termination (excluding the variable portion thereof);
and Employee shall not be entitled to any other compensation, remuneration or
other sums provided for in this Employment Agreement or to which Employee might
otherwise be entitled hereunder or at law or in equity.
D. COMPENSATION UPON DEATH OR DISABILITY. Upon the death of
Employee, or termination because Employee is Disabled, Employer shall pay to
Employee, his legal guardian or the legal representative of Employee's estate
(or heir as designated by the legal representative of Employee's estate at such
time), within thirty (30) days following the date of Employee's death or
termination, the Salary (including the variable portion thereof, equitably
prorated, provided that this amount is payable after completion of Purchaser's
audited financial statements for the year in question), if any, and amounts
payable under Section 6, if any, accrued and unpaid through the date of death or
termination; and Employee (or such legal guardian, legal representative or any
heirs) shall not be entitled to any other compensation, remuneration or other
sums provided for in this Employment Agreement or to which Employee might
otherwise be entitled hereunder or at law or in equity.
E. COMPENSATION UPON TERMINATION WITHOUT CAUSE. In the event
that Employer terminates this Employment Agreement without Cause prior to the
second anniversary of the date hereof, Employee's sole and exclusive
compensation and remedy hereunder shall be to receive from Employer severance
pay equal to (i) the amount of Salary and amounts payable under Section 6, if
any, accrued and unpaid through the date of termination, and (ii) as and when
payable (as if Employee had remained an employee of Employer), the Salary
(including the variable portion thereof) and amounts payable under Section 6
that Employee would have received during the period following termination until
the second anniversary of the date of this Employment Agreement.
F. KEY-MAN INSURANCE. In the event that Employer has obtained
a key-man term insurance policy (the "Policy") on the life of Employee, all
proceeds payable in respect thereof shall be the property solely of Employer. In
the event that Employee's employment terminates for any reason other than
Employee's death, Employee may request that the Policy be assigned to Employee
by giving written notice to Employer to that effect. Subject to obtaining any
requisite consent from the insurer, Employer shall, if Employee has so
requested, assign the Policy to Employee subject to Employee's reimbursement to
Employer of any premiums paid by Employer which relate to any period following
the date of termination of Employee's employment, and the cash value, if any, of
the Policy. In the event that Employer desires to obtain any such Policy,
Employee shall fully cooperate in Employer's efforts, including submitting to
medical exams and tests and executing and delivering applications and
information statements.
10. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
A. CONFIDENTIAL INFORMATION. Employee acknowledges that
Employee has been informed by Employer of Employer's policy to maintain as
secret and confidential all information and materials relating to (i) the
financial condition, businesses and interests of Employer and its Affiliates,
(ii) the systems, Know-how and Records, products, services, costs, inventions,
computer software programs, marketing and sales techniques and/or programs,
methods, methodologies, manuals, lists and other trade secrets heretofore or
hereafter acquired, sold, developed, maintained and/or used by Employer and its
Affiliates and (iii) the nature and terms of Employer's and its Affiliates'
relationships with their respective customers, suppliers, lenders, underwriters,
vendors, consultants, independent contractors, attorneys, accountants and
employees (all such information and materials being hereinafter collectively
referred to as "Confidential Information"). Employee further acknowledges that
such Confidential Information is of great value to Employer and its Affiliates
and, as a
4
result of Employee's employment by Employer, Employee will be making use of,
acquiring and/or adding to such Confidential Information. Therefore, Employee
understands that it is reasonably necessary to protect Employer's and its
Affiliates' good will and business interests that Employee agree and,
accordingly, Employee does hereby agree, that Employee will not directly or
indirectly (except where authorized by the President of Employer for the benefit
of Employer and/or its Affiliate(s) and/or as required in the course of his
employment) at any time hereafter divulge or disclose for any purpose whatsoever
to any persons, firms, corporations or other entities other than Employer or its
Affiliates (hereinafter referred to collectively as "Third Parties"), or use or
cause or authorize any Third Parties to use, any such Confidential Information,
except as otherwise required by law.
B. EMPLOYER'S MATERIALS. In accordance with the foregoing,
Employee furthermore agrees that (i) Employee will at no time retain or remove
from the premises of Employer or its Affiliates any products, prototypes,
drawings, notebooks, software programs or discs or similar containers of
software, manuals, data, books, records, materials or documents of any kind or
description for any purpose unconnected with the strict performance of
Employee's duties with Employer and (ii) upon the cessation or termination of
Employee's employment with Employer for any reason, Employee shall forthwith
deliver or cause to be delivered up to Employer any and all drawings, notebooks,
software programs or discs or similar containers of software, manuals, data,
books, records, materials and other documents and materials in Employee's
possession or under Employee's control relating to any Confidential Information
or any other material or thing which is otherwise the property of Employer or
its Affiliates.
11. COVENANT-NOT-TO-COMPETE
In view of (a) the Confidential Information known to and to be
obtained by or disclosed to Employee (including, without limitation, Employee's
knowledge of, and familiarity and relationships with, Employer's other employees
and Employer's customers and suppliers), (b) the know-how acquired and to be
acquired by Employee, (c) the substantial consideration paid and payable to
Employee under the Purchase Agreement, and to Employee under this Employment
Agreement, and (d) the sale of the good will of the business embodied in the
Purchase Agreement, and as a material inducement to Employer to enter into this
Employment Agreement and to employ Employee and to pay to Employee the
substantial compensation Employee will be receiving, Employee covenants and
agrees that, for as long as Employee is employed by Employer and for a period of
two (2) years after the later of (i) the date Employee ceases for any reason to
be employed by Employer and (ii) the date Employee ceases to receive any Salary
(as severance pay or otherwise) from Employer, Employee shall not, directly or
indirectly, (A) sell any products or services sold or offered by Employer or its
Affiliates (including either of the Corporations) to any customer or former
customer of Employer or its Affiliates (including either of the Corporations),
(B) obtain for resale from any supplier of Employer or its Affiliates (including
either of the Corporations) any products of the type Employer or its Affiliates
(including either of the Corporations) purchases or has purchased for resale,
(C) solicit the services of, or hire, directly or indirectly, whether on his own
behalf or on behalf of others, any managerial or executive employee or
salesperson of Employer or its Affiliates (including either of the Corporations)
or who was employed by Employer or any of Employer's Affiliates (including
either of the Corporations) at any time during the period commencing one year
prior to the commencement of the Employment Term and ending on the date of
termination of Employee's employment, (D) obtain any interest in, any employment
with, or any right to participate in, directly or indirectly, any enterprise
competitive with the business of Employer or its Affiliates (including either of
the Corporations) anywhere within the continental United States which provides
goods or services to customers located in any county or city in which either
Corporation has provided goods or services to customers during the one-year
period ending on the date hereof or located in any county or city in which
either Surviving Corporation has provided goods or services to customers during
the Employment
5
Term (the "Geographical Territory"), or (E) otherwise assist any person or
entity in so competing, or in any capacity engage in any activity or business,
passively or actively, as an owner, participant, employee or agent, competitive
with the business of Employer or its Affiliates (including either of the
Corporations) in any county or city within the continental United States which
provides goods or services to customers located in the Geographical Territory
(provided that the restrictions in (D) and (E) shall not in any event continue,
with respect to any county or city within the Geographical Territory, beyond the
time that Employer or any of its Affiliates ceases to carry on a like business
therein). The foregoing restriction shall not prevent Employee from accepting
employment as a manufacturer's representative at any time following December 31,
1997 if such manufacturer is not a major supplier of Employer or its Affiliates
(including either of the Corporations) and Employee's termination of employment
occurred for a reason other than Cause. A major supplier of Employer or its
Affiliates (including either of the Corporations) is one whose products account
for 5% or more of the sales of Employer or of any Affiliate of Employer or of
Employer and its Affiliates viewed as a group. Employee acknowledges that the
business of Employer and its Affiliates is national in scope, that one can
effectively compete with such business in the Geographical Territory from
anywhere in the continental United States, and that, therefore, such
geographical area of restriction is reasonable in the circumstances to protect
Employer's legitimate business interests. The covenants and restrictions
contained in this Section 11 are intended to be separate and divisible from, and
operate concurrently with, the similar covenants and restrictions contained in
the Restrictive Covenant and are each intended to be separately enforceable. Any
differences between the covenants and restrictions contained herein and therein,
such as with respect to time period restrictions, are intentional.
12. EMPLOYER'S REMEDIES FOR BREACH OF SECTIONS 10 AND 11
Employee covenants and agrees that if Employee shall violate
or breach any of Employee's covenants or agreements provided for in Sections 10
or 11 hereof, Employer and/or its Affiliates shall be entitled to an accounting
and repayment of all profits, compensation, commissions, remunerations and
benefits which Employee directly or indirectly has realized and realizes as a
result of, growing out of or in connection with any such violation or breach. In
addition, in the event of a breach or violation or threatened or imminent breach
or violation of any provisions of Sections 10 or 11 hereof, Employer and/or its
Affiliates shall be entitled to a temporary and permanent injunction or any
other appropriate decree of specific performance or equitable relief (without
being required to post bond or other security) from a court of competent
jurisdiction in order to prevent, prohibit or restrain any such breach or
violation or threatened or imminent breach or violation by Employee, by
Employee's partners, agents, representatives, servants, employers or employees
and/or by any Third Parties. Employer shall be entitled to such injunctive or
other equitable relief in addition to any damages which are suffered, together
with reasonable attorneys' and paralegals' fees and costs and other costs
incurred in connection with any such litigation, both before and at trial and at
all tribunal levels. It is understood that resort by Employer and/or its
Affiliates to such injunctive or other equitable relief shall not be deemed to
waive or to limit in any respect any other rights or remedies which Employer or
its Affiliates may have with respect to such breach or violation. Employer's
Affiliates may enforce these provisions directly in their own names and right.
13. REASONABLENESS OF RESTRICTIONS
A. REASONABLENESS. Employee acknowledges that any breach or
violation of Section 10 or 11 hereof will cause irreparable injury and damage
and incalculable harm to Employer and its Affiliates and that it would be very
difficult or impossible to measure all of the damages resulting from any such
breach or violation. Employee further acknowledges that Employee has carefully
read and considered the provisions of Sections 10, 11 and 12 hereof and, having
done so, agrees that the restrictions and remedies set forth in such Sections
6
(including, but not limited to, the time period, geographical and types of
restrictions imposed) are fair and reasonable and are reasonably required for
the protection of the business, trade secrets, interests and good will of
Employer and its Affiliates. Employee further acknowledges that Employee's
covenants in Sections 10 and 11 have been made to induce Employer to complete
the Merger to which it was a party pursuant to the Purchase Agreement, but for
which this Employment Agreement would not have been possible.
B. SEVERABILITY. Employee understands and intends that each
provision and restriction agreed to by Employee in Sections 10, 11 and 12 hereof
shall be construed as separate and divisible from every other provision and
restriction. In the event that any one of the provisions of, or restrictions in,
Sections 10, 11 and/or 12 hereof shall be held to be invalid or unenforceable,
and is not reformed by a court of competent jurisdiction, the remaining
provisions thereof and restrictions therein shall nevertheless continue to be
valid and enforceable as though the invalid or unenforceable provisions or
restrictions had not been included. In the event that any such provision
relating to time period, geographical and/or type of restriction shall be
declared by a court of competent jurisdiction to exceed the maximum or
permissible time period, geographical or type of restriction such court deems
reasonable and enforceable, said time period, geographical and/or type of
restriction shall be deemed to become and shall thereafter be the maximum time
period, geographical area and/or type of restriction which such court deems
reasonable and enforceable.
C. SURVIVABILITY. The restrictions, acknowledgements,
covenants and agreements of Employee set forth in Sections 10, 11, 12 and 13 of
this Employment Agreement shall survive any termination of this Employment
Agreement or of Employee's employment (for any reason, including expiration of
the Employment Term).
14. LAW APPLICABLE
This Employment Agreement shall be governed by and construed
pursuant to the laws of the State of California.
15. NOTICES
Any notices required or permitted to be given pursuant to this
Employment Agreement shall be sufficient, if in writing and sent in the manner
required and/or permitted in the Purchase Agreement.
16. SUCCESSION
This Employment Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective legal representatives,
heirs, assignees and/or successors in interest of any kind whatever; provided,
however, that Employee acknowledges and agrees that he cannot assign or delegate
any of his rights, duties, responsibilities or obligations hereunder to any
other person or entity. Employer shall have the right to assign its rights and
delegate its duties under this Employment Agreement.
17. ENTIRE AGREEMENT
This Employment Agreement constitutes the entire final
agreement between the parties with respect to, and supersedes any and all prior
agreements between the parties hereto both oral and written concerning, the
subject matter hereof and may not be amended, modified or terminated except by a
writing signed by the parties hereto.
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18. SEVERABILITY
If any provision of this Employment Agreement shall be held to
be invalid or unenforceable, and is not reformed by a court of competent
jurisdiction, such invalidity or unenforceability shall attach only to such
provision and shall not in any way affect or render invalid or unenforceable any
other provision of this Employment Agreement, and this Employment Agreement
shall be carried out as if such invalid or unenforceable provision were not
herein contained.
19. NO WAIVER
A waiver of any breach or violation of any term, provision or
covenant herein contained shall not be deemed a continuing waiver or a waiver of
any future or past breach or violation. No oral waiver shall be binding.
20. ATTORNEYS' FEES
In the event that either of the parties to this Employment
Agreement institutes suit against the other party to this Employment Agreement
to enforce or declare any of his or its rights hereunder, the prevailing party
in such action shall be entitled to recover from the other party all reasonable
costs thereof, including reasonable attorneys' and paralegals' fees and costs
incurred before and at trial and at all tribunal levels, and whether or not suit
or any other proceeding is instituted.
21. COUNTERPARTS
This Employment Agreement may be executed in counterparts,
each of which shall be an original, but both of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands on
the day and year first above written.
EMPLOYER:
ALL AMERICAN ADDED VALUE, INC., a
California corporation
By:_____________________________
Title:__________________________
EMPLOYEE:
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
8
EXHIBIT "A-5"
FORM OF ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of __________, 1995, by and between ALL
AMERICAN ADDED VALUE, INC., a corporation organized and existing under the laws
of the State of California (hereinafter referred to as "Employer"), and ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇ (hereinafter referred to as "Employee").
W I T N E S S E T H:
WHEREAS, Employer is a California corporation engaged in the
distribution of electronic components and the performance of certain services
related thereto;
WHEREAS, Employer desires to employ Employee upon the terms and
conditions set forth below and Employee desires to accept employment upon such
terms and conditions; and
WHEREAS, Employer and Employee desire to set forth in writing the terms
and conditions of their agreements and understandings with respect to Employee's
employment by Employer.
NOW, THEREFORE, the parties agree as follows:
1. EMPLOYMENT
Employer hereby employs Employee, and Employee hereby accepts
employment by Employer, upon all the terms and conditions set forth in this
Employment Agreement. All capitalized terms used herein, which are not defined
herein, shall have the respective meanings ascribed to them in that certain
Merger Purchase Agreement pursuant to which this Employment Agreement is being
executed (the "Purchase Agreement").
2. TERM
Subject to the provisions for earlier termination set forth in
Section 9 hereof, this Employment Agreement shall commence on the date hereof
and shall continue until the close of business of the day preceding the second
anniversary of the date hereof (the "Employment Term").
3. EMPLOYEE'S REPRESENTATIONS AND WARRANTIES
Employee represents and warrants to Employer that he is free
to accept employment with Employer as contemplated herein and has no other
written or oral obligations or commitments of any kind or nature which would in
any way interfere with his acceptance of employment pursuant to the terms hereof
or the full performance of his obligations hereunder or the exercise of his best
efforts in his employment hereunder or which would otherwise pose any conflict
of interest.
4. DUTIES AND EXTENT OF SERVICES
A. DUTIES. Employee's duties and responsibilities hereunder
shall be those reasonably assigned to him from time to time by Employer. Such
duties may, in Employer's discretion, consist of certain duties similar to those
performed by Employee for Added Value and/or Rocky Mountain prior to the
Mergers, and such other duties and responsibilities as may be reasonably
requested from time to time by Employer's President, Chief Executive Officer,
Executive Vice President, or Board of Directors. Employee agrees to devote his
full and exclusive time, skill, attention and energy diligently and competently
to perform the duties and responsibilities assigned to him hereunder, or
pursuant hereto.
B. RULES AND REGULATIONS. Employee agrees to abide
by the rules and regulations of Employer promulgated by Employer from time to
time with
respect and applicable to Employer's employees generally, which are all hereby
incorporated by reference and made a part of this Employment Agreement.
C. PLACE OF SERVICE. Employee shall render his
services generally in, and shall not be obligated to maintain his office in any
place other than, Orange County, California.
5. COMPENSATION
A. BASE COMPENSATION. Subject to the provisions of Section 9
of this Employment Agreement, Employer shall pay salary to Employee ("Salary")
based upon the rate of $130,000 per annum, or $10,833.33 per calendar month (the
first month's Salary to be prorated accordingly, if necessary). Salary shall be
payable in accordance with Employer's normal payroll practices for its employees
and shall be subject to payroll deductions and tax withholdings in accordance
with Employer's usual practices and as required by law. Presently, payroll is
made on a semi-monthly basis.
B. BONUS COMPENSATION. In order to induce Employee
to execute and deliver this Employment Agreement, in addition to the other
compensation herein provided for, Employer shall pay to Employee concurrently
with the execution and delivery of this Agreement incentive bonus compensation
in the amount of $100,000.
6. FRINGE BENEFITS AND EXPENSES
A. EMPLOYEE BENEFITS. Employee shall not be entitled to any
benefits or fringe benefits except as specifically set forth in this Employment
Agreement and except for those, if any, made available by Employer from time to
time, in Employer's sole discretion, to all of its other employees generally.
B. EXPENSES. Employer shall reimburse Employee for his
reasonable out-of-pocket costs and expenses in connection with the performance
of his duties and responsibilities hereunder, subject to the specific prior
written approval thereof by the President of Employer or Employer's Board of
Directors for any item of expense or any items of related expenses in excess of
$500.
C. CAR ALLOWANCE. In order to defray Employee's
automobile expenses incurred in connection with his duties, Employer shall pay
to Employee a monthly car allowance of $500. Employer has no obligation to
provide an automobile to Employee.
D. INCENTIVE STOCK OPTIONS. Concurrently with the execution
and delivery of this Agreement, Employer shall cause Purchaser to grant to
Employee options to acquire 10,000 All American Shares ("Incentive Stock
Options") pursuant to Purchaser's Employees', Officers', Directors' Stock Option
Plan (the "Plan"). The price at which Employee may exercise any of the Incentive
Stock Options shall be the fair market value of an All American Share at the
time such Incentive Stock Options are granted, as same shall be fixed by the
compensation committee of Purchaser's Board of Directors on or about such time.
The Incentive Stock Options shall vest over six years from the date granted,
1/6th at the end of each such year, and shall be exercisable within the
seven-year period immediately following the date granted, provided that all
unvested and vested and unexercised Incentive Stock Options shall expire
automatically on the date that Employee voluntarily or involuntarily leaves the
employ of Employer, and provided further, that, in the event Employee is
Disabled, Employee shall have the right until the earlier of the one-year
anniversary of the disability and the expiration date of the Incentive Stock
Options to exercise all Incentive Stock Options vested and unexercised as of the
date of disability. All other terms and conditions of the Incentive Stock
Options shall be as set forth in the Plan or shall conform to policies and
guidelines with respect to options pursuant to the Plan granted to employees of
similar status.
2
7. VACATIONS
Employee shall be entitled to a total of four weeks of
vacation and six sick days during each full year of the Employment Term with
full compensation (provided, however, that Employee shall not be entitled to be
compensated for any unused vacation or sick days upon termination of this
Employment Agreement). The periods during which Employee will be absent from
work shall be at the reasonable discretion of Employer.
8. FACILITIES
Employer shall provide and maintain (or cause to be provided
and maintained) such facilities, equipment, supplies and personnel as it deems
necessary in its sole discretion for Employee's performance of his duties and
responsibilities under this Employment Agreement.
9. TERMINATION OF EMPLOYMENT
A. TERMINATION EVENTS. Notwithstanding any provisions of this
Employment Agreement to the contrary, this Employment Agreement may be
terminated only as follows: by Employer with or without Cause (as hereinafter
defined), effective upon the delivery of written notice to Employee; upon
Employee's death; or upon Employee becoming Disabled (as later defined) and
receiving written notice of termination from Employer to that effect.
B. DEFINITIONS OF CAUSE AND DISABLED. For purposes of this
Employment Agreement, "Cause" shall mean and include: (i) fraud; (ii) dishonesty
in performance of employment duties; (iii) commission of a felony; (iv) habitual
drunkenness during business hours or at Employer's premises; (v) drug addiction
or use during business hours or at Employer's premises; (vi) gross negligence in
the performance of employment duties; (vii) abandonment of employment duties;
(viii) repeated insubordination; (ix) conduct on the part of Employee relating
to Employer's business or his employment duties (which is not authorized,
directed or approved by Employer) which results in governmental sanctions being
imposed on Employer or Employee; (x) material breach by Employee of this
Employment Agreement or any other written agreement between Employer and
Employee governing Employee's conduct or employment whether now existing or
hereafter created which, if curable, is not cured by Employee within 30 days
following his receipt of written notice thereof (such notice shall specify in
reasonable detail the nature of the material breach and the curative steps, if
curable, required to be taken); or (xi) material breach by Added Value or Rocky
Mountain or any Key Employee of any of its or his representations, warranties,
covenants or obligations under the Purchase Agreement or the Guaranty and
Agreement with respect to which Employee had personal involvement or knowledge
and which, if curable, is not cured within 30 days following notice to Employee
thereof (such notice shall specify in reasonable detail the nature of the
material breach and the curative steps, if curable, required to be taken).
Employee shall be deemed "Disabled" if, in Employer's reasonable judgment,
Employee is unable, due to mental, emotional or physical injury or illness, to
perform substantially all of his employment duties for a period of 90
consecutive days. Termination of this Employment Agreement for disability will
be effective on the later of (x) the 90th day following the disability event and
(y) the date Employer gives notice of termination by reason of disability to
Employee.
C. EFFECT OF TERMINATION FOR CAUSE OR EMPLOYEE'S
RESIGNATION. In the event that this Employment Agreement is terminated by
Employer with Cause, or because Employee resigns from or quits his employment,
Employer shall pay to Employee, within thirty (30) days following the date of
such termination, the Salary, if any, and amounts payable under Section 6, if
any, accrued and unpaid through the date of such termination; and Employee shall
not be entitled to any other compensation, remuneration or other sums provided
for in this Employment Agreement or to which Employee might otherwise be
entitled hereunder or at law or in equity.
3
D. COMPENSATION UPON DEATH OR DISABILITY. Upon the death of
Employee, or termination because Employee is Disabled, Employer shall pay to
Employee, his legal guardian or the legal representative of Employee's estate
(or heir as designated by the legal representative of Employee's estate at such
time), within thirty (30) days following the date of Employee's death or
termination, the Salary, if any, and amounts payable under Section 6, if any,
accrued and unpaid through the date of death or termination; and Employee (or
such legal guardian, legal representative or any heirs) shall not be entitled to
any other compensation, remuneration or other sums provided for in this
Employment Agreement or to which Employee might otherwise be entitled hereunder
or at law or in equity.
E. COMPENSATION UPON TERMINATION WITHOUT CAUSE. In the event
that Employer terminates this Employment Agreement without Cause prior to the
second anniversary of the date hereof, Employee's sole and exclusive
compensation and remedy hereunder shall be to receive from Employer severance
pay equal to (i) the amount of Salary and amounts payable under Section 6, if
any, accrued and unpaid through the date of termination, and (ii) as and when
payable (as if Employee had remained an employee of Employer), the Salary and
amounts payable under Section 6 that Employee would have received during the
period following termination until the second anniversary of the date of this
Employment Agreement.
F. KEY-MAN INSURANCE. In the event that Employer has obtained
a key-man term insurance policy (the "Policy") on the life of Employee, all
proceeds payable in respect thereof shall be the property solely of Employer. In
the event that Employee's employment terminates for any reason other than
Employee's death, Employee may request that the Policy be assigned to Employee
by giving written notice to Employer to that effect. Subject to obtaining any
requisite consent from the insurer, Employer shall, if Employee has so
requested, assign the Policy to Employee subject to Employee's reimbursement to
Employer of any premiums paid by Employer which relate to any period following
the date of termination of Employee's employment, and the cash value, if any, of
the Policy. In the event that Employer desires to obtain any such Policy,
Employee shall fully cooperate in Employer's efforts, including submitting to
medical exams and tests and executing and delivering applications and
information statements.
10. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
A. CONFIDENTIAL INFORMATION. Employee acknowledges that
Employee has been informed by Employer of Employer's policy to maintain as
secret and confidential all information and materials relating to (i) the
financial condition, businesses and interests of Employer and its Affiliates,
(ii) the systems, Know-how and Records, products, services, costs, inventions,
computer software programs, marketing and sales techniques and/or programs,
methods, methodologies, manuals, lists and other trade secrets heretofore or
hereafter acquired, sold, developed, maintained and/or used by Employer and its
Affiliates and (iii) the nature and terms of Employer's and its Affiliates'
relationships with their respective customers, suppliers, lenders, underwriters,
vendors, consultants, independent contractors, attorneys, accountants and
employees (all such information and materials being hereinafter collectively
referred to as "Confidential Information"). Employee further acknowledges that
such Confidential Information is of great value to Employer and its Affiliates
and, as a result of Employee's employment by Employer, Employee will be making
use of, acquiring and/or adding to such Confidential Information. Therefore,
Employee understands that it is reasonably necessary to protect Employer's and
its Affiliates' good will and business interests that Employee agree and,
accordingly, Employee does hereby agree, that Employee will not directly or
indirectly (except where authorized by the President of Employer for the benefit
of Employer and/or its Affiliate(s) and/or as required in the course of his
employment) at any time hereafter divulge or disclose for any purpose whatsoever
to any persons, firms, corporations or other entities other than Employer or its
Affiliates (hereinafter referred to collectively as "Third Parties"), or use or
4
cause or authorize any Third Parties to use, any such Confidential Information,
except as otherwise required by law.
B. EMPLOYER'S MATERIALS. In accordance with the foregoing,
Employee furthermore agrees that (i) Employee will at no time retain or remove
from the premises of Employer or its Affiliates any products, prototypes,
drawings, notebooks, software programs or discs or similar containers of
software, manuals, data, books, records, materials or documents of any kind or
description for any purpose unconnected with the strict performance of
Employee's duties with Employer and (ii) upon the cessation or termination of
Employee's employment with Employer for any reason, Employee shall forthwith
deliver or cause to be delivered up to Employer any and all drawings, notebooks,
software programs or discs or similar containers of software, manuals, data,
books, records, materials and other documents and materials in Employee's
possession or under Employee's control relating to any Confidential Information
or any other material or thing which is otherwise the property of Employer or
its Affiliates.
11. COVENANT-NOT-TO-COMPETE
In view of (a) the Confidential Information known to and to be
obtained by or disclosed to Employee (including, without limitation, Employee's
knowledge of, and familiarity and relationships with, Employer's other employees
and Employer's customers and suppliers), (b) the know-how acquired and to be
acquired by Employee, (c) the substantial consideration paid and payable to
Employee under the Purchase Agreement, and to Employee under this Employment
Agreement, and (d) the sale of the good will of the business embodied in the
Purchase Agreement, and as a material inducement to Employer to enter into this
Employment Agreement and to employ Employee and to pay to Employee the
substantial compensation Employee will be receiving, Employee covenants and
agrees that, for as long as Employee is employed by Employer and for a period of
two (2) years after the later of (i) the date Employee ceases for any reason to
be employed by Employer and (ii) the date Employee ceases to receive any Salary
(as severance pay or otherwise) from Employer, Employee shall not, directly or
indirectly, (A) sell any products or services sold or offered by Employer or its
Affiliates (including either of the Corporations) to any customer or former
customer of Employer or its Affiliates (including either of the Corporations),
(B) obtain for resale from any supplier of Employer or its Affiliates (including
either of the Corporations) any products of the type Employer or its Affiliates
(including either of the Corporations) purchases or has purchased for resale,
(C) solicit the services of, or hire, directly or indirectly, whether on his own
behalf or on behalf of others, any managerial or executive employee or
salesperson of Employer or its Affiliates (including either of the Corporations)
or who was employed by Employer or any of Employer's Affiliates (including
either of the Corporations) at any time during the period commencing one year
prior to the commencement of the Employment Term and ending on the date of
termination of Employee's employment, (D) obtain any interest in, any employment
with, or any right to participate in, directly or indirectly, any enterprise
competitive with the business of Employer or its Affiliates (including either of
the Corporations) anywhere within the continental United States which provides
goods or services to customers located in any county or city in which either
Corporation has provided goods or services to customers during the one-year
period ending on the date hereof or located in any county or city in which
either Surviving Corporation has provided goods or services to customers during
the Employment Term (the "Geographical Territory"), or (E) otherwise assist any
person or entity in so competing, or in any capacity engage in any activity or
business, passively or actively, as an owner, participant, employee or agent,
competitive with the business of Employer or its Affiliates (including either of
the Corporations) in any county or city within the continental United States
which provides goods or services to customers located in the Geographical
Territory (provided that the restrictions in (D) and (E) shall not in any event
continue, with respect to any county or city within the Geographical Territory,
beyond the time that Employer or any of its Affiliates ceases to carry on a like
business therein). The foregoing restriction shall not prevent Employee from
accepting employment as a
5
manufacturer's representative at any time following December 31, 1997 if such
manufacturer is not a major supplier of Employer or its Affiliates (including
either of the Corporations) and Employee's termination of employment occurred
for a reason other than Cause. A major supplier of Employer or its Affiliates
(including either of the Corporations) is one whose products account for 5% or
more of the sales of Employer or of any Affiliate of Employer or of Employer and
its Affiliates viewed as a group. Employee acknowledges that the business of
Employer and its Affiliates is national in scope, that one can effectively
compete with such business in the Geographical Territory from anywhere in the
continental United States, and that, therefore, such geographical area of
restriction is reasonable in the circumstances to protect Employer's legitimate
business interests. The covenants and restrictions contained in this Section 11
are intended to be separate and divisible from, and operate concurrently with,
the similar covenants and restrictions contained in the Restrictive Covenant and
are each intended to be separately enforceable. Any differences between the
covenants and restrictions contained herein and therein, such as with respect to
time period restrictions, are intentional.
12. EMPLOYER'S REMEDIES FOR BREACH OF SECTIONS 10 AND 11
Employee covenants and agrees that if Employee shall violate
or breach any of Employee's covenants or agreements provided for in Sections 10
or 11 hereof, Employer and/or its Affiliates shall be entitled to an accounting
and repayment of all profits, compensation, commissions, remunerations and
benefits which Employee directly or indirectly has realized and realizes as a
result of, growing out of or in connection with any such violation or breach. In
addition, in the event of a breach or violation or threatened or imminent breach
or violation of any provisions of Sections 10 or 11 hereof, Employer and/or its
Affiliates shall be entitled to a temporary and permanent injunction or any
other appropriate decree of specific performance or equitable relief (without
being required to post bond or other security) from a court of competent
jurisdiction in order to prevent, prohibit or restrain any such breach or
violation or threatened or imminent breach or violation by Employee, by
Employee's partners, agents, representatives, servants, employers or employees
and/or by any Third Parties. Employer shall be entitled to such injunctive or
other equitable relief in addition to any damages which are suffered, together
with reasonable attorneys' and paralegals' fees and costs and other costs
incurred in connection with any such litigation, both before and at trial and at
all tribunal levels. It is understood that resort by Employer and/or its
Affiliates to such injunctive or other equitable relief shall not be deemed to
waive or to limit in any respect any other rights or remedies which Employer or
its Affiliates may have with respect to such breach or violation. Employer's
Affiliates may enforce these provisions directly in their own names and right.
13. REASONABLENESS OF RESTRICTIONS
A. REASONABLENESS. Employee acknowledges that any breach or
violation of Section 10 or 11 hereof will cause irreparable injury and damage
and incalculable harm to Employer and its Affiliates and that it would be very
difficult or impossible to measure all of the damages resulting from any such
breach or violation. Employee further acknowledges that Employee has carefully
read and considered the provisions of Sections 10, 11 and 12 hereof and, having
done so, agrees that the restrictions and remedies set forth in such Sections
(including, but not limited to, the time period, geographical and types of
restrictions imposed) are fair and reasonable and are reasonably required for
the protection of the business, trade secrets, interests and good will of
Employer and its Affiliates. Employee further acknowledges that Employee's
covenants in Sections 10 and 11 have been made to induce Employer to complete
the Merger to which it was a party pursuant to the Purchase Agreement, but for
which this Employment Agreement would not have been possible.
B. SEVERABILITY. Employee understands and intends
that each provision and restriction agreed to by Employee in Sections 10, 11 and
12 hereof
6
shall be construed as separate and divisible from every other provision and
restriction. In the event that any one of the provisions of, or restrictions in,
Sections 10, 11 and/or 12 hereof shall be held to be invalid or unenforceable,
and is not reformed by a court of competent jurisdiction, the remaining
provisions thereof and restrictions therein shall nevertheless continue to be
valid and enforceable as though the invalid or unenforceable provisions or
restrictions had not been included. In the event that any such provision
relating to time period, geographical and/or type of restriction shall be
declared by a court of competent jurisdiction to exceed the maximum or
permissible time period, geographical or type of restriction such court deems
reasonable and enforceable, said time period, geographical and/or type of
restriction shall be deemed to become and shall thereafter be the maximum time
period, geographical area and/or type of restriction which such court deems
reasonable and enforceable.
C. SURVIVABILITY. The restrictions, acknowledgements,
covenants and agreements of Employee set forth in Sections 10, 11, 12 and 13 of
this Employment Agreement shall survive any termination of this Employment
Agreement or of Employee's employment (for any reason, including expiration of
the Employment Term).
14. LAW APPLICABLE
This Employment Agreement shall be governed by and construed
pursuant to the laws of the State of California.
15. NOTICES
Any notices required or permitted to be given pursuant to this
Employment Agreement shall be sufficient, if in writing and sent in the manner
required and/or permitted in the Purchase Agreement.
16. SUCCESSION
This Employment Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective legal representatives,
heirs, assignees and/or successors in interest of any kind whatever; provided,
however, that Employee acknowledges and agrees that he cannot assign or delegate
any of his rights, duties, responsibilities or obligations hereunder to any
other person or entity. Employer shall have the right to assign its rights and
delegate its duties under this Employment Agreement.
17. ENTIRE AGREEMENT
This Employment Agreement constitutes the entire final
agreement between the parties with respect to, and supersedes any and all prior
agreements between the parties hereto both oral and written concerning, the
subject matter hereof and may not be amended, modified or terminated except by a
writing signed by the parties hereto.
18. SEVERABILITY
If any provision of this Employment Agreement shall be held to
be invalid or unenforceable, and is not reformed by a court of competent
jurisdiction, such invalidity or unenforceability shall attach only to such
provision and shall not in any way affect or render invalid or unenforceable any
other provision of this Employment Agreement, and this Employment Agreement
shall be carried out as if such invalid or unenforceable provision were not
herein contained.
7
19. NO WAIVER
A waiver of any breach or violation of any term, provision or
covenant herein contained shall not be deemed a continuing waiver or a waiver of
any future or past breach or violation. No oral waiver shall be binding.
20. ATTORNEYS' FEES
In the event that either of the parties to this Employment
Agreement institutes suit against the other party to this Employment Agreement
to enforce or declare any of his or its rights hereunder, the prevailing party
in such action shall be entitled to recover from the other party all reasonable
costs thereof, including reasonable attorneys' and paralegals' fees and costs
incurred before and at trial and at all tribunal levels, and whether or not suit
or any other proceeding is instituted.
21. COUNTERPARTS
This Employment Agreement may be executed in counterparts,
each of which shall be an original, but both of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands on
the day and year first above written.
EMPLOYER:
ALL AMERICAN ADDED VALUE, INC., a
California corporation
By:_____________________________
Title:__________________________
EMPLOYEE:
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
8
EXHIBIT "B"
GUARANTY AND AGREEMENT
GUARANTY AND AGREEMENT
GUARANTY AND AGREEMENT ("Agreement"), dated October ___, 1995, by and
among ▇▇▇▇▇ ▇▇▇▇▇▇, THE ▇▇▇▇▇▇ FAMILY CHARITABLE REMAINDER TRUST, ▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇ ▇. ▇▇▇▇▇▇ (each, a "Target Stockholder" and,
collectively, the "Target Stockholders"), ALL AMERICAN SEMICONDUCTOR, INC., a
Delaware corporation ("Purchaser"), ALL AMERICAN ADDED VALUE, INC., a California
corporation ("California Subsidiary"), and ALL AMERICAN A.V.E.D., INC., a
Colorado corporation ("Colorado Subsidiary").
PRELIMINARY STATEMENT
Reference is made to the Merger Purchase Agreement of even date
herewith ("Purchase Agreement") among Purchaser, California Subsidiary, Colorado
Subsidiary, Added Value Electronics Distribution, Inc., a California corporation
("Added Value"), and A.V.E.D.-Rocky Mountain, Inc., a Colorado corporation
("Rocky Mountain"). This Agreement is being executed and delivered pursuant to
the requirements of the Purchase Agreement. Capitalized terms used herein, which
are not defined herein, shall have the respective meanings ascribed to them in
the Purchase Agreement.
NOW, THEREFORE, in consideration of the Merger Consideration and, if
applicable, Additional Consideration to be received by each of the Target
Stockholders, and in order to induce Purchaser and Subsidiaries to execute and
deliver the Purchase Agreement and to consummate the transactions contemplated
thereby, the Target Stockholders hereby make the following guarantees,
representations, covenants, agreements and indemnities in favor of Purchaser and
Subsidiaries.
1. GUARANTY. Each of the Target Stockholders, subject to the
limitations contained in Section 5 hereof, hereby jointly and severally
unconditionally and irrevocably guarantees to Purchaser and Subsidiaries the due
and prompt payment, performance and honor by each of the Corporations when due
to be paid, performed or honored of and under each and every warranty, covenant,
agreement and obligation of each of the Corporations set forth in the Purchase
Agreement, and the truth, accuracy and completeness in all material respects of
each representation made by each of the Corporations set forth in the Purchase
Agreement or any certificate delivered to Purchaser and/or Subsidiaries at
Closing. Such guaranty is an absolute, primary, irrevocable, unconditional,
present and continuing guaranty of payment and performance and not of
collection, and is no way conditioned or contingent upon any attempt to collect
from either Corporation, the exercise by Purchaser or either Subsidiary of any
other right or remedy which any of them has or may have under the Purchase
Agreement, any other agreement, at law or in equity, or upon any other
condition, contingency, matter or thing whatever. Each of the Target
Stockholders hereby waives notice of acceptance hereof, notice of any
representation, warranty, covenant, obligation or agreement hereby guaranteed
and notice of any breach thereof, notice of presentment for payment, demand or
protest, notice of increase of guarantor's risk or of adverse changes to the
Corporations or the Business, and all other notices and demands to which any
Target Stockholder might be entitled at law or in equity, to the fullest extent
waivable. Each Target Stockholder agrees that he or she is bound to the payment
and performance of and under all warranties, covenants and obligations of the
Corporations set forth in the Purchase Agreement, and the representations of the
Corporations set forth in the Purchase Agreement or any certificate delivered to
Purchaser and/or Subsidiaries at Closing, as fully as if same were directly
made, given, due and owing by each Target Stockholder to Purchaser and
Subsidiaries. Each Target Stockholder further waives any defense arising by
reason of any disability or other defense of the Corporations or any other
defense whatever other than the due payment and performance by each of the
Corporations of and under all of their respective warranties, covenants and
obligations set forth in the Purchase Agreement, and the truth, completeness and
accuracy in all material respects of all of their respective representations set
forth in the Purchase Agreement or any certificate
delivered to Purchaser and/or Subsidiaries at Closing. Each Target Stockholder
agrees that, subject to the limitations contained in Section 5, he or she is
jointly and severally liable and responsible with each Corporation for and under
each warranty, covenant and obligation of such Corporation set forth in the
Purchase Agreement and for any misrepresentations made by either Corporation
thereunder or in any certificate delivered pursuant thereto. Each Target
Stockholder hereby irrevocably and forever waives against and with respect to
each Corporation any and all rights of subrogation, contribution, reimbursement
or indemnity whatever (recognizing that such rights in the circumstances of the
Mergers would deprive Purchaser and the Surviving Corporations of the essential
benefits of this Agreement). Each Target Stockholder agrees that, without notice
to him or her and without in any way or manner affecting or impairing or
diminishing any of his or her obligations under this Agreement, Purchaser and/or
either Subsidiary may, actively or passively, by action or inaction, compromise,
settle, release, extend or substitute any representation, warranty, covenant or
obligation guaranteed hereby, settle with or release any other Target
Stockholder(s), waive or modify any such representation, warranty, covenant or
obligation or the Purchase Agreement generally, or refuse or fail to enforce any
of its rights under the Purchase Agreement.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF TARGET
STOCKHOLDERS.
(a) Notwithstanding that none of the Key Employees has
executed the Purchase Agreement, each Key Employee hereby joins in the Purchase
Agreement, as if a party thereto, for the purpose of agreeing to be bound, and
each hereby agrees so to be bound, by all representations, warranties,
covenants, agreements and obligations set forth as made by, or otherwise
attributed to, such Key Employee (or any of them, whether individually or as a
group or part of a group) in the Purchase Agreement, and further agrees that,
except as set forth in Section 5 of this Agreement, he is jointly and severally
liable for, and with respect to, all of such representations, warranties,
covenants, agreements and obligations and all breaches thereof and defaults
thereunder. Further, to the extent that the Purchase Agreement expressly
specifies that one, more or all of the Target Stockholders shall take or refrain
from taking a particular action or actions, each Target Stockholder hereby
acknowledges such obligation and agrees to abide by and fulfill such obligation.
(b) Each Target Stockholder represents and warrants that he or
she owns the Target Shares for which he or she is to receive Merger
Consideration, and will be conveying such Target Shares to Purchaser in the
appropriate Merger(s), free of any Liens. Each Target Stockholder covenants that
he or she will not sell, transfer or dispose of any Target Shares prior to
Closing for any reason whatever.
(c) Each Target Stockholder has no present plan, intention or
arrangement to dispose of any of the All American Shares to be received by them
in the Mergers or potentially to be received by them as Additional
Consideration.
(d) Each Target Stockholder shall from and after the date
hereof observe, honor and comply with all of the confidentiality and
noncompetition covenants and restrictions set forth in the Restrictive Covenant
as if such covenants and restrictions were set forth in their entireties in this
Agreement.
3. APPROVAL OF TRANSACTIONS.
(a) Each Target Stockholder, by his or her signature below,
consents to and approves the execution and delivery by each Corporation of the
Purchase Agreement, and the consummation by each Corporation of all of the
transactions contemplated by the Purchase Agreement to be consummated by it
(including, without limitation, the Mergers), and otherwise approves the Mergers
and each of the transactions set forth in and contemplated by the Purchase
Agreement, as same may be amended or modified from time to time. Each Added
Value Target Stockholder specifically consents to, approves and adopts the Added
2
Value Agreement of Merger, as same may be amended from time to time, and each
Rocky Mountain Target Stockholder and Added Value (as a stockholder of Rocky
Mountain) specifically consents to, approves and adopts the Rocky Mountain
Articles of Merger and the Plan of Merger pursuant to which they are to be
filed, as same may be amended from time to time. Each Target Stockholder, on
behalf of himself or herself and his or her successors and assigns, represents,
warrants, covenants and agrees that such consent and approval constitutes
approval on his or her part of the respective Mergers and plans and agreements
thereof pursuant to Section 1201 of the California General Corporation Law and
Section ▇-▇▇▇-▇▇▇ of the Colorado Business Corporation Act, respectively, and
that no further consent or approval on his or her part is required in order for
all of the transactions (including, without limitation, the Mergers) set forth
in or contemplated by the Purchase Agreement to be consummated in accordance
with the terms thereof, and each Target Stockholder hereby forever waives any
dissenters rights he or she may have at law or otherwise. Each Target
Stockholder is hereby forever estopped from making any assertions to the
contrary. Each Target Stockholder forever waives his or her right to receive
notice and/or copies of the plans or agreements of the respective Mergers
pursuant to Section 7-111- 103(4) of the Colorado Business Corporation Act or
any corresponding or similar provision under the California General Corporation
Law.
(b) Each Target Stockholder represents, warrants, covenants
and agrees for the benefit of Purchaser and Subsidiaries that he or she has no
rights or options under any existing or historic incentive stock option plans or
similar plans of either of the Corporations (except for ▇▇▇▇▇▇ ▇▇▇▇▇ as set
forth in Section 4.34 of the Purchase Agreement), and has no rights against, and
is owed no obligations by, either of the Corporations or any other Target
Stockholder pursuant to that certain Stock Redemption Agreement, dated April 19,
1982, among Added Value, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, as amended by Amendment to Stock Redemption Agreement,
dated March 4, 1987, or that certain Stock Redemption Agreement, dated March 1,
1987, among Rocky Mountain, ▇▇▇▇▇ ▇▇▇▇▇▇ and Added Value, or any similar or
related agreement, any such options, rights or obligations (including any rights
of first refusal, contractual share restrictions and the like) having been (and,
as a confirmatory matter, each Target Stockholder agrees they hereby are)
cancelled and of no further force or effect.
4. SURVIVAL AND INDEMNIFICATION.
(a) The representations, warranties, covenants, obligations
and agreements contained in this Agreement, and in any agreements, certificates
or other instruments delivered pursuant to this Agreement or the Purchase
Agreement, shall survive the Closing and the consummation of the transactions
contemplated by the Purchase Agreement (including the Mergers), and, if the
Mergers do not occur, any termination of the Purchase Agreement, and shall
remain in full force and effect, regardless of any investigation made by or on
behalf of any party or of the actual or constructive knowledge by any party of
any inaccuracy or breach thereof.
(b) Each Target Stockholder, subject to the limitations
contained in Section 5, hereby agrees, jointly and severally, to indemnify and
hold harmless Purchaser, Subsidiaries and their respective stockholders,
officers, directors, attorneys, accountants, employees (in each case, excluding
any Target Stockholders) and Affiliates and the Corporations, including the
Surviving Corporations (individually, a "Purchaser Indemnified Party") from and
against all Liabilities, losses, costs and expenses (including, without
limitation, interest, penalties and reasonable attorneys' fees and expenses
incurred before and at trial or any other proceeding, at all tribunal levels,
and whether or not suit or any other proceeding is instituted, and in
establishing the right to be indemnified hereunder) (collectively, "Losses")
incurred directly or indirectly by a Purchaser Indemnified Party by reason of or
resulting from:
3
(i) any breach or inaccuracy of any of the
representations or warranties of either Corporation contained in or made
pursuant to the Purchase Agreement, any agreement or certificate executed or
delivered pursuant to the Purchase Agreement, or any Schedule or Exhibit
thereto;
(ii) any breach of any of the covenants,
agreements or obligations of or by either Corporation contained in or made
pursuant to the Purchase Agreement, any agreement executed or delivered pursuant
to the Purchase Agreement, or any Schedule or Exhibit thereto, or any breach by
any of the Target Stockholders under Section 1 of this Agreement; and/or
(iii) any claim made by a third party alleging
facts which, if true, would entitle a Purchaser Indemnified Party to
indemnification pursuant to this Section 4.
5. LIMITATIONS ON LIABILITY OF TARGET STOCKHOLDERS.
(a) For the purposes of this Agreement, "Principal Target
Stockholder" shall mean any of, and "Principal Target Stockholders" shall mean
all of, ▇▇▇▇▇ ▇▇▇▇▇▇, The ▇▇▇▇▇▇ Family Charitable Remainder Trust, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
(b) No Principal Target Stockholder shall, except in the case
of willful or intentional breaches or defaults of, or caused by, such Principal
Target Stockholder, or criminal or fraudulent conduct on his or her part, be
obligated to pay amounts pursuant to Sections 1, 2 and/or 4 above to the extent
that such amounts would exceed, in the aggregate, the aggregate amount of Merger
Consideration, Additional Consideration and other consideration or compensation
paid or payable to such Target Stockholder pursuant to the Purchase Agreement
and the Restrictive Covenant and the amount of any incentive employment
compensation payable at Closing in connection with any employment agreement or
arrangement between either Corporation and such Principal Target Stockholder.
Except with respect to willful or intentional acts, or willful or intentional
breaches or defaults caused by, a Target Stockholder, or criminal or fraudulent
conduct on his or her part, the liability under this Agreement of any Target
Stockholder who is not a Principal Target Stockholder may be satisfied only out
of such Target Stockholder's Pledged Shares pursuant to the exercise of secured
party remedies under the Pledge Agreement.
(c) Neither Purchaser nor either Subsidiary shall be entitled
to recover any Losses as a result of a breach of this Agreement unless and until
such Losses exceed, in the aggregate, $200,000. However, once such Losses do, in
the aggregate, exceed $200,000, Purchaser and Subsidiaries may recover all of
such Losses, including the first $200,000 thereof. The foregoing limitation on
the rights and remedies of Purchaser and Subsidiaries shall not apply to Losses
which result from any criminal or fraudulent act or omission or any willful,
intentional or knowing misrepresentation, breach of warranty or breach of
covenant, any breach of the representations and warranties contained in Sections
4.29, 4.31 or 4.34 of the Purchase Agreement, or to the rights and remedies of
Purchaser or Subsidiaries against the Corporations and the Key Employees
referred to in Sections 9.5 and 9.16 of the Purchase Agreement in the event
Closing does not occur. Further, if Closing does not occur, in addition to any
liability of the Corporations under the Purchase Agreement, only the Key
Employees shall have any liability under this Agreement.
6. PLEDGE AGREEMENT. Each Target Stockholder acknowledges and agrees
that all of his or her representations, warranties, covenants, agreements and
obligations set forth in this Agreement shall, assuming Closing occurs, be
secured by the Pledge Agreement on the Closing Date. This Agreement shall remain
in full force and effect in the event of, and shall survive, any termination of
the Pledge Agreement.
4
7. CONTRIBUTION AND INDEMNITY AMONG TARGET STOCKHOLDERS.
(a) The provisions of this Section create rights and
obligations only of the Target Stockholders and do not create any rights or
obligations of Purchaser or either Subsidiary, or otherwise in any manner affect
or involve Purchaser or either Subsidiary. These provisions constitute a
separate agreement among the Target Stockholders which are set forth in this
Agreement solely for convenience.
(b) The Target Stockholders each hereby agree that each will
contribute and bear his or her pro rata share, based upon the percentage of
Merger Consideration that he or she receives, of any cost, loss, obligation or
liability assessed against or paid by any other Target Stockholder to Purchaser
or Subsidiaries pursuant to this Agreement or the Pledge Agreement. If a Target
Stockholder ("Indemnified Target Stockholder") pays more than his or her pro
rata share of any such cost, loss, obligation or liability, then the other
Target Stockholders agree to indemnify and promptly pay (but in any event not
later than five business days thereafter) to such Indemnified Target Stockholder
their respective pro rata shares of such cost, loss, obligation or liability.
8. NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of Purchaser
or either Subsidiary to exercise, and no delay in the exercise of, any right,
power, privilege or remedy of Purchaser or either Subsidiary hereunder or under
the Purchase Agreement or any other agreement or instrument executed in
connection herewith or therewith or pursuant hereto or thereto, or pursuit of
any particular right, power, privilege or remedy hereunder or thereunder at any
particular time, singly or together with others, or any partial exercise
thereof, shall operate as a waiver of, or preclude the exercise or availability
of, any right, power, privilege or remedy of Purchaser or either Subsidiary
under this Agreement or the Purchase Agreement or any other agreement or
instrument executed or delivered in connection herewith or therewith or pursuant
hereto or thereto.
9. AMENDMENTS AND WAIVERS. The parties may, by written agreement signed
by the parties, modify any of the covenants or agreements or extend the time for
the performance of any of the obligations contained in this Agreement or in any
document delivered pursuant to this Agreement. Any party may waive, by written
instrument signed by such party, any inaccuracies in the representations and
warranties of another party or compliance by another party with any of its
obligations contained in this Agreement or in any document delivered pursuant to
this Agreement. This Agreement may be amended only by written instrument signed
by the parties hereto.
10. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
11. NOTICES. Any notice, request or other document to be
given hereunder to a party shall be in writing and delivered in person or sent
by registered or certified mail, postage prepaid, return receipt requested, or
an overnight air courier service, as follows:
If to Purchaser or either Subsidiary, addressed to it
at:
All American Semiconductor, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
5
With a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Constant ▇▇▇▇▇▇▇▇ & Bilzin
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
If to the Target Stockholders (or any of them),
addressed to him, her or them at the respective
address(es) set forth in Schedule I attached.
With a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
All such notices, requests and other documents shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, first class postage prepaid, return
receipt requested, if mailed; and the next business day after timely delivery to
the courier, if sent by an overnight air courier service guaranteeing next day
delivery. Any party may change its address for receiving notices, requests and
other documents by giving written notice of such change to the other parties
hereto.
12. PARTIAL INVALIDITY. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, and is not reformed by such court, such holding shall not
invalidate or render unenforceable any other provision hereof.
13. SECTION HEADINGS. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
14. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
15. ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement and the Schedules and Exhibits thereto and the agreements and
instruments delivered pursuant hereto or thereto, contains the entire agreement
among the parties hereto, and supersedes all prior agreements and undertakings
between or among the parties hereto relating to the subject matter hereof and
thereof, including, without limitation, any letter of intent or proposal
executed or delivered by or on behalf of any of the parties prior to the date
hereof (except for any existing confidentiality restrictions and exclusivity
agreements, including, without limitation, those set forth in paragraphs 8, 9,
10 and 11 of that certain letter of intent, dated June 28, 1995, as extended,
among Purchaser, Added Value, Rocky Mountain and the Principal Target
Stockholders, which shall survive).
16. GENDER. With respect to the language of this Agreement, the
use of the masculine gender shall include the feminine and neuter, and the use
of the neuter shall include the masculine and/or feminine, in each case, as the
context reasonably requires.
17. ACKNOWLEDGMENT. Each Target Stockholder represents and
warrants to Purchaser and Subsidiary that he or she has read and understood the
Purchase Agreement and has been advised by independent legal counsel with
respect to all matters relating to this Agreement (or understands that he or she
has the right
6
to have been so advised, and that seeking and receiving such independent legal
advice is advisable).
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the date first above written.
TARGET STOCKHOLDERS:
Principal Target Stockholders:
-------------------------- -------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, individually ▇▇▇▇ ▇. ▇▇▇▇▇▇
and personally, and as sole
trustee of The ▇▇▇▇▇▇ Family
Charitable Remainder Trust _________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------- -------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------- -------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Target Stockholders Who Are Not
Principal Target Stockholders:
------------------------- -------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------- -------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
▇▇▇ ▇. ▇▇▇▇▇▇
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PURCHASER:
ALL AMERICAN SEMICONDUCTOR, INC.
By:_____________________________
Title:_______________________
CALIFORNIA SUBSIDIARY:
ALL AMERICAN ADDED VALUE, INC.
By:_____________________________
Title:_______________________
COLORADO SUBSIDIARY:
ALL AMERICAN A.V.E.D. INC.
By:_____________________________
Title:_______________________
The undersigned hereby executes this Agreement in order to join in all
of the approvals, consents, representations, warranties, covenants, agreements,
acknowledgments and waivers set forth in Section 3 of the above Agreement.
ADDED VALUE ELECTRONICS
DISTRIBUTION, INC.
By:____________________________
Title:______________________
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SCHEDULE "I"
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EXHIBIT "C"
PLEDGE AGREEMENT
STOCK PLEDGE AGREEMENT
STOCK PLEDGE AGREEMENT ("Agreement"), dated __________, 1995, by and among
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"Target Stockholder" and, collectively, the "Target Stockholders"), in favor
of ALL AMERICAN SEMICONDUCTOR, INC., a Delaware corporation ("Purchaser"),
ALL AMERICAN ADDED VALUE, INC., a California corporation, and ALL AMERICAN
A.V.E.D., INC., a Colorado corporation (collectively, the "Surviving
Corporations") (Purchaser and the Surviving Corporations are collectively
referred to as "Secured Party").
PRELIMINARY STATEMENT
Reference is made to the Merger Purchase Agreement pursuant to which
this Agreement is executed and delivered ("Purchase Agreement") among Purchaser,
Subsidiaries, Added Value Electronics Distribution, Inc., a California
corporation ("Added Value"), and A.V.E.D.-Rocky Mountain, Inc., a Colorado
corporation ("Rocky Mountain"). Capitalized terms used herein, which are not
defined herein, shall have the respective meanings ascribed to them in the
Purchase Agreement.
NOW, THEREFORE, in consideration of the Merger Consideration and, if
applicable, Additional Consideration to be received by each of the Target
Stockholders, and in order to induce Purchaser and Subsidiaries to consummate
the transactions contemplated by the Purchase Agreement, the Target Stockholders
hereby make the following covenants and agreements in favor of Purchaser and the
Surviving Corporations.
1. DEFINED TERMS. As used herein, the following terms shall
have the following meanings:
"Collateral" shall mean, with respect to each Target
Stockholder, (a) the All American Shares owned by such Target Stockholder as set
forth in the Merger Consideration tables set forth in Exhibit "G" to the
Purchase Agreement, and his or her beneficial interest in the Voting Trust
Agreement, and, with respect to the Target Stockholders collectively, all of the
All American Shares owned by the Target Stockholders set forth in Exhibit "G" to
the Purchase Agreement and their collective beneficial interests in the Voting
Trust Agreement, and (b) all Proceeds arising from the foregoing.
"Event of Default" shall mean, with respect to a Target
Stockholder, a material breach by such Target Stockholder of any of his or her
representations, warranties, covenants, obligations, restrictions or agreements
contained in the Guaranty and Agreement, the Restrictive Covenant, the Voting
Trust Agreement or this Agreement, or failure by such Target Stockholder to pay
or perform any of the Obligations of such Target Stockholder, which is not cured
(if curable) within thirty (30) days following written notice thereof to such
Target Stockholder (such 30-day period being inclusive of, and not in addition
to, any grace or cure period set forth in any other such agreement).
"Obligations" shall mean, with respect to each Target
Stockholder, all of such Target Stockholder's obligations of any kind or
description whatever under the Guaranty and Agreement, the Restrictive Covenant,
the Voting Trust Agreement and this Agreement, including, without limitation,
all indemnity obligations thereunder and hereunder, and the obligation to pay
damages of any kind to Secured Party as a consequence of any Event of Default,
and including any and all of the foregoing for which he or she is jointly and
severally liable pursuant to the terms of this Agreement or any of such other
agreements.
"Proceeds" shall have the meaning assigned to it under the
Uniform Commercial Code and, in any event, shall include, but not be limited to,
(i) any and all payments (in any form whatever) made or due and payable to a
Target Stockholder from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any
governmental body, authority, bureau or agency (or any person acting under color
of governmental authority) or other person; and (ii) any and all amounts from
time to time paid or payable with respect to or in connection with any of the
Collateral, whether in cash or in kind, including dividends or distributions of
any kind (cash, stock or other property), and, subject to Section 4 hereof,
including any additional or other All American Shares, Voting Trust
Certificates, or other securities received in exchange for or in addition to or
replacement of the Collateral described in subsection (a) of the definition
thereof pursuant to any recapitalization, reclassification, stock split, reverse
stock split, conversion, merger or other transaction.
"Uniform Commercial Code" shall mean the Uniform Commercial
Code as the same may from time to time be in effect in the State of Florida,
except as the context may otherwise require.
2. ACKNOWLEDGMENT OF OBLIGATIONS. The Obligations of each Target
Stockholder, including all Obligations for which he or she is jointly and
severally liable pursuant to this Agreement, the Guaranty and Agreement, the
Restrictive Covenant and/or the Voting Trust Agreement, shall each be secured by
all of the Collateral owned by such Target Stockholder. Except as otherwise
provided in the Guaranty and Agreement, the Restrictive Covenant, the Voting
Trust Agreement or in this Agreement, the Obligations are the joint and several
obligations of the Target Stockholders and, upon an Event of Default relating to
any Target Stockholder, the Collateral owned by each Target Stockholder so
jointly and severally liable shall be available to Secured Party and shall be
subject to all of Secured Party's rights and remedies hereunder, including the
right of foreclosure.
3. ASSIGNMENT AND GRANT OF SECURITY INTEREST. As security for the
prompt and complete payment and performance when due of all the Obligations owed
by him or her, and to induce Secured Party to consummate the Purchase Agreement,
each Target Stockholder hereby grants to Secured Party a security interest in
all of such Target Stockholder's right, title and interest in and to the
Collateral owned by such Target Stockholder. The Collateral (and all stock
certificates and voting trust certificates evidencing the Collateral) shall
remain in the possession of Secured Party as set forth in the Voting Trust
Agreement.
4. PROCEEDS. Secured Party authorizes each Target Stockholder to
collect all Proceeds (including cash and stock dividends) of the Collateral
(other than reissues of stock pursuant to a recapitalization, where the
recapitalized stock and the existing stock for which it is being exchanged are
of equivalent value, and where giving such recapitalized stock or a portion
thereof to the Target Stockholders would therefore represent a decrease in the
value of the Collateral). Secured Party may, without cause or notice after the
occurrence and during the continuance of an Event of Default, curtail or
terminate said authority at any time. If required by Secured Party at any time
after the occurrence and during the continuance of an Event of Default, all such
Proceeds shall be paid directly to Secured Party and held as Collateral pursuant
hereto.
5. REPRESENTATIONS AND WARRANTIES. Each of the Target Stockholders
hereby represents and warrants to Secured Party (and agrees that each such
representation and warranty shall be a continuing representation and warranty
until the Obligations have been paid, performed and satisfied in full or this
Agreement otherwise terminates) that:
(a) Except for the security interests granted to Secured Party
pursuant to this Agreement and except for the Voting Trust Agreement, such
Target Stockholder is the sole owner of the Collateral applicable to him or her,
having good and marketable title thereto, free and clear of any and all liens,
charges or other encumbrances.
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(b) This Agreement constitutes a valid and continuing first
lien on and a perfected security interest in the Collateral owned by such Target
Stockholder in favor of Secured Party, prior to all other liens, charges or
other encumbrances of any kind whatever, and is enforceable as such as against
creditors of such Target Stockholder. All action necessary or desirable to
protect and perfect such security interest has been duly taken.
(c) There is not any actions, suits or proceedings at law or
in equity (governmental or nongovernmental), or judgments, writs or decrees,
pending or, to the knowledge of such Target Stockholder, threatened against or
affecting such Target Stockholder, or imminent, as to which (with respect to
actions, suits or proceedings) there is a reasonable possibility of an adverse
determination and which, if adversely determined, would individually or in the
aggregate materially impair the rights and interests granted to Secured Party
hereunder, or, with respect to judgments, writs or decrees, if enforced, would
individually or in the aggregate materially impair the rights and interests
granted to Secured Party hereunder.
6. COVENANTS. Each of the Target Stockholders covenants and
agrees with Secured Party that from and after the date of this Agreement and
until the Obligations are fully paid, performed and satisfied or this Agreement
terminates in accordance with the terms hereof:
(a) At any time and from time to time, upon the written
request of Secured Party, and at such Target Stockholder's expense, such Target
Stockholder will promptly and duly execute and deliver any and all such further
instruments, certificates and documents and take such further action as Secured
Party may reasonably deem necessary in obtaining the full benefits of this
Agreement and of the rights and powers herein granted, including, without
limitation, the execution and delivery of stock certificates, voting trust
certificates, stock powers and other instruments of transfer.
(b) Such Target Stockholder will pay promptly when due any
taxes, assessments and governmental charges or levies imposed upon the
Collateral owned by such Target Stockholder.
(c) Such Target Stockholder will perform and comply in all
material respects with all material obligations under all agreements (including
without limitation the Voting Trust Agreement and the Restrictive Covenant) to
which it is a party or by which it is bound, in each case, relating to the
Collateral owned by such Target Stockholder.
(d) Such Target Stockholder will not create, permit or suffer
to exist, and will defend the Collateral against and take such other action as
is necessary to remove, any lien, charge or other encumbrance on the Collateral
owned by such Target Stockholder, except for the security interest in the
Collateral granted to Secured Party hereunder (and the rights of the Voting
Trustees under the Voting Trust Agreement), and will defend the right, title and
interest of Secured Party in and to any of such Target Stockholder's rights to
the Collateral owned by such Target Stockholder and in and to the Proceeds
therefrom against the claims and demands of all other persons whomsoever.
(e) Such Target Stockholder will advise Secured Party
promptly, in reasonable detail, (i) of any lien, charge or other encumbrance
made or asserted against any of the Collateral owned by such Target Stockholder,
and (ii) of the occurrence of any other event which to his or her knowledge
would have a material adverse effect on the security interests created hereunder
in the Collateral owned by such Target Stockholder.
(f) Such Target Stockholder will not sell or otherwise dispose
of all or any part of the Collateral except as permitted by the terms of this
Agreement, the Restrictive Covenant and the Voting Trust Agreement.
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7. APPOINTMENT OF SECURED PARTY AS ATTORNEY-IN-FACT.
(a) Each Target Stockholder hereby irrevocably constitutes and
appoints Purchaser or any officer or agent of Purchaser, with full power of
substitution, as his or her true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of such Target
Stockholder and in the name of such Target Stockholder or in its, his or her own
name, from time to time in Purchaser's discretion after the occurrence and
during the continuance of an Event of Default, for the purpose of carrying out
the terms of this Agreement, to take any and all appropriate action and to
execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement (including, without
limitation, the agreements contained in Section 9) and, without limiting the
generality of the foregoing, hereby gives Purchaser the power and right, on
behalf of such Target Stockholder, without notice to or assent by such Target
Stockholder, to do the following:
(i) upon the occurrence and during the continuance
of an Event of Default, to ask, demand, collect, receive and give acquittances
and receipts for any and all moneys due and to become due with respect to the
Collateral and, in the name of such Target Stockholder or in its own name or
otherwise, to take possession of and endorse and collect any checks, drafts,
notes, acceptances or other instruments for the payment of moneys due with
respect to the Collateral and to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise as deemed appropriate by
Purchaser for the purpose of collecting any and all such moneys due with respect
to the Collateral;
(ii) upon failure of such Target Stockholder
timely so to do after the occurrence and during the continuance of an Event of
Default, to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral except for
the security interests in the Collateral granted hereby; and
(iii) upon the occurrence and during the continuance
of an Event of Default, (A) to direct any party liable for any payment to
Purchaser with respect to the Collateral owned by such Target Stockholder to
make payment of any kind and all moneys due and to become due thereunder
directly to Secured Party or as Purchaser shall direct; (B) to receive payment
of and give receipt for any and all moneys, claims and other amounts due and to
become due at any time in respect of or arising out of any such Collateral; (C)
to sign and endorse any invoices, drafts against debtors, assignments,
verifications and notices in connection with accounts and other documents
relating to such Collateral; (D) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect such Collateral and to enforce any other right in respect of any
Collateral; (E) to defend any suit, action or proceeding brought against such
Target Stockholder with respect to any such Collateral; (F) to settle,
compromise or adjust any suit, action or proceeding described above and, in
connection therewith, to give such discharges or releases as Purchaser may deem
appropriate; and (G) generally to sell, transfer, pledge, make any agreement
with respect to or otherwise deal with any of such Collateral as fully and
completely as though Purchaser were the absolute owner thereof for all purposes,
and to do, at any time, or from time to time after the occurrence and during the
continuance of an Event of Default, at the expense of such Target Stockholder,
all acts and things which Purchaser deems necessary to protect, preserve or
realize upon such Collateral and Secured Party's security interest therein, in
order to effect the intent of this Agreement, all as fully and effectively as
such Target Stockholder might do. The Target Stockholders hereby ratify all that
said attorney shall lawfully do or cause to be done by virtue hereof. This power
of attorney is a power coupled with an interest and shall be irrevocable.
(b) The powers conferred on Purchaser hereunder are
solely to protect Secured Party's interest in the Collateral and shall not
impose any duty upon it to exercise such powers. Purchaser shall be accountable
only for amounts
4
that it actually receives as a result of the exercise of such powers and neither
Purchaser nor any of Purchaser's officers, directors, employees or agents shall
be responsible to any Target Stockholder for any act or failure to act, except
for any act or failure to act that is finally adjudicated or otherwise
conclusively determined to be attributable solely to the gross negligence or
wilful misconduct of Purchaser or such officer, director, employee or agent.
(c) Each of the Target Stockholders also authorizes Purchaser
at any time and from time to time upon the occurrence and during the continuance
of an Event of Default to execute, in connection with the sale provided for in
Section 9 of this Agreement, any endorsements, assignments or other instruments
of conveyance or transfer with respect to the Collateral owned by such Target
Stockholder.
8. PERFORMANCE BY SECURED PARTY OF OBLIGATIONS. If a Target Stockholder
fails to perform or comply with any of his or her agreements contained herein
and Secured Party, as provided for by the terms of this Agreement, shall perform
or comply on behalf of such Target Stockholder or otherwise cause performance or
compliance with such agreement, the expenses of Secured Party incurred in
connection with such performance or compliance (including without limitation the
expenses of all matters covered in Section 7 above) shall be reimbursed to
Secured Party on demand and shall constitute Obligations secured hereby.
9. REMEDIES; RIGHTS UPON DEFAULT. Each of the Target Stockholders
acknowledges and agrees that it is the intention of such Target Stockholder
that, upon the occurrence and during the continuance of an Event of Default,
Secured Party shall be able to take all necessary and appropriate action to
realize upon the Collateral owned by such Target Stockholder in order to receive
payment and performance in full of the Obligations owed by such Target
Stockholder. If an Event of Default with respect to a Target Stockholder shall
occur and be continuing, Secured Party may exercise in addition to all other
rights and remedies granted to it in this Agreement and in any other instrument
or agreement securing, evidencing or relating to any of the Obligations all
rights and remedies of a secured party under the Uniform Commercial Code.
Secured Party shall apply the net proceeds of any collections, recovery,
receipt, appropriation, realization or sale of or with respect to such
Collateral (after deducting all reasonable costs and expenses of every kind
incurred therein or incidental to the care, safekeeping or otherwise of any or
all of such Collateral or in any way relating to the rights of Secured Party
hereunder, including reasonable attorneys' fees and legal expenses) to the
payment in whole or in part of the Obligations. After so applying such net
proceeds and after the payment by Secured Party of any other amount required by
any provision of law, the remaining balance of such net proceeds shall be
applied as any court of competent jurisdiction, such Target Stockholder or
whomever is lawfully entitled to receive such funds may direct. To the extent
permitted by applicable law, such Target Stockholder waives all claims, damages
and demands against Secured Party arising out of the repossession, retention or
sale of the Collateral. Each Target Stockholder agrees that Secured Party need
not give more than ten (10) days notice of the time and place of any public sale
or of the time after which a private sale may take place and that such notice is
reasonable notification of such matters. Any balance of the Obligations
remaining unsatisfied after realization upon such Collateral shall be
recoverable from the Principal Target Stockholders (as such term is defined in
the Guaranty and Agreement) to the extent permitted by the Guaranty and
Agreement; each such Principal Target Stockholder shall (subject to such
limitations in the Guaranty and Agreement) be responsible for any deficiency. No
deficiency may be recovered from any Target Stockholder who is not a Principal
Target Stockholder.
10. LIMITATION ON SECURED PARTY'S DUTY IN RESPECT OF COLLATERAL.
Beyond the use of reasonable care in the custody thereof, Secured Party shall
not have any duty as to any Collateral in Secured Party's possession or control
or in the possession or control of any agent or nominee of it or as to the
preservation of rights against prior parties or any other rights pertaining
thereto. Secured
5
Party shall not be obligated to pay any amounts to any Target Stockholder with
respect to the Collateral owned by such Target Stockholder due to its failure to
exercise reasonable care in the custody thereof, except such amounts as are
finally adjudicated or otherwise conclusively determined to be attributable
solely to Secured Party's gross negligence or wilful misconduct with respect to
such Collateral in Secured Party's possession or control.
11. RIGHT TO SUBSTITUTE COLLATERAL. Any Target Stockholder may, at any
time during the term of this Agreement, propose to substitute collateral of
reasonably equivalent value to the Collateral owned by such Target Stockholder
for such Collateral owned by such Target Stockholder. If a Target Stockholder
makes such a proposal, and the substitute collateral offered is in all material
respects of equivalent value to, and as readily marketable and as stable in
value as, the Collateral, Secured Party shall accept such substitute collateral
for such Collateral provided that Secured Party is granted a perfected, first
priority lien in such substitute collateral and such Target Stockholder executes
and delivers to Secured Party such documents as Secured Party reasonably
requests to give effect to the foregoing without in any manner diminishing
Secured Party's rights, protections and benefits under this Agreement.
12. VOTING; DIVIDENDS. So long as there shall exist an Event of
Default, Secured Party shall be entitled to exercise all voting power with
respect to the shares of capital stock of the Target Stockholder pledged
pursuant hereto (including the right to instruct the Voting Trustees pursuant to
the Voting Trust Agreement) and to receive and retain, as additional Collateral
hereunder, any and all dividends and interest at any time and from time to time
declared or paid upon any such Collateral.
13. TERMINATION. Unless an Event of Default shall have occurred and is
continuing, the security interest in the Collateral granted pursuant to this
Agreement shall terminate on the second anniversary of the date hereof. At such
time, Secured Party shall do or cause to be done all such things as may be
necessary to extinguish its security interest in the Collateral. If an Event of
Default (or an event which, with or without notice or lapse of time or both, or
if not cured, would result in an Event of Default) does exist at such second
anniversary, the pledges created under this Agreement shall not terminate as to
all Target Stockholders liable with respect thereto, but shall continue until
all Obligations have been paid, performed and satisfied in full or all
Collateral securing said Obligations has been fully realized upon; PROVIDED,
HOWEVER, that, if the possible damages (of any and all kinds) recoverable by
Secured Party in respect of such Event of Default could not, under any
circumstances, in Secured Party's sole (but good faith) judgment, equal or
exceed the then-value of the All American Shares subject to the pledge (after
giving effect to all negative fluctuations of value of the Collateral that could
occur until such Collateral is likely, in Secured Party's judgment, to be
realized upon and sold), Secured Party shall release from the pledge, on a pro
rata basis as among the Target Stockholders, the Collateral having a value in
excess of such possible damages. While an Event of Default exists (or an event
which, with or without notice or lapse of time or both, or if not cured, would
result in an Event of Default) with respect to a Target Stockholder, none of the
transfers of All American Shares permitted to be made by such Target Stockholder
under the Restrictive Covenant, the Voting Trust Agreement or otherwise shall be
permitted.
14. NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of Secured
Party to exercise, and no delay in the exercise of, any right, power, privilege
or remedy of Secured Party hereunder, or under the Purchase Agreement or any
other agreement or instrument executed in connection herewith or therewith or
pursuant hereto or thereto, or pursuit of any particular right, power, privilege
or remedy hereunder or thereunder at any particular time, singly or together
with others, or any partial exercise thereof, shall operate as a waiver of, or
preclude the exercise or availability of, any right, power, privilege or remedy
of Secured Party under this Agreement or the Purchase Agreement or any other
6
agreement or instrument executed or delivered in connection herewith or
therewith or pursuant hereto or thereto.
15. AMENDMENTS AND WAIVERS. The parties may, by written agreement
signed by the parties, modify any of the covenants or agreements or extend the
time for the performance of any of the obligations contained in this Agreement
or in any document delivered pursuant to this Agreement. Any party may waive, by
written instrument signed by such party, compliance by another party with any of
its obligations contained in this Agreement or in any document delivered
pursuant to this Agreement. This Agreement may be amended only by written
instrument signed by the parties hereto.
16. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
17. NOTICES. Any notice, request or other document to be given
hereunder to a party shall be in writing and delivered in person or sent by
registered or certified mail, postage prepaid, return receipt requested, or an
overnight air courier service, as follows:
If to Secured Party, addressed to it at:
All American Semiconductor, Inc.
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▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
With a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Constant ▇▇▇▇▇▇▇▇ & Bilzin
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
If to the Target Stockholders (or any of them),
addressed to him, her or them at the respective
address(es) set forth in Schedule I attached to the
Guaranty and Agreement.
With a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
All such notices, requests and other documents shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, first class postage prepaid, return
receipt requested, if mailed; and the next business day after timely delivery to
the courier, if sent by an overnight air courier service guaranteeing next day
delivery. Any party may change its address for receiving notices, requests and
other documents by giving written notice of such change to the other parties
hereto.
18. PARTIAL INVALIDITY. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, and is not reformed by such court, such holding shall not
invalidate or render unenforceable any other provision hereof.
7
19. SECTION HEADINGS. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
20. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
21. ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement and the Schedules and Exhibits thereto and the agreements and
instruments delivered pursuant hereto or thereto, contains the entire agreement
among the parties hereto, and supersedes all prior agreements and undertakings
between or among the parties hereto relating to the subject matter hereof and
thereof, including, without limitation, any letter of intent or proposal
executed or delivered by or on behalf of any of the parties prior to the date
hereof.
22. GENDER. With respect to the language of this Agreement,
the use of the masculine gender shall include the feminine and neuter, and the
use of the neuter shall include the masculine and/or feminine, in each case, as
the context reasonably requires.
23. ACKNOWLEDGMENT. Each Target Stockholder represents and warrants to
Secured Party that he or she has read and understood this Agreement and the
Purchase Agreement (including, but not limited to, who is and who is not
considered a Principal Target Stockholder) and has been advised by independent
legal counsel with respect to all matters relating to this Agreement (or
understands that he or she has the right to have been so advised, and that
seeking and receiving such independent legal advice is advisable).
8
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the date first above written.
TARGET STOCKHOLDERS:
Principal Target Stockholders:
------------------------- -------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------- -------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------- -------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Target Stockholders Who Are Not
Principal Target Stockholders:
------------------------- -------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------- -------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
▇▇▇ ▇. ▇▇▇▇▇▇
SECURED PARTY:
ALL AMERICAN SEMICONDUCTOR, INC.
By:_____________________________
Title:_______________________
ALL AMERICAN ADDED VALUE, INC.
By:_____________________________
Title:_______________________
ALL AMERICAN A.V.E.D., INC.
By:_____________________________
Title:_______________________
9
EXHIBIT "D"
RESTRICTIVE COVENANT
RESTRICTIVE COVENANT
RESTRICTIVE COVENANT ("Agreement"), dated __________, 1995, by and
among ▇▇▇▇▇ ▇▇▇▇▇▇, THE ▇▇▇▇▇▇ FAMILY CHARITABLE REMAINDER TRUST, ▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇ ▇. ▇▇▇▇▇▇ (each, a "Target Stockholder" and,
collectively, the "Target Stockholders"), in favor of ALL AMERICAN
SEMICONDUCTOR, INC., a Delaware corporation ("Purchaser"), ALL AMERICAN ADDED
VALUE, INC., a California corporation, and ALL AMERICAN A.V.E.D., INC., a
Colorado corporation (collectively, the "Surviving Corporations").
PRELIMINARY STATEMENT
Reference is made to the Merger Purchase Agreement pursuant to which
this Agreement is executed and delivered ("Purchase Agreement") among Purchaser,
Subsidiaries, Added Value Electronics Distribution, Inc., a California
corporation ("Added Value"), and A.V.E.D.-Rocky Mountain, Inc., a Colorado
corporation ("Rocky Mountain"). Capitalized terms used herein, which are not
defined herein, shall have the respective meanings ascribed to them in the
Purchase Agreement.
NOW, THEREFORE, in consideration of the Merger Consideration and, if
applicable, Additional Consideration to be received by each of the Target
Stockholders, and in order to induce Purchaser and Subsidiaries to consummate
the transactions contemplated by the Purchase Agreement, the Target Stockholders
hereby make the following covenants and agreements in favor of Purchaser and the
Surviving Corporations.
1. CONFIDENTIAL INFORMATION. Each Target Stockholder acknowledges that
he or she has been informed of the policy of Purchaser and its Affiliates
(including, without limitation, the Surviving Corporations) (collectively, the
"Purchaser Group") to maintain as secret and confidential all information and
materials relating to (i) the financial condition, businesses and interests of
the Purchaser Group (and each of them), (ii) the systems, Know-how and Records,
products, services, costs, inventions, computer software programs, marketing and
sales techniques and/or programs, methods, methodologies, manuals, lists and
other trade secrets heretofore or hereafter acquired, sold, developed,
maintained and/or used by the Purchaser Group (and each of them) and (iii) the
nature and terms of the Purchaser Group's (and each's) relationships with its
customers, suppliers, lenders, underwriters, vendors, consultants, independent
contractors, attorneys, accountants and employees (all such information and
materials being hereinafter collectively referred to as "Confidential
Information"). Each Target Stockholder further acknowledges that such
Confidential Information is of great value to the Purchaser Group (and each of
them). Each Target Stockholder understands that it is reasonably necessary to
protect the Purchaser Group's good will and business interests that such Target
Stockholder agree and, accordingly, such Target Stockholder does hereby agree,
that such Target Stockholder will not directly or indirectly (except where
authorized by the President of Purchaser for the benefit of the Purchaser Group
and/or as required in the course of his employment, if any, with the Purchaser
Group) at any time hereafter divulge or disclose for any purpose whatever to any
persons, firms, corporations or other entities other than the Purchaser Group
(hereinafter referred to collectively as "Third Parties"), or use or cause or
authorize any Third Parties to use, any such Confidential Information, except as
otherwise required by law.
2. COVENANT-NOT-TO-COMPETE. In view of (a) the Confidential Information
known to each Target Stockholder, (b) the substantial consideration paid and
payable to such Target Stockholder under or pursuant to the Purchase Agreement,
and (c) the sale of the good will of the business embodied in the Purchase
Agreement, and as a material inducement to Purchaser to consummate the Purchase
Agreement, each Target Stockholder covenants and agrees that such Target
Stockholder shall not, directly or indirectly, (A) for and during the First
Applicable Period (as set forth in Schedule I with respect to such Target
Stockholder), sell any products or services sold or offered by the Purchaser
Group (or any of them, including either of the Corporations) to any customer or
former customer of the Purchaser Group (or any of them, including either of the
Corporations), (B) for and during the First Applicable Period, obtain for resale
from any supplier of the Purchaser Group (or any of them, including either of
the Corporations) any products of the type the Purchaser Group (or any of them,
including either of the Corporations) purchases or has purchased for resale, (C)
for and during the First Applicable Period, solicit the services of, or hire,
directly or indirectly, whether on his or her own behalf or on behalf of others,
any managerial or executive employee or salesperson of the Purchaser Group (or
any of them, including either of the Corporations) or who was employed by the
Purchaser Group (or any of them, including either of the Corporations) at any
time during the period commencing one year prior to the date hereof and ending
five years following the date hereof, (D) for and during the Second Applicable
Period (as set forth in Schedule I with respect to such Target Stockholder),
obtain any interest in, any employment with, or any right to participate in,
directly or indirectly, any enterprise competitive with the business of the
Purchaser Group (or any of them, including either of the Corporations) anywhere
within the continental United States which provides goods or services to
customers located in any county or city in which either Corporation has provided
goods or services to customers at any time during the one-year period ending on
the date hereof (the "Geographical Territory"), or (E) for and during the Second
Applicable Period, otherwise assist any person or entity in so competing, or in
any capacity engage in any activity or business, passively or actively, as an
owner, participant, employee or agent, competitive with the business of the
Purchaser Group (or any of them, including either of the Corporations) in any
county or city within the continental United States which provides goods or
services to customers located in the Geographical Territory (provided that the
restrictions in (D) and (E) shall not in any event continue, with respect to any
county or city in the Geographical Territory, beyond the time that Employer or
any of its Affiliates ceases to carry on a like business therein). The foregoing
restriction shall not prevent a Principal Target Stockholder from accepting
employment as a manufacturer's representative at any time following December 31,
1997 if such manufacturer is not a major supplier to the Purchaser Group (or any
of them, including either of the Corporations). A major supplier to the
Purchaser Group is one whose products account for 5% or more of the sales of the
Purchaser Group or any member thereof. Each Target Stockholder acknowledges that
the business of the Purchaser Group is national in scope, that one can
effectively compete with such business in the Geographical Territory from
anywhere in the continental United States, and that, therefore, such
geographical area of restriction is reasonable in the circumstances to protect
the Purchaser Group's legitimate business interests. As consideration for the
respective covenants of the Target Stockholders made pursuant to Sections 1 and
2 of this Agreement, each Target Stockholder shall, on the date hereof, receive
the payment set forth opposite his or her name in Schedule I attached.
3. PURCHASER GROUP'S REMEDIES FOR BREACH OF SECTIONS 1 AND 2. Each
Target Stockholder covenants and agrees that if he or she shall violate or
breach any of his or her covenants or agreements provided for in Section 1 or 2
hereof, the Purchaser Group (and each of them) shall be entitled to an
accounting and repayment of all profits, compensation, commissions,
remunerations and benefits which such Target Stockholder directly or indirectly
has realized and realizes as a result of, growing out of or in connection with
any such violation or breach. In addition, in the event of a breach or violation
or threatened or imminent breach or violation of any provisions of Section 1 or
2 hereof, the Purchaser Group (and each of them) shall be entitled to a
temporary and permanent injunction or any other appropriate decree of specific
performance or equitable relief (without being required to post bond or other
security) from a court of competent jurisdiction in order to prevent, prohibit
or restrain any such breach or violation or threatened or imminent breach or
violation by such Target Stockholder, by such Target Stockholder's partners,
agents, representatives, servants, employers or employees and/or by any Third
Parties. The Purchaser Group (and each of them) shall be entitled to such
injunctive or other equitable relief in addition to any damages which are
suffered, together with reasonable attorneys' and paralegals' fees and costs and
other costs incurred in connection
2
with any such litigation, both before and at trial and at all tribunal levels.
It is understood that resort by the Purchaser Group (or any of them) to such
injunctive or other equitable relief shall not be deemed to waive or to limit in
any respect any other rights or remedies which the Purchaser Group (or any of
them) may have with respect to such breach or violation. Each member of the
Purchaser Group may enforce these provisions directly in its own name and right.
4. REASONABLENESS OF RESTRICTIONS.
(a) Each Target Stockholder acknowledges that any breach or
violation of the covenants set forth in Section 1 or 2 hereof will cause
irreparable injury and damage and incalculable harm to the Purchaser Group and
that it would be very difficult or impossible to measure all of the damages
resulting from any such breach or violation. Each Target Stockholder further
acknowledges that such Target Stockholder has carefully read and considered the
provisions of Sections 1, 2 and 3 hereof and, having done so, agrees that the
restrictions and remedies set forth in such Sections (including, but not limited
to, the time period, geographical and types of restrictions imposed) are fair
and reasonable and are reasonably required for the protection of the business,
trade secrets, interests and good will of the Purchaser Group. Each Target
Stockholder further acknowledges that his or her covenants in Sections 1 and 2
have been made to induce Purchaser to complete the Mergers pursuant to the
Purchase Agreement, and that Purchaser would not have done so (and no
Stockholder would be receiving or receive any Merger Consideration or Additional
Consideration) absent the covenants and agreements of the Target Stockholders
herein contained.
(b) Each Target Stockholder understands and intends that each
provision and restriction agreed to by him or her in Sections 1, 2 and 3 hereof
shall be construed as separate and divisible from every other provision and
restriction. In the event that any one of the provisions of, or restrictions in,
Sections 1, 2 and/or 3 hereof shall be held to be invalid or unenforceable, and
is not reformed by a court of competent jurisdiction, the remaining provisions
thereof and restrictions therein shall nevertheless continue to be valid and
enforceable as though the invalid or unenforceable provisions or restrictions
had not been included. In the event that any such provision relating to time
period, geographical and/or type of restriction shall be declared by a court of
competent jurisdiction to exceed the maximum or permissible time period,
geographical or type of restriction such court deems reasonable and enforceable,
said time period, geographical and/or type of restriction shall be deemed to
become and shall thereafter be the maximum time period, geographical area and/or
type of restriction which such court deems reasonable and enforceable.
5. RESTRICTIONS ON SALE BY TARGET STOCKHOLDERS OF ALL AMERICAN SHARES.
In addition to the restrictions contained in the Pledge Agreement and the Voting
Trust Agreement, and notwithstanding that the All American Shares given to the
Target Stockholders in the Mergers are registered under the Securities Act, each
Target Stockholder agrees to the following reasonable restrictions concerning
the transferability of All American Shares owned by such Target Stockholder from
and after the date hereof:
(a) During the period commencing on the date hereof, and
ending as of the close of business of the day preceding the second anniversary
of the date hereof, the Target Stockholders may not, in the aggregate, sell,
transfer or otherwise dispose of in any manner more than a number of All
American Shares equal to $1,125,000 divided by the All American Share Value, and
no individual Target Stockholder may sell, transfer or otherwise dispose of in
any manner more than a number of All American Shares equal to the product
obtained by multiplying (i) the number of All American Shares equal to
$1,125,000 divided by the All American Share Value, by (ii) a percentage (the
"Individual Percentage") which is equal to the percentage of Merger
Consideration received by such Target Stockholder in the Mergers. In addition,
during such two-year period, the Target Stockholders may not, in the aggregate,
sell, transfer or otherwise dispose of in any manner more than 50,000 All
American Shares during any 14-day period or
3
more than 10,000 All American Shares in any one day, and each Target Stockholder
shall be limited to his or her Individual Percentage of such number.
(b) Commencing with the second anniversary of the date hereof,
the Target Stockholders may not, in the aggregate, sell, transfer or otherwise
dispose of in any manner more than 200,000 All American Shares during any 14-day
period or more than 50,000 All American Shares in any one day, and each Target
Stockholder shall be limited to his or her Individual Percentage of such number.
(c) If a Target Stockholder wishes to relinquish all or a
portion of his pro rata right(s) to sell or dispose of All American Shares
described in subsection (a) or (b) above to another Target Stockholder, he or
she may do so by giving Purchaser written notice to such effect. Such
relinquishment shall be irrevocable.
(d) The restrictions set forth in subsections (a) and (b)
above shall not apply on any trading day where the last sale price of an All
American Share for the immediately preceding trading day equalled or exceeded
$5.00.
(e) The restrictions herein contained are in addition to any
restrictions which might be imposed by law (including any securities law,
including without limitation any under Rule 144 and/or Rule 145 under the
Exchange Act). In the event that Purchaser, in good faith, determines that a
legal restriction on the transferability of All American Shares by the Target
Stockholders (in whole or in part) may exist (such as, by way of example only,
securities laws restrictions or limitations which could apply if the Target
Stockholders were viewed as or considered an affiliated group or insiders),
Purchaser may cause its stock transfer agent not to process any potentially
violative transfers unless and until a legal opinion, in form and content, and
from a law firm, reasonably acceptable to Purchaser is obtained and delivered to
Purchaser (at the expense of the Target Stockholders) to the effect that the
proposed transfers are not restricted under any applicable securities or other
laws.
(f) Notwithstanding any of the foregoing contained in this
Section 5 to the contrary, each Target Stockholder represents, warrants and
covenants to Purchaser and the Surviving Corporations as follows. The Target
Stockholders have no present plan, intention or arrangement to dispose of any of
the All American Shares received by them in either Merger in a manner that would
cause either Merger to violate the continuity of shareholder interest
requirement set forth in Treasury Regulation ss. 1.368-1.
6. LIABILITY. Each of the Principal Target Stockholders shall be
jointly and severally liable for, and in respect of, any breach or violation by
any Target Stockholder of any covenant, obligation, agreement or restriction
contained in this Agreement, subject to the limitations on liability contained
in the Guaranty and Agreement. Each Target Stockholder who is not a Principal
Target Stockholder shall be liable for, and in respect of, only his or her own
breach or violation of covenants, obligations, agreements and restrictions set
forth in this Agreement, and not for, or in respect of, a breach or violation of
any other Target Stockholder, subject to the limitations on liability contained
in the Guaranty and Agreement.
7. NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of Purchaser
or the Surviving Corporations or any other member of the Purchaser Group to
exercise, and no delay in the exercise of, any right, power, privilege or remedy
of Purchaser or the Surviving Corporations or any other member of the Purchasing
Group hereunder, or under the Purchase Agreement or any other agreement or
instrument executed in connection herewith or therewith or pursuant hereto or
thereto, or pursuit of any particular right, power, privilege or remedy
hereunder or thereunder at any particular time, singly or together with others,
or any partial exercise thereof, shall operate as a waiver of, or preclude the
exercise or availability of, any right, power, privilege or remedy of Purchaser
or the
4
Surviving Corporations or any other member of the Purchaser Group under this
Agreement or the Purchase Agreement or any other agreement or instrument
executed or delivered in connection herewith or therewith or pursuant hereto or
thereto.
8. AMENDMENTS AND WAIVERS. The parties may, by written agreement signed
by the parties, modify any of the covenants or agreements or extend the time for
the performance of any of the obligations contained in this Agreement or in any
document delivered pursuant to this Agreement. Any party may waive, by written
instrument signed by such party, compliance by another party with any of its
obligations contained in this Agreement or in any document delivered pursuant to
this Agreement. This Agreement may be amended only by written instrument signed
by the parties hereto.
9. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
10. NOTICES. Any notice, request or other document to be given
hereunder to a party shall be in writing and delivered in person or sent by
registered or certified mail, postage prepaid, return receipt requested, or an
overnight air courier service, as follows:
If to Purchaser or the Surviving Corporations (or any
other member of the Purchaser Group), addressed to it
at:
All American Semiconductor, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
With a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Constant ▇▇▇▇▇▇▇▇ & Bilzin
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
If to the Target Stockholders (or any of them),
addressed to him, her or them at the respective
address(es) set forth in Schedule I attached to the
Guaranty and Agreement.
With a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
All such notices, requests and other documents shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, first class postage prepaid, return
receipt requested, if mailed; and the next business day after timely delivery to
the courier, if sent by an overnight air courier service guaranteeing next day
delivery. Any party may change its address for receiving notices, requests and
other documents by giving written notice of such change to the other parties
hereto.
11. PARTIAL INVALIDITY. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, and is not reformed by such court, such holding shall not
invalidate or render unenforceable any other provision hereof.
5
12. SECTION HEADINGS. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
13. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
14. ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement and the Schedules and Exhibits thereto and the agreements and
instruments delivered pursuant hereto or thereto, contains the entire agreement
among the parties hereto, and supersedes all prior agreements and undertakings
between or among the parties hereto relating to the subject matter hereof and
thereof, including, without limitation, any letter of intent or proposal
executed or delivered by or on behalf of any of the parties prior to the date
hereof.
15. GENDER. With respect to the language of this Agreement,
the use of the masculine gender shall include the feminine and neuter, and the
use of the neuter shall include the masculine and/or feminine, in each case, as
the context reasonably requires.
16. ACKNOWLEDGMENT. Each Target Stockholder represents and warrants to
Purchaser and the Surviving Corporations that he or she has read and understood
this Agreement and the Purchase Agreement (including, but not limited to, who is
and who is not considered a Principal Target Stockholder) and has been advised
by independent legal counsel with respect to all matters relating to this
Agreement (or understands that he or she has the right to have been so advised,
and that seeking and receiving such independent legal advice is advisable).
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the date first above written.
TARGET STOCKHOLDERS:
Principal Target Stockholders:
------------------------- -------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, individually and ▇▇▇▇ ▇. ▇▇▇▇▇▇
personally, and as sole trustee
of The ▇▇▇▇▇▇ Family Charitable
Remainder Trust _________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------- -------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
6
Target Stockholders Who Are Not
Principal Target Stockholders:
------------------------- -------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------- -------------------------
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
PURCHASER:
ALL AMERICAN SEMICONDUCTOR, INC.
By:_____________________________
Title:_______________________
SURVIVING CORPORATIONS:
ALL AMERICAN ADDED VALUE, INC.
By:_____________________________
Title:_______________________
ALL AMERICAN A.V.E.D., INC.
By:_____________________________
Title:_______________________
7
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SCHEDULE I
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Target Stockholder First Applicable Second Payment
Period Applicable
Period
==================================================================================================================================
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▇▇▇▇▇ ▇▇▇▇▇▇ 5 years 5 years $280,000
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 5 years 5 years $115,000
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 5 years 5 years $105,000
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▇▇▇▇ ▇. ▇▇▇▇▇▇ 3 years 3 years $105,000
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 5 years 5 years $ 90,000
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 3 years 2 years $ 90,000
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 5 years 5 years $ 90,000
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 3 years 1 year $ 90,000
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▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 4 years 2 years $ 75,000
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▇▇▇ ▇. ▇▇▇▇▇▇ 2 years 1 year $ 75,000
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▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 2 years 1 year $ 55,000
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 2 years 1 year $ 30,000
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EXHIBIT "E"
VOTING TRUST AGREEMENT
VOTING TRUST AGREEMENT
VOTING TRUST AGREEMENT ("Agreement"), dated __________, 1995, by and
among ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇ ▇. ▇▇▇▇▇▇ (each, a
"Target Stockholder" and, collectively, the "Target Stockholders"), and ▇▇▇▇
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, as voting trustees and not as individuals
(individually, a "Voting Trustee" and, collectively, the "Voting Trustees").
PRELIMINARY STATEMENT
Reference is made to the Merger Purchase Agreement pursuant to which
this Agreement is executed and delivered ("Purchase Agreement") among ALL
AMERICAN SEMICONDUCTOR, INC., a Delaware corporation ("Purchaser"), ALL AMERICAN
ADDED VALUE, INC., a California corporation, ALL AMERICAN A.V.E.D., INC., a
Colorado corporation, ADDED VALUE ELECTRONICS DISTRIBUTION, INC., a California
corporation, and A.V.E.D.-ROCKY MOUNTAIN, INC., a Colorado corporation.
Capitalized terms used herein, which are not defined herein, shall have the
respective meanings ascribed to them in the Purchase Agreement.
NOW, THEREFORE, in consideration of the Merger Consideration and, if
applicable, Additional Consideration to be received by each of the Target
Stockholders, and in order to induce Purchaser and Subsidiaries to consummate
the transactions contemplated by the Purchase Agreement, the Target Stockholders
hereby make the following covenants and agreements to and with the Voting
Trustees.
1. CREATION OF VOTING TRUSTS. Each Target Stockholder acknowledges that
he or she has made subject to this Agreement, and each Target Stockholder shall
deposit and deliver, and hereby irrevocably assigns, to the Voting Trustees, the
number of All American Shares owned by him or her as set forth in the Merger
Consideration tables attached as Exhibit "G" to the Purchase Agreement. The
Voting Trustees shall cause to be issued to and in the name of the respective
Target Stockholders one or more Voting Trust Certificates representing the All
American Shares so received by the Voting Trustees. The Target Stockholders
shall execute and deliver to the Voting Trustees such instruments of transfer as
the Voting Trustees may reasonably require in order to effectuate and confirm
the assignments and deposits referred to above.
2. POWERS OF VOTING TRUSTEES AND LIMITATIONS THEREON. During the term
of this Agreement and the continuance of the voting trusts created under this
Agreement the Voting Trustees shall possess and be entitled to exercise in
respect of the All American Shares from time to time subject hereto all rights
of voting and abstaining from voting or otherwise to participate in
stockholders' actions in all matters relating to Purchaser and shall, except as
provided below in this Section 2, without any limitation whatever, be free to
exercise their own discretion in so doing, including the election of any one or
more of the Voting Trustees or their nominees as directors or officers, or both,
of Purchaser. With respect to the following matters, the Voting Trustees shall
vote the All American Shares subject hereto only as instructed in writing by the
respective Target Stockholders owning the respective beneficial interests in,
and Voting Trust Certificates relating to, such All American Shares: (a) a
merger of Purchaser into or with another corporation or entity; (b) the sale of
all or substantially all of Purchaser's assets; (c) dissolution of Purchaser; or
(d) an amendment to Purchaser's certificate of incorporation which increases the
authorized shares of common stock of Purchaser or otherwise alters or modifies
Purchaser's capital structure. The Voting Trustees shall not be entitled to any
fees or commissions for their services hereunder.
3. VOTING TRUST CERTIFICATES AND PERMITTED TRANSFERS.
(a) Each Voting Trust Certificate issued hereunder shall be
substantially in the form of Schedule "I" hereto, or in such other form as may
from time to time be adopted by the Voting Trustees, and shall be signed by the
Voting Trustees. Subject to the terms hereof, a Voting Trust Certificate issued
by the Voting Trustees and so signed shall entitle the registered holder thereof
upon the termination of this Agreement (or upon the permitted sale of All
American Shares from time to time as hereinafter provided in accordance with the
terms of this Agreement), to receive in accordance with the provisions hereof a
share certificate or certificates for the number of All American Shares (or
lower number, if requested pursuant to a permitted sale) represented thereby,
and in the meantime to the rights in respect of such All American Shares
provided in this Agreement.
(b) All stock certificates evidencing All American Shares
subject to the trusts created hereby, together with all Voting Trust
Certificates relating thereto, shall, simultaneously herewith, be pledged to
Purchaser pursuant to the Pledge Agreement, which is being executed and
delivered simultaneously herewith. The Voting Trustees shall, in their
respective representative capacities as officers of Purchaser, hold all of such
stock certificates and Voting Trust Certificates on behalf of Purchaser in
accordance with the terms of the Pledge Agreement, as well as holding such items
as Voting Trustees under this Agreement. Subject to the terms of the Pledge
Agreement and this Agreement, the All American Shares owned by a Target
Stockholder subject to the trusts created by this Agreement and the pledge
created under the Pledge Agreement shall, provided that no Event of Default (as
such term is defined in the Pledge Agreement) with respect to such Target
Stockholder has occurred and is continuing, be released from the trusts created
hereby and the pledge created under the Pledge Agreement in connection with any
sale of such All American Shares by such Target Stockholder in an open-market,
arms-length, BONA FIDE sale transaction to an unrelated third party or parties
which is permitted by the Restrictive Covenant (a "Permitted Sale"). In order to
effectuate a Permitted Sale, a Target Stockholder who wishes to make a Permitted
Sale shall give the Voting Trustees at least five (5) business days advance
written notice of his or her desire to enter into a Permitted Sale, specifying
the exact number of All American Shares that shall be subject to the Permitted
Sale. Upon the execution of the Permitted Sale (which must occur no earlier than
after the fifth business day following the giving of the aforesaid notice), such
Target Stockholder shall deliver or cause the applicable broker to send to the
Voting Trustees by facsimile transmission and commercial overnight courier
service guaranteeing next day delivery, with confirmation by telephone, a
written confirmation of execution of the Permitted Sale ("Permitted Sale
Confirmation"). Upon receipt of the Permitted Sale Confirmation, the Voting
Trustees shall as soon as is practicable, but not later than five (5) days
thereafter, cause the appropriate stock certificate(s) and Voting Trust
Certificate(s) to be issued, reissued and/or cancelled in whole or in part as
necessary to deliver to such Target Stockholder or the applicable broker an
unlegended stock certificate issued in the name of such Target Stockholder for
the number of All American Shares specified in the Permitted Sale Confirmation,
and, if necessary, a Voting Trust Certificate to replace the Voting Trust
Certificate(s) cancelled in connection with the Permitted Sale covering the
balance of any All American Shares covered by the cancelled Voting Trust
Certificate(s) which are not part of the Permitted Sale. In the event of a
Permitted Sale after the Pledge Agreement has terminated (i.e., after the Voting
Trust Certificates have been released from the pledge and returned to the
appropriate Target Stockholders in accordance with the terms of the Pledge
Agreement), a Target Stockholder desiring to enter into a Permitted Sale shall,
together with the aforementioned five-day notice to the Voting Trustees, deliver
to the Voting Trustees his or her Voting Trust Certificate(s) covering at least
the number of All American Shares sought to be transferred, endorsed in such
manner and/or accompanied by such other instruments of transfer as the Voting
Trustees may reasonably require so that the Voting Trustees may undertake the
procedures set forth in the preceding sentence. Voting Trust Certificates may be
issued in blocks representing 1,000, 5,000, 10,000, 20,000, 25,000, 50,000,
100,000 and/or 200,000 All American Shares as, in the discretion of the Voting
Trustees, would help facilitate Permitted Sales which may occur. The Voting
Trustees or Purchaser may require a Target Stockholder to execute and deliver,
in connection with any purported Permitted Sale, such affidavits and other
assurances to the effect that what is proposed by the Target Stockholder
2
is in fact a Permitted Sale. Voting Trust Certificates and beneficial interests
in All American Shares subject to the voting trusts created by this Agreement
may be transferred by a Target Stockholder, for estate planning purposes, to one
or more immediate family members of such Target Stockholder, a trust for the
benefit solely of such Target Stockholder and/or his or her immediate family and
lineal descendants, or upon death by last will and testament or the laws of
intestacy, provided that, in any such case, (i) the affected All American Shares
shall, in the hands of the recipient or transferee, remain in every respect
subject to the voting trusts hereby created and all terms, provisions and
conditions of this Agreement, as if no transfer had occurred, and (ii) such
recipient or transferee executes and delivers to the Voting Trustees such
agreements and documents as the Voting Trustees request in order to evidence the
foregoing.
4. RECAPITALIZATION. In the event of the subdivision, consolidation,
change, classification or reclassification at any time of any All American
Shares at such time subject to the voting trusts hereby created into a higher or
lower number of shares of Purchaser or into a different class of shares of
Purchaser, or in the event of the conversion of such shares upon the
amalgamation of Purchaser with any other company or companies, the Voting Trust
Certificate representing the same shall thereafter represent the numbers and
classes of shares resulting from such subdivision, consolidation, change,
classification, reclassification or conversion until such Voting Trust
Certificate is exchanged for a new Voting Trust Certificate correctly describing
the securities represented thereby.
5. REGISTER. The Voting Trustees shall keep or cause to be kept at the
offices of Purchaser proper books and records in respect of the Voting Trust
Certificates, including a register or registers in which shall be recorded the
names and addresses of the holders of Voting Trust Certificates, the number of
All American Shares to which such holders are respectively entitled pursuant to
the provisions of this Agreement and such other information as may be deemed
advisable by the Voting Trustees. Such register or registers shall be kept
available for inspection by the holders of Voting Trust Certificates at all
reasonable times. The Voting Trustees may, at any time and from time to time,
change the address at which such records are kept and, in such event, shall give
notice of such change to the Target Stockholders.
6. TRANSFER PROCEDURES. Except as otherwise provided in this Agreement,
Voting Trust Certificates and the beneficial interests in the All American
Shares represented thereby shall be transferable (to the extent the transfer
thereof is permitted by the terms of this Agreement) only on the books kept by
the Voting Trustees, and no transfer shall be valid or effective except upon
transfer by the registered holder thereof or by the attorney of the registered
holder thereof duly appointed in writing upon: (i) surrender of such Voting
Trust Certificate duly endorsed and/or accompanied by an instrument of transfer
duly executed by the registered holder thereof or the attorney of the registered
holder thereof duly appointed in writing together with proof satisfactory to the
Voting Trustees of such due execution and, where applicable, of the appointment
of such attorney; and (ii) delivery of evidence of payment to the Voting
Trustees maintaining such books of a sum equal to all applicable security
transfer taxes (if any) payable in respect of such transfer. Upon such transfer,
the Voting Trustees shall cause to be issued such Voting Trust Certificates
and/or share certificate(s) as shall be proper in consequence thereof.
7. SUCCESSORS. Any person becoming entitled to a Voting Trust
Certificate in consequence of the death of the registered holder thereof or
otherwise by operation of law shall be entitled, upon surrender of the Voting
Trust Certificate and production of such evidence of the right of such person as
the Voting Trustees shall then reasonably require, and upon compliance with the
requirements of all applicable laws including payment of a sum equal to all
applicable security transfer taxes (if any) payable in respect thereof, to one
or more Voting Trust Certificates in the name of such person in lieu of the
Voting Trust Certificate so surrendered.
3
8. LOSS OR DESTRUCTION OF VOTING TRUST CERTIFICATES. In the event of
the mutilation of any Voting Trust Certificate, the Voting Trustees may upon
surrender thereof cause to be issued a replacement Voting Trust Certificate. In
the event of the loss, destruction or theft of any Voting Trust Certificate, the
Voting Trustees may cause to be issued a replacement Voting Trust Certificate
upon production of such evidence of such loss, destruction or theft and such
indemnity as the Voting Trustees may in their discretion reasonably require.
9. THIRD PARTIES. The Voting Trustees shall be entitled at all times to
treat and consider for all purposes the registered holder of a Voting Trust
Certificate as the holder and legal and beneficial owner thereof and of the
beneficial interest in the All American Shares represented thereby and shall not
be required to take notice of any interest, trust or claim of any third party.
10. DISTRIBUTIONS. Subject to the provisions of Section 11 hereof, the
registered holder of a Voting Trust Certificate, upon any distribution by
Purchaser (including without limitation any dividend or redemption payment) to
its stockholders in respect of the All American Shares, shall be entitled to
receive from the Voting Trustees his or her pro rata share of such distribution,
subject only to the requirements of the Pledge Agreement, provided that, in the
case of any payment to be made by the Voting Trustees in cash under the
provisions of this Section 10, the Voting Trustees may deduct therefrom any
amount they may be lawfully required to withhold and account for in respect of
taxes and that, in the case of any distribution to be made by the Voting
Trustees under such provisions other than in cash, the Voting Trustees may
require payment to them of the amount of any such taxes as a condition precedent
to the right of the holder of any Voting Trust Certificate to distribution.
Notwithstanding the foregoing provisions of this Section 10, where any such
distribution by Purchaser constitutes a final distribution (either by way of
redemption or otherwise) in respect of any shares of the capital stock of
Purchaser represented by a Voting Trust Certificate, the Voting Trustees shall
not be required to make any distribution under this Section 10 to the holder of
such Voting Trust Certificate until surrender thereof.
11. REGISTERED HOLDER. Any distribution or partial distribution to a
holder of a Voting Trust Certificate under the provisions of Section 10 hereof
by the Voting Trustees shall be made to the registered holder of such Voting
Trust Certificate at the time of such distribution or partial distribution
(unless otherwise directed in writing by such registered holder) whether or not
such registered holder was the registered holder thereof at the time the money
or property so distributed was received by the Voting Trustees.
12. REMOVAL OF VOTING TRUSTEE. A Voting Trustee shall cease to
be a Voting Trustee if he:
(i) is adjudged bankrupt;
(ii) is removed as a Voting Trustee by a court
of competent jurisdiction;
(iii) delivers to the other Voting Trustee then
in office his written resignation as a Voting Trustee; or
(iv) dies or becomes permanently incapacitated.
Any vacancy that may occur between Voting Trustees by resignation,
death, incapacity or inability or refusal to continue to act shall promptly be
filled by the remaining Voting Trustee. If there is no remaining Voting Trustee
or he is unable or refuses to act, any such vacancy shall be filled by the Board
of Directors of Purchaser. Every person appointed to fill any such vacancy shall
have the same rights, powers and discretions as though originally appointed a
Voting Trustee hereunder.
4
13. EXERCISE OF AUTHORITY. Either Voting Trustee, acting alone,
may carry out this Agreement, and the intent, purposes, terms and provisions
hereof and all transactions contemplated hereby.
14. CANCELLATION OF CERTIFICATES. All Voting Trust Certificates
surrendered pursuant to the provisions hereof shall be cancelled.
15. LIMITATIONS ON LIABILITY OF VOTING TRUSTEES. By way of
supplement to, and not in lieu of, the provisions of any law affording
protection or powers to trustees and notwithstanding any law or principle of law
to the contrary it is agreed that:
(a) neither a Voting Trustee nor any nominee of the Voting
Trustees shall be under any liability or responsibility by reason of any loss or
damage arising in consequence of any mistake or error of law or fact or any
matter or thing done or omitted to be done under or in relation to this
Agreement whatever except to the extent such loss or damage is in consequence of
his own wilful wrongful act, wilful wrongful neglect or wilful default;
(b) in relation to this Agreement the Voting Trustees and any
nominee of the Voting Trustees may take the opinion or advice of any counsel or
other expert, and shall not be responsible for any loss occasioned by acting or
failing to act thereon, except as provided in subsection (a) of this Section 15;
and
(c) any Voting Trustee or any firm or corporation in which he
may be a member, shareholder, officer or director or with which he may have any
other connection may deal with Purchaser or with its shares or with Voting Trust
Certificates representing the same in any manner whatever as fully as though he
were not a Voting Trustee.
16. DISSOLUTION OF VOTING TRUSTS. The voting trusts created
under this Agreement shall dissolve on the earliest of the following dates:
(a) the sixth anniversary of the date hereof;
(b) the date when all the Voting Trustees at such time
in office shall execute a written instrument so declaring; or
(c) the date when no All American Shares remain subject
to the voting trusts created hereby.
Thereafter, the Voting Trustees shall (except for a dissolution under subsection
(c)) notify all registered holders of Voting Trust Certificates of such
dissolution. Such notice shall fix a place or places and a day (which shall be
within fifteen days thereafter) at which and on and after which any registered
holder of a Voting Trust Certificate may, on surrender thereof, receive a share
certificate or certificates for the shares represented thereby. Upon such
dissolution the rights of the holders of Voting Trust Certificates shall be
confined to the rights provided by this Section 16 and the right to receive
their proportionate interest or interests in any other property then subject to
the trusts hereof and not theretofore distributed; provided that the register or
registers of the Voting Trust Certificate holders shall be kept open by the
Voting Trustees for thirty days after such dissolution to enable surrenders of
Voting Trust Certificates. At any time after thirty days following the day upon
which Voting Trust Certificates may first be surrendered pursuant to the said
notice and after distribution or payment of all other property (if any) held
upon the trusts hereof the Voting Trustees may close such registers and transfer
the shares represented by unsurrendered Voting Trust Certificates to Purchaser's
stock transfer agent for transfer to the respective registered holders of the
Voting Trust Certificates representing the same or their lawful permitted
assigns against surrender of such Voting Trust Certificates, whereupon this
Agreement shall terminate and the Voting Trustees shall be under no further
obligation to such holders, provided that the provisions of Section 15 shall
survive.
5
17. GOVERNING LAW. Notwithstanding any law or principle of law
to the contrary and regardless of the domicile or residence of any Voting
Trustee or any nominee thereof or any Target Stockholder, this Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware. Venue of any dispute shall be governed by the provisions of Section
9.7 of the Purchase Agreement.
18. AMENDMENTS AND WAIVERS. The parties may, by written agreement
signed by the parties, modify any of the covenants or agreements or extend the
time for the performance of any of the obligations contained in this Agreement
or in any document delivered pursuant to this Agreement. Any party may waive, by
written instrument signed by such party, compliance by another party with any of
its obligations contained in this Agreement or in any document delivered
pursuant to this Agreement. This Agreement may be amended only by written
instrument signed by the parties hereto.
19. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
20. NOTICES. Any notice, request or other document to be given
hereunder to a party shall be in writing and delivered in person or sent by
registered or certified mail, postage prepaid, return receipt requested, or an
overnight air courier service, as follows:
If to the Voting Trustees, addressed to them at:
All American Semiconductor, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
With a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Constant ▇▇▇▇▇▇▇▇ & Bilzin
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
If to the Target Stockholders (or any of them),
addressed to him, her or them at the respective
address(es) set forth in Schedule I attached to the
Guaranty and Agreement.
With a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
All such notices, requests and other documents shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, first class postage prepaid, return
receipt requested, if mailed; and the next business day after timely delivery to
the courier, if sent by an overnight air courier service guaranteeing next day
delivery. Any party may change its address for receiving notices, requests and
other documents by giving written notice of such change to the other parties
hereto. The requirements concerning notification of an intended Permitted Sale
and Permitted Sale Confirmation are in addition to (and not in lieu of or
superseded by) the requirements of this Section.
21. PARTIAL INVALIDITY. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
6
jurisdiction, and is not reformed by such court, such holding shall not
invalidate or render unenforceable any other provision hereof.
22. SECTION HEADINGS. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
23. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
24. ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement and the Schedules and Exhibits thereto and the agreements and
instruments delivered pursuant hereto or thereto (including the Pledge Agreement
and the Restrictive Covenant), contains the entire agreement among the parties
hereto, and supersedes all prior agreements and undertakings between or among
the parties hereto relating to the subject matter hereof and thereof, including,
without limitation, any letter of intent or proposal executed or delivered by or
on behalf of any of the parties prior to the date hereof.
25. GENDER. With respect to the language of this Agreement,
the use of the masculine gender shall include the feminine and neuter, and the
use of the neuter shall include the masculine and/or feminine, in each case, as
the context reasonably requires.
26. ACKNOWLEDGMENT. Each Target Stockholder represents and warrants to
the Voting Trustees that he or she has read and understood this Agreement and
the Purchase Agreement and has been advised by independent legal counsel with
respect to all matters relating to this Agreement (or understands that he or she
has the right to have been so advised, and that seeking and receiving such
independent legal advice is advisable).
27. DISPUTES. Section 9.14 of the Purchase Agreement shall
apply to this Agreement.
7
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the date first above written.
TARGET STOCKHOLDERS:
------------------------- ------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------- -------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------- -------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------- -------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------- -------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------- -------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇. ▇▇▇▇▇▇
VOTING TRUSTEES:
--------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇, as Voting Trustee
and not individually
--------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, as Voting
Trustee and not individually
8
SCHEDULE "I"
CERTIFICATE NO. _____
VOTING TRUST CERTIFICATE
IN RESPECT OF COMMON SHARES
OF
ALL AMERICAN SEMICONDUCTOR, INC.
(INCORPORATED UNDER THE LAWS OF DELAWARE)
THIS CERTIFIES THAT following the dissolution of the voting trusts
under, or otherwise in accordance with the terms of, a certain Voting Trust
Agreement (the "Agreement") dated as of the ____ day of _____________, 1995 and
made by and among certain stockholders of All American Semiconductor, Inc. (the
"Company") and Messrs. ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ as the original
Voting Trustees thereunder,
_______________________________________________________________________________
(Name)
who is the registered holder of this Voting Trust Certificate, will, on
surrender hereof, be entitled to receive a share certificate or certificates for
_________________ common shares with a par value of $0.01 per share (United
States currency) in the capital of the Company, or such number of shares of such
other class of the capital stock of the Company as this Voting Trust Certificate
may then represent in accordance with the terms of the Agreement, be entitled to
receive payment of the amount of any distribution received in cash by the Voting
Trustees in respect of the shares or any thereof represented hereby to the
extent not theretofore distributed by the Voting Trustees in accordance with the
terms of the Agreement and to have the rights provided by the Agreement in
respect of any dividend or other distribution received other than in cash by the
Voting Trustees in respect of such shares.
This Voting Trust Certificate is issued under and pursuant to, and the
rights of the holder or holders hereof and of the Voting Trustees are subject to
and limited by, the terms of the Agreement, an executed copy whereof is on file
and open to inspection at all reasonable times by holders of Voting Trust
Certificates at the offices of the Company at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
This Voting Trust Certificate and the beneficial interest under the
Agreement in all or any of the shares represented hereby are, subject to the
pledge of this Voting Trust Certificate to the Company pursuant to a separate
agreement and other restrictions on transferability which exist or may from time
to time exist, transferable only by the registered holder hereof, in person or
by duly authorized attorney, on the books kept by the Voting Trustees at the
aforesaid offices, upon surrender of this Voting Trust Certificate duly endorsed
and/or accompanied by a sufficient instrument of transfer duly executed by the
registered holder hereof or the attorney of such registered holder with proof
satisfactory to the Voting Trustees of such due execution and, where applicable,
of the appointment of such attorney, and payment of a sum equal to all
applicable security transfer taxes (if any) payable in respect of such transfer.
The Voting Trustees are entitled at all times to treat and consider for
all purposes the registered holder hereof as the holder and legal and beneficial
owner hereof and of the beneficial interest under the Agreement in the shares
represented hereby and are not required to take notice of any interest, trust or
claim of any third party.
The voting trusts under the Agreement will be dissolved on
______________, 2001, unless sooner dissolved in accordance with the provisions
of the Agreement.
IN WITNESS WHEREOF, the Voting Trustees have signed this certificate.
Date of Issuance:___________________________
____________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇, as Voting Trustee and
not individually
_____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, as Voting Trustee
and not individually
FORM OF ENDORSEMENT OF VOTING TRUST CERTIFICATE
For value received __________________hereby sell, assign and transfer
unto _______________________________________________________________the within
Voting Trust Certificate and the beneficial interest under the Voting Trust
Agreement referred to therein in ________shares represented by such Voting Trust
Certificate and do hereby irrevocably constitute and appoint___________________
_____________attorney to transfer such Voting Trust Certificate and interest
on the books kept by the Voting Trustees, with full power of substitution in the
premises.
Dated this _____ day of _______________, _____
____________________________________
IN the presence of:
____________________________
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the certificate in every particular without alteration
or enlargement, or any change whatever.
-2-
EXHIBIT "F-1"
AGREEMENT OF MERGER
(CALIFORNIA)
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER, dated as of the _____ day of
____________, 1995 ("Merger Agreement"), is entered into by and among ALL
AMERICAN SEMICONDUCTOR, INC., a Delaware corporation ("Parent"), ADDED VALUE
ELECTRONICS DISTRIBUTION, INC., a California corporation ("Added Value"), and
ALL AMERICAN ADDED VALUE, INC., a California corporation and a wholly-owned
subsidiary of Parent ("Surviving Corporation").
R E C I T A L S:
A. Added Value is a California corporation and on the date
hereof has authorized capital stock consisting of two hundred thousand (200,000)
shares of common stock ("Added Value Common Stock") of which one hundred three
thousand (103,000) shares are issued and outstanding.
B. Surviving Corporation is a California corporation
and on the date hereof has one hundred (100) shares of its capital stock
outstanding, all of which are owned by Parent.
C. Prior to the execution of this Merger Agreement, Parent,
Added Value and Surviving Corporation have entered into a Merger Purchase
Agreement (the "Purchase Agreement") providing for certain representations,
warranties and other agreements in connection with the transactions contemplated
hereby. This Merger Agreement and the Purchase Agreement are intended to be
construed together to effectuate their purpose.
D. The Boards of Directors of Parent, Added Value and
Surviving Corporation deem it advisable and in their mutual best interests and
in the best interests of their respective shareholders that Added Value be
acquired by Parent through a merger (the "Merger") of Added Value into Surviving
Corporation.
E. The Boards of Directors of Parent, Added Value and
Surviving Corporation have approved the Merger.
AGREEMENTS
1. Added Value shall be merged into Surviving
Corporation and Surviving Corporation shall be the surviving corporation.
2. The Merger shall become effective at such time (the
"Effective Time") as this Merger Agreement and the officers' certificates of
Surviving Corporation and Added Value are filed with the Secretary of State of
the State of California pursuant to Section 1103 of the California General
Corporation Law.
3. (a) At the Effective Time, each of the issued and
outstanding shares of Added Value Common Stock (up to a maximum of 103,000
issued and outstanding shares) shall be converted automatically into and
exchanged for the right to receive an amount (the "Merger Consideration") equal
to $24.67869 in cash (without interest) plus $41.13115 in shares of the
authorized and unissued common stock, $.01 par value, of Parent (the "Parent
Shares") at the Parent Share Value (defined below). Aggregate amounts paid per
shareholder of Added Value at the Effective Time (individually, a "Target
Stockholder" and, collectively, the "Target Stockholders") shall be rounded to
the nearest whole cent. The outstanding shares of Surviving Corporation prior to
the Merger shall remain outstanding following, and are not affected by, the
Merger.
(b) As soon as is reasonably practicable
following the Effective Time, Parent shall pay or cause to be paid the Merger
Consideration. Fractional Parent Shares shall not be issued. Any of the
shareholders of Added Value who would otherwise be entitled to receive a
fractional interest in a
Parent Share shall receive, at the time the Merger Consideration is paid, a cash
distribution in lieu of such fractional share based upon the Parent Share Value.
(c) In addition to the Merger Consideration,
the Target Stockholders may become entitled to receive Additional Consideration
(defined below) as follows:
(i) If, on the Share Appreciation Date
(defined below), the Actual Share Appreciation Value (defined below) is not
equal to or higher than the Share Appreciation Target Value (defined below), the
Additional Consideration, if any, shall, within ten (10) days following the
Share Appreciation Date, be paid to those Target Stockholders entitled to
receive Additional Consideration.
(ii) The Additional Consideration, if
any, may be paid by Parent, solely at Parent's election, in cash, in Parent
Shares (based upon the Actual Share Appreciation Value), or a combination
thereof; PROVIDED, HOWEVER, that payment shall be made in Parent Shares (based
upon the Actual Share Appreciation Value) to the extent necessary to cause the
total Merger Consideration and Additional Consideration (viewed in dollar value
using, as to valuation of Parent Shares, the Parent Share Value or Actual Share
Appreciation Value, as applicable) paid to all Target Stockholders, in the
aggregate, to consist of a higher dollar value of Parent Shares than of cash
consideration. In determining the amount (viewed in dollar value) of Parent
Shares for these purposes, effect shall be given to the amount of imputed
interest for federal and state income tax purposes, if any, which shall be
deducted in making the above calculation.
(iii) Notwithstanding any of the foregoing
to the contrary contained in this Section 3(c), in calculating any Additional
Consideration, the following provisions shall apply:
(A) If, for any thirty (30)
consecutive trading days on The NASDAQ Stock Market (or such other market or
exchange on which Parent Shares may, at such time, trade) prior to the Share
Appreciation Date, the last sale price of a Parent Share is equal to or higher
than the Share Appreciation Target Value, the total number of Parent Shares
acquired by the Target Stockholders pursuant to the Merger the sale of which
have not been restricted pursuant to the Restrictive Covenant (defined below)
over such period ("Unrestricted Shares") shall be excluded from and reduce the
number of Parent Shares referenced in clause (B) of the definition of Additional
Consideration set forth in Section 3(d)(ii) when calculating Additional
Consideration.
(B) Once the last sale price
of a Parent Share has equalled or exceeded the Share Appreciation Target Value
for any such 30-consecutive-trading-day period prior to the Share Appreciation
Date, to the extent that immediately following such period (but prior to the
Share Appreciation Date) the last sale price of a Parent Share continues to
equal or exceed the Share Appreciation Target Value, each Parent Share acquired
by any Target Stockholder pursuant to the Merger the sale of which becomes
unrestricted pursuant to the Restrictive Covenant at any such time during which
Parent Shares have continued, uninterrupted, to trade at a price equal to or
higher than the Share Appreciation Target Value shall automatically become part
of the Unrestricted Shares subject to exclusion in calculating Additional
Consideration.
(C) If, and to the extent
that, Parent, in its sole discretion, permanently waives in writing the
restrictions on transferability of all of the Parent Shares set forth in the
Restrictive Covenant at any time prior to the Share Appreciation Date and during
any 30-consecutive-trading-day period following (or commencing with) the date
that such written waiver is given (but which is prior to, or ends on, the Share
Appreciation Date) the last sale price of a Parent Share equals or exceeds the
-2-
Share Appreciation Target Value, such Parent Shares shall automatically become
part of the Unrestricted Shares subject to exclusion in calculating Additional
Consideration.
(D) For purposes of calculating
Additional Consideration, each Parent Share sold, transferred or otherwise
disposed of (other than the pledge thereof pursuant to the Pledge Agreement
(defined below) or the transfer thereof to the voting trustee under the Voting
Trust Agreement (defined below)) by any Target Stockholder to any person at any
time after the Effective Time shall conclusively be deemed to be a Parent Share
acquired by such Target Stockholder pursuant to the Merger the sale, transfer or
disposal of which shall reduce the number of Parent Shares used to calculate
Additional Consideration (regardless of any acquisitions or reacquisitions of
Parent Shares by such Target Stockholder at any time).
(E) Should there occur any stock
split, reverse stock split, stock dividend, reclassification or recapitalization
which changes the character or amount of the Parent Shares (a "Capital Stock
Change") after the Effective Time, but prior to the date on which any Additional
Consideration is to be paid, and Parent has elected or is required to pay some
or all of such Additional Consideration in Parent Shares, Parent shall make such
adjustments to such portion of the Additional Consideration that will consist of
Parent Shares as shall be equitable and appropriate in order to make such
portion of the Additional Consideration which is to consist of Parent Shares, as
nearly as practicable, equivalent in value to what such portion of the
Additional Consideration which is to consist of Parent Shares would have been
had such Capital Stock Change not occurred.
(F) Should a merger or exchange
occur with respect to the Parent Shares after the Effective Time, but prior to
the date on which any Additional Consideration is to be paid, such that the
holders of Parent Shares are given shares of capital stock ("Successor Company
Shares") of another company ("Successor Company") or cash or a combination
thereof and the Parent Shares are cancelled or otherwise cease to exist, in
calculating and paying the Additional Consideration (if any), the Share
Appreciation Target Value and the Actual Share Appreciation Value shall be
calculated with reference to the value (and any increases thereto) of Successor
Company Shares, and paid, to the extent not paid in cash, in Successor Company
Shares, after making all adjustments as are necessary, equitable and appropriate
to reach the same result that would have been reached had any (or no)
appreciation in share value occurred with respect to the Parent Shares, rather
than the Successor Company Shares, as if such merger or exchange had not
occurred. In the event of any such merger or exchange, this Agreement, including
but not limited to the obligation herein to pay Additional Consideration, shall
be binding upon any such Successor Company.
(d) For purposes of this Section 3, the following
additional definitions shall apply:
(i) "Actual Share Appreciation Value" shall
mean the higher of (A) the Parent Share Value and (B) the average last sale
price of a Parent Share on The NASDAQ Stock Market (or on whatever stock
exchange or market Parent Shares are then trading, if not The NASDAQ Stock
Market) over the 30-day period ending on the Share Appreciation Date, subject to
any necessary adjustments pursuant to Sections 3(c)(iii)(E) and 3(c)(iii)(F).
(ii) "Additional Consideration" shall mean
(with respect to each Target Stockholder) the product obtained by multiplying
(A) the amount, if any, by which the Share Appreciation Target Value exceeds the
Actual Share Appreciation Value, by (B) the number of Parent Shares issued to
such Target Stockholder pursuant to the Merger which has been owned by such
Target Stockholder at all times from and after the Effective Time through and
including
-3-
the Share Appreciation Date (subject, however, to any necessary adjustments
pursuant to Section 3(c)(iii)).
(iii) "Parent Share Value" shall mean the higher
of (A) $2.25 per share and (B) the average last sale price of a Parent Share on
The NASDAQ Stock Market over the 30-day period ending on the trading day
immediately prior to the date of the Effective Time.
(iv) "Pledge Agreement" shall mean the pledge
agreement to be executed by the Target Stockholders in favor of Parent and
Surviving Corporation pursuant to the provisions of the Purchase Agreement.
(v) "Restrictive Covenant" shall mean the
restrictive covenant to be executed and delivered to Parent and Surviving
Corporation by the Target Stockholders pursuant to the provisions of the
Purchase Agreement.
(vi) "Share Appreciation Date" shall mean June
30, 1998.
(vii) "Share Appreciation Target Value" shall
mean the sum of (A) the Parent Share Value and (B) the quotient obtained by
dividing $1,900,000 by the total number of Parent Shares issued to the Target
Stockholders, in the aggregate, upon consummation of the Merger; and
(viii) "Voting Trust Agreement" shall mean the
voting trust agreement to be entered into pursuant to the provisions of the
Purchase Agreement by the Target Stockholders with respect to the Parent Shares
beneficially owned by the Target Stockholders.
4. The Articles of Incorporation of Surviving
Corporation as in effect as of the Effective Time shall remain unchanged.
5. The bylaws of Surviving Corporation as in effect
at the Effective Time shall remain unchanged.
6. At the Effective Time, the separate existence of Added
Value shall cease and Surviving Corporation shall succeed, without other
transfer, to all the rights and property of Added Value and shall be subject to
all the debts and liabilities thereof in the same manner as if Surviving
Corporation had itself incurred them. All rights of creditors and all liens upon
the property of each constituent corporation shall be preserved unimpaired,
provided that such liens upon property of Added Value shall be limited to the
property affected thereby immediately prior to the Effective Time.
7. After the Effective Time, Added Value, through the persons
who were its officers immediately prior to the Merger, shall execute or cause to
be executed such further assignments, assurances or other documents as may be
necessary or desirable to confirm title to properties, assets and rights in
Surviving Corporation.
8. (a) Notwithstanding the approval of this Merger Agreement
by the shareholders of all or any of the constituent corporations, this Merger
Agreement may be terminated at any time prior to the Effective Time by mutual
agreement of the Boards of Directors of the constituent corporations.
(b) Notwithstanding the approval of this
Merger Agreement by the shareholders of all or any of the constituent
corporations, this Merger Agreement shall terminate forthwith prior to the
Effective Time in the event that the Purchase Agreement shall be terminated as
therein provided.
(c) In the event of the termination of this
Merger Agreement as provided above, this Merger Agreement shall forthwith become
void and there shall be no liability on the part of any of Parent, Added Value
or Surviving
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Corporation, or their respective officers or directors, except as provided in
the Purchase Agreement.
(d) This Merger Agreement may be amended by
the parties hereto any time before or after approval hereof by the shareholders
of the constituent corporations, but, after such approval, no amendments shall
be made which by law or agreement require the further approval of the
shareholders without obtaining such approval. This Merger Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
IN WITNESS WHEREOF, the parties have executed this Merger
Agreement as of the date first written above.
ALL AMERICAN SEMICONDUCTOR, INC.,
a Delaware corporation
By:______________________________
President
By:______________________________
Secretary
ADDED VALUE ELECTRONICS DISTRIBUTION, INC., a
California corporation
By:______________________________
President
By:______________________________
Secretary
ALL AMERICAN ADDED VALUE, INC., a California
corporation
By:______________________________
President
By:______________________________
Secretary
-5-
CERTIFICATE OF APPROVAL
OF
AGREEMENT OF MERGER
______________________ and _____________________ certify that:
1. They are the President and Secretary, respectively,
of Added Value Electronics Distribution, Inc., a California corporation (the
"Corporation").
2. The principal terms and conditions of the Agreement of
Merger dated as of __________, 1995, entered into by and among the Corporation,
All American Semiconductor, Inc., a Delaware corporation, and All American Added
Value, Inc., a California corporation, attached hereto were duly approved by the
board of directors and shareholders of the Corporation.
3. The Corporation has only one class of shares and
the number of shares outstanding is one hundred three thousand (103,000).
4. The shareholder vote required for approval of the
Agreement of Merger was more than 50% of the outstanding shares.
5. The number of shares voting for the approval of
the Agreement of Merger constituted 100% of the outstanding shares.
We further declare under penalty of perjury under the laws of
the State of California that the matters set forth in this Certificate are true
and correct of our own knowledge.
Date:__________________, 1995
-----------------------------
President
-----------------------------
Secretary
CERTIFICATE OF APPROVAL
OF
AGREEMENT OF MERGER
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ certify that:
1. They are the President and Secretary, respectively,
of All American Added Value, Inc., a California corporation (the "Corporation").
2. The principal terms and conditions of the Agreement of
Merger dated as of __________, 1995, entered into by and among the Corporation,
All American Semiconductor, Inc., a Delaware corporation, and Added Value
Electronics Distribution, Inc., a California corporation, attached hereto were
duly approved by the board of directors and shareholders of the Corporation.
3. The Corporation has only one class of shares and
the number of shares outstanding is one hundred (100).
4. The shareholder vote required for approval of the
Agreement of Merger was more than 50% of the outstanding shares.
5. The number of shares voting for the approval of
the Agreement of Merger constituted 100% of the outstanding shares.
6. Equity securities of the Corporation's parent corporation,
All American Semiconductor, Inc., a Delaware corporation, are to be issued in
the merger and the required vote of the stockholders of the parent corporation
was obtained.
We further declare under penalty of perjury under the laws of
the State of California that the matters set forth in this Certificate are true
and correct of our own knowledge.
Date:__________________, 1995
-----------------------------
President
-----------------------------
Secretary
EXHIBIT "F-2"
ARTICLES OF MERGER (COLORADO)
ARTICLES OF MERGER
OF
A.V.E.D.-ROCKY MOUNTAIN, INC.
A COLORADO CORPORATION
WITH AND INTO
ALL AMERICAN A.V.E.D., INC.
A COLORADO CORPORATION
These ARTICLES OF MERGER are entered into this ___ day of ________,
1995, by and between the below-named constituent corporations. The undersigned
corporation DOES HEREBY CERTIFY;
FIRST: That the name and state of incorporation of each of
the constituent corporations of the merger are as follows:
STATE OF
NAME INCORPORATION
A.V.E.D.-Rocky Mountain, Inc. Colorado
All American A.V.E.D., Inc. Colorado
SECOND: That a Plan of Merger between the parties to the merger has
been approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with the requirements of Article 111 of
Title 7 of the Colorado Revised Statutes, 1973, as amended.
To wit:
(A) That on ______ ___, 1995, the Plan of Merger was
adopted by the Board of Directors of A.V.E.D.-Rocky
Mountain, Inc., pursuant to Colo. Rev. Stat.
ss. ▇-▇▇▇-▇▇▇ and as of such date was approved by
unanimous consent of its shareholders.
(B) That on ______ ___, 1995, the Plan of Merger was
adopted by the Board of Directors of All American
A.V.E.D., Inc. and that, in lieu of shareholder
approval, the Plan of Merger was adopted pursuant to
Colo. Rev. Stat. ss. 7-111-103(7), and that the
outstanding shares of All American A.V.E.D., Inc.,
were such as to render such provision for the adoption
of these Articles applicable and eliminate the
requirement of shareholder approval.
THIRD: That the Plan of Merger is attached hereto and
incorporated herein by reference.
FOURTH: That the surviving corporation of the merger is All
American A.V.E.D., Inc., a Colorado corporation, and the name of the surviving
corporation shall be All American A.V.E.D., Inc.
FIFTH: That the Articles of Incorporation and Bylaws of All
American A.V.E.D., Inc., a Colorado corporation, shall be the Articles of
Incorporation and Bylaws of the surviving corporation, without amendment.
SIXTH: That the merger shall become effective on the date and at
the time when these Articles of Merger shall have been accepted for filing by
the Colorado Secretary of State.
IN WITNESS WHEREOF, A.V.E.D.-Rocky Mountain, Inc., and All American
A.V.E.D., Inc., the constituent corporations have caused these Articles of
Merger to be signed in their respective corporate
- 2 -
names and on their behalf by their respective Presidents as of the
___ day of ________, 1995.
A.V.E.D.-ROCKY MOUNTAIN, INC.
By:__________________________
______________, President
ALL AMERICAN A.V.E.D., INC.
By:__________________________
______________, President
Copies of this document, when filed, may be sent to:
▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Constant ▇▇▇▇▇▇▇▇ & Bilzin
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
PLAN OF MERGER
OF A.V.E.D.-ROCKY MOUNTAIN, INC.,
A COLORADO CORPORATION, WITH AND INTO
ALL AMERICAN A.V.E.D., INC.
A COLORADO CORPORATION
THIS PLAN OF MERGER (this "Plan") dated as of _______, 1995, by and
between A.V.E.D.-ROCKY MOUNTAIN, INC., a Colorado corporation ("Colorado
Target"), and ALL AMERICAN A.V.E.D., INC., a Colorado corporation (the
"Corporation").
W I T N E S S E T H
WHEREAS, Colorado Target is a corporation organized under the laws
of the State of Colorado, the authorized capital of which consists of 10,000
shares, without par value ("Colorado Target Common Stock") of which 1,072 shares
are issued and outstanding as of the date hereof; and
WHEREAS, the Corporation is a Colorado corporation, the authorized
capital of which consists of 100 shares, with no par value ("New Common Stock"),
all of which are issued and outstanding as of the date hereof; and
WHEREAS, the respective Boards of Directors of Colorado Target and
the Corporation have determined that the merger of Colorado Target with and into
the Corporation, under and pursuant to the terms and conditions herein set forth
or referred to, is desirable and in the best interests of the respective
corporations and their respective shareholders, and the respective Boards of
Directors of Colorado Target and the Corporation have adopted this Plan; and
WHEREAS, the Board of Directors of Colorado Target has directed
that this Plan be submitted to its shareholders for approval.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto do hereby agree that the Plan
shall be as follows:
ARTICLE I
MERGER AND NAME OF SURVIVING CORPORATION
1.1. Subject to the terms and conditions of this Plan and that
certain Merger Purchase Agreement, hereby incorporated by this reference (the
"Agreement"), dated as of October __, 1995, by and among All American
Semiconductor, Inc. ("Purchaser"), All American Added Value, Inc., Added Value
Electronics Distribution, Inc., Colorado Target, and the Corporation, as of the
"Effective Date" (as defined in Section 1.2 hereof), Colorado Target shall be
merged with and into the Corporation pursuant to the provisions of, and with the
effect provided under, Colorado law (the "Merger"). On the Effective Date, the
separate existence of Colorado Target shall cease and the Corporation, as the
surviving entity, shall continue unaffected and unimpaired by the Merger. (The
Corporation as existing on and after the Effective Date is hereinafter sometimes
referred to as the "Surviving Corporation"). The name of the Surviving
Corporation shall not change.
1.2. Articles of Merger evidencing the transactions
contemplated herein shall be delivered for filing to the Secretary
of State of Colorado. The Merger shall become effective on the date
and at the time when the Articles of Merger shall have been accepted for filing
by the Secretary of State of Colorado ("Effective Date").
ARTICLE II
ARTICLES OF INCORPORATION AND BYLAWS
The Articles of Incorporation of the Corporation in effect
immediately prior to the Effective Date shall be the Articles of Incorporation
of the Surviving Corporation, until altered, amended or repealed in accordance
with their terms and the Colorado Business Corporation Act. The Bylaws of the
Corporation in effect immediately prior to the Effective Date shall be the
Bylaws of the Surviving Corporation until altered, amended or repealed in
accordance with their terms.
ARTICLE III
BOARD OF DIRECTORS AND OFFICERS
On the Effective Date, the Board of Directors of the Surviving
Corporation shall consist of those persons serving as directors of the
Corporation immediately prior to the Effective Date and the officers of the
Surviving Corporation shall be those persons serving as officers of the
Corporation immediately prior to the Effective Date, in each case subject to the
provisions of the Surviving Corporation's Articles of Incorporation and Bylaws.
ARTICLE IV
CAPITAL
The shares of the Corporation issued and outstanding immediately
prior to the Effective Date shall, on the Effective Date, continue to be issued
and outstanding.
ARTICLE V
CONVERSION OF COLORADO TARGET SHARES
5.1. On the Effective Date, each share of Colorado Target Common
Stock outstanding immediately prior to the Effective Date shall by virtue of the
Merger be converted into a right to receive from Purchaser $585.76265 per share
in cash (without interest) and common shares of Purchaser equal in value to
$976.27108 per share (except that, although with respect to the Common Stock
owned by ▇▇▇▇▇ ▇▇▇▇▇▇ and The ▇▇▇▇▇▇ Family Charitable Remainder Trust, viewed
as a whole, the payment of cash and common shares of Purchaser shall be in such
proportion, as between ▇▇. ▇▇▇▇▇▇ and such trust, such trust shall receive only
cash and ▇▇. ▇▇▇▇▇▇ shall receive common shares of Purchaser and cash as set
forth in the Agreement), along with Additional Consideration, if any, all
pursuant to and in accordance with the Agreement.
5.2. On the Effective Date, the stock transfer books of Colorado
Target shall be closed and no transfer of Colorado Target Common Stock shall
thereafter be made or recognized.
ARTICLE VI
TERMINATION
This Plan may be abandoned at any time prior to the
Effective Date, before or after the approval of shareholders of
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Colorado Target, by the mutual consent of the Corporation and Colorado Target,
by action of their respective Boards of Directors.
ARTICLE VII
FURTHER ASSURANCES
If at any time the Corporation shall consider or be advised that
any further assignments, conveyances or assurances are necessary or desirable to
vest, perfect or confirm in the Corporation title to any property or rights of
Colorado Target, or otherwise carry out the provisions hereof, the proper
officers and directors of Colorado Target, as of the Effective Date, and
thereafter the officers of the Corporation, acting on behalf of Colorado Target,
shall execute and deliver any and all property or assignments, conveyances and
assurances, and do all things necessary or desirable to vest, perfect or confirm
title to such property or rights in the Corporation and otherwise carry out the
provisions hereof.
ARTICLE VIII
MISCELLANEOUS
8.1. Subject to the applicable provisions of the Colorado Business
Corporation Act, at any time prior to the Effective Date, the parties hereto may
modify or amend this Plan, by written agreement executed and delivered by duly
authorized officers of the respective parties.
8.2. The headings of the several Articles herein are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Plan.
8.3. This Plan shall be governed by and construed in accordance
with the laws of the State of Colorado applicable to agreements made and
entirely to be performed in such jurisdiction, except to the extent federal law
is mandatorily applicable.
IN WITNESS WHEREOF, this Plan has been duly executed and delivered
by the duly authorized officers of the parties hereto on the date first
hereinabove written.
A.V.E.D.-ROCKY MOUNTAIN, INC.,
a Colorado corporation
By:____________________________
Name:
Title:
ALL AMERICAN A.V.E.D., INC.,
a Colorado corporation
By:____________________________
Name:
Title:
-3-
EXHIBIT "G"
MERGER CONSIDERATIN TABLES
---------------------------------------------------------------------------------------------------------------------------------
ADDED VALUE MERGER
=================================================================================================================================
TARGET STOCKHOLDER (Added Value Target CASH SHARES *
Shares) (%)
=================================================================================================================================
---------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ (20,000) (19.4175%) $ 493,573.87 $ 822,623.08
---------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (15,000) (14.5631%) $ 370,180.39 $ 616,967.32
---------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ $ 493,573.87 $ 822,623.08
(20,000) (19.4175%)
---------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (10,000) (9.7087%) $ 246,786.92 $ 411,311.55
---------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (10,000) (9.7087%) $ 246,786.92 $ 411,311.55
---------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (10,000) (9.7087%) $ 246,786.92 $ 411,311.55
---------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (5,000) (4.8544%) $ 123,393.47 $ 205,655.77
---------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ $ 246,786.92 $ 411,311.55
(10,000) (9.7087%)
---------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (3,000) (2.9126%) $ 74,035.78 $ 123,392.98
---------------------------------------------------------------------------------------------------------------------------------
TOTALS: (103,000) (100%) $2,541,905.06 $ 4,236,508.43
---------------------------------------------------------------------------------------------------------------------------------
TOTAL ADDED VALUE MERGER CONSIDERATION: $6,778,413.49
--------------------------
* NUMBER OF SHARES = AMOUNT SHOWN IN COLUMN DIVIDED BY ALL AMERICAN SHARE VALUE.
---------------------------------------------------------------------------------------------------------------------------------
ROCKY MOUNTAIN MERGER
=================================================================================================================================
TARGET STOCKHOLDER (Rocky Mountain CASH SHARES *
Target Shares) (%)
=================================================================================================================================
---------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ (378) (35.261194%) $ 4,686.10 $ 585,762.65
---------------------------------------------------------------------------------------------------------------------------------
The ▇▇▇▇▇▇ Family Charitable $ 346,771.49 $ 0
Remainder Trust (222) (20.708955%)
---------------------------------------------------------------------------------------------------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇ (72) (6.7164%) $ 42,174.91 $ 70,291.52
---------------------------------------------------------------------------------------------------------------------------------
All American Added Value, Inc.** (400) $ 234,305.06 $ 390,508.43
(37.31343%)
---------------------------------------------------------------------------------------------------------------------------------
TOTALS: (1072) (100%) $ 627,937.56 $ 1,046,562.60
---------------------------------------------------------------------------------------------------------------------------------
TOTAL ROCKY MOUNTAIN MERGER CONSIDERATION: $1,674,500.16
--------------------------
* NUMBER OF SHARES = AMOUNT SHOWN IN COLUMN DIVIDED BY ALL AMERICAN SHARE VALUE.
**AFTER GIVING EFFECT TO THE CALIFORNIA MERGER
EXHIBIT "H"
FORM OF DISCRETIONARY BONUS CANCELLATION AGREEMENT
AGREEMENT CANCELLING DISCRETIONARY BONUS
AND PROMISING TO ENTER INTO AN EMPLOYMENT
AGREEMENT AND PAY ADDITIONAL EMPLOYMENT COMPENSATION
AGREEMENT, dated as of October 31, 1995 ("Agreement"), by and among ALL
AMERICAN A.V.E.D., INC., a Colorado corporation ("All American"), A.V.E.D.-ROCKY
MOUNTAIN, INC. ("Rocky Mountain"), a Colorado corporation, and _____________
("Employee").
1. BACKGROUND. Reference is made to that certain agreement titled
"DISCRETIONARY BONUS," styled as a Resolution of the Board of Directors of Rocky
Mountain, dated March 8, 1994, executed by Rocky Mountain and Employee, pursuant
to which, among other things, Employee was granted a monetary employment bonus
payable in the event of a sale of Rocky Mountain (the "Discretionary Bonus").
All American's parent company has agreed, subject to certain conditions
precedent, to acquire Rocky Mountain by way of a merger of Rocky Mountain with
and into All American (the "Rocky Mountain Acquisition"). Employee has informed
Rocky Mountain and All American that Employee believes that it would be
economically disadvantageous to Employee if Employee were to receive payment
under the Discretionary Bonus in connection with the Rocky Mountain Acquisition
in the manner originally contemplated by Employee and Rocky Mountain, and has
requested that a different arrangement be offered to Employee in lieu of the
Discretionary Bonus. This Agreement sets forth such arrangement.
2. EFFECTIVENESS. This Agreement shall become effective and operative
if, and only if, the Rocky Mountain Acquisition is completed. If the Rocky
Mountain Acquisition is completed, this Agreement shall become automatically and
immediately effective and operative upon such completion without any further
action being required. Unless and until this Agreement shall become effective
and operative as aforesaid, none of the parties to this Agreement shall have any
rights against, or obligations to, any of the other parties to this Agreement
under, pursuant to or by reason of this Agreement.
3. CANCELLATION OF DISCRETIONARY BONUS. The Discretionary Bonus and all
obligations to Employee thereunder is and are hereby cancelled, void and of no
force or effect, as if the Discretionary Bonus had never been adopted or
executed. Employee hereby represents and warrants to Rocky Mountain and All
American that Employee has no right, other than the Discretionary Bonus hereby
cancelled, to proceeds or payments from Rocky Mountain or All American of any
kind or nature (other than Employee's normal employment compensation from Rocky
Mountain as earned), and that Employee owns no direct or indirect equity or
other interest in Rocky Mountain or any right, warrant or option to acquire any
of the capital stock of Rocky Mountain or any other interest in Rocky Mountain
or its business.
4. EMPLOYMENT AGREEMENT AND ADDITIONAL EMPLOYMENT COMPENSATION
PURSUANT THERETO.
(a) In lieu of the Discretionary Bonus cancelled hereby, All
American (as successor by merger to Rocky Mountain) and Employee shall enter
into an employment agreement immediately upon the completion of the Rocky
Mountain Acquisition (the "Employment Agreement"). The Employment Agreement
shall provide for an employment term of two (2) years, commencing on the date of
completion of the Rocky Mountain Acquisition, and shall provide for base
compensation/commissions/contingent bonus compensation (as applicable) to
Employee at least as favorable to Employee as that which is in effect for the
1995 calendar year ("Base Compensation"). In addition to Base Compensation,
Employee shall receive (i) an incentive bonus payable upon execution and
delivery of this Agreement of $_______ ("Incentive Bonus"), and (ii) additional
fixed monthly compensation of $______ in respect of each of the 24 months of the
employment term ("Additional Compensation"), unless Employee resigns or quits or
Employee's employment is terminated for "Cause" (as described below).
(b) The Employment Agreement will provide that Employee's
employment thereunder may be terminated by All American with or without Cause
and shall also
terminate if Employee dies or becomes permanently "Disabled." For these
purposes, the definitions of "Cause" and "Disabled" shall be, generally, the
definitions used in the employment agreement of ▇▇▇▇▇ ▇▇▇▇▇▇ which is to be
executed in connection with the Rocky Mountain Acquisition (and shall be at
least as favorable to Employee as they are to ▇▇. ▇▇▇▇▇▇). Upon termination of
Employee's employment for any reason other than a termination by All American
without Cause, Employee shall receive Base Compensation earned and/or accrued
through the date of termination. If the termination by All American is without
Cause, Employee shall also continue to receive Base Compensation for the 90 days
following the date of termination, as and when Employee would have received such
Base Compensation had Employee continued employment during such 90-day period.
If, during the two-year employment term, Employee's employment is terminated by
All American without Cause, or because Employee has died or become permanently
Disabled, Employee (or Employee's guardian, personal representative, estate or
heirs, as applicable) shall continue to receive the Additional Compensation
monthly for the balance of the 24-month period, as if Employee's employment had
not terminated but had continued to the end of the two-year employment term. If,
however, Employee is terminated by Employer with Cause or if Employee resigns or
quits, Employee shall be entitled to no further Additional Compensation from and
after the date Employee has been so terminated, resigned or quit, except for, if
appropriate, a prorated amount of the Additional Compensation payable in respect
of the month in which such termination of employment occurs.
(c) The Employment Agreement will contain confidentiality
restrictions and non-competition restrictions of the types contained in ▇▇.
▇▇▇▇▇▇'▇ employment agreement referenced above. The non-competition
restrictions, which are substantial, shall apply during the term of Employee's
employment (which, of course, shall be a full-time commitment on the part of
Employee) and, upon termination of employment, and shall continue to apply
thereafter for the period equal to the longer of (i) one year after termination
of Employee's employment (for any reason) and (ii) the then-balance of the
2-year employment term. However, if Employee's employment is terminated by All
American without Cause, such non-competition restrictions shall remain in effect
only for so long as All American agrees to pay Employee, on a monthly basis, the
Base Compensation (exclusive of any portion thereof which is comprised of
commissions or other contingent compensation).
(d) The Employment Agreement shall contain such other terms and
conditions as are consistent with those found in employment agreements between
All American (or its parent or affiliates) and employees of similar status to
Employee.
5. INDEPENDENT COUNSEL. THIS AGREEMENT IS INTENDED TO CREATE AND
DOES CREATE LEGAL RIGHTS AND OBLIGATIONS WHICH ARE ENFORCEABLE IN COURT.
EMPLOYEE IS STRONGLY URGED TO CONSULT AN ATTORNEY OF EMPLOYEE'S OWN CHOOSING TO
ADVISE EMPLOYEE CONCERNING THIS AGREEMENT PRIOR TO SIGNING THIS AGREEMENT.
ALL AMERICAN A.V.E.D., INC.
By:__________________________
Name:________________________
Title:_______________________
A.V.E.D.-ROCKY MOUNTAIN, INC.
By:___________________________
▇▇▇▇▇ ▇▇▇▇▇▇, President
EMPLOYEE:
_______________________________
_______________________________
-2-
EXHIBIT "I"
FORM OF AGREEMENT REGARDING EMPLOYMENT
ALL AMERICAN ADDED VALUE, INC.
▇▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
October __, 1995
▇▇. ▇▇▇▇ ▇▇▇▇▇▇
c/o Added Value Electronics Distribution, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇. ▇▇▇▇▇▇:
This letter sets forth certain agreements between you, as an employee
of Added Value Electronics Distribution, Inc., Added Value Electronics
Distribution, Inc. ("Added Value"), and All American Added Value, Inc. ("All
American"). This letter is being signed by you in order to induce All American
and its parent company to enter into an agreement to acquire the business of
Added Value (the "Business") through the merger of Added Value with and into All
American (the "Added Value Acquisition"). Added Value and All American have
identified you as a valuable employee of the Business, and wish to secure your
agreement to enter into a two-year employment agreement with All American
effective upon the completion of the Added Value Acquisition (the "Employment
Agreement"). You understand that both All American (and its parent company) and
Added Value will be relying upon your agreements set forth in this letter in
entering into agreements for the Added Value Acquisition. Accordingly, we all
agree as follows.
Upon the completion of the Added Value Acquisition, you and All
American shall enter into the Employment Agreement. The Employment Agreement
shall have a term of two (2) years, commencing on the date of completion of the
Added Value Acquisition, and shall provide for base
compensation/commissions/contingent bonus compensation (as applicable) to be
paid to you which are at least as favorable to you as that which is in effect
for the 1995 calendar year (the "Compensation"). The Employment Agreement will
provide that your employment thereunder may be terminated by All American with
or without "Cause" and shall also terminate if you die or become "Disabled." For
these purposes, the definitions of "Cause" and "Disabled" shall be, generally,
the definitions used in the respective employment agreements of ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ which are to be executed in
connection with the Added Value Acquisition (and shall be at least as favorable
to you as they are to those persons). You shall also be permitted to resign or
quit your employment during such two-year employment period.
The Employment Agreement shall also provide that you shall hold in
strict confidence, and not disclose to any person, or use or authorize any
person to use, any of Added Value's or All American's confidential or
proprietary information and materials or its trade secrets, including, but not
limited to, its customer and supplier lists and information, and its designs,
inventions, technology and know-how (collectively, "Trade Secrets") in any
manner or for any purpose other than in the performance of your employment
duties. The Employment Agreement shall prohibit you for a period after your
employment for any reason terminates from, directly or indirectly or in any
capacity, soliciting or engaging in business or dealings which are competitive
with the Business with customers or suppliers of the Business for as long as All
American continues to do business with them, as you agree that any such
competitive business or dealings with such customers or suppliers by you would
necessarily be based or predicated upon your knowledge or use of such Trade
Secrets, in whole or in part. The period of such restriction as it relates to
you soliciting or engaging in such competitive business or dealings with
customers and suppliers of the Business shall be the period of your employment
with All American (which, of
course, shall be a full-time commitment on your part), and shall continue
thereafter for a period equal to the longer of (a) one year after termination of
your employment (for any reason, including your resignation or quitting), and
(b) the then-balance of the 2-year employment term. However, if your employment
is terminated by All American without Cause, such prohibition shall remain in
effect only for so long as All American agrees to pay you, on a monthly basis,
the Compensation (exclusive of any portion thereof which is comprised of
commissions or other contingent compensation). You, of course, may not, at any
time, even after expiration of the foregoing period of restriction, disclose to
any third parties any Trade Secrets or use Trade Secrets in any manner which
would constitute misappropriation, theft or improper use thereof.
The Employment Agreement will provide that if All American terminates
your employment without Cause, you shall continue to receive Compensation for
the 90 days following the date of termination as and when you would have
received such Compensation had your employment continued during such 90-day
period. The Employment Agreement shall contain such other benefits, terms and
conditions as are consistent with those found in employment agreements between
All American (or its parent or affiliates) and employees of similar status to
you.
You understand that All American is under no obligation to you under
this letter unless and until the Added Value Acquisition is completed, and that
Added Value is under no obligation to you under this letter if the Added Value
Acquisition is not completed.
You further agree that if, despite being tendered an Employment
Agreement consistent in all material respects with the terms of this letter, you
refuse, upon the completion of the Added Value Acquisition, to execute and
deliver such Employment Agreement, or if you resign or quit prior to the Added
Value Acquisition, without limitation on the remedies of Added Value and All
American in respect of such a breach by you, you shall be subject to the
restriction on soliciting or engaging in competitive business or dealings with
customers or suppliers of the Business outlined above for a period of 18 months
following the date of completion of the Added Value Acquisition or the date of
your resignation or quitting, as applicable.
All American's obligations under this letter shall become void if, at
any time between the date of this letter and the completion of the Added Value
Acquisition, you commit any act or omission or engage in any conduct which would
have constituted "Cause" under the Employment Agreement. In such event, the 18-
month restriction described in the previous paragraph shall apply from the date
that you leave the employ of Added Value under or as a result of such
circumstances.
If you are in agreement with the terms and conditions of this letter,
please sign it below in the space provided for that purpose. Before you sign,
however, please be advised that this letter is intended to create and does
create legal rights and obligations which are enforceable in court. You are
strongly urged to consult an attorney of your own choosing to advise you
concerning this letter before signing it.
All American looks forward to a mutually-beneficial relationship with
you following completion of the Added Value Acquisition, assuming, of course,
that it occurs as we anticipate.
Very truly yours,
ALL AMERICAN ADDED VALUE, INC.
By:____________________________
Name:__________________________
Title:_________________________
-2-
ADDED VALUE ELECTRONICS
DISTRIBUTION, INC.
By:___________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
AGREED TO AND ACCEPTED:
-------------------------
▇▇▇▇ ▇▇▇▇▇▇
-3-