EXHIBIT 2.1
__________________________________________________
AGREEMENT AND PLAN OF MERGER
by and among
REFAC TECHNOLOGY DEVELOPMENT CORPORATION,
HFID ACQUISITION CORPORATION,
HUMAN FACTORS INDUSTRIAL DESIGN, INC.
and
THE PRINCIPAL STOCKHOLDERS OF HUMAN FACTORS
INDUSTRIAL DESIGN, INC
dated as of
November 25, 1997
__________________________________________________
TABLE OF CONTENTS
ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . 1
1.2 Closing . . . . . . . . . . . . . . . . . . . 2
1.3 Effective Time . . . . . . . . . . . . . . . 2
1.4 Certificate of Incorporation and By-Laws . . 2
1.5 Directors and Officers of the Surviving
Corporation . . . . . . . . . . . . . . . . . 2
1.6 Operation of the Surviving Corporation . . . 3
1.7 Board Actions . . . . . . . . . . . . . . . . 3
1.8 Stockholders' Meeting . . . . . . . . . . . . 4
ARTICLE II PURCHASE AND CONVERSION OF SECURITIES . . . 4
2.1 Merger Consideration . . . . . . . . . . . . 4
2.2 Conversion of Shares . . . . . . . . . . . . 6
2.3 Exchange of Certificates . . . . . . . . . . 7
2.4 Payment of Cash Consideration . . . . . . . . 7
2.5 Delivery of Promissory Note . . . . . . . . . . 8
2.6 Subsequent Payment . . . . . . . . . . . . . . 8
2.7 Legend . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL
STOCKHOLDERS . . . . . . . . . . . . . . . . 8
3.1 Organization . . . . . . . . . . . . . . . . 9
3.2 Subsidiaries and Equity Investments;
Affiliates . . . . . . . . . . . . . . . . . 9
3.3 Capitalization . . . . . . . . . . . . . . . 9
3.4 Authorization; Validity of Agreement; HFID
Action . . . . . . . . . . . . . . . . . . . 10
3.5 Consents and Approvals; No Violations . . . . 11
3.6 Financial Statements . . . . . . . . . . . . 12
3.7 Undisclosed Liabilities . . . . . . . . . . . 12
3.8 Absence of Certain Changes or Events . . . . 13
3.9 Legal Proceedings . . . . . . . . . . . . . . 13
3.10 Taxes and Tax Returns . . . . . . . . . . . . 14
3.11 Licenses; Compliance with Applicable Law . . 15
3.12 Personal Property . . . . . . . . . . . . . . 15
3.13 Real Property . . . . . . . . . . . . . . . . 16
3.14 Work In Process . . . . . . . . . . . . . . . 16
3.15 Insurance. . . . . . . . . . . . . . . . . . 16
3.16 ERISA; Benefit Plans. . . . . . . . . . . . . 17
3.17 Certain Contracts . . . . . . . . . . . . . . 19
3.18 Intellectual Property . . . . . . . . . . . . 20
3.19 Customers and Suppliers . . . . . . . . . . . 21
3.20 Arrangements with Directors, Officers and
Affiliates . . . . . . . . . . . . . . . . . 21
3.21 Receivables . . . . . . . . . . . . . . . . . 21
3.22 Investment Intent . . . . . . . . . . . . . . 22
3.23 Vote Required . . . . . . . . . . . . . . . . 22
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF REFAC . . 22
4.1 Organization . . . . . . . . . . . . . . . . 22
4.2 Capitalization . . . . . . . . . . . . . . . 22
4.3 Authorization; Validity of Agreement;
Necessary Action . . . . . . . . . . . . . . 23
4.4 Consents and Approvals; No Violations . . . . 24
4.5 SEC Reports . . . . . . . . . . . . . . . . . 24
4.6 Absence of Certain Changes or Events . . . . 25
4.7 Legal Proceedings . . . . . . . . . . . . . . . 25
4.8 Arrangements with Directors, Officers and
Affiliates . . . . . . . . . . . . . . . . . . 25
ARTICLE V REPRESENTATIONS AND WARRANTIES OF MERGER SUB 26
5.1 Organization . . . . . . . . . . . . . . . . 26
5.2 Capitalization . . . . . . . . . . . . . . . 26
5.3 Authorization; Validity of Agreement;
Necessary Action . . . . . . . . . . . . . . 27
5.4 Consents and Approvals; No Violations . . . . 27
ARTICLE VI COVENANTS . . . . . . . . . . . . . . . . . 28
6.1 Interim Operations of HFID . . . . . . . . . 28
6.2 Consents and Approvals . . . . . . . . . . . 29
6.3 No Solicitation . . . . . . . . . . . . . . . 29
6.4 Access to Information . . . . . . . . . . . . 30
6.5 Brokers or Finders . . . . . . . . . . . . . 30
6.6 Key Man Insurance . . . . . . . . . . . . . . 30
6.7 Agreement to Vote Shares . . . . . . . . . . 30
6.8 Employment Agreements and Stock Options . . . 31
6.9 Confidentiality, Non-Competition, etc. . . . . 31
6.10 Bonuses . . . . . . . . . . . . . . . . . . . . 35
6.11 REFAC Investment . . . . . . . . . . . . . . . 35
6.12 Aggregate Contingent Payment . . . . . . . . 36
6.13 Additional Agreements . . . . . . . . . . . . 37
6.14 Publicity . . . . . . . . . . . . . . . . . . 37
6.15 Notification of Certain Matters . . . . . . . 37
6.16 Assignment . . . . . . . . . . . . . . . . . 38
ARTICLE VII CONDITIONS . . . . . . . . . . . . . . . . 39
7.1 Conditions to Each Party's Obligation to
Effect the Merger . . . . . . . . . . . . . . 40
7.2 Conditions to REFAC's Obligations to Effect
the Merger . . . . . . . . . . . . . . . . . 40
7.3 Conditions to HFID's Obligations to Effect
the Merger . . . . . . . . . . . . . . . . . 41
ARTICLE VIII TERMINATION . . . . . . . . . . . . . . . 42
8.1 Termination . . . . . . . . . . . . . . . . . 42
8.2 Effect of Termination . . . . . . . . . . . . 42
ARTICLE IX INDEMNIFICATION . . . . . . . . . . . . . . . 43
9.1 Survival . . . . . . . . . . . . . . . . . . . 43
9.2 Indemnification by Principal Stockholders . . . 43
9.3 Indemnification by REFAC . . . . . . . . . . . 44
9.4 Claims . . . . . . . . . . . . . . . . . . . . 44
9.5 Third-Party Claims; Assumption of Defense . . . 45
9.6 Calculation of Losses . . . . . . . . . . . . . 46
ARTICLE X MISCELLANEOUS . . . . . . . . . . . . . . . . 47
10.1 Fees and Expenses . . . . . . . . . . . . . 47
10.2 Arbitration . . . . . . . . . . . . . . . . . 47
10.3 Amendment, Modification and Other Action. . 47
10.4 Notices . . . . . . . . . . . . . . . . . . 49
10.5 Interpretation . . . . . . . . . . . . . . . 49
10.6 Counterparts . . . . . . . . . . . . . . . . 49
10.7 Entire Agreement; No Third Party
Beneficiaries; Rights of Ownership . . . . . 49
10.8 Severability . . . . . . . . . . . . . . . . 49
10.9 Governing Law . . . . . . . . . . . . . . . 49
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this
"Agreement"), dated as of November 25, 1997, by and among
REFAC Technology Development Corporation, a Delaware
corporation ("REFAC"), HFID Acquisition Corporation, a
New York corporation ("MERGER SUB"), Human Factors
Industrial Design, Inc., a New York corporation ("HFID"),
and each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (collectively, the
"Principal Stockholders").
WHEREAS, the Board of Directors of REFAC, the
Board of Directors of MERGER SUB and the Board of
Directors of HFID have approved, and deem it advisable
and in the best interests of their respective
stockholders to consummate, the acquisition of MERGER SUB
by HFID and the merger of MERGER SUB with and into HFID
upon the terms and subject to the conditions set forth
herein; and
NOW, THEREFORE, in consideration of the
foregoing and the respective representations, warranties,
covenants and agreements set forth herein, the parties
hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. (a) Upon the terms
and subject to the conditions of this Agreement and in
accordance with the New York Business Corporation Law
(the "NYBCL"), at the Effective Time (as defined in
Section 1.3), HFID and MERGER SUB shall consummate a
merger (the "Merger") pursuant to which (i) MERGER SUB
shall be merged with and into HFID and the separate
corporate existence of MERGER SUB shall thereupon cease,
(ii) HFID shall be the successor or surviving corporation
in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation") and shall continue to be
governed by the laws of the State of New York, and (iii)
all of the rights, privileges, immunities, powers and
franchises of HFID and MERGER SUB shall vest in the
Surviving Corporation and all obligations, duties, debts
and liabilities of HFID and MERGER SUB shall become the
obligations, duties, debts and liabilities of the
Surviving Corporation.
(b) Upon consummation of the Merger, HFID
shall operate as a subsidiary of REFAC.
Section 1.2 Closing. The closing of the
Merger (the "Closing") shall take place at 10:00 a.m. on
a date to be specified by the parties, which shall be no
later than the second business day after satisfaction or
waiver of all of the conditions set forth in Article VI
hereof (the "Closing Date"), at the offices of Skadden,
Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, unless another date or place is
agreed to in writing by the parties hereto.
Section 1.3 Effective Time. As soon as
practicable following the satisfaction or waiver of the
conditions set forth in Article VI hereof, MERGER SUB and
HFID will cause a Certificate of Merger to be executed
and filed on the Closing Date (or on such other date as
REFAC and HFID may agree) with the Secretary of State of
New York, as provided in the NYBCL. The term "Effective
Time" shall be the date and time when the Merger becomes
effective, as set forth in the Certificate of Merger.
Section 1.4 Certificate of Incorporation and
By-Laws. At the Effective Time, the Certificate of
Incorporation of HFID, as in effect immediately prior to
the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation until
thereafter amended in accordance with applicable law.
The By-Laws of HFID, as in effect immediately prior to
the Effective Time, shall be the by-laws of the Surviving
Corporation until thereafter amended in accordance with
applicable law. The Merger shall have the effects
specified in the NYBCL. The parties hereto agree that as
soon as practicable after the Effective Time, the
Certificate of Incorporation and By-Laws shall be revised
as necessary to effect the provisions hereof.
Section 1.5 Directors and Officers of the
Surviving Corporation. (a) The directors of the
Surviving Corporation from and after the Effective Time
shall be ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, until
their successors shall have been duly elected or
appointed or qualified or until their earlier death,
resignation or removal in accordance with the Surviving
Corporation's certificate of incorporation and by-laws.
(b) The officers of the Surviving Corporation
from and after the Effective Time shall be ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, as President, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, as Vice
President, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, as Vice President, and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, as Secretary and Treasurer, until their
successors shall have been duly elected or appointed or
qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's
certificate of incorporation and by-laws.
(c) At the Effective Time, REFAC shall cause
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ to be appointed a Director of REFAC.
Section 1.6 Operation of the Surviving
Corporation. (a) REFAC, as sole stockholder of the
Surviving Corporation, shall use reasonable efforts to
cause the business and operations of the Surviving
Corporation to be conducted in a manner consistent with
past practice of HFID.
(b) The Principal Stockholders, as officers and
directors of the Surviving Corporation, shall, except as
expressly contemplated by this Agreement, the Employment
Agreements, or as agreed in writing by REFAC, conduct the
business of the Surviving Corporation after the Effective
Time in a manner consistent with past practice of HFID.
Section 1.7 Board Actions. (a) HFID hereby
approves of and consents to the Merger and represents
that its Board of Directors, at a meeting duly called and
held, has (i) unanimously determined that each of the
Agreement and the Merger is fair and in the best
interests of the holders of the capital stock of
HFID;(ii) approved this Agreement and the transactions
contemplated hereby, including the Merger; and (iii)
resolved to recommend that the stockholders of HFID
approve and adopt this Agreement and the Merger.
(b) MERGER SUB hereby approves of and consents
to the Merger and represents that its Board of Directors,
at a meeting duly called and held has (i) unanimously
determined that each of the Agreement and the Merger are
fair and in the best interest of the holders of the
capital stock of MERGER SUB and (ii) approved this
Agreement and the transactions contemplated hereby,
including the Merger.
(c) REFAC hereby approves of and consents to
the Merger and represents that its Board of Directors, at
a meeting duly called and held, has (i) unanimously
determined that each of the Agreement and the Merger are
fair and in the best interests of the holders of the
capital stock of REFAC; and (ii) approved this Agreement
and the transactions contemplated hereby, including the
Merger.
Section 1.8 Stockholders' Meeting. If
required by applicable law in order to consummate the
Merger, HFID shall, in accordance with applicable law,
duly call, give notice of, convene and hold a special
meeting of its stockholders and submit this Agreement and
the Merger to vote of HFID's stockholders for their
adoption and approval as promptly as possible following
the execution and delivery of this Agreement.
ARTICLE II
PURCHASE AND CONVERSION OF SECURITIES
Section 2.1 Merger Consideration. (a) Upon
the terms and subject to the conditions set forth in this
Agreement, in exchange for the aggregate shares issued
and outstanding of the common stock, without par value,
of HFID (the "HFID Common Stock"), REFAC shall pay to the
stockholders (the "Stockholders") of HFID aggregate
consideration (the "Aggregate Merger Consideration") of
(A) $6,000,000 consisting of (i) the dollar value of the
"Aggregate Stock Consideration," which is 119,378.74
shares of the common stock, par value $.01 per share (the
"REFAC Common Stock"), times the Average Daily Closing
Price and the (ii) "Aggregate Cash Consideration," which
is an amount in cash equal to $4,500,000, plus (B) the
Aggregate Dividend Payments, if any, plus (C) the
Aggregate Contingent Payments. An aggregate of 12,000
shares shall be payable with respect to the Aggregate
Stock Consideration as soon as possible after the
Effective Time and $450,000 of the Aggregate Cash
Consideration shall be payable at the Effective Time (the
"Initial Payment Date"). An aggregate of 107,374 shares
shall be payable with respect to the Aggregate Stock
Consideration on January 5, 1998 (the "Subsequent Payment
Date"), and an aggregate of $4,050,000 of the Aggregate
Cash Consideration shall be payable on the Subsequent
Payment Date, pursuant to the procedures set forth in
Section 2.7. The Aggregate Dividend Payments shall be
payable on the Subsequent Payment Date. Cash shall be
payable in lieu of fractional shares.
(b) Each holder of HFID Common Stock shall
receive the number of shares and the cash payments set
forth below:
Initial Payment Date Payments
Stock Cash
Stockholder Consideration Consideration
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 3,600 $135,000
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ 2,400 $90,000
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 2,400 $90,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 2,100 $78,750
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 600 $22,500
▇▇▇▇ ▇. ▇▇▇▇, III 600 $22,500
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 300 $11,250
Subsequent Payment Date Payments
Stock Cash
Stockholder Consideration Consideration
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 32,213 $1,215,000
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ 21,475 $810,000
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 21,475 $810,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 18,791 $708,750
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 5,368 $202,500
▇▇▇▇ ▇. ▇▇▇▇, III 5,368 $202,500
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 2,684 $101,250
References herein to the "Merger
Consideration," the "Stock Consideration," the "Cash
Consideration," the "Dividend Payment" and the
"Contingent Payment" shall refer, with respect to any
HFID stockholder, to the pro rata portion per share of
the Aggregate Merger Consideration, the Aggregate Stock
Consideration, the Aggregate Cash Consideration, the
Aggregate Dividend Payments and the Aggregate Contingent
Payments, respectively, set forth above.
(c) The "Average Daily Closing Price" shall be
the average of the daily closing prices per share
reported on the American Stock Exchange from the period
beginning September 17, 1997 to November 24, 1997, which
is 12.565051.
(d) The "Aggregate Contingent Payment" shall
be the payment, if any, payable pursuant to Section 6.12.
(e) The "Aggregate Dividend Payment" shall be
the product of (i) the amount of any dividend per share
of REFAC Common Stock for which the record date falls
from and including the date of this Agreement and up to
and including the Subsequent Payment Date and (ii) the
portion of shares of the Aggregate Stock Consideration
that is paid on the Subsequent Payment Date.
(f) Notwithstanding the foregoing, (i) if the
Average Daily Closing Price is less than $7.00, REFAC
shall have the right, or (ii) if the Average Daily
Closing Price is greater than $14.00, the Principal
Stockholders shall have the right to require REFAC, to
increase the Cash Consideration by the amount otherwise
payable as the Stock Consideration, and such increased
Cash Consideration for each share of HFID Common Stock
held by any stockholder of HFID Common Stock.
Section 2.2 Conversion of Shares. As of the
Effective Time, by virtue of the Merger and without any
action on the part of REFAC, HFID, the holders of HFID
Common Stock, or the holders of REFAC Common Stock:
(a) Each issued and outstanding share of HFID
Common Stock shall be converted into the right to receive
the Merger Consideration.
(b) All shares of HFID Common Stock that are
owned by HFID shall be cancelled and retired and shall
cease to exist and no consideration shall be delivered in
exchange therefor.
(c) Each share of REFAC Common Stock issued
and outstanding immediately prior to the Effective Time
shall remain an issued and outstanding share of REFAC
Common Stock of the Surviving Corporation and shall not
be affected by the Merger.
(d) All of the shares of HFID Common Stock
shall no longer be outstanding and shall automatically be
cancelled and shall cease to exist as of the Effective
Time, and each certificate (each, a "Certificate")
previously representing such shares of HFID Common Stock
shall thereafter represent the right to receive (i) a
certificate or certificates representing the number of
whole shares of REFAC Common Stock payable as the Stock
Consideration, (ii) cash in lieu of fractional shares
into which the shares of HFID Common Stock represented by
such Certificate would have been converted as part of the
Stock Consideration and (iii) the Cash Consideration.
(e) At the Effective Time, each share of
common stock, par value $.01 per share, of MERGER SUB
issued and outstanding immediately prior to the Effective
Time shall be converted into two shares of common stock
of the Surviving Corporation, and the Surviving
Corporation shall be a wholly owned subsidiary of REFAC.
Section 2.3 Exchange of Certificates. (a)
As soon as possible after the Effective Time, upon
surrender by each holder of record of a Certificate or
Certificates representing HFID Common Stock that upon the
Effective Time was converted pursuant to Section 2.2 into
the right to receive the Merger Consideration, REFAC
shall issue to each such holder of record of Certificates
a certificate or certificates representing ten percent
(10%) of the Stock Consideration, and the Certificates so
surrendered shall forthwith be cancelled. If payment of
the Merger Consideration is to be made to a person other
than the person in whose name the surrendered Certificate
is registered, it shall be a condition of payment that
the Certificate, so surrendered shall be properly
endorsed or shall be otherwise in proper form for
transfer and that the person requesting such payment
shall have paid any transfer and other non-income taxes
required by reason of the payment of the Merger
Consideration to a person other than the registered
holder of the Certificate surrendered or shall have
established to the satisfaction of the Surviving
Corporation that such tax either has been paid or is not
applicable. Until surrendered as contemplated by this
Section 2.3, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to
receive the Merger Consideration as contemplated by this
Section 2.3.
(b) Transfer Books; No Further Ownership
Rights in the Shares. At the Effective Time, the stock
transfer books of HFID shall be closed and thereafter
there shall be no further registration of transfers of
shares of HFID Common Stock on the records of HFID. From
and after the Effective Time, the holders of Certificates
evidencing ownership of the HFID Common Stock outstanding
immediately prior to the Effective Time shall cease to
have any rights with respect to such HFID Common Stock,
except as otherwise provided for herein or by applicable
law. If, after the Effective Time, Certificates are
presented to MERGER SUB for any reason, they shall be
cancelled and exchanged as provided in this Article II.
Section 2.4 Payment of Cash Consideration. As
soon as possible after the Effective Time, and, in any
event, no later than the end of the same business day if
the Effective Time occurs prior to 2:00 p.m., or the
immediately following business day if the Effective Time
occurs after 2:00 p.m., REFAC will pay, to each record
holder of HFID Common Stock, 10% of the Cash
Consideration in immediately available funds by wire
transfer to an account designated by such record holder
at least two business days prior to the Effective Time.
Section 2.5 Delivery of Promissory Note. As
soon as possible after the Effective Time, REFAC shall
deliver to each of the Principal Stockholders a
promissory note (each, a "Promissory Note"), in
substantially the form set forth in Exhibit A hereto, for
ninety percent (90%) of the Cash Consideration, duly
executed by REFAC and dated the date of the Effective
Time.
Section 2.6 Subsequent Payment. No later than
10:00 a.m. on January 5, 1998, the Exchange Agent shall
issue to each holder of record of Certificates as of the
Effective Time (i) a certificate or certificates
representing ninety percent (90%) of the Stock
Consideration, (ii) cash payable in lieu of fractional
shares and (iii) cash payable pursuant to the Promissory
Notes.
Section 2.7 Legend. On each certificate
representing shares of common stock of the Surviving
Corporation, as well as in the stock ledger of the
Surviving Corporation, the following legend shall
conspicuously appear:
"NO REGISTRATION OF TRANSFER OF THE COMMON
STOCK WILL BE MADE ON THE BOOKS OF HUMAN
FACTORS/INDUSTRIAL DESIGN, INC. UNLESS SUCH
TRANSFER IS MADE PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933 OR PURSUANT TO AN EXEMPTION FROM
APPLICABLE FEDERAL, STATE AND FOREIGN
REGISTRATION REQUIREMENTS."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
PRINCIPAL STOCKHOLDERS
Each Principal Stockholder hereby (i) with
respect to the Section 3.4(b), Section 3.4(c) and Section
3.22, individually represents and warrants and (ii) with
respect to the remainder of this Article III, severally
and not jointly, represents and warrants to REFAC as of
the date of this Agreement and as of the Effective Time
(such representations and warranties being remade at the
Effective Time) as follows, and acknowledges and confirms
that REFAC is relying upon such representations and
warranties in connection with the execution, delivery and
performance of this Agreement:
Section 3.1 Organization. HFID is a
corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and
authority and all necessary governmental approvals to
own, lease and operate its properties and to carry on its
business as now being conducted, except where the failure
to be so organized, existing and in good standing or to
have such power, authority and governmental approvals
would not, individually or in the aggregate, have a
Material Adverse Effect on HFID. As used in this
Agreement, any reference to any state of facts, event or
effect being material or having a "Material Adverse
Effect" on or with respect to HFID means such state of
facts, event or effect is materially adverse to the
financial condition, businesses or results of operations
of HFID. HFID is not qualified or licensed to do
business and is not required to be qualified or licensed
to do business in any jurisdiction outside of the State
of New York. HFID has heretofore delivered to REFAC
complete and correct copies of the Certificate of
Incorporation and By-Laws of HFID as currently in effect.
Section 3.2 Subsidiaries and Equity
Investments; Affiliates. HFID does not own or have any
agreement, oral or written, to acquire at any time by any
means, directly or indirectly, any interest or investment
in any corporation, partnership, joint venture or other
business association or entity.
Section 3.3 Capitalization. (a) The
authorized capital stock of HFID consists of 200 shares
of common stock. As of the date hereof, 200 shares of
common stock are issued and outstanding and no shares of
common stock are held in the treasury of HFID. All of
the outstanding shares of HFID's capital stock are duly
authorized, validly issued, fully paid and non-
assessable. There are no bonds, debentures, notes or
other indebtedness having general voting rights (or
convertible into securities having such rights) ("Voting
Debt") of HFID issued and outstanding. Except as set
forth above, as of the date hereof, (i) there are no
shares of capital stock of HFID authorized, issued or
outstanding and (ii) there are no existing options,
warrants, calls, subscriptions or other rights,
agreements, arrangements or commitments of any character,
relating to the issued or unissued capital stock of HFID,
obligating HFID to issue, transfer or sell or cause to be
issued, transferred or sold any shares of capital stock
or Voting Debt of HFID or securities convertible into or
exchangeable for such shares or equity interests, or
obligating HFID to grant, extend or enter into any such
option, warrant, call, subscription or other right,
agreement, arrangement or commitment, except that the
shareholders of HFID have preemptive rights and, pursuant
to a termination agreement by each of the Principal
Stockholders and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and ▇▇▇▇ ▇. ▇▇▇▇ (the "Other Stockholders"), to be
entered into in connection herewith, shall confirm their
waiver of such rights with respect to prior issuances of
HFID Common Stock.
(b) Except for the Shareholders Agreement,
effective as of January 2, 1996, among HFID, the
Principal Stockholders, and the other HFID stockholders
parties thereto, there are no stockholders agreements,
voting trusts or other agreements or understandings to
which HFID is a party with respect to the voting of the
capital stock of HFID.
(c) HFID is not required to redeem, repurchase
or otherwise acquire shares of capital stock of HFID as a
result of the transactions contemplated by this
Agreement.
Section 3.4 Authorization; Validity of
Agreement; HFID Action. (a) HFID has full corporate
power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby.
The execution, delivery and performance by HFID of this
Agreement, and the consummation by it of the transactions
contemplated hereby, have been duly authorized by the
Board of Directors of HFID and, except for obtaining the
approval of its stockholders as contemplated by Section
1.8 or as otherwise required by the NYBCL, no other
corporation action on the part of HFID is necessary to
authorize the execution and delivery by HFID of this
Agreement and the consummation by it of the transactions
contemplated hereby. This Agreement has been duly
executed and delivered by HFID and, assuming due and
valid authorization, execution and delivery hereof by
REFAC and the Principal Stockholders, is a valid and
binding obligation of HFID enforceable against HFID in
accordance with its terms, except as such enforcement may
be limited by bankruptcy and other laws generally affect
the rights of creditors and general principals of equity.
(b) Such Principal Stockholder has the power
and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by such
Principal Stockholder and, assuming due and valid
authorization, execution and delivery hereof by REFAC and
HFID, is a valid and binding obligation of such Principal
Stockholder enforceable against such Principal
Stockholder in accordance with its terms, except as such
enforcement may be limited by bankruptcy and other laws
generally affect the rights of creditors and general
principles of equity.
(c) Such Principal Stockholder has good, valid
and marketable title to the shares of HFID Common Stock
he is selling pursuant hereto, free and clear of any
lien, charge, security interest, pledge, mortgage,
encumbrance, claim, option, limitation or restriction of
any kind (collectively, "Liens") thereto other than
pursuant to this Agreement.
Section 3.5 Consents and Approvals; No
Violations. Except for the filings, permits,
authorizations, consents and approvals as may be required
under, and other applicable requirements of, the NYBCL,
neither the execution, delivery or performance of this
Agreement by HFID and such Principal Stockholder nor the
consummation by HFID and such Principal Stockholder of
the transactions contemplated hereby nor compliance by
HFID or such Principal Stockholder with any of the
provisions hereof will (i) conflict with or result in any
breach of any provision of the certificate of
incorporation or the by-laws of HFID, (ii) require any
filing with, or permit, authorization, consent or
approval of, any court, arbitral tribunal, administrative
agency or commission or other governmental or regulatory
authority or agency (a "Governmental Entity"), (iii)
except as set forth in Schedule 3.5, (either alone or
upon the occurrence of any additional acts or events)
result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a
default, or give rise to any right of termination,
amendment, cancellation or acceleration under, any of the
terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, contract, agreement
or other instrument or obligation to which HFID is a
party or by which it or any of its properties or assets
may be bound or result in the creation of any Lien or
(iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to HFID or any of
its properties or assets, excluding from the foregoing
clauses (ii), (iii) and (iv) such violations, breaches or
defaults which would not, individually or in the
aggregate, have a Material Adverse Effect on HFID, and
which will not materially impair the ability of HFID or
such Principal Stockholder to consummate the transactions
contemplated hereby.
Section 3.6 Financial Statements. HFID has
previously furnished to REFAC copies, certified by the
chief financial officer and chief executive officer of
HFID, of (i) unaudited balance sheets of HFID as of
December 31, 1996, December 31, 1995 and December 31,
1994, (ii) the related unaudited statements of
operations, changes in stockholders' equity and cash
flows of HFID for the fiscal periods then ended, and
(iii) the unaudited balance sheets of HFID as of
September 30, 1997 and the related unaudited statements
of operations and changes in stockholders' equity of HFID
for the period ended September 30, 1997 (collectively,
the "September Financial Statements"). Each of the
balance sheets included in the financial statements
referred to in this Section 3.6 (including the related
notes thereto) presents fairly the financial position of
HFID as of their respective dates, and the other related
statements included therein (including the related notes
thereto) present fairly the results of operations,
changes in financial position and cash flows for the
periods then ended, all in conformity with generally
accepted accounting principles ("GAAP") applied on a
consistent basis, except as otherwise noted therein or in
the notes thereto and subject, in the case of the
September Financial Statements, to normal year-end
adjustments and the absence of certain footnote
disclosures. All such financial statements are or will
be complete in all material respects and have been
prepared from, and are in accordance with, the books of
account and records of HFID. Since January 1, 1996, HFID
has not made any change in its accounting practices or
policies applied in the preparation of its financial
statements.
Section 3.7 Undisclosed Liabilities. Except
as set forth in Schedule 3.7, HFID has no liability or
obligation, secured or unsecured (whether absolute,
accrued, contingent or otherwise, and whether due or to
become due), of a nature required by GAAP to be reflected
in a corporate balance sheet or disclosed in the notes
thereto, except for those that either (i) are accrued or
reserved against in the HFID Balance Sheet or disclosed
in the notes thereto in accordance with GAAP or (ii) were
incurred in the ordinary course of business consistent
with past practice, whether before or after the date of
the HFID Balance Sheet. HFID is not directly or
indirectly liable upon or with respect to (by discount,
repurchase agreements or otherwise), or obligated in any
other way to provide funds in respect of, or to guarantee
or assume, any material debt, obligation or dividend of
any person, except for those that are accrued or reserved
against in the HFID Balance Sheet or disclosed in the
notes thereto in accordance with GAAP.
Section 3.8 Absence of Certain Changes or
Events. Except as set forth in Schedule 3.8, since
December 31, 1996, there has not been: (i) any Material
Adverse Effect on HFID; (ii) any damage, destruction or
casualty loss, whether covered by insurance or not, which
had a Material Adverse Effect on HFID; (iii) (A) any
increase in the rate or terms of compensation or other
benefits payable or to become payable by HFID to its key
employees (other than the Principal Stockholders), except
increases occurring in the ordinary course of business
consistent with past practice; or (B) any grant of
severance or termination pay, or contract by HFID to make
or grant any severance or termination pay, or paid any
bonus other than customary year-end bonuses for 1996, or
(C) any strike, work stoppage, slowdown, or other
material labor disturbance at HFID; (iv) any entry into
any agreement, commitment or transaction (including
without limitation any borrowing, capital expenditure or
capital financing) by HFID, which is material to HFID,
except agreements, commitments or transactions in the
ordinary course of business consistent with past practice
or as contemplated herein; or (v) any change by HFID in
its accounting methods, principles or practices except as
required by GAAP.
Section 3.9 Legal Proceedings. (a) As of the
date hereof, except as set forth in Schedule 3.9, HFID is
not a party to any, and there are no pending or
threatened, material legal, administrative, arbitral or
other proceedings, claims, actions or governmental or
regulatory investigations of any nature against HFID or
challenging the validity or propriety of the transactions
contemplated by this Agreement as to any of which there
is a reasonable probability of an adverse determination
and which, if adversely determined, would, individually
or in the aggregate, have a Material Adverse Effect on
HFID.
(b) There is no injunction, order, judgment or
decree imposed upon HFID or the assets of HFID which has
had, or might reasonably be expected to have, a Material
Adverse Effect on HFID.
Section 3.10 Taxes and Tax Returns. (a) HFID
has duly filed all material federal, state, county,
foreign and local information returns and tax returns
required to be filed by it on or prior to the date hereof
(all such returns being accurate and complete in all
respects) and has duly paid or made provision for (in
accordance with GAAP) the payment of all Taxes (as
defined in Section 3.10(c)) and other governmental
charges which have been incurred or are due or claimed to
be due from it by federal, state, county, foreign or
local taxing authorities on or prior to the date hereof,
including, without limitation, if and to the extent
applicable, those due in respect of its properties,
income, business, capital stock, deposits, franchises,
licenses, sales and payrolls. The federal income tax
returns of HFID have been examined by the Internal
Revenue Service (the "IRS") for taxable years through
December 31, 1995, and either no deficiencies were
asserted as a result of such examination for which HFID
does not have adequate reserves (in accordance with GAAP)
or all such deficiencies were satisfied. Except as set
forth on Schedule 3.10 (a), there are no examinations
pending, disputes pending, or claims asserted in writing
for, Taxes or assessments upon HFID, nor has HFID been
requested in writing to give any currently effective
waivers extending the statutory period of limitation
applicable to any federal, state, county or local income
tax return for any period. In addition, (i) proper and
accurate amounts have been withheld by HFID from its
employees for all periods prior to the date hereof in
compliance in all respects with the tax withholding
provisions of applicable federal, state and local laws,
(ii) federal, state, county and local returns which are
accurate and complete in all respects have been filed by
HFID for all periods for which returns were due with
respect to income tax withholding, Social Security and
unemployment taxes, (iii) the amounts shown on such
federal, state, local or county returns to be due and
payable have been paid in full or adequate provision
therefor has been included by HFID in its financial
statements as of September 30, and (iv) there are no
Tax liens upon any property or assets of HFID except
liens for current taxes not yet due. HFID has not been
required to include in income any adjustment pursuant to
Section 481 of the Code by reason of a voluntary change
in accounting method initiated by HFID (except as may be
required in connection with this transaction), and the
IRS has not initiated or proposed any such adjustment or
change in accounting method, in either case which has had
or is reasonably likely to have a material adverse effect
on HFID. Except as set forth in the financial statements
described in Section 3.5, HFID has not entered into a
transaction which is being accounted for under the
installment method of Section 453 of the Code, which
would be reasonably likely to have a Material Adverse
Effect on HFID.
(b) HFID is not a party to any tax allocation
or sharing agreement and has never been a member of an
affiliated group filing a consolidated federal income tax
return and does not have any liability for taxes of any
person (other than HFID) under Treasury regulation
Section 1.1502-6 (or any similar provision of state,
local or foreign law) as a transferee or successor or by
contract or otherwise.
(c) As used in this Agreement, the term "Tax"
or "Taxes" means all federal, state, county, local, and
foreign income, excise, gross receipts, gross income, ad
valorem, profits, gains, property, capital, sales,
transfer, use, payroll, employment, severance,
withholding, duties, intangibles, franchise, backup
withholding, and other taxes (including without
limitation estimated taxes), charges, levies or like
assessments together with all penalties and additions to
tax and interest thereon.
Section 3.11 Licenses; Compliance with
Applicable Law. HFID holds all material licenses,
franchises, permits and authorizations necessary for the
lawful conduct of its business under and pursuant to all,
and has complied with and is not in default in any
material respect under any, applicable law, statute,
order, rule, regulation, policy and/or guideline of any
Governmental Entity relating to HFID, except in each case
where the failure to hold such license, franchise, permit
or authorization or such noncompliance or default would
not, individually or in the aggregate, have a Material
Adverse Effect on HFID, and HFID does not know of, and
has not received notice of, any material violations of
any of the above.
Section 3.12 Personal Property. Schedule 3.12
sets forth as of the date of this Agreement a complete
and correct list of each item of machinery, equipment,
furniture, fixtures and other tangible personal property
owned, leased or used by HFID having an original purchase
cost or aggregate lease cost to HFID exceeding $25,000
(the "Machinery and Equipment"). Except as set forth on
Schedule 3.12, HFID owns outright and has good, valid and
marketable title, free and clear of any Lien, to the
Machinery and Equipment as owned by it and to all the
machinery, equipment, furniture, fixtures, inventory,
receivables and other tangible or intangible personal
property reflected on the HFID Balance Sheet and all such
property acquired since the date thereof, except for
sales and dispositions in the ordinary course of business
consistent with past practice since the date of the HFID
Balance Sheet, except to the extent that any such failure
to have good title would not, in the aggregate with any
and all such failures, reasonably be expected to have a
Material Adverse Effect on HFID. None of the Liens
listed on Schedule 3.12 has, or can reasonably be
expected to have, a Material Adverse Effect on HFID.
Except as set forth in Schedule 3.12, HFID holds good and
transferable leaseholds in all of the Machinery and
Equipment as leased by it, in each case under valid and
enforceable leases. HFID does not hold any personal
property of any other person, firm or corporation
pursuant to any consignment or similar arrangement.
Section 3.13 Real Property. Schedule 3.13
lists, as of the date of this Agreement, all leases under
which HFID is a lessee or lessor. Except for the
property used pursuant to the leases listed on Schedule
3.13, HFID does not own or use any real property. The
leases listed on Schedule 3.13 are valid, binding and
enforceable obligations of HFID in accordance with their
terms, are in full force and effect, there are no
existing defaults by HFID thereunder, and no event has
occurred which (whether with or without notice, lapse of
time or both) would constitute a default thereunder.
Section 3.14 Work In Process. All work for
work in progress as of September 30, 1997 is billed
monthly on a time and materials basis and is fairly
reflected in the September Financial Statements,
including all appropriate reserves, on a basis consistent
with prior periods.
Section 3.15 Insurance. All policies of fire,
liability, workmen's compensation and other forms of
insurance owned or held by and insuring HFID are listed
on Schedule 3.15. Except as set forth in Schedule 3.15,
all policies of fire, liability, workmen's compensation
and other forms of insurance owned or held by and
insuring HFID are in full force and effect, all premiums
with respect thereto covering all periods up to and
including the date as of which this representation is
being made have been paid (other than retroactive
premiums which may be payable with respect to
comprehensive general liability and workmen's
compensation insurance policies), and no notice of
cancellation or termination has been received with
respect to any such policy which was not replaced on
substantially similar terms prior to the date of such
cancellation. Other than as set forth on Schedule 3.15,
such policies are valid, outstanding and enforceable
policies and will not in any way be affected by, or
terminate or lapse by reason of, the transactions
contemplated by this Agreement. Except as described in
Schedule 3.15, as of the date of this Agreement HFID has
not been refused any insurance with respect to its assets
or operations nor has its coverage been limited in any
material respect by any insurance carrier to which it has
applied for any such insurance or with which it has
carried insurance during the last three years. HFID has
heretofore made available to REFAC true and complete
copies of all such policies.
Section 3.16 ERISA; Benefit Plans. (a)
Schedule 3.16(a) contains a list of all "employee pension
benefit plans" (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) (sometimes referred to herein as
"Pension Plans"), "employee welfare benefit plans" (as
defined in Section 3(1) of ERISA), bonus, stock option,
stock purchase and deferred compensation plans or
arrangements, termination or severance pay plan, each
employment termination or severance program, agreement or
arrangement, and other employee fringe benefit plans (all
the foregoing being herein referred to as "Benefit
Plans"), in each case, which has been established,
maintained, or contributed to, or required to be
contributed to, by HFID for the benefit of, or relating
to, any employees or former employees of HFID. HFID has
delivered to REFAC true, complete and correct copies of
(i) each Benefit Plan (or, in the case of any unwritten
Benefit Plan, a description thereof), (ii) the most
recent determination letter received from the Internal
Revenue Service, (iii) the latest actuarial evaluations,
(iv) the most recent annual report on Form 5500 filed
with the Internal Revenue Service with respect to each
Benefit Plan (if any such report was required), including
Schedule A and Schedule B thereto, (v) the most recent
summary plan description for each Benefit Plan for which
such a summary plan description is required and (vi) each
trust agreement and group annuity contract relating to
any Benefit Plan. HFID has no commitment, whether
legally binding or otherwise, to create any additional
employee benefit plan or modify or change any existing
Benefit Plan that would affect any employee or former
employee of HFID.
(b) Each Benefit Plan has been administered in
all material respects in accordance with its terms and
applicable law, including but not limited to ERISA and
the Internal Revenue Code of 1986, as amended (the
"Code"). Except as disclosed in Schedule 3.16(b), there
are no pending or threatened investigations by any
governmental agency, termination proceedings or other
claims (except for benefits payable in the normal
operation of the Benefit Plans), suits or proceedings
against or involving any Benefit Plan or asserting any
rights or claims to benefits under any Benefit Plan that
could reasonably give rise to any material liability and
no facts exist that could reasonably be expected to give
rise to any material liability in the event of any such
investigation, claim, suit or proceeding.
(c) Except as disclosed in Schedule 3.16(c),
all contributions to, and payments from, the Benefit
Plans that may have been required to be made in
accordance with the Benefit Plans have been timely made.
(d) HFID does not contribute to, and has never
contributed to, a Pension Plan that is or was subject to
Section 302 of ERISA or Section 412 of the Code.
(e) With respect to any Benefit Plan that is an
employee welfare benefit plan, except as disclosed in
Schedule 3.16(e), (i) no such Benefit Plan is funded
through a welfare benefits fund, as such term is defined
in Section 419(e) of the Code, and (ii) each such Benefit
Plan that is a group health plan, as such term is defined
in Section 5000(b)(1) of the Code, complies with the
applicable requirements of Section 4980B(f) of the Code.
No Benefit Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or
not insured) for employees or former employees of HFID
for periods extending beyond their retirement or other
termination of service, other than (x) coverage mandated
by applicable law, (y) death benefits under any Pension
Plan or (z) benefits the full cost of which is borne by
the current or former employee (or his or her
beneficiary).
(f) Schedule 3.16 (f) lists each Benefit Plan
that contains "change in control" or similar provisions
or that provides for "stay-on" bonuses or severance
payments in connection with a "change in control" or
similar situation (each, a "Change of Control
Arrangement"). No Change of Control Arrangement
individually or collectively could give rise to the
payment of any amount that would not be deductible
pursuant to the terms of Section 280G of the Code.
Section 3.17 Certain Contracts. (a) Except as
set forth in Schedule 3.17(a)(i), HFID is not a party to
or bound by any contract, arrangement, commitment or
understanding (whether written or oral) (i) with respect
to the employment of any directors, executive officers,
key employees or material consultants, (ii) which, upon
the consummation of the transactions contemplated by this
Agreement will (either alone or upon the occurrence of
any additional acts or events) result in any payment
(whether of severance pay or otherwise) becoming due from
REFAC, MERGER SUB, the Surviving Corporation, or any of
their respective subsidiaries to any officer or employee
thereof, (iii) which contains any material non-compete
provisions with respect to any line of business or
geographic area in which business is conducted with
respect to HFID or which restricts the conduct of any
line of business by HFID or any geographic area in which
HFID may conduct business, in each case in any material
respect, (iv) which, upon the consummation of the
transactions contemplated by this Agreement will (either
alone or upon the occurrence of any additional acts or
events), result in a violation or breach of, or
constitute (with or without due notice or lapse of time
or both) a default, or give rise to any right of
termination, amendment, cancellation or acceleration
under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to
which HFID is a party or by which it or any of its
properties or assets may be bound or result in the
creation of any Lien or (v) with or to a labor union or
guild (including any collective bargaining agreement),
(vi) any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated,
by the occurrence of any of the transactions contemplated
by this Agreement, or the value of any of the benefits of
which will be calculated on the basis of any of the
transactions contemplated by this Agreement or (vii)
which would prohibit or materially delay the consummation
of the Merger or any of the transactions contemplated by
this Agreement.
(b) Schedule 3.17 (b) lists all agreements,
written or oral, of HFID with a value greater than $5,000
other than customer contracts in accordance with the
normal course of HFID's business. Each contract,
arrangement, commitment or understanding of the type
described in this Section 3.17 is referred to herein as
an "HFID Contract," and HFID does not know of and has
received no notice of, any violation of the above by any
of the other parties thereto (except for violations
which, individually or in the aggregate, would not have a
Material Adverse Effect on HFID).
(c) (i) Each HFID Contract is valid and
binding on HFID and in full force and effect, (ii) HFID
has in all material respects performed all obligations
required to be performed by it to date under each HFID
Contract, except where such noncompliance, individually
or in the aggregate, would not have a Material Adverse
Effect on HFID, and (iii) no event or condition exists
which constitutes or, after notice or lapse of time or
both, would constitute, a breach or default on the part
of HFID under any such HFID Contract, except where such
breaches or defaults, individually or in the aggregate,
would not have a Material Adverse Effect on HFID.
Section 3.18 Intellectual Property. Schedule
3.18 sets forth a true and complete list of all material
patents, trademarks (registered or unregistered), trade
names (registered or unregistered), service marks
(registered or unregistered), registered copyrights and
computer software applications (excluding noncritical,
uncustomized shrink-wrap or off-the-shelf software) owned
or used by or licensed to HFID, and all license
agreements related thereto to which HFID is a party
(collectively, the "Intellectual Property"), and, with
respect to trademarks, contains a list of all
jurisdictions in which such trademarks are registered or
applied for by HFID and all corresponding registration
and application numbers. Except as disclosed on Schedule
3.18 or as provided in any agreement listed on Schedule
3.18, HFID owns or has the right to use, without payment
to any other party, the Intellectual Property used in or
necessary for the conduct of its business and the
consummation of the transactions contemplated hereby will
not, by itself, materially alter or impair any such
rights. Except as disclosed on Schedule 3.18, all
Intellectual Property owned or used by HFID is free and
clear of all Liens arising through actions of HFID.
Except as disclosed on Schedule 3.18, no material claims
or other proceedings are pending or threatened against
HFID by any third party person or entity with respect to
the ownership, validity, enforceability or the right to
use any Intellectual Property.
Section 3.19 Customers and Suppliers. (a)
Schedule 3.19 sets forth a complete and correct list of
the ten largest customers by dollar volume for 1996 and
1997 (to September 30, 1997). Except as disclosed in
Schedule 3.19, since January 1, 1996, HFID has not at any
time received from any customer any formal notice or
written allegation of a default or breach with respect to
any work performed and none of such customers has
delivered any formal notice stating its intention to
terminate or change significantly its relationship with
HFID or to hold HFID accountable for any damages
sustained as a result of any work performed by HFID.
(b) HFID is not dependent upon any supplier
for the services or materials that it requires in its
business. Its largest supplier in terms of annual
purchases is Dynacept, a model maker, and there are ample
alternative sources of supply for such services.
Section 3.20 Arrangements with Directors,
Officers and Affiliates. Except for the agreements and
other arrangements disclosed in Schedule 3.20 (the
"Affiliate Arrangements"), as of the date hereof, there
are no agreements or other arrangements between HFID, on
the one hand, and any director, officer, employee,
stockholder or other affiliate, as defined in Rule 405
under the Securities Act of 1933, as amended (the
"Securities Act"), of HFID on the other hand, including,
without limitation, management agreements and loans to or
by HFID from or to any of such persons. Except as
disclosed in Schedule 3.20, since January 1, 1997, none
of the officers or directors of HFID, or, to the best
knowledge of, and after due inquiry by, the Principal
Stockholders, any spouse or immediate relative of any of
such persons, has been a director or officer of, or has
had any direct interest in, any firm, corporation,
association or business enterprise which during such
period has been a supplier, customer or sales agent of
HFID or has competed with or been engaged in any business
of the kind being conducted by HFID. Except as disclosed
in Schedule 3.20, no affiliate of HFID owns or has any
rights in or to any of the assets, properties or rights
used by HFID in its ordinary course of business.
Section 3.21 Receivables. All accounts
receivable, notes receivable and other receivables
arising from the operation of HFID's business have arisen
from bona fide transactions in the ordinary course of
business.
Section 3.22 Investment Intent. The shares of
REFAC Common Stock will be acquired hereunder by each
Principal Stockholder without registration under the
Securities Act solely for the account of such Principal
Stockholder and its specified designees, for investment,
and not with a view to the resale or distribution
thereof.
Section 3.23 Vote Required. The affirmative
vote of the holders of sixty-seven and one-half percent
of the holders of the HFID Common Stock are the only
votes of the holders of any class or series of HFID's
capital stock necessary to approve this Agreement and the
transactions contemplated hereby, subject to any other
vote which may be required by the NYBCL.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF REFAC
REFAC represents and warrants to HFID and the
Principal Stockholders as follows:
Section 4.1 Organization. REFAC is a
corporation duly organized, validly existing and in good
standing under the laws of Delaware and has all requisite
corporate power and authority and all necessary
governmental approvals to own, lease and operate its
properties and to carry on its business as now being
conducted, except where the failure to be so organized,
existing and in good standing or to have such power,
authority and governmental approvals would not,
individually or in the aggregate, have a Material Adverse
Effect on REFAC. REFAC is duly qualified or licensed to
do business and in good standing in each jurisdiction in
which the property owned, leased or operated by it or the
nature of the business conducted by it makes such
qualification or licensing necessary, except where the
failure to be so duly qualified or licensed and in good
standing would not, individually or in the aggregate,
have a Material Adverse Effect on REFAC.
Section 4.2 Capitalization. (a) Information
concerning the capitalization of REFAC, including its
authorized capital stock, the number of shares issued and
outstanding, and the number of shares of treasury stock,
has previously been furnished to HFID in REFAC's annual
report for 1996. As of the date hereof, 3,634,387 shares
of REFAC Common Stock are issued and outstanding and
1,775,000 shares of REFAC Common Stock are held in the
treasury of REFAC. All of the outstanding shares of
REFAC's capital stock are, and shares of REFAC's which
may be issued pursuant to the exercise of outstanding
employee stock options will be, when issued in accordance
with the respective terms thereof, duly authorized,
validly issued, fully paid and non-assessable. There is
no Voting Debt of REFAC issued and outstanding. Except
as set forth above, as of the date hereof, (i) there are
no shares of capital stock of REFAC authorized, issued or
outstanding and (ii) except for warrants to purchase
200,000 shares of REFAC Common Stock for $8.25 per share
of REFAC Common Stock issued to Palisade Capital
Corporation, there are no existing options, warrants,
calls, pre-emptive rights, subscriptions or other rights,
agreements, arrangements or commitments of any character,
relating to the issued or unissued capital stock of
REFAC, obligating REFAC to issue, transfer or sell or
cause to be issued, transferred or sold any shares of
capital stock or Voting Debt of REFAC or securities
convertible into or exchangeable for such shares or
equity interests, or obligating REFAC to grant, extend or
enter into any such option, warrant, call, subscription
or other right, agreement, arrangement or commitment.
(b) There are no stockholders agreements,
voting trusts or other agreements or understandings to
which REFAC is a party with respect to the voting of the
capital stock of REFAC.
(c) REFAC is not required to redeem,
repurchase or otherwise acquire shares of capital stock
of REFAC as a result of the transactions contemplated by
this Agreement.
(d) No dividend has been declared by REFAC
which is unpaid as of the date of this Agreement.
Section 4.3 Authorization; Validity of
Agreement; Necessary Action. REFAC has full corporate
power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby.
The execution, delivery and performance by REFAC and the
consummation by REFAC of the transactions contemplated
hereby, have been duly authorized by the Board of
Directors of REFAC and no other corporate action on the
part of REFAC is necessary to authorize the execution and
delivery by REFAC and the consummation of the
transactions contemplated hereby. This Agreement has
been duly executed and delivered by REFAC, and, assuming
due and valid authorization, execution and delivery
hereof by HFID and the Principal Stockholders, is a valid
and binding obligation of REFAC, enforceable against it
in accordance with its terms except as such enforcement
may be limited by bankruptcy and other laws generally
affect the rights of creditors and general principals of
equity.
Section 4.4 Consents and Approvals; No
Violations. Except for the filings, permits,
authorizations, consents and approvals as may be required
under, and other applicable requirements of, the NYBCL,
neither the execution, delivery or performance of this
Agreement by REFAC nor the consummation by REFAC of the
transactions contemplated hereby nor compliance by REFAC
with any of the provisions hereof will (i) conflict with
or result in any breach of any provision of the
certificate of incorporation or by-laws of REFAC, (ii)
require any filing with, or permit, authorization,
consent or approval of, any Governmental Entity, (iii)
result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation
or acceleration) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or
obligation to which REFAC is a party or by which any of
its properties or assets may be bound or (iv) violate any
order, writ, injunction, decree, statute, rule or
regulation applicable to REFAC or any of its properties
or assets, excluding from the foregoing clauses (ii),
(iii) and (iv) such violations, breaches or defaults
which would not, individually or in the aggregate, have a
Material Adverse Effect on REFAC and which will not
materially impair the ability of REFAC to consummate the
transactions contemplated hereby.
Section 4.5 SEC Reports. REFAC has filed,
pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as the case may
be, all material forms, statements, reports and documents
(including all exhibits, amendments and supplements
thereto) (the "SEC Documents") required to be filed with
respect to the business and operations of REFAC under
each of the Securities Act and the Exchange Act, and the
respective rules and regulations thereunder, and all of
the SEC Documents complied in all material respects with
all applicable requirements of the Securities Act or the
Exchange Act, as the case may be, and the appropriate act
and the rules and regulations thereunder in effect on the
date each such report was filed. At the respective dates
they were filed, none of the SEC Documents contained any
untrue statement of a material fact or omitted to state
any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
The consolidated financial statements of REFAC included
in the SEC Documents complied as to form in all material
respects with the applicable accounting requirements and
the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with
GAAP consistently applied throughout the period involved
(except as may be indicated therein or in the notes
thereto) and fairly present the consolidated financial
position, results of operations and cash flows of REFAC
as of the dates or for the periods indicated therein,
subject, in the case of the unaudited statements, to
normal year-end adjustments and the absence of certain
footnote disclosures.
Section 4.6 Absence of Certain Changes or
Events. Except as set forth in Schedule 4.6, since
December 31, 1996, there has not been any Material
Adverse Effect on REFAC.
Section 4.7 Legal Proceedings. (a) As of the
date hereof, except as set forth in the SEC Documents,
REFAC is not a party to any, and there are no pending or,
to the best of REFAC's knowledge, threatened, material
legal, administrative, arbitral or other proceedings,
claims, actions or governmental or regulatory
investigations of any nature against REFAC or challenging
the validity or propriety of the transactions
contemplated by this Agreement as to any of which there
is a reasonable probability of an adverse determination
and which, if adversely determined, would, individually
or in the aggregate, have a Material Adverse Effect on
REFAC.
(b) There is no injunction, order, judgment or
decree imposed upon REFAC or the assets of REFAC which
has had, or might reasonably be expected to have, a
Material Adverse Effect on REFAC.
Section 4.8 Arrangements with Directors,
Officers and Affiliates. Except as disclosed in the SEC
Documents, as of the date hereof, there are no agreements
or other arrangements between REFAC, on the one hand, and
any director, officer, employee, stockholder or other
affiliate, as defined in Rule 405 under the Securities
Act, of REFAC, on the other hand, including, without
limitation, management agreements and loans to or by
REFAC from or to any of such persons. Except as
disclosed in the SEC Reports, since January 1, 1997, none
of the officers or directors of REFAC, or, to the best
knowledge of, and after due inquiry by, REFAC, any spouse
or immediate relative of any of such persons, has been a
director or officer of, or has had any direct interest
in, any firm, corporation, association or business
enterprise which during such period has been a supplier,
customer or sales agent of REFAC or has competed with or
been engaged in any business of the kind being conducted
by REFAC. Except as disclosed in the SEC Reports, no
affiliate of REFAC owns or has any rights in or to any of
the assets, properties or rights used by REFAC in its
ordinary course of business.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MERGER SUB
MERGER SUB represents and warrants to HFID and
the Principal Stockholders as follows:
Section 5.1 Organization. MERGER SUB is a
corporation duly organized, validly existing and in good
standing under the laws of New York and has all requisite
corporate power and authority and all necessary
governmental approvals to own, lease and operate its
properties and to carry on its business as now being
conducted, except where the failure to be so organized,
existing and in good standing or to have such power,
authority and governmental approvals would not,
individually or in the aggregate, have a Material Adverse
Effect on MERGER SUB. MERGER SUB is duly qualified or
licensed to do business and in good standing in each
jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by
it makes such qualification or licensing necessary,
except where the failure to be so duly qualified or
licensed and in good standing would not, individually or
in the aggregate, have a Material Adverse Effect on
MERGER SUB.
Section 5.2 Capitalization. (a) The
authorized capital stock of MERGER SUB consists of 100
shares of common stock. As of the date hereof, 100
shares of common stock are issued and outstanding and no
shares of common stock are held in the treasury of MERGER
SUB. All of the outstanding shares of MERGER SUB's
capital stock are duly authorized, validly issued, fully
paid and non-assessable, and are owned beneficially and
of record by REFAC. There is no Voting Debt of MERGER
SUB issued and outstanding. Except as set forth above,
as of the date hereof, (i) there are no shares of capital
stock of MERGER SUB authorized, issued or outstanding and
(ii) there are no existing options, warrants, calls, pre-
emptive rights, subscriptions or other rights,
agreements, arrangements or commitments of any character,
relating to the issued or unissued capital stock of
MERGER SUB, obligating HFID to issue, transfer or sell or
cause to be issued, transferred or sold any shares of
capital stock or Voting Debt of MERGER SUB or securities
convertible into or exchangeable for such shares or
equity interests, or obligating MERGER SUB to grant,
extend or enter into any such option, warrant, call,
subscription or other right, agreement, arrangement or
commitment.
(b) There are no stockholders agreements,
voting trusts or other agreements or understandings to
which MERGER SUB is a party with respect to the voting of
the capital stock of MERGER SUB.
(c) MERGER SUB is not required to redeem,
repurchase or otherwise acquire shares of capital stock
of MERGER SUB as a result of the transactions
contemplated by this Agreement.
Section 5.3 Authorization; Validity of
Agreement; Necessary Action. MERGER SUB has full
corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance by
MERGER SUB and the consummation by MERGER SUB of the
transactions contemplated hereby, have been duly
authorized by the Board of Directors of MERGER SUB and no
other corporate action on the part of MERGER SUB is
necessary to authorize the execution and delivery by
MERGER SUB and the consummation of the transactions
contemplated hereby. This Agreement has been duly
executed and delivered by MERGER SUB, and, assuming due
and valid authorization, execution and delivery hereof by
HFID, REFAC and the Principal Stockholders, is a valid
and binding obligation of MERGER SUB, enforceable against
it in accordance with its terms except as such
enforcement may be limited by bankruptcy and other laws
generally affect the rights of creditors and general
principals of equity.
Section 5.4 Consents and Approvals; No
Violations. Except for the filings, permits,
authorizations, consents and approvals as may be required
under, and other applicable requirements of, the NYBCL,
neither the execution, delivery or performance of this
Agreement by MERGER SUB nor the consummation by MERGER
SUB of the transactions contemplated hereby nor
compliance by MERGER SUB with any of the provisions
hereof will (i) conflict with or result in any breach of
any provision of the certificate of incorporation or by-
laws of MERGER SUB, or (ii) require any filing with, or
permit, authorization, consent or approval of, any
Governmental Entity.
ARTICLE VI
COVENANTS
Section 6.1 Interim Operations of HFID. (a)
Except as expressly contemplated by this Agreement or as
agreed in writing by REFAC, after the date hereof and
prior to the Effective Time, (i) the business of HFID
shall be conducted only in the ordinary and usual course
consistent with past practice, (ii) HFID and the
Principal Stockholders shall use all commercially
reasonable efforts to preserve intact its present
business organization and personnel, (iii) HFID and the
Principal Stockholders shall use all commercially
reasonable efforts to preserve the good will and
advantageous relationships with customers, suppliers,
independent contractors, employees and other persons
material to the business of HFID, (iv) HFID and the
Principal Stockholders shall use all commercially
reasonable efforts to not permit any action or omission
that would cause any of the representations or warranties
of HFID or the Principal Stockholders contained herein to
become inaccurate, or any of the covenants of HFID or the
Principal Stockholders to be breached.
(b) HFID will not, directly or indirectly, (i)
issue any shares of capital stock (ii) amend its
certificate of incorporation or by-laws; (iii) split,
combine or reclassify the outstanding shares of HFID
Common Stock; (iv) declare, set aside or pay any dividend
or other distribution payable in cash, stock or property
with respect to its capital stock; or (v) redeem,
purchase or otherwise acquire directly or indirectly any
of its capital stock.
Section 6.2 Consents and Approvals. (a) Upon
the terms and subject to the conditions of this
Agreement, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the
transactions contemplated by this Agreement as promptly
as practicable including, but not limited to, (i) the
preparation and filing of all forms, registrations and
notices required to be filed to consummate the
transactions contemplated by this Agreement and the
taking of such actions as are necessary to obtain any
requisite approvals, consents, order, exemptions or
waivers by any third party or Governmental Entity, and
(ii) causing the satisfaction of all conditions to the
Closing.
(b) Each of REFAC and HFID shall promptly
consult with the other with respect to, provide any
necessary information that is not subject to legal
privilege with respect to, and provide the other (or its
counsel) copies of, all filings made by such party with
any Governmental Entity or any other information supplied
by such party to a Governmental Entity in connection with
this Agreement and the transactions contemplated by this
Agreement. Each of REFAC and HFID shall promptly inform
the other of any communication from any Governmental
Entity regarding any of the transactions contemplated by
this Agreement. If such party receives a request from
any such Governmental Entity with respect to the
transactions contemplated by this Agreement, then such
party will endeavor in good faith to make, or cause to be
made, as soon as reasonably practicable and after
consultation with the other party, an appropriate
response in compliance with such request.
Section 6.3 No Solicitation. HFID shall not
(and shall use its best efforts to cause its officers,
directors, employees, representatives and agents,
including, but not limited to, investment bankers,
attorneys and accountants, not to), directly or
indirectly, encourage, solicit, participate in or
initiate discussions or negotiations with, or provide any
information to, any corporation, partnership, person or
other entity or group (other than REFAC, any of its
affiliates or representatives) concerning any merger,
tender offer, exchange offer, sale of assets, sale of
shares of capital stock or debt securities or similar
transactions involving HFID or any division or operating
or principal business unit of REFAC (an "Acquisition
Proposal").
Section 6.4 Access to Information. (a) Upon
reasonable notice HFID shall afford to the officers,
employees, accountants, counsel and other representatives
of REFAC, access, during normal business hours during the
period prior to the Effective Time, to all its
properties, books, contracts, commitments and records
and, during such period, HFID shall make available to
REFAC all information concerning its business, properties
and personnel as such party may reasonably request.
(b) REFAC shall keep such information strictly
confidential and shall not (i) disclose such information
to any party, other than executive personnel and third
party advisors that are involved in effecting the
transactions contemplated hereby, which personnel and
advisors shall use such information solely to assist in
effecting the transactions contemplated hereby or (ii)
use such information for any purpose other than to effect
the transactions contemplated hereby.
Section 6.5 Brokers or Finders. Each of
REFAC, HFID, MERGER SUB and the Principal Stockholders
represents, as to itself and its affiliates that no
agent, broker, investment banker, financial advisor or
other firm or person is or will be entitled to any
brokers' or finders' fee or any other commission or
similar fee in connection with any of the transactions
contemplated by this Agreement and each of REFAC, HFID,
MERGER SUB and the Principal Stockholders agrees to
indemnify and hold the other parties hereto harmless from
and against any and all claims, liabilities or
obligations with respect to any other fees, commissions
or expenses asserted by any person on the basis of any
act or statement alleged to have been made by such party
or its affiliates.
Section 6.6 Key Man Insurance. ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ agrees to provide any information, and submit to
any medical examination, necessary for the purchase by
REFAC of a "key man" insurance policy, naming him as the
insured and REFAC as the sole beneficiary, in such sum as
▇▇▇▇▇ ▇▇▇▇▇ appropriate to insure against his death.
Section 6.7 Agreement to Vote Shares. (a)
Each of the Principal Stockholders agrees to vote his
shares of HFID Common Stock, and undertakes to use his
best efforts to cause the other stockholders of HFID
Common Stock (other than the other Principal
Stockholders) to vote their shares, for the approval of
the Merger and the adoption of this Agreement.
(b) REFAC, as sole stockholder of MERGER SUB,
agrees to vote its shares of MERGER SUB common stock for
the approval of the Merger and the adoption of this
Agreement.
Section 6.8 Employment Agreements and Stock
Options. REFAC and each of the Principal Stockholders
agree that, at or prior to the Effective Time, the
Surviving Corporation and such Principal Stockholder
shall enter into an employment agreement (each, an
"Employment Agreement") substantially in the form set
forth as Exhibit B hereto. REFAC further agrees that at
or prior to the Effective Time (a) the Surviving
Corporation will enter into Employment Agreements in the
form attached hereto as Exhibit C with ▇▇▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇ III, and ▇▇▇▇▇▇ ▇▇▇▇▇▇ (the "Other
Stockholders"), (each of which will incorporate by
reference the Confidentiality and Non-Competition
provisions of Section 6.9 herein), and (b) REFAC will
enter into stock option agreements with the Principal
Stockholders and the Other Stockholders in the form
attached hereto as Exhibit D.
Section 6.9 Confidentiality, Non-Competition,
etc. (a) As used herein, "Confidential Information"
means any confidential or proprietary information
relating to the identity of HFID's customers, the
identity of representatives of customers with whom HFID
has dealt, the kinds of services provided by HFID to
customers, the manner in which such services are
performed or offered to be performed, the service needs
of actual or prospective customers, pricing information,
information concerning the creation, acquisition or
disposition of products and services, customer
maintenance listings, computer software applications,
research and development data, know-how, personnel
information and other trade secrets. Notwithstanding the
above, Confidential Information shall not include any
information that:
(i) is generally known to industrial
designers and/or to entities in HFID's trade or
business;
(ii) is generally available to the public
without conducting a substantial search of
published literature;
(iii) is part of the professional skills
and know-how developed by the Principal
Stockholder during the course of his career; or
(iv) is subject to disclosure pursuant to
any order or regulation of any governmental,
regulatory or administrative agency or
authority or court of judicial authority.
If a particular portion or aspect of
Confidential Information becomes subject to any of the
foregoing exceptions, all other portions or aspects of
such information shall remain subject to all of the
provisions of this Agreement.
(b) Each Principal Stockholder acknowledges
that: (i) the Principal Stockholder's employment by HFID
has and will require that the Principal Stockholder have
access to and knowledge of Confidential Information; (ii)
the disclosure of any such Confidential Information to
existing or potential competitors of HFID would place
HFID at a competitive disadvantage and would do damage,
monetary or otherwise, to HFID's business; and (iii) the
engaging by the Principal Stockholder in any of the
activities prohibited by this Section 6.9 may constitute
improper appropriation and/or use of Confidential
Information. Each Principal Stockholder expressly
acknowledges the trade secret status of the Confidential
Information and that the Confidential Information
constitutes a protectable business interest of HFID.
Accordingly, HFID and each Principal Stockholder agrees
as follows:
(i) During the Employment Period and for a
period of five (5) years thereafter, he shall not,
directly or indirectly, whether individually, as a
director, stockholder, owner, partner, employee,
principal or agent of any business, or in any other
capacity, make known, disclose, furnish, make
available or utilize any of the Confidential
Information, other than in the proper performance of
the duties as an employee of HFID. Notwithstanding
the foregoing, any information which meets the
definition of trade secret under the Uniform Trade
Secret Act and does not fall within subparagraphs
(a)(i) to (a)(iii) above, will be maintained in
confidence so long as it continues to be treated as
a trade secret.
(ii) The Principal Stockholder agrees to return
all Confidential Information, including all
photocopies, extracts and summaries thereof, and any
such information stored electronically on tapes,
computer disks or in any other manner to HFID at any
time during employment upon HFID's request and upon
the termination of his employment for any reason.
(c) Each Principal Stockholder shall promptly
and fully disclose to HFID in writing all inventions,
improvements, discoveries, developments, know-how,
concepts, writings, formulae, processes, methods and
ideas (whether copyrightable, patentable or otherwise)
made, received, generated, conceived, acquired, written
or reduced to practice by the Principal Stockholder alone
or in conjunction with others, during or before or after
working hours (whether or not at the request or upon the
suggestion of HFID), during the period of his employment
with HFID, in or relating to the products or services of
HFID or its customers which are known to the Principal
Stockholder as a consequence of his employment with HFID
(the "Inventions").
The Principal Stockholder agrees that any and
all such Inventions shall be the exclusive property of
HFID and agrees to assign and transfer to HFID all of his
right, title and interest in and to all Inventions. The
Principal Stockholder will, at HFID's expense, assist
HFID in executing, acknowledging and delivering all
papers and documents, doing all things and supplying all
information that HFID may deem necessary or desirable to
transfer or record the transfer of the Principal
Stockholder's entire right, title and interest in
Inventions to HFID and to enable HFID to obtain patent,
copyright or trademark protection for Inventions anywhere
in the world during the terms of his employment by HFID.
The obligations of the Principal Stockholder hereunder
shall continue beyond the termination of his employment
with HFID with respect to Inventions conceived or made by
the Principal Stockholder during the period of his
employment and shall be binding upon assigns, executors,
administrators and other legal representatives of the
Principal Stockholder.
(d) Each Principal Stockholder shall not, so long as
he is employed by HFID, engage in "Competition" with
HFID. For purposes of this Agreement, Competition by the
Principal Stockholder shall mean the Principal
Stockholder's engaging in, or otherwise directly or
indirectly being employed by or acting as a consultant or
lender to, or being a director, officer, employee,
principal, agent, stockholder, member, owner or partner
of, or permitting his name to be used in connection with
the activities of any other business or organization
anywhere in the United States which competes, directly or
indirectly, with the business of HFID as the same shall
be constituted at any time during his employment.
Notwithstanding the foregoing, the Principal Stockholder
may during such period be the "beneficial holder" (as
such term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) of up to two percent
(2%) of a publicly held company, the beneficial ownership
of which would otherwise cause the Principal Stockholder
to be in breach of this Section 6.9(d).
(e) For a period of thirty-six (36) months
following the termination of each Principal Stockholder's
employment with HFID, whether upon expiration of the Term
or otherwise, each of the Principal Stockholders agrees
that he will not, directly or indirectly, for his benefit
or for the benefit of any other person, firm or entity,
do any of the following:
(i) solicit from any customer doing
business with HFID as of such Principal
Stockholder's termination, business of the same or
of a similar nature to the business of HFID with
such customer;
(ii) solicit from any known potential
customer of HFID business of the same or of a
similar nature to that which has been the subject of
a known written or oral bid, offer or proposal by
HFID, or of substantial preparation with a view to
making such a bid, proposal or offer, within six (6)
months prior to such Principal Stockholder's
termination;
(iii) solicit the employment or services
of, or hire, any person who was known to be employed
by or was a known consultant to HFID upon the
termination of the Principal Stockholder's
employment, or within six (6) months prior thereto;
(iv) otherwise interfere with the business
or accounts of HFID; or
(v) solicit from any licensee of HFID
business from such licensee or a joint venture with
such licensee, in either case, which involves
business that is of the same or of a similar nature
to the business of HFID.
(f) The Principal Stockholder acknowledges
that the services to be rendered by him to HFID are of a
special and unique character, which gives this Agreement
a peculiar value to HFID, the loss of which may not be
reasonably or adequately compensated for by damages in an
action at law, and that a material breach or threatened
breach by him of any of the provisions contained in this
Section 6.9 will cause HFID irreparable injury. The
Principal Stockholder therefore agrees that HFID shall be
entitled, in addition to any other right or remedy, to a
temporary, preliminary and permanent injunction, without
the necessity of proving the inadequacy of monetary
damages or the posting of any bond or security, enjoining
or restraining the Principal Stockholder from any such
violation or threatened violations.
(g) The Principal Stockholder further
acknowledges and agrees that due to the uniqueness of his
services and confidential nature of the information he
will possess, the covenants set forth herein are
reasonable and necessary for the protection of the
business and goodwill of HFID.
(h) For purposes of this Section 6.9, the term
"HFID" shall include HFID & REFAC, and the terms
"Employment Period" and "Term" shall have the meaning set
forth in the Employment Agreements.
(i) The covenants in this Section 6.9 shall
survive, with respect to each Principal Stockholder,
for the respective Employment Periods and for such
additional periods of time for which the covenants are
made.
Section 6.10 Bonuses. On or prior to the
Effective Time, HFID may pay additional compensation and
or a bonus to each of the Principal Stockholders in an
amount not to exceed $50,000 in the aggregate.
Section 6.11 REFAC Investment. Within 90 days
of the Effective Time, REFAC shall contribute no less
than $1 million in cash (the "Investment") to the
Surviving Corporation. REFAC shall not withdraw the
Investment as a dividend or otherwise earlier than the
end of the fifth fiscal year after the consummation of
the Merger, provided that at least two of the Principal
Stockholders remain employees, are parties to Employment
Agreements, and are Board Members of HFID until the end
of the fifth fiscal year after the consummation of the
Merger. If all or any portion of the Investment is not
used for the operations of the Surviving Corporation, it
shall be invested in securities of the United States
Government. Any amounts earned on such investments in
government securities ("Investment Earnings") shall be
paid upon receipt to REFAC as a dividend.
Section 6.12 Aggregate Contingent Payment.
(a) No later than 90 days after the end of the fifth
full fiscal year following the Closing (the "Contingent
Payment Date"), REFAC shall pay the Aggregate Contingent
Payment to the Stockholders. The Aggregate Contingent
Payment shall be divided among the Stockholders pro rata,
according to the number of shares of HFID Common Stock
each such Stockholder sold at the Closing, and shall be
payable by wire transfer to an account designated by such
Stockholder at least two business days prior to the
Contingent Payment Date. The Aggregate Contingent
Payment shall equal (i) the excess, if any, in the
Average EBITDA over $891,000 multiplied by (ii) 3.366,
which amount shall then be reduced by (iii) the aggregate
amount paid or payable from the Earnings Pool to the
Stockholders or other employees under or by reason of the
terms of the Employment Agreements between HFID and the
Principal Stockholders or comparable employment
agreements between HFID and other employees during the
five fiscal years following the Closing and (iv) the
aggregate amount paid or payable to the Stockholder under
Section 7(f)(y) of the Employment Agreement.
(b) For purposes of this Agreement:
(i) "Earnings Pool" shall mean, with
respect to any full fiscal year of HFID, an
amount equal to fifty percent (50%) of the
excess, if any, of (i) HFID's EBITDA (as
defined below) over (ii) $891,000. The Earnings
Pool available to current employees of HFID
shall be reduced by any amounts paid pursuant
to clause (y) of Section 7(f) of the Employment
Agreements.
(ii) "EBITDA" shall mean, with respect to
any full fiscal year of HFID, "EBIDTA" HFID's
net income for such fiscal year, before
provision for the Earnings Pool, interest
expense, income taxes, depreciation and
amortization, and less any Investment Earnings.
For purposes of this Agreement all
determinations with respect to the calculation
of EBITDA for any fiscal year of HFID shall be
made in accordance with generally accepted
accounting principles, consistently applied, by
REFAC's regular independent public accountants.
For purposes of this Agreement, in computing
EBIDTA for any fiscal year, any (A) management
charges, (B) overhead allocation by REFAC to
HFID, (C) fees and expenses for patents filed
with the consent of REFAC, (D) key man life
insurance payments, and (E) severance payments
made pursuant to Section 7(f) of the Employment
Agreements, shall not be taken into account,
provided, that HFID shall be required to
provide to REFAC reasonable consulting services
in connection with REFAC's evaluation of new
technology submissions at no cost to REFAC, and
provided, further, that any work other than
such consulting services performed for REFAC
shall be charged to REFAC on terms no less
favorable than those HFID makes available to
any of its unaffiliated clients during such
fiscal year. As used in this Agreement fiscal
year shall be the calendar year.
(iii) "Average EBITDA" shall mean the
aggregate of the highest four (4) EBITDA
amounts for the first five full fiscal years
following the Closing divided by four (4).
Section 6.13 Additional Agreements. Subject
to the terms and conditions herein provided, each of the
parties hereto shall use all reasonable efforts to take,
or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable under
applicable laws and regulations, or to remove any
injunctions or other impediments or delays, legal or
otherwise, to consummate and make effective the Merger
and the other transactions contemplated by this
Agreement. In case at any time after the Effective Time
any further action is necessary or desirable to carry out
the purposes of this Agreement, the proper officers and
directors of REFAC and HFID, and the Principal
Stockholders, shall use all reasonable efforts to take,
or cause to be taken, all such necessary actions.
Section 6.14 Publicity. The initial press
release with respect to the execution of this Agreement
shall be a press release of REFAC. REFAC shall, prior to
issuing such initial press release, provide HFID with the
opportunity to review and comment upon such press
release.
Section 6.15 Notification of Certain Matters.
Each of REFAC, HFID and the Principal Stockholders shall
give prompt notice to the other parties hereto of (i) the
occurrence or non-occurrence of any event the occurrence
or non-occurrence of which would cause any representation
or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the
Effective Time and (ii) any material failure of REFAC,
HFID or any of the Principal Stockholders, as the case
may be, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any
notice pursuant to this Section 6.15 shall not limit or
otherwise affect the remedies available hereunder to the
party receiving such notice.
Section 6.16 Assignment. Neither this
Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the
prior written consent of the other parties.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's
Obligation to Effect the Merger. The respective
obligation of each party to effect the Merger shall be
subject to the satisfaction on or prior to the Closing
Date of each of the following conditions, any and all of
which may be waived in whole or in part by REFAC, HFID or
the Principal Stockholders, as the case may be, to the
extent permitted by applicable law:
(a) No statute, rule, order, decree or
regulation shall have been enacted or promulgated by any
Governmental Entity which prohibits the consummation of
the Merger and all governmental consents, orders and
approvals required for the consummation of the Merger and
the transactions contemplated hereby shall have been
obtained and shall be in effect at the Effective Time.
(b) There shall be no order or injunction of a
Governmental Entity of competent jurisdiction in effect
precluding, restraining, enjoining or prohibiting
consummation of the Merger.
(c) (i) With respect to the obligations of
REFAC and HFID, the Employment Agreements shall have been
executed, or (ii) with respect to the obligations of each
Principal Stockholder, such Principal Stockholder's
Employment Agreement and Stock Option Agreement shall
have been executed, and REFAC shall have executed a
guaranty in the form attached hereto as Exhibit E with
respect to the obligations to each Principal Stockholder
under the Employment Agreements.
(d) With respect to the obligations of HFID,
the Employment Agreements with the Other Stockholders
shall have been executed, and REFAC shall have executed a
guaranty in the form attached hereto as Exhibit E with
respect to the obligations to each Other Stockholder
under the Employment Agreements.
(e) The stockholders of HFID shall /have
approved and adopted this Agreement at the special
meetings called for that purpose; provided, however, that
the right to terminate this Agreement under this Section
7.1(e) shall not be available to any party whose failure
to fulfill any obligation under this Agreement has been
the cause of, or resulted in, the failure of the
stockholders of HFID to approve and adopt this Agreement.
Section 7.2 Conditions to REFAC's Obligations
to Effect the Merger. The obligations of REFAC to
consummate the Merger are further subject to the
fulfillment of the following conditions, which may be
waived in whole or in part by REFAC:
(a) The representations and warranties of the
Principal Stockholders in this Agreement shall be true
and correct in all material respects both when made and
(except for those representations and warranties that
address matters only as of a particular date which need
only be true and correct in all material respects as of
such date) as of the Effective Time after giving effect
to the Merger as if made at and as of such time and REFAC
shall have received a certificate signed on behalf of
HFID by an officer of HFID to the foregoing effect.
(b) HFID and the Principal Stockholders shall
have performed in all material respects each of their
respective obligations under this Agreement required to
be performed by it at or prior to the Effective Time.
(c) HFID shall have furnished to REFAC copies
of the financial statements required pursuant to Section
3.6, and the Chief Financial Officer and the Chief
Executive Officer of HFID shall have certified that each
of the financial statements of HFID furnished pursuant to
Section 3.6 is true and correct in all material respects.
(d) No material adverse change in the
business, operations, or financial condition of HFID
shall have occurred.
(e) There shall be no material inaccuracy in
any of the financial and/or business data furnished by
HFID to REFAC.
(f) REFAC shall have received an opinion of
counsel, dated the Closing Date, to the effect that:
(i) HFID has been duly incorporated and is an
existing corporation under the laws of the State of
New York, with corporate power and authority to own
its properties and conduct its business;
(ii) All of the shares of the HFID Common Stock
have been duly authorized and are validly issued,
fully paid and nonassessable; and
(iii) The Agreement has been duly authorized,
executed and delivered by HFID.
(g) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall have provided any
information and submitted to any medical examination,
necessary for the purchase by REFAC of a "key man"
insurance policy, naming ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ as the
insured and REFAC as the sole beneficiary, in such sum as
▇▇▇▇▇ ▇▇▇▇▇ appropriate to insure against his death, and
such information and examinations have not disclosed any
fact or condition that would be likely to prevent the
purchase of such an insurance policy at standard rates.
Section 7.3 Conditions to HFID's Obligations
to Effect the Merger. The obligations of HFID to
consummate the Merger are further subject to the
fulfillment of the following conditions, which may be
waived in whole or in part by HFID:
(a) The representations and warranties of
REFAC contained in this Agreement shall be true and
correct in all material respects both when made and
(except for those representations and warranties that
address matters only as of a particular date which need
only be true and correct in all material respects as of
such date) as of the Effective Time after giving effect
to the Merger as if made at and as of such time, and HFID
shall have received a certificate signed on behalf of
REFAC by an officer of REFAC to the foregoing effect and
to the effect that, as of the Effective Time, the
Disclosure Schedules are true and correct in all material
respects;
(b) REFAC shall have performed in all material
respects each of its obligations under this Agreement
required to be performed by it at or prior to the
Effective Time;
(c) The shares of REFAC Common Stock issued as
the Stock Consideration shall be listed on the American
Stock Exchange;
(d) No material adverse change in the
business, operations, or financial condition of REFAC
shall have occurred;
(e) There shall be no material inaccuracy in
any of the financial and/or business data furnished by
REFAC to HFID.
(f) HFID shall have received an opinion of
counsel, dated the Closing Date, to the effect that:
(i) All of the shares of the REFAC Common Stock
issued as Stock Consideration have been duly
authorized and are validly issued, fully paid and
nonassessable;
(ii) The Stock Option Agreements to be entered
into have been duly authorized.
(iii) The Agreement has been duly authorized,
executed and delivered by REFAC and MERGER SUB.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may
be terminated and the Merger contemplated herein may be
abandoned at any time prior to the Effective Time,
whether before or after stockholder approval thereof:
(a) By mutual agreement of REFAC, HFID and the
Principal Stockholders;
(b) By REFAC or HFID:
(i) if the Merger shall not have been
consummated by December 31, 1997; provided, however,
that the right to terminate this Agreement under
this Section 8.1(b)(i) shall not be available to any
party whose failure to fulfill any obligation under
this Agreement has been the cause of, or resulted
in, the failure of the Merger to occur on or prior
to such date; or
(ii) if any Governmental Entity shall
have issued an order, decree or ruling or taken any
other action (which order, decree, ruling or other
action the parties hereto shall use their reasonable
efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have
become final and non-appealable.
Section 8.2 Effect of Termination. In the
event of the termination of this Agreement as provided in
Section 8.1, written notice thereof shall forthwith be
given to the other party or parties specifying the
provision hereof pursuant to which such termination is
made, and this Agreement shall forthwith become null and
void, and there shall be no liability on the part of any
party hereto except (A) for fraud or for material breach
of this Agreement and (B) as set forth in this Section
8.2 and Section 9.1.
ARTICLE IX
INDEMNIFICATION
Section 9.1 Survival. The representations and
warranties of the Principal Stockholders and REFAC in
this Agreement or in any document delivered pursuant
hereto shall survive the Closing until thirty-six (36)
months after the Effective Time, provided, however, that
such time limitation shall not apply to the
representations and warranties set forth in Section 3.10
(such representations and warranties to survive until the
expiration of the statute of limitations applicable to
the Taxes in question, taking into account any extensions
of such statute of limitations), and no time limitation
whatsoever shall apply to the representations and
warranties in Section 3.3. After the end of the relevant
survival period specified above, the Principal
Stockholders' obligations to REFAC under Article VIII
with respect to such representations and warranties shall
expire and terminate.
Section 9.2 Indemnification by Principal
Stockholders. Each of the Principal Stockholders
severally and not jointly agree to indemnify, defend and
hold harmless REFAC against any liabilities, losses,
costs, claims, damages, penalties and expenses including
reasonable attorneys' fees and expenses and reasonable
investigation and litigation costs incurred in relation
to the indemnified matter or in enforcing such indemnity
("Losses") relating to or arising out of:
(a) any breach of any of the
representations or warranties made by such
Principal Stockholder in Section 3.6 (Financial
Statements) and Section 3.10 (Taxes and Tax
Returns) of this Agreement; and
(b) any breach of any of the
representations or warranties in the remainder
of Article 3 (other than Sections 3.6 and 3.10)
made by such Principal Stockholder provided,
however, that such Principal Stockholder shall
have willfully and intentionally breached such
warranty and/or had actual knowledge that such
representation was untrue;
provided, however, that none of the Principal
Stockholders shall have any liability under this Section
9.2 until the aggregate Losses arising out of such
breaches equal or exceed $100,000 (the "Threshold
Liability") in the aggregate, at which point the
Principal Stockholders shall be responsible for the
indemnification of Losses in excess of $100,000; and
provided further, that the maximum aggregate liability
(the "Maximum Liability") of each Principal Stockholder
with respect to Section 9.2(a) shall be as set forth
below.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ $720,000
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ $480,000
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ $480,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ $420,000
The Maximum Liability shall not apply to any
liability with respect to Section 9.2(b).
Notwithstanding anything in Section 9.2 to the contrary,
there shall not be any Maximum Liability, with respect to
any loss relating to, or arising out of, the
representations and warranties in Section 3.3 hereof or
the assertion of preemptive rights by any person.
Section 9.3 Indemnification by REFAC. REFAC
agrees to indemnify, defend and hold harmless the
Principal Stockholders against any Losses relating to or
arising out of any breach of any representation or
warranty or covenant made by REFAC in this Agreement or
any document delivered to the Principal Stockholders at
the Closing.
Section 9.4 Claims. The provisions of this
Section shall be subject to Section 9.5. As soon as is
reasonably practicable after becoming aware of a claim
for indemnification under this Agreement (including a
claim or suit by a third party) the indemnified person
shall promptly give notice to the indemnifying person of
such claim. The failure of the indemnified person to
give notice shall not relieve the indemnifying person of
its obligations under this Article IX except to the
extent that the indemnifying person shall have been
prejudiced thereby. If the indemnifying person does not
object in writing to such indemnification claim within 60
calendar days of receiving notice thereof, the
indemnified person shall be entitled to promptly recover
from the indemnifying person the amount of such claim,
and no later objection by the indemnifying person shall
be permitted. If the indemnifying person agrees that it
has an indemnification obligation but asserts that it is
obligated to pay only a lesser amount, the indemnifying
person shall promptly pay to the indemnified person the
lesser amount, without prejudice to the indemnified
person's claim for the difference.
Section 9.5 Third Party Claims; Assumption of
Damage. The indemnifying person may, at its own expense,
(a) defend, contest or otherwise protect the indemnified
party against any claim, suit, action or proceeding and
(b) upon notice to the indemnified person, and the
indemnifying person's delivering to the indemnified
person a written agreement that (x) the indemnified
person is entitled to indemnification pursuant to Section
9.2 or 9.3 for all Losses arising out of such claim,
suit, action or proceeding (except those Losses arising
by reason of the indemnified person's wilful misconduct
or gross negligence) and that (y) the indemnifying person
shall be liable for the entire amount of any Loss, (in
each case under clause (x) and (y), if the indemnifying
person is a Principal Stockholder, subject to the
Threshhold Liability and the Maximum Liability, if
applicable), then the indemnifying person may at any time
during the course of any such claim, suit, action or
proceeding, assume the defense thereof; provided,
however, that (i) the indemnifying person's counsel is
reasonably satisfactory to the indemnified person, and
(ii) the indemnifying person shall thereafter consult
with the indemnified person upon the indemnified person's
reasonable request for such consultation from time to
time with respect to such claim, suit, action or
proceeding. If the indemnifying person assumes such
defense, the indemnified person shall have the right (but
not the duty) to participate in the defense thereof and
to employ counsel, at its own expense, separate from the
counsel employed by the indemnifying person. If,
however, the indemnifying person's counsel reasonably
determines in its judgment that representation by the
indemnifying person's counsel of both the indemnifying
person and the indemnified person would present such
counsel with a conflict of interest, then such
indemnified person may employ separate counsel to
represent or defend it in any such claim, action, suit or
proceeding and the indemnifying person shall pay the
reasonable fees and disbursements of such separate
counsel. Whether or not the indemnifying person chooses
to assume the defense of any such claim, suit, action or
proceeding, all of the parties hereto shall cooperate in
the defense or prosecution thereof. Any settlement or
compromise made or caused to be made by the indemnified
person or the indemnifying person, as the case may be, of
any such claim, suit, action or proceeding of the kind
referred to in Section 9.5 shall also be binding upon the
indemnifying person or the indemnified person, as the
case may be, in the same manner as if a final judgment or
decree had been entered by a court of competent
jurisdiction in the amount of such settlement or
compromise. The indemnifying person shall not be
permitted to settle or compromise any claim, suit, action
or proceeding without obtaining the prior written consent
of the indemnified person, which shall not be
unreasonably withheld or delayed; provided, however, in
the event that the settlement offer will result in the
indemnified person having no losses (monetary or
otherwise) or continuing obligations with respect to the
claim, suit, action or proceeding, the indemnifying
person shall be permitted to settle or compromise such
claim, suit, action or proceeding without the prior
written consent of the indemnified person. In the event
that the indemnifying person does not elect to assume the
defense of any claim, suit, action or proceeding, then
any failure of the indemnified person to defend or to
participate in the defense of any claim, suit, action or
proceeding, or to cause the same to be done, shall not
relieve the indemnifying person of its obligations
hereunder.
Section 9.6 Calculation of Losses. In
calculating any Losses pursuant to Section 9.2, such
calculations shall take into account any deductions, loss
or other tax benefits realized by HFID or REFAC, in
connection with the payment of the amount being
indemnified against by the Principal Stockholders. All
indemnification payments received by REFAC under this
Article IX shall be deemed adjustments to the Merger
Consideration.
ARTICLE X
MISCELLANEOUS
Section 10.1 Fees and Expenses. (a) Except
as contemplated by this Agreement, all costs and expenses
incurred in connection with this Agreement and the
consummation of the transactions contemplated hereby
shall be paid by the party incurring such expenses.
(b) Subsection (a) notwithstanding, all costs
and expenses incurred by HFID and/or the Principal
Stockholders in connection with this Agreement and the
consummation of the transactions contemplated hereby up
to an aggregate of $85,000 shall be paid by HFID. Any
amounts in excess of $85,000 shall be paid by the
Principal Stockholders.
Section 10.2 Arbitration. Any dispute or
controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators sitting in
New York, New York, in accordance with the rules of the
American Arbitration Association then in effect.
Judgment may be entered on the arbitrator's award in any
court having jurisdiction. If a claim for indemnification
is made under this Agreement (including a claim or suit
by a third party) and there is no indemnifiable Loss
payable by the indemnifying person with respect thereto
the indemnified person shall pay to the indemnifying
person all of his or its reasonable costs and expenses
incurred in connection with the defense of such claim,
including reasonable attorney's fees.
Section 10.3 Amendment, Modification and Other
Action. Subject to applicable law, this Agreement may be
amended, modified and supplemented in any and all
respects, whether before or after any vote of the
stockholders of HFID contemplated hereby, by written
agreement of the parties hereto, at any time prior to the
Closing Date with respect to any of the terms contained
herein; provided, however, that after the approval of
this Agreement by the stockholders of HFID, no such
amendment, modification or supplement shall reduce the
amount or change the form of the Merger Consideration.
Section 10.4 Notices. All notices and other
communications hereunder shall be in writing and shall be
deemed given if delivered personally, telecopied (which
is confirmed) or sent by an overnight courier service,
such as Federal Express, to the parties at the following
addresses (or at such other address for a party as shall
be specified by like notice):
if to REFAC, to:
REFAC Technology Development Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
if to HFID, to:
Human Factors/Industrial Design, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Esanu Katsky ▇▇▇▇▇▇ & Siger, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
if to the Principal Stockholders, to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇. ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
in each case, with a copy to ▇▇▇ ▇. ▇▇▇▇▇▇,
Esq. at the address listed above
Section 10.5 Interpretation. When a reference
is made in this Agreement to Sections, such reference
shall be to a Section of this Agreement unless otherwise
indicated. Whenever the words "include," "includes" or
"including" are used in this Agreement they shall be
deemed to be followed by the words "without limitation."
Section 10.6 Counterparts. This Agreement may
be executed in two or more counterparts, all of which
shall be considered one and the same agreement and shall
become effective when two or more counterparts have been
signed by each of the parties and delivered to the other
parties.
Section 10.7 Entire Agreement; No Third Party
Beneficiaries; Rights of Ownership. This Agreement
(including the documents and the instruments referred to
herein): (a) constitute the entire agreement and
supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the
subject matter hereof, and (b) except as specifically
provided herein, is not intended to confer upon any
person other than the parties hereto any rights or
remedies hereunder.
Section 10.8 Severability. If any term,
provision, covenant or restriction of this Agreement is
held by a Governmental Entity of competent jurisdiction
to be invalid, void, unenforceable or against its
regulatory policy, the remainder of the terms,
provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way
be affected, impaired or invalidated.
Section 10.9 Governing Law. This Agreement
shall be governed by and construed in accordance with the
laws of the State of New York without giving effect to
the principles of conflicts of law thereof.
IN WITNESS WHEREOF, each of the Principal
Stockholders has signed, and REFAC, MERGER SUB and HFID
have caused this Agreement to be signed by their
respective officers thereunto duly authorized as of the
date first written above.
REFAC TECHNOLOGY DEVELOPMENT
CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
HUMAN FACTORS INDUSTRIAL
DESIGN, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
HFID ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
PRINCIPAL STOCKHOLDERS:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
EXHIBIT A
PROMISSORY NOTE
$_________ November 25, ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
REFAC Technology Development Corporation,
Delaware corporation (the "Company"), for value received,
hereby promises to pay to the Holder, as hereinafter
defined, the principal sum of $______. This Note shall
bear interest on the unpaid principal balance outstanding
at a rate per annum equal to 5%. The principal amount of
and the interest on this Note shall be payable in full on
January 5, 1998 ("Maturity Date"). Payment of the
principal of and interest on this Note will be made to
the Holders by wire transfer in same day or next day
funds to the account set forth on Annex I hereto, or to
such other account as may be designated in writing by the
Holders not less than 5 business days prior to payment,
in such coin or currency of the United States of America
as at the time of payment is legal tender for the payment
of public and private debts.
_________________________
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE MAY NOT BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION.
This Note is subject to the following
additional terms and conditions:
ARTICLE 1
DEFINITIONS
As used in this Note, the following terms,
where used with an initial capital letter, have the
following meanings:
1.1 Company. The "Company" means REFAC Technology
Development Corporation, a Delaware corporation, and
will also include its successors and assigns.
1.2 Event of Default. "Event of Default" shall have the
meaning set forth in Section 2.1.
1.3 HFID. "HFID" means Human Factors Industrial Design,
Inc.
1.4 Holder. "Holder" means __________.
1.5 Merger Agreement. "Merger Agreement" means the
Merger Agreement, dated as of November 25, 1997, as
amended from time to time, by and among the Company,
HFID Acquisition Corporation, Human Factors
Industrial Design, Inc. and the Principal
Stockholders of Human Factors Industrial Design,
Inc.
1.6 Person. "Person" means any individual, corporation,
partnership, joint venture, association, joint-stock
company, trust, unincorporated organization,
government or any agency or political subdivision
thereof or any other entity.
ARTICLE 2
DEFAULT
2.1 Events of Default. Any one or more of the
following events, if they occur and are continuing, will
be deemed to be Events of Default under this Note.
(a) default in the payment in full of any
installment of interest on this Note as and when the
same becomes due and payable;
(b) default in the payment in full of the principal
of this Note as and when the same becomes due and
payable at maturity, by declaration or otherwise;
(c) entry by a court having jurisdiction of a
decree, judgment or order for relief concerning the
Company in an involuntary case under any applicable
bankruptcy, insolvency, reorganization, or other
similar law, or appointment of a receiver,
liquidator, trustee, assignee, custodian,
sequestrator (or other similar official) of the
Company or of its property, or ordering of the
winding up or liquidation of its affairs; or
(d) institution by the Company of a voluntary case
under any applicable bankruptcy, insolvency,
reorganization, or other similar law, or consent by
the Company to the entry of an order for relief in
an involuntary case under such law, or consent of
the Company to the appointment of or taking
possession by a receiver, liquidator, trustee,
assignee, custodian, sequestrator (or other similar
official) of the Company or of its assets, property,
or making by the Company of a general assignment for
the benefit of creditors, or admission in writing by
the Company of its inability to pay its debts
generally as they become due, or taking by the
Company or any corporate action furthering any of
the above purposes.
2.2 Rights on Default. If an Event of Default
occurs, the principal of this Note, together with any
accrued and unpaid interest, if not already due, shall
automatically become immediately due and payable, without
any declaration, presentment, demand, protest or other
requirement of any kind, all of which are hereby
expressly waived by the Company. The Holder may rescind
an acceleration and its consequences if the rescission
would not conflict with any judgment or decree and if all
existing Events of Default have been cured or waived
except nonpayment of principal or interest that has
become due solely because of such acceleration. No such
rescission shall affect any subsequent default or impair
any right consequent thereto. Any delay or omission by
the Holders in exercising any right or remedy arising
upon an Event of Default shall not impair such right or
remedy or constitute a waiver of or an acquiescence in
the Event of Default. All remedies are cumulative to the
extent permitted by law.
2.3 Waiver of Past Defaults. The Holder may waive
an existing default and its consequences by written
notice to the Company. When a default is waived, it is
deemed cured, but no such waiver shall extend to any
subsequent or other default or impair any consequent
rights.
2.4 Enforcement. If the Holder declares the
principal of this Note, together with all accrued and
unpaid interest on this Note, due and payable
immediately, the Holder may proceed to protect and
enforce its rights by an action at law, suit in equity,
or other appropriate proceeding.
ARTICLE 3
MISCELLANEOUS
3.1 Transferability; Negotiability. This Note
is not transferrable or negotiable.
3.2 Merger Agreement. This Note is issued
pursuant to, and is subject to the provisions of, the
Merger Agreement.
3.3 Immunity. This Note is solely a corporate
obligation of the Company, and no personal liability
whatever shall attach to, or is or will be incurred by,
the shareholders, officers or directors, as such, of the
Company or any of its successors, because of the creation
of the indebtedness under this Note, or under or by
reason of the obligations, covenants or agreements
contained in or implied from this Note. This Section 3.2
is not intended to modify or otherwise affect the common
law and statutory rights and obligations of shareholders,
directors and officers of the Company as of the date
hereof.
3.4 Notices. All notices, request, demands
and payments of principal and interest given to or made
under this Note will, except as otherwise specified in
this Note, be in writing by mail, overnight delivery,
confirmed facsimile transmission or hand delivery will be
effective upon the earlier of (a) receipt or (b) the
fifth day following the date such notice was mailed
properly addressed, first class, registered or certified
mail, return receipt requested, postage prepaid, to the
other party at the addresses set forth below (which may
be changed at any time by notice under this Section 3.3):
The Company: REFAC Technology Development
Corporation
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▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: President
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to: Skadden, Arps, Slate, ▇▇▇▇▇▇▇ &
▇▇▇▇ LLP
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▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
The Holder: _____________
_____________
_____________
with a copy to:
▇▇▇ ▇. ▇▇▇▇▇▇
Esanu Katsky & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
3.5 Headings. The headings in this Note are
inserted for convenience only and will not affect the
meaning or interpretation of all or any part of this
Note.
3.6 Costs of Collection. The Company shall
reimburse the Holder upon his written request for all
reasonable costs and expenses, including, without
limitation, reasonable attorneys' fees, incurred by the
Holder in connection with the collection of payment of
principal of or interest on the Note, following a default
with respect thereto.
3.7 Construction. Wherever possible, each
provision of this Note will be interpreted in such a
manner as to be effective and valid under applicable law
but if any provision of this Note is prohibited by or
invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or
invalidity without invalidating the remainder of such
provision or the remaining provisions of this Note.
3.8 Amendments. This Note may not be
modified, amended, rescinded, canceled or waived, in
whole or in part, except by written instruments signed by
the Company and the Holder. Upon any modification,
amendment or supplement of or to the terms hereof, the
Holder shall surrender this Note to the Company within 10
days of written notice by the Company, and the Company
shall immediately thereafter issue a new Note to the
Holder as modified, amended or supplemented in accordance
with the terms hereof.
3.9 Jurisdiction. The Company agrees to
submit to personal jurisdiction in the State of New York
in any action or proceeding arising out of this Note. Un
furtherance of such agreement, the Company hereby agrees
and consents that without limiting other methods of
obtaining jurisdiction, personal jurisdiction over the
Company in any such action or proceeding may be obtained
within or without the jurisdiction of any federal or
state court located in New York and that any process or
notice of motion or other application to any such court
in connection with any such action or proceeding may be
served upon the Company by registered or certified mail
to, or by personal service at, the last known address of
the Company, whether such address be within or without
the jurisdiction of any such court. The Company hereby
agrees that the venue of any litigation arising in
connection with the indebtedness, or in respect of any of
the obligations of the Company under this Note, shall, to
the extent permitted by law, be in New York County.
3.10 Obligations under the Note. The Company
acknowledges that this Note and the Company's obligations
under this Note are and shall at all times continue to be
absolute and unconditional in all respects, and shall at
all times be valid and enforceable irrespective of any
other agreements or circumstances of any nature
whatsoever which might otherwise constitute a defense to
this Note. The Company absolutely, unconditionally, and
irrevocably waives any and all right to assert any
setoff, counterclaim or crossclaim of any nature
whatsoever with respect to the Note.
3.11 Default Interest. If the principal
amount of this Note, together with any accrued and unpaid
interest, is declared immediately due and payable by the
Holder pursuant to the default provisions of this Note,
or if the amount due on the Maturity Date is not paid in
full on such date, the Company shall commence, five
business days after such a default, pay interest on the
principal sum then remaining unpaid from the date of such
declaration or the Maturity Date, as the case may be,
until the date on which the principal sum then
outstanding is paid in full, at a rate per annum
(calculated for the actual number of days elapsed on the
basis of a 360-day year) equal to 16%, provided, however,
that such interest rate shall in no event exceed the
maximum interest rate which the Company may by law pay.
3.12 Governing Law. This Note is made subject
to and shall be construed under the laws of the State of
New York, without giving effect to the principles of
conflicts of law thereof.
IN WITNESS WHEREOF, the Company has caused this
Note to be duly executed as of the day and year first set
forth above.
REFAC Technology Development
Corporation
a Delaware corporation
By:________________________
Name:
Title:
EXHIBIT B
AGREEMENT, made this 25th day of November,
1997, by and between Human Factors Industrial Design,
Inc. ("HFID") and ____________ (the "Executive").
WHEREAS, REFAC Technology Development
Corporation ("REFAC") and the Company have entered into
that certain Agreement and Plan of Merger (the "Merger
Agreement"), dated as of November 25, 1997, by and among
REFAC, HFID Acquisition Corporation ("New HFID"), HFID
and the principal stockholders of HFID (the "HFID
Principals") pursuant to which New HFID will be merged
with and into the Company (the "Merger"), and, as a
result of which Merger, HFID shall operate as a
subsidiary of REFAC (HFID hereinafter referred to as the
"Company");
WHEREAS, the Executive has been employed by the
Company and currently serves as its Controller;
WHEREAS, REFAC and the Company recognize the
Executive's substantial contribution to the growth and
success of the Company and desire to provide for the
continued employment of the Executive with the Company on
the terms and subject to the conditions set forth herein;
WHEREAS, Executive wishes to be so employed by
the Company; and
WHEREAS, the parties hereto desire to enter
into this Agreement setting forth the terms and
conditions of the employment relationship of the
Executive with the Company;
NOW, THEREFORE, the parties hereto agree as
follows:
1. Employment. The Company hereby agrees to
employ the Executive, and the Executive hereby agrees to
serve, subject to the provisions of this Agreement, as an
employee of the Company.
For the period during which the Executive
provides services to the Company under this Agreement
(the "Employment Period"), the Executive shall perform
the duties associated with the position of Controller in
a firm in a similar industry and of comparable size to
the Company. Such duties and responsibilities shall
include the duties and responsibilities previously
discharged by the Executive as an employee of HFID as
well as any duties and responsibilities as are from time
to time assigned to the Executive by the Board of
Directors of the Company (the "Board"). The Executive
agrees to devote his time, attention and energies to the
performance of the duties assigned to him hereunder, and
to perform such duties faithfully, diligently and to the
best of his abilities and subject to such laws, rules,
regulations and policies from time to time applicable to
the Company's employees. The Executive agrees to refrain
from engaging in any activity that does, will or could
reasonably be deemed to conflict with the best interests
of the Company.
In addition, during the Employment Period, the
Executive shall serve without additional compensation as
a director of the Company, subject to his continued
election to such position. The Executive hereby agrees
that, upon the termination of his employment hereunder
for any reason other than because of his death, he shall
immediately tender his resignation from the Board, which
resignation shall be effective as of the effective date
of such termination.
2. Term of Agreement. Subject to Section 7
hereof, the term of this Agreement (the "Term") shall
commence on the effective date of the Merger, and shall
expire on December 31, 2002 (the "Initial Term");
provided, however, that commencing on January 1, 2003,
and on each January 1 thereafter, the Term shall
automatically be extended for one (1) additional year
unless, not later than June 30 of the preceding year, the
Company or the Executive shall have given notice not to
extend the Term.
3. Compensation.
(a) Salary: During the Employment
Period, the Company shall pay to the Executive a base
salary at an annual rate of $_____, payable in accordance
with the Company's regular payroll practices. All
applicable withholding taxes shall be deducted from such
base salary payments. The Executive's base salary shall
be reviewed annually beginning on January 1, 1999, and
shall be increased each year by an amount equal to no
less than five percent (5%) of the previous year's base
salary.
(b) Incentive Bonus. Unless his
employment is earlier terminated other than pursuant to
Section 7(f) hereof, during the Term the Executive will
be eligible to receive a cash bonus (an "Annual Bonus")
in respect of each full fiscal year of the Company.
During the Initial Term, the amount of the Annual Bonus
shall be allocated, as determined by a majority of the
HFID Principals, from the "Earnings Pool" (as defined
below), provided, that the HFID Principals, as a group,
may not be allocated any amount exceeding eighty percent
(80%) of the Earnings Pool in any such fiscal year.
Following the expiration of the Initial Term, the Annual
Bonus, if any, shall be determined by the Board in its
discretion. The Annual Bonus shall be paid in cash as
soon as practicable, but in no event later than ninety
(90) days, following the end of the relevant fiscal year.
The "Earnings Pool" shall only be
calculated and shall only apply during the Initial Term.
With respect to any full fiscal year of the Company, the
"Earnings Pool" shall be an amount equal to fifty percent
(50%) of the excess, if any, of (i) the Company's EBITDA
(as defined below) over (ii) $891,000. The Earnings Pool
available to current employees of the Company shall be
reduced by any amounts paid pursuant to clause (y) of
Section 7(f) of this Agreement. For purposes of this
Agreement, with respect to any full fiscal year of the
Company, "EBIDTA" shall mean the Company's net income for
such fiscal year, before provision for the Earnings Pool,
interest expense, income taxes, depreciation and
amortization, and less any investment income. For
purposes of this Agreement all determinations with
respect to the calculation of EBITDA for any fiscal year
of the Company shall be made in accordance with generally
accepted accounting principles, consistently applied, by
REFAC's regular independent public accountants. For
purposes of this Agreement, in computing EBIDTA for any
fiscal year, any overhead allocation by REFAC to HFID,
any (A) management charges, (B) overhead allocation by
REFAC to HFID, (C) fees and expenses for patents filed
with the consent of REFAC, (D) key man life insurance
payments and (E) severance payments made pursuant to
Section 7(f) shall not be taken into account, provided,
that the Company shall be required to provide to REFAC
consulting services in connection with REFAC's evaluation
of new technology submissions, and provided, further,
that any work other than such consulting services
performed for REFAC shall be charged to REFAC on terms no
less favorable than those the Company makes available to
any of its unaffiliated clients during such fiscal year.
In addition, for any fiscal year, severance payments and
benefits that may be paid and provided pursuant to
Section 7(f) hereof shall not be a charge against EBITDA.
(c) Stock Options. Simultaneously
herewith, REFAC is granting to the Executive an option to
purchase shares of the common stock, par value $.10 per
share, of REFAC pursuant to the terms of a stock option
agreement.
4. Benefits. During the Employment Period,
the Executive shall be entitled to participate in such
benefit plans and programs as are maintained by the
Company from time to time, as such plans may be amended
from time to time. The Company shall maintain disability
insurance during the Employment Period for the Executive
providing benefits in amounts and on terms no less
favorable to the Executive than the disability insurance
currently in effect for the Executive, provided that the
monthly premium payments in respect of such disability
insurance shall not exceed the amount REFAC pays as of
the date hereof for such disability insurance.
5. Vacation. During the Employment Period,
the Executive shall be entitled to paid vacation pursuant
to the terms of the Company's vacation policy, which
shall be consistent with the past practice of the
Company. Such vacation shall be taken at such times as
will interfere as little as possible with the performance
of the Executive's duties hereunder.
6. Expenses. The Company will reimburse the
Executive for reasonable and necessary business expenses
of the Executive for travel, meals and similar items
incurred during the Employment Period in connection with
the performance of the Executive's duties, and which are
consistent with such guidelines as the senior executive
officers and/or the Board of Directors of the Company may
from time to time establish. All payments for
reimbursement of such expenses shall be made to the
Executive only upon the presentation to the Company of
appropriate vouchers or receipts.
7. Termination; Severance Pay.
(a) Notwithstanding any provision of this
Agreement to the contrary, the employment of the
Executive hereunder shall terminate on the first to occur
of the following:
(i) the date of the Executive's
death;
(ii) the date on which the Company
shall give the Executive notice of termination on
account of Disability (as defined below);
(iii) the date on which the Company
shall give the Executive notice of termination for
Cause (as defined below);
(iv) expiration of the Term; or
(v) the date specified by the
Company on the notice of termination which shall be
delivered to the Executive for termination of
employment for any reason other than the reasons set
forth in (i) through (iv), above, which date shall
be no later than ninety (90) days following the date
of receipt of such notice of termination.
(b) The Company shall have the right in
its discretion to terminate the Executive's employment
for "Disability," which shall be deemed the reason for
such termination if, as a result of the Executive's
incapacity due to physical or mental illness, the
Executive shall have been absent from the full-time
performance of the Executive's duties with the Company
for a period of one hundred twenty (120) consecutive days
during the Term, or a period or periods aggregating more
than one hundred twenty (120) days in any six (6)
consecutive month period during the Term. The Executive
agrees to submit to such medical examinations as may be
necessary to determine whether a Disability exists,
pursuant to reasonable requests which may be made by the
Company from time to time.
(c) For purposes of this Agreement:
(i) "Cause" shall mean the occurrence of any of
the following, as reasonably determined by the Company:
(A) the willful and continued
failure, in the reasonable judgment of the Board, by
the Executive to perform substantially his duties
with the Company (other than any such failure
resulting from his death or Disability) after a
written demand for substantial performance is
delivered to the Executive by the Board which
specifically identifies the manner in which it is
believed that the Executive has not substantially
performed his duties;
(B) the willful engaging by the
Executive in conduct which in the reasonable opinion
of the Board is materially and demonstrably
injurious to the Company or any of its parents,
subsidiaries or affiliates; or
(C) the conviction of the Executive
(or the entering by the Executive of a plea of
guilty or nolo contenders) for any felony or any
lesser crime which involved the Company or its
property, or any of the Company's parents,
subsidiaries or affiliates or any such entity's
property.
Notwithstanding the foregoing, the Executive will not be
deemed to have been terminated for Cause within the
meaning of clause (A) or (B) without (x) reasonable
notice to the Executive setting forth the reasons for the
Company's intention to terminate for Cause, (y) an
opportunity for the Executive, together with his counsel,
to be heard before the Board, and (z) delivery to the
Executive of a notice of termination from the Board
finding that, in the good faith opinion of the Board,
clause (A) or (B) hereof may be invoked, and specifying
the particulars thereof in detail.
(ii) "Good Reason" shall mean, without the
Executive's express written consent, (A) the assignment
to the Executive of any duties materially inconsistent
with, or the diminution of, the Executive's position,
titles, offices, duties, responsibilities and status with
the Company; (B) the relocation of the Company's
principal executive offices to a location more than 75
miles from the location of such offices on the date
hereof or the Company's requiring the Executive to be
based anywhere other than the Company's principal
executive offices except for required travel on the
Company's business; or (C) the failure by the Company to
pay to the Executive any portion of the Executive's
current compensation within ten (10) business days of the
date such compensation is due.
(d) In the event the Executive's
employment is terminated for any reason, the Executive or
his estate, conservator or designated beneficiary, as the
case may be, shall be entitled to payment of any earned
but unpaid base salary and accrued but unused vacation
days, through the date of termination (such amount, the
"Accrued Earnings"). In addition, during the sixty (60)
day period following the effective date of termination of
his employment other than by reason of his death, the
Executive shall have the right in his discretion to
purchase from the Company the policies of life insurance
secured by the Company for a purchase price equal to
their respective cash surrender values. The Company
shall have no obligation to secure life insurance in
addition to policies currently in effect with respect to
the Executive. Following the payment of the Accrued
Earnings, except as provided in Sections 7(e) and 7(f)
below, the Company shall have no further obligation to
the Executive under this Agreement.
(e) In the event the Executive's
employment is terminated by reason of the Executive's
death or Disability, the Executive (or his beneficiary,
if applicable) shall be entitled to receive the Accrued
Earnings and the Company shall continue to pay to the
Executive (or his beneficiary, if applicable) the
Executive's base salary as provided under Section 3(a)
hereof (as such base salary may have been increased) for
a period of ninety (90) days following the effective date
of such termination of employment.
(f) In the event the Executive's
employment is terminated for any reason other than (i) by
the Executive without Good Reason, (ii) by reason of the
Executive's death, Disability or retirement or (iii) by
the Company for Cause, the Executive (or his beneficiary,
if applicable) shall be entitled to receive the Accrued
Earnings and the Company shall pay to the Executive (or
his beneficiary, if applicable) (x) a lump sum in cash
equal to the Executive's base salary as provided under
Section 3(a) hereof (as in effect on the effective date
of such termination) that would otherwise have been
payable during the remainder of the Term and (y) an
Annual Bonus as provided under Section 3(b) hereof for
the remainder of the Term (payable at such time or times
as such Annual Bonus would have been paid to the
Executive were he employed by the Company for the
remainder of the Term). The amount payable under clause
(y) above shall be equal to no less than fifty percent
(50%) of the Annual Bonus earned by the Executive in
respect of the last fiscal year completed prior to the
effective date of termination; provided, that, if the
date of such termination occurs prior to the date on
which the determination of the Annual Bonus to be paid in
respect of the first fiscal year to be completed during
the Term is made, the Executive shall be deemed to have
earned an Annual Bonus in respect of such first fiscal
year equal to seven and one-half percent (7.5%) of the
Earnings Pool in respect of such year. In addition, in
the event of such termination of employment, the Company
shall provide, except to the extent that the Executive
shall receive similar benefits from a subsequent
employer, life, health, disability and similar benefits
(other than stock options which are not exercisable at
the time such notice is given) to which the Executive
would have been entitled for the remainder of the Term.
(g) Notwithstanding any other provision
of this Agreement, the termination for any reason of the
Executive's employment or his service on the Board shall
not affect REFAC's obligations with respect to the
Contingent Payment (as defined in the Merger Agreement).
8. Return of Company Property. The Executive
agrees that following the termination of his employment
for any reason, he shall return all property of REFAC,
the Company, its subsidiaries, affiliates and any
divisions thereof he may have managed which is then in or
thereafter comes into his possession, including, but not
limited to, documents, contracts, agreements, plans,
photographs, books, notes, electronically stored data and
all copies of the foregoing as well as any other
materials or equipment supplied by the Company to the
Executive.
9. Survival of Executive Covenants. The
provisions set forth in Section 8 hereof shall remain in
full force and effect after the termination of the
Executive's employment, notwithstanding the expiration of
the Term or termination of the Employment Period.
10. Entire Agreement. This Agreement sets
forth the entire agreement between the parties with
respect to its subject matter and merges and supersedes
all prior discussions, agreements and understandings of
every kind and nature between them and neither party
shall be bound by any term or condition other than as
expressly set forth or provided for in this Agreement.
This Agreement may not be changed or modified without
either the prior written consent of REFAC or the
unanimous written consent of the Board. Any such change
or modification must be set forth in a written agreement,
signed by the parties hereto.
11. Arbitration. Any dispute or controversy
arising under or in connection with this Agreement shall
be settled exclusively by arbitration, conducted before a
panel of three arbitrators sitting in New York, New York,
in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on
the arbitrator's award in any court having jurisdiction.
The arbitrators, in their discretion, may direct that the
successful party in any such arbitration shall be
entitled to be reimbursed by the other party for
reasonable attorneys' fees and expenses incurred in
connection with such dispute or controversy.
12. Waiver. The failure of either party to
this Agreement to enforce any of its terms, provisions or
covenants shall not be construed as a waiver of the same
or of the right of such party to enforce the same.
Waiver by either party hereto of any breach or default by
the other party of any term or provision of this
Agreement shall not operate as a waiver of any other
breach or default.
13. Successors and Assignability. This
Agreement is intended to bind and inure to the benefit of
and be enforceable by the Executive and his heirs,
executors or administrators, and to bind and inure to the
benefit of and be enforceable by the Company and its
successors and assigns. This Agreement shall not be
assignable by the Executive. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined
and any successor to its business.
14. Severability. In the event that any one
or more of the provisions of this Agreement shall be held
to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remainder of the
Agreement shall not in any way be affected or impaired
thereby. Moreover, if any one or more of the provisions
contained in this Agreement shall be held to be
excessively broad as to duration, activity or subject,
such provisions shall be construed by limiting and
reducing them so as to be enforceable to the maximum
extent allowed by applicable law.
15. Notices. Any notice given hereunder shall
be in writing and shall be deemed to have been given when
sent by facsimile, delivered by messenger or courier
service (against appropriate receipt), or mailed by
registered or certified mail (return receipt requested),
addressed as follows:
If to the Company: REFAC Technology
Development Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
If to the Executive: [ ]
[ ]
[ ]
[ ]
or at such other address as shall be indicated to either
party in writing. Notice of change of address shall be
effective only upon receipt.
16. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of
the State of New York, without regard to its conflict of
law rules.
17. Descriptive Headings. The paragraph
headings contained herein are for reference purposes only
and shall not in any way affect the meaning or
interpretation of this Agreement.
18. Counterparts. This Agreement may be
executed in one or more counterparts, which, together,
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement on the date first written above.
HUMAN FACTORS INDUSTRIAL
DESIGN, INC.
By:________________________
Title:
[EXECUTIVE]
--------------------------
EXHIBIT C
EMPLOYMENT AGREEMENT
AGREEMENT, made this 25th day of November,
1997, by and between Human Factors Industrial Design,
Inc. ("HFID") and _________ (the "Executive").
WHEREAS, REFAC Technology Development
Corporation ("REFAC") and the Company have entered into
that certain Agreement and Plan of Merger (the "Merger
Agreement"), dated as of November 25, 1997, by and among
REFAC, HFID Acquisition Corporation ("New HFID"), HFID
and the principal stockholders of HFID (the "HFID
Principals") pursuant to which New HFID will be merged
with and into the Company (the "Merger"), and, as a
result of which Merger, HFID shall operate as a
subsidiary of REFAC (HFID hereinafter referred to as the
"Company");
WHEREAS, the Executive has been employed as a
senior executive of the Company;
WHEREAS, REFAC and the Company recognize the
Executive's substantial contribution to the growth and
success of the Company and desire to provide for the
continued employment of the Executive with the Company on
the terms and subject to the conditions set forth herein;
WHEREAS, Executive wishes to be so employed by
the Company; and
WHEREAS, the parties hereto desire to enter
into this Agreement setting forth the terms and
conditions of the employment relationship of the
Executive with the Company;
NOW, THEREFORE, the parties hereto agree as
follows:
1. Employment. The Company hereby agrees to
employ the Executive, and the Executive hereby agrees to
serve, subject to the provisions of this Agreement, as an
employee of the Company.
For the period during which the Executive
provides services to the Company under this Agreement
(the "Employment Period"), the Executive shall perform
the duties associated with the position of senior
executive in a firm in a similar industry and of
comparable size to the Company. Such duties and
responsibilities shall include the duties and
responsibilities previously discharged by the Executive
as an employee of HFID as well as any duties and
responsibilities as are from time to time assigned to the
Executive by the Board of Directors of the Company (the
"Board"). The Executive agrees to devote all of his
business time, attention and energies to the performance
of the duties assigned to him hereunder, and to perform
such duties faithfully, diligently and to the best of his
abilities and subject to such laws, rules, regulations
and policies from time to time applicable to the
Company's employees. The Executive agrees to refrain
from engaging in any activity that does, will or could
reasonably be deemed to conflict with the best interests
of the Company.
2. Term of Agreement. Subject to Section 7
hereof, the term of this Agreement (the "Term") shall
commence on the effective date of the Merger, and shall
expire on December 31, 2002 (the "Initial Term");
provided, however, that commencing on January 1, 2003,
and on each January 1 thereafter, the Term shall
automatically be extended for one (1) additional year
unless, not later than June 30 of the preceding year, the
Company or the Executive shall have given notice not to
extend the Term.
3. Compensation.
(a) Salary: During the Employment
Period, the Company shall pay to the Executive a base
salary at an annual rate of $______, payable in
accordance with the Company's regular payroll practices.
All applicable withholding taxes shall be deducted from
such base salary payments. The Executive's base salary
shall be reviewed annually beginning on January 1, 1999,
and shall be increased each year by an amount equal to no
less than five percent (5%) of the previous year's base
salary.
(b) Incentive Bonus. Unless his
employment is earlier terminated other than pursuant to
Section 7(f) hereof, during the Term the Executive will
be eligible to receive a cash bonus (an "Annual Bonus")
in respect of each full fiscal year of the Company. Such
Annual Bonus, if any, shall be determined by the Board in
its discretion. The Annual Bonus shall be paid in cash
as soon as practicable, but in no event later than ninety
(90) days, following the end of the relevant fiscal year.
(c) Stock Options. Simultaneously
herewith, REFAC is granting to the Executive an option to
purchase shares of the common stock, par value $.10 per
share, of REFAC pursuant to the terms of a stock option
agreement.
4. Benefits. During the Employment Period,
the Executive shall be entitled to participate in such
benefit plans and programs as are maintained by the
Company from time to time, as such plans may be amended
from time to time. The Company shall maintain disability
insurance during the Employment Period for the Executive
providing benefits in amounts and on terms no less
favorable to the Executive than the disability insurance
currently in effect for the Executive, provided that the
monthly premium payments in respect of such disability
insurance shall not exceed the amount REFAC pays as of
the date hereof for such disability insurance.
5. Vacation. During the Employment Period,
the Executive shall be entitled to paid vacation pursuant
to the terms of the Company's vacation policy, which
shall be consistent with the past practice of the
Company. Such vacation shall be taken at such times as
will interfere as little as possible with the performance
of the Executive's duties hereunder.
6. Expenses. The Company will reimburse the
Executive for reasonable and necessary business expenses
of the Executive for travel, meals and similar items
incurred during the Employment Period in connection with
the performance of the Executive's duties, and which are
consistent with such guidelines as the senior executive
officers and/or the Board of Directors of the Company may
from time to time establish. All payments for
reimbursement of such expenses shall be made to the
Executive only upon the presentation to the Company of
appropriate vouchers or receipts.
7. Termination; Severance Pay.
(a) Notwithstanding any provision of this
Agreement to the contrary, the employment of the
Executive hereunder shall terminate on the first to occur
of the following:
(i) the date of the Executive's
death;
(ii) the date on which the Company
shall give the Executive notice of termination on
account of Disability (as defined below);
(iii) the date on which the Company
shall give the Executive notice of termination for
Cause (as defined below);
(iv) expiration of the Term; or
(v) the date specified by the
Company on the notice of termination which shall be
delivered to the Executive for termination of
employment for any reason other than the reasons set
forth in (i) through (iv), above, which date shall
be no later than ninety (90) days following the date
of receipt of such notice of termination.
(b) The Company shall have the right in
its discretion to terminate the Executive's employment
for "Disability," which shall be deemed the reason for
such termination if, as a result of the Executive's
incapacity due to physical or mental illness, the
Executive shall have been absent from the full-time
performance of the Executive's duties with the Company
for a period of one hundred twenty (120) consecutive days
during the Term, or a period or periods aggregating more
than one hundred twenty (120) days in any six (6)
consecutive month period during the Term. The Executive
agrees to submit to such medical examinations as may be
necessary to determine whether a Disability exists,
pursuant to reasonable requests which may be made by the
Company from time to time.
(c) For purposes of this Agreement:
(i) "Cause" shall mean the occurrence of any of
the following, as reasonably determined by the Company:
(A) the willful and continued
failure, in the reasonable judgment of the Board, by
the Executive to perform substantially his duties
with the Company (other than any such failure
resulting from his death or Disability) after a
written demand for substantial performance is
delivered to the Executive by the Board which
specifically identifies the manner in which it is
believed that the Executive has not substantially
performed his duties;
(B) the willful engaging by the
Executive in conduct which in the reasonable opinion
of the Board is materially and demonstrably
injurious to the Company or any of its parents,
subsidiaries or affiliates; or
(C) the conviction of the Executive
(or the entering by the Executive of a plea of
guilty or nolo contenders) for any felony or any
lesser crime which involved the Company or its
property, or any of the Company's parents,
subsidiaries or affiliates or any such entity's
property.
Notwithstanding the foregoing, the Executive will not be
deemed to have been terminated for Cause within the
meaning of clause (A) or (B) without (x) reasonable
notice to the Executive setting forth the reasons for the
Company's intention to terminate for Cause, (y) an
opportunity for the Executive, together with his counsel,
to be heard before the Board, and (z) delivery to the
Executive of a notice of termination from the Board
finding that, in the good faith opinion of the Board,
clause (A) or (B) hereof may be invoked, and specifying
the particulars thereof in detail.
(ii) "Good Reason" shall mean, without the
Executive's express written consent, (A) the assignment
to the Executive of any duties materially inconsistent
with, or the diminution of, the Executive's position,
titles, offices, duties, responsibilities and status with
the Company; (B) the relocation of the Company's
principal executive offices to a location more than 75
miles from the location of such offices on the date
hereof or the Company's requiring the Executive to be
based anywhere other than the Company's principal
executive offices except for required travel on the
Company's business; or (C) the failure by the Company to
pay to the Executive any portion of the Executive's
current compensation within ten (10) business days of the
date such compensation is due.
(d) In the event the Executive's
employment is terminated for any reason, the Executive or
his estate, conservator or designated beneficiary, as the
case may be, shall be entitled to payment of any earned
but unpaid base salary and accrued but unused vacation
days, through the date of termination (such amount, the
"Accrued Earnings"). In addition, during the sixty (60)
day period following the effective date of termination of
his employment other than by reason of his death, the
Executive shall have the right in his discretion to
purchase from the Company the policies of life insurance
secured by the Company for a purchase price equal to
their respective cash surrender values. The Company
shall have no obligation to secure life insurance in
addition to policies currently in effect with respect to
the Executive. Following the payment of the Accrued
Earnings, except as provided in Sections 7(e) and 7(f)
below, the Company shall have no further obligation to
the Executive under this Agreement.
(e) In the event the Executive's
employment is terminated by reason of the Executive's
death or Disability, the Executive (or his beneficiary,
if applicable) shall be entitled to receive the Accrued
Earnings and the Company shall continue to pay to the
Executive (or his beneficiary, if applicable) the
Executive's base salary as provided under Section 3(a)
hereof (as such base salary may have been increased) for
a period of ninety (90) days following the effective date
of such termination of employment.
(f) In the event the Executive's
employment is terminated for any reason other than (i) by
the Executive without Good Reason, (ii) by reason of the
Executive's death, Disability or retirement or (iii) by
the Company for Cause, the Executive (or his beneficiary,
if applicable) shall be entitled to receive the Accrued
Earnings and the Company shall pay to the Executive (or
his beneficiary, if applicable) (x) a lump sum in cash
equal to the Executive's base salary as provided under
Section 3(a) hereof (as in effect on the effective date
of such termination) that would otherwise have been
payable during the remainder of the Term and (y) an
Annual Bonus as provided under Section 3(b) hereof for
the remainder of the Term (payable at such time or times
as such Annual Bonus would have been paid to the
Executive were he employed by the Company for the
remainder of the Term). The amount payable under clause
(y) above shall be equal to no less than fifty percent
(50%) of the Annual Bonus earned by the Executive in
respect of the last fiscal year completed prior to the
effective date of termination. In addition, in the event
of such termination of employment, the Company shall
provide, except to the extent that the Executive shall
receive similar benefits from a subsequent employer,
life, health, disability and similar benefits (other than
stock options which are not exercisable at the time such
notice is given) to which the Executive would have been
entitled for the remainder of the Term.
(g) Notwithstanding any other provision
of this Agreement, the termination for any reason of the
Executive's employment or his service on the Board shall
not affect REFAC's obligations with respect to the
Contingent Payment (as defined in the Merger Agreement).
8. Return of Company Property;Incorporation of
Certain Provisions of Merger Agreement.
(a) The Executive agrees that following the
termination of his employment for any reason, he shall
return all property of REFAC, the Company, its
subsidiaries, affiliates and any divisions thereof he may
have managed which is then in or thereafter comes into
his possession, including, but not limited to, documents,
contracts, agreements, plans, photographs, books, notes,
electronically stored data and all copies of the
foregoing as well as any other materials or equipment
supplied by the Company to the Executive.
(b) The confidentiality and non-competition
covenants set forth in Section 6.9 of the Merger
Agreement, which are therein applicable to each of the
principal stockholders of HFID, are incorporated herein
by reference thereto. The Executive hereby agrees to be
bound by such confidentiality and non-competition
covenants to the same extent and for the same periods of
time as are each of the principal stockholders of HFID.
9. Survival of Executive Covenants. The
provisions set forth in Section 8 hereof shall remain in
full force and effect after the termination of the
Executive's employment, notwithstanding the expiration of
the Term or termination of the Employment Period.
10. Entire Agreement. This Agreement sets
forth the entire agreement between the parties with
respect to its subject matter and merges and supersedes
all prior discussions, agreements and understandings of
every kind and nature between them and neither party
shall be bound by any term or condition other than as
expressly set forth or provided for in this Agreement.
This Agreement may not be changed or modified without
either the prior written consent of REFAC or the
unanimous written consent of the Board. Any such change
or modification must be set forth in a written agreement,
signed by the parties hereto.
11. Arbitration. Any dispute or controversy
arising under or in connection with this Agreement shall
be settled exclusively by arbitration, conducted before a
panel of three arbitrators sitting in New York, New York,
in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on
the arbitrator's award in any court having jurisdiction.
The arbitrators, in their discretion, may direct that the
successful party in any such arbitration shall be
entitled to be reimbursed by the other party for
reasonable attorneys' fees and expenses incurred in
connection with such dispute or controversy.
12. Waiver. The failure of either party to
this Agreement to enforce any of its terms, provisions or
covenants shall not be construed as a waiver of the same
or of the right of such party to enforce the same.
Waiver by either party hereto of any breach or default by
the other party of any term or provision of this
Agreement shall not operate as a waiver of any other
breach or default.
13. Successors and Assignability. This
Agreement is intended to bind and inure to the benefit of
and be enforceable by the Executive and his heirs,
executors or administrators, and to bind and inure to the
benefit of and be enforceable by the Company and its
successors and assigns. This Agreement shall not be
assignable by the Executive. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined
and any successor to its business.
14. Severability. In the event that any one
or more of the provisions of this Agreement shall be held
to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remainder of the
Agreement shall not in any way be affected or impaired
thereby. Moreover, if any one or more of the provisions
contained in this Agreement shall be held to be
excessively broad as to duration, activity or subject,
such provisions shall be construed by limiting and
reducing them so as to be enforceable to the maximum
extent allowed by applicable law.
15. Notices. Any notice given hereunder shall
be in writing and shall be deemed to have been given when
sent by facsimile, delivered by messenger or courier
service (against appropriate receipt), or mailed by
registered or certified mail (return receipt requested),
addressed as follows:
If to the Company: REFAC Technology
Development Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
If to the Executive: [ ]
[ ]
[ ]
[ ]
or at such other address as shall be indicated to either
party in writing. Notice of change of address shall be
effective only upon receipt.
16. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of
the State of New York, without regard to its conflict of
law rules.
17. Descriptive Headings. The paragraph
headings contained herein are for reference purposes only
and shall not in any way affect the meaning or
interpretation of this Agreement.
18. Counterparts. This Agreement may be
executed in one or more counterparts, which, together,
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement on the date first written above.
HUMAN FACTORS INDUSTRIAL
DESIGN, INC.
By:________________________
Title:
[EXECUTIVE]
___________________________
EXHIBIT D
REFAC TECHNOLOGY DEVELOPMENT CORPORATION
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, entered into as of
November 25, 1997, between REFAC Technology Development
Corporation, a Delaware Corporation ("REFAC"), and
__________ (the "Optionee"), an employee of Human Factors
Industrial Design, Inc. ("HFID").
WHEREAS, REFAC and HFID have entered into that
certain Agreement and Plan of Merger (the "Merger
Agreement"), dated as of November 25, 1997, by and among
REFAC, HFID Acquisition Corporation ("New HFID"), HFID
and the Principal Stockholders (as defined in the Merger
Agreement) of HFID, pursuant to which New HFID will be
merged with and into HFID (the "Merger"), and, as a
result of which Merger, HFID shall operate as a
subsidiary of REFAC;
WHEREAS, in connection with the Merger, the
Optionee has entered into that certain Employment
Agreement, dated as of November 25, 1997 (the
"Employment Agreement"), pursuant to which the Optionee
is entitled to receive the stock option evidenced hereby;
WHEREAS, the Board of Directors of REFAC has
determined that it is in its and its stockholders' best
interests to grant to the Optionee an option to purchase
shares of REFAC's common stock, par value $.10 per share
("Stock") in the amount and on the terms and conditions
set forth herein; and
WHEREAS, the Board of Directors of REFAC has
determined that it is in its and its stockholders' best
interests that the Option granted hereby shall not be
subject to the terms and provisions of REFAC's 1990 Stock
Option and Incentive Plan.
NOW, THEREFORE, in consideration of the mutual
covenants hereinafter set forth and for other good and
valuable consideration, the parties hereto have agreed
and do hereby agree as follows:
Section 1. GRANT OF OPTION. The Optionee is
hereby granted an option (the "Option") to purchase an
aggregate of ____ shares of Stock, subject to adjustment
as provided in Section 3 hereof, on the terms and
conditions herein set forth.
Section 2. EXERCISE PRICE. The exercise price
per share of the Stock subject to the Option shall be
equal to 100 percent of the Fair Market Value of such
stock on the date of grant, as determined pursuant to
Section 5(c).
Section 3. EFFECT OF CERTAIN CHANGES. If
there is any change in the Stock through the declaration
of extraordinary dividends, stock dividends,
recapitalization, stock splits, or combinations or
exchanges of such shares, or other similar transactions,
the number of shares of Stock subject to the Option and
the exercise price per share of the Option shall be
proportionately adjusted by the committee (the
"Committee") established by the Board of Directors of
REFAC to administer REFAC's executive incentive programs
to reflect such change in the issued shares of Stock.
Section 4. TERM AND EXERCISABILITY OF OPTION.
(a) Term of Option. Unless the Option is
previously cancelled pursuant to this Agreement, the term
of the Option and of this Agreement shall commence on the
date hereof (the "Date of Grant") and terminate on the
tenth anniversary of the Date of Grant (such tenth
anniversary, the "Expiration Date"). Upon the
termination of the Option, all rights of the Optionee
hereunder shall cease.
(b) Exercisability of Option. The Option
shall be exercisable as to twenty-five percent (25%) of
the aggregate number of shares covered hereby on the Date
of Grant. Subject to Section 7 hereof, the Option will
become exercisable in cumulative fashion as to an
additional twenty-five percent (25%) of the aggregate
number of shares of Stock covered hereby on each of the
first three (3) anniversaries of the Date of Grant.
Subject to Section 7 hereof, the right of the Optionee to
purchase shares with respect to which this Option has
become exercisable as herein provided may be exercised in
whole or in part at any time or from time to time, prior
to the tenth anniversary of the Date of Grant.
Section 5. PAYMENT OF PURCHASE PRICE;
WITHHOLDING TAXES.
(a) Payment of Purchase Price. Payment of the
exercise price for any shares of Stock being purchased
hereunder (the "Purchase Price") must be made in cash, by
certified or bank check or by delivering to REFAC
previously acquired shares of Stock (none of which shares
may be subject to any claim, lien, security interest,
community property right or other right of spouses or
present or former family members, pledge, option, voting
agreement or other restriction or encumbrance of any
natures whatsoever). If the Optionee pays by delivering
shares of Stock, the Optionee must include with the
notice of exercise the certificates for such shares, duly
endorsed for transfer. REFAC will value the shares of
Stock delivered by the Optionee at their Fair Market
Value (as defined below) on the date of receipt and, if
the value of such shares exceeds the Purchase Price, will
return to the Optionee cash in an amount equal to the
value, so determined, of any fractional portion of a
share of Stock exceeding the Purchase Price and will
issue a certificate for any whole shares of Stock
exceeding the Purchase Price.
(b) Withholding Taxes. At the time the
Optionee gives notice of exercise of the Option, the
Optionee shall include with such notice payment in cash
or by certified or bank check in an amount equal to all
Federal, state, local, employment or other withholding
taxes due, if any, at the time of exercise of the Option
or shall give other assurance to REFAC satisfactory to
the Committee of the payment of such withholding taxes.
(c) Fair Market Value. For purposes of this
Agreement, the "Fair Market Value" of the Stock as of a
particular date shall be (i) the closing sales price of
the Stock on a national securities exchange for the last
preceding date on which there was a sale of such Stock on
such exchange, or (ii) if the Stock is then traded on an
over-the-counter market, the average of the closing bid
and asked prices for the Stock in such over-the-counter
market for the last preceding date on which there was a
sale of such Stock in such market, or (iii) if the Stock
is not then listed on a national securities exchange or
traded in an over-the-counter market, such value as the
Committee in its discretion may determine.
Section 6. TRANSFER OF SHARES.
(a) REFAC shall deliver certificates for the
shares of Stock purchased hereunder as soon as
practicable after receiving the payments required under
Section 5 hereof and all other documents as may be
required by law or the terms hereof.
(b) The sale and delivery of any shares
purchased hereunder are subject to approval of any
governmental agency which may, in the opinion of counsel
to REFAC, be required in connection with the
authorization, issuance or sale of Stock. REFAC shall
use its best efforts to obtain any such approval. No
shares of Stock shall be issued under the Option prior to
compliance with such requirements and with REFAC's
listing agreement with the American Stock Exchange (or
other exchange upon which the Stock may then be listed).
The Committee may impose such restrictions on any shares
of Stock acquired pursuant to the exercise of the Option
as is required by applicable Federal securities laws,
under the requirements of any stock exchange or market
upon which such shares are then listed and/or traded, and
under any blue sky or state securities laws applicable to
such shares.
Section 7. TERMINATION OF EMPLOYMENT.
(a) Except as provided in this Section 7, the
Option may not be exercised after the Optionee has ceased
to be employed by HFID.
(b) If the Optionee's employment with HFID is
terminated by HFID for Cause (as defined in the
Employment Agreement), the Option shall be cancelled as
of the date of such termination of employment.
(c) If the Optionee's employment with HFID is
terminated (i) by reason of the Optionee's death (A)
during the term of the Employment Agreement or (B) within
ninety (90) days following the effective date of
termination of the Optionee's employment with HFID for
any reason other than for Cause or (ii) by reason of the
Optionee's Disability (as defined in the Employment
Agreement) or retirement, the Option shall be exercisable
by the Optionee (or his beneficiary, if appropriate), to
the extent exercisable on the effective date of such
termination of employment for a period of one (1) year
following the effective date of such termination of
employment.
(d) If the Optionee's employment with HFID is
terminated for any reason other than for Cause (as
defined in the Employment Agreement) or by reason of the
optionee's death, Disability (as defined in the
Employment Agreement) or retirement, the Optionee shall
have the right to exercise the Option, to the extent
exercisable on the effective date of such termination of
employment, for a period of ninety (90) days following
the effective date of such termination of employment.
(e) Notwithstanding anything to the contrary
in this Section 7, the Option shall not be exercisable
later than the Expiration Date.
Section 8. RIGHTS OF OPTIONEE.
(a) The Optionee shall have none of the rights
of a stockholder with respect to the shares covered by
the Option until the shares are issued or transferred to
such Optionee pursuant to Section 6 hereof.
(b) The Option shall not interfere with or
limit in any way the right of HFID to terminate the
Optionee's employment at any time, nor confer upon the
Optionee any right to continue in the employ of HFID.
Section 9. NONTRANSFERABILITY OF OPTION. The
Option shall not be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated, other than by
will or by the laws of descent and distribution, and
shall be exercisable during the Optionee's lifetime only
by him or his legal representative.
Section 10. NOTIFICATION.
(a) The Option shall be exercised by written
notification of exercise substantially in the form of
Exhibit A hereto and delivered to the Secretary of REFAC
in accordance with subsection (b) of this Section 10.
Such notification shall specify the number of shares of
Stock to be purchased and the manner in which payment is
to be made.
(b) Any notification required or permitted
hereunder shall be in writing and must be given by
personal delivery or by certified mail, return receipt
requested, addressed, if to REFAC or the Committee, to
REFAC, at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, or to the Optionee at the address set forth below,
as the case may be, and deposited, postage prepaid, in
the United States mail; provided, however, that a
notification of exercise pursuant to subsection (a) of
this Section 10 shall be effective only upon receipt by
REFAC of such notification and all necessary
documentation, including full payment for the Shares.
Either party may, by notification to the other given in
the manner aforesaid, change the address for future
notices.
Section 11. CANCELLATION AND REISSUANCE. The
Committee shall have the authority to provide for the
cancellation of the Option and the reissuance of a
replacement Option upon such terms as the Committee, in
its sole discretion, deems appropriate, provided that
such terms shall not adversely affect the Optionee in any
material way.
Section 12. RESERVATION OF SHARES. REFAC
agrees that, until the exercise or expiration of the
Option, at all times there shall be reserved for issuance
and/or delivery upon exercise of this Option such number
of shares of Stock as shall be required for issuance and
delivery upon exercise of the Option.
Section 13. GOVERNING LAW; INTERPRETATION.
(a) This Agreement shall be governed by and
construed in accordance with the laws of the State of
Delaware, without giving effect to its conflicts of law
principles.
(b) The Committee shall have final authority
to interpret and construe this Agreement and to make any
and all determinations under them, and its determination
and decisions shall be final, conclusive and binding upon
the Optionee and his legal representative in respect of
any questions arising under this Agreement.
Section 14. MISCELLANEOUS.
(a) This Agreement shall bind and inure to the
benefit of REFAC, its successors and assigns, and the
Optionee and his personal representatives and assigns.
(b) The failure of REFAC to enforce at any
time any provision of this Agreement shall in no way be
construed to be a waiver of such provision or of any
other provision hereof.
(c) Amendment. This Agreement may be amended
or modified at any time by an instrument in writing
signed by the parties hereto.
IN WITNESS WHEREOF, REFAC has caused this
Agreement to be duly executed by its officer thereunder
duly authorized and the Optionee has hereunto set his
hand, all as of the day and year set forth above.
REFAC TECHNOLOGY DEVELOPMENT
CORPORATION
By_________________________________
Name:
Title:
ACCEPTED:
___________________________
Optionee Date
Address:
___________________________
___________________________
___________________________
EXHIBIT E
GUARANTY
This GUARANTY ("Guaranty") is made as of
November 25, 1997 by REFAC Technology Development
Corporation, a Delaware corporation (the "Guarantor"), in
favor of ___________ (the "Employee").
WHEREAS, the Guarantor has entered into an
Agreement and Plan of Merger, dated as of November __,
1997 (the "Merger Agreement"), by and among the
Guarantor, the Employee, HFID Acquisition Corporation, a
New York corporation and Human Factors Industrial Design,
Inc., a New York corporation (the "Employer"), and
certain other principal stockholders of the Employer;
WHEREAS, pursuant to the Merger Agreement, the
Employer will become a wholly owned subsidiary of the
Guarantor;
WHEREAS, the Employee will enter into an
employment agreement (the "Employment Agreement") with
the Employer, dated as of November __, 1997, with an
initial term (the "Initial Term") that expires on
December 31, 2002;
NOW, THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the Guarantor agrees as follows:
1. The recitals set forth above are
incorporated herein by reference.
2. In order to induce the Employee to enter
into the Merger Agreement and the Employment Agreement,
the Guarantor hereby unilaterally, unconditionally and
irrevocably guarantees to the Employee the full and
timely performance by the Employer of all obligations
under the Employment Agreement, including any amendments
thereto, as follows: If any payment is overdue by more
than 10 business days under any Employment Agreement, the
Guarantor will, upon the written notice of the Employee,
pay any such sums to the Employee or any third party
beneficiary designated by the Employee within five
business days of receiving such notice. The guaranties
set forth herein shall remain in full force and effect
until the full and complete satisfaction, payment,
performance and discharge of all obligations under the
Employment Agreement.
3. The Guarantor hereby makes all of the
representations, warranties, covenants and agreements
made by the Employer in the Employment Agreements and in
any certificate, instrument or other document ("Ancillary
Documents") delivered by the Employer pursuant to or in
connection with the Employment Agreement, as though the
word "Refac Technology Development Corporation" had been
substituted for the word the "Company" throughout the
Employment Agreement.
4. The obligations of the Guarantor hereunder
are limited to obligations during the Initial Term of the
Employment Agreement as defined therein.
5. This Agreement shall be binding on and
inure to the benefit of and be enforceable by the parties
hereto and their respective heirs, legal representatives
and successors, but shall not be assigned by any of them.
6. This Agreement may not be modified or
amended except by a written agreement duly executed by
the Guarantor and the Employee.
7. This Agreement shall be governed by and
construed in accordance with the laws of the State of New
York, regardless of the laws that might otherwise govern
under applicable principles of conflicts of laws thereof.
8. Any dispute or controversy arising under or
in connection with this Agreement shall be settled
exclusively by arbitration, conducted before a panel of
three arbitrators sitting in New York, New York, in
accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on
the arbitrator's award in any court having jurisdiction.
The arbitrators, in their discretion, may direct that the
successful party in any such arbitration shall be
entitled to be reimbursed by the other party for
reasonable attorneys' fees and expenses incurred in
connection with such dispute or controversy.
9. This Agreement may be executed in two or
more counterparts, all of which shall be considered one
and the same agreement and each of which shall be deemed
an original.
10. The failure of any Employee at any time to
require performance of the Guarantor of any of its
obligations hereunder shall not constitute a waiver of
the rights of such Employee to require performance at a
later time. No modification of or waiver or consent
under this Agreement shall be of any effect unless made
or given by means of a written instrument which
identifies this Agreement specifically and which
specifically states that it amends this Agreement and
which is signed by the Employee.
11. The liability of the Guarantor shall be
direct and immediate and not conditional or contingent
upon the pursuance by the Employee of whatever remedies
he may have at law or in equity, against the Employer.
The Guarantor hereby waives presentment, demand for
payment, protest and notice of protest.
12. The Guarantor warrants that this Guaranty
is fully enforceable in accordance with its terms and
that it has been fully authorized.
13. This Agreement and the obligations of the
Guarantor hereunder shall not be affected in any manner
by (i) any modification of the terms of the Employment
Agreement or the creation of additional obligations under
the Employment Agreement agreed to by the Guarantor.
14. In the event any one or more provisions of
this Guaranty shall be held invalid, illegal or
unenforceable, the validity, legality and enforceability
of the remainder of the Guaranty shall not in any way be
affected or impaired thereby.
15. IN WITNESS WHEREOF, the parties have
caused this instrument to be duly executed on the date
first above written.
REFAC Technology
Development Corporation
By: __________________________
Name:
Title: