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EXHIBIT 2.5
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
by and among
CP Clare Corporation
as Buyer
Clare Micronix Integrated Systems, Inc.
as Buyer Sub
Micronix Integrated Systems, Inc.
as Company
Xxxxxx Xxxxx, individually
and
the Principal Stockholders of the Company
July 6, 1998
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AGREEMENT AND PLAN OF MERGER
INDEX
Page
SECTION 1. MERGER..............................................................1
1.1 The Merger..........................................................1
1.2 Signing of Agreement................................................1
1.3 Effective Time; Closing.............................................2
1.4 Articles of Incorporation...........................................2
1.5 By-laws.............................................................2
1.6 Directors and Officers..............................................2
1.7 Effect on Securities of the Company.................................2
1.8 Effect on Securities of Buyer Sub...................................3
1.9 Manner of Payment...................................................3
1.10 Issuance of Options.................................................3
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
MANAGEMENT .........................................................4
2.1 Making of Representations and Warranties............................4
2.2 Organization and Qualifications of the Company......................4
2.3 Capital Stock of the Company; Beneficial Ownership..................5
2.4 Subsidiaries........................................................5
2.5 Authority of the Company............................................5
2.6 Real and Personal Property..........................................6
2.7 Financial Statements................................................8
2.8 Taxes...............................................................9
2.9 Collectibility of Accounts Receivable..............................10
2.10 Inventories........................................................10
2.11 Absence of Certain Changes.........................................10
2.12 Ordinary Course....................................................12
2.13 Banking Relations..................................................12
2.14 Intellectual Property..............................................12
2.15 Contracts..........................................................14
2.16 Litigation.........................................................15
2.17 Compliance with Laws...............................................15
2.18 Insurance..........................................................15
2.19 Warranty or Other Claims...........................................15
2.20 Powers of Attorney.................................................16
2.21 Finder's Fee.......................................................16
2.22 Permits; Burdensome Judgments, etc.................................16
2.23 Corporate Records; Copies of Documents.............................16
2.24 Transactions with Interested Persons...............................16
2.25 Employee Benefit Programs..........................................16
2.26 Environmental Matters..............................................18
2.27 List of Directors and Officers.....................................20
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2.28 Disclosure.........................................................20
2.29 Non-Foreign Status.................................................20
2.30 Backlog............................................................20
2.31 Employees; Labor Matters...........................................20
2.32 Customers, Distributors and Suppliers..............................21
2.33 Transfer of Shares.................................................21
2.34 Stock Repurchase...................................................21
SECTION 3. INTENTIONALLY OMITTED..............................................21
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER............................21
4.1 Making of Representations and Warranties...........................21
4.2 Organization of Buyer and Buyer Sub................................22
4.3 Authority of Buyer and Buyer Sub...................................22
4.4 Litigation.........................................................22
4.5 Finder's Fee.......................................................23
4.6 Option Shares......................................................23
SECTION 5. CONDITIONS.........................................................23
5.1 Conditions to the Obligations of Buyer and Buyer Sub...............23
5.2 Conditions to Obligations of the Company, the Principal
Stockholders and Xxxxxx Xxxxx.....................................26
SECTION 6. TERMINATION OF AGREEMENT...........................................27
6.1 Termination........................................................27
6.2 Failure to Merge...................................................27
6.3 Effect of Termination..............................................27
SECTION 7. RIGHTS AND OBLIGATIONS SUBSEQUENT TO AGREEMENT DATE
AND CLOSING........................................................27
7.1 Conduct of Business................................................27
7.2 Survival of Representations and Warranties.........................27
7.3 Repayment of Promissory Notes......................................28
7.4 Benefits to Company Employees......................................28
7.5 Tax Returns........................................................28
7.6 Further Assurances.................................................29
SECTION 8. INDEMNIFICATION....................................................29
8.1 Indemnification by the Xxxxx Entities..............................29
8.2 Limitations on Indemnification by the Xxxxx Entities...............29
8.3 Indemnification by Buyer...........................................30
8.4 Limitation on Indemnification by Buyer.............................30
8.5 Indemnification by Xxxx Xxxxx......................................31
8.6 Notice; Defense of Claims..........................................31
8.7 Satisfaction of Xxxxx Entities Indemnification Obligations.........32
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SECTION 9. MISCELLANEOUS....................,,................................32
9.1 Fees and Expenses..................................................32
9.2 Governing Law......................................................33
9.3 Notices............................................................33
9.4 Entire Agreement...................................................34
9.5 Assignability; Binding Effect......................................34
9.6 Captions and Gender................................................35
9.7 Execution in Counterparts..........................................35
9.8 Amendments.........................................................35
9.9 Publicity and Disclosures..........................................35
9.10 Consent to Jurisdiction............................................35
9.11 Specific Performance...............................................35
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement") entered into as of July 6,
1998 by and among CP Clare Corporation, a Massachusetts corporation ("Buyer"),
Clare Micronix Integrated Systems, Inc., a California corporation and a
wholly-owned subsidiary of Buyer ("Buyer Sub"), Micronix Integrated Systems,
Inc. a California corporation (the "Company"), Xxxxxx Xxxxx and Xxxx Xxxxx, as
trustees of the Xxxxx Family Trust (the "Xxxxx Trust"), Xxxxx Investments, LLC,
a Nevada limited liability company (the "Xxxxx LLC"), and Xxxx Xxxxx (each a
stockholder of the Company and, collectively, herein referred to as the
"Principal Stockholders" and individually as a "Principal Stockholder"; the
Principal Stockholders and said other stockholders of the Company being herein
collectively referred to as the "Stockholders" and individually as a
"Stockholder"). The Xxxxx Trust, the Xxxxx LLC and Xxxx Xxxxx and Xxxxxx Xxxxx,
individually, are, collectively with any entity (other than the Saint Xxxx
School) to which the Xxxxx Trust has, since June 1, 1998, transferred shares of
the Company, hereinafter referred to as the "Xxxxx Entities."
W I T N E S S E T H
WHEREAS, the outstanding capital stock of the Company consists of
14,549,138 shares of the Company's Common Stock, no par value per share (said
shares being referred to herein as the "Company Shares"); and
WHEREAS, Buyer wishes to acquire the Company by means of a reverse merger
of Buyer Sub with and into the Company.
NOW, THEREFORE, in order to consummate said transaction and in
consideration of the mutual agreements set forth herein, the parties hereto
agree as follows:
SECT65535ON 1. MERGER.
1.1 THE MERGER. On the Merger Effective Date and at the Effective Time (as
such terms are defined in Section 1.3), Buyer Sub shall be merged with and into
the Company in accordance with this Agreement and the separate existence of
Buyer Sub shall thereupon cease (the "Merger"). The Company shall be the
surviving corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation") and the name of the Surviving Corporation shall be
"Clare Micronix Integrated Systems, Inc." The Merger shall have the effects
specified in Section 1107 of the California General Corporation Law ("CGCL").
1.2 SIGNING OF AGREEMENT. The execution of this Agreement, and all other
documents contemplated by this Agreement, shall occur at the offices of Xxxxxxx,
Procter & Xxxx XXX, Xxxxxxxx Xxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 at 10:00 a.m. on
the date hereof (the "Agreement Date").
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1.3 EFFECTIVE TIME; CLOSING. The parties hereto shall cause an Agreement
of Merger (in the form attached hereto as EXHIBIT K), with all necessary
certificates, satisfying the requirements of Section 1101 of the CGCL to be
properly executed, verified and delivered for filing in accordance with Section
1103 of the CGCL on the Agreement Date. The Merger shall become effective on the
date (the "Merger Effective Date") such Agreement of Merger is filed with the
Secretary of State of California in accordance with Section 1103 of the CGCL.
The time at which the Merger becomes effective on the Merger Effective Date is
hereinafter referred to as the "Effective Time." The closing of the Merger
(herein called the "Closing") shall occur on the date the parties receive
notification from the Secretary of State of California that such Agreement of
Merger has been accepted for recording or filing. The date on which the Closing
occurs is hereinafter referred to as the "Closing Date." In the event the Merger
Effective Date is earlier than the Closing Date, the Merger Consideration shall
be deemed to have been paid and the options to be issued pursuant to Section
1.10 shall be deemed to have been issued on the Merger Effective Date.
1.4 ARTICLES OF INCORPORATION. From and after the Effective Time, the
Articles of Incorporation of Buyer Sub, as in effect immediately prior to the
Effective Time and as attached hereto as EXHIBIT A, shall be and become the
Articles of Incorporation of the Surviving Corporation, and shall thereafter
continue in effect until amended as provided therein and in accordance with
California law.
1.5 BY-LAWS. The By-laws of Buyer Sub, as in effect immediately prior to
the Effective Time and as attached hereto as EXHIBIT B, shall be the By-laws of
the Surviving Corporation, and shall thereafter continue in effect until amended
as provided therein and in accordance with California law.
1.6 DIRECTORS AND OFFICERS. The directors and officers of Buyer Sub
holding office on the Merger Effective Date shall, from and after the Merger
Effective Date, be the directors and officers of the Surviving Corporation,
until their respective successors shall have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Articles of Incorporation or By-laws.
1.7 EFFECT ON SECURITIES OF THE COMPANY.
(a) At the Effective Time, each Company Share outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the Company, Buyer Sub or the holders of any of the
securities of either entity, be converted into the right to receive a cash
payment on the Closing Date equal to the quotient obtained by dividing fifteen
million eight hundred thousand dollars ($15,800,000) by the number of Company
Shares (the "Merger Consideration") which number of Company Shares and the
holders thereof shall be certified to Buyer by the Company and the Management
(as such term is defined in Section 2.1) as of the Agreement Date and as of the
Merger Effective Date. The Stockholders of the Company, and the portion of the
Merger Consideration to be received by each, are set forth on EXHIBIT C attached
hereto.
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(b) At the Effective Time, as a result of the Merger and without any
action on the part of the holder thereof, the Company Shares outstanding
immediately prior to the Effective Time shall cease to be outstanding, shall be
canceled and retired and shall cease to exist and each holder of a certificate
representing the Company Shares shall thereafter cease to have any rights with
respect to such Company Shares except the right to receive, without interest,
the Merger Consideration.
(c) Notwithstanding paragraph (a) or (b) above, no holder of Company
Shares who shall have validly exercised his or her right to dissent from the
Merger with respect to any Company Shares (such person, a "Dissenter"), as
provided by California law, shall receive any portion of the Merger
Consideration with respect to such Company Shares. Each Dissenter shall receive
the amount awarded or otherwise payable to such Dissenter in accordance with
California law.
(d) Each outstanding option to purchase shares of the Company's
Common Stock shall be either exercised for shares of the Company's Common Stock
(and such shares are included in the Company Shares) or be canceled prior to the
Agreement Date. The provisions in any plan, program or arrangement providing for
the issuance or grant of any interest in respect of the Company Shares shall be
canceled as of the Effective Time.
1.8 EFFECT ON SECURITIES OF BUYER SUB. At the Effective Time, each share
of Buyer Sub issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of Buyer Sub
or the holder of such shares, be converted into one fully paid and nonassessable
share of Common Stock of the Surviving Corporation.
1.9 MANNER OF PAYMENT. On the Closing Date, Buyer shall pay or cause to be
paid to each Stockholder, by wire transfer of immediately available funds or by
a check issued by Buyer, the portion of the Merger Consideration set forth
opposite such Stockholder's name on EXHIBIT C attached hereto.
1.10 ISSUANCE OF OPTIONS. As of the Merger Effective Date, Buyer will award
to the employees of the Company options to purchase an aggregate of 500,000
shares of Buyer's common stock, par value $.01 per share. Such options shall be
delivered by Buyer on the Closing Date and shall be allocated among such
employees as set forth in EXHIBIT D hereto. The options shall qualify as
"incentive stock options" as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code") and shall be issued under the CP Clare
Corporation 1995 Stock Option and Incentive Plan (the "Plan"); PROVIDED,
HOWEVER, that if any such employee cannot lawfully receive incentive stock
options to purchase such employee's full allotment of Buyer's common stock, such
employee shall receive incentive stock options under the Plan only to the extent
permitted by law and all other options awarded to such employee shall be
non-qualified options (which term shall mean any option which does not qualify
as an incentive stock option under the Code) and shall be approved in advance by
Buyer's Board of Directors. Such non-qualified options shall incorporate the
terms and
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conditions of the Plan and shall otherwise be in a form mutually agreed to by
Buyer and such employee. All options granted pursuant to this Section 1.10 shall
have a 10 year term, shall vest cumulatively in equal yearly installments over a
5 year period and be priced at the fair market value of Buyer's common stock,
par value $.01 per share, on the date of grant. Any employee of the Company who
receives options pursuant to this Section 1.10 shall execute, prior to the
Agreement Date, a release of all claims against the Company and the Principal
Stockholders in a form reasonably acceptable to Buyer.
SECT65535ON 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE MANAGEMENT.
2.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement to
Buyer and Buyer Sub to enter into this Agreement and consummate the transactions
contemplated hereby, the Company and each of Xxxxxx Xxxxx and Xxxx Xxxxx (Xxxxxx
Xxxxx and Xxxx Xxxxx being herein referred to as the "Management") jointly and
severally hereby make to Buyer and Buyer Sub the representations and warranties
contained in this Section 2 effective as of the Agreement Date and as of the
Merger Effective Date; PROVIDED, HOWEVER, that (i) Management shall not have any
right of indemnity or contribution from the Company with respect to any breach
of representation or warranty hereunder and (ii) the Stockholder warranties in
Section 2.3(b) are only made severally by each Principal Stockholder with
respect to the shares owned by such Principal Stockholder and by the Company
with respect to the shares owned by any other Stockholder. Statements made to
the knowledge of the Management refers to matters of which the Management should
have been aware in connection with the discharge of their duties in the
management of the Company.
2.2 ORGANIZATION AND QUALIFICATIONS OF THE COMPANY. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of California with full corporate power and authority to own or lease its
properties and to conduct its business in the manner and in the places where
such properties are owned or leased or such business is currently conducted or
proposed to be conducted. The copies of the Company's Articles of Incorporation
as amended to date, certified by the California Secretary of State, and of the
Company's by-laws, as amended to date, certified by the Company's Secretary, and
heretofore delivered or made available to Buyer's counsel, are complete and
correct, and no amendments thereto are pending except for amendments
contemplated by this Agreement. The Company is not in violation of any term of
its Articles of Incorporation or By-laws. All actions of the Board of Directors
of the Company have been duly and validly taken or duly and validly ratified.
The Company is not required to be licensed or qualified to conduct its business
or own its property in any other jurisdiction except such jurisdictions where
failure to so qualify would not have a material adverse effect on the Company.
2.3 CAPITAL STOCK OF THE COMPANY; BENEFICIAL OWNERSHIP.
(a) The authorized capital stock of the Company consists of
100,000,000
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shares of Common Stock, no par value per share, of which 14,549,138
shares are duly and validly issued, outstanding, fully paid and non-assessable
and of which 85,450,862 shares are authorized but unissued. None of the
Company's capital stock has been issued in violation of any federal or state
law. Except as set forth in the SCHEDULE 2.3(a) attached hereto, there are no
voting trusts, voting agreements, proxies or other agreements, instruments or
undertakings with respect to the voting of the Company Shares to which the
Company or, to the knowledge of the Management, any of the Stockholders is a
party.
(b) Each of the Stockholders owns beneficially and of record the
Company Shares set forth opposite such Stockholder's name on EXHIBIT C hereto
free and clear of any liens, restrictions or encumbrances. The Company Shares
set forth on EXHIBIT C constitute all of the issued and outstanding securities
of the Company.
(c) Except as disclosed on SCHEDULE 2.3(c) hereof, there are no
outstanding options, warrants, rights, commitments, preemptive rights or
agreements of any kind for the issuance or sale of, or outstanding securities
convertible into, any additional shares of capital stock of any class of the
Company.
(d) The Stock Confirmation, Stock Purchase and Mutual General Release
Agreements entered into by and among the Company, Xxxxxx Xxxxx and each
Stockholder and such Stockholder's spouse were duly executed and constitute the
valid and binding obligation of the Company, each in accordance with its terms.
2.4 SUBSIDIARIES. The Company's subsidiaries and investments in any other
corporation or business organization are listed in SCHEDULE 2.4 (collectively,
the "Subsidiaries" or individually, a "Subsidiary"). There are no material
liabilities of the Company in connection with any Subsidiaries.
2.5 AUTHORITY OF THE COMPANY. The Company has full right, authority and
power to enter into this Agreement and each agreement, document and instrument
to be executed and delivered by the Company pursuant to this Agreement and to
carry out the transactions contemplated hereby. The execution, delivery and
performance by the Company of this Agreement and each such other agreement,
document and instrument have been duly authorized by all necessary action of the
Company and no other action on the part of the Company or the Stockholders is
required in connection therewith.
This Agreement and each agreement, document and instrument executed and
delivered by the Company pursuant to this Agreement constitutes, or when
executed and delivered will constitute, valid and binding obligations of the
Company enforceable in accordance with their terms. The execution, delivery and
performance by the Company of this Agreement and each such agreement, document
and instrument:
(i) does not and will not violate any provision of the Articles
of Incorporation or by-laws of the Company;
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(ii) except as set forth in SCHEDULE 2.5, does not and will not
violate any laws of the United States, or any state or other jurisdiction
applicable to the Company or require the Company to obtain any approval,
consent or waiver of, or make any filing with, any person or entity
(governmental or otherwise) that has not been obtained or made, except for
filings to be made and identified in this Agreement or where such violation
or the failure to obtain such approval, consent or waiver or make such
filing will not have a material adverse effect on the Company; and
(iii) does not and will not result in a breach of, constitute a
default under, accelerate any obligation under, or give rise to a right of
termination of any indenture or loan or credit agreement or any other
agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which the Company is a party or by which the property
of the Company is bound or affected, or result in the creation or
imposition of any mortgage, pledge, lien, security interest or other charge
or encumbrance on any of the Company's assets or the Company Shares, except
as specifically identified on SCHEDULE 2.5 or where such breach, default,
acceleration, right of termination, creation or imposition will not have a
material adverse effect on the Company.
2.6 REAL AND PERSONAL PROPERTY.
(a) REAL PROPERTY. The Company does not own any real property. All
of the real property leased by the Company is identified on SCHEDULE 2.6(a)
(herein referred to as the "Leased Real Property").
(i) TITLE. The Company has good, clear, record and marketable
title to enforceable leasehold interests in the Leased Real Property, in
each case free and clear of all easements, covenants, restrictions, leases,
mortgages, liens, assessments, claims, rights, judgments, encroachments or
other matters affecting title (collectively, "Encumbrances"), other than:
(x) easements, covenants, restrictions and similar encumbrances
that do not and could not materially interfere with the use
of the real property as currently used and improved, and
(y) minor encroachments that do not and could not materially
adversely affect the value or use of the real property as
currently used and improved and that could be removed
without material cost
((x) and (y) are collectively referred to as "Permitted Encumbrances"),
subject only to the right of reversion of the Lessor, except as set forth
in SCHEDULE 2.6(a).
(ii) STATUS OF LEASES. All leases of Leased Real Property are
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identified on SCHEDULE 2.6(a), and true and complete copies thereof have
been delivered or made available to Buyer. Except as set forth on SCHEDULE
2.6(a), each of said leases has been duly authorized and executed by the
Company and is in full force and effect. The Company is not in default
under any of said leases, nor has any event occurred which, with notice or
the passage of time, or both, would give rise to such a default. To the
knowledge of the Management, the other party to each of said leases is not
in default under any of said leases and there is no event which, with
notice or the passage of time, or both, would give rise to such a default.
(iii)CONDITION OF LEASED REAL PROPERTY. Except as set forth in
SCHEDULE 2.6(a), to the knowledge of the Management, (a) there are no
material defects in the physical condition of any buildings or improvements
constituting part of the Leased Real Property and (b) all such buildings
and improvements are in good operating condition and repair, have been well
maintained. To the knowledge of the Management, none of the Leased Real
Property is located in an area designated by any governmental authority as
being within a flood plain or subject to special flood or other hazards.
Access to the Leased Real Property is by a public way or public street.
(iv) COMPLIANCE WITH THE LAW. The Company has not received any
notice from any governmental authority of any violation of any law,
ordinance, regulation, license, permit or authorization issued with respect
to any Leased Real Property that has not been heretofore corrected and, to
the knowledge of the Management, no such violation exists which could have
an adverse affect on the operation or value of any Leased Real Property.
All improvements located on or constituting part of the Leased Real
Property and their use and operation by the Company to the knowledge of the
Management, were and are now in compliance in all respects with all
applicable laws, ordinances, regulations, licenses, permits and
authorizations, except as set forth in SCHEDULE 2.6(a). The Company has not
received any notice of any real estate tax deficiency or assessment or,
except as set forth on SCHEDULE 2.6(a), is aware of any proposed
deficiency, claim or assessment with respect to any of the Leased Real
Property, or any pending or threatened condemnation thereof.
(b) PERSONAL PROPERTY. Except as specifically disclosed in the Base
Balance Sheet (as hereinafter defined), the Company has good and marketable
title to all of its personal property. SCHEDULE 2.6(b) specifically identifies
any of such personal property or assets that are subject to a capital lease.
None of such personal property or assets is subject to any mortgage, pledge,
lien, conditional sale agreement, security title, encumbrance or other charge
except as specifically disclosed in said Schedule or in the Base Balance Sheet.
The Base Balance Sheet reflects all personal property of the Company, excluding
items written down as obsolete or diminimus items. Except as otherwise specified
in SCHEDULE 2.6(b) hereto, all material leasehold improvements, furnishings,
machinery and equipment of the Company (except for furnishings, machinery and
equipment that are obsolete or have been written off by the Company) are in good
repair, have been well maintained, and substantially comply with all applicable
laws, ordinances and regulations, and such machinery and equipment is in good
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working order other than latent defects which are not reasonably capable of
detection during normal operation of such machinery and equipment.
2.7 FINANCIAL STATEMENTS.
(a) The Company has previously delivered or made available to Buyer
the following financial statements, copies of which are attached hereto as
SCHEDULE 2.7:
(i) Consolidated and consolidating balance sheet of the Company
for its fiscal year ending on June 30, 1997 and a statement of income,
retained earnings and cash flows for the year then ended, of which the
consolidated statement is certified by the President of the Company.
(ii) Consolidated and consolidating balance sheets of the Company
as of September 30, 1997, December 31, 1997 and May 31, 1998 (the
consolidated and consolidating balance sheet as of May 31, 1998 herein
referred to as the "Base Balance Sheet") and statements of income, retained
earnings and cash flows for the period then ended, certified by the
Company's President.
Except as set forth on SCHEDULE 2.7, said financial statements have been
prepared in accordance with generally accepted accounting principles applied
consistently during the periods covered thereby (except that no footnotes to
such financial statements have been prepared), are complete and correct in all
material respects and present fairly in all material respects the financial
condition of the Company at the dates of said statements and the results of its
operations for the periods covered thereby.
(b) Except as set forth on SCHEDULE 2.7, as of the date of the Base
Balance Sheet, the Company had no liabilities of any nature, whether accrued,
absolute, contingent or otherwise, asserted or unasserted, known or unknown
(including without limitation, liabilities as guarantor or otherwise with
respect to obligations of others, liabilities for taxes due or then accrued or
to become due, or contingent or potential liabilities relating to activities of
the Company or the conduct of its business prior to the date of the Base Balance
Sheet regardless of whether claims in respect thereof had been asserted as of
such date), except liabilities stated or adequately reserved against on the Base
Balance Sheet, or reflected in Schedules furnished to Buyer hereunder as of the
date hereof or immaterial liabilities incurred in the ordinary course of
business of the Company which are not required to be reflected in the Base
Balance Sheet or the notes thereto under generally accepted accounting
principles.
(c) Except as set forth on SCHEDULE 2.7, as of the date hereof, the
Company does not have any material liabilities of any nature, whether accrued,
absolute, contingent or otherwise, asserted or unasserted, known or unknown
(including without limitation, liabilities as guarantor or otherwise with
respect to obligations of others, or liabilities for taxes due or then accrued
or to become due or contingent or potential liabilities relating to activities
of the Company or the conduct of its business prior to the date hereof or the
Closing, as the case may
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be, regardless of whether claims in respect thereof had been asserted as of such
date), except liabilities (i) stated or adequately reserved against on the Base
Balance Sheet or the notes thereto, (ii) reflected in Schedules furnished to
Buyer hereunder on the date hereof, or (iii) incurred in the ordinary course of
business of the Company consistent with the terms of this Agreement.
2.8 TAXES.
(a) Except as set forth in SCHEDULE 2.8 attached hereto, the Company
has paid or caused to be paid or provided for (including amounts accrued or
reflected on the Base Balance Sheet) all federal, state, local, foreign, and
other taxes, including without limitation, income taxes, estimated taxes,
alternative minimum taxes, excise taxes, sales taxes, use taxes, value-added
taxes, gross receipts taxes, franchise taxes, capital stock taxes, employment
and payroll-related taxes, withholding taxes, stamp taxes, transfer taxes,
windfall profit taxes, environmental taxes and property taxes, whether or not
measured in whole or in part by net income, and all deficiencies, or other
additions to tax, interest, fines and penalties owed by it, including any
increase in an amount owed due to the unavailability of any loss or deduction
claimed by the Company (collectively, "Taxes"), required to be paid or provided
for by it through the date hereof whether disputed or not.
(b) Except as set forth on SCHEDULE 2.8, the Company has in
accordance with applicable law filed all federal, state, local and foreign tax
returns required to be filed by it through the date hereof, and all such returns
correctly and accurately set forth the amount of any Taxes relating to the
applicable period. A list of all federal and state income tax returns filed with
respect to the Company for taxable periods ended on or after June 30, 1992 is
set forth in SCHEDULE 2.8 attached hereto, and said Schedule indicates those
returns that have been audited or currently are the subject of an audit. For
each taxable period of the Company ended on or after June 30, 1992, the Company
has delivered or made available to Buyer correct and complete copies of all
federal and state income tax returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company.
(c) Neither the Internal Revenue Service nor any other governmental
authority is now asserting or, to the knowledge of the Management, threatening
to assert against the Company any deficiency or claim for additional Taxes. No
claim has ever been made by an authority in a jurisdiction where the Company
does not file reports and returns that the Company is or may be subject to
taxation by that jurisdiction. There are no security interests on any of the
assets of the Company that arose in connection with any failure (or alleged
failure) to pay any Taxes. Except as set forth in SCHEDULE 2.8, the Company has
never entered into a closing agreement pursuant to Section 7121 of the Code.
(d) The Company has not been notified by any tax authority that any
audit of a tax return filed by the Company is contemplated or pending. No
extension of time with respect to any date on which a tax return was or is to be
filed by the Company is in force, and no waiver or agreement by the Company is
in force for the extension of time for the
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assessment or payment of any Taxes.
(e) The Company has never been (or has ever had any liability for
unpaid Taxes because it once was) a member of an "affiliated group" (as defined
in Section 1504(a) of the Code). The Company has never filed, and has never been
required to file, a consolidated, combined or unitary tax return with any other
entity. The Company is not a party to any tax sharing agreement.
(f) For purposes of this Agreement, all references to Sections of the
Code shall include any predecessor provisions to such Sections and any similar
provisions of federal, state, local or foreign law.
2.9 COLLECTIBILITY OF ACCOUNTS RECEIVABLE. All of the material accounts
receivable of the Company shown or reflected on the Base Balance Sheet or
existing at the date hereof (less the reserve for bad debts set forth on the
Base Balance Sheet) are or will be at the Closing valid and legally enforceable
claims, fully collectible and subject to no set off or counterclaim. The Company
has no accounts or loans receivable from any person, firm or corporation which
is affiliated with the Company or from any director, officer or employee of the
Company, and all accounts and loans receivable from any such person, firm or
corporation shall be paid in cash prior to or simultaneously with the Closing.
2.10 INVENTORIES. Except as disclosed in SCHEDULE 2.10, the inventories of
the Company shown on the Base Balance Sheet or existing on the date hereof
reflect write-downs to realizable values in the case of items which are below
standard quality or have become obsolete or unsaleable through regular
distribution channels in the ordinary course of the business of the Company. The
values of the inventories stated in the Base Balance Sheet and any subsequent
financial statements of the Company reflect the normal inventory valuation
policies of the Company and were determined at the lower of cost or market in
accordance with generally accepted accounting principles, practices and methods
consistently applied. Purchase commitments for raw materials and parts are not
in excess of the Company's past practice and none are at prices materially in
excess of current market prices. Except as set forth in SCHEDULE 2.10, all
inventory items are located on the Leased Real Property. Except as set forth in
SCHEDULE 2.10, since the date of the Base Balance Sheet, no inventory items have
been sold or disposed of except through sales or dispositions in the ordinary
course of business at profit margins consistent with the experience of the
Company during the nine month period ended March 31, 1998, and all sales
commitments for the products of the Company are at prices not less than
inventory values plus selling expenses and said profit margins.
2.11 ABSENCE OF CERTAIN CHANGES. Except as disclosed in SCHEDULE 2.11
attached hereto, since the date of the Base Balance Sheet there has not been:
(a) Any change in the financial condition, properties, assets,
liabilities, business or operations of the Company, which change by itself or in
conjunction with all other such changes, whether or not arising in the ordinary
course of business, has been materially adverse with respect to the Company;
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(b) Any contingent liability incurred by the Company as guarantor or
otherwise with respect to the obligations of others or any cancellation of any
material debt or claim owing to, or intentional or written waiver of any
material right of, the Company;
(c) Any mortgage, encumbrance or lien placed on any of the properties
of the Company which remains in existence on the date hereof or will remain on
the Closing Date;
(d) Any obligation or liability of any nature, whether accrued,
absolute, contingent or otherwise (including without limitation liabilities for
Taxes due or to become due or contingent or potential liabilities relating to
products or services provided by the Company or the conduct of the business of
the Company since the date of the Base Balance Sheet regardless of whether
claims in respect thereof have been asserted), incurred by the Company other
than obligations and liabilities incurred in the ordinary course of business
consistent with the terms of this Agreement (it being understood that asserted
product or service liability claims shall not be deemed to be incurred in the
ordinary course of business);
(e) Any purchase, sale or other disposition, or any agreement or
other arrangement for the purchase, sale or other disposition, of any of the
properties or assets of the Company other than in the ordinary course of
business;
(f) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or business
of the Company, taken as a whole;
(g) Any declaration, setting aside or payment of any dividend by the
Company, or the making of any other distribution in respect of the capital stock
of the Company, or any direct or indirect redemption, purchase or other
acquisition by the Company of its own capital stock;
(h) Any labor trouble or claim of unfair labor practices involving
the Company; any change in the compensation payable or to become payable by the
Company to any of its officers, employees, agents or independent contractors
other than normal merit increases in accordance with its usual practices; or any
bonus payment or arrangement made to or with any of such officers, employees,
agents or independent contractors;
(i) Any change with respect to the officers or management of the
Company, except as set forth on SCHEDULE 2.11;
(j) Any payment or discharge of a material lien or liability of the
Company which was not shown on the Base Balance Sheet or incurred in the
ordinary course of business thereafter, except as required by the terms of this
Agreement;
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(k) Any obligation or liability incurred by the Company to any of its
officers, directors, stockholders or employees, or any loans or advances made by
the Company to any of its officers, directors, stockholders or employees, except
normal compensation and expense allowances payable to officers or employees;
(l) Any change in accounting methods or practices, credit practices
or collection policies used by the Company;
(m) Any other transaction entered into by the Company other than
transactions in the ordinary course of business; or
(n) Any agreement or understanding whether in writing or otherwise,
for the Company to take any of the actions specified in paragraphs (a) through
(m) above.
2.12 ORDINARY COURSE. Since the date of the Base Balance Sheet, the Company
has conducted its business only in the ordinary course and consistently with its
prior practices, except as described in SCHEDULE 2.12.
2.13 BANKING RELATIONS. All of the arrangements which the Company has with
any banking institution are accurately described in SCHEDULE 2.13 attached
hereto, indicating with respect to each of such arrangements the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, direct debit charges, fund transfers, etc.) and the person or
persons authorized in respect thereof.
2.14 INTELLECTUAL PROPERTY.
(a) The Company has no registered patents, copyrights or trademarks
and no applications for such rights are pending. Except as described in SCHEDULE
2.14, the Company has ownership of, or license to use, all copyright, trade
secret, trademark, or other proprietary rights (collectively, "Intellectual
Property") used or to be used in the business of the Company as presently
conducted or contemplated. There are no asserted claims or demands of any other
person pertaining to any of such Intellectual Property and no proceedings have
been instituted, or are pending or, to the knowledge of the Management,
threatened, which challenge the rights of the Company in respect thereof. Except
as set forth on SCHEDULE 2.14, the Company has the right to use, free and clear
of claims or rights of other persons, all customer lists, designs, manufacturing
or other processes, computer software, systems, data compilations, research
results and other information required for or incident to its products or its
business as presently conducted or contemplated.
(b) All trademarks and copyrights which are owned by or licensed to
the Company or used or to be used by the Company in its business as presently
conducted or contemplated, and all other items of Intellectual Property which
are material to the business or operations of the Company, are listed in
SCHEDULE 2.14.
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(c) All material licenses or other agreements under which the Company
is granted rights in Intellectual Property are listed in SCHEDULE 2.14. All said
licenses or other agreements are in full force and effect, there is no material
default by the Company or, to the knowledge of the Management, by any other
party thereto, and, except as set forth on SCHEDULE 2.14, all of the rights of
the Company thereunder are freely assignable. To the knowledge of the
Management, the licensors under said licenses and other agreements have and had
all requisite power and authority to grant the rights purported to be conferred
thereby. True and complete copies of all such licenses or other agreements, and
any amendments thereto, have been provided or made available to Buyer.
(d) All licenses or other agreements under which the Company has
granted rights to others in Intellectual Property owned or licensed by the
Company are listed in SCHEDULE 2.14. All of said licenses or other agreements
are in full force and effect, there is no material default by the Company or, to
the knowledge of the Management, any other party thereto, and, except as set
forth on SCHEDULE 2.14, all of the rights of Company thereunder are freely
assignable. True and complete copies of all such licenses or other agreements,
and any amendments thereto, have been provided or made available to Buyer.
(e) The Company has required all professional and technical employees
and other employees having access to valuable non-public information of Company,
to execute agreements under which such employees are required to convey to the
Company ownership of all inventions and developments conceived or created by
them in the course of their employment and to maintain the confidentiality of
all such information of Company. The Company has not made any such information
available to any person other than employees of Company except pursuant to
written agreements requiring the recipients to maintain the confidentiality of
such information and appropriately restricting the use thereof. The Management
has no knowledge of any infringement by others of any Intellectual Property
rights of the Company.
(f) To the knowledge of the Management, the present and contemplated
business, activities and products of the Company do not infringe upon any
Intellectual Property of any other person. No proceeding charging the Company
with infringement of any adversely held patent, copyrights, trade secret,
trademark or other proprietary right has been filed or, to the knowledge of the
Management, is threatened to be filed. The Company is not making unauthorized
use of any confidential information or trade secrets of any person, including
without limitation, any former employer of any past or present employee of
Company. Except as set forth in SCHEDULE 2.14, neither the Company nor, to the
knowledge of the Management, any of its employees have any agreements or
arrangements with any persons other than the Company related to confidential
information or trade secrets of such persons or restricting any such employee's
ability to engage in business activities relating to the business of the
Company. The activities of its employees on behalf of the Company do not violate
any such agreements or arrangements known to the Company.
2.15 CONTRACTS. Except for contracts, commitments, plans, agreements and
licenses
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described in SCHEDULE 2.15 (true and complete copies of which have been
delivered or made available to Buyer), the Company is not a party to or subject
to:
(a) any plan or contract providing for bonuses, pensions, options,
stock purchases, deferred compensation, retirement payments, profit sharing,
collective bargaining or the like, or any contract or agreement with any labor
union;
(b) any employment contract or contract for services which requires
the payment of more than $50,000 annually or which is not terminable within 30
days by the Company without liability for any penalty or severance payment;
(c) any contract or agreement for the purchase of any commodity,
material or equipment except purchase orders in the ordinary course for less
than $50,000 each;
(d) any other contracts or agreements creating any obligations of the
Company of $50,000 or more with respect to any such contract or agreement not
specifically disclosed elsewhere under this Agreement;
(e) any contract or agreement providing for the
purchase of all or substantially all of its requirements of a particular product
from a supplier;
(f) any contract or agreement involving more than $50,000 which by
its terms does not terminate or is not terminable without penalty by the Company
or its successors within one year after the date hereof;
(g) any contract or agreement for the sale or lease of its products
not made in the ordinary course of business;
(h) any contract with any sales agent or distributor of products of
the Company;
(i) any contract containing covenants limiting the freedom of the
Company to compete in any line of business or with any person or entity;
(j) any contract or agreement for the purchase of any fixed asset for
a price in excess of $100,000 whether or not such purchase is in the ordinary
course of business;
(k) any material license agreement (as licensor or licensee);
(l) any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for the borrowing of money;
(m) any contract or agreement with any officer, employee, director or
stockholder of the Company (other than the Company's standard Confidentiality
and Invention
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Assignment Agreements) or with any persons or organizations controlled by or
affiliated with any of them; or
(n) any contract or subcontract involving the sale of goods or
services to the United States or any foreign government.
Except as set forth in SCHEDULE 2.15, the Company is not in default under
any such contracts, commitments, plans, agreements or licenses described in said
Schedule and the Management has no knowledge of conditions or facts which with
notice or passage of time, or both, would constitute a default; provided,
however, that from time to time the milestones set forth in the development
agreements listed on SCHEDULE 2.15 hereto are not met in the ordinary course but
there are no threatened claims, other than have been disclosed.
2.16 LITIGATION. SCHEDULE 2.16 hereto lists all currently pending
litigation and governmental or administrative proceedings or investigations to
which the Company is a party. Except for matters described in SCHEDULE 2.16,
there is no litigation or governmental or administrative proceeding or
investigation pending or, to the knowledge of the Management, threatened against
the Company or its affiliates which may have any material adverse effect on the
properties, assets, prospects, financial condition or business of the Company or
which would prevent or hinder the consummation of the transactions contemplated
by this Agreement. With respect to each matter set forth therein, SCHEDULE 2.16
sets forth a description of the matter, the forum (if any) in which it is being
conducted, the parties thereto and the type and amount of relief sought.
2.17 COMPLIANCE WITH LAWS. Except as set forth in SCHEDULE 2.17 hereto, the
Company is in compliance in all material respects with all applicable statutes,
ordinances, orders, judgements, decrees, rules and regulations promulgated by
any federal, state, municipal entity, agency, court or other governmental
authority which apply to the Company or to the conduct of its business, and the
Company has not received notice of a violation or alleged violation of any such
statute, ordinance, order, rule or regulation.
2.18 INSURANCE. The Company is insured to the extent disclosed in SCHEDULE
2.18 attached hereto and all such insurance policies and arrangements are
disclosed in said Schedule. Said insurance policies and arrangements are in full
force and effect, all premiums with respect thereto are currently paid, and the
Company is in compliance in all material respects with the terms thereof.
2.19 WARRANTY OR OTHER CLAIMS. There are no asserted or, to the knowledge
of the Management, threatened product liability, warranty or other similar
claims, or any facts upon which a material claim of such nature could be based,
against the Company for products or services which are defective or fail to meet
any product or service warranties except as disclosed in SCHEDULE 2.19 hereto.
Other than as set forth on SCHEDULE 2.19, no claim has been asserted against the
Company for renegotiation or price redetermination of any business transaction,
and, to the knowledge of the Management, there are no facts upon which any such
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claim could be based.
2.20 POWERS OF ATTORNEY. Except as set forth in SCHEDULE 2.20, neither the
Company, any Principal Stockholder or Xxxxxx Xxxxx has granted any outstanding
power of attorney.
2.21 FINDER'S FEE. Except for the fee payable by the Company to Sutro &
Company, the Company has not incurred or become liable for any broker's
commission or finder's fee relating to or in connection with the transactions
contemplated by this Agreement.
2.22 PERMITS; BURDENSOME JUDGMENTS, ETC. SCHEDULE 2.22 lists all material
permits, registrations, licenses, franchises, certifications and other approvals
(collectively, the "Approvals") required from federal, state or local
authorities in order for the Company to conduct its business. The Company has
obtained all such Approvals, which are valid and in full force and effect, and
is operating in compliance therewith. Such Approvals include, but are not
limited to, those required under federal, state or local statutes, ordinances,
orders, requirements, rules, regulations, or laws pertaining to environmental
protection, public health and safety, worker health and safety or buildings.
Except as disclosed in SCHEDULE 2.22 or in any other Schedule hereto, the
Company is not subject to or bound by any judgment, decree or order which may
materially and adversely affect its business or prospects, its condition,
financial or otherwise, or any of its assets or properties.
2.23 CORPORATE RECORDS; COPIES OF DOCUMENTS. The corporate record books of
the Company accurately record all corporate action taken by its stockholders and
board of directors and committees. The copies of the corporate records of the
Company, as made available to Buyer for review, are true and complete copies of
the originals of such documents. The Company has made available for inspection
and copying by Buyer and its counsel true and correct copies of all documents
referred to in this Section or in the Schedules delivered to Buyer pursuant to
this Agreement.
2.24 TRANSACTIONS WITH INTERESTED PERSONS. Except as set forth in SCHEDULE
2.24 hereto, neither the Company, any Stockholder, officer or director of the
Company or, to the knowledge of the Management, any of their respective spouses
or family members, owns directly or indirectly on an individual or joint basis
any material interest in, or serves as an officer or director or in another
similar capacity of, any competitor or supplier of Company, or any organization
which has a material contract or arrangement with the Company.
2.25 EMPLOYEE BENEFIT PROGRAMS.
(a) SCHEDULE 2.25 lists every Employee Program (as defined below)
that has been maintained (as defined below) by the Company at any time during
the three-year period ending on the Closing date.
(b) Each Employee Program which has ever been maintained by the
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Company and which has at any time been intended to qualify under Section 401(a)
or 501(c)(9) of the Code has received a favorable determination or approval
letter from the Internal Revenue Service ("IRS") regarding its qualification
under such section and has, in fact, been qualified under the applicable section
of the Code from the effective date of such Employee Program through and
including the Closing (or, if earlier, the date that all of such Employee
Program's assets were distributed). To the knowledge of the Management, no event
or omission has occurred which would cause any such Employee Program to lose its
qualification under the applicable Code section.
(c) The Management does not know and has no reason to know, of any
failure of any party to comply in all material respects with any laws applicable
to the Employee Programs that have been maintained by the Company. With respect
to any Employee Program ever maintained by the Company, there has occurred no
"prohibited transaction," as defined in Section 406 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or Section 4975 of the Code,
or breach of any duty under ERISA or other applicable law (including, without
limitation, any health care continuation requirements or any other tax law
requirements, or conditions to favorable tax treatment, applicable to such
plan), which could result, directly or indirectly, in any taxes, penalties or
other liability to the Company, Buyer Sub or Buyer. No litigation, arbitration,
or governmental administrative proceeding (or investigation) or other proceeding
(other than those relating to routine claims for benefits) is pending or
threatened with respect to any such Employee Program except such proceeding that
would not have a material adverse effect on the Company.
(d) Except as disclosed in SCHEDULE 2.25, neither the Company nor any
Affiliate (as defined below) (i) has ever maintained any Employee Program which
has been subject to title IV of ERISA (including, but not limited to, any
Multiemployer Plan (as defined below)) or (ii) has ever provided health care or
any other non-pension benefits to any employees after their employment is
terminated (other than as required by law) or has ever promised to provide such
post-termination benefits.
(e) With respect to each Employee Program maintained by the Company
within the three years preceding the Closing, complete and correct copies of the
following documents (if applicable to such Employee Program) have previously
been delivered or made available to Buyer: (i) all documents embodying or
governing such Employee Program, and any funding medium for the Employee Program
(including, without limitation, trust agreements) as they may have been amended;
(ii) the most recent IRS determination or approval letter with respect to such
Employee Program under Code Sections 401 or 501(c)(9), and any applications for
determination or approval subsequently filed with the IRS; (iii) the three most
recently filed IRS Forms 5500, with all applicable schedules and accountants'
opinions attached thereto; (iv) the summary plan description for such Employee
Program (or other descriptions of such Employee Program provided to employees)
and all modifications thereto; (v) any insurance policy (including any fiduciary
liability insurance policy) related to such Employee Program; (vi) any documents
evidencing any loan to an Employee Program that is a leveraged employee stock
ownership plan; and (vii) all other materials reasonably
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necessary for Buyer to perform any of its responsibilities with respect to any
Employee Program subsequent to the Closing (including, without limitation,
health care continuation requirements).
(f) For purposes of this section:
(i) "Employee Program" means (A) all employee benefit plans
within the meaning of ERISA Section 3(3), including, but not limited to,
multiple employer welfare arrangements (within the meaning of ERISA Section
3(4)), plans to which more than one unaffiliated employer contributes and
employee benefit plans (such as foreign or excess benefit plans) which are
not subject to ERISA; and (B) all stock option plans, bonus or incentive
award plans, severance pay policies or agreements, deferred compensation
agreements, supplemental income arrangements, vacation plans, and all other
employee benefit plans, agreements, and arrangements not described in (A)
above. In the case of an Employee Program funded through an organization
described in Code Section 501(c)(9), each reference to such Employee
Program shall include a reference to such organization.
(ii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides (or has promised to provide) benefits
under such Employee Program, or has any obligation (by agreement or under
applicable law) to contribute to or provide benefits under such Employee
Program, or if such Employee Program provides benefits to or otherwise
covers employees of such entity, or their spouses, dependents, or
beneficiaries.
(iii)An entity is an "Affiliate" of the Company if it would have
ever been considered a single employer with the Company under ERISA Section
4001(b) or part of the same "controlled group" as the Company for purposes
of ERISA Section 302(d)(8)(C).
(iv) "Multiemployer Plan" means a (pension or non-pension)
employee benefit plan to which more than one employer contributes and which
is maintained pursuant to one or more collective bargaining agreements.
2.26 ENVIRONMENTAL MATTERS.
(a) Except as set forth in SCHEDULE 2.26 hereto, (i) the Company has
not ever generated, transported, used, stored, treated, disposed of, or managed
any Hazardous Waste (as defined below); (ii) no Hazardous Material (as defined
below) has ever been or is threatened to be spilled, released, or disposed of by
the Company or, to the knowledge of the Management, by any other party at any
site presently or formerly owned, operated, leased, or used by the Company, or
to the knowledge of the Management, has ever been located in the soil or
groundwater at any such site; (iii) no Hazardous Material has ever been
transported by the Company or, to the knowledge of the Management, by any other
party, from any site
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presently or formerly owned, operated, leased, or used by the Company for
treatment, storage, or disposal at any other place; (iv) the Company does not
presently own, operate, lease, or use, nor has it previously owned, operated,
leased, or used any site on which underground storage tanks are or were located;
and (v) no lien has ever been imposed by any governmental agency on any
property, facility, machinery, or equipment owned, operated, leased, or used by
the Company in connection with the presence of any Hazardous Material.
(b) Except as set forth in SCHEDULE 2.26 hereto, (i) the Company has
no liability under, nor has it ever violated, any Environmental Law (as defined
below); (ii) the Company, any property owned, operated, leased, or used by it,
and any facilities and operations thereon, are presently in compliance, in all
material respects, with all applicable Environmental Laws; (iii) the Company has
not ever entered into or been subject to any judgment, consent decree,
compliance order, or administrative order with respect to any environmental or
health and safety matter or received any notice, demand letter or administrative
inquiry with respect to any environmental or health and safety matter or the
enforcement of any Environmental Law.
(c) Except as set forth in SCHEDULE 2.26 hereto, no site operated,
leased, or used by the Company contains any asbestos or asbestos-containing
material, any polychlorinated biphenyls (PCBs) or equipment containing PCBs, or
any urea formaldehyde foam insulation; PROVIDED, HOWEVER, that the Management
has not made any independent survey (except as set forth in the XXXXX report) or
done any testing to determine if such materials were or are present.
(d) The Company has made available to Buyer copies of all material
documents, records, and information in the possession or control of the Company
concerning any environmental or health and safety matter relevant to the
Company, whether generated by the Company or others, including without
limitation, environmental audits, environmental risk assessments, site
assessments, documentation regarding off-site disposal of Hazardous Materials,
spill control plans, and reports, correspondence, permits, licenses, approvals,
consents, and other authorizations related to environmental or health and safety
matters issued by any governmental agency.
(e) For purposes of this SECTION 2.26, (i) "Hazardous Material" shall
mean and include any hazardous waste, hazardous material, hazardous substance,
petroleum product, oil, toxic substance, pollutant, contaminant, or other
substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; (ii) "Hazardous
Waste" shall mean and include any hazardous waste as defined or regulated under
any Environmental Law; (iii) "Environmental Law" shall mean any environmental or
health and safety-related law, regulation, rule, ordinance, or by-law at the
foreign, federal, state, or local level, whether existing as of the date hereof
or previously enforced; and (iv) "Company" shall mean and include Company and
all other entities for whose conduct the Company is or may be held responsible
under any Environmental Law.
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2.27 LIST OF DIRECTORS AND OFFICERS. SCHEDULE 2.27 hereto contains a true
and complete list of all current directors and officers of the Company. In
addition, SCHEDULE 2.27 hereto contains a list of all managers, employees and
consultants of the Company who, individually, have received or are scheduled to
receive compensation from the Company for the fiscal year ending June 30, 1998.
In each case such Schedule includes the current job title and aggregate annual
compensation of each such individual.
2.28 DISCLOSURE. The representations, warranties and statements of the
Company, the Principal Stockholders and the Management contained in this
Agreement and in the certificates, exhibits and schedules delivered by the
Company pursuant to this Agreement to Buyer do not contain any untrue statement
of a material fact, and, when taken together, do not omit to state a material
fact required to be stated therein or necessary in order to make such
representations, warranties or statements not misleading in light of the
circumstances under which they were made.
2.29 NON-FOREIGN STATUS. The Company is not a "foreign person" within the
meaning of Section 1445 of the Code and Treasury Regulations Section 1.1445-2.
2.30 BACKLOG. As of the date indicated in SCHEDULE 2.30, the Company has
reflected in its books and records purchase orders for the sale or lease of
products or services, for which revenues have not been recognized by the
Company, as set forth in SCHEDULE 2.30.
2.31 EMPLOYEES; LABOR MATTERS. The Company employs a total of approximately
52 full-time employees and no part-time employees and generally enjoys good
employer-employee relationships taken as a whole. The Company is not delinquent
in payments to any of its employees for any wages, salaries, commissions,
bonuses or other direct compensation for any services performed for it to the
date hereof or amounts required to be reimbursed to such employees. Upon
termination of the employment of any of said employees, neither the Company nor
Buyer will by reason of the transactions contemplated under this Agreement or
anything done prior to the Closing be liable to any of said employees for
so-called "severance pay" or any other payments (except for accrued benefits),
except as set forth in SCHEDULE 2.31. The Company has no policy, practice, plan
or program of paying severance pay or any form of severance compensation in
connection with the termination of employment, except as set forth in said
Schedule. Except as disclosed in SCHEDULE 2.26, the Company is in compliance in
all material respects with all applicable laws and regulations respecting labor,
employment, fair employment practices, work place safety and health, terms and
conditions of employment, and wages and hours. There are no charges of
employment discrimination or unfair labor practices, nor are there any strikes,
slowdowns, stoppages of work, or any other concerted interference with normal
operations which are existing, pending or, to the knowledge of the Management,
threatened against or involving the Company. There is no active campaign for
unionization targeting the employees of the Company. There are no grievances,
complaints or charges that have been filed against the Company under any formal
dispute resolution procedure (including, but not limited to, any proceedings
under any dispute resolution procedure under any collective bargaining
agreement) that might have an adverse effect on the
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Company or the conduct of its business, and there is no arbitration or similar
proceeding pending and no claim therefor has been asserted. No collective
bargaining agreement is in effect or is currently being or is about to be
negotiated by the Company. The Company has not received any actual notice
indicating that any of its employment policies or practices is currently being
audited or investigated by any federal, state or local government agency. The
Company is, and at all times since November 6, 1986 has been, in compliance with
the requirements of the Immigration Reform Control Act of 1986.
2.32 CUSTOMERS, DISTRIBUTORS AND SUPPLIERS. SCHEDULE 2.32(a) sets forth any
customer, sales representative or distributor (whether pursuant to a commission,
royalty or other arrangement) which accounts for more than 5% of the sales of
the Company from July 1, 1997 through June 9, 1998 (collectively, the "Customers
and Distributors"). SCHEDULE 2.32(b) lists all of the suppliers of the Company
to whom the Company has made payments aggregating $100,000 or more from November
1, 1997 through June 9, 1998, to date, showing, with respect to each, the name,
address and dollar volume involved (the "Suppliers"). To the knowledge of the
Management, except as set forth on SCHEDULE 2.32, the relationships of the
Company with its Customers, Distributors and Suppliers are good commercial
working relationships. Except as set forth on SCHEDULE 2.32, no Customer,
Distributor or Supplier has canceled, materially modified, or otherwise
terminated its relationship with the Company, or has during the last twelve
months decreased materially its services, supplies or materials to the Company
or its usage or purchase of the services or products of the Company, nor to the
knowledge of the Management, does any Customer, Distributor or Supplier have any
plan or intention to do any of the foregoing.
2.33 TRANSFER OF SHARES. No holder of stock of the Company has at any time
transferred any of such stock to any employee of the Company, which transfer
constituted or could be viewed as compensation for services rendered to the
Company by said employee.
2.34 STOCK REPURCHASE. Except as set forth on SCHEDULE 2.34, the Company
has not redeemed or repurchased any of its capital stock.
SECT65535ON 3. INTENTIONALLY OMITTED.
SECT65535ON 4. REPRESENTATIONS AND WARRANTIES OF BUYER.
4.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement to
the Company, the Principal Stockholders and Xxxxxx Xxxxx to enter into this
Agreement and consummate the transactions contemplated hereby, Buyer hereby
makes the representations and warranties to the Company, the Principal
Stockholders and Xxxxxx Xxxxx contained in this Section 4.
4.2 ORGANIZATION OF BUYER AND BUYER SUB. Buyer is a corporation duly
organized,
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validly existing and in good standing under the laws of Massachusetts
and Buyer Sub is a corporation duly organized, validly existing and in good
standing under the laws of California, and each has full corporate power to own
or lease its properties and to conduct its business in the manner and in the
places where such properties are owned or leased or such business is conducted
by it.
4.3 AUTHORITY OF BUYER AND BUYER SUB. Buyer and Buyer Sub each has full
right, authority and power to enter into this Agreement and each agreement,
document and instrument to be executed and delivered by Buyer and Buyer Sub
pursuant to this Agreement and to carry out the transactions contemplated
hereby. The execution, delivery and performance by Buyer and Buyer Sub of this
Agreement and each such other agreement, document and instrument have been duly
authorized by all necessary corporate action of Buyer and Buyer Sub and no other
action on the part of Buyer or Buyer Sub is required in connection therewith.
This Agreement and each other agreement, document and instrument executed and
delivered by Buyer and Buyer Sub pursuant to this Agreement constitute, or when
executed and delivered will constitute, valid and binding obligations of Buyer
and Buyer Sub enforceable in accordance with their terms. The execution,
delivery and performance by Buyer and Buyer Sub of this Agreement each such
agreement, document and instrument:
(i) does not and will not violate any provision of the Articles
of Organization (or other charter document) or by-laws of Buyer or Buyer
Sub;
(ii) does not and will not violate any laws of the United States
or of any state or any other jurisdiction applicable to Buyer or Buyer Sub
or require Buyer or Buyer Sub to obtain any approval, consent or waiver of,
or make any filing with, any person or entity (governmental or otherwise)
which has not been obtained or made; and
(iii) does not and will not result in a breach of, constitute a
default under, accelerate any obligation under, or give rise to a right of
termination of any indenture, loan or credit agreement, or other agreement
mortgage, lease, permit, order, judgment or decree to which Buyer or Buyer
Sub is a party and which is material to the business and financial
condition of Buyer and Buyer Sub and its parent and affiliated
organizations on a consolidated basis.
4.4 LITIGATION. There is no litigation pending or, to its knowledge,
threatened against Buyer or Buyer Sub which would prevent or hinder the
consummation of the transactions contemplated by this Agreement.
4.5 FINDER'S FEE. Except for the fee payable by Buyer to Xxxxxxx &
Company, neither Buyer nor Buyer Sub has incurred or become liable for any
broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement.
4.6 OPTION SHARES. The shares of Buyer's Common Stock, par value $.01 per
share, to be issued upon the exercise of the options to purchase Buyer's Common
Stock to be
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issued pursuant to Section 1.9 hereof, have been reserved for issuance and when
issued in accordance with their terms will be validly issued, fully paid and
non-assessable.
SECT65535ON 5. CONDITIONS.
5.1 CONDITIONS TO THE OBLIGATIONS OF BUYER AND BUYER SUB. The obligation
of Buyer and Buyer Sub to consummate this Agreement and the transactions
contemplated hereby are subject to the fulfillment, on or prior to the Agreement
Date, of the following conditions precedent:
(a) REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the
representations and warranties of the Company, the Management and the Principal
Stockholders contained in this Agreement shall be true and correct as of the
Agreement Date and the Merger Effective Date; and the Company, the Management
and each of the Principal Stockholders shall, on or before the Agreement Date,
have performed all of their obligations hereunder which by the terms hereof are
to be performed on or before the Closing.
(b) APPROVAL OF BUYER'S COUNSEL. All actions, proceedings,
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters contemplated by
this Agreement shall have been approved by Xxxxxxx, Procter & Xxxx LLP as
counsel for Buyer, and such counsel shall have received on behalf of Buyer such
other certificates, opinions, and documents in form satisfactory to such
counsel, as Buyer may reasonably require from the Company, the Management and
the Principal Stockholders to evidence compliance with the terms and conditions
hereof as of the Agreement Date and the correctness as of the Agreement Date of
the representations and warranties of the Principal Stockholders, Management and
the Company.
(c) OPINION OF COUNSEL. On the Agreement Date, Buyer shall have
received from The Xxxxx Firm, counsel for the Company and Xxxxxx Xxxxx, an
opinion as of said date, as to the matters set forth in EXHIBIT E hereto and as
otherwise reasonably satisfactory to Buyer.
(d) NO LITIGATION. There shall have been no determination by Buyer,
acting in good faith, that the consummation of the transactions contemplated by
this Agreement has become inadvisable or impracticable by reason of the
institution or threat by any person or any federal, state or other governmental
authority of litigation, proceedings or other action against Buyer, the Company
or Stockholders or any material adverse change in the laws or regulations
applicable to the Company.
(e) CONSENTS. Except for filings required pursuant to this Agreement,
the Company, Management or the Principal Stockholders shall have made, prior to
the Agreement Date, all filings with and notifications of governmental
authorities, regulatory agencies and other entities required to be made by the
Company or the Stockholders in connection with the
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execution and delivery of this Agreement, the performance of the transactions
contemplated hereby and the continued operation of the business of the Company
by Buyer subsequent to the Closing; and the Company, the Management, the
Principal Stockholders and Buyer shall have received, prior to the Agreement
Date, all authorizations, waivers, consents and permits, in form and substance
reasonably satisfactory to Buyer, from all third parties, including, without
limitation, applicable governmental authorities, regulatory agencies, lessors,
lenders and contract parties, required to permit the continuation of the
business of the Company and the consummation of the transactions contemplated by
this Agreement, and to avoid a breach, default, termination, acceleration or
modification of any material indenture, loan or credit agreement or any other
material agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award as a result of, or in connection with, the execution and
performance of this Agreement.
(f) EMPLOYMENT AND NON-COMPETITION AGREEMENTS. On or prior to the
Agreement Date, Xxxxxx Xxxxx shall have executed and delivered to Buyer an
Employment Agreement and a Non-Competition Agreement, to be effective as of the
Merger Effective Date, in substantially the form of EXHIBIT F and EXHIBIT G,
respectively.
(g) EMPLOYMENT AND NON-COMPETITION AGREEMENTS. On or prior to the
Agreement Date, Xxxx Xxxxx shall have executed and delivered to Buyer an
Employment Agreement and a Non-Competition Agreement, to be effective as of the
Merger Effective Date, in substantially the form of EXHIBIT H and EXHIBIT I,
respectively.
(h) OPTIONS. On or prior to the Agreement Date, the Company shall
provide evidence reasonably satisfactory to Buyer that all options issued and
outstanding under the Stock Option Plan for Key Employees of the Company (the
"Option Plan") have been either accelerated or canceled in accordance with their
terms.
(i) ACQUISITION AUDIT. On or prior to the Agreement Date, Buyer shall
have received a satisfactory report from Xxxxxx Xxxxxxxx LLP with respect to the
physical inventory of the Company to be performed by the Company and observed by
Xxxxxx Xxxxxxxx LLP as of the date hereof.
(j) BUSINESS RELATIONS. On or prior to the Agreement Date, Buyer
shall be reasonably satisfied with the personal interviews with the Customers,
Distributors and Suppliers.
(k) TERMINATION OF UCC'S. On or prior to the Agreement Date, all
financing statements (as such term is defined under the California Uniform
Commercial Code) filed against the Company shall have been terminated, except as
to the equipment leases set forth in SCHEDULE 2.6(b).
(l) TERMINATION OF SECURITY AGREEMENTS. On or prior to the Agreement
Date (but subject to the consummation of the Merger) all security agreements
identified on SCHEDULE
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2.6(b) or in the Base Balance Sheet (including, without limitation, (i) the
Security Agreement made as of February 14, 1996 by and between the Company and
The Xxxxx Firm, (ii) the Security Agreement made as of February 5, 1996 by and
between the Company and Xxxxxxx X. Xxxxxxxx and (iii) the Security Agreement
made as of February 5, 1996 by and between the Company and Xxxxxx X. Xxxxx and
Xxxx Xxxxx) shall have been terminated.
(m) TERMINATION OF INDEMNIFICATION AGREEMENT. On or prior to the
Agreement Date, (but subject to the consummation of the Merger), the
Indemnification Agreement made as of February 5, 1996 by and between the Company
and Xxxxxx X. Xxxxx and Xxxx Xxxxx shall have been terminated.
(n) TERMINATION OF TAX LIEN. On or prior to the Agreement Date, the
tax lien in favor of the Internal Revenue Service on the assets of the Company
in the amount of approximately $95,000 shall have been released and discharged.
(o) PAYMENT OF PROMISSORY NOTE. The unsecured promissory note issued
on February 1, 1997 by Xxxxxx X. Xxxxx to the Company in the principal amount of
up to $1,000,000, payable on January 31, 2007, shall have been paid in full
immediately prior to the Closing Date or arrangements reasonably satisfactory to
Buyer shall have been made for payment of such note to be made in connection
with or immediately following the Closing.
(p) STOCKHOLDER APPROVAL. Prior to the Agreement Date, the Company
shall have either (i) duly called a meeting of the Stockholders at which no more
than one stockholder, (which stockholder shall not be any of the Principal
Stockholders, Xxxxxxx Xxxxx, Xxxxx Xxxxxx or Xxxx Xxxxxxxx), failed to vote in
favor of the Merger (either by voting against the Merger, abstaining or not
attending such meeting) or (ii) obtained the unanimous written consent of the
Stockholders to the Merger.
(q) TAX GOOD STANDING CERTIFICATE. Prior to the
Agreement Date, the Company shall have obtained from the
California Franchise Tax Board a Tax Good Standing Certificate.
(r) RELEASE. Prior to the Agreement Date, any employee of the Company
who receives options to purchase the common stock, par value $.01 per share, of
Buyer pursuant to Section 1.10 shall execute a release of all claims against the
Company and the Principal Stockholders in a form reasonably satisfactory to
Buyer.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY, THE PRINCIPAL STOCKHOLDERS
AND XXXXXX XXXXX. The obligation of the Company, the Principal Stockholders and
Xxxxxx Xxxxx to consummate this Agreement and the transactions contemplated
hereby is subject to the fulfillment, on or prior to the Agreement Date, of the
following conditions precedent:
(a) REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the
representations and warranties of Buyer and Buyer Sub contained in this
Agreement shall be true and correct
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as of the Agreement Date and the Merger Effective Date; and Buyer and Buyer Sub
shall, on or before the Agreement Date, have performed all of their obligations
hereunder which by the terms hereof are to be performed on or before the Closing
(b) APPROVAL OF THE COMPANY'S COUNSEL. All actions, proceedings,
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters contemplated by
this agreement shall have been approved by The Xxxxx Firm as counsel for the
Company and Xxxxxx Xxxxx, and such counsel shall have received on behalf of the
Company and Xxxxxx Xxxxx such other certificates, opinions and documents in form
satisfactory to such counsel as the Company may reasonably require from Buyer or
Buyer Sub to evidence compliance with the terms and conditions hereof as of the
Agreement Date and the correctness as of the Agreement Date of the
representations and warranties of Buyer and Buyer Sub.
(c) NO LITIGATION. There shall have been no determination by the
Company, acting in good faith, that the consummation of the transactions
contemplated by this Agreement has become inadvisable or impracticable by reason
of the institution or threat by any person or any federal, state or other
governmental authority of material litigation, proceedings or other action
against Buyer, Buyer Sub, the Company, or any Stockholder.
(d) EMPLOYMENT AND NON-COMPETITION AGREEMENTS. On or prior to the
Agreement Date, Buyer shall have executed and delivered to Xxxxxx Xxxxx an
Employment Agreement and a Non-Competition Agreement, effective as of the Merger
Effective Date, in substantially the form of EXHIBIT F and EXHIBIT G,
respectively.
(e) EMPLOYMENT AND NON-COMPETITION AGREEMENTS. On or prior to the
Agreement Date, Buyer shall have executed and delivered to Xxxx Xxxxx an
Employment Agreement and a Non-Competition Agreement, effective as of the Merger
Effective Date, in substantially the form of EXHIBIT H and EXHIBIT I,
respectively.
(f) OPTIONS. Prior to the Agreement Date, the issuance of all options
contemplated by Section 1.10 shall have been approved by Buyer and Buyer shall
have reserved for issuance shares of Buyer's common stock which may be issued
upon the exercise of such options.
(g) OPINION OF COUNSEL. On the Agreement Date, the Company shall have
received from Xxxx X. Xxxxxxxxx, Vice President and Corporate Counsel of Buyer,
an opinion as of said date, as to the matters set forth in EXHIBIT J hereto and
as otherwise reasonably satisfactory to the Company.
(h) TAX CLEARANCE CERTIFICATE. On the Agreement Date, Buyer Sub
shall have obtained from the California Franchise Tax Board a Tax Clearance
Certificate.
SECT65535ON 6. TERMINATION OF AGREEMENT.
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6.1 TERMINATION. Subject to Section 6.2, this Agreement may be terminated
only by mutual written consent of all of the parties to this Agreement.
6.2 FAILURE TO MERGE. In the event (i) the Secretary of State of
California fails to accept for recording or filing the Agreement of Merger filed
by the parties in connection with the Merger on or prior to July 17, 1998, (ii)
the Secretary of State of California requires substantial changes to such
Agreement of Merger before such Agreement of Merger will be accepted for
recording or filing and (iii) Buyer determines in good faith that such changes
are unreasonable and will require material changes to the terms of this
Agreement and Buyer notifies the Company and the Principal Stockholders of such
determination, then this Agreement shall terminate immediately. The parties will
use commercially reasonable effort to promptly address changes required by the
California Secretary of State, including filing revised agreements of merger and
officers certificates, unless the changes are as described in clause (ii) above.
6.3 EFFECT OF TERMINATION. All obligations of the parties hereunder shall
cease upon any termination pursuant to this Section 6, provided, however, that
(i) the provisions of this Section 6, Section 9.1 and Section 9.9 hereof shall
survive any such termination of this Agreement and (ii) nothing herein shall
relieve any party from any liability for a material error or omission in any of
its representations or warranties contained herein or a material failure to
comply with any of its conditions or agreements contained herein.
SECTION 7. RIGHTS AND OBLIGATIONS SUBSEQUENT TO AGREEMENT DATE AND CLOSING.
7.1 CONDUCT OF BUSINESS. From and after the Agreement Date until the
Closing Date, the Company agrees that it will conduct its business in the
ordinary course and consistent with past practices and that the Board of
Directors of the Company will take no action without the prior approval of
Buyer.
7.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
representations, warranties, agreements and obligations herein or in any
schedule, exhibit, certificate or financial statement delivered by any party to
the other party incident to the transactions contemplated hereby are material,
shall be deemed to have been relied upon by the other party and shall survive
the Closing regardless of any investigation and shall not merge in the
performance of any obligation by either party hereto; PROVIDED, HOWEVER, that
such representations and warranties shall expire on the same dates as and to the
extent that the rights to indemnification with respect thereto under Section 8
shall expire. The sole remedy for a breach of such representation and warranty
under the Agreement shall be a claim for indemnification pursuant to Section 8.
7.3 REPAYMENT OF PROMISSORY NOTES. Buyer will pay and discharge within 45
days
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following the Closing the following promissory notes: Promissory Notes,
each dated April 1, 1996, payable to the order of Xxxxx Willing in the original
principal amounts of $250,000 and $139,778.
7.4 BENEFITS TO COMPANY EMPLOYEES. Within a reasonable time following the
Closing, employees of the Company shall be entitled to comparable benefits and
remuneration as if such employees were, following the Closing, employed directly
by Buyer on a basis consistent with the title and responsibility of such
employee, taking into account the local markets. In addition, each such employee
shall receive service credit for the time such employee was employed by the
Company prior to the Closing.
7.5 TAX RETURNS.
(a) Following the Closing, Buyer and Xxxxxx Xxxxx shall have joint
control over the preparation and filing of tax returns for the Surviving
Corporation for all pre-closing periods, which returns shall be filed in good
faith and in a timely manner. Such tax returns shall be prepared by a big four
accounting firm mutually selected by Buyer and Xxxxxx Xxxxx and any legal
matters or tax disputes arising in connection with such tax returns shall be
handled by a law firm to be mutually selected by Buyer and Xxxxxx Xxxxx.
(b) Buyer agrees that it shall not make any election with respect to
taxes or amend any previously filed tax return of the Company without first
discussing such election or amendment with Xxxxxx Xxxxx; PROVIDED, HOWEVER, that
this Section 7.4(b) shall not prohibit the Company from making an election with
respect to taxes or filing any amendment to a previously filed tax return if
such election or amendment is (i) required by the Code and the rules promulgated
thereunder or (ii) at the direction of the Internal Revenue Service in
connection with an audit of Buyer or the Surviving Corporation.
(c) Each Principal Stockholder agrees that he shall not make any
election with respect to taxes or amend any previously filed tax return of such
Principal Stockholder without first discussing such election or amendment with
Buyer if such election or amendment shall adversely affect the tax reporting of
Buyer or the Surviving Corporation; PROVIDED, HOWEVER, that this Section 7.4(c)
shall not prohibit a Principal Stockholder from making an election with respect
to taxes or filing any amendment to a previously filed tax return if such
election or amendment is (i) required by the Code and the rules promulgated
thereunder or (ii) at the direction of the Internal Revenue Service in
connection with an audit of such Principal Stockholder.
7.6 FURTHER ASSURANCES. The parties agree that from time to time they
shall execute and deliver such further documents, and perform such further acts,
as may be necessary to comply with the terms of this Agreement.
SECT65535ON 8. INDEMNIFICATION.
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8.1 INDEMNIFICATION BY THE XXXXX ENTITIES. The Xxxxx Entities jointly and
severally agree subsequent to the Closing to indemnify and hold the Company,
Buyer, Buyer Sub and their respective subsidiaries and affiliates and persons
serving as officers, directors, partners or employees thereof (individually a
"Buyer Indemnified Party" and collectively the "Buyer Indemnified Parties")
harmless from and against any damages, liabilities, losses, taxes, fines,
penalties, costs, and expenses (including, without limitation, reasonable fees
of counsel) of any kind or nature whatsoever (whether or not arising out of
third-party claims and including all amounts paid in investigation, defense or
settlement of the foregoing, subject to the provisions below) which may be
sustained or suffered by any of them arising out of or based upon any of the
following matters:
(a) fraud, intentional misrepresentation or a deliberate or wilful
breach by the Company, the Management or any Principal Stockholder of any of
their representations or warranties under this Agreement or in any certificate,
schedule or exhibit delivered pursuant hereto (collectively, "Fraud Claims");
(b) any breach of the representations and warranties (other than the
representation and warranty of Xxxx Xxxxx with respect to the Shares owned by
him in Section 2.3(b)) set forth in Section 2.3(a) and 2.3(b) (collectively,
"Capitalization Claims");
(c) any breach of the representations and warranties set forth in
Section 2.8 hereof (collectively, "Tax Claims");
(d) any breach of the representations and warranties set forth in
Section 2.26 hereof (collectively, "Environmental Claims"); and
(e) other than Fraud Claims, Capitalization Claims, Tax Claims, and
Environmental Claims, any other breach of any representation or warranty of the
Company or the Management under this Agreement or in any certificate, schedule
or exhibit delivered pursuant hereto, or by reason of any claim, action or
proceeding asserted or instituted growing out of any matter or thing
constituting a breach of such representations or warranties ("General Claims").
8.2 LIMITATIONS ON INDEMNIFICATION BY THE XXXXX ENTITIES. Notwithstanding
the foregoing, the right of Buyer Indemnified Parties to indemnification under
Section 8.1 shall be subject to the following provisions:
(a) No indemnification shall be payable to any Buyer Indemnified
Party with respect to Environmental Claims and General Claims, unless the total
of all claims for indemnification pursuant to such claims shall exceed $237,000
in the aggregate (the "Deductible"), and the only amount payable by the Xxxxx
Entities pursuant to such claims is the amount, if any, over the Deductible;
(b) No indemnification shall be payable to a Buyer Indemnified Party
with
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respect to General Claims made after the date that is eighteen (18) months
following the Closing Date (the "General Claims Indemnification Cut-Off Date");
(c) No indemnification shall be payable to a Buyer Indemnified Party
with respect to Tax Claims or Environmental Claims made after the date that the
statute of limitations applicable to such claim shall have expired;
(d) The aggregate amount to be payable by the Xxxxx Entities to all
Buyer Indemnified Parties with respect to Environmental Claims and General
Claims shall be limited to $4,500,000 in the aggregate; and
(e) The aggregate amount to be payable by the Xxxxx Entities to all
Buyer Indemnified Parties with respect to Capitalization Claims and Tax Claims
shall be limited to the aggregate amount received by the Xxxxx Entities and the
Saint Xxxx School pursuant to Section 1.2 hereof, less amounts paid pursuant to
Section 8.2(d).
8.3 INDEMNIFICATION BY BUYER. Buyer agrees to indemnify and hold the
Stockholders (individually a "Stockholder Indemnified Party" and collectively
the "Stockholder Indemnified Parties") harmless from and against any damages,
liabilities, losses and expenses (including, without limitation, reasonable fees
of counsel) of any kind or nature whatsoever (whether or not arising out of
third-party claims and including all amounts paid in investigation, defense or
settlement of the foregoing) which may be sustained or suffered by any of them
arising out of or based upon any breach of any representation or warranty made
by Buyer in this Agreement or in any certificate delivered by Buyer hereunder,
or by reason of any claim, action or proceeding asserted or instituted growing
out of any matter or thing constituting such a breach.
8.4 LIMITATION ON INDEMNIFICATION BY BUYER. Notwithstanding the foregoing,
the right of Stockholder Indemnified Parties to indemnification under
Section 8.3 shall be subject to the following provisions:
(a) No indemnification pursuant to Section 8.3 shall be payable to
the Stockholders, unless the total of all claims for indemnification pursuant to
Section 8.3 shall exceed $100,000 in the aggregate, whereupon the full amount of
such claims shall be recoverable in accordance with the terms hereof;
(b) No indemnification shall be payable to the Stockholders with
respect to claims asserted pursuant to Section 8.3 above after the General
Claims Indemnification Cut-Off Date.
8.5 INDEMNIFICATION BY XXXX XXXXX. Xxxxx Xxxxx agrees to indemnify and
hold the Buyer Indemnified Parties harmless from and against any damages,
liabilities, losses, taxes, fines, penalties, costs and expenses (including,
without limitation, reasonable fees of counsel) of any kind or nature whatsoever
(whether or not arising out of third-party claims and including all amounts paid
in investigation, defense or settlement of the foregoing, subject to
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the provisions below) which may be sustained or suffered by any of them arising
out of or based upon any breach of the representation and warranty with respect
to the shares owned by him set forth in Section 2.3(b). The aggregate amount to
be payable by Xxxx Xxxxx to all Buyer Indemnified Parties pursuant to this
Section 8.5 shall be limited to the amount received by Xxxx Xxxxx pursuant to
Section 1.2 hereof.
8.6 NOTICE; DEFENSE OF CLAIMS. An indemnified party may make claims for
indemnification hereunder by giving written notice thereof to the indemnifying
party within the period in which indemnification claims can be made hereunder.
Following a claim for indemnification (except with respect to a claim asserted
by a third party), the parties agree to submit to mediation with respect to such
claim in Boston, Massachusetts with a mediator chosen by the indemnified party
and reasonably acceptable to the indemnifying party; PROVIDED, HOWEVER, that if
no resolution is reached with respect to such claim within 30 days following the
first mediation meeting, the parties are no longer obligated to pursue such
mediation. If indemnification is sought for a claim or liability asserted by a
third party, the indemnified party shall also give written notice thereof to the
indemnifying party promptly after it receives notice of the claim or liability
being asserted, but the failure to do so shall not relieve the indemnifying
party from any liability except to the extent that it is prejudiced by the
failure or delay in giving such notice. Such notice shall summarize the bases
for the claim for indemnification and any claim or liability being asserted by a
third party. Within 30 days after receiving such notice the indemnifying party
shall give written notice to the indemnified party stating whether it disputes
the claim for indemnification and whether it will defend against any third party
claim or liability at its own cost and expense. If the indemnifying party fails
to give notice that it disputes an indemnification claim within 45 days after
receipt of notice thereof, it shall be deemed to have accepted and agreed to the
claim, which shall become immediately due and payable. The indemnifying party
shall be entitled to direct the defense against a third party claim or liability
with counsel selected by it (subject to the consent of the indemnified party,
which consent shall not be unreasonably withheld) as long as the indemnifying
party is conducting a good faith and diligent defense. The indemnified party
shall at all times have the right to fully participate in the defense of a third
party claim or liability at its own expense directly or through counsel;
provided, however, that if the named parties to the action or proceeding include
both the indemnifying party and the indemnified party and the indemnified party
is advised that representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct, the
indemnified party may engage separate counsel at the expense of the indemnifying
party; and provided further that no settlement with respect to such claim shall
be made without the mutual consent of the indemnified and indemnifying party. If
no such notice of intent to dispute and defend a third party claim or liability
is given by the indemnifying party, or if such good faith and diligent defense
is not being or ceases to be conducted by the indemnifying party, the
indemnified party shall have the right, at the expense of the indemnifying
party, to undertake the defense of such claim or liability (with counsel
selected by the indemnified party), and to compromise or settle it, exercising
reasonable business judgment. If the third party claim or liability is one that
by its nature cannot be defended solely by the indemnifying party, then the
indemnified party shall make available such information and assistance as the
indemnifying party may reasonably
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request and shall cooperate with the indemnifying party in such defense, at the
expense of the indemnifying party.
8.7 SATISFACTION OF XXXXX ENTITIES INDEMNIFICATION OBLIGATIONS. In order
to satisfy the indemnification obligations of the Xxxxx Entities, a Buyer
Indemnified Party shall have the right (in addition to collecting directly from
the Xxxxx Entities) to set-off its indemnification claims against any amounts
due to Xxxxxx Xxxxx pursuant to the Non-Competition Agreement by and between
Buyer and Xx. Xxxxx; PROVIDED, HOWEVER, that during the time any such
indemnification claim is pending, any amounts owed by Buyer to Xx. Xxxxx
pursuant to such Non-Competition Agreement shall be paid to an interest bearing
account with an independent escrow agent, selected by Buyer and reasonably
agreed to by Xx. Xxxxx, pursuant to an escrow agreement, the terms of which
shall be mutually agreeable, and Buyer shall have the right to apply such funds
to the satisfaction of such indemnification claim only following the final
adjudication of such claim. Any balance remaining in such escrow account
following the final adjudication and payment of such claim shall be paid to Xx.
Xxxxx.
SECT65535ON 9. MISCELLANEOUS.
9.1 FEES AND EXPENSES.
(a) Subject to Section 9.1(c), each of the parties will bear its own
expenses in connection with the negotiation and the consummation of the
transactions contemplated by this Agreement, and no expenses of the Company, the
Management or the Principal Stockholders relating in any way to the Merger
hereunder and the transactions contemplated hereby (other than in-house Company
costs, such as travel), including without limitation legal, accounting or other
professional expenses of the Company or Stockholder, shall be charged to or paid
by the Company or Buyer.
(b) Subject to Section 9.1(c), the Stockholders will pay all costs
incurred, whether at or subsequent to the Closing, in connection with the
transfer of the Company Shares to Buyer as contemplated by this Agreement,
including without limitation, all transfer taxes and charges applicable to such
transfer.
(c) Notwithstanding anything else herein to the contrary, at the
Closing Buyer will assume the following fees and expenses payable by the Company
or any of the Stockholders: (i) the fees and expenses of Sutro & Company, not to
exceed $100,000 and (ii) the reasonable fees and expenses of The Xxxxx Firm, not
to exceed $150,000 and not to include the fees and expenses relating to any
personal estate or tax planning services performed by The Xxxxx Firm on behalf
of Xxxxxx Xxxxx, Xxxx Xxxxx or the family or an affiliated entity of either of
them.
9.2 GOVERNING LAW. This Agreement shall be construed under and governed by
the internal laws of the Commonwealth of Massachusetts without regard to its
conflict of laws
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provisions.
9.3 NOTICES. Any notice, request, demand or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been
given if delivered or sent by facsimile transmission, upon receipt, or if sent
by registered or certified mail, upon the sooner of the date on which receipt is
acknowledged or the expiration of three days after deposit in United States post
office facilities properly addressed with postage prepaid. All notices to a
party will be sent to the addresses set forth below or to such other address or
person as such party may designate by notice to each other party hereunder:
TO BUYER: CP Clare Corporation
00 Xxxxxx Xxxx Xxxxx
Xxxxxxx, XX 00000-0000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxxx
With a copy to: Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxxx X. Cable
TO COMPANY: c/o Xxxxxx Xxxxx
0 Xxxxxx Xxxx
Xxxxxx Xxxxxx, XX 00000
With a copy to: THE XXXXX FIRM
0000 Xxxxxx Xxxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx
TO XXXXXX XXXXX: Xxxxxx Xxxxx
0 Xxxxxx Xxxx
Xxxxxx Xxxxxx, XX 00000
With a copy to: THE XXXXX FIRM
0000 Xxxxxx Xxxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx
TO XXXX XXXXX: Xxxx Xxxxx
00000 Xxxxx Xxxxxx
00
00
Xxxxxx Xxxxxx, XX 00000
With a copy to: Xxxxxx Xxxxxxx, Esq.
Xxxxx and Xxxxxx LLP
000 Xxxxx Xxxx., Xxx. 0000
Xxxxx Xxxx, XX 00000
Fax: (000) 000-0000
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
9.4 ENTIRE AGREEMENT. This Agreement, including the Schedules and Exhibits
referred to herein and the other writings specifically identified herein or
contemplated hereby, is complete, reflects the entire agreement of the parties
with respect to its subject matter, and supersedes all previous written or oral
negotiations, commitments and writings. No promises, representations,
understandings, warranties and agreements have been made by any of the parties
hereto except as referred to herein or in such Schedules and Exhibits or in such
other writings; and all inducements to the making of this Agreement relied upon
by either party hereto have been expressed herein or in such Schedules or
Exhibits or in such other writings.
9.5 ASSIGNABILITY; BINDING EFFECT. This Agreement shall only be assignable
by Buyer to a corporation or partnership controlling, controlled by or under
common control with Buyer upon written notice to the Company and the
Stockholders. This Agreement may not be assigned by the Stockholders or the
Company without the prior written consent of Buyer. This Agreement shall be
binding upon and enforceable by, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
9.6 CAPTIONS AND GENDER. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter,
as the context may require.
9.7 EXECUTION IN COUNTERPARTS. For the convenience of the parties and to
facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
9.8 AMENDMENTS. This Agreement may not be amended or modified, nor may
compliance with any condition set forth herein be waived, except by a writing
duly and validly executed by each party hereto, or in the case of a waiver, the
party waiving compliance
9.9 PUBLICITY AND DISCLOSURES. No press releases or public disclosure,
either written or oral, of the transactions contemplated by this Agreement,
shall be made by a party to this
34
39
Agreement without the prior knowledge and written consent of Buyer and the
Company, other than as required by law. The parties will agree on a form of
press release to be issued following the close of business on the Agreement
Date.
9.10 CONSENT TO JURISDICTION. Each of the parties hereby consents to
personal jurisdiction, service of process and venue in the federal or state
courts of Massachusetts for any claim, suit or proceeding arising under this
Agreement, or in the case of a third party claim subject to indemnification
hereunder, in the court where such claim is brought and agrees that, with
respect to a claim for indemnification against any Principal Stockholder or the
Xxxxx Entities with respect to a Fraud Claim, Capitalization Claim or Tax Claim,
the federal or state courts of Massachusetts shall be the appropriate venue
(unless, in the case of a third party claim, the parties are unable to change
the venue of such claim to Massachusetts). With respect to all other claims for
indemnification against the Xxxxx Entities, none of the Xxxxx Entities shall be
deemed to have waived its right to assert an argument of forum non conveniens,
or similar argument, with respect to such claim.
9.11 SPECIFIC PERFORMANCE. The parties agree that it would be difficult to
measure damages which might result from a breach of this Agreement and that
money damages would be an inadequate remedy for such a breach. Accordingly, if
there is a breach or proposed breach of any provision of this Agreement, the
non-breaching party shall be entitled, in addition to any other remedies which
it may have, to an injunction or other appropriate equitable relief to restrain
such breach without having to show or prove actual damage to the breaching
party.
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40
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date set forth above by their duly authorized
representatives.
BUYER:
CP CLARE CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxxxx
-------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: Vice President and Chief
Operating Officer
36
41
BUYER SUB:
CLARE MICRONIX INTEGRATED
SYSTEMS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: Vice President
COMPANY:
MICRONIX INTEGRATED SYSTEMS,
INC.
By: /s/ Xxxxxx Xxxxx
--------------------------------------
Name: Xxxxxx Xxxxx
Title: President
PRINCIPAL STOCKHOLDERS:
Xxxxx Family Trust, dated April 30, 1997,
as community property
/s/ Xxxxxx X. Xxxxx
--------------------------------------
Xxxxxx X. Xxxxx, as Trustee
/s/ Xxxx X. Xxxxx
--------------------------------------
Xxxx X. Xxxxx, as Trustee
XXXXX INVESTMENTS, LLC
By: /s/ Xxxxx X. Xxxxxxxxxx
--------------------------------------
Xxxxx X. Xxxxxxxxxx, General Manager
37
42
/s/ XXXX XXXXX
-----------------------------------
Xxxx Xxxxx
/s/ XXXXXX XXXXX
-----------------------------------
Xxxxxx Xxxxx, individually
38
43
LIST OF EXHIBITS AND SCHEDULES
Exhibit A: Charter of Buyer Sub
B: By-laws of Buyer Sub
C: List of Stockholders, Stockholdings and Consideration to be Paid
D: List of options to be granted following the Closing
E. Form of Legal Opinion for Counsel to Company and Xxxxxx Xxxxx
F: Form of Employment Agreement (Xxxxx)
G: Form of Non-Competition Agreement (Xxxxx)
H: Form of Employment Agreement (Xxxxx)
I: Form of Non-Competition Agreement (Xxxxx)
J: Form of Legal Opinion of Corporate Counsel of Buyer
K: Form of Agreement of Merger
Schedule 2.3(a) Voting Agreements, etc.
2.3(c) Options
2.4 Subsidiaries
2.5 Encumbrances
2.6(a) Leased Real Property
2.6(b) Personal Property
2.7 Financial Statements
2.8 Tax Disclosures
2.9 Affiliated Accounts Receivable
2.10 Inventories
2.11 Absence of Changes
2.12 Business Not in the Ordinary Course
2.13 Banking Arrangements
2.14 Intellectual Property
2.15 Contracts, etc.
2.16 Litigation
2.17 Compliance with Laws
2.18 Insurance
2.19 Warranty Claims
2.22 Permits, Burdensome Agreements
2.24 Transactions with Interested Persons
44
2.25 Employee Benefit Programs
2.26 Environmental Matters
2.27 Officers and Directors
2.30 Backlog
2.31 Labor Matters
2.32(a) Customers and Distributors
2.32(b) Suppliers
2.34 Stock Repurchases
45
EXHIBIT C
LIST OF STOCKHOLDERS, STOCKHOLDINGS AND MERGER CONSIDERATION
MERGER
CONSIDERATION
--------------------------------------------------------------------------------
OWNERSHIP CASH
NAME AND ADDRESS OF OF COMPANY AT
STOCKHOLDER SHARES CLOSING
--------------------------------------------------------------------------------
Xxxxxx X. Xxxxx and Xxxx X. Xxxxx or 10,518,000 $11,422,284.95
Successor Trustee(s), as Trustees of ($632,546.56)
the Xxxxx Family Trust, dated ---------------
April 30, 1997, as community property $10,789,738.39
--------------------------------------------------------------------------------
Saint Xxxx School 100,000 $ 108,597.50
--------------------------------------------------------------------------------
Xxxxx Investments, LLC 1,382,000 $ 1,500,817.44
--------------------------------------------------------------------------------
Xxxx Xxxxx 1,433,914 $ 1,557,194.74
--------------------------------------------------------------------------------
Xxxx Xxxxxxxx 383,336 $ 416,293.31
--------------------------------------------------------------------------------
Xxxxx Xxxxxxx 20,000 $ 21,719.50
--------------------------------------------------------------------------------
Xxxxxxx X. Xxxxx 50,000 $ 54,298.75
--------------------------------------------------------------------------------
Xxxxxxx Xxxxxxxx 50,000 $ 54,298.75
--------------------------------------------------------------------------------
Xxxxx X. Xxxxxx 20,000 $ 21,719.50
--------------------------------------------------------------------------------
Xxxx Xxxxx 50,000 $ 54,298.75
--------------------------------------------------------------------------------
Xxxxxx Xxxxxxx 26,847 $ 29,155.17
--------------------------------------------------------------------------------
Xxxxxx X. Xxxxx 17,857 $ 19,392.26
--------------------------------------------------------------------------------
Xxxxxxxxxx Xxxxxxxxxx 25,000 $ 27,149.37
--------------------------------------------------------------------------------
Xxxxx Xxxxxxx 34,684 $ 37,665.96
--------------------------------------------------------------------------------
Shunsaku Ueda 20,000 $ 21,719.50
--------------------------------------------------------------------------------
Xxxxx X. Xxxxxx 362,500 $ 393,665.93
--------------------------------------------------------------------------------
Xxx Xxxxxxx 20,000 $ 21,719.50
--------------------------------------------------------------------------------
Xxxxxx Xxxxxxx 25,000 $ 27,149.37
--------------------------------------------------------------------------------
Xxxx Xxxxxxxxx 10,000 $ 10,859.75
--------------------------------------------------------------------------------
TOTAL: 14,549,138 $ 15,800,000
--------------------------------------------------------------------------------
46
EXHIBIT D
List of options to purchase shares of Buyer to be granted immediately
following the Closing
NAME OF EMPLOYEE OPTIONS TO BE GRANTED
---------------- ---------------------
Xxxxxx Xxxxx 240,000
Xxxx Xxxxx 75,000
Xxxxxxx Xxxxx 18,000
Xxxxxxx Xxxxxxxx 20,000
Xxxxx Xxxxxx 30,000
Xxxx Xxxxx 18,000
Xxxxx Xxxxxxx 13,000
Xxxxxxxxxx Xxxxxxxxxx 13,000
Xxxxxxx Xxxxxxxx 13,000
Shunsaku Ueda 8,250
Xxxxx Xxxxxxx 8,250
Keh-Xxxx Xxx 5,000
Xxxxx Xxxxxxxxx 1,500
Xxxxxx Xxxxxxx 13,000
Khampouth Pabmixay 500
Xxxxxxxxx Xxxxxx 500
Xxxxx Xxxx 5,000
Xxxxxx Xxxxx 5,000
Xxxx Xxxxxxx 1,000
Xxxxx Xxxxxx 5,000
Xxxxxx Xxxxxx 1,000
Xxxx Xxxxxxxxx 5,000
Xxxxx Xxxxx 500
Xxxxxxx Xxxxx 500
