Exhibit 2.2
Execution Copy
AGREEMENT AND PLAN OF MERGER
Agreement entered into as of January 30, 1997 by and among
ThermoSpectra Corporation, a Delaware corporation (the
"Buyer"), Park Acquisition Corp., a Delaware corporation and
a wholly-owned subsidiary of the Buyer (the "Transitory
Subsidiary"), and Park Scientific Instruments Corporation, a
California corporation (the "Company"). The Buyer, the
Transitory Subsidiary and the Company are referred to
collectively herein as the "Parties."
This Agreement contemplates a merger of the Transitory
Subsidiary into the Company. In such merger, the
shareholders of the Company will receive cash in exchange
for their capital stock of the Company.
Now, therefore, in consideration of the representations,
warranties and covenants herein contained, the Parties agree
as follows.
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in
Section 1.3 below), in accordance with this Agreement, the
General Corporation Law of the State of California (the
"California Law") and the Delaware General Corporation Law
(the "Delaware Law"), the Transitory Subsidiary shall be
merged with and into the Company (the "Merger"), the
separate existence of the Transitory Subsidiary shall cease
and the Company shall continue as the surviving corporation.
The Company is hereinafter sometimes referred to as the
"Surviving Corporation." At the election of the Buyer, any
direct or indirect wholly-owned subsidiary of the Buyer
organized under the laws of a state of the United States may
be substituted for the Transitory Subsidiary as a
constituent corporation in the Merger for purposes of this
Section 1.1. At the election of the Buyer, the Merger may be
structured so that the Company shall be merged with and into
the Transitory Subsidiary with the result that the
Transitory Subsidiary shall be the "Surviving Corporation."
If the Buyer elects to structure the Merger so that the
Transitory Subsidiary, rather than the Company, is the
Surviving Corporation, (a) the inaccuracy of any
representation or warranty of the Company which is premised
on the assumption that the Company shall be the Surviving
Corporation, which representation or warranty becomes
inaccurate solely as the result of the Transitory
Subsidiary, rather than the Company, being the Surviving
Corporation, shall not be deemed to be a breach of such
representation or warranty and shall not release Buyer and
the Transitory Subsidiary from their duties and obligations
1PAGE
under this Agreement, (b) the other provisions of this
Agreement relating to the Merger (including without
limitation Section 1.4) shall be deemed to be appropriately
modified to reflect such alternative structure and (c) any
Taxes incurred by the Company that would not have been
incurred had the Company been the Surviving Corporation
shall be the responsibility of Buyer and Transitory
Subsidiary and such Taxes shall not give rise to any
obligation on the part of the Company Shareholders, as
defined below, or to any liability to be reflected in the
Closing Balance Sheet, as defined below.
1.2 EFFECT OF THE MERGER. At the Effective Time, the
Surviving Corporation shall continue its corporate existence
under the laws of the State of California and the Merger
shall have the effects set forth in Section 259 of the
Delaware Law and Section 1107 of the California Law.
1.3 CONSUMMATION OF THE MERGER. At the Closing (as defined
in Section 1.6), the Parties will cause the Merger to be
consummated by delivering to the Secretary of State of the
State of Delaware a certificate of merger and by delivering
to the Secretary of State of the State of California an
agreement of merger, together with officer's certificates,
each in such form or forms as may be required by, and
executed and acknowledged in accordance with, the relevant
provisions of the Delaware Law and the California Law (such
documents being referred to collectively as the "Merger
Documents"), and shall make all other filings and recordings
required by the Delaware Law and the California Law in
connection with the Merger. The Merger shall become
effective at the time of filing of the appropriate Merger
Documents with the Secretary of State of the State of
California, or at such later time, which shall be as soon as
reasonably practicable, specified as the effective time in
the Merger Documents (the "Effective Time").
1.4 ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND
OFFICERS. The Articles of Incorporation and Bylaws of the
Surviving Corporation shall be the Articles of Incorporation
and Bylaws of the Company as in effect immediately prior to
the Effective Time until thereafter amended as provided
under the California Law. The directors of the Transitory
Subsidiary immediately prior to the Effective Date will be
the initial directors of the Surviving Corporation, and the
officers of the Company immediately prior to the Effective
Time will be the initial officers of the Surviving
Corporation, in each case until their successors are elected
and qualified.
1.5 CONVERSION OF SHARES.
(a) At the Effective Time, by virtue of the Merger and
without any action on the part of the Transitory Subsidiary,
2PAGE
the Company, the Surviving Corporation or the holder of any
of the following securities:
(i) Subject to Section 1.5(b), (c) and (d), each share
(other than shares to be canceled pursuant to clause (vi)
below) of the Company's common stock (the "Company Common
Stock") issued and outstanding immediately prior to the
Effective Time (the "Outstanding Common Stock") shall be
canceled and extinguished and be converted into and become
the right to receive that amount of cash, without interest
(the "Common Stock Consideration"), equal to the quotient of
(A) $16,055,656 less all payments made pursuant to clauses
(ii) through (v) below, divided by (B) the sum of the total
shares of Outstanding Common Stock and the total number of
shares of Company Common Stock underlying the Company
Options (as defined below) which are granted, vested and
outstanding immediately prior to the Effective Time (the
"Vested Option Shares").
(ii) Subject to Section 1.5(b), (c) and (d), each share
(other than shares to be canceled pursuant to clause (vi)
below) of the Company's Series B Preferred Stock ("Series B
Stock") issued and outstanding immediately prior to the
Effective Time (the "Outstanding Series B Stock") shall be
canceled and extinguished and be converted into the right to
receive $2.00 in cash, without interest.
(iii) Subject to Section 1.5(b), (c) and (d), each share
(other than shares to be canceled pursuant to clause (vi)
below) of the Company's Series C Preferred Stock (the
"Series C Stock") issued and outstanding immediately prior
to the Effective Time (the "Outstanding Series C Stock")
shall be canceled and extinguished and be converted into the
right to receive $1.25 in cash, without interest.
(iv) Subject to Section 1.5(b), (c) and (d), each share
(other than shares to be canceled pursuant to clause (vi)
below) of the Company's Series D Preferred Stock (the
"Series D Stock") issued and outstanding immediately prior
to the Effective Time (the "Outstanding Series D Stock")
shall be canceled and extinguished and be converted into the
right to receive $1.274 in cash, without interest.
(v) Subject to Section 1.5(b), (c) and (d), each share
(other than shares to be canceled pursuant to clause (vi)
below) of the Company's Series E Preferred Stock ("Series E
Stock") issued and outstanding immediately prior to the
Effective Time (the "Outstanding Series E Stock") shall be
canceled and extinguished and be converted into the right to
receive $1.274 in cash, without interest. The Outstanding
Common Stock, Outstanding Series B Stock, Outstanding Series
C Stock, Outstanding Series D Stock and Outstanding Series E
Stock are sometimes collectively referred to herein as the
"Company Shares."
3PAGE
(vi) Each Company Share that is issued and outstanding
immediately prior to the Effective Time and owned by the
Buyer, the Transitory Subsidiary or the Company or any
direct or indirect subsidiary of the Buyer, the Transitory
Subsidiary or the Company, shall be canceled and retired,
and no payment shall be made with respect thereto.
(vii) Each share of the Transitory Subsidiary's capital
stock issued and outstanding immediately prior to the
Effective Time shall be converted into and become one
validly issued, fully paid and nonassessable share of the
same class of capital stock of the Surviving Corporation.
(b) The aggregate amount of cash paid in consideration for
the Company Shares (the "Merger Consideration") shall be
subject to adjustment after the Closing Date as follows:
(i) Within 60 days after the Closing Date (as defined in
Section 1.6), the Buyer shall prepare and deliver to Xxxxx
Xxxxxx, as representative of the Company Shareholders (the
"Company Shareholder Representative"), a balance sheet
reflecting the Net Assets (as defined below) of the Company
as of the Closing Date (the "Draft Closing Balance Sheet").
The Buyer shall prepare the Draft Closing Balance Sheet in
accordance with GAAP (as defined in Section 2.6 below) as
applied consistent with the Company's past accounting
periods. For purposes of this Agreement "Net Assets" shall
mean total assets of the Company (excluding any cash
resulting from the exercise of Company Options prior to the
Closing) minus total liabilities of the Company (excluding
any liability to Xxxxxxx & Company, Inc. or to Xxxx
Xxxxxxxxxxx pursuant to engagement letters dated March 4,
1996 and January 1, 1996, respectively (together, the
"Engagement Letters")).
(ii) On the same day on which the Buyer delivers the Draft
Closing Balance Sheet to the Company Shareholder
Representative, the Buyer shall also deliver to the Company
Shareholder Representative a statement (the "Draft Closing
Backlog Statement") reflecting, as of the Closing Date, the
Company's backlog of binding purchase orders from customers
in the United States with firm shipment dates no later than
120 days after the Closing Date and the Company's backlog of
orders from its Subsidiaries, provided that any such
Subsidiary has binding purchase orders from third party
customers with firm shipment dates no later than 120 days
after the Closing Date equal to such backlog (collectively,
the "Closing Backlog"). Closing Backlog shall also include
all verbal purchase orders received by the Company and
assigned purchase order numbers by customers as of the
Closing Date, provided that the Company shall receive within
five business days after the Closing Date a binding written
purchase order with firm shipment date no later than 120
4PAGE
days after the Closing Date relating to any such verbal
purchase order. Immediately prior to the Closing, the chief
financial officer of the Company shall deliver to the Buyer
and the Transitory Subsidiary a certificate setting forth
the verbal purchase orders outstanding as of the Closing
Date. For purposes of determining verbal purchase orders
received as of the Closing Date such certificate shall be
conclusive.
(iii) The Company Shareholder Representative shall deliver
to the Buyer within 60 days after receiving the Draft
Closing Balance Sheet and the Draft Closing Backlog
Statement a detailed statement describing his objections (if
any) thereto. Failure of the Company Shareholder
Representative so to object to the Draft Closing Balance
Sheet or the Draft Closing Backlog Statement shall
constitute acceptance thereof, whereupon the Draft Closing
Balance Sheet and the Draft Closing Backlog Statement shall
be deemed to be the "Closing Balance Sheet" and the "Closing
Backlog Statement," respectively . The Buyer and the Company
Shareholder Representative shall use reasonable efforts to
resolve any such objections, but if they do not reach a
final resolution within 30 days after the Buyer has received
the statement of objections, the Buyer and the Company
Shareholder Representative shall select an internationally
recognized accounting firm mutually acceptable to them (the
"Neutral Auditors") to resolve any remaining objections. If
the Buyer and the Company Shareholder Representative are
unable to agree on the choice of Neutral Auditors, they
shall select by lot a "big six" accounting firm other than
Deloitte & Touche LLP and Xxxxxx Xxxxxxxx LLP as Neutral
Auditors. The Draft Closing Balance Sheet shall be adjusted
by the Neutral Auditors only to conform to GAAP and, as so
adjusted, shall constitute the Closing Balance Sheet. The
Draft Closing Backlog Statement shall be adjusted by the
Neutral Auditors only to conform to the definition of
Closing Backlog and, as so adjusted, shall constitute the
Closing Backlog Statement. All such adjustments by the
Neutral Auditors shall be conclusive and binding upon the
Buyer and the shareholders of the Company as of the
Effective Time (the "Company Shareholders"). The Buyer, on
one hand, and the Company Shareholders, on the other, shall
share equally the fees and expenses of the Neutral Auditors.
The Company Shareholders' portion of such fees and expenses
shall be deducted from the Escrow Amount (as defined in
Section 1.10) and returned by the Escrow Agent (as defined
in Section 1.7) to the Buyer, as provided in the Escrow
Agreement (as defined in Section 1.7), which will pay such
amount to the Neutral Auditors.
(iv) During the period of any dispute referred to above,
the Buyer shall cooperate fully with the Company Shareholder
Representative and the Company Shareholder Representative's
accountants. The Company Shareholder Representative and the
5PAGE
Company Shareholder Representative's accountants shall have
access to all books and records and other information of the
Company reasonably necessary for the evaluation of the Draft
Closing Balance Sheet and the Draft Closing Backlog
Statement; provided, however, that any such access shall be
allowed only in such manner as not to interfere unreasonably
with the operations of the Company.
(v) If the Net Assets as shown on the Closing Balance Sheet
are less than $2,772,500 then an amount equal to such
shortfall shall be deducted from the Escrow Amount and
returned by the Escrow Agent to the Buyer as provided in the
Escrow Agreement, and such amount shall not be paid in
consideration for the Company Shares in the Merger.
(vi) Provided that Closing Backlog is greater than or equal
to $2,150,000, if the Net Assets as shown on the Closing
Balance Sheet are more than $2,772,500 then an amount equal
to such excess shall be added to the Escrow Amount and, at
the discretion of the Company Shareholder Representative,
either (A) paid to the Company Shareholder Representative
(for distribution to the Company Shareholders) by the Escrow
Agent within twenty (20) business days following the
acceptance of the Closing Balance Sheet, provided that the
Escrow Agent and the Buyer are notified by the Company
Shareholder Representative of such payment at least ten (10)
business days prior to the date of such payment or (B) held
by the Escrow Agent pursuant to the Escrow Agreement, in
which case such amount shall be deemed to have been paid in
consideration for the Company Shares in the Merger.
(vii) If the Closing Backlog as shown on the Closing
Backlog Statement is less than $1,900,000, then an amount
equal to fifty percent (50%) of such shortfall shall be
deducted from the Escrow Amount and returned by the Escrow
Agent to the Buyer as provided in the Escrow Agreement, and
such amount shall not be paid in consideration for the
Company Shares in the Merger.
(viii) If the Closing Backlog as shown on the Closing
Backlog Statement is greater than $2,150,000, then an amount
equal to fifty percent (50%) of such excess shall be added
to the Escrow Amount and, at the discretion of the Company
Shareholder Representative, either (A) paid to the Company
Shareholder Representative (for distribution to the Company
Shareholders) by the Escrow Agent within twenty (20)
business days following the acceptance of the Closing
Balance Sheet, provided that the Escrow Agent and the Buyer
are notified by the Company Shareholder Representative of
such payment at least ten (10) business days prior to the
date of such payment or (B) held by the Escrow Agent
pursuant to the Escrow Agreement, in which case such amount
shall be deemed to have been paid in consideration for the
Company Shares in the Merger.
6PAGE
(ix) If the Closing Backlog is greater than or equal to the
sum set forth in (vii) above and less than or equal to the
sum set forth in (viii) above, then no amount shall be
deducted from or added to the Escrow Amount.
(x) The adoption of this Agreement and the approval of the
Merger by the shareholders of the Company shall constitute
approval of the appointment of the Company Shareholder
Representative and ratification of all actions taken by the
Company Shareholder Representative pursuant to this Section
1.5(b).
(c) Upon the payment of the Merger Consideration as
provided in Section 1.9, $3,518,800 of such consideration
(the "Initial Escrow Amount") shall be withheld from the
payment that Company Shareholders are entitled to receive
pursuant to Section 1.5(a), and placed in an escrow account
as described in Section 1.10. Such withholding shall be
made pro rata based on the portion of Merger Consideration
that each Company Shareholder would have been entitled to
receive but for the creation of such escrow. The
consideration paid net of the Initial Escrow Amount is
referred to as the "Closing Consideration."
(d) (i) Company Shares held by a holder who, subject to and
in accordance with Section 1300 et seq. of the California
Law, has demanded and perfected his right to an appraisal of
his Company Shares and has not effectively withdrawn or lost
his right to such appraisal ("Dissenting Shares"), shall not
be converted into a right to receive Merger Consideration
and such holder shall be entitled only to such rights as are
granted by Section 1300 et seq. of the California Law. If
after the Effective Time such holder withdraws, with the
consent of the Surviving Corporation, or loses his right to
appraisal for his Company Shares, such Company Shares shall
be treated as if they had been converted as of the Effective
Time into the right to receive the amount payable in respect
of such Company Shares pursuant to Section 1.5.
(ii) The Company shall give the Buyer and the Transitory
Subsidiary prompt notice of any demands for purchase, or
notices of intent to demand purchase, received by the
Company with respect to Company Shares, and the Buyer and
the Transitory Subsidiary shall have the right to control
all negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior
written consent of the Buyer and the Transitory Subsidiary
or as otherwise required by law, make any payment with
respect to, or settle, or offer to settle, any such demands.
1.6 THE CLOSING. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take
place at the offices of the Buyer in Waltham, Massachusetts,
7PAGE
commencing at 2:00 p.m. local time on, March 5, 1997 or, if
all of the conditions to the obligations of the Parties to
consummate the transactions contemplated hereby have not
been satisfied or waived by such date, on such mutually
agreeable later date as soon as practicable after the
satisfaction or waiver of all conditions to the obligations
of the Parties to consummate the transactions contemplated
hereby (the "Closing Date").
1.7 ACTIONS AT THE CLOSING. At the Closing, (a) the
Company shall deliver to the Buyer and the Transitory
Subsidiary the various certificates, instruments and
documents referred to in Section 5.2, (b) the Buyer and the
Transitory Subsidiary shall deliver to the Company the
various certificates, instruments and documents referred to
in Section 5.3, (c) the Company and the Transitory
Subsidiary shall file the Merger Documents as provided in
Section 1.3, (d) the Buyer, the Company Shareholder
Representative and the Escrow Agent (as defined therein)
shall execute and deliver the Indemnification and Escrow
Agreement attached hereto as Exhibit A (the "Escrow
Agreement") and (e) the Buyer shall pay the Closing
Consideration to the Paying Agent (defined below) and the
Initial Escrow Amount to the Escrow Agent.
1.8 ADDITIONAL ACTION. The Surviving Corporation may, at
any time after the Effective Time, take any action,
including executing and delivering any document, in the name
and on behalf of either the Company or the Transitory
Subsidiary, in order to consummate the transactions
contemplated by this Agreement.
1.9 PAYMENT FOR SHARES
(a) Immediately prior to the Closing, the chief financial
officer of the Company shall deliver to the Buyer and the
Transitory Subsidiary a closing certificate (the "Closing
Certificate"), which shall set forth (i) the total number of
Vested Option Shares and the total number of Outstanding
Common Stock, Outstanding Series B Stock, Outstanding
Series C Stock, Outstanding Series D Stock and Outstanding
Series E Stock, and (ii) the Merger Consideration payable
with respect to each share of Outstanding Common Stock,
computed in the manner set forth in Section 1.5 hereof. The
Closing Certificate shall be accompanied by appropriate
documentation supporting such computations. For purposes of
determining the Merger Consideration payable to holders of
Company Common Stock, the Closing Certificate shall be
conclusive and binding upon the Company, the Company
Shareholders, the Buyer and the Transitory Subsidiary. The
determination of the Merger Consideration payable to the
holders of the Company Common Stock shall be included in the
Merger Documents.
8PAGE
(b) Within five (5) business days following the Closing
Date, American Stock Transfer & Trust Company (the "Paying
Agent"), shall transmit to each Company Shareholder a form
of letter of transmittal (the "Letter of Transmittal") and
instructions for use in effecting the surrender of each
certificate representing Company Shares (a "Certificate")
held by such Company Shareholder in exchange for the Closing
Consideration represented by such Company Shares. Upon the
proper surrender of a Certificate, a duly executed Letter of
Transmittal and any required tax certifications to the
Paying Agent by a Company Shareholder in accordance with
such instructions, the Paying Agent shall deliver to such
Company Shareholder a check for the Closing Consideration
that such Company Shareholder is entitled to receive,
without interest. It shall be a condition of such payment
and delivery that the surrendered Certificate be properly
endorsed or otherwise in proper form for transfer and that
the person surrendering such shall pay any transfer or other
taxes required by reason of such payment or delivery or
establish to the satisfaction of the Paying Agent, the Buyer
and/or the Surviving Corporation that such tax has been paid
or is not applicable. Until so surrendered for payment, each
Certificate heretofore representing Company Shares (other
than Dissenting Shares) shall, subject to Section 1.10
hereof, be deemed for all purposes to evidence the right to
receive cash as described in accordance with Section 1.5
above and until so surrendered for payment, the holder of
such outstanding Certificate shall not have any rights as a
shareholder of the Company, except such rights, if any, as
such holder may have with respect to Dissenting Shares and
shall not be entitled to receive any consideration from the
Surviving Corporation and/or the Buyer with respect to the
Company Shares represented by such Certificate. If
outstanding Certificates are not surrendered, or the cash
payment therefor is not claimed prior to thirty (30) months
after the Effective Time (or, in any particular case, prior
to such earlier date on which such cash payment would
otherwise escheat to or become the property of any
governmental unit or agency), the unclaimed amounts shall,
to the extent permitted by applicable law, become the
property of the Buyer, free and clear of all claims or
interest of any person previously entitled thereto, provided
that the Buyer shall have given written notice of such event
to the Company Shareholder Representative at least sixty
(60) days prior to such transfer.
(c) In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Certificate to be lost,
stolen or destroyed, the Buyer shall issue in exchange for
such lost, stolen or destroyed Certificate the cash payable
in exchange therefor as provided in Section 1.5. The Buyer
may, in its discretion and as a condition precedent to the
payment thereof, require the owner of such lost, stolen or
9PAGE
destroyed Certificate to give the Buyer a bond in such sum
as it may direct as indemnity against any claim that may be
made against the Buyer with respect to the Certificate
alleged to have been lost, stolen or destroyed.
1.10 ESCROW.
(a) The Escrow Amount (as defined in the Escrow Agreement)
shall be held by the Escrow Agent under the Escrow Agreement
pursuant to the terms thereof. The Escrow Amount, which
shall initially consist of the Initial Escrow Amount, shall
be held as a trust fund and shall not be subject to any
lien, attachment, trustee process or any other judicial
process of any creditor of any party, and shall be held and
disbursed solely for the purposes and in accordance with the
terms of the Escrow Agreement. It is intended that the
assets held in escrow as above provided shall facilitate the
ability of the Buyer and the Surviving Corporation to
recover amounts to which they are entitled under this
Agreement or the Escrow Agreement as a result of
misrepresentations, breaches of warranties and breaches of
covenants contained in this Agreement and to satisfy claims
of the Buyer and the Surviving Corporation arising as a
result of this Agreement or the Escrow Agreement, including
satisfaction of the Company's or Company Shareholders'
obligations under Sections 1.5(b), 8.2 or 8.12 hereof.
Accordingly, and to the extent necessary to provide such
protection to the Buyer and the Surviving Corporation,
property held in escrow thereunder shall be available to
satisfy claims of the Buyer and the Surviving Corporation
under this Agreement or the Escrow Agreement to the extent
provided in such agreements.
(b) The adoption of this Agreement and the approval of the
Merger by the Company Shareholders shall constitute approval
of the Escrow Agreement and of all of the arrangements
relating thereto, including without limitation the placement
of the Initial Escrow Amount in escrow and the appointment
of the Company Shareholder Representative.
1.11 CLOSING OF TRANSFER BOOKS. At the Effective Time, the
stock transfer books of the Company shall be closed and no
transfer of Company Shares shall thereafter be made. If,
after the Effective Time, Certificates are presented to the
Surviving Corporation they shall be canceled and exchanged
for cash in accordance with Section 1.5, subject to Section
1.10 and to applicable law in the case of Dissenting Shares.
1.12 STOCK OPTIONS. At or prior to the Effective Time,
Buyer and the Company shall take all action necessary to
cause the assumption by the Buyer as of the Effective Time
of the options to purchase Company Common Stock outstanding
as of the Effective Time (the "Company Options"). The
Company Options shall be converted without any action on the
10PAGE
part of the holders thereof into options (the "Buyer
Options") to purchase shares of the common stock of the
Buyer, $.01 par value per share (the "Buyer Common Stock")
as of the Effective Time. Under the Buyer Options, the
number of shares of Buyer Common Stock that each record
holder of an option agreement which represents a Company
Option (the "Optionholders") shall be entitled to receive
upon the exercise of such Buyer Option shall be a number of
whole and fractional shares of Buyer Common Stock determined
by multiplying the number of shares of Company Common Stock
subject to such Company Option, determined immediately
before the Effective Time, by the ratio equal to the Common
Stock Consideration divided by $14.75, the closing price of
the Buyer's Common Stock as quoted on the American Stock
Exchange on the trading day immediately before the date
hereof (the "Option Exchange Ratio"). The option exercise
price of each share of Buyer Common Stock subject to any
Buyer Option shall be the amount (rounded up to the nearest
whole cent) obtained by dividing the exercise price per
share of Company Common Stock at which the assumed Company
Option was exercisable immediately before the Effective Time
by the Option Exchange Ratio. The assumption and conversion
of Company Options to Buyer Options as provided herein shall
not give the Optionholders additional benefits which they
did not have immediately prior to the Effective Time, result
in any acceleration of any vesting schedule for any Company
Option, or relieve the Optionholders of any obligations or
restrictions applicable to their options or the shares
obtainable upon exercise of the options. The parties intend
that the assumption and conversion of Company Options shall
be treated as an issuance or assumption of stock options in
a transaction to which Section 424(a) applies within the
meaning of Section 424(a) of the Code (as defined below) and
this Section 1.12 shall be interpreted and applied
consistent with such intention. Only whole shares of Buyer
Common Stock shall be issued upon exercise of any Buyer
Option and in lieu of receiving any fractional share of
Buyer Common Stock, the holder of such option shall receive
in cash the fair market value of the fractional share, net
of the applicable exercise price of the fractional share and
applicable withholding taxes.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer that the
statements contained in this Article II are true and
correct, except as set forth in the disclosure schedule
attached hereto as Exhibit B (the "Disclosure Schedule").
The Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs
contained in this Article II, and the disclosures in any
paragraph of the Disclosure Schedule shall qualify only the
corresponding paragraph in this Article II. Each individual
11PAGE
representation and warranty contained herein shall be
interpreted and enforced separately and no representation or
warranty contained herein shall be construed as limiting any
other representation and warranty contained herein. The
Buyer shall be assumed to have relied upon the
representations and warranties contained herein,
notwithstanding any investigation of the Company made by the
Buyer prior to the Closing. The term "ordinary course of
business", when used in this Article II, shall mean the
ordinary course of business of the Company consistent with
its past custom and practice (including with respect to
frequency and amount).
2.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The
Company is a corporation duly organized, validly existing
and in corporate and tax good standing under the laws of the
state of California. The Company is duly qualified to
conduct business and is in corporate and tax good standing
as a foreign corporation in each jurisdiction in which the
failure to so qualify would have a Material Adverse Effect
(as defined below). The Company has all requisite corporate
power and authority to carry on the businesses in which it
is engaged and to own and use the properties owned and used
by it. The Company has furnished to the Buyer true and
complete copies of its Amended and Restated Articles of
Incorporation together with the Certificate of Determination
filed November 15, 1995 (collectively, the "Amended and
Restated Articles of Incorporation") and Bylaws, each as
amended and as in effect on the date hereof. Each amendment
to the Company's Amended and Restated Articles of
Incorporation has been duly adopted by all requisite
director and shareholder action and in accordance with all
applicable law. The Company is not in default under or in
violation of any provision of its Amended and Restated
Articles of Incorporation or Bylaws or any other instrument,
document or agreement setting forth the terms and conditions
of any shares of capital stock or other securities of the
Company, or the rights and obligations of any holder of such
shares or other securities, including, without limitation,
the Series B Preferred Stock Purchase Agreement dated as of
October 23, 1992 among the Company and the Purchasers listed
in the Schedule of Purchasers thereto (the "Series B
Agreement"), the Series C Preferred Stock and Warrant
Purchase Agreement dated as of November 22, 1992 among the
Company and the Purchasers listed in the Schedule of
Purchasers thereto (the "Series C Agreement"), the Series D
Preferred Stock Purchase Agreement dated as of June 29, 1994
among the Company and the Purchasers listed in the Schedule
of Purchasers thereto (the Series D Agreement") and the
Series E Preferred Stock Purchase Agreement dated as of
December 29, 1995 among the Company and the Purchasers
listed in the Schedule of Purchasers thereto (the "Series E
Agreement").
12PAGE
2.2 CAPITALIZATION. The authorized capital stock of the
Company consists of (i) 20,000,000 shares of Company Common
Stock, of which 6,774,688 shares are issued and outstanding
and (ii) 4,000,000 shares of preferred stock ("Preferred
Stock"), of which (a) 250,000 shares have been designated
Series A Preferred Stock, of which no shares are issued and
outstanding, (b) 940,602 shares have been designated Series
B Stock, of which 273,935 shares are issued and outstanding,
(c) 280,000 shares have been designated Series C Stock, of
which all shares are issued and outstanding, (d) 1,400,000
shares have been designated Series D Stock, of which
1,237,016 shares are issued and outstanding, and (e) 382,653
shares have been designated Series E Stock, of which 353,571
shares are issued and outstanding. The shares of Series B
Stock, Series C Stock and Series D Stock issued and
outstanding are convertible into an aggregate of 1,790,951
shares of Company Common Stock, representing the conversion
of each share of Series B Stock, Series C Stock and Series D
Stock into 1.0 share of Company Common Stock. The
liquidation preferences (including any declared or
accumulated but unpaid dividends through the date hereof)
for the Series B Stock, Series C Stock, Series D Stock and
the Series E Stock are $2.00, $1.25, $.1274 and $1.274,
respectively, per share. Under the terms of the Series B
Stock, Series C Stock, Series D Stock and Series E Stock,
the Merger will be considered to be a liquidation of the
Company. Section 2.2 of the Disclosure Schedule sets forth a
complete and accurate list of (i) all shareholders of the
Company, indicating the type and number of shares held by
each shareholder, and (ii) all Optionholders and all holders
of warrants to purchase Company Common Stock (the "Company
Warrants") indicating the type and number of shares subject
to each Company Option and Company Warrant and the exercise
price, vesting status and termination date of each Company
Option and Company Warrant. All of the issued and
outstanding shares of Company Common Stock, Series B Stock,
Series C Stock, Series D Stock and Series E Stock are, and
all shares of Company Common Stock that may be issued upon
exercise of Company Options and Company Warrants or upon
conversion of Series B Stock, Series C Stock and Series D
Stock will be, upon such exercise or conversion, duly
authorized, validly issued, fully paid, nonassessable and
free of all preemptive rights. Except as set forth in
Section 2.2 of the Disclosure Schedule, there are no
outstanding or authorized shares of capital stock or other
securities or options, warrants, rights, agreements or
commitments to which the Company is a party or which are
binding upon the Company providing for the issuance,
disposition or acquisition of any of its capital stock or
other securities. There are no outstanding or authorized
stock appreciation, phantom stock or similar rights with
respect to the Company. There are no agreements, voting
trusts, proxies, or understandings with respect to the
voting or registration under the Securities Act of 1933 (the
13PAGE
"Securities Act"), of any shares of any capital stock of the
Company to which the Company is party. To the Company's
knowledge, no agreements, voting trusts, proxies, or
understandings with respect to the voting or registration
under the Securities Act, of any shares of any capital stock
of the Company otherwise exist. All of the issued and
outstanding shares of Company Common Stock, Series B Stock,
Series C Stock, Series D Stock and Series E Stock and other
outstanding securities of the Company were issued in
compliance with applicable federal and state securities
laws. No repurchase of capital stock by the Company (i)
violated the Company's Amended and Restated Articles of
Incorporation or Bylaws or any laws, rules or regulations
applicable to the Company or (ii) caused any breach of any
agreement to which the Company is or was a party.
2.3 AUTHORIZATION OF TRANSACTION. The Company has all
requisite corporate power and authority to execute and
deliver this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement and,
subject to the adoption of this Agreement and the approval
of the Merger by (a) the holders of a majority of the shares
of Company Common Stock, (b) the holders of a majority of
the shares of Company Common Stock and the Preferred Stock
(calculated on an as converted basis) issued and outstanding
and entitled to vote, voting together as a single class (c)
the holders of a majority of the shares of each series of
Preferred Stock issued and outstanding and entitled to vote,
voting separately and (d) the holders of a majority of the
shares of Preferred Stock issued and outstanding and
entitled to vote, voting together as a single class
(collectively, the "Requisite Shareholder Approval"), the
performance by the Company of this Agreement and the
consummation by the Company of the transactions contemplated
hereby have been duly and validly authorized by all
necessary corporate action on the part of the Company. This
Agreement has been duly and validly executed and delivered
by the Company and constitutes a valid and binding
obligation of the Company, enforceable in accordance with
its terms. The Board of Directors of the Company unanimously
has, after due consideration of its fiduciary duties, (i)
determined that this Agreement and the transactions
contemplated hereby, including the Merger, are fair to the
Company and the shareholders of the Company, (ii) approved
this Agreement and the transactions contemplated hereby,
including the Merger and (iii) resolved to recommend
approval and adoption of this Agreement and the Merger by
the shareholders of the Company.
2.4 NONCONTRAVENTION. Subject to compliance with the
applicable requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "Xxxx-Xxxxx-Xxxxxx
Act"), and the filing of the Merger Documents with the
Secretary of State of the State of California and the
14PAGE
Secretary of State of the State of Delaware, neither the
execution and delivery of this Agreement by the Company, nor
the consummation by the Company of the transactions
contemplated hereby, will (a) require on the part of the
Company or any corporation with respect to which the
Company, directly or indirectly, has the power to vote or
direct the voting of sufficient securities to elect a
majority of the directors (any of the foregoing being
referred to herein as a "Subsidiary") any filing with, or
any permit, authorization, consent or approval of, any
court, arbitration tribunal, administrative agency or
commission or other governmental or regulatory authority or
agency (a "Governmental Entity"), (b) conflict with or
violate any provision of the charter or Bylaws of the
Company or any Subsidiary, (c) conflict with, result in a
breach of, constitute (with or without due notice or lapse
of time or both) a default under, result in the acceleration
of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice, consent or waiver
under, any material contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness,
Security Interest (as defined below) or other arrangement to
which the Company or any Subsidiary is a party or by which
the Company or any Subsidiary is bound or to which any of
their assets is subject except as provided in Section 2.4 of
the Disclosure Schedule, (d) result in the imposition of any
Security Interest (as defined below) upon any assets of the
Company or any Subsidiary or (e) violate any order, writ,
injunction, decree, statute, rule or regulation applicable
to the Company, any Subsidiary or any of their properties or
assets or (f) entitle any employee of the Company or any
Subsidiary to severance or other payments or to any increase
in compensation or benefits. For purposes of this Agreement,
"Security Interest" means any mortgage, pledge, security
interest, encumbrance, charge, or other lien (whether
arising by contract or by operation of law), other than (i)
mechanic's, materialmen's, and similar liens, (ii) liens
arising under worker's compensation, unemployment insurance,
social security, retirement, and similar legislation, and
(iii) liens on goods in transit incurred pursuant to
documentary letters of credit, in each case arising in the
ordinary course of business of the Company or any Subsidiary
and not material to the Company and its Subsidiaries taken
as a whole. Section 2.4 of the Disclosure Schedule sets
forth a true, correct and complete list of all consents and
approvals of non-governmental third parties that are
required in connection with the consummation by the Company
and the Subsidiaries of the transactions contemplated by
this Agreement.
2.5 SUBSIDIARIES. Section 2.5 of the Disclosure Schedule
sets forth for each Subsidiary (a) its name and jurisdiction
of incorporation, (b) the number of shares of authorized
15PAGE
capital stock of each class of its capital stock, (c) the
number of issued and outstanding shares of each class of its
capital stock, the names of the holders thereof and the
number of shares held by each such holder, (d) the number of
shares of its capital stock held in treasury, and (e) its
directors and officers. Each Subsidiary is a corporation
duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or
organization. Each Subsidiary is duly qualified to conduct
business and is in corporate and tax good standing in each
jurisdiction in which the failure to so qualify would have a
Material Adverse Effect. Each Subsidiary has all requisite
corporate power and authority to carry on the businesses in
which it is engaged and to own and use the properties owned
and used by it. The Company has delivered to the Buyer
correct and complete copies of the charter and Bylaws of
each Subsidiary, as amended to date. No Subsidiary is in
default under or in violation of any provision of its
charter or Bylaws. All of the issued and outstanding shares
of capital stock of each Subsidiary are duly authorized,
validly issued, fully paid, nonassessable and free of
preemptive rights. All shares of each Subsidiary that are
held of record or owned beneficially by either the Company
or any Subsidiary are held or owned free and clear of any
restrictions on transfer (other than restrictions under the
Securities Act and state securities laws), claims, Security
Interests, options, warrants, rights, contracts, calls,
commitments, equities and demands. There are no outstanding
or authorized options, warrants, rights, agreements or
commitments (contingent or otherwise) to which the Company
or any Subsidiary is a party or which are binding on any of
them providing for the issuance, disposition or acquisition
of any capital stock of any Subsidiary. There are no
outstanding stock appreciation, phantom stock or similar
rights with respect to any Subsidiary. There are no voting
trusts, proxies, or other agreements or understandings with
respect to the voting of any capital stock of any
Subsidiary. The Company does not control directly or
indirectly or have any direct or indirect equity
participation in any corporation, partnership, trust, or
other business association which is not a Subsidiary.
2.6 REPORTS AND FINANCIAL STATEMENTS. The Company has
provided to the Buyer (i) the audited consolidated balance
sheets and statements of operations, changes in
shareholders' equity and cash flows for each of the last
three fiscal years for the Company and the Subsidiaries (or
such shorter periods as such Subsidiaries have been in
existence); and (ii) the unaudited consolidated balance
sheet and statements of income as of and for the quarter
ended as of December 31, 1996 (the "Most Recent Fiscal
Quarter End"). Such financial statements (collectively, the
"Financial Statements") have been prepared in accordance
with United States generally accepted accounting principles
16PAGE
applied on a consistent basis throughout the periods covered
thereby ("GAAP"), fairly present the consolidated financial
condition, results of operations and cash flows of the
Company and the Subsidiaries as of the respective dates
thereof and for the periods referred to therein and are
consistent with the books and records of the Company and the
Subsidiaries, provided, however, that the Financial
Statements referred to in clause (ii) above are subject to
normal recurring year-end adjustments (which will not be
material) and do not include footnotes or statements of cash
flows and changes in shareholders' equity.
2.7 ABSENCE OF CERTAIN CHANGES. Since the Most Recent
Fiscal Quarter End, (a) there has not been any material
adverse change in the assets, business, prospects, financial
condition or results of operations of the Company or its
Subsidiaries, nor has there occurred any event or
development which could reasonably be foreseen to result in
such a material adverse change in the future, and (b)
neither the Company nor any Subsidiary has taken any of the
actions set forth in paragraphs (a) through (o) of Section
4.5.
2.8 UNDISCLOSED LIABILITIES. Neither the Company nor any
of its Subsidiaries has any liability, whether absolute or
contingent, liquidated or unliquidated, accrued or unaccrued
and whether due or to become due, except for (a) liabilities
shown on the balance sheet referred to in clause (ii) of
Section 2.6 (the "Most Recent Balance Sheet"), (b)
liabilities which have arisen since the Most Recent Fiscal
Quarter End in the ordinary course of business and which are
similar in nature and amount to the liabilities which arose
during the comparable period of time in the immediately
preceding fiscal year and (c) contractual liabilities
incurred in the ordinary course of business which are not
required by GAAP to be reflected on a balance sheet.
2.9 TAX MATTERS.
(a) Each of the Company and the Subsidiaries has filed in a
timely manner (including permitted extensions) all Tax
Returns (as defined below) that it was required to file and
all such Tax Returns were correct and complete in all
material respects. All Taxes shown on such Tax Returns have
been paid in full on a timely basis or have been accrued on
the Most Recent Balance Sheet, and no other Taxes are owed
by the Company with respect to items or periods covered by
such Returns. The unpaid Taxes of the Company and the
Subsidiaries for Tax periods through the date of the Most
Recent Balance Sheet do not exceed the accruals and reserves
for Taxes set forth on the Most Recent Balance Sheet.
Neither the Company nor any Subsidiary has any actual or
potential liability for any Tax obligation of any taxpayer
(including without limitation any affiliated group of
17PAGE
corporations or other entities that included the Company or
any Subsidiary during a prior period) other than the Company
and the Subsidiaries. All Taxes that the Company or any
Subsidiary is or was required by law to withhold or collect
have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Entity.
There are no liens for Taxes on the assets of the Company or
any Subsidiary other than liens for Taxes not yet due and
payable. For purposes of this Agreement, "Taxes" means all
taxes, charges, fees, levies or other similar assessments or
liabilities, including without limitation income, gross
receipts, ad valorem, premium, value-added, excise, real
property, personal property, sales, use, transfer,
withholding, employment, payroll and franchise taxes imposed
by the United States of America or any state, local or
foreign government, or any agency thereof, or other
political subdivision of the United States or any such
government, and any interest, fines, penalties, assessments
or additions to tax resulting from, attributable to or
incurred in connection with any tax or any contest or
dispute thereof. For purposes of this Agreement, "Tax
Returns" means all reports, returns, declarations,
statements or other information required to be supplied to a
taxing authority in connection with Taxes.
(b) The Company has delivered to the Buyer correct and
complete copies of all federal income Tax Returns,
examination reports and statements of deficiencies assessed
against or agreed to by any of the Company or any Subsidiary
since December 31, 1992. The federal income Tax Returns of
the Company have never been audited by the Internal Revenue
Service. No examination or audit of any Tax Returns of the
Company or any Subsidiary by any Governmental Entity is
currently in progress or, to the knowledge of the Company
and the Subsidiaries, threatened or contemplated. Neither
the Company nor any Subsidiary has waived any statute of
limitations with respect to Taxes or agreed to an extension
of time with respect to a Tax assessment or deficiency,
which waiver or extension is still in effect. There is no
dispute or claim concerning any Tax liability of any of the
Company and its Subsidiaries, either raised or claimed in
writing by any authority or as to which the Company, its
Subsidiaries or their directors, officers or employees have
knowledge based upon personal contact with any agent of any
such authority. No claim has ever been made by an authority
in a jurisdiction where any of the Company and its
Subsidiaries does not file Tax Returns that it is or may be
subject to Tax in that jurisdiction.
(c) Neither the Company nor any Subsidiary is a "consenting
corporation" within the meaning of Section 341(f) of the
Internal Revenue Code of 1986 (the "Code") and none of the
assets of the Company nor the Subsidiaries are subject to an
election under Section 341(f) of the Code. None of the
18PAGE
Company and its Subsidiaries has made any payments or is a
party to any agreement that under certain circumstances
could obligate it to make any payments that will not be
deductible under Section 280G of the Code. Neither the
Company nor any Subsidiary has been a United States real
property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified
in Section 897(c)(l)(A)(ii) of the Code. Neither the Company
nor any Subsidiary is a party to any Tax allocation or
sharing agreement.
(d) Neither the Company nor any Subsidiary is or has ever
been a member of an "affiliated group" of corporations
(within the meaning of Section 1504 of the Code), other than
a group of which only the Company and the Subsidiaries are
members. Neither the Company nor any Subsidiary has made an
election under Treasury Reg. Section 1.1502-20(g). Neither
the Company nor any Subsidiary is or has been required to
make a basis reduction pursuant to Treasury Reg. Section
1.1502-20(b) or Treasury Reg. Section 1.337(d)-2T(b).
(e) All material elections with respect to Taxes, other than
those elections reflected in the Tax Returns referred to in
subsection (b), as of the date hereof are set forth in
Section 2.9 of the Disclosure Schedule. None of the assets
of the Company nor any Subsidiary is property that the
Company or any Subsidiary is required to treat as being
owned by any other person pursuant to the "safe harbor
lease" provisions of former Section 168(f)(8) of the Code.
None of the assets of the Company nor any Subsidiary
directly or indirectly secures any debt the interest on
which is tax exempt under Section 103(a) of the Code. None
of the assets of the Company nor any Subsidiary is "tax
exempt use property" within the meaning of Section 168(h) of
the Code. Neither the Company nor any Subsidiary has agreed
to make or is required to make any adjustment under Section
481 of the Code by reason of a change in accounting method
or otherwise. Neither the Company nor any Subsidiary has
participated in an international boycott within the meaning
of Section 999 of the Code. Except as set forth in Section
2.5(e) of the Disclosure Schedule, neither the Company nor
any Subsidiary has or has had a permanent establishment in
any foreign country, as defined in any applicable treaty or
convention between the United States and such foreign
country. Neither the Company nor any Subsidiary is a party
to any joint venture, partnership or other arrangement or
contract that could be treated as a partnership for federal
income tax purposes.
2.10 ASSETS. Each of the Company and the Subsidiaries owns
or leases all tangible assets necessary for the conduct of
its businesses as presently conducted and as presently
proposed to be conducted. Each such tangible asset is free
from material defects, has been maintained in accordance
19PAGE
with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear) and
is suitable for the purposes for which it presently is used.
Except as described in Section 2.10 of the Disclosure
Schedule, no asset of the Company (tangible or intangible)
is subject to any Security Interest.
2.11 OWNED REAL PROPERTY. Neither the Company nor any
Subsidiary owns any real property.
2.12 INTELLECTUAL PROPERTY.
(a) Each of the Company and the Subsidiaries owns, or is
licensed or otherwise possesses legally enforceable rights
to use, all Intellectual Property (as defined below) that is
used to conduct its business as currently conducted or
planned to be conducted. For purposes of this Agreement, the
term "Intellectual Property" means all (i) patents, patent
applications, patent disclosures and all related
continuation, continuation-in-part, divisional, reissue,
reexamination, utility, model, certificate of invention and
design patents, patent applications, registrations and
applications for registrations, (ii) trademarks, service
marks, trade dress, logos, trade names and corporate names
and registrations and applications for registration thereof,
(iii) copyrights and registrations and applications for
registration thereof, (iv) mask works and registrations and
applications for registration thereof, (v) computer software
(other than software that is generally commercially
available), data and documentation, (vi) trade secrets and
confidential business information, whether patentable or
unpatentable and whether or not reduced to practice,
know-how, manufacturing and production processes and
techniques, research and development information,
copyrightable works, financial, marketing and business data,
pricing and cost information, business and marketing plans
and customer and supplier lists and information, (vii) other
proprietary rights relating to any of the foregoing and
(viii) copies and tangible embodiments thereof. Section 2.12
of the Disclosure Schedule lists (i) all patents and patent
applications, all trademarks, all registered copyrights, and
all trade names and service marks which are used in the
business of the Company or the Subsidiaries, including the
jurisdictions in which each such Intellectual Property right
has been issued or registered or in which any such
application for such issuance or registration has been
filed, (ii) all material written licenses, sublicenses and
other agreements to which the Company or a Subsidiary is a
party and pursuant to which any person is authorized to use
any Intellectual Property rights, and (iii) all material
written licenses, sublicenses and other agreements as to
which the Company or a Subsidiary is a party and pursuant to
which the Company or a Subsidiary is authorized to use any
third party Intellectual Property ("Third Party Intellectual
20PAGE
Property Rights") which is used in the business of the
Company or any Subsidiary or which form a part of any
product or service of the Company or any Subsidiary. The
Company has made available to the Buyer correct and complete
copies of all such patents, registrations, applications,
licenses and agreements (as amended to date) and related
documentation. Except pursuant to the Contracts listed on
Section 2.14 of the Disclosure Schedule and except pursuant
to the licenses listed on Section 2.12 of the Disclosure
Schedule, neither the Company nor any Subsidiary has agreed
to indemnify any person or entity for or against any
infringement, misappropriation or other conflict with
respect to any item of Intellectual Property that the
Company or any Subsidiary owns or uses. Neither the Company
nor any Subsidiary is a party to any oral license,
sublicense or agreement which, if reduced to written form,
would be required to be listed in Section 2.12 of the
Disclosure Schedule under the terms of this Section 2.12(a).
(b) Neither the Company nor any of the Subsidiaries is, nor
will any of them be as a result of the execution and
delivery of this Agreement or the performance of the
Company's obligations under this Agreement, in breach of any
license, sublicense or other agreement relating to the
Intellectual Property or Third Party Intellectual Property
Rights.
(c) Neither the Company nor any of the Subsidiaries has been
named in any suit, action or proceeding which involves a
claim of infringement of any Intellectual Property right of
any third party. Except as set forth on Section 12.2(c) of
the Disclosure Schedule, no person or entity has alleged,
either orally or in writing, that the manufacturing,
marketing, licensing or sale of the products or performance
of the service offerings of the Company and the Subsidiaries
infringes any Intellectual Property right of any third
party. Except as set forth on Section 12.2(c) of the
Disclosure Schedules, to the knowledge of the Company and
the Subsidiaries, the Intellectual Property rights of the
Company and the Subsidiaries are not being infringed by
activities, products or services of any third party.
2.13 REAL PROPERTY LEASES. Section 2.13 of the Disclosure
Schedule lists and describes briefly all real property
leased or subleased to the Company or any Subsidiary and
lists the term of such lease or sublease, any extension and
expansion options, and the rent payable thereunder. The
Company has delivered to the Buyer correct and complete
copies of the leases and subleases (as amended to date)
listed in Section 2.13 of the Disclosure Schedule. With
respect to each lease and sublease listed in Section 2.13 of
the Disclosure Schedule:
21PAGE
(a) the lease or sublease is legal, valid, binding,
enforceable and in full force and effect;
(b) the lease or sublease will continue to be legal, valid,
binding, enforceable and in full force and effect
immediately following the Closing in accordance with the
terms thereof as in effect prior to the Closing;
(c) neither the Company or any Subsidiary nor, to the best
knowledge of the Company, any other party to the lease or
sublease is in breach or default in any material respect,
and no event has occurred which, with notice or lapse of
time, would constitute any such breach or default, or permit
termination, modification, or acceleration thereunder;
(d) there are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease;
(e) neither the Company nor any Subsidiary has assigned,
transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in the leasehold or subleasehold;
(f) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the
operation of said facilities;
(g) to the knowledge of the Company, the owner of the
facility leased or subleased has good and clear record and
marketable title to the parcel of real property, free and
clear of any Security Interest, easement, covenant or other
restriction, except for recorded easements, covenants, and
other restrictions which do not impair the intended use,
occupancy or value of the property subject thereto; and
(h) the Company and the Subsidiaries have obtained
non-disturbance agreements from the holder of each superior
Security Interest and ground lease in connection with each
such lease or sublease (each of which is listed in Section
2.13 of the Disclosure Schedule); and the representations
and warranties set forth in clauses (a) through (d) of this
Section 2.13 with respect to leases and subleases are true
and correct with respect to such non-disturbance agreements.
2.14 CONTRACTS. Section 2.14 of the Disclosure Schedule
lists the following written arrangements to which the
Company or any Subsidiary is a party:
(a) any written arrangement pursuant to which any party is
indemnified for or against any liability under Environmental
Laws (as defined in Section 2.21 below);
(b) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to
22PAGE
third parties providing for lease payments in excess of
$50,000 per annum;
(c) any written arrangement (or group of related written
arrangements) for the purchase or sale of raw materials,
commodities, supplies, products or other personal property
or for the furnishing or receipt of services (i) which calls
for performance over a period of more than one year, (ii)
which involves more than the sum of $50,000, or (iii) in
which the Company or any Subsidiary has granted
manufacturing rights, "most favored nation" pricing
provisions or marketing or distribution rights relating to
any products or territory or has agreed to purchase a
minimum quantity of goods or services or has agreed to
purchase goods or services exclusively from a certain party;
(d) any written arrangement establishing a partnership or
joint venture;
(e) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed,
or guaranteed (or may create, incur, assume, or guarantee)
indebtedness (including capitalized lease obligations)
involving more than $50,000 or under which it has imposed
(or may impose) a Security Interest on any of its assets,
tangible or intangible;
(f) any written arrangement concerning confidentiality
(other than those entered into the ordinary course of
business) or noncompetition;
(g) any written arrangement involving any shareholder of the
Company or their affiliates, as defined in Rule 12b-2 under
the Securities Exchange Act of 1934 (as amended, the
"Exchange Act") ("Affiliates");
(h) any written arrangement for the purchase or sale of
assets or businesses, or for the purchase or sale of
securities;
(i) any written arrangement under which the consequences of
a default or termination could have a material adverse
effect on the assets, business, financial condition, results
of operations or future prospects of the Company and the
Subsidiaries, taken as a whole (a "Material Adverse
Effect"); and
(j) any other written arrangement (or group of related
written arrangements) either involving more than $50,000 or
not entered into in the ordinary course of business.
The Company has delivered to the Buyer a correct and
complete copy of each written arrangement (as amended to
date) listed in Section 2.14 of the Disclosure Schedule.
23PAGE
With respect to each written arrangement so listed: (i) the
written arrangement is legal, valid, binding and enforceable
and in full force and effect; (ii) the written arrangement
will continue to be legal, valid, binding and enforceable
and in full force and effect immediately following the
Closing in accordance with the terms thereof as in effect
prior to the Closing; and (iii) no party is in material
breach or default, and no event has occurred which with
notice or lapse of time would constitute a material breach
or default or permit termination, modification, or
acceleration, under the written arrangement. Neither the
Company nor any Subsidiary is a party to any oral contract,
agreement or other arrangement which, if reduced to written
form, would be required to be listed in Section 2.14 of the
Disclosure Schedule under the terms of this Section 2.14.
2.15 ACCOUNTS RECEIVABLE. All accounts receivable of the
Company and the Subsidiaries reflected on the Most Recent
Balance Sheet (except for those that have been collected
since the Most Recent Fiscal Quarter End) are valid
receivables subject to no setoffs or counterclaims and are
current and collectible (within 90 days after the date on
which it first became due and payable) net of the applicable
reserve for bad debts on the Most Recent Balance Sheet. All
accounts receivable reflected in the financial or accounting
records of the Company that have arisen since the Most
Recent Fiscal Quarter End (except for those that have been
collected since the Most Recent Fiscal Quarter End) are
valid receivables subject to no setoffs or counterclaims and
are collectible (within 90 days after the date on which it
first became due and payable), net of a reserve for bad
debts in an amount proportionate to the reserve shown on the
Most Recent Balance Sheet.
2.16 POWERS OF ATTORNEY. Except as set forth in Section
2.16 of the Disclosure Schedules, there are no outstanding
powers of attorney executed on behalf of the Company or any
Subsidiary.
2.17 INSURANCE. Section 2.17 of the Disclosure Schedule
sets forth the following information with respect to each
insurance policy (including fire, theft, casualty, general
liability, workers compensation, business interruption,
environmental, product liability and automobile insurance
policies and bond and surety arrangements) to which the
Company or any Subsidiary has been a party, a named insured,
or otherwise the beneficiary of coverage at any time within
the past five years:
(a) the name of the insurer, the name of the policyholder
and the name of each covered insured;
(b) the policy number and the period of coverage;
24PAGE
(c) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis)
and amount (including a description of how deductibles and
ceilings are calculated and operate) of coverage; and
(d) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
Each such insurance policy (i) is enforceable and in full
force and effect; and (ii) will continue to be enforceable
and in full force and effect immediately following the
Closing in accordance with the terms thereof as in effect
prior to the Closing. Neither the Company nor any Subsidiary
(A) is in breach or default (including with respect to the
payment of premiums or the giving of notices) under such
policy, and no event has occurred which, with notice or the
lapse of time, would constitute such a breach or default or
permit termination, modification or acceleration, under such
policy; (B) has received any notice from the insurer
disclaiming coverage or reserving rights with respect to a
particular claim or such policy in general; or (C) has
incurred any loss, damage, expense or liability covered by
any such insurance policy for which it has not properly
asserted a claim under such policy. Each of the Company and
the Subsidiaries is covered by insurance in scope and amount
customary and reasonable for the businesses in which it is
engaged.
2.18 LITIGATION. Section 2.18 of the Disclosure Schedule
identifies, and contains a brief description of, (a) any
unsatisfied judgment, or any order, decree, stipulation or
injunction to which the Company or any Subsidiary is subject
and (b) any claim, complaint, action, suit, proceeding,
hearing or investigation by or before any Governmental
Entity or before any arbitrator to which the Company or any
Subsidiary is a party or, to the knowledge of the Company
and the Subsidiaries, is threatened to be made a party or
which would otherwise have a Material Adverse Effect.
2.19 EMPLOYEES. Section 2.19 of the Disclosure Schedule
contains a list of all employees of the Company and each
Subsidiary, indicating, with respect to each such employee,
his or her position, annual rate of compensation, bonus for
the last fiscal year of the Company, method for calculating
bonus for the current fiscal year and any other arrangement
under which cash compensation is payable by the Company.
Each such employee has entered into a
confidentiality/assignment of inventions agreement with the
Company or a Subsidiary, a copy of which has previously been
delivered to the Buyer. To the knowledge of the Company and
its Subsidiaries, no employee has any plans to terminate
employment with the Company or any Subsidiary. Neither the
Company nor any Subsidiary is a party to or bound by any
collective bargaining agreement, nor has any of them
25PAGE
experienced any strikes, grievances, claims of unfair labor
practices or other collective bargaining disputes. The
Company and the Subsidiaries have no knowledge of any
organizational effort made or threatened, either currently
or within the past five years, by or on behalf of any labor
union with respect to employees of the Company or any
Subsidiary.
2.20 EMPLOYEE BENEFITS.
(a) Section 2.20(a) of the Disclosure Schedule contains a
complete and accurate list of all Employee Benefit Plans (as
defined below) maintained, or contributed to, by the
Company, any Subsidiary, or any ERISA Affiliate (as defined
below). For purposes of this Agreement, "Employee Benefit
Plan" means any "employee pension benefit plan" (as defined
in Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), any "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA), and any
other written or oral plan, agreement or arrangement
involving direct or indirect compensation, including without
limitation insurance coverage, severance benefits,
disability benefits, deferred compensation, bonuses, stock
options, stock purchase, phantom stock, stock appreciation
or other forms of incentive compensation or post-retirement
compensation. For purposes of this Agreement, "ERISA
Affiliate" means any entity which is a member of (i) a
controlled group of corporations (as defined in Section
414(b) of the Code), (ii) a group of trades or businesses
under common control (as defined in Section 414(c) of the
Code), or (iii) an affiliated service group (as defined
under Section 414(m) of the Code or the regulations under
Section 414(o) of the Code), any of which includes the
Company or a Subsidiary. Complete and accurate copies of (i)
all Employee Benefit Plans which have been reduced to
writing, (ii) written summaries of all unwritten Employee
Benefit Plans, (iii) all related trust agreements, insurance
contracts and summary plan descriptions, and (iv) all annual
reports filed on IRS Form 5500, 5500C or 5500R for the last
five plan years for each Employee Benefit Plan, have been
delivered to the Buyer. Each Employee Benefit Plan has been
administered in all material respects in accordance with its
terms and each of the Company, the Subsidiaries and the
ERISA Affiliates has in all material respects met its
obligations with respect to such Employee Benefit Plan and
has made all required contributions thereto. The Company and
all Employee Benefit Plans are in compliance in all material
respects with the currently applicable provisions of ERISA
and the Code and the regulations thereunder.
(b) There are no investigations by any Governmental Entity,
termination proceedings or other claims (except claims for
benefits payable in the normal operation of the Employee
Benefit Plans and proceedings with respect to qualified
26PAGE
domestic relations orders), suits or proceedings against or
involving any Employee Benefit Plan or asserting any rights
or claims to benefits under any Employee Benefit Plan that
could give rise to any material liability.
(c) All the Employee Benefit Plans that are intended to be
qualified under Section 401(a) of the Code have received
determination letters from the Internal Revenue Service to
the effect that such Employee Benefit Plans are qualified
and the plans and the trusts related thereto are exempt from
federal income taxes under Sections 401(a) and 501(a),
respectively, of the Code, no such determination letter has
been revoked and revocation has not been threatened, and no
such Employee Benefit Plan has been amended since the date
of its most recent determination letter or application
therefor in any respect, and no act or omission has
occurred, that would adversely affect its qualification or
materially increase its cost.
(d) Neither the Company, any Subsidiary, nor any ERISA
Affiliate has ever maintained an Employee Benefit Plan
subject to Section 412 of the Code or Title IV of ERISA.
(e) At no time has the Company, any Subsidiary or any ERISA
Affiliate been obligated to contribute to any
"multi-employer plan" (as defined in Section 4001(a)(3) of
ERISA).
(f) There are no unfunded obligations under any Employee
Benefit Plan providing benefits after termination of
employment to any employee of the Company or any Subsidiary
(or to any beneficiary of any such employee), including but
not limited to retiree health coverage and deferred
compensation, but excluding continuation of health coverage
required to be continued under Section 4980B of the Code and
insurance conversion privileges under state law.
(g) No act or omission has occurred and no condition exists
with respect to any Employee Benefit Plan maintained by the
Company, any Subsidiary or any ERISA Affiliate that would
subject the Company, any Subsidiary or any ERISA Affiliate
to any material fine, penalty, tax or liability of any kind
imposed under ERISA or the Code.
(h) No Employee Benefit Plan is funded by, associated with,
or related to a "voluntary employee's beneficiary
association" within the meaning of Section 501(c)(9) of the
Code.
(i) No Employee Benefit Plan, plan documentation or
agreement, summary plan description or other written
communication distributed generally to employees by its
terms prohibits the Company from amending or terminating any
such Employee Benefit Plan except as required by law.
27PAGE
(j) Section 2.20(j) of the Disclosure Schedule discloses
each: (i) agreement with any director, executive officer or
other key employee of the Company or any Subsidiary (A) the
benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction
involving the Company or any Subsidiary of the nature of any
of the transactions contemplated by this Agreement, (B)
providing any term of employment or compensation guarantee
or (C) providing severance benefits or other benefits after
the termination of employment of such director, executive
officer or key employee; (ii) agreement, plan or arrangement
under which any person may receive payments from the Company
or any Subsidiary that may be subject to the tax imposed by
Section 4999 of the Code or included in the determination of
such person's "parachute payment" under Section 280G of the
Code; and (iii) agreement or plan binding the Company or any
Subsidiary, including without limitation any stock option
plan, stock appreciation right plan, restricted stock plan,
stock purchase plan, severance benefit plan, or any Employee
Benefit Plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
2.21 ENVIRONMENTAL MATTERS.
(a) Each of the Company and the Subsidiaries has complied
with all Environmental Laws (as defined below) applicable to
their business operations. For purposes of this Agreement,
"Environmental Law" means any federal, state or local law,
statute, rule or regulation or the common law relating to
the environment or occupational health and safety, including
without limitation any statute, regulation or order
pertaining to (i) treatment, storage, disposal, generation
and transportation of Materials of Environmental Concern (as
defined below); (ii) air, water and noise pollution; (iii)
groundwater and soil contamination; (iv) the release or
threatened release into the environment of Materials of
Environmental Concern, including without limitation
emissions, discharges, injections, spills, escapes or
dumping of pollutants, contaminants or chemicals; (v) the
protection of wild life, marine sanctuaries and wetlands,
including without limitation all endangered and threatened
species; (vi) storage tanks, vessels and containers; (vii)
underground and other storage tanks or vessels, abandoned,
disposed or discarded barrels, containers and other closed
receptacles; (viii) health and safety of employees and other
persons; and (ix) manufacture, processing, use,
distribution, treatment, storage, disposal, transportation
or handling of Materials of Environmental Concern. As used
above, the terms "release" and "environment" shall have the
28PAGE
meaning set forth in the federal Comprehensive Environmental
Compensation, Liability and Response Act of 1980, as amended
("CERCLA").
(b) There have been no releases of any Materials of
Environmental Concern into the environment, at any parcel of
real property or any facility formerly or currently owned or
leased by the Company or a Subsidiary. There has been no
release of Materials of Environmental Concern for which
liability can be imposed on the Company or the Subsidiary
under any Environmental Law. For purposes of this Agreement,
"Materials of Environmental Concern" means any chemicals,
pollutants or contaminants, hazardous substances (as such
term is defined under CERCLA), solid wastes and hazardous
wastes (as such terms are defined under the federal Resource
Conservation and Recovery Act), toxic materials, industrial
materials, oil or petroleum and petroleum products, or any
other material subject to regulation under any Environmental
Law.
(c) There is no pending or, to the knowledge of the Company
and the Subsidiaries, threatened civil or criminal
litigation, written notice of violation or noncompliance,
formal administrative or judicial proceeding, claim, cause
of action, liability, investigation, citation, order,
consent order, consent decree, inquiry or information
request by any Governmental Entity, involving the Company or
any Subsidiary relating to any of the following: (i)
violation of any Environmental Law; (ii) violation of any
permit, license or registration issued under any
Environmental Law; (iii) the disposal, discharge or release
of Materials of Environmental Concern, whether or not in
compliance with Environmental Laws; (iv) the generation,
storage, treatment, transportation, reclamation, recycling
or other handling of Materials of Environmental Concern,
whether or not in compliance with Environmental Laws; (v)
the ownership, operation or use of any landfill, surface
impoundment, pit, pond, lagoon, underground injection well,
waste pile, land treatment unit, wastewater treatment plant,
air pollution control equipment, or any other unit used for
the storage, disposal, handling or treatment of Materials of
Environmental Concern; (vi) the exacerbation of previously
existing environmental contamination; or (vii) exposure to
any Materials of Environmental Concern, noises, odors, or
vibrations at or from any real property or facility formerly
or currently owned or leased by the Company or a Subsidiary.
Without limiting the foregoing, none of the Company nor any
Subsidiary has been named a "potentially responsible party"
under any Environmental Law or has received any
correspondence or notice that it may be named a "potentially
responsible party."
(d) The Company and the Subsidiaries possess all permits,
licenses and/or registrations required under Environmental
29PAGE
Laws for their business operations, and all such permits,
licenses and/or registrations are valid and in full force
and effect.
(e) Set forth in Section 2.21(e) of the Disclosure Schedule
is a list of all environmental, health and safety reports,
investigations, audits, assessments, surveys and analyses,
relating to premises currently or previously owned or
occupied by the Company or a Subsidiary which the Company
has possession of or access to. Complete and accurate copies
of each such report, or the results of each such
investigation have been provided to the Buyer.
(f) To the knowledge of the Company and its Subsidiaries,
all entities, including without limitation transporters,
treatment, storage and disposal facilities, and remediation
companies, used by the Company or a Subsidiary, for the
transportation, storage, disposal, treatment or other
handling of Materials of Environmental Concern possess all
permits, licenses and registrations required under
Environmental Laws. None of the Company or any of its
Subsidiaries have or will have any liability as a result of
any act or omission by any of such entities. To the
knowledge of the Company, there is no previous, pending or
threatened civil or criminal litigation, written notice of
violation or noncompliance, formal administrative or
judicial proceeding, investigation, citation, order, consent
order, consent decree, inquiry or information request by any
Governmental Entity, relating to such entities for any
violations of Environmental Laws.
2.22 LEGAL COMPLIANCE. Each of the Company and the
Subsidiaries, and the conduct and operation of their
respective businesses, are in compliance in all material
respects with all laws (including rules and regulations
thereunder) of any federal, state or local government or
foreign government of a country in which the Company or any
of its Subsidiaries does business, or any Governmental
Entity, which are applicable to the Company or such
Subsidiary, and none of the Company or any Subsidiaries has
received any notice from any Governmental Entity that it is
in violation of, or has violated any such laws (including
rules and regulations thereunder).
2.23 PERMITS. Section 2.23 of the Disclosure Schedule sets
forth a list of all material permits, licenses,
registrations, certificates, orders or approvals from any
Governmental Entity (including without limitation those
issued or required under Environmental Laws and those
relating to the occupancy or use of owned or leased real
property) ("Permits") issued to or held by the Company or
any Subsidiary. Such listed Permits are the only Permits
that are required for the Company and the Subsidiaries to
conduct their respective businesses as presently conducted
30PAGE
or as proposed to be conducted, except for those the absence
of which would not have any Material Adverse Effect. Each
such Permit is in full force and effect and, to the best of
the knowledge of the Company or any Subsidiary, no
suspension or cancellation of such Permit is threatened and,
to the best knowledge of the Company or any Subsidiary,
there is no basis for believing that such Permit will not be
renewable upon expiration. Each such Permit will continue in
full force and effect following the Closing.
2.24 CERTAIN BUSINESS RELATIONSHIPS WITH AFFILIATES. No
Affiliate of the Company or of any Subsidiary (a) owns any
property or right, tangible or intangible, which is used in
the business of the Company or any Subsidiary, (b) has any
claim or cause of action against the Company or any
Subsidiary, or (c) owes any money to, or is owed by money
by, the Company or any Subsidiary. Section 2.24 of the
Disclosure Schedule describes any transactions or
relationships between the Company and any Affiliate thereof
which are reflected in the statements of operations of the
Company included in the Financial Statements.
2.25 BROKERS' FEES. Neither the Company nor any Subsidiary
has any liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to
the transactions contemplated by this Agreement except that
the Company is obligated to pay Xxxxxxx & Company, Inc. and
Xxxx Xxxxxxxxxxx the fees described in Section 2.25 of the
Disclosure Schedule. Except for such fees, the Company shall
have no liability to Xxxxxxx & Company, Inc. nor to Xxxx
Xxxxxxxxxxx under the Engagement Letters or otherwise
arising out of the transactions contemplated hereby or
thereby.
2.26 BOOKS AND RECORDS. The minute books and other similar
records of the Company and each Subsidiary contain true and
complete records of all actions taken at any meetings of the
Company's or such Subsidiary's shareholders, Board of
Directors or any committee thereof and of all written
consents executed in lieu of the holding of any such
meeting. The books and records of the Company and each
Subsidiary accurately reflect in all material respects the
assets, liabilities, business, financial condition and
results of operations of the Company or such Subsidiary and
have been maintained in accordance with good business and
bookkeeping practices.
2.27 CUSTOMERS AND SUPPLIERS. No material purchase order
or commitment of the Company or any Subsidiary is in excess
of normal requirements, nor are prices provided therein in
excess of current market prices for the products or services
to be provided thereunder. No material supplier of the
Company or any Subsidiary has indicated to the Company or
such Subsidiary within the past year that it will stop, or
31PAGE
decrease the rate of, supplying materials, products or
services to them and no material customer of the Company or
any Subsidiary has indicated to the Company or such
Subsidiary within the past year that it will stop, or
decrease the rate of, buying, leasing or licensing
materials, products or services from them. Section 2.27 of
the Disclosure Schedule sets forth a list of (a) each
customer that accounted for more than 5% of the consolidated
revenues of the Company during the last full fiscal year or
the interim period through the Most Recent Fiscal Quarter
End and the amount of revenues accounted for by such
customer during each such period and (b) each supplier that
is the sole supplier of any significant product or component
to the Company or a Subsidiary.
2.28 BANKING FACILITIES.
(a) Section 2.28 of the Disclosure Schedule sets forth a
true, correct and complete list of: (i) each bank, savings
and loan or similar financial institution at which the
Company or any Subsidiary has an account, safety deposit
box, line of credit or credit facility and the numbers of
the accounts or safety deposit boxes maintained by the
Company or any Subsidiary thereat and details, including
terms, of any line of credit or credit facility; and (ii)
the names of all persons authorized to draw on each such
account or to have access to any such safety deposit box
facility, together with a description of the authority (and
conditions thereof, if any) of each such person with respect
thereto.
(b) All of the outstanding indebtedness (secured or
unsecured) for borrowed money of the Company may be prepaid
without the consent or approval of, or prior notice to, any
other person, and without payment of any premium or penalty.
2.29 SURETYSHIPS. Except as set forth in Section 2.29 of
the Disclosure Schedule, none of the Company or any
Subsidiary has any obligation or liability (whether actual,
accrued, accruing, contingent or otherwise) as guarantor,
surety, co-signer, endorser, co-maker, indemnitor or
otherwise in respect of the obligation of any person,
corporation, partnership, joint venture, association,
organization or other entity, except as endorser or maker of
checks or letters of credit, respectively, endorsed or made
in the ordinary course of business.
2.30 BACKLOG. As of December 31, 1996, the Company's
backlog of binding purchase orders with firm shipment dates
no later than March 30, 1997 was at least $1.297 million.
2.31 GOVERNMENT CONTRACTS. The Company has not been
suspended or debarred from bidding on contracts or
subcontracts with any Governmental Entity and no such
32PAGE
suspension or debarment has been initiated or, to the
Company's knowledge, threatened. The consummation of the
transactions contemplated by this Agreement will not result
in any such suspension or debarment. The Company has not
been audited or investigated and is not now being audited or
investigated by the U.S. Government Accounting Office, the
U.S. Department of Defense or any of its agencies, the
Defense Contract Audit Agency, the U.S. Department of
Justice, the Inspector General of any U.S. Governmental
Entity, any similar agencies or instrumentalities of any
foreign Governmental Entity, or any price contractor with a
Governmental Entity nor, to the Company's knowledge, has any
such audit or investigation been threatened. To the
Company's knowledge, there is no valid basis for (a) the
suspension or debarment of the Company from bidding on
contracts or subcontracts with any Governmental Entity or
(b) any claim pursuant to an audit or investigation by any
of the entities named in the foregoing sentence. The Company
has no agreements, contracts or commitments which require it
to obtain or maintain a security clearance with any
Governmental Entity.
2.32 INVENTORIES. All Inventories (as defined below) are
of a quality and quantity usable and salable in the Ordinary
Course of Business. Items included in such Inventories are
carried on the books of the Company at the lower of cost or
market and, with respect to Inventories existing as of the
Most Recent Fiscal Quarter End, are reflected on the Most
Recent Balance Sheet, net of applicable reserves for excess
and obsolete items. Such reserves have been determined in
accordance with past practices and conform to GAAP. The
term "Inventories" includes all stock of raw materials,
work-in-process and finished goods, including demonstration
inventory, owned by the Company, for manufacturing,
assembly, processing, finishing, demonstration and sale or
resale to others.
2.33 DISCLOSURE. No representation or warranty of the
Company in this Agreement and no statement in the Disclosure
Schedule omits to state a material fact necessary to make
the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSITORY SUBSIDIARY
Each of the Buyer and the Transitory Subsidiary represents
and warrants to the Company as follows:
3.1 ORGANIZATION. Each of the Buyer and the Transitory
Subsidiary is a corporation duly organized, validly existing
and in corporate good standing under the laws of the state
of its incorporation. Buyer and Transitory Subsidiary have
33PAGE
delivered to the Company true and correct copies of their
Certificates of Incorporation and By-laws, as amended.
3.2 AUTHORIZATION OF TRANSACTION. Each of the Buyer and
the Transitory Subsidiary has all requisite power and
authority to execute and deliver this Agreement and (in the
case of the Buyer) the Escrow Agreement and to perform its
obligations hereunder and thereunder. The execution and
delivery of this Agreement and (in the case of the Buyer)
the Escrow Agreement by the Buyer and the Transitory
Subsidiary, the performance of this Agreement and (in the
case of the Buyer) the Escrow Agreement and the consummation
of the transactions contemplated hereby and thereby by the
Buyer and the Transitory Subsidiary have been duly and
validly authorized by all necessary corporate action on the
part of the Buyer and the Transitory Subsidiary. This
Agreement has been duly and validly executed and delivered
by the Buyer and the Transitory Subsidiary and constitutes a
valid and binding obligation of the Buyer and the Transitory
Subsidiary, enforceable against them in accordance with its
terms. The Board of Directors of each of the Buyer and the
Transitory Subsidiary has approved this Merger and the
transactions contemplated hereby and the approval of the
stockholders of the Buyer is not required for this Merger.
3.3 NONCONTRAVENTION. Subject to compliance with the
applicable requirements of the Xxxx-Xxxxx-Xxxxxx Act and
the filing of the Merger Documents with the Secretary of
State of the State of California and the Secretary of State
of the State of Delaware, neither the execution and delivery
of this Agreement or (in the case of the Buyer) the Escrow
Agreement by the Buyer or the Transitory Subsidiary, nor the
consummation by the Buyer or the Transitory Subsidiary of
the transactions contemplated hereby or thereby, will (a)
conflict or violate any provision of the charter or Bylaws
of the Buyer or the Transitory Subsidiary, (b) require on
the part of the Buyer or the Transitory Subsidiary any
filing with, or permit, authorization, consent or approval
of any Governmental Entity, (c) conflict with, result in
breach of, constitute (with or without due notice or lapse
of time or both) a default under, result in the acceleration
of, create in any party any right to accelerate, terminate,
modify or cancel, or require any notice, consent or waiver
under, any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security
Interest or other arrangement to which the Buyer or the
Transitory Subsidiary is a party or by which either is bound
or to which any of their assets are subject, or (d) violate
any order, writ, injunction, decree, statute, rule or
regulation applicable to the Buyer or the Transitory
Subsidiary or any of their properties or assets.
34PAGE
3.4 BROKERS' FEES. Neither the Buyer nor the Transitory
Subsidiary has any liability or obligation to pay any fees
or commissions to any broker, finder or agent with respect
to the transactions contemplated by this Agreement.
ARTICLE IV
COVENANTS
4.1 BEST EFFORTS. Each of the Parties shall use its best
efforts to take all actions and to do all things necessary,
proper or advisable to consummate the transactions
contemplated by this Agreement; provided, however, that
notwithstanding anything in this Agreement to the contrary,
the Buyer shall not be required to sell or dispose of or
hold separately (through a trust or otherwise) any assets or
businesses of the Buyer or its Affiliates.
4.2 NOTICES AND CONSENTS. The Company shall use its best
efforts to obtain, at its expense, all such waivers,
permits, consents, approvals or other authorizations from
third parties and Governmental Entities, and to effect all
such registrations, filings and notices with or to third
parties and Governmental Entities, as may be required by or
with respect to the Company in connection with the
transactions contemplated by this Agreement (including
without limitation those listed in Section 2.4 of the
Disclosure Schedule).
4.3 SHAREHOLDERS' APPROVAL. The Company shall take all
action necessary in accordance with applicable law to
convene the Shareholder Meeting at the earliest possible
time after the date hereof for the purpose of approving the
Merger. The Company shall submit the Merger to its
shareholders for their approval, and its Board of Directors
shall recommend to the shareholders, and continue to
recommend until the completion of the Shareholder Meeting,
the adoption of this Agreement and the approval of the
Merger. The Company shall use all reasonable efforts to
solicit proxies from its shareholders and otherwise to
obtain all votes and approvals of the shareholders necessary
for the approval and adoption of the Merger under California
Law and its Amended and Restated Articles of Incorporation
and Bylaws.
4.4 XXXX-XXXXX-XXXXXX ACT. Each of the Parties shall file
at the earliest possible time after the date hereof, the
Notification and Report Forms and related material (if any)
required to be filed by it with the Federal Trade Commission
and the Antitrust Division of the United States Department
of Justice under the Xxxx-Xxxxx-Xxxxxx Act, and each shall
use its best efforts to obtain an early termination of the
applicable waiting period, and shall make promptly any
further filings or information submissions pursuant thereto
that may be necessary, proper or advisable; provided,
35PAGE
however, that the Buyer shall not be obligated to respond to
formal requests for additional information or documentary
material pursuant to 16 C.F.R. 803.20 under the
Xxxx-Xxxxx-Xxxxxx Act except to the extent it elects to do
so in its sole discretion.
4.5 OPERATION OF BUSINESS. Except as contemplated by this
Agreement, during the period from the date of this Agreement
to the Effective Time, the Company shall (and shall cause
each Subsidiary to) conduct its operations in the ordinary
course of business and in compliance with all applicable
laws and regulations and, to the extent consistent
therewith, use all reasonable efforts to preserve intact its
current business organization, keep its physical assets in
good working condition, keep available the services of its
current officers and employees and preserve its
relationships with customers, suppliers and others having
business dealings with it to the end that its goodwill and
ongoing business shall not be impaired in any material
respect. Without limiting the generality of the foregoing,
prior to the Effective Time or termination of this Agreement
pursuant to Section 6.1 hereof, neither the Company nor any
Subsidiary shall, without the written consent of the Buyer:
(a) issue, sell, deliver or agree or commit to issue, sell
or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to
purchase or otherwise) or authorize the issuance, sale or
delivery of, or redeem or repurchase, any stock of any class
or any other securities or any rights, warrants or options
to acquire any such stock or other securities (except
pursuant to the conversion or exercise of Series B Stock,
Series C Stock, Series D Stock, Company Options or Company
Warrants outstanding on the date hereof in accordance with
their terms), or amend any of the terms of any such stock,
securities, rights, warrants or options, except that the
Company may issue to employees hired after the date hereof
options (subject to standard vesting) to purchase an
aggregate of not more than 10,000 shares of Common Stock
pursuant to the Company's 1988 Incentive Stock Option Plan;
(b) split, combine or reclassify any shares of its capital
stock; or declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock;
(c) create, incur or assume any debt not currently
outstanding (including obligations in respect of capital
leases) except in the ordinary course of business; assume,
guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the
obligations of any other person or entity; or make any
loans, advances or capital contributions to, or investments
in, any other person or entity;
36PAGE
(d) enter into, adopt or amend any Employee Benefit Plan or
any employment or severance agreement or arrangement of the
type described in Section 2.20(j) or (except for normal
increases in the ordinary course of business and consistent
with past practices) increase in any manner the compensation
or fringe benefits of, or modify the employment terms of,
its directors, officers or employees, generally or
individually, or pay any benefit not required by the terms
in effect on the date hereof of any existing Employee
Benefit Plan;
(e) acquire, sell, lease, encumber or dispose of any assets
or property (including without limitation any shares or
other equity interests in or securities of any Subsidiary or
any corporation, partnership, association or other business
organization or division thereof), other than purchases and
sales of assets in the ordinary course of business;
(f) amend its Amended and Restated Articles of Incorporation
or Bylaws;
(g) change in any material respect its accounting methods,
principles or practices, except insofar as may be required
by a generally applicable change in GAAP;
(h) discharge or satisfy any Security Interest or pay any
obligation or liability other than in the ordinary course of
business;
(i) mortgage or pledge any of its property or assets or
subject any such assets to any Security Interest other than
in the ordinary course of business;
(j) sell, assign, transfer or license any Intellectual
Property, other than in the ordinary course of business
other than the license of SPM-related technology in
connection with the establishment of PSI Korea on terms
substantially as provided to the Buyer in a memo dated
December 6, 1996;
(k) enter into any contract of the kind described in Section
2.14 or, amend, terminate, take or omit to take any action
that would constitute a violation of or default under, or
waive any rights under, any contract or agreement listed in
Section 2.14 of the Disclosure Schedule;
(l) make or commit to make any capital expenditure in excess
of $25,000 per item;
(m) make any Tax election or, except in the ordinary course
of business, settle or compromise any federal, state, local
or foreign Tax liability;
37PAGE
(n) take any action or fail to take any action permitted by
this Agreement with the knowledge that such action or
failure to take action would result in (i) any of the
representations and warranties of the Company set forth in
this Agreement becoming untrue or (ii) any of the conditions
to the Merger set forth in Article V not being satisfied; or
(o) agree in writing or otherwise to take any of the
foregoing actions.
4.8 FULL ACCESS. The Company shall (and shall cause each
Subsidiary to) permit representatives of the Buyer to have
full access (at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the
Company and the Subsidiaries) to all premises, properties,
financial and accounting records, contracts, other records
and documents, and personnel, of or pertaining to the
Company and each Subsidiary.
4.9 NOTICE OF BREACHES. The Company shall promptly deliver
to the Buyer written notice of any event or development that
would (a) render any statement, representation or warranty
of the Company in this Agreement (including the Disclosure
Schedule) inaccurate or incomplete in any material respect,
or (b) constitute or result in a breach by the Company of,
or a failure by the Company to comply with, any agreement or
covenant in this Agreement applicable to the Company. The
Buyer or the Transitory Subsidiary shall promptly deliver to
the Company written notice of any event or development that
would (i) render any statement, representation or warranty
of the Buyer or the Transitory Subsidiary in this Agreement
inaccurate or incomplete in any material respect, or (ii)
constitute or result in a breach by the Buyer or the
Transitory Subsidiary of, or a failure by the Buyer or the
Transitory Subsidiary to comply with, any agreement or
covenant in this Agreement applicable to such party. No such
disclosure shall be deemed to avoid or cure any such
misrepresentation or breach.
4.10 EXCLUSIVITY. Neither the Company nor any Subsidiary
shall, and the Company shall use its best efforts and shall
cause its subsidiaries to use best efforts to cause their
respective Affiliates and each of their respective officers,
directors, employees, representatives and agents not to,
directly or indirectly, (a) encourage, solicit, initiate,
engage or participate in discussions or negotiations with
any person or entity (other than the Buyer) concerning any
merger, consolidation, sale of material assets, tender
offer, recapitalization, accumulation of shares of the
Company's capital stock, proxy solicitation or other
business combination involving the Company, any Subsidiary
or any division of the Company or any Subsidiary or (b)
provide any non-public information concerning the business,
38PAGE
properties or assets of the Company or any Subsidiary to any
person or entity (other than the Buyer).
4.11 PROXY STATEMENT OR INFORMATION STATEMENT. None of
the information included in or incorporated by reference in
the proxy statement or information statement relating to the
meeting of the Company's shareholders (the "Shareholder
Meeting") to be held in connection with the Merger (the
"Proxy Statement") will, at the date it or any amendments or
supplements thereto are mailed to shareholders, at the time
of the Shareholder Meeting and at the Effective Time,
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary in order to make the statements therein, in light
of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any
event relating to the Company or any of its respective
Affiliates, officers or directors should be discovered by
the Company which should be set forth in an amendment or
supplement to the Proxy Statement, the Company shall
promptly inform the Buyer. Notwithstanding the foregoing,
the Company makes no representation or warranty with respect
to any information supplied by the Buyer or the Transitory
Subsidiary which is contained in any of the foregoing
documents.
4.12 BENEFIT ARRANGEMENTS. Buyer covenants and agrees
that to the extent the existing benefit plans and
arrangements provided by the Company to its employees are
terminated on or after the Effective Time, such employees
shall be entitled to participate in benefit plans and
arrangements which are, in the aggregate, comparable to the
benefit plans and arrangements which are available and
subsequently become available to employees of the Buyer's
Subsidiaries.
ARTICLE V
CONDITIONS TO CONSUMMATION OF MERGER
5.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each Party to consummate the Merger are
subject to the satisfaction of the following conditions:
(a) this Agreement and the Merger shall have received the
Requisite Shareholder Approval;
(b) all applicable waiting periods (and any extensions
thereof) under the Xxxx-Xxxxx-Xxxxxx Act shall have expired
or otherwise been terminated;
(c) no action, suit or proceeding shall be pending or
threatened by or before any Governmental Entity wherein an
unfavorable judgment, order, decree, stipulation or
injunction would (i) prevent consummation of any of the
39PAGE
transactions contemplated by this Agreement or (ii) cause
any of the transactions contemplated by this Agreement to be
rescinded following consummation.
5.2 CONDITIONS TO OBLIGATIONS OF THE BUYER AND THE
TRANSITORY SUBSIDIARY. The obligation of each of the Buyer
and the Transitory Subsidiary to consummate the Merger is
subject to the satisfaction of the following additional
conditions:
(a) the holders of at least ninety percent (90%) of the
outstanding shares of the Company Common Stock and 90% of
the outstanding shares of each series of Preferred Stock
entitled to vote therefor, shall have voted in favor of the
Merger;
(b) the Company and the Subsidiaries shall have obtained all
of the waivers, permits, consents, approvals or other
authorizations, and effected all of the registrations,
filings and notices, referred to in Section 4.2;
(c) no action, suit or proceeding shall be pending or
threatened by or before any Governmental Entity wherein an
unfavorable judgment, order, decree, stipulation or
injunction would affect adversely the right of the Buyer to
own, operate or control any of the assets and operations of
the Surviving Corporation and the Subsidiaries following the
Merger, and no such judgment, order, decree, stipulation or
injunction shall be in effect; provided that any suit or
action filed prior to the Effective Time against the Company
by Digital Instruments Corporation asserting any patent
infringement claim made by Digital Instruments Corporation
related to the allegations described in Section 2.12(c) of
the Disclosure Schedules shall be deemed not to adversely
affect the rights of the Buyer following the Merger;
(d) the representations and warranties of the Company set
forth in Article II shall be true and correct when made on
the date hereof and shall be true and correct in all
material respects as of the Effective Time as if made as of
the Effective Time, except for representations and
warranties made as of a specific date, which shall be true
and correct as of such date; provided that any suit or
action filed by Digital Instruments Corporation described in
Section 5.2(c) shall not be deemed to make any
representation untrue in any material respect.
(e) the Company shall have performed or complied with its
agreements and covenants required to be performed or
complied with under this Agreement as of or prior to the
Effective Time;
(f) the Company shall have delivered to the Buyer and the
Transitory Subsidiary a certificate (without qualification
40PAGE
as to knowledge or materiality or otherwise) to the effect
that each of the conditions specified in clauses (a) through
(d) of this Section 5.2 is satisfied in all respects;
(g) the Buyer and the Transitory Subsidiary shall have
received from Venture Law Group, counsel to the Company, an
opinion dated as of the Closing Date in the form attached as
Exhibit C;
(h) the Buyer and the Transitory Subsidiary shall have
received the resignations, effective as of the Effective
Time, of each director and officer of the Company and the
Subsidiaries specified by the Buyer in writing at least five
business days prior to the Closing;
(i) all agreements between the Company and the Company
Shareholders, including, without limitation, the Series B
Agreement, the Series C Agreement, the Series D Agreement
and the Series E Agreement shall have been terminated prior
to, or shall terminate effective upon, the Effective Time
with the effect that the Company shall have no further
obligation or liability thereunder;
(j) all Company Warrants shall have been exercised prior to,
or shall be exercised effective upon, the Effective Time
with the effect that the Company shall have no further
obligation or liability thereunder;
(k) each of Xxxx Xxxxxx, Xxxxxxx Xxxx, Xxxxx X. Xxx, Xxxxxx
Xxxxxxx, Xxxxxxx Xxxxxx and Xxxxx Xxxxx shall have executed
a non-competition agreement in substantially the form
attached hereto as Exhibit D;
(l) in response to its recent application, the Company shall
have received Export Commodity Control Number
classifications for the Company's products from the United
States Department of Commerce, which classifications shall
be reasonably satisfactory to Buyer;
(m) the Company's Closing Backlog shall be at least
$1,500,000;
(n) the Company shall have signed a license agreement and
side letter with IBM in the form attached hereto as Exhibit
F, Exhibit 2 of which shall require total payments of not
more than $120,000 per year from the Company to IBM; and
(o) all actions to be taken by the Company in connection
with the consummation of the transactions contemplated
hereby and all certificates, opinions, instruments and other
documents required to effect the transactions contemplated
hereby shall be reasonably satisfactory in form and
substance to the Buyer.
41PAGE
5.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligation of the Company to consummate the Merger is
subject to the satisfaction of the following additional
conditions:
(a) the representations and warranties of the Buyer and the
Transitory Subsidiary set forth in Article III shall be true
and correct when made on the date hereof and shall be true
and correct in all material respects as of the Effective
Time as if made as of the Effective Time, except for
representations and warranties made as of a specific date,
which shall be true and correct as of such date;
(b) each of the Buyer and the Transitory Subsidiary shall
have performed or complied with its agreements and covenants
required to be performed or complied with under this
Agreement as of or prior to the Effective Time;
(c) each of the Buyer and the Transitory Subsidiary shall
have delivered to the Company a certificate (without
qualification as to knowledge or materiality or otherwise)
to the effect that each of the conditions specified in
clauses (a) and (b) of this Section 5.3 is satisfied in all
respects; and
(d) the Company shall have received from Xxxx X. Xxxxxxxxx,
General Counsel of the Buyer, an opinion dated as of the
Closing Date in the form attached as Exhibit E.
(e) all actions to be taken by the Buyer and the Transitory
Subsidiary in connection with the consummation of the
transactions contemplated hereby and all certificates,
instruments and other documents required to effect the
transactions contemplated hereby shall be reasonably
satisfactory in form and substance to the Company.
ARTICLE VI
TERMINATION
6.1 TERMINATION OF AGREEMENT. The Parties may terminate
this Agreement prior to the Effective Time (whether before
or after Requisite Shareholder Approval) as provided below:
(a) the Parties may terminate this Agreement by mutual
written consent duly authorized by all necessary corporate
actions;
(b) the Buyer may terminate this Agreement by giving written
notice to the Company in the event the Company is in breach
of any material representation, warranty or covenant
contained in this Agreement, and such breach is not remedied
within 10 days of delivery of written notice thereof, and
the Company may terminate this Agreement by giving written
notice to the Buyer and the Transitory Subsidiary in the
42PAGE
event the Buyer or the Transitory Subsidiary is in breach of
any material representation, warranty or covenant contained
in this Agreement, and such breach is not remedied within 10
days of delivery of written notice thereof;
(c) any Party may terminate this Agreement by giving written
notice to the other Parties at any time after the Company
Shareholders have voted on whether to approve this Agreement
and the Merger in the event this Agreement and the Merger
fail to receive the Requisite Shareholder Approval;
(d) any Party may terminate this Agreement if (i) there
shall be an order of a court in effect to prevent
consummation of this Agreement or (ii) there shall be any
action taken, or any statute, rule, regulation or order
enacted, promulgated, issued or deemed applicable to this
Agreement or the transactions contemplated hereby, by any
Governmental Entity that would make the consummation of this
Agreement illegal;
(e) the Buyer may terminate this Agreement by giving written
notice to the Company if the Closing shall not have occurred
on or before March 31, 1997 by reason of the failure of any
condition precedent under Section 5.1 or 5.2 hereof (unless
the failure results from a breach by the Buyer or the
Transitory Subsidiary of any representation, warranty or
covenant contained in this Agreement); or
(f) the Company may terminate this Agreement by giving
written notice to the Buyer and the Transitory Subsidiary if
the Closing shall not have occurred on or before March 31,
1997 by reason of the failure of any condition precedent
under Section 5.1 or 5.3 hereof (unless the failure results
from a breach by the Company of any representation, warranty
or covenant contained in this Agreement).
6.2 EFFECT OF TERMINATION. If any Party terminates this
Agreement pursuant to Section 6.1, all obligations of the
Parties hereunder shall terminate without any liability of
any Party or its officers or directors, to any other Party,
except to the extent such termination results from the
breach by such Party of any material representation,
warranty or covenant contained in this Agreement, provided
that the obligations under Section 8.1 shall survive the
termination of this Agreement.
ARTICLE VII
DEFINITIONS
For purposes of this Agreement, each of the following
defined terms is defined in the Section of this Agreement
indicated below.
43PAGE
DEFINED TERM SECTION
SECTION
Affiliate 2.14(g)
Amended and Restated Articles of 2.1
Incorporation
Buyer Introduction
Buyer Common Stock 1.12
Buyer Options 1.12
California Law 1.1
CERCLA 2.21(a)
Certificate 1.9(b)
Closing 1.6
Closing Backlog 1.5(b)
Closing Backlog Statement 1.5(b)
Closing Balance Sheet 1.5(b)
Closing Certificate 1.9(a)
Closing Date 1.6
Closing Consideration 1.5(c)
Code 2.9(c)
Common Stock Consideration 1.5(a)
Company Introduction
Company Common Stock 1.5(a)
Company Options 1.12
Company Shares 1.5(a)
Company Shareholder 1.5(b)
Company Shareholder Representative 1.5(b)
Company Warrants 2.2
Delaware Law 1.1
Disclosure Schedule Article II
Dissenting Shares 1.5(d)
Draft Closing Backlog Statement 1.5(b)
Draft Closing Balance Sheet 1.5(b)
Effective Time 1.3
Employee Benefit Plan 2.20(a)
Engagement Letters 1.5(b)
Environmental Law 2.21(a)
ERISA 2.20(a)
ERISA Affiliate 2.20(a)
Escrow Agreement 1.7
Escrow Agent 1.7
44PAGE
Escrow Amount 1.1
Exchange Act 2.14(g)
Financial Statements 2.6
GAAP 2.6
Governmental Entity 2.4
Xxxx-Xxxxx-Xxxxxx Act 2.4
Initial Escrow Amount 1.5(c)
Intellectual Property 2.12(a)
Inventories 2.32
Letter of Transmittal 1.9(b)
Material Adverse Effect 2.14
Materials of Environmental Concern 2.21(b)
Merger 1.1
Merger Consideration 1.5(b)
Merger Documents 1.3
Most Recent Balance Sheet 2.8
Most Recent Fiscal Quarter End 2.6
Net Assets 1.5(b)
Neutral Auditors 1.5(b)
Option Exchange Ratio 1.12
Optionholders 1.12
Ordinary Course of Business Article II
Outstanding Common Stock 1.5(a)
Outstanding Series B Stock 1.5(a)
Outstanding Series C Stock 1.5(a)
Outstanding Series D Stock 1.5(a)
Outstanding Series E Stock 1.5(a)
Party Introduction
Paying Agent 1.9(b)
Permit 2.23
Proxy Statement 2.34
Requisite Shareholder Approval 2.3
Securities Act 2.2
Security Interest 2.4
Series B Agreement 2.1
Series C Agreement 2.1
Series D Agreement 2.1
Series E Agreement 2.1
Series B Stock 1.5(a)
45PAGE
Series C Stock 1.5(a)
Series D Stock 1.5(a)
Series E Stock 1.5(a)
Shareholder Meeting 2.34
Subsidiary 2.4
Surviving Corporation 1.1
Taxes 2.9(a)
Tax Returns 2.9(a)
Third Party Intellectual Property Rights 2.12(a)
Transitory Subsidiary Introduction
ARTICLE VIII
MISCELLANEOUS
8.1 PRESS RELEASES AND ANNOUNCEMENTS. No Party shall issue
any press release or public disclosure relating to the
subject matter of this Agreement without the prior approval
of the other Parties, which shall not unreasonably be
withheld; provided, however, that the Buyer may make any
public disclosure it believes in good faith is required by
law, regulation or stock exchange rule (in which case the
Buyer shall advise the other Parties and provide them with a
copy of the proposed disclosure prior to making the
disclosure).
8.2 TAX PAYMENTS.
(a) Except as provided in Section 8.2(b) hereof:
(i) The Company Shareholders shall be liable for any
and all claims, losses, liabilities, obligations, damages,
impositions, assessments, demands, judgments, settlements,
costs and expenses (including reasonable attorneys',
accountants' and experts' fees and expenses) with respect to
Taxes of the Company or for which the Company may be liable
with respect to any and all periods (Taxes attributable to
any portions thereof to be determined in accordance with
subsection (b)) ending before the Effective Time
("Pre-Closing Periods"), except to the extent such Taxes are
specifically accrued on the face of the Closing Balance
Sheet.
(ii) The Buyer shall be liable for any and all claims,
losses, liabilities, obligations, damages, impositions,
assessments, demands, judgments, settlements, costs and
expenses (including reasonable attorneys', accountants' and
experts' fees and expenses and any applicable assessments of
interest and penalties) with respect to Taxes attributable
to the Company or for which the Company may be liable with
respect to any and all periods, or portions thereof,
46PAGE
beginning on or after the Effective Time ("Post-Closing
Periods") and with respect to any Taxes arising from the
Merger solely due to the substitution of the Transitory
Subsidiary for the Company as the Surviving Corporation.
(b) In the case of any Tax that is attributable to a
taxable period which begins before the Closing Date and ends
on or after the Closing Date, the amount of Taxes
attributable to the Pre-Closing Period shall be determined
as follows:
(i) In the case of ad valorem Taxes imposed on the
Company and franchise or similar Taxes imposed on the
Company based on capital (including net worth or long-term
debt) or number of shares of stock authorized, issued or
outstanding, the portion attributable to the Pre-Closing
Period shall be the amount of such Taxes for the entire
taxable period multiplied by a fraction, the numerator of
which is the number of days in the Pre-Closing Period and
the denominator of which is the number of days in the entire
taxable period.
(ii) In the case of all other Taxes, the portion
attributable to the Pre-Closing Period shall be determined
on the basis of an interim closing of the books of the
Company as of the Effective Time, and the determination of
the hypothetical Tax for such Pre-Closing Period, determined
on the basis of such interim closing of the books, without
annualization.
(c) For purposes of this Section 8.2, any and all
transactions or events contemplated by this Agreement that
occur prior to the Effective Time shall be deemed to have
occurred in the Pre-Closing Period.
(d) To the maximum extent permitted by applicable law,
neither the Buyer nor any of the Buyer's Affiliates or
Subsidiaries (including, with respect to Post-Closing
Periods, the Company) will carry back to any Pre-Closing
Period of the Company, any loss, credit or deduction
incurred or generated in, or attributable to, any
Post-Closing Period that would affect any Tax Return of the
Company for such period, and the Buyer agrees to make or
exercise, or cause to be made or exercised, any and all
necessary or permitted elections or options available under
applicable law to avoid any such carryback.
(e) Any payments to be made by the Company Shareholders
under this Section 8.2 shall be deducted from the Escrow
Amount and returned by the Escrow Agent to the Buyer, as
provided in the Escrow Agreement.
47PAGE
(f) All payments under Sections 1.5(b), 8.2 or 8.12 of this
Agreement and under the Escrow Agreement shall be deemed
adjustments to the Merger Consideration for Tax purposes.
8.3 NO THIRD PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any person other than the
Parties and their respective successors and permitted
assigns.
8.4 ENTIRE AGREEMENT. This Agreement (including the
documents referred to herein) constitutes the entire
agreement among the Parties and supersedes any prior
understandings, agreements, or representations by or among
the Parties, written or oral, with respect to the subject
matter hereof.
8.5 SUCCESSION AND ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the Parties named
herein and their respective successors and permitted
assigns. No Party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the
prior written approval of the other Parties; provided that
the Transitory Subsidiary may assign its rights, interests
and obligations hereunder to an Affiliate of the Buyer.
8.6 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the same
instrument.
8.7 HEADINGS. The section headings contained in this
Agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this
Agreement.
8.8 NOTICES. All notices, requests, demands, claims, and
other communications hereunder shall be in writing. Any
notice, request, demand, claim, or other communication
hereunder shall be deemed duly delivered two business days
after it is sent by registered or certified mail, return
receipt requested, postage prepaid, or one business day
after it is sent via a reputable nationwide overnight
courier service, in each case to the intended recipient as
set forth below:
If to the Company: Copy to:
Park Scientific Instruments Venture Law Group
0000 Xxxxxxxx Xxxxxx 0000 Xxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000 Xxxxx Xxxx, XX 00000
48PAGE
Attention: President Attention: Xxxxxxx X.
Xxxxxxx, Esq.
If to the Buyer or the Copy to:
Transitory Subsidiary:
ThermoSpectra Corporation Thermo Electron
Corporation
00 Xxxxx Xxxxxx 00 Xxxxx Xxxxxx
Xxxxxxx, XX 00000 Xxxxxxx, XX 00000
Attention: President Attention: General
Counsel
Any Party may give any notice, request, demand, claim, or
other communication hereunder using any other means
(including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless
and until it actually is received by the party for whom it
is intended. Any Party may change the address to which
notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
8.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the
law of conflicts) of the State of Delaware.
8.10 AMENDMENTS AND WAIVERS. The Parties may mutually
amend any provision of this Agreement at any time prior to
the Effective Time; provided, however, that any amendment
effected subsequent to the Requisite Shareholder Approval
shall be subject to the restrictions contained in the
California Law. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing
and signed by all of the Parties. No waiver by any Party of
any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
8.11 SEVERABILITY. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any
jurisdiction shall not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any
other situation or in any other jurisdiction. If the final
judgment of a court of competent jurisdiction declares that
any term or provision hereof is invalid or unenforceable,
49PAGE
the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to
reduce the scope, duration, or area of the term or
provision, to delete specific words or phrases, or to
replace any invalid or unenforceable term or provision with
a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time
within which the judgment may be appealed.
8.12 EXPENSES. Except as set forth in the Escrow
Agreement, each of the Parties shall bear its own costs and
expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions
contemplated hereby; provided, however, that if the Merger
is consummated, the Company and the Subsidiaries shall not
incur more than an aggregate of $75,000 in legal and
accounting fees and expenses in connection with the Merger,
and any fees and expenses incurred by the Company or its
Subsidiaries in excess of such amount shall be deducted from
the Escrow Amount and returned by the Escrow Agent to the
Buyer, as provided in the Escrow Agreement.
8.13 SPECIFIC PERFORMANCE. Each of the Parties
acknowledges and agrees that one or more of the other
Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance
with their specific terms or otherwise are breached.
Accordingly, each of the Parties agrees that the other
Parties shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of
the United States or any state thereof having jurisdiction
over the Parties and the matter, in addition to any other
remedy to which it may be entitled, at law or in equity.
8.14 CONSTRUCTION. The language used in this Agreement
shall be deemed to be the language chosen by the Parties
hereto to express their mutual intent, and no rule of strict
construction shall be applied against any Party. Any
reference to any federal, state, local, or foreign statute
or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context
requires otherwise.
8.15 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits
and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
8.16 SURVIVAL OF THE REPRESENTATIONS AND WARRANTIES. All
of the Company's representations and warranties in this
Agreement, as modified by the Disclosure Schedule, shall
50PAGE
survive the Effective Time and continue until the earlier of
(i) the date two years from the Effective Time or (ii) the
release of the escrow established pursuant to the Escrow
Agreement, whereupon the representations and warranties
shall expire.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
51PAGE
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
THERMOSPECTRA CORPORATION
By: /s/ Xxxx Xxxxx-Xxxxxxx
----------------------
Name: Xxxx Xxxxx-Xxxxxxx
Title: President
PARK ACQUISITION CORP.
By: /s/ Xxxx Xxxxx-Xxxxxxx
----------------------
Name: Xxxx Xxxxx-Xxxxxxx
Title: President
PARK SCIENTIFIC INSTRUMENTS CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
---------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
