2/22/96
PURCHASE AGREEMENT
BETWEEN
INTERNATIONAL POWER SYSTEMS, INC.
and
XXXX-XXXXX CORPORATION
relating to
POWER CONVERTIBLES CORPORATION
Dated as of February 23, 1996
ARTICLE 1 DEFINITIONS. . . . . . . . . . . . . . . . . . . .1
ARTICLE 2 PURCHASE OF STOCK AND INTERCOMPANY
INDEBTEDNESS . . . . . . . . . . . . . . . . . . .7
2.1 Purchase of Stock and Intercompany Indebtedness . 7
2.2 Purchase Price. . . . . . . . . . . . . . . . . . 7
2.3 Purchase Price Adjustment . . . . . . . . . . . . 8
2.4 Post-Closing Payment in Respect of Income Taxes . 9
2.5 Elections Under Section 338 of the Code . . . . . 9
ARTICLE 3 CLOSING. . . . . . . . . . . . . . . . . . . . . .9
3.1 The Closing . . . . . . . . . . . . . . . . . . . 9
3.2 Obligations of Parent . . . . . . . . . . . . . . 9
3.3 Obligations of Purchaser. . . . . . . . . . . . . 10
ARTICLE 4 CONDITIONS . . . . . . . . . . . . . . . . . . . .11
4.1 Conditions to Obligation of Parent and
Its Subsidiaries . . . . . . . . . . . . . . . . 11
4.2 Conditions to Obligations of Purchaser. . . . . . 11
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PARENT . . . . .13
5.1 Organization and Qualification. . . . . . . . . . 13
5.2 Authority . . . . . . . . . . . . . . . . . . . . 13
5.3 Capitalization. . . . . . . . . . . . . . . . . . 15
5.4 Financial Statements. . . . . . . . . . . . . . . 16
5.5 Related Party Transactions. . . . . . . . . . . . 16
5.6 Absence of Certain Changes or Events. . . . . . . 17
5.7 Assets. . . . . . . . . . . . . . . . . . . . . . 17
5.8 Intellectual Property . . . . . . . . . . . . . . 18
5.9 Contracts and Commitments . . . . . . . . . . . . 18
5.10 Litigation, Etc.. . . . . . . . . . . . . . . . . 19
5.11 Compliance with Law . . . . . . . . . . . . . . . 19
5.12 Income Taxes and Taxes. . . . . . . . . . . . . . 19
5.13 Employee Benefit Plans. . . . . . . . . . . . . . 22
5.14 Environmental Compliance. . . . . . . . . . . . . 24
5.15 Finders . . . . . . . . . . . . . . . . . . . . . 24
5.16 Disclosure. . . . . . . . . . . . . . . . . . . . 25
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER. . . .25
6.1 Organization and Qualification. . . . . . . . . . 25
6.2 Authority . . . . . . . . . . . . . . . . . . . . 25
6.3 No Breach . . . . . . . . . . . . . . . . . . . . 25
6.4 Finders . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 7 COVENANTS. . . . . . . . . . . . . . . . . . . . .26
7.1 Notice of Breach of Representation. . . . . . . . 26
7.2 Covenants of Parent . . . . . . . . . . . . . . . 26
7.3 Obtaining Consents. . . . . . . . . . . . . . . . 28
7.4 Publicity . . . . . . . . . . . . . . . . . . . . 28
7.5 Records . . . . . . . . . . . . . . . . . . . . . 29
7.6 HSR Act Filing. . . . . . . . . . . . . . . . . . 29
7.7 Minority Offer. . . . . . . . . . . . . . . . . . 29
7.8 Employee Matters. . . . . . . . . . . . . . . . . 30
7.9 Documentation of Intercompany Indebtedness. . . . 30
7.10 Further Assurances. . . . . . . . . . . . . . . . 30
ARTICLE 8 RESTRICTIVE COVENANTS. . . . . . . . . . . . . . .30
8.1 Non-Competition . . . . . . . . . . . . . . . . . 30
8.2 Non-Solicitation of Employees . . . . . . . . . . 31
8.3 Non-Solicitation or Interference with
Customers and Suppliers . . . . . . . . . . . . . 31
8.4 Confidential Information. . . . . . . . . . . . . 31
8.5 Acknowledgments . . . . . . . . . . . . . . . . . 31
ARTICLE 9 TERMINATION. . . . . . . . . . . . . . . . . . . .31
9.1 Termination . . . . . . . . . . . . . . . . . . . 31
9.2 Procedure . . . . . . . . . . . . . . . . . . . . 31
9.3 Effect of Termination . . . . . . . . . . . . . . 32
ARTICLE 10 INDEMNIFICATION. . . . . . . . . . . . . . . . . .32
10.1 Survival of Representations and Warranties. . . . 32
10.2 Indemnification by Parent . . . . . . . . . . . . 32
10.3 Indemnification by Purchaser. . . . . . . . . . . 33
10.4 Terms and Conditions of Indemnification . . . . . 33
ARTICLE 11 MISCELLANEOUS. . . . . . . . . . . . . . . . . . .35
11.1 Expenses. . . . . . . . . . . . . . . . . . . . . 35
11.2 Entire Agreement. . . . . . . . . . . . . . . . . 35
11.3 Notices . . . . . . . . . . . . . . . . . . . . . 35
11.4 Waiver. . . . . . . . . . . . . . . . . . . . . . 36
11.5 Binding Effect. . . . . . . . . . . . . . . . . . 36
11.6 No Third-Party Beneficiaries. . . . . . . . . . . 36
11.7 Severability. . . . . . . . . . . . . . . . . . . 37
11.8 Headings. . . . . . . . . . . . . . . . . . . . . 37
11.9 Counterparts. . . . . . . . . . . . . . . . . . . 37
11.10 Governing Law . . . . . . . . . . . . . . . . . . 37
Purchase Agreement
between
International Power Systems, Inc.
and
Xxxx-Xxxxx Corporation
PURCHASE AGREEMENT, dated as of February 23, 1996, between INTER-
NATIONAL POWER SYSTEMS, INC., an Arizona corporation ("Purchaser"), and XXXX-
XXXXX CORPORATION, a Delaware corporation ("Parent").
WHEREAS, Purchaser desires to acquire all the shares of capital stock of
Power Convertibles Corporation, an Arizona corporation (the "Corporation"),
directly or indirectly owned by Parent, and all indebtedness (consisting of
principal amounts, accrued but unpaid interest and any fees or other amounts
necessary to repay such indebtedness in full) of the Corporation and its Sub-
sidiaries (as such term is defined below) owed to Parent and its Subsidiaries
("Intercompany Indebtedness").
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1 DEFINITIONS
The following terms have the following meanings when used in this Agree-
ment:
"Affiliate" means, with regard to any Person, any other Persons con-
trolling, controlled by or under common control with such Person.
"Anti-Dilution Agreement" means the agreement between the Corporation
(under the name Analog Microsystems, Inc.) and the Relevant Parent Subsidiary,
dated December 7, 1988.
"Authorizations" means all licenses, permits, approvals, authorizations,
qualifications, or the like, issued or to be issued by any Governmental
Authorities, relating to the Corporation, any of its Subsidiaries or their
business.
"Bank" means Norwest Bank Arizona, N.A., and affiliated companies.
"Bank Debt" means amounts necessary to repay indebtedness owed by the
Corporation to the Bank as of a specified date, including without limitation
principal, accrued but unpaid interest and any applicable prepayment
penalties, breakage
fees, premiums or other fees that the Corporation would owe the Bank if the
Bank Debt were repaid in full on such date, as more fully described on
Exhibit 1A hereto. As of December 31, 1995, the amount of the Bank Debt was
Two Million Two Hundred Forty-Seven Thousand Three Hundred Forty-Four and
87/100 Dollars ($2,247,344.87).
"Claimant" has the meaning given to it in Section 10.4(a).
"Closing" means the closing and consummation of the transactions con-
templated hereby.
"Closing Date" has the meaning given to it in Section 3.1.
"Closing Documents" has the meaning given to it in Section 5.2.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means documents, data, reports, analyses,
compilations, studies, interpretations, projections, forecasts, records,
extracts, notes or other written information regarding Intellectual Property
prepared by the Corporation excluding information which (i) becomes
generally available to the public other than as a result of disclosures by
Parent or of its offices or directors after the date hereof; or (ii) becomes
available to any Person on a non-confidential basis from sources other than
Parent or its subsidiaries, or which is required to be disclosed to comply
with any Governmental Authority.
"Corporation" has the meaning given to it in the recitals hereto.
"Corporation Common Stock" means the Common Stock, 01/100 Dollar ($.01)
par value, of the Corporation.
"Corporation Preferred Stock" means, collectively, the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock.
"directly or indirectly" means as an individual, partner, shareholder,
creditor, director, officer, principal, agent, employee, trustee, consultant,
advisor or in any other relationship or capacity.
"DOL" means the United States Department of Labor.
"Encumbrance" means any lien, charge, encumbrance, option, right of first
refusal, security interest, easement, obligation or claim or other third party
right of any kind.
"Environment" means any surface or subsurface physical medium or natural
resource, including, air, land, soil, surface waters, ground waters,
stream and river sediments, and biota.
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"Environmental Laws" means any Foreign, federal, state, local or municipal
Laws relating to injury to, or the pollution or protection of, human health
and safety or the Environment.
"Environmental Liabilities" means any claims, judgments, damages (in-
cluding punitive damages), losses, penalties, fines, liabilities,
encumbrances, liens, violations, costs and expenses (including attorneys and
consultants fees) of investigation, remediation or defense of any matter
relating to human health, safety or the Environment of whatever kind or
nature by any party, entity or authority, (A) which are incurred as a result
of (i) the existence of Hazardous Substances in, on, under, at or emanating
from any real property presently or formerly owned or operated by the Corpora-
tion or any of its Subsidiaries or (ii) the offsite transportation, treatment,
storage or disposal of Hazardous Substances generated by the Corporation or
any of its subsidiaries or (iii) the violation of any Environmental Laws or
(B) which arise under the Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"ERISA Affiliate" has the meaning given to it in Section 5.13(a).
"Escrow Agent" means First Interstate Bank of Arizona, N.A., or such
other escrow agent mutually agreed upon by Purchaser and Parent, who shall
serve as escrow agent under the Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement among Parent, Purchaser
and the Escrow Agent in the form annexed hereto as Exhibit 1B.
"Financial Information" means documents, data, reports, analyses,
compilations, studies, interpretations, projections, forecasts, records,
extracts, notes or other written information regarding the financial status
or historical performance of the Corporation, except as required to
comply with the requirements or requests of any Governmental Authority.
"Financial Statements" means the audited consolidating and consolidated
balance sheets and related consolidating and consolidated statements of cash
flows of the Corporation and its Subsidiaries as at December 31, 1995, 1994
and 1993, and for the fiscal years then ended, together with the opinions of
the auditors thereon.
"Foreign" means any jurisdiction outside of the United States, including,
without limitation, any federal, national, state, local or municipal juris-
diction in Mexico or Ireland.
"Foreign Subsidiary" means any Subsidiary which is organized under the
laws of a Foreign jurisdiction.
"Fully Diluted Basis" means on a fully diluted basis based on all cur-
rently outstanding shares of Corporation Common Stock and upon the assumptions
that
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(i) all outstanding Stock that is directly or indirectly convertible into
Corporation Common Stock has been so converted and such shares of Corporation
Common Stock are outstanding, (ii) all Options are fully vested and have been
exercised in full and all shares of Corporation Common Stock covered thereby
are outstanding, and (iii) all Unauthorized Options are validly granted and
fully vested and have been exercised in full, and all shares of Corporation
Common Stock covered thereby are outstanding.
"GAAP" means generally accepted accounting principles and practices in
the United States on the date hereof.
"Governmental Authority" means any nation or government, any state, local
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Hazardous Substances" means petroleum, petroleum products, petroleum-
derived substances, radioactive materials, hazardous wastes, polychlorinated
biphenyls, lead based paint, urea formaldehyde, asbestos or any materials
containing asbestos, and any materials or substances regulated or defined as
or included in the definition of "hazardous substances," "hazardous materials,"
"hazardous wastes," "hazardous constituents," "toxic substances," "pollutants,"
"contaminants" or any similar denomination intended to classify substances by
reason of toxicity, carcinogenicity, ignitability, corrosivity or reactivity
under any Environmental Law.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended, 15 U.S.C. subsection 18a, and the regulations promulgated there-
under.
"Income Taxes" (or "Income Tax" where the context requires) means all
taxes (other than "Taxes" as defined in this Agreement), governmental charges
and assessments imposed by United States (i) federal; (ii) state; and (iii)
local Governmental Authorities on the income of Parent, the Corporation or
any Subsidiary of the Corporation, or otherwise payable by Parent, the
Corporation or any Subsidiary of the Corporation to United States (a)
federal; (b) state; and (c) local Governmental Authorities, with respect to
the income of Parent, the Corporation or any Subsidiary of the Corporation,
whether attributable to statutory provisions or applicable regulations and
including interest charges, additions to tax and penalties with respect
thereto.
"Income Tax Return" means each and every report, return, declaration,
information return, statement or other information required to be supplied to
a taxing authority or other Governmental Authority in connection with the
determination, assessment, collection or administration of any Income Tax or
Income Taxes filed by or including Parent or the Corporation, including
without limitation, any combined or consolidated return for any group of
entities including the Corporation.
"Indemnitor" has the meaning given to it in Section 10.4(a).
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"Intellectual Property" means all patents, trademarks, service marks,
trade names and copyrights, and all pending applications therefor, and all
trade secrets, computer programs and software, inventions and other pro-
prietary processes and information of any kind, owned by the Corporation or
any of its Subsidiaries or in which the Corporation or any of its Subsidiaries
has a proprietary or ownership right or interest or otherwise relating to or
used in the business of the Corporation or any of its Subsidiaries.
"Intercompany Indebtedness" has the meaning given to it in the recitals
hereto. As of December 31, 1995, the amount of the Intercompany Indebtedness
was Two Million Six Hundred Seven Thousand Five Hundred Ninety-Eight and
06/100 Dollars ($2,607,598.06).
"IRS" means the Internal Revenue Service.
"Knowledge of Parent" or words of similar import means, with regard to
any matter, the actual knowledge of the Responsible Parent Officers. Proof of
actual knowledge must be based upon concrete facts. For purpose of the
definition of "Knowledge of Parent" hereunder only, Parent shall be under no
obligation whatsoever to make an independent investigation or inquiry of facts
with respect to the Corporation.
"Law" means any law (statutory or otherwise), rule, regulation, ordinance,
code, decree, order or judgment (including without limitation the common law
and any judicial or administrative interpretations, guidances, directives,
policy statements or opinions) of any federal, state, local, municipal or
Foreign Governmental Authority.
"Losses" has the meaning given to it in Section 10.2(a).
"Material Contract" means any agreement, contract, commitment or arrange-
ment referred to in Section 5.9.
"Options" means, with respect to the Corporation or any of its Sub-
sidiaries, options, warrants, call rights and any other rights (contractual
or otherwise) of any Person to purchase, acquire or subscribe for any shares
of the capital stock of the Corporation or any of its Subsidiaries or any
such rights; all agreements, contracts, commitments, arrangements or plans to
issue or other rights calling for the issuance of, shares of capital stock of
the Corporation or any of its Subsidiaries; all securities and other instru-
ments convertible into, exercisable for or exchangeable for capital stock of
the Corporation or any of its Subsidiaries; all "restricted stock" or similar
stock of the Corporation or any of its Subsidiaries issued or granted to any
Person and subject to divestiture; and all phantom stock, stock appreciation
rights or similar obligations to pay any Person as if he held capital stock
of the Corporation or any of its subsidiaries.
"Parent" has the meaning given to it in the caption hereto.
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"Parent Claimant" has the meaning given to it in Section 10.3.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, corporation, partnership, limited
liability company, joint venture, trust or other entity.
"Plan" has the meaning given to it in Section 5.13(a).
"Purchase Price" has the meaning given to it in Section 2.2.
"Purchaser" has the meaning given to it in the caption hereto.
"Purchaser Claimant" has the meaning given to it in Section 10.2(a).
"Real Property" has the meaning given to it in Section 5.14(a).
"Relevant Parent Subsidiary" means Xxxx-Xxxxx International Holding
Corporation, a Delaware corporation.
"Responsible Parent Officers" means Xxxxx X. Xxxxxx, Xxxx X. Xxxxxx and
Xxxxxx Xxx Xxxxxx.
"Series A Preferred Stock" means the Series A Preferred Stock, One and
00/100 Dollar ($1.00) par value, of the Corporation.
"Series B Preferred Stock" means the Series B Preferred Stock, One and
00/100 Dollar ($1.00) par value, of the Corporation.
"Series C Preferred Stock" means the Series C Preferred Stock, Ten and
00/100 Dollars ($10.00) par value, of the Corporation.
"Stock" means, collectively, the Corporation Common Stock and Corporation
Preferred Stock owned beneficially and/or of record by Parent or the Relevant
Parent Subsidiary.
"Subsidiary" means any corporation, partnership, association, trust or
other business entity, of which the entity in question owns directly or in-
directly a majority (by number of votes) of the outstanding voting interests.
"Tax Return" means each and every report, return, declaration, infor-
mation return, statement or other information required to be supplied to a
taxing authority or other Governmental Authority in connection with the
determination, assessment, collection or administration of any Tax or Taxes
or filed by or including Parent or the Corporation, including without limita-
tion, any combined or consolidated return for any group of entities including
the Corporation.
"Taxes" (or "Tax" where the context requires) means all federal, state,
county, provincial, local, Foreign and other taxes, duties, or similar
charges (including, with-
-6-
out limitation, income, profits, personal property, premium, estimated,
excise, sales, use, environmental, occupancy, gross receipts, franchise, ad
valorem, severance, capital levy, production, transfer, gains, withholding,
occupation, employment and payroll related and property taxes, import and
export duties and other governmental charges and assessments) imposed by any
taxing authority or other Governmental Authority on or payable by Parent or
the Corporation (including without limitation with respect to or as a result
of the transactions contemplated hereby) or with respect to business, opera-
tions, products, assets or properties of Parent, the Corporation or any
Subsidiary of the Corporation, whether attributable to statutory or non-
statutory rules and whether or not measured in whole or in part by net income,
and including interest, additions to tax and penalties with respect thereto,
and including expenses associated with contesting any proposed adjustment
related to any of the foregoing. Notwithstanding the foregoing, the term
"Taxes" shall not include Income Taxes.
"Unauthorized Options" means Options that the Corporation may have
granted or issued or may be claimed to have granted or issued, but that were
not authorized by formal action by the Corporation's Board of Directors and
that accordingly may not be binding obligations of the Corporation.
ARTICLE 2 PURCHASE OF STOCK AND INTERCOMPANY INDEBTEDNESS
2.1 Purchase of Stock and Intercompany Indebtedness. Upon the terms and
subject to the conditions hereof, and upon the basis of the agreements,
representations and warranties contained in this Agreement, at the Closing
Parent shall, and shall cause the Relevant Parent Subsidiary to, sell, trans-
fer, assign, convey, set over and deliver to Purchaser, and Purchaser shall
purchase and acquire from Parent or such Subsidiary, all of the Stock owned
by Parent or the Relevant Parent Subsidiary and all of the Intercompany
Indebtedness, free and clear of any and all Encumbrances.
2.2 Purchase Price. Purchaser shall pay an aggregate amount equal to
Fourteen Million Nine Hundred Eighty-Five Thousand Three Hundred Eighty-Three
and 03/100 Dollars ($14,985,383.03) at the Closing (the "Purchase Price"),
subject to adjustment as provided below, consisting of the following:
(a) Purchaser shall loan to the Corporation for immediate repayment
of the Bank Debt (or, at Purchaser's option, Purchaser may advance the
proceeds of the loan directly to the Bank for the account of the
Corporation [in either case, such loan being included in the Purchase
Price]) the amount of Two Million Two Hundred Forty-Seven Thousand Three
Hundred Forty-Four and 87/100 Dollars ($2,247,344.87), subject to
adjustment pursuant to Section 2.3.
(b) Purchaser shall pay to Parent or Relevant Parent Subsidiary
an amount equal to the sum of (i) Two Million Six Hundred Seven Thousand
Five Hundred Ninety-Eight and 06/100 Dollars ($2,607,598.06) and (ii)
the amount of interest that accrues on the Intercompany Indebtedness from
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January 1, 1996, but remains unpaid as of the close of business on the
day prior to the Closing Date, to acquire the Intercompany Indebtedness
from Parent and the Relevant Parent Subsidiary, subject to adjustment
pursuant to Section 2.3.
(c) Purchaser shall pay to Parent or Relevant Parent Subsidiary
the amount of Four Hundred Seventy-Eight Thousand Five Hundred Fifty and
00/100 Dollars ($478,550.00) to acquire from Parent and the Relevant
Parent Subsidiary all shares of Series A Preferred Stock owned by them;
(d) Purchaser shall pay to Parent or Relevant Parent Subsidiary
the amount of Six Hundred Fifty-Two Thousand One Hundred Fifty and 00/100
Dollars ($652,150.00) to acquire from Parent and the Relevant Parent Sub-
sidiary all shares of Series C Preferred Stock owned by them; and
(e) Purchaser shall pay to Parent or Relevant Parent Subsidiary the
amount of Eight Million Nine Hundred Ninety-Nine Thousand Seven Hundred
Forty and 10/100 Dollars ($8,999,740.10) to acquire all the shares of
Corporation Common Stock owned beneficially and of record by Parent or the
Relevant Corporation Subsidiary (representing at least seventy-nine per-
cent (79%) of the Corporation Common Stock on a Fully Diluted Basis,
although the parties believe that, based on the information set forth on
the Schedules hereto, the Corporation Common Stock being sold hereunder
represents eighty-four and 6/10 percent (84.6%) of the currently issued
and outstanding Corporation Common Stock), and in respect of the assign-
ment of the Anti-Dilution Agreement and the other agreements referred to
in Section 3.2(f) hereof to Purchaser.
At the Closing, Parent or Relevant Parent Subsidiary shall deliver to the
Escrow Agent an aggregate of One Million and 00/100 Dollars ($1,000,000.00)
of the amount received by it under clause (e) above, to be held and dis-
tributed in accordance with the terms of the Escrow Agreement.
2.3 Purchase Price Adjustment.
(a) The amount set forth in Section 2.2(a) is based upon the amount
of Bank Debt outstanding on December 31, 1995. If the amount of Bank Debt
on the Closing Date is greater or less than such amount, the increase or
decrease shall result in a dollar for dollar increase or decrease of the
Purchase Price and Purchaser shall pay such amount in full at the Closing.
Notwithstanding the foregoing, the amount of the Bank Debt on the Closing
Date shall not be more than Four Hundred Thousand and 00/100 Dollars
($400,000.00) greater than the amount referred to in Section 2.2(a) with-
out the prior written approval of Purchaser.
(b) The amount set forth in Section 2.2(b) is based upon the amount
of Intercompany Indebtedness on December 31, 1995. If the amount of the
Intercompany Indebtedness is greater or less than such amount by virtue of
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cash advances to or from the Corporation by Parent or the Relevant
Corporation Subsidiary after December 31, 1995, which the parties agree
shall not include amounts described in subsection 2.4 below, the
increase or decrease shall result in a dollar for dollar increase or
decrease of the Purchase Price and Purchaser shall pay such adjusted
Intercompany Indebtedness amount in order to fully acquire all of the
Intercompany Indebtedness at the Closing. Notwithstanding the foregoing,
the amount of the Intercompany Indebtedness on the Closing Date shall
not be more than One Hundred Thousand and 00/100 Dollars ($100,000.00)
greater than the amount referred to in Section 2.2(b) without the prior
written approval of Purchaser.
2.4 Post-Closing Payment in Respect of Income Taxes. Within forty-five
(45) days after the Closing Date, Purchaser shall pay to Parent an amount to
reimburse Parent for Income Taxes attributable to the United States taxable
income earned by the Corporation and its Subsidiaries for the period from
January 1, 1996, through the close of business on the day prior to the
Closing Date, as mutually determined by Parent and Purchaser within thirty
(30) days after the Closing. Such Income Tax amount shall be calculated by
multiplying (i) such United States taxable income by (ii) an effective
Income Tax rate of thirty-nine and one-half percent (39.5%). Except for the
payment provided in this Section 2.4 (and the payment to purchase the Inter-
company Indebtedness under Section 2.2 hereof), neither Purchaser nor the
Corporation shall have any liability for Income Taxes through the Closing
Date, including, without limitation, any Income Taxes arising from the
elections under Section 338 of the Code referred to in Section 2.5 or other-
wise from the transactions contemplated by this Agreement, all of which
shall be the responsibility of Parent.
2.5 Elections Under Section 338 of the Code. At the Closing, Purchaser
shall make an election under Section 338(a) of the Code with respect to the
Corporation and Purchaser and Parent shall make a joint election under
Section 338(h)(10) of the Code (and under any relevant similar provisions of
state or local law with respect to the Corporation). The parties shall not
take any Tax or Income Tax position inconsistent with such elections.
ARTICLE 3 CLOSING
3.1 The Closing. The Closing shall take place at 9:00 A.M. local time
at the offices of Xxxxxx, Xxxxx & Xxxxxxx, P.C., 00 Xxxxx Xxxxx Xxxxxx, Xxxxx
0000, Xxxxxx, Arizona, three (3) business days after all waiting periods
under the HSR Act shall have expired or been terminated, but not earlier than
March 4, 1996, or at such other time, date or place as the parties may
mutually agree, subject to the conditions to Closing set forth herein. The
date of the Closing is referred to herein as the "Closing Date".
3.2 Obligations of Parent. At the Closing, Parent shall and shall
cause the Relevant Parent Subsidiaries to deliver to Escrow Agent the amount
referred to in
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the last sentence of Section 2.2 hereof, and to deliver to Purchaser the
following, at the expense of Parent:
(a) Certificates representing all of the shares of Stock,
registered in the name of Parent or a Relevant Parent Subsidiary, duly
endorsed for transfer to Purchaser or with stock powers duly executed in
favor of Purchaser, with all applicable transfer tax stamps affixed.
(b) Instruments representing all the Intercompany Indebtedness,
registered in the name of or payable to the order of Parent or a
Relevant Parent Subsidiary, duly endorsed for transfer to Purchaser or
with note powers duly executed in favor of Purchaser with all applicable
transfer tax stamps affixed.
(c) The certificates and other documents required by Section
4.2 hereof.
(d) Appropriate receipts consistent with the provisions of this
Agreement.
(e) A certificate executed by an officer of the Corporation as to
a stockholders' resolution or other evidence satisfactory to Purchaser
that Xxxxxx Xxxxx, Xxxxxx Xxxxxxxx, Xxxxxxx Xxxxxxx, Xxxxxxx Xxxxxxx,
Xx., and Xxxxxxxx XxXxxxxx have been validly elected by the requisite
vote of stockholders of the corporation as the sole directors of the
Corporation effective as of the Closing and that Parent shall have used
its reasonable efforts to cause such persons to be elected as the sole
directors of each of the Corporation's Subsidiaries effective as of the
Closing or as soon thereafter as possible.
(f) Assignment to Purchaser of the Anti-Dilution Agreement and any
other agreements between Parent and the Corporation which Purchaser
reasonably requests.
(g) Evidence of the termination of all Tax sharing, Income Tax
sharing or similar agreements among the Corporation or any of its Sub-
sidiaries and Parent or any of its Subsidiaries.
(h) All other documents, instruments and writings required to be
delivered by Parent or the Relevant Parent Subsidiary at or prior to the
Closing pursuant to this Agreement or otherwise required in connection
herewith.
3.3 Obligations of Purchaser. At the Closing, Purchaser shall deliver
to Parent the following, at the expense of Purchaser:
(a) That portion of the Purchase Price to be delivered pursuant
to Section 2.2.
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(b) The certificate and other documents required by Section
4.1 hereof.
(c) Appropriate receipts consistent with the provisions of this
Agreement.
(d) All other documents, instruments and writings required to be
delivered by Purchaser at or prior to the Closing pursuant to this
Agreement or otherwise required in connection herewith.
ARTICLE 4 CONDITIONS
4.1 Conditions to Obligation of Parent and Its Subsidiaries. The
obligations of Parent and its Subsidiaries to consummate the transactions
contemplated hereby shall be subject to the fulfillment or the waiver by it
of each of the following conditions:
(a) Parent shall have received each of the following documents:
(i) the Escrow Agreement, duly executed and delivered by
Purchaser and the Escrow Agent;
(ii) forms of elections under Sections 338(a) and 338(h)(10)
of the Code, duly executed and delivered by Purchaser in accordance
with the provisions of this Agreement; and
(iii) a certified copy of resolutions duly adopted by the
Board of Directors of Purchaser with regard to this Agreement, the
Escrow Agreement and the transactions contemplated hereby and
thereby.
(b) Each of the representations and warranties made by Purchaser
in this Agreement shall be true and correct as of the date hereof and
as of the Closing Date as if made on the Closing Date, and Parent shall
have received a certificate of an officer of Purchaser as to the fore-
going.
(c) Purchaser shall have performed all its obligations under this
Agreement to be performed by it on or prior to the Closing Date.
(d) All applicable waiting periods under the HSR Act shall have
expired or been terminated.
4.2 Conditions to Obligations of Purchaser. The obligation of Purchaser
to consummate the transactions contemplated by this Agreement shall be subject
to the fulfillment or the waiver by it of each of the following conditions:
(a) Purchaser shall have received each of the following documents:
(i) the Escrow Agreement, duly executed and delivered by
Parent and the Escrow Agent;
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(ii) a form of election under Section 338(h)(10) of the Code,
duly executed and delivered by Parent in accordance with the terms
of this Agreement;
(iii) a certified copy of resolutions duly adopted by the
Boards of Directors of Parent and the Relevant Parent Subsidiary
with regard to this Agreement, the Escrow Agreement and the trans-
actions contemplated hereby and thereby;
(iv) a certificate, dated the Closing Date, of the Chief
Financial Officer of Parent, as to (x) the then outstanding amount
of the Intercompany Indebtedness and (y) the amount of the then
accrued but unpaid dividends on the Corporation Preferred Stock;
(v) a letter from Norwest Bank Arizona, and its applicable
Affiliate, specifying the amount that would be required to repay in
full the principal amount and accrued but unpaid interest on the
Bank Debt outstanding as of the Closing Date, plus any applicable
prepayment penalties, breakage fees, premiums or other fees that
the Corporation would owe such lender if the Bank Debt were repaid
in full as of the Closing Date. Such letter may be in the form of
a letter dated within five (5) business days of the Closing Date
setting forth the repayment amount as of such date, plus the amount
per diem by which the repayment amount shall increase; and
(vi) a certificate, dated as of the Closing Date, from either
the Chief Financial Officer of the Corporation or the Chief
Financial Officer of Parent, stating either (a) the unpaid
balance of the Bank Debt, including interest and fees; or (b) that
no further borrowings have been made on the Bank Debt since the date
of the letter referred to in subsection 4.2(a)(v) above.
(b) Each of the representations and warranties made by Parent in
this Agreement shall be true and correct as of the date hereof and as
of the Closing Date as if made on the date thereof, and Purchaser shall
have received a certificate of a Responsible Parent Officer as to the
foregoing.
(c) The Corporation and its Subsidiaries shall have conducted
their business only in the ordinary and usual course consistent with
past practice from December 31, 1995 to the Closing Date. No material
adverse change shall have occurred in the business or assets of the
Corporation or any of its Subsidiaries from December 31, 1995 to the
Closing Date, and no other event, loss, damage, condition or state of
facts of any character shall exist which materially and adversely
affects or can reasonably be expected in the ordinary course or events
materially and adversely to affect the business, financial condition,
prospects, earnings, assets, properties, net worth or results of
operations of the Corporation or any of its Subsidiaries.
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(d) Parent shall have performed all of its obligations under this
Agreement to be performed by it on or prior to the Closing Date.
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants as follows:
5.1 Organization and Qualification; Subsidiaries. Each of Parent and
the Relevant Parent Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. To the Knowledge of Parent:
(a) each of the Corporation and its Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation, with full corporate power and
authority to own, lease and operate its properties and assets and to
conduct its business as it is now being conducted;
(b) the copies of the Certificate of Incorporation and By-Laws of
the Corporation and each of its Subsidiaries heretofore delivered to
Purchaser are complete and accurate copies of such instruments as
presently in effect;
(c) the Corporation has no Subsidiaries other than as set forth on
Schedule 5.1 hereto, and does not directly or indirectly own any interest
in any other Person;
(d) the Corporation is, directly or indirectly, the record and
beneficial owner of the entire outstanding equity interest in each of
its Subsidiaries;
(e) no equity securities of any Subsidiaries are or may become
required to be issued by reason of any presently outstanding Options;
(f) all of the shares of capital stock owned by the Corporation in
its Subsidiaries are validly issued, fully paid and nonassessable; and
(g) the Corporation's investment in each of its Foreign Sub-
sidiaries has been duly authorized by and registered with all necessary
Governmental Authorities.
5.2 Authority; No Breach.
(a) Each of Parent and the Relevant Parent Subsidiary has all
requisite power and authority to execute and deliver this Agreement and
all documents, certificates, agreements, instruments and writings
related hereto ("Closing Documents") and to perform, carry out and
consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance of this Agreement and the other
Closing Documents have been duly authorized by all necessary corporate
action on the part of Parent and the
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Relevant Parent Subsidiary. This Agreement does, and when executed by
Parent and the Relevant Parent Subsidiary, the other Closing Documents
will, constitute the legal, valid and binding obligations of each of
Parent and, as applicable, the Relevant Parent Subsidiary, enforceable
against Parent and, as applicable, the Relevant Parent Subsidiary, in
accordance with their respective terms.
(b) Except as set forth in Schedule 5.2 hereto, neither the
execution and delivery of this Agreement or the other Closing Documents
by Parent or the Relevant Parent Subsidiary nor the consummation of the
transactions contemplated hereby or thereby will: (i) violate any
provision of the Certificate of Incorporation or By-Laws (or other
similar charter or governing documents) of Parent or any Relevant Parent
Subsidiary; (ii) conflict with, result in a breach of or constitute a
default (or an event which, with or without notice, lapse of time or
both, would constitute a default) under any agreement or other instrument
to which Parent or the Relevant Parent Subsidiary is a party or by which
Parent or the Relevant Parent Subsidiary or any of their respective
properties or assets are subject or bound; (iii) result in the creation
of, or give any party the right to create, any Encumbrance upon assets
or properties of Parent or the Relevant Parent Subsidiary; (iv) conflict
with, violate, result in a breach of or constitute a default under any
judgment, decree, order, or process of any court or Governmental
Authority affecting Parent or the Relevant Parent Subsidiary; (v) con-
flict with or violate any Law applicable to the business of Parent or
the Relevant Parent Subsidiary; (vi) to the Knowledge of Parent,
terminate or modify, or give any third party the right to terminate
or modify, the provisions or terms of any contract or commitment to
which Parent or the Relevant Parent Subsidiary is a party or by which
it or any of its properties or assets is subject or bound; or (vii)
require Parent or the Relevant Parent Subsidiary to obtain any authori-
zation, consent, approval or waiver from, or to make any declaration,
filing or registration with, any Governmental Authority or, to the
Knowledge of Parent, any other Person other than such as have been
obtained or made and other than filings under the HSR Act.
(c) To the Knowledge of Parent, except as set forth in Schedule
5.2 hereto, neither the execution and delivery of this Agreement or the
other Closing Documents by Parent or the Relevant Parent Subsidiary nor
the consummation of the transactions contemplated hereby or thereby
will: (i) conflict with, result in a breach of or constitute a default
(or an event which, with or without notice, lapse of time or both, would
constitute a default) under any agreement or other instrument to which
the Corporation or any Subsidiary of the Corporation is a party or by
which the Corporation or any Subsidiary of the Corporation or any of
their respective properties or assets are subject or bound; (ii) result
in the creation of, or give any party the right to create, any Encum-
brance upon assets or properties of the Corporation or any Subsidiary
of the Corporation; (iii) conflict with, violate, result in a breach of
or constitute a default under any judgment, decree, order, or process
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of any court or Governmental Authority (other than those affecting
Parent or the Relevant Parent Subsidiary, as referred to in Section
5.2(b)(iv) above); (iv) conflict with or violate any Law applicable
to the business of the Corporation or any Subsidiary of the Corporation;
(v) terminate or modify, or give any third party the right to terminate
or modify, the provisions or terms of any Material Contract or any other
contract or commitment to which the Corporation or any Subsidiary of the
Corporation is a party or by which it or any of its properties or assets
is subject or bound; or (vi) require the Corporation or any Subsidiary
of the Corporation to obtain any authorization, consent, approval or
waiver from, or to make any declaration, filing or registration with,
any Governmental Authority or any other Person (including, without
limitation, pursuant to any Material Contract) other than such as have
been obtained or made.
5.3 Capitalization; Intercompany Debt.
(a) As of the date hereof, to the Knowledge of Parent, the author-
ized capital stock of the Corporation consists of 10,300,000 shares, of
which 10,000,000 are Corporation Common Stock, 100,000 are Series A
Preferred Stock, 100,000 are Series B Preferred Stock and 100,000 are
Series C Preferred Stock. The Relevant Parent Subsidiary owns, bene-
ficially and of record, an aggregate 1,044,418 shares of Corporation
Common Stock, 47,855 shares of Series A Preferred Stock, no shares of
Series B Preferred Stock and 62,215 shares of Series C Preferred Stock.
As of the date hereof, to the Knowledge of Parent: (i) a total of
1,234,463 shares of Corporation Common Stock are outstanding, and such
shares are owned of record by the Persons set forth on Schedule 5.3(a)-1
hereto, and (ii) there are no shares of Corporation Preferred Stock out-
standing other than those owned by Parent or the Relevant Parent
Subsidiary. The shares of Stock owned by Parent or the Relevant Parent
Subsidiary and, to the Knowledge of Parent, the other outstanding shares
of Corporation Common Stock are duly authorized, validly issued, fully
paid and nonassessable, and have not been issued and are not owned or
held in violation of any preemptive right of stockholders provided
by statute, set forth in the Corporation's Certificate of Incorporation
or in any agreement to which Parent or, to the Knowledge of Parent,
the Corporation or any Subsidiary of either of them is a party. To the
Knowledge of Parent, no Person has any such preemptive rights. As of
the date hereof, except as set forth on Schedule 5.3(a)-2 hereto, to
the Knowledge of the Parent, no Options or Unauthorized Options of any
kind are outstanding and no Person has any valid claims to hold such
Options or Unauthorized Options. To the Knowledge of Parent, true,
complete and correct copies of all documents evidencing Options and
Unauthorized Options set forth on Schedule 5.3(a)-2 have been previously
delivered to Purchaser. Neither Parent nor the Relevant Parent Sub-
sidiary is, and to the Knowledge of Parent neither the Corporation nor
any Subsidiary of the Corporation is, a party to any stockholders or
voting trust agreements or any other agreements, arrangements or under-
standings with regard to the capital stock of the Corporation, except
as set forth on Schedule 5.3(a)-3. The
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Corporation Common Stock being sold hereunder represents at least
seventy-nine percent (79%) of the Corporation Common Stock on a Fully
Diluted Basis, although the parties believe that, based on the
information set forth on the Schedules hereto, the Corporation Common
Stock being sold hereunder represents eighty-four and 6/10 percent
(84.6%) of the currently issued and outstanding Corporation Common
Stock. A true, complete and correct copy of the Anti-Dilution Agree-
ment (and all amendments thereto) has been delivered to Purchaser. No
representation or warranty is made as to the effect any amendment or
waiver of or under the Anti-Dilution Agreement agreed to by Purchaser
or the Corporation after the Closing Date may have on the matters
covered by this Agreement. The representations made in this Section
as of the date hereof as to matters referred to on Schedules 5.3(a)-1
and 5.3(a)-2 shall be made as of the Closing Date with respect to up-
dated versions of such Schedules delivered at the Closing otherwise
consistent with the provisions of this Section.
(b) The Intercompany Indebtedness constitutes all the indebtedness
owing by the Corporation or any of its Subsidiaries to Parent or any of
its Affiliates, is in full force and effect, constitutes the legal,
valid and binding obligation of the Corporation and is enforceable
against the Corporation in accordance with its terms. Except for
indebtedness owed to vendors in the ordinary course for trade financing,
neither the Corporation nor any of its Subsidiaries has any debt
obligations for borrowed money other than the Bank Debt and Intercompany
Indebtedness. Since December 31, 1995, no payments of any kind have
been made with respect to the Bank Debt or Intercompany Indebtedness or
to any Related Party, except as provided in Section 5.3(b). True,
complete and correct copies of all documents evidencing Intercompany
Indebtedness have been previously delivered to Purchaser, and are listed
on Schedule 5.3(b).
5.4 Financial Statements. Prior to the date hereof, Parent has
delivered to Purchaser the Financial Statements described on Schedule 5.4.
To the Knowledge of Parent, the Financial Statements have been prepared from,
and are in accordance with, the books and records of the Corporation and its
Subsidiaries, are complete and correct and present fairly the financial
position of the Corporation and its Subsidiaries as of the dates thereof
and their results of operations and of cash flows for the periods then ended,
in each case in accordance with GAAP applied on a basis consistent with the
prior practice of the Corporation and its Subsidiaries.
5.5 Related Party Transactions. Except as set forth in Schedule 5.5
hereto, there are no contracts, leases, loans, commitments, arrangements,
other understandings or any other transactions requiring payment, whether
written or oral, between Parent and any Affiliate of Parent, on the one hand,
and the Corporation or any of its Subsidiaries, on the other hand. Except
as set forth in Schedule 5.5 hereto, to the Knowledge of Parent, there are
no contracts, leases, loans, commitments, arrangements, other understandings
or any other transactions requiring payment, whether written or oral, between
the Corporation or any of its Subsidiaries, on the one hand,
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and any stockholder, director or officer of the Corporation or any entity
other than the Corporation controlled by any such person or in which any
such person has more than a five percent (5%) ownership interest, on the
other hand, other than routine, at-will employment arrangements in the
ordinary course of business.
5.6 Absence of Certain Changes or Events. Except as set forth in
Schedule 5.6 hereto, to the Knowledge of Parent, since December 31, 1995,
the business of the Corporation and its Subsidiaries has been conducted
only in the ordinary and usual course consistent with past practice. Without
limiting the generality of the foregoing, except as set forth in Schedule
5.6 hereto, to the Knowledge of Parent, since December 31, 1995, the
Corporation and its Subsidiaries have not: (a) suffered any material adverse
change in their condition (financial or otherwise), business, operations,
assets, net worth or prospects; (b) sold or transferred any of their assets
(other than inventory sold or used in the ordinary course); (c) suffered any
damage, destruction or loss (whether or not covered by insurance); (d)
(i) granted any increase in the rate or terms of compensation payable or to
become payable to their directors, officers or employees, or (ii) granted any
increase in the rate or terms of any bonus, insurance, pension or other
employee benefit plan payment or arrangement made by any of them; (e) made
any change in their accounting methods, principles or practices; (f) borrowed
or agreed to borrow any funds or incurred, assumed or become subject to,
whether directly or by way of guarantee or otherwise, any liabilities or
obligations except in the ordinary course of business as permitted by this
Agreement; (g) permitted or allowed any of their property or assets to be
subjected to any Encumbrance, except for liens for current taxes not yet
due; (h) made any capital expenditures or commitments in excess of Twenty-
Five Thousand and 00/100 Dollars ($25,000.00) in the aggregate for repairs
or additions to property, plant, equipment or tangible capital assets; or (i)
agreed, whether in writing or otherwise, to take any action described in this
Section 5.6.
5.7 Assets.
(a) To the Knowledge of Parent, the Corporation and its Sub-
sidiaries have good and freely transferable title to all of the material
assets set forth on the Interim Balance Sheet (other than items of
inventory disposed of in the ordinary course of business), free and
clear of all Encumbrances, except as described on Schedule 5.7 hereto.
To the Knowledge of Parent, such assets constitute, in the aggregate,
all assets necessary for the Corporation and its Subsidiaries to operate
their business in the ordinary course in all material respects. None of
the assets used by the Corporation or its Subsidiaries in the conduct of
their business as presently conducted is owned or leased by Parent or the
Relevant Parent Subsidiary, except as set forth on Schedule 5.7 hereto.
(b) To the Knowledge of Parent, (i) the Corporation and its Sub-
sidiaries do not own any real property in fee simple and (ii) Schedule
5.7 hereto contains a list and brief description of all real property
leased by the Corporation and its Subsidiaries and the improvements
(including buildings and other structures) located on such real property.
To the Knowledge of Parent,
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(A) all leases are valid, binding and enforceable in accordance with
their terms and are in full force and effect, and (B) the Corporation is
not in default and with giving of notice or lapse of time or both will
not be in default under any such lease. To the Knowledge of Parent,
all work required to be done by the Corporation or any Subsidiary of
the Corporation as a tenant has been duly performed and paid for.
5.8 Intellectual Property. To the Knowledge of Parent, Schedule 5.8
hereto lists (a) all patents and pending patent applications, and registered
and unregistered trademarks, service marks, trade names, and copyrights of
the Corporation and its Subsidiaries; and (b) all licenses of Intellectual
Property to or from the Corporation or any of its Subsidiaries and contracts
or agreements containing such licenses. To the Knowledge of Parent, each of
the Corporation and its Subsidiaries owns, is licensed, or has the right to
use all Intellectual Property as is sufficient to conduct, as presently
conducted, its business and pays no royalty with respect thereto except as
set forth in Schedule 5.8 hereto. The Corporation and its Subsidiaries do
not make use of any Intellectual Property owned by Parent or licensed by a
third party to Parent other than as set forth in Schedule 5.8 hereto. To
the Knowledge of Parent, no claims have been asserted either orally or in
writing by any person pertaining to any Intellectual Property used by the
Corporation or any Subsidiary of the Corporation, or challenging or
questioning the validity or effectiveness of any license or agreement
referred to in Schedule 5.8 hereto, or alleging any infringement or misuse of
any Intellectual Property by the Corporation or any of its Subsidiaries; and
to the Knowledge of Parent, there is no valid basis for any such claim.
5.9 Contracts and Commitments.
(a) Except as set forth in Schedule 5.9 hereto, to the Knowledge
of Parent, neither the Corporation nor any Subsidiary of the Corporation
has any agreements, contracts, arrangements or commitments, written or
oral, which (i) either individually or in conjunction with other agree-
ments, contracts, arrangements or commitments with the same party and in
connection with the same matter involve or relate to the payment or
receipt by the Corporation or any Subsidiary of the Corporation of an
aggregate of Ten Thousand and 00/100 Dollars ($10,000.00) or more over
the term of the contract or will not be totally performed by all parties
thereto within ninety (90) days from the date hereof; (ii) provide for
the payment of any bonus or commission based on sales or earnings, or
are with Parent or any officer, director, consultant, agent or Affiliate
of Parent or the Corporation or any Subsidiary of the Corporation, or
relate to employment (other than employment arrangements terminable at
will, without liability on the part of the Corporation or any Sub-
sidiary); (iii) relate to non-competition (and the Corporation and its
Subsidiaries are not otherwise restricted by any agreement or other
commitment from carrying on its business as currently conducted or
selling goods of any sort anywhere in the world); or (iv) constitute
powers of attorney or obligations or liabilities as guarantor, surety,
or indemnitor in respect of the obligation of any other Person.
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(b) Except as set forth in Schedule 5.9 hereto, to the Knowledge
of Parent, neither the Corporation nor any Subsidiary of the Corporation
is in breach or default under any Material Contract, there exists no
event or condition which (whether with or without notice, lapse of time
or both) would constitute a default thereunder, and all Material
Contracts are valid and in full force and effect and will not cease to
be valid and in full force and effect after the Closing. To the
Knowledge of Parent, accurate and complete copies of all Material
Contracts, including all amendments thereto, and accurate and complete
summaries of all oral Material Contracts have previously been heretofore
delivered to Purchaser.
5.10 Litigation, Etc. To the Knowledge of Parent, except as set forth
in Schedule 5.10 hereto, there has not been in the three (3) years prior to
the date hereof, nor is there currently, any claim, action, suit, inquiry,
proceeding or investigation of any kind or nature whatsoever, by or before
any domestic or Foreign court or governmental or other regulatory or
administrative agency or commission or tribunal pending or threatened against
or involving the Corporation or any Subsidiary of the Corporation or any of
their respective businesses or properties, or which questions or challenges
the validity of this Agreement or any action taken or to be taken by Parent
pursuant to this Agreement or in connection with the transactions contemplated
hereby. To the Knowledge of Parent, there is no valid basis for any such
claim, action, suit, inquiry, proceeding or investigation. To the Knowledge
of Parent, neither the Corporation nor any Subsidiary of the Corporation is
subject to any judgment, order, decree or legal requirement (other than legal
requirements applicable generally to the industry in which the Corporation
and its Subsidiaries conducts business) which may have a material adverse
effect on its business practices or on its ability to acquire any property
or conduct its business.
5.11 Compliance with Law. To the Knowledge of Parent, except as listed
or described in Schedule 5.11 hereto, to the knowledge of Parent, the
Corporation is conducting its business, and all of its facilities are, in
compliance and capable of continued compliance with all applicable Laws and
Authorizations.
5.12 Income Taxes and Taxes.
(a) The Corporation, each Subsidiary of the Corporation or Parent
on behalf of the Corporation and its Subsidiaries, has duly, timely and
properly filed or will file within the time prescribed by law, all U.S.
federal, U.S. state and U.S. local Income Tax Returns required to be
filed by it with respect to the Income Tax of the Corporation and its
Subsidiaries with the appropriate governmental agencies in all
jurisdictions in which such Income Tax Returns are required by law to
be filed and such Income Tax Returns were, or when filed will be,
complete and accurate. The Corporation, a Subsidiary of the Corporation
or Parent on behalf of the Corporation and its Subsidiaries has paid in
full to all U.S. federal, U.S. state and U.S. local taxing authorities
(or made adequate provision in the Financial Statements with respect to
Income Tax Returns not yet due for the payment of) all Income
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Taxes due or claimed to be due on or in respect to all such Income Tax
Returns. Except as set forth on Schedule 5.12 hereto, none of Parent,
the Corporation or any Subsidiary of the Corporation is the subject of
any pending or, to its Knowledge, threatened Income Tax examination nor
is it a party to any proceeding or inquiry by any Governmental Authority
for the assessment or the proposed assessment or for the collection of
Income Taxes, or interest or penalties with respect thereto, nor has any
claim for the assessment or proposed assessment or for the collection of
Income Taxes, or interest or penalties with respect thereto, been
asserted against Parent, the Corporation or any Subsidiary of the
Corporation. There are no liens for Income Taxes that are due and
unpaid on any of the properties or assets of the Corporation or any
Subsidiary of the Corporation. Except to the extent set forth on
Schedule 5.12 hereto, there are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any assess-
ment or audit of any Income Tax or Income Tax Return of the Corporation
or any Subsidiary of the Corporation or of any combined or consolidated
return for any group of entities including the Corporation or any Sub-
sidiary of the Corporation, with respect to the sales, income, business
or operations of the Corporation or any Subsidiary of the Corporation
for any period.
(b) To the Knowledge of Parent, the Corporation, each Subsidiary
of the Corporation or Parent on behalf of the Corporation and its Sub-
sidiaries, has duly, timely and properly filed or will file within the
time prescribed by law, all federal, state, Foreign, local and other
Tax Returns required to be filed by it with respect to the income,
business, sales, properties or operations of the Corporation and its
Subsidiaries with the appropriate governmental agencies in all
jurisdictions in which such Tax Returns are required by law to be filed
and such Tax Returns were, or when filed will be, complete and accurate.
To the Knowledge of Parent, the Corporation, a Subsidiary of the
Corporation or Parent on behalf of the Corporation and its Subsidiaries
has paid in full to all federal, state, local or Foreign taxing
authorities (or made adequate provision in the Financial Statements with
respect to Tax Returns not yet due for the payment of) all Taxes due or
claimed to be due on or in respect to all such Tax Returns. To the
Knowledge of Parent, except as set forth on Schedule 5.12 hereto, none
of Parent, the Corporation or any Subsidiary of the Corporation is the
subject of any pending or, to its Knowledge, threatened Tax examination
nor is it a party to any proceeding or inquiry by any Governmental
Authority for the assessment or the proposed assessment or for the
collection of Taxes, or interest or penalties with respect thereto, nor
has any claim for the assessment or proposed assessment or for the
collection of Taxes, or interest or penalties with respect thereto,
been asserted against Parent, the Corporation or any Subsidiary of the
Corporation. To the Knowledge of Parent, there are no liens for Taxes
that are due and unpaid on any of the properties or assets of the
Corporation or any Subsidiary of the Corporation. To the Knowledge of
Parent, except to the extent set forth on Schedule 5.12 hereto, there
are no outstanding agreements or waivers extending the statutory period
of limitation applicable to any assessment or audit of any Tax or Tax
Return of the
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Corporation or any Subsidiary of the Corporation or of any combined or
consolidated return for any group of entities including the Corporation
or any Subsidiary of the Corporation, with respect to the sales, income,
business or operations of the Corporation or any Subsidiary of the
Corporation for any period. To the Knowledge of Parent, all amounts
required to be withheld by the Corporation, any Subsidiary of the
Corporation, or by Parent in connection with the business or operations
of the Corporation, from customers with respect to the sale of goods, or
from or on behalf of employees for income, social security and unemploy-
ment insurance taxes and other employment taxes or obligations of any
kind whatsoever, have been collected or withheld and either paid to
the appropriate governmental agency or set aside and, to the extent
required by law, held in accounts for such purpose.
(c) (i) To the Knowledge of Parent, neither the Corporation nor
any Subsidiary of the Corporation is a party to any agreement,
contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code.
None of the Corporation or any Subsidiary of the Corporation is
required to include in income any amount in respect of any deferred
gain or loss arising from deferred intercompany transactions (as
described in Treasury Regulation Section 1.1502-13), or with
respect to the stock or obligations of any other corporation (as
described in Treasury Regulation Section 1.1502-14). To the
Knowledge of Parent, except with respect to sums included in the
Intercompany Indebtedness or which are payable pursuant to this
Agreement, none of the Corporation or any Subsidiary of the
Corporation has any liability or obligation to make any payment to
any taxing authority or to Parent or its Affiliates on account of
Income Taxes for any period ending on or prior to the Closing Date,
due to several liability imposed under Treasury Regulation
Section 1.1502-6 or any similar provision of state or local laws
or the provision of any Tax or Income Tax sharing agreements
involving Parent or any Subsidiary of Parent, except to the extent
described on Schedule 5.12 hereto. None of the Corporation or any
Subsidiary of the Corporation is a party to any Tax or Income Tax
sharing agreements involving Parent or any Subsidiary of Parent,
except to the extent described on Schedule 5.12 hereto. All Tax
or Income Tax sharing agreements (exclusive of the provisions of
this Agreement regarding Income Taxes) involving Parent or any Sub-
sidiary of Parent shall terminate at the Closing and shall there-
after be of no further force or effect. None of Parent, the Corpor-
ation or any Subsidiary of the Corporation, with respect to the in-
come, business or operations of the Corporation, has made any Income
Tax elections pursuant to Treasury Regulation Section 1.1502-20.
(ii) Notwithstanding anything contained in Section 5.12(c)(i)
above, the stock rights, option rights and other payment rights
(if any)
-21-
of the individuals pursuant to the instruments set forth on Schedule
5.12(c) hereof by themselves do not create any "excess parachute
payments" within the meaning of Section 280G of the Code.
5.13 Employee Benefit Plans.
To the Knowledge of Parent:
(a) Schedule 5.13 contains a true and complete list of all
"employee benefit plans," within the meaning of Section 3(3) of ERISA,
and any other bonus, profit sharing, compensation, pension, severance,
deferred compensation, fringe benefit, insurance, welfare, medical,
post-retirement health or welfare benefit, health, life, stock option,
stock purchase, service award, relocation, disability, accident, sick
pay, vacation, termination, individual employment, executive compen-
sation, incentive, bonus, commission, payroll practices, retention or
other plan, agreement, policy, trust fund or arrangement, (whether
written or oral) maintained, sponsored or contributed to by the
Corporation or any of its Subsidiaries or any entity that would be
deemed a "single employer" with the Corporation or any of its Sub-
sidiaries under Section 414(b), (c), (m) or (o) of the Code or
Section 4001 of ERISA (an "ERISA Affiliate") on behalf of any employee
of the Corporation or any of its Subsidiaries (whether current, former
or retired) or their beneficiaries or with respect to which the
Corporation, any of its Subsidiaries or any ERISA Affiliate has or has
had any obligation on behalf of any such employee or beneficiary (each,
a "Plan"). With respect to each Plan, true and complete copies of (i)
the documents embodying and relating to each Plan, including, without
limitation, the Plan document(s), all amendments, investment management
agreements, insurance contracts, collective bargaining agreements,
summary plan descriptions with each summary of material modification
and employee handbook(s), (ii) written descriptions of each oral Plan,
(iii) annual reports for the last three (3) years, (iv) actuarial
valuation reports and financial statements for the last three (3) years,
and (v) each material communication received by Seller or any ERISA
Affiliate from the IRS, the DOL or any other governmental authority
including, without limitation, the most recent determination letter
received from the IRS, have been delivered to Purchaser.
(b) None of the ERISA Affiliates, the Corporation, any Subsidiary
of the Corporation or any of their respective predecessors has ever
contributed to or contribute to, participated or participate in or has
ever been obligated to contribute to, (i) any "multiemployer plan"
(within the meaning of Section 4001(a)(3) of ERISA or Section 414(f) of
the Code) or (ii) any single employer pension plan (within the meaning
of Section 4001(a)(15) of ERISA) which is subject to Sections 4063 and
4064 of ERISA. Neither the Corporation nor any of its Subsidiaries is
liable for or will be liable for any liability of any ERISA Affiliate
(including predecessors) with regard to any "employee benefit plan"
(within the meaning of Section 3(3) of ERISA) including, without limita-
tion, withdrawal liability, liabilities to the PBGC (other than for
required
-22-
premium payments) or liabilities under Section 412 of the Code or
Section 302(a)(2) of ERISA. The Corporation, each of its Subsidiaries,
each ERISA Affiliate, each Plan and each "plan sponsor" (within the
meaning of Section 3(16) of ERISA) of each "welfare benefit plan"
(within the meaning of Section 3(1) of ERISA has complied in all
respects with the requirements of Section 4980B of the Code and Title
I, Subtitle B, Part 6 of ERISA.
(c) With respect to each of the Plans listed on Schedule 5.13:
(i) each Plan intended to qualify under Section 401(a) of the Code has
received a determination letter from the IRS to the effect that the
Plan is qualified under Section 401 of the Code and any trust maintained
pursuant thereto is exempt from federal income taxation under Section
501 of the Code and nothing has occurred that caused or could cause the
loss of such qualification or exemption or the imposition of any penalty
or tax liability; (ii) all payments required by any Plan, any
collective bargaining agreement or by law (including all contributions,
insurance premiums or intercompany charges) with respect to all periods
through the Closing Date shall have been made prior to the Closing (on
a pro rata basis where such payments are otherwise discretionary at
year end) or provided for by the Corporation and its Subsidiaries by
full accruals as if all targets required by such Plan had been or will
be met at maximum levels) on its financial statements; (iii) none are
pension plans (within the meaning of Section 3(2) of ERISA) which are
subject to Section 412 of the Code or Section 302 of ERISA; (iv) no
claim, lawsuit, arbitration or other action has been threatened,
asserted, instituted or anticipated against the Plans, any trustee or
fiduciaries thereof, Seller or any ERISA Affiliate, any director,
officer or employee thereof, or any of the assets of any trust or the
Plans; (v) each Plan complies and has been maintained and operated in
accordance with its terms and the terms and the provisions of applicable
law, including, without limitation, ERISA and the Code; (vi) no
"prohibited transaction," within the meaning of Section 4975 of the
Code and Section 406 of ERISA, has occurred or is expected to occur
with respect to any Plan which has subjected or could subject the
Corporation, any of its Subsidiaries, any officer, director or employee
thereof or any trustee, administrator or other fiduciary, to a tax
or penalty on prohibited transactions imposed by either Section 502 of
ERISA or Section 4975 of the Code, or any other liability with respect
thereto; (vii) no Plan is under audit or investigation by the IRS
or the DOL or any other governmental authority and no such completed
audit, if any, has resulted in the imposition of any tax or penalty;
(viii) each Plan intended to meet requirements for tax-favored treat-
ment under Sections 79, 106, 117, 125, 129 or 132 of the Code satisfies
the applicable requirements under the Code; (ix) with respect to each
Plan that is funded mostly or partially through an insurance policy,
none of the Corporation, any of its Subsidiaries or any ERISA Affiliate
has any liability in the nature of retroactive rate adjustment, loss
sharing arrangement or other actual or contingent liability arising
wholly or partially out of events occurring on or before the Closing
Date; and (x) no Plan is maintained in connection with any trust
described in Section 501(c)(9) of the Code.
-23-
(d) The consummation of the transactions contemplated by this
Agreement will not give rise to any liability, including, without
limitation, liability for severance pay, unemployment compensation,
termination pay or withdrawal liability, or accelerate the time of
payment or vesting or increase the amount of compensation or benefits
due to any current, former, or retired employee or their beneficiaries
solely by reason of such transactions. No amounts payable under any
Plan will fail to be deductible for federal income tax purposes by
virtue of Section 280G of the Code. None of the Corporation, any
Subsidiary of the Corporation or any ERISA Affiliate maintains,
contributes to, or in any way provides for any benefits of any kind
whatsoever (other than under Section 4980B of the Code, the Federal
Social Security Act or a plan qualified under Section 401(a) of the
Code) to any current or future retiree or terminee. Neither the
Corporation nor any Subsidiary of the Corporation has any commitment,
whether formal or informal, to create any additional plan or arrange-
ment or modify any Plan.
5.14 Environmental Compliance. To the Knowledge of Parent, except as
set forth in Schedule 5.14:
(a) All of the current and past operations of the Corporation and
its Subsidiaries at or from any real property presently or formerly
owned, used, leased, occupied or operated by the Corporation or any of
its Subsidiaries (the "Real Property") comply and have complied with all
applicable Environmental Laws. Neither the Corporation nor any of its
Subsidiaries has received any notice, whether oral or written, from any
Governmental Authority or third party of any actual or threatened
Environmental Liabilities with respect to the Real Property or the
conduct of its business. There are no conditions existing at any Real
Property that require, or which with the giving of notice or the passage
of time or both may require investigation, remedial or corrective
action, removal or closure pursuant to the Environmental Laws or which
would indicate the release, discharge, omission, dumping, disposal or
presence of Hazardous Substances at, on or under the Real Property.
(b) There are no underground storage tanks, asbestos or asbestos
containing materials, polychlorinated biphenyls, urea formaldehyde, or
other Hazardous Substances (other than small quantities of Hazardous
Substances stored and maintained in accordance with all applicable
Environmental Laws for use in the ordinary course of the business of
the Seller) in, on, over, under or at any presently owned or operated
Real Property.
(c) Parent and the Corporation have provided to Purchaser all
environmental reports, assessments, audits, studies, investigations,
data and other written environmental information in their custody,
possession or control concerning the Real Property.
5.15 Finders. None of Parent, any of its Subsidiaries other than the
Corporation and its Subsidiaries or any of their respective directors,
officers, employees or
-24-
agents, or, to the Knowledge of Parent, the Corporation, any of its Sub-
sidiaries or any of their respective directors, officers, employees or
agents, has taken any action that, directly or indirectly, would obligate
Purchaser, the Corporation or any of the Corporation's Subsidiaries to
anyone acting as broker, finder, financial advisor or in any similar
capacity in connection with this Agreement or any of the transactions
contemplated hereby.
5.16 Disclosure. No representation or warranty by Parent in this
Agreement contains or will contain any untrue statement of material fact or
omit to state a material fact necessary to make the statements contained
therein not misleading. All of Parent's representations and warranties
shall be deemed made again as of the Closing Date and shall then be true.
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants as follows:
6.1 Organization and Qualification. Purchaser is a corporation duly
organized, validly existing and in good standing in its respective
jurisdiction of incorporation with full corporate power and authority to
own, lease and operate its properties and assets and to conduct its business
as it is now being conducted.
6.2 Authority. Purchaser has all requisite power and authority to
execute and deliver this Agreement and the Closing Documents to which it is a
party and to perform, carry out and consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance of this Agree-
ment have been duly authorized by all necessary corporate action on the part
of Purchaser. This Agreement does, and when executed by Purchaser, the other
Closing Documents shall, constitute the legal, valid and binding obligations
of Purchaser, enforceable against Purchaser in accordance with their
respective terms.
6.3 No Breach. Neither the execution and delivery of this Agreement
by Purchaser nor the consummation of the transactions contemplated herein
will: (a) violate any provision of the Certificate of Incorporation or By-
laws of Purchaser; (b) conflict with, result in a breach of or constitute a
default (or an event which, with or without notice, lapse of time or both,
would constitute a default) under any agreement or other instrument to which
Purchaser is a party or by which Purchaser or any of its assets is bound;
(c) result in the creation of, or give any party the right to create, any
Encumbrance upon the properties or assets of Purchaser; (d) conflict with,
violate, result in a breach of or constitute a default under any judgment,
decree, order or process of any court or Governmental Authority; (e) conflict
with or violate any Law applicable to the business of Purchaser; (f)
terminate or modify, or give any third party the right to terminate or
modify, the provisions or terms of any contract or commitment to which
Purchaser is a party or by which Purchaser (or any of its properties or
assets) is subject or bound; or (i) require Purchaser to obtain any
authorization, consent, approval or waiver from, or to make any filing with,
any person or any public body or authority, other than such as have been
obtained or made and other than filings under the HSR Act.
-25-
6.4 Finders. None of Purchaser or any of its directors or officers
has taken any action that, directly or indirectly, would obligate Parent to
anyone acting as a broker, finder, financial advisor or in any similar
capacity in connection with this Agreement or any of the transactions
contemplated hereby.
ARTICLE 7 COVENANTS
7.1 Notice of Breach of Representation. From and after the date hereof
and from and after Closing, Purchaser shall give prompt written notice to
Parent of any fact or assertion which it is aware involves a breach or
inaccuracy of any representation, warranty or covenant of Parent contained
in this Agreement, stating the nature and basis of such claim or assertion
and the amounts thereof, to the extent known. No failure to give such notice
shall in and of itself affect the indemnification obligations of Parent here-
under except to the extent provided by the applicable law.
7.2 Covenants of Parent.
(a) Unless Purchaser otherwise agrees in writing, Parent shall,
and shall use its best efforts to cause the Relevant Parent Subsidiary
and the Corporation to, do the following at their sole expense until
the Closing:
(i) No amendment shall be made to the Certificate of
Incorporation or By-Laws of the Corporation or any of its
Subsidiaries.
(ii) No share of capital stock of the Corporation or any of
its Subsidiaries, Option or Unauthorized Option to acquire any
such share or right to subscribe to or purchase any such share or
security convertible into or exchangeable for any such share,
shall be issued or sold by the Corporation or any of its Sub-
sidiaries, other than as may be required upon the exercise of the
Options and Unauthorized Options listed on Schedule 5.3(a)-2. The
Anti-Dilution Agreement shall not be amended, rescinded, modified
or waived in any respect.
(iii) No dividend or liquidating or other distribution (in
cash, stock or otherwise) or stock split shall be authorized,
declared, paid or effected by the Corporation in respect of the
outstanding shares of Corporation Common Stock or Corporation
Preferred Stock. No direct or indirect redemption, purchase or
other acquisition shall be made by the Corporation of shares of
Corporation Common Stock or Corporation Preferred Stock, other
than repurchases of stock from employees whose employment by the
Corporation terminates on or after the date hereof but prior to
the Closing in accordance with the terms of existing agreements
providing for such repurchase. True, complete and correct copies
of such agreements have been provided to Purchaser. Any consider-
ation paid for such repurchases shall be deducted from the
aggregate funds available for payment to minority shareholders
under Section 7.6.
-26-
(iv) The Corporation and its Subsidiaries shall (A) operate
their business in the ordinary course of business as historically
conducted, (B) maintain their assets in good operating condition,
(C) pay those debts and accounts payable relating to their business
that are incurred by them, in the ordinary course of business and
on a timely basis, (D) not incur any obligations for borrowed money
other than Bank Debt and Intercompany Indebtedness and (E) not
permit Bank Debt or Intercompany Indebtedness to exceed the amounts
referred to with respect thereto in Section 2.3.
(v) The Corporation and its Subsidiaries shall afford
Purchaser, its attorneys, accountants and representatives, free
and full access to the business of the Corporation and its Sub-
sidiaries, their assets, the books and records of the Corporation
and its Subsidiaries relating thereto and employees of the
Corporation and its Subsidiaries who are familiar with the business
and assets of the Corporation and its Subsidiaries, at all reason-
able times upon reasonable notice during normal business hours and
in such a manner as not to disrupt business, and shall provide to
Purchaser and its representatives such additional financial and
operating data and other information as to their business and
assets as Purchaser shall from time to time reasonably request.
Purchaser shall take the foregoing actions in cooperation with
Parent. Parent shall permit a representative of Purchaser to be
on the premises of the Corporation and shall cause the Board of
Directors of the Corporation to instruct the officers of the
Corporation to consult with such representative on any business
decisions not in the normal course of business except any business
decision not in the normal course of business which would have an
impact on the Corporation not in excess of Twenty-Five Thousand
and 00/100 Dollars ($25,000.00). Parent shall not permit the
Corporation to make any new capital expenditures of which Parent
is aware without the prior consent of Purchaser, unless such
expenditure does not exceed Twenty-Five Thousand and 00/100 Dollars
($25,000.00).
(vi) Parent shall promptly advise Purchaser in writing of the
commencement or threat against Parent or the Corporation of any
suit, litigation or legal proceeding that relates to or might
affect the business of the Corporation and its Subsidiaries or the
transactions contemplated hereby, if and to the extent such matters
are communicated to Parent.
(vii) Parent and the Corporation shall cause all casualty and
liability insurance coverage currently in effect with respect to
the assets of the Corporation to remain in effect and apply all
insurance proceeds in respect of casualty to the replacement or
rebuilding of such assets.
-27-
(viii) Parent shall not, and shall not give its permission
to or authorize any officer, director, employee or representative
to, and shall use its best efforts to cause the Corporation not to,
and not to give its permission or authorize any officer, director,
employee or representative to, solicit or enter into, negotiations
with any party, other than Purchaser, for the purchase and sale of
the Corporation, any Subsidiary of the Corporation or the business
or assets of any of them. Parent shall not be responsible for the
actions of any Person who acts in violation of this Section without
Parent's authorization; provided that in connection with any such
actions, (w) Parent shall promptly advise Purchaser if Parent
becomes aware of them, (x) Parent shall not permit the provision
of Confidential Information regarding the Corporation to any
Person, (y) Parent shall not permit the access of any Persons to
the Corporation, its business, employees or customers and (z)
Parent shall not permit any other activity that may disrupt the
business or operations of the Corporation or interfere with
Parent's ability to consummate the transactions contemplated hereby
at the Closing, to the extent Parent has the legal power to prevent
such interference.
(b) After the Closing Date, documents (including information
embodied in computer-readable media) that are retained by Parent and
that are related to the Corporation or the operation of the business of
the Corporation and its Subsidiaries prior to the Closing Date shall be
open for inspection by representatives of Purchaser or the Corporation
at any time during regular business hours upon reasonable advance
notice, and Purchaser or the Corporation may make such copies thereof
as it may reasonably request. Without limiting the generality of the
foregoing, Parent shall not destroy or give up possession of any item
referred to above without first offering to Purchaser or the Corporation
the opportunity, at expense of Purchaser or the Corporation (but without
any other payment), to obtain the same.
7.3 Obtaining Consents. Prior to the Closing, Parent shall permit
Purchaser to contact any or all of the contracting parties under the Material
Contracts for the purpose of determining and verifying the precise terms and
nature of their contract rights and Parent shall, and shall cause the
Corporation to, cooperate and lend assistance to Purchaser in connection
therewith. Purchaser and Parent shall use all reasonable efforts to obtain
all consents, approvals and waivers from, and give all notices to, and make
all declarations, filings and registrations with, and governmental and
regulatory agencies that are required to consummate the transactions contem-
plated hereby and to permit the continued operation of the business of the
Corporation and its Subsidiaries after the Closing. Purchaser and Parent
shall coordinate and cooperate with one another and supply such assistance
as may be reasonably requested by each in connection with the foregoing.
7.4 Publicity. Prior to the Closing, neither party hereto shall issue
or make, or cause to have issued or made, the publication or dissemination
of any press release or other announcement to divulge the existence of this
Agreement or
-28-
with respect to the transactions contemplated hereby except after consulta-
tion with and prior approval of the other party hereto, which approval shall
not be unreasonably withheld; provided, however, that nothing herein shall
prevent any party from making such public announcement as that party may
consider necessary or appropriate in order to satisfy its legal, contractual
or other obligations.
7.5 Records. After the Closing, Parent shall take all actions
requested by Purchaser to transfer records relating to the business of the
Corporation and its Subsidiaries to the Corporation, which may include making
duplicate copies of any records of the Corporation (whether arising before
or after the Closing) retained by Parent in the form of papers or computer
media. After the Closing, Purchaser shall, subject to the provisions of
Section 8.4, cause the Corporation to permit representatives of Parent to
inspect the Corporation's pre-Closing records during regular business hours
upon reasonable advance notice and in such a manner as not to disrupt
business, for purposes of Parent's compliance with its accounting, tax, legal
and insurance obligations. The Corporation's pre-Closing records shall be
preserved by Purchaser for at least seven (7) years after the date of Closing
and shall thereafter not be destroyed except after written notice to Parent
which provides Parent a reasonable opportunity to obtain possession of such
records.
7.6 HSR Act Filing. Each of Parent and Purchaser shall as promptly as
practicable (but in no event later than ten (10) days following the date
hereof) file with the United States Federal Trade Commission and the United
States Department of Justice the notification and report form required for
the transactions contemplated hereby, and thereafter each of Parent and
Purchaser shall as promptly as practicable file any supplemental informa-
tion requested in connection therewith pursuant to the HSR Act. Any such
notification and report form shall be in substantial compliance with the
requirements of the HSR Act. Each of Parent and Purchaser shall use its
respective best efforts to obtain any clearance required under the HSR Act
for the consummation of the transactions contemplated hereby (but shall not
be required to divest themselves of any assets in connection therewith).
7.7 Minority Offer. Within ninety (90) days of the Closing Date,
Purchaser shall, or shall cause one of its Affiliates to, offer in writing
to purchase all Corporation Common Stock, Options and Unauthorized Options
not then owned by it. The aggregate purchase consideration for such offer
shall be Two Million Three Hundred Ninety-Two Thousand Three Hundred
Thirty-Five and 97/100 Dollars ($2,392,335.97) for all shares of Corpora-
tion Common Stock, Options and all Unauthorized Options, which based upon
the number of shares of Corporation Common Stock, Options and Unauthorized
Options set forth on the Schedules hereto, represents Six and 01/100 Dollars
($6.01) per share of Corporation Common Stock. Such purchase price may be
reduced proportionately in the event Purchaser learns of additional Options,
Unauthorized Options or outstanding shares of Stock. Such offer shall allow
all Options and Unauthorized Options to be accelerated and exercised solely
for the purpose of accepting such offer. Such offer shall remain open for
at least ten (10) days, and shall for holders of shares representing less
than two percent (2%) of the Corporation Common Stock (or Options or
Unauthorized Options
-29-
to acquire such a number of shares) on a Fully Diluted Basis require only
those representations and warranties customary in a tender offer, provided
such representations and warranties shall not be materially more restrictive
than those set forth herein. If any holders do not accept such offer,
Purchaser shall have no obligation to pay any particular price for shares
of Stock and may deal with such holders in any manner it deems appropriate.
Nothing herein shall affect or limit Purchaser's right in any respect, if
its offer is not accepted, to enforce existing agreements with holders,
elect not to accelerate any Options, challenge the validity of any
Unauthorized Options or to enter into any alternative arrangements with
any employee, as the Purchaser determines.
7.8 Employee Matters. After the Closing, Purchaser and the Corporation
shall not assume or be responsible in any way for the obligations,
liabilities or responsibilities (whether arising before or after the Closing)
of any employee benefit plan of Parent, any ERISA Affiliate or any fiduciary
under, arising from, or with respect to any employee benefit plan, agreement,
policy, trust fund or arrangement maintained, sponsored or contributed to by
Parent or any of its Subsidiaries.
7.9 Documentation of Intercompany Indebtedness. Prior to the Closing,
Parent shall cause the Corporation to document all Intercompany Indebtedness
that is not at present documented with a promissory note to be documented
with a promissory note, duly authorized, executed and delivered by the
Corporation, in form reasonably satisfactory to Purchaser.
7.10 Further Assurances. After the Closing, Purchaser and Parent shall
and shall cause their respective Affiliates to, at the request of the other
without further cost or expense to the other, execute and deliver such other
instruments of conveyance and transfer and assumption and take such other
action as may be reasonably request so as to consummate the transactions
contemplated by this Agreement or to correct errors and defects.
ARTICLE 8 RESTRICTIVE COVENANTS
8.1 Non-Competition.
A. Neither Parent nor any of its Affiliates shall, for a period
of five (5) years from the Closing Date, take away the currently
existing business of the Corporation by developing, manufacturing,
distributing, marketing or selling DC to DC converters which can
directly serve as a "Second Source" for "Existing Products." For
purposes of this Agreement, the term "Second Source" means the use of
Parent products which do not require the redesign of the printed circuit
board by the customer. For purposes of this Agreement, the term
"Existing Products" means products described in the Corporation's
catalog in effect as of the date of Closing.
B. Parent and its Affiliates shall not be constrained in any way
from manufacturing, distributing, marketing or selling DC to DC
converters listed in Parent's catalog in effect as of the date of
Closing or other DC to DC con-
-30-
verters which are not a direct "Second Source" for "Existing Products,"
as defined above.
8.2 Non-Solicitation of Employees. None of Parent or any of its
Affiliates shall directly or indirectly, for itself or on behalf of any other
Person, hire any salaried employee of the Corporation or any of its Sub-
sidiaries, or induce nor attempt to induce any such salaried employee to
leave his or her employment with the Corporation or any of its Subsidiaries
at any time within five (5) years from the date hereof, except as the parties
may otherwise agree.
8.3 Non-Solicitation or Interference with Customers and Suppliers.
None of Parent or any of its Affiliates shall, directly or indirectly, for
itself or on behalf of any other Person, for a period of five (5) years after
the date hereof, knowingly interfere with the business or patronage of the
Corporation or any of its Subsidiaries with any of their customers or
suppliers or other Persons with whom they deal, or disparage the Corporation,
any of its Subsidiaries or any of their products or services, or, to the
extent in contravention of the restrictions contained in Section 8.1,
solicit, contact or enter into any business transaction with any customers,
suppliers or other Persons of the Corporation or any of its Subsidiaries.
If Purchaser believes action of or on behalf of Parent in violation of the
foregoing has taken place, Purchaser shall notify Parent in writing
specifying the basis of such violation, and Parent agrees to immediately
take curative action.
8.4 Confidential Information. None of Parent or any of its Affiliates
shall at any time disclose to any Person other than the Corporation or any of
its Subsidiaries any Confidential Information. After the Closing, neither
Parent nor any of its Affiliates shall actively and knowingly disseminate
Financial Information of the Corporation to any known competitors of the
Corporation.
8.5 Acknowledgments. Parent acknowledges that, in view of the nature
of the Corporation and its Subsidiaries and the business objectives of
Purchaser in acquiring it, and the consideration paid to Parent therefor,
the restrictions contained in this Article 8 are reasonably necessary to
protect the legitimate business interests of Purchaser and the Corporation
and that Purchaser and the Corporation may be entitled to equitable relief
as a result of a violation.
ARTICLE 9 TERMINATION
9.1 Termination. This Agreement may be terminated at or before the
Closing:
(a) by mutual agreement of Purchaser and Parent; or
(b) at the option of Purchaser or Parent, if the Closing shall
not have occurred on or before the close of business on March 29, 1996.
9.2 Procedure. A party terminating this Agreement pursuant to this
Article 9 shall do so by written notice to the other.
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9.3 Effect of Termination. If this Agreement is rightfully terminated
as provided for this Article 9, then, except for Section 11.1, this Agreement
shall forthwith become wholly void and of no further force or effect, without
liability on the part of either party to this Agreement.
ARTICLE 10 INDEMNIFICATION
10.1 Survival of Representations and Warranties. All representations
and warranties contained in Articles 5 and 6 shall survive the Closing and
shall remain in full force and effect for eighteen (18) months after the
Closing Date; provided, however, that the representations and warranties
contained in Sections 5.12 and 5.13 shall remain in full force and effect
until six (6) months after the expiration of the applicable statute of
limitations (after giving effect to all extensions).
10.2 Indemnification by Parent.
(a) From and after the Closing, Parent shall indemnify and save
Purchaser and its Affiliates (including, after the Closing, the
Corporation and its Subsidiaries) and their respective directors,
officers, employees, agents and representatives (each, a "Purchaser
Claimant") harmless from and defend each of them from and against any
and all demands, claims, actions, liabilities, losses, costs, damages
or expenses whatsoever (including any necessary investigations of any
claims and reasonable attorneys' fees) (collectively, "Losses")
asserted against, imposed upon or incurred by the Purchaser Claimants
resulting from or arising out of:
(i) First Dollar Unlimited. Any inaccuracy or breach of any
representation or warranty of Parent contained in the following
Sections of this Agreement, or any claim by a third party which,
if true, would constitute a breach of such representation or
warranty, without dollar limitation whatsoever:
5.2(a), 5.2(b), 5.2(c), 5.3(a), 5.3(b), 5.4, 5.12(a),
5.15 and, to the extent it relates to any of the
Sections in this clause, 5.16.
(ii) First Dollar Limited. Any inaccuracy or breach of a
representation or warranty of Parent contained in the following
Sections of this Agreement, or any claim by a third party which,
if true, would constitute a breach of such representation or
warranty, subject to an overall maximum dollar cost to Parent
under this Agreement of One Million Dollars ($1,000,000.00)
(the "Parent Maximum"):
5.1, 5.5, 5.6, 5.7, 5.8, 5.9(a), 5.9(b), 5.10, 5.11,
5.12(b), 5.12(c)(i) and (ii), 5.13, 5.14 and, to the
extent it relates to any of the Sections in this
clause, 5.16.
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(b) From and after the Closing, and without being limited by the
substance or duration of any representations or warranties contained
herein, Parent shall indemnify and save Purchaser Claimants harmless
from and defend each of them from and against any and all Losses
asserted against, imposed upon or incurred by the Purchaser Claimants
resulting from or arising out of (i) any Income Taxes imposed upon the
Corporation or any of its Subsidiaries for any periods through the
Closing Date or for any Income Tax imposed upon a Purchaser Claimant
arising from or relating to the Corporation or any of its Subsidiaries
having been a member of a group with Parent filing consolidated Income
Tax returns (including, without limitation, any Income Taxes arising
from the elections under Section 338 of the Code provided for in Section
2.5 or Income Taxes otherwise arising from the transactions contemplated
by this Agreement); (ii) state and local sales, use or transaction
privilege taxes assessed by virtue of sales of products by Parent to
customers, including, without limitation, products manufactured by the
Corporation which were sold by Parent; (iii) any matters relating to
compliance with ERISA by Parent, any of its Subsidiaries (other than the
Corporation), any ERISA Affiliate (other than the Corporation) or any of
their Plans prior to or after the Closing Date; (iv) any claim by a
third party which, if true, would constitute one of the circumstances
described above; and (v) any breach of any covenant or obligation of
Parent contained in Article 7 hereof. The foregoing shall be without
dollar limitation whatsoever.
(c) In addition, in the event of a determination by the IRS that
any of the requirements for the elections under Section 338(a) or
338(h)(10) of the Code, which are provided for in Section 2.5 hereof,
is not satisfied, Parent shall promptly pay to Purchaser the amount of
the Income Tax savings or refunds realized by Parent by virtue of such
determination as and when such Income Tax savings are realized or
refunds are received. Parent shall notify Purchaser promptly if the IRS
seeks to challenge such elections and shall provide Purchaser with such
information as Purchaser may reasonably request from time to time to
determine the extent of such Income Tax savings, but such information
shall not include Tax Returns or Income Tax Returns.
10.3 Indemnification by Purchaser. From and after the Closing,
Purchaser shall indemnify and save the Parent and its Affiliates (excluding
the Corporation and its Subsidiaries), directors, officers, employees, agents
and representatives (each, a "Parent Claimant") harmless from and defend each
of them from and against any and all Losses asserted against, imposed upon
or incurred by the Parent Claimants resulting from or arising out of (i) any
inaccuracy or breach of any representation or warranty of Purchaser contained
herein or (ii) any breach of any covenant or obligation of Purchaser
contained in Article 7 hereof.
10.4 Terms and Conditions of Indemnification. The respective obliga-
tions and liabilities of Purchaser and Parent to indemnify pursuant to this
Article 10 shall be subject to the following terms and conditions:
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(a) In respect of any claim or assertion of liability by a third
party other than with respect to Income Taxes:
(i) The party seeking indemnification (the "Claimant") shall
give prompt written notice to the other party (the "Indemnitor") of
any state of facts which Claimant determines will give rise to a
claim by the Claimant against the Indemnitor based on the indemnity
agreements contained in this Article 10, stating the nature and
basis of said claims and the amounts thereof, to the extent known.
No failure to give such notice shall affect the indemnification
obligations of Indemnitor hereunder except to the extent Indemnitor
can demonstrate such failure materially prejudiced such
Indemnitor's ability to successfully defend the matter giving rise
to the indemnification claim.
(ii) In the event any action, suit or proceeding is brought
against Claimant, with respect to which the Indemnitor may have
liability under this Article 10, then if Indemnitor notifies
Claimant in writing, within thirty (30) days of Claimant's notice
of such action, suit or proceeding, that Indemnitor agrees that
it is undertaking and will prosecute the defense of the claim
under this Article 10, such action, suit or proceeding may be
defended by the Indemnitor. Claimant shall have the right to
employ its own counsel in any such case, but the fees and expenses
of such counsel shall be at Claimant's own expense unless (A) the
employment of such counsel and the payment of such fees and
expenses both shall have been specifically authorized by the
Indemnitor in connection with the defense of such action, suit or
proceeding, or (B) Claimant shall have reasonably concluded and
specifically notified the Indemnitor that there may be specific
defenses available to it which are different from or additional to
those available to the Indemnitor, or that such action, suit or
proceeding involves or could have an effect upon matters beyond
the scope of the indemnity agreements contained in this Article 10.
(iii) In addition, in any event specified in clause (B) of
the second sentence of subsection (ii) above, the Indemnitor, to
the extent made necessary by such different or additional defenses,
shall not have the right to direct the defense of such action, suit
or proceeding on behalf of Claimant. If Indemnitor and Claimant
cannot agree on a mechanism to separate the defense of matters
extending beyond the scope of indemnification, such matters shall
be defended on the basis of joint consultation.
(iv) Claimant shall be kept fully informed by the Indemnitor
of such action, suit or proceeding at all stages thereof, whether
or not it is represented by counsel. The Indemnitor shall, at the
Indemnitor's expense, make available to Claimant and its attorneys
and accountants all books and records of the Indemnitor relating to
such proceedings or
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litigation, and the parties hereto agree to render to each other
such assistance as they may reasonably require of each other in
order to ensure the proper and adequate defense of any such
action, suit or proceeding.
(b) The Indemnitor shall make no settlement of any claims which
Indemnitor has undertaken to defend, without Claimant's consent, unless
(i) the Indemnitor fully indemnifies the Indemnitee for all losses,
(ii) there is no finding or admission of violation of law by, or effect
on any other claims that may be made against Claimant, (iii) the relief
granted in connection therewith requires no action on the part of and
has no effect on Claimant, and (iv) the settlement provides for a full,
unconditional release of Claimant.
(c) If the Indemnitor fails to pay, compromise or settle any claim
within sixty (60) days of the date notice thereof is given pursuant to
Section 10.4(a)(i) or, in the case of an action, suit or proceeding
contemplated by Section 10.4(a)(ii), to commence to defend such action,
suit or proceeding within thirty(30) days of notice and thereafter to
prosecute such contest diligently, Claimant may pay the claim and the
Indemnitor shall promptly, upon written demand of Claimant, reimburse
Claimant for the full amount of such payment, plus interest from the
date of such payment by Claimant to the date of reimbursement at the
prime rate announced by Chemical Bank in New York City from time to
time during such period plus one percent (1%).
ARTICLE 11 MISCELLANEOUS
11.1 Expenses. Each of Purchaser and Parent shall pay and bear its
own fees and expenses incident to the negotiation, preparation and execution
of this Agreement, including, without limitation, fees and expenses of its
respective counsel, accountants, investment banking firm and other experts.
Notwithstanding the foregoing, at the Closing Parent shall reimburse
Purchaser for one-half of all applicable filing fees under the HSR Act.
11.2 Entire Agreement; Modification. This Agreement and the Schedules
and Exhibits hereto set forth the entire understanding of the parties with
respect to the subject matter hereof and supersede all existing agreements
among them concerning such subject matter; any others are specifically
waived. This Agreement may be amended only by a written instrument executed
by Purchaser and Parent.
11.3 Notices. All notices and other communications hereunder shall be
validly given or made if in writing, when delivered personally (by courier
service or otherwise), when sent by telecopy, or when actually received when
mailed by first-class certified or registered United States mail, postage-
prepaid and return receipt requested, and all legal process with regard
hereto shall be validly served when served in accordance with applicable law,
in each case when directed to the party to receive such notice or other
communication as set forth below, or at such other address or telecopy
number as any party hereto may from time to time advise the other parties
pursuant to this Section:
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(i) If to Purchaser:
International Power Systems, Inc.
0000 Xxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxx 00000
Telecopier: (000) 000-0000
Attention: President
with a copy to:
Proskauer Xxxx Xxxxx & Xxxxxxxxxx LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxxxx, Esq.
(ii) If to Parent:
Xxxx-Xxxxx Corporation
0000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxxx, Xxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Chief Financial Officer
with a copy to:
Xxxxxx, Xxxxx & Xxxxxxx, P.C.
00 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxx, Esq.
11.4 Waiver. Any waiver by any party of a breach of any term of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of that term or of any breach of any other term of this Agreement.
The failure of a party to insist upon strict adherence to any term of this
Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence
to that term or any other term of this Agreement. Any waiver must be in
writing.
11.5 Binding Effect. The provisions of this Agreement shall be binding
upon and inure to the benefit of Purchaser, Parent and their respective
successors. This Agreement may not be assigned by any party hereto, except
that Purchaser may assign this Agreement to an Affiliate of Purchaser.
11.6 No Third-Party Beneficiaries. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not
a party to this Agreement except for the Indemnified Parties pursuant to
Article 10.
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11.7 Severability. If any provision of this Agreement is invalid,
illegal or unenforceable, the balance of this Agreement shall remain in
effect, and if any provision is inapplicable to any person or circumstance,
it shall nevertheless remain applicable to all other persons and circumstances.
11.8 Headings. The headings in this Agreement are solely for convenience
of reference and shall be given no effect in the construction or
interpretation of this Agreement.
11.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.10 Governing Law; Forum. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Arizona
(i.e., without regard to its conflicts of law rules), and the forum for
any dispute hereunder shall be the state or federal courts located in
Pima County, Arizona.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
Parent: XXXX-XXXXX CORPORATION
By __/s/ Xxxx X. Carter_______________
Xxxx X. Xxxxxx, Executive Vice President
and Chief Financial Officer
Purchaser: INTERNATIONAL POWER SYSTEMS, INC.
By __/s/ X. Xxxxxx Goodyear_________
A. Xxxxxx Xxxxxxxx, Vice President
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Exhibits
1A Bank Debt
1B Escrow Agreement
Schedules
5.1 Subsidiaries of Corporation
5.2 Exceptions to Nonviolation of Bylaws and Agreements
5.3(a)-1 Ownership of Stock
5.3(a)-2 Options and Unauthorized Options
5.3(a)-3 Agreements Regarding Capital Stock of Corporation
5.3(b) List of Instruments Evidencing Intercompany Indebtedness
5.4 Financial Statements
5.5 Related Party Transactions
5.6 Non-Ordinary Course Transactions Since 12/31/95
5.7 Encumbrances Upon Assets of Corporation; Leases
5.8 Patents, Trademarks and Intellectual Property
5.9 Long Term Contracts, Material Contracts and Defaults Thereunder
5.10 Pending Litigation
5.11 Legal Compliance Exceptions
5.12 Pending Tax Examinations; Tax Liens
5.12(c) Known Termination Payment Obligations
5.13 Employee Benefit Plans
5.14 Exceptions to Environmental Compliance
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