EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
dated as of
October 30, 2002
among
ULTRA CLEAN HOLDINGS, INC.
ULTRA CLEAN TECHNOLOGY SYSTEMS & SERVICE, INC.
MITSUBISHI CORPORATION
MITSUBISHI INTERNATIONAL CORPORATION
and
CLEAN MERGER COMPANY
TABLE OF CONTENTS
Page
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ARTICLE 1
Definitions
Section 1.01. Definitions ........................................... 1
ARTICLE 2
The Merger
Section 2.01. The Merger ............................................ 6
Section 2.02. Conversion of Shares .................................. 7
Section 2.03. Surrender and Payment ................................. 7
Section 2.04. Dissenting Shares ..................................... 8
Section 2.05. Closing Balance Sheet ................................. 9
Section 2.06. Adjustment of Purchase Price .......................... 10
Section 2.07. Existing Debt ......................................... 11
Section 2.08. Adjustments ........................................... 11
Section 2.09. Withholding Rights .................................... 11
Section 2.10. Lost Certificates ..................................... 11
ARTICLE 3
The Surviving Corporation
Section 3.01. Articles of Incorporation ............................. 11
Section 3.02. Bylaws ................................................ 12
Section 3.03. Directors and Officers ................................ 12
ARTICLE 4
Representations and Warranties of the Company and Sellers
Section 4.01. Corporate Existence and Power ......................... 12
Section 4.02. Corporate Authorization ............................... 12
Section 4.03. Governmental Authorization ............................ 13
Section 4.04. Non-contravention ..................................... 13
Section 4.05. Capitalization ........................................ 14
Section 4.06. Subsidiaries .......................................... 14
Section 4.07. Financial Statements .................................. 14
Section 4.08. Absence of Certain Changes ............................ 15
Section 4.09. No Undisclosed Liabilities ............................ 16
Section 4.10. Compliance with Laws and Court Orders ................. 17
Section 4.11. Material Contracts .................................... 17
Section 4.12. Litigation ............................................ 18
Section 4.13. Finders' Fees ......................................... 19
Section 4.14. Consents .............................................. 19
Section 4.15. Employee Benefit Plans ................................ 19
Section 4.16. Properties ............................................ 21
Section 4.17. Intentionally Left Blank. ............................. 22
Section 4.18. Intellectual Property ................................. 22
Section 4.19. Insurance Coverage .................................... 25
Section 4.20. Licenses and Permits .................................. 25
Section 4.21. Receivables ........................................... 26
Section 4.22. Debt .................................................. 26
Section 4.23. Employees ............................................. 26
Section 4.24. Labor Matters ......................................... 26
Section 4.25. Environmental Matters ................................. 26
Section 4.26. Certain Interests. .................................... 27
Section 4.27. Customers; Suppliers .................................. 28
Section 4.28. Books And Records ..................................... 29
Section 4.29. Inventories ........................................... 29
Section 4.30. State Takeover Statutes ............................... 29
ARTICLE 5
Representations and Warranties of Parent
Section 5.01. Corporate Existence and Power ......................... 29
Section 5.02. Corporate Authorization ............................... 30
Section 5.03. Governmental Authorization ............................ 30
Section 5.04. Non-contravention ..................................... 30
Section 5.05. Finders' Fees ......................................... 31
Section 5.06. Financing ............................................. 31
Section 5.07. Litigation ............................................ 31
Section 5.08. Solvency .............................................. 31
ARTICLE 6
Covenants of the Company and Sellers
Section 6.01. Conduct of the Company ................................ 31
Section 6.02. Shareholder Approval .................................. 34
Section 6.03. Access to Information ................................. 34
Section 6.04. No Solicitation ....................................... 34
Section 6.05. Notices of Certain Events ............................. 35
Section 6.06. Resignations .......................................... 35
Section 6.07. Noncompetition ........................................ 35
Section 6.08. Intercompany Accounts ................................. 36
Section 6.09. Company Stock Option Plan ............................. 36
Section 6.10. Applied Materials ..................................... 37
Section 6.11. Voting Of Common Stock; Proxy ......................... 37
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ARTICLE 7
Covenants of Parent
Section 7.01. Obligations Of Merger Subsidiary ...................... 37
Section 7.02. Confidentiality ....................................... 37
ARTICLE 8
Covenants of Parent, Merger Subsidiary, the Sellers and the Company
Section 8.01. Reasonable Efforts .................................... 37
Section 8.02. Certain Filings ....................................... 38
Section 8.03. Public Announcements .................................. 38
Section 8.04. Further Assurances .................................... 38
Section 8.05. Notifications ......................................... 38
ARTICLE 9
Conditions to the Merger
Section 9.01. Conditions to Obligations of Each Party ............... 39
Section 9.02. Conditions to the Obligations of Parent and
Merger Subsidiary ..................................... 39
Section 9.03. Conditions to Obligations of the Company and the
Sellers ............................................... 41
ARTICLE 10
Termination
Section 10.01. Termination ........................................... 42
Section 10.02. Effect of Termination ................................. 43
ARTICLE 11
Miscellaneous
Section 11.01. Notices ............................................... 43
Section 11.02. Survival of Representations and Warranties;
Indemnification ....................................... 45
Section 11.03. Defense Of Claims ..................................... 47
Section 11.04. Amendments; No Waivers ................................ 48
Section 11.05. Expenses .............................................. 48
Section 11.06. Successors and Assigns ................................ 49
Section 11.07. Governing Law ......................................... 49
Section 11.08. Jurisdiction .......................................... 49
Section 11.09. WAIVER OF JURY TRIAL .................................. 49
Section 11.10. Counterparts; Effectiveness; Benefit .................. 49
Section 11.11. Entire Agreement ...................................... 49
Section 11.12. Captions .............................................. 50
Section 11.13. Severability .......................................... 50
Section 11.14. Specific Performance .................................. 50
Section 11.15. Arbitration ........................................... 50
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ARTICLE 12
Tax Matters
Section 12.01. Tax Definition ........................................ 50
Section 12.02. Tax Representations ................................... 51
Section 12.03. Covenants ............................................. 53
Section 12.04. Tax Sharing ........................................... 54
Section 12.05. Filing of Tax Returns; Cooperation On Tax Matters ..... 54
Section 12.06. Tax Indemnification ................................... 56
Section 12.07. Certain Disputes ...................................... 57
Section 12.08. Purchase Price Adjustment ............................. 57
Section 12.09. Survival .............................................. 57
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of October 30, 2002, among Ultra
Clean Technology Systems & Service, Inc., a California corporation (the
"COMPANY"), Mitsubishi Corporation, a Japanese corporation ("MC")and Mitsubishi
International Corporation, a New York corporation ("MIC")(each a "SELLER,"
collectively, the "SELLERS"), Ultra Clean Holdings, Inc., a Delaware corporation
("PARENT"), and Clean Merger Company, a Delaware corporation and a wholly-owned
subsidiary of Parent ("MERGER SUBSIDIARY").
WHEREAS, upon the terms and subject to the conditions of this Agreement
and in accordance with California Law, Parent and the Company will enter into a
business combination transaction pursuant to which Merger Subsidiary will merge
with and into the Company;
WHEREAS, the Board of Directors of the Company has determined that the
business combination transaction is consistent with and in furtherance of the
long-term business strategy of the Company and fair to, and in the best
interests of, the Company and its shareholders and has approved and adopted this
Agreement and the transactions contemplated by this Agreement and has
recommended the approval and adoption of this Agreement by the shareholders of
the Company;
WHEREAS, Sellers own all of the outstanding shares of common stock, no par
value, of the Company;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Subsidiary, Sellers and the Company hereby agree as follows:
ARTICLE 1
Definitions
Section 1.01. Definitions. (a) The following terms, as used herein, have
the following meanings:
"ACQUISITION PROPOSAL" means, other than the transactions contemplated by
this Agreement, any Third Party offer, proposal or inquiry relating to, or any
Third Party indication of interest in, (i) any acquisition or purchase, direct
or indirect, of 5% or more of the assets of the Company or 5% or more of any
class of equity or voting securities of the Company, (ii) any tender offer
(including a self-tender offer) or exchange offer that, if consummated, would
result in any Third Party beneficially owning 5% or more of any class of equity
or voting securities of the Company or (iii) a merger, consolidation, share
exchange, business combination, sale of all or substantially all the assets,
reorganization,
recapitalization, liquidation, dissolution or other similar transaction
involving the Company.
"AFFILIATE" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by or under common control with such
Person.
"BUSINESS DAY" means a day other than Saturday, Sunday or any day on which
commercial banks in San Francisco, California are authorized or required by law
to close.
"CALIFORNIA LAW" means the California Corporations Code.
"CLOSING DATE" means the date upon which the Closing occurs.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY BALANCE SHEET" means the consolidated balance sheet of the
Company as of December 31, 2001 and the footnotes thereto.
"COMPANY COMMON STOCK" means the shares of common stock, no par value, of
the Company.
"COMPANY BALANCE SHEET DATE" means December 31, 2001.
"COMPANY STOCK OPTIONS" shall mean all outstanding options to purchase the
Company's equity securities granted pursuant to the Company Stock Option Plan.
"COMPANY STOCK OPTION PLAN" shall mean the Ultra Clean Technology Systems
& Services, Inc. 1999 Stock Option Plan.
"DEBT REPAYMENT AMOUNT" shall mean the outstanding principal, any accrued
interest and any other amounts outstanding (including any fees, penalties or
other amounts payable) under the Existing Debt.
"DELAWARE LAW" means the General Corporation Law of the State of Delaware.
"ENVIRONMENTAL LAWS" means any federal, state, local or foreign law
(including common law), treaty, judicial decision, regulation, rule, judgment,
order, decree, injunction, permit or governmental restriction or requirement or
any agreement with any governmental authority or other third party, relating to
human health and safety, the environment or to pollutants, contaminants, wastes
or chemicals or any toxic, radioactive, ignitable, corrosive, reactive or
otherwise hazardous substances, wastes or materials.
"ENVIRONMENTAL PERMITS" means all permits, licenses, franchises,
certificates, approvals and other similar authorizations of governmental
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authorities relating to or required by Environmental Laws and affecting, or
relating in any way to, the business of the Company as currently conducted.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA AFFILIATE" of any entity means any other entity that, together with
such entity, would be treated as a single employer under Section 414 of the
Code.
"EXISTING DEBT" shall mean: (a) the Loan Agreement between the Company
and MIC dated January 1, 2002 relating to a facility of $14,000,000; (b) the
Revolving Uncommitted Availability Facility Agreement between the Company and
Mizuho Corporate Bank, Ltd., a Japanese banking corporation acting through its
Los Angeles agency ("MBL") dated May 1, 2002, and; (c) the General Transaction
Agreement between the Company and Mitsubishi Trust & Banking Corporation, a
Japanese banking corporation acting through its Los Angeles agency ("MTB") dated
May 3, 1999 (each of MIC, MBL and MTB a "LENDER" and collectively the "LENDERS,"
and each agreement referenced above a "LOAN AGREEMENT" and collectively, the
"LOAN AGREEMENTS.")
"INTELLECTUAL PROPERTY RIGHTS" means (i) inventions, whether or not
patentable, reduced to practice or made the subject of one or more pending
patent applications, (ii) national and multinational statutory invention
registrations, patents and patent applications (including all reissues,
divisions, continuations, continuations-in-part, extensions and reexaminations
thereof) registered or applied for in the United States and all other nations
throughout the world, all improvements to the inventions disclosed in each such
registration, patent or patent application, (iii) trademarks, service marks,
trade dress, logos, domain names, trade names and corporate names (whether or
not registered) in the United States and all other nations throughout the world,
including all variations, derivations, combinations, registrations and
applications for registration of the foregoing and all goodwill associated
therewith, (iv) copyrights (whether or not registered) and registrations and
applications for registration thereof in the United States and all other nations
throughout the world, including all derivative works, moral rights, renewals,
extensions, reversions or restorations associated with such copyrights, now or
hereafter provided by law, regardless of the medium of fixation or means of
expression, (v) rights in computer software (including source code, object code,
firmware, operating systems and specifications), (vi) rights in trade secrets
and, to the extent protectable as trade secrets or proprietary information,
business information (including pricing and cost information, business and
marketing plans and customer and supplier lists) and know-how (including
manufacturing and production processes and techniques and research and
development information), (vii) rights in industrial designs (whether or not
registered), (viii) rights in databases and data collections, (ix) rights in
mask works, (x) all rights to obtain and rights to apply for patents, and to
register trademarks and copyrights, (xi) all rights in all of the foregoing
provided by treaties, conventions and common law and (xii) all rights of the
Company to xxx or recover and retain damages and costs and attorneys' fees
incurred by the
3
Company for past, present and future infringement or misappropriation by Third
Parties of any of the foregoing.
"INTERIM BALANCE SHEET" means the unaudited balance sheet of the Company
as of September 30, 2002.
"INTERIM BALANCE SHEET DATE" means September 30, 2002.
"KNOWLEDGE" of any Person that is not an individual means the knowledge of
such Person's Officers after reasonable inquiry; provided that the knowledge of
the Company or Sellers shall mean the knowledge, of Xxxxxxxxx Xxxxxxx, Xxxxxxxx
Xxxxxxx, Xxxxx Xxxxxxx, Xxxxx Xxxx, Xxxxxx Xxxxxxxx, Xxxxxxx Xxxxxxx and Xxxxx
Xxxxxx, after reasonable inquiry.
"LICENSED INTELLECTUAL PROPERTY RIGHTS" means all Intellectual Property
Rights owned by a Person other than the Company and licensed or sublicensed to
the Company.
"LIEN" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such property or asset. For purposes of this Agreement, a
Person shall be deemed to own subject to a Lien, any property or asset that it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
"MATERIAL ADVERSE EFFECT" means, with respect to any Person, a material
adverse effect on the condition (financial or otherwise), business, assets or
results of operations of such Person and its Subsidiaries, taken as a whole,
other than as a result of general economic conditions or events affecting the
Person's industry generally but which do not materially disproportionately
affect the Person.
"MERGER CONSIDERATION" means the quotient obtained by dividing (A)
thirty-four million six hundred eighty thousand dollars ($34,680,000) minus the
Debt Repayment Amount and the Spread Payment Amount by (B) the total number of
shares of Company Common Stock issued and outstanding at the Effective Time,
rounded to the fourth decimal place.
"MINIMUM WORKING CAPITAL" means $11,230,000 plus $750,000, less cash
payments related to capital expenditures (excluding any capital leases) incurred
during October 2002; provided, however, that under no circumstance shall Minimum
Working Capital be less than $11,230,000.
"1933 ACT" means the Securities Act of 1933, as amended.
"1934 ACT" means the Securities Exchange Act of 1934.
"OFFICER" of any Person means any executive officer of such Person.
4
"OPTION TERMINATION AGREEMENTS" means those agreements between the Company
and Persons holding options having an exercise price per share less than the
Merger Consideration which provide for the cancellation of such options in
exchange for a cash settlement.
"OWNED INTELLECTUAL PROPERTY RIGHTS" means all Intellectual Property
Rights owned by the Company.
"PERSON" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"SEC" means the Securities and Exchange Commission.
"SHARES" means the shares of Common Stock, no par value, of the Company.
"SPREAD PAYMENT AMOUNT" means the aggregate amount of payments made by the
Company pursuant to the Option Termination Agreements.
"SUBSIDIARY" means, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at any time directly or indirectly owned by such Person.
"TAX BENEFIT ITEM" shall mean $440,852, provided that the Tax Benefit Item
shall be reduced to the extent of any cash payment received from any Taxing
Authority in respect of any component benefit item of the Tax Benefit Item
between the date hereof and the Closing Date. Schedule I shall set forth the
items used to determine the Tax Benefit Item (the "TAX BENEFIT ITEM SCHEDULE").
"TAX LIABILITY ITEM" shall mean $457,053, provided that the Tax Liability
Item shall be reduced to the extent of any cash payment made to any Taxing
Authority in satisfaction of any component liability item of the Tax Liability
Item between the date hereof and the Closing Date. Schedule II shall set forth
the items used to determine the Tax Liability Item (the "TAX LIABILITY ITEM
SCHEDULE").
"THIRD PARTY" means any Person as defined in this Agreement or in Section
13(d) of the 1934 Act, other than Parent or any of its Affiliates.
Any reference in this Agreement to a statute shall be to such statute, as
amended from time to time, and to the rules and regulations promulgated
thereunder.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
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TERM SECTION
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Accounting Referee Section 12.07
Buyer Indemnitee Section 12.01
CERCLA Section 4.25
Certificates Section 2.03
Closing Section 2.01
Closing Balance Sheet Section 2.05
Closing Working Capital Section 2.05
Company Securities Section 4.05
Confidentiality Agreement Section 6.03
Consents Section 4.14
Effective Time Section 2.01
Employee Plans Section 4.15
End Date Section 10.01
Exchange Agent Section 2.03
Final Working Capital Section 2.06
GAAP Section 4.07
Governmental Authority Section 9.02
Indemnity Cap Section 11.02
Indemnified Party Section 11.02
Indemnifying Party Section 11.02
Loss Section 11.02
Material Contracts Section 4.11
Merger Section 2.01
Motoyama Section 4.18
Multiemployer Plan Section 4.15
Outstanding Common Section 4.05
Parent Indemnified Parties Section 11.02
Permits Section 4.20
Post-Closing Tax Period Section 12.01
Pre-Closing Tax Period Section 12.01
Seller Indemnified Parties Section 11.02
Surviving Corporation Section 2.01
Tax Section 12.01
Tax Asset Section 12.01
Taxing Authority Section 12.01
Tax Loss Section 12.06
Tax Sharing Agreements Section 12.01
Transfer Taxes Section 12.03
ARTICLE 2
The Merger
Section 2.01. The Merger. (a) At the Effective Time, Merger Subsidiary
shall be merged (the "MERGER") with and into the Company in accordance with
California Law, whereupon the separate existence of Merger Subsidiary shall
6
cease, and the Company shall be the surviving corporation (the "SURVIVING
CORPORATION").
(b) As soon as practicable after satisfaction or, to the extent permitted
hereunder, waiver of all conditions to the Merger, the Company and Merger
Subsidiary will file an agreement of merger with the Secretary of State of the
State of California, a certificate of merger with the Delaware Secretary of
State, and make all other filings or recordings required by California Law or
Delaware Law in connection with the Merger. The Merger shall become effective at
such time (the "EFFECTIVE TIME") as the agreement of merger is accepted by the
Secretary of State of the State of California or at such later time as is
specified in the agreement of merger. Immediately prior to the filing of the
agreement of merger, a closing (the "CLOSING") will be held at the offices of
Xxxxx Xxxx & Xxxxxxxx, 0000 Xx Xxxxxx Xxxx, Xxxxx Xxxx, Xxxxxxxxxx 00000 (or
such other place as the parties may agree).
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, powers, privileges and franchises and be subject to all
of the obligations, liabilities, restrictions and disabilities of the Company
and Merger Subsidiary, all as provided under California Law.
Section 2.02. Conversion of Shares. At the Effective Time:
(a) except as otherwise provided in Section 2.02(b) or Section 2.04, each
Share outstanding immediately prior to the Effective Time shall be converted
into the right to receive the Merger Consideration in cash without interest;
(b) each Share held by the Company as treasury stock or owned by Parent or
any of its Subsidiaries immediately prior to the Effective Time shall be
canceled, and no payment shall be made with respect thereto; and
(c) each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become one
share of common stock of the Surviving Corporation with the same rights, powers
and privileges as the shares so converted and shall constitute the only
outstanding shares of capital stock of the Surviving Corporation.
Section 2.03. Surrender and Payment. (a) Parent will act as exchange agent
(the "EXCHANGE AGENT") for the purpose of exchanging certificates representing
Shares (the "CERTIFICATES") for the Merger Consideration. Upon the Closing,
Parent will make available the Merger Consideration to be paid by wire transfer
in respect of the Shares. On the Closing Date, Sellers will surrender the
Certificates to the Exchange Agent for cancellation together with a letter of
transmittal and instructions (which shall specify that the delivery shall be
effected, and risk of loss and title shall pass, only upon proper delivery of
the Certificates to the Exchange Agent) for use in such exchange.
7
(b) Each holder of Shares that have been converted into the right to
receive the Merger Consideration will be entitled to receive, upon surrender to
the Exchange Agent of a Certificate, together with a properly completed letter
of transmittal, the Merger Consideration payable for each Share represented by
such Certificate. Until so surrendered, each such Certificate shall represent
after the Effective Time for all purposes only the right to receive such Merger
Consideration.
(c) If any portion of the Merger Consideration is to be paid to a Person
other than the Person in whose name the surrendered Certificate is registered,
it shall be a condition to such payment that the Certificate so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the Person requesting such payment shall pay to the Exchange Agent any transfer
or other taxes required as a result of such payment to a Person other than the
registered holder of such Certificate or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
(d) After the Effective Time, there shall be no further registration of
transfers of Shares. If, after the Effective Time, Certificates are presented to
the Surviving Corporation, they shall be canceled and exchanged for the Merger
Consideration provided for, and in accordance with the procedures set forth, in
this Article 2.
(e) Parent shall not be liable to any holder of Shares for any amount paid
to a public official pursuant to applicable abandoned property, escheat or
similar laws. Immediately prior to such time when amounts remaining unclaimed by
holders of Shares would otherwise escheat to or become property of any
governmental authority, such unclaimed amounts shall become, to the extent
permitted by applicable law, the property of Parent free and clear of any claims
or interest of any Persons previously entitled thereto.
(f) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 2.03(a) to pay for Shares for which dissenter's rights
have been perfected shall be returned to Parent, upon demand.
Section 2.04. Dissenting Shares. Notwithstanding Section 2.02, Shares
outstanding immediately prior to the Effective Time and held by a holder who has
not voted in favor of the Merger or consented thereto in writing and who has
demanded appraisal for such Shares in accordance with California Law shall not
be converted into a right to receive the Merger Consideration, but the holder
thereof shall only be entitled to such rights as are provided by California Law,
unless such holder fails to perfect, withdraws or otherwise loses its right to
appraisal. If, after the Effective Time, such holder fails to perfect, withdraws
or loses its right to appraisal, such Shares shall be treated as if they had
been converted as of the Effective Time into a right to receive the Merger
Consideration. The Company shall give Parent prompt notice of any demands
received by the Company for appraisal of Shares, and Parent shall have the right
8
to participate in all negotiations and proceedings with respect to such demands.
Except with the prior written consent of Parent, the Company shall not make any
payment with respect to, or settle or offer to settle, any such demands.
Section 2.05. Closing Balance Sheet. (a) As promptly as practicable,
Parent will cause to be prepared and delivered to Sellers the Closing Balance
Sheet, together with an unqualified audit report of Deloitte & Touche thereon,
and a certificate based on such Closing Balance Sheet setting forth Parent's
calculation of Closing Working Capital. The Closing Balance Sheet ("CLOSING
BALANCE SHEET") shall (x) fairly present the financial position of the Company
at the close of business on the Closing Date in accordance with generally
accepted accounting principles applied on a basis consistent with those used in
the preparation of the Company Balance Sheet, (y) include line items
substantially consistent with those in the Company Balance Sheet, and (z) be
prepared in accordance with accounting policies and practices consistent with
those used in the preparation of the Company Balance Sheet. "CLOSING WORKING
CAPITAL" means the excess of current assets over current liabilities of the
Company as shown on the Closing Balance Sheet, with the following adjustments:
(i) [intentionally left blank]; (ii) excluding the effect (including the Tax
effect) of the payment of the Spread Payment Amount and any exercise of employee
stock options occurring between the date hereof and the Closing Date; (iii)
excluding the Existing Debt and payoff of the Existing Debt; and (iv) reflecting
no items in respect of Taxes other than the Tax Benefit Item and the Tax
Liability Item.
(b) If Sellers disagree with Parent's calculation of Closing Working
Capital delivered pursuant to Section 2.05(a), Sellers may, within thirty (30)
days after delivery of the documents referred to in Section 2.05(a), deliver a
notice to Parent disagreeing with such calculation and setting forth Sellers'
calculation of such amount. Any such notice of disagreement shall specify those
items or amounts as to which Sellers disagree, and Sellers shall be deemed to
have agreed with all other items and amounts contained in the Closing Balance
Sheet and the calculation of Closing Working Capital delivered pursuant to
Section 2.05(a).
(c) If a notice of disagreement shall be delivered pursuant to Section
2.05(b), Parent and Sellers shall, during the thirty (30) days following such
delivery, use their reasonable efforts to reach agreement on the disputed items
or amounts in order to determine, as may be required, the amount of Closing
Working Capital, which amount shall not be less than the amount thereof shown in
Parent's calculations delivered pursuant to Section 2.05(a) nor more than the
amount thereof shown in Sellers' calculation delivered pursuant to Section
2.05(b). If, during such period, Parent and Sellers are unable to reach such
agreement, they shall promptly thereafter cause independent accountants of
nationally recognized standing reasonably satisfactory to Parent and Sellers
(who shall not have any material relationship with Parent or Sellers), promptly
to review this Agreement and the disputed items or amounts for the purpose of
calculating Closing Working Capital. In making such calculation, such
independent accountants shall consider only those items or amounts in the
9
Closing Balance Sheet or Parent's calculation of Closing Working Capital as to
which Sellers have disagreed. Such independent accountants shall deliver to
Parent and Seller, as promptly as practicable, a report setting forth such
calculation. Such report shall be final and binding upon Parent and Sellers. The
cost of such review and report shall be borne by Parent if the difference
between Final Working Capital and Parent's calculation of Closing Working
Capital delivered pursuant to Section 2.05(a) is greater than the difference
between Final Working Capital and Sellers' calculation of Closing Working
Capital delivered pursuant to Section 2.05(b), by Sellers if the first such
difference is less than the second such difference and otherwise equally by
Parent and Sellers.
(d) Parent and Sellers agree that they will, and agree to cause their
respective independent accountants and the Company to cooperate and assist in
the preparation of the Closing Balance Sheet and the calculation of Closing
Working Capital and in the conduct of the audits and reviews referred to in this
Section, including without limitation, the making available to the extent
necessary of books, records, work papers and personnel.
Section 2.06. Adjustment of Purchase Price. (a) If Minimum Working Capital
exceeds Final Working Capital, Sellers shall pay to Parent, as an adjustment to
the Purchase Price, in the manner and with interest as provided in Section
2.06(b), the amount of such excess; provided, however, that in no circumstances
shall any such payment exceed one million four hundred eighty-five thousand
dollars ($1,485,000). "FINAL WORKING CAPITAL" means Closing Working Capital as
shown in Parent's calculation delivered pursuant to Section 2.05(a), if no
notice of disagreement with respect thereto is duly delivered pursuant to
Section 2.05(b); or if such a notice of disagreement is delivered, as agreed by
Parent and Sellers pursuant to Section 2.05(c) or in the absence of such
agreement, as shown in the independent accountant's calculation delivered
pursuant to Section 2.05(c); provided that, in no event shall Final Working
Capital be less than Parent's calculation of Closing Working Capital delivered
pursuant to Section 2.05(a) or more than Sellers' calculation of Closing Working
Capital delivered pursuant to Section 2.05(b).
(b) If Sellers are obligated to make a payment pursuant to Section
2.06(a), such payment shall be paid within ten days after the date Final Working
Capital has been determined by delivery by Sellers of a certified or official
bank check payable in immediately available funds to Parent or by causing such
payments to be credited to such account of Parent as may be designated by
Parent. The amount of any payment to be made pursuant to this Section shall bear
interest from and including the Closing Date to but excluding the date of
payment at a rate per annum equal to the Prime rate as published in the Wall
Street Journal, Eastern Edition in effect from time to time during the period
from the Closing Date to the date of payment. Such interest shall be payable at
the same time as the payment to which it relates and shall be calculated daily
on the basis of a year of 365 days and the actual number of days elapsed.
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Section 2.07. Existing Debt. Upon Closing, Parent shall, on behalf of the
Company, pay by wire transfers to the Lenders an amount equal, in the aggregate,
to the Debt Repayment Amount (net of any applicable withholding taxes, which
Parent shall withhold and remit to the appropriate Taxing Authority), in full
satisfaction of the Existing Debt, the Loan Agreements shall terminate, and
there shall be no further financial obligations nor any amounts outstanding
under the Loan Agreements.
Section 2.08. Adjustments. If, during the period between the date of this
Agreement and the Effective Time, any change in the outstanding Shares shall
occur, including by reason of any reclassification, recapitalization, stock
split or combination, exchange or readjustment of Shares, or stock dividend
thereon with a record date during such period, the Merger Consideration and any
other amounts payable pursuant to this Agreement shall be appropriately
adjusted.
Section 2.09. Withholding Rights. Each of the Surviving Corporation and
Parent shall be entitled to deduct and withhold from the consideration or
payable to any Person pursuant to this Article 2 such amounts as it is required
to deduct and withhold with respect to the making of such payment under any
provision of federal, state, local or foreign tax law. If the Surviving
Corporation or Parent, as the case may be, so withholds amounts, such amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the Shares, in respect of which the Surviving Corporation or Parent,
as the case may be, made such deduction and withholding.
Section 2.10. Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond, in such
reasonable amount as the Surviving Corporation may direct, as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will pay, in exchange for such lost, stolen or destroyed
Certificate, the Merger Consideration, to be paid in respect of the Shares
represented by such Certificate, as contemplated by this Article 2.
ARTICLE 3
The Surviving Corporation
Section 3.01. Articles of Incorporation. The articles of incorporation of
the Company in effect at the Effective Time shall be the articles of
incorporation of the Surviving Corporation until amended in accordance with
applicable law, provided that, at the Effective Time, such articles of
incorporation shall be amended as set forth in Exhibit A.
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Section 3.02. Bylaws. The bylaws of Merger Subsidiary in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable law.
Section 3.03. Directors and Officers. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
applicable law, (i) the directors of Merger Subsidiary at the Effective Time
shall be the directors of the Surviving Corporation and (ii) the officers of the
Company at the Effective Time, other than Xxxxxxxxx Xxxxxxx, who shall resign
effective as of the Closing, shall be the officers of the Surviving Corporation.
ARTICLE 4
Representations and Warranties of the Company and Sellers
The Company and Sellers each jointly and severally represent and warrant
to Parent, subject to such exceptions as are disclosed in the attached
disclosure schedule (which disclosure schedule shall reference the corresponding
appropriate section and paragraph numbers to which disclosure relates), that:
Section 4.01. Corporate Existence and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of California and has all corporate powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted. Schedule 4.01 contains a complete and accurate list
of every jurisdiction in which the Company is qualified to do business. The
Company is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where such qualification is necessary, except for
jurisdictions where the failure to so qualify would not reasonably be expected
to have a Material Adverse Effect on the Company. The Company has heretofore
delivered to Parent true and complete copies of the articles of incorporation
and bylaws of the Company as currently in full force and effect. The Company is
not in violation of any of the provisions of its articles of incorporation or
bylaws.
Section 4.02. Corporate Authorization. (a) The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby are within the Company's corporate
powers and, except for the affirmative vote of the holders of a majority of the
outstanding Shares in connection with the consummation of the Merger, has been
duly authorized by all necessary corporate action on the part of the Company.
This Agreement, assuming due authorization, execution and delivery by the other
parties hereto and thereto, constitutes a valid and binding agreement of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be subject to the laws of general application relating
to bankruptcy, insolvency, reorganization, arrangement, moratorium and the
relief of debtors and rules of law governing specific performance, injunctive
relief or other equitable remedies.
12
(b) The execution, delivery and performance by each Seller of this
Agreement, and the consummation by each Seller of the transactions contemplated
hereby is within each Seller's corporate powers and has been duly authorized by
all necessary corporate action on the part of each Seller. This Agreement,
assuming due authorization, execution and delivery by the other parties hereto
and thereto, constitutes a valid and binding agreement of each Seller
enforceable against each Seller in accordance with its terms, except as such
enforceability may be subject to the laws of general application relating to
bankruptcy, insolvency, reorganization, arrangement, moratorium and the relief
of debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies.
Section 4.03. Governmental Authorization. (a) The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby requires no action on the part of the
Company by or in respect of, or filing with, any governmental body, agency,
official or authority, domestic, foreign or supranational, other than the filing
of an agreement of merger with respect to the Merger with the Secretary of State
of the State of California, the filing of a certificate of merger with the
Delaware Secretary of State, and the filing of appropriate documents with the
relevant authorities of other states in which the Company is qualified to do
business.
(b) The execution, delivery and performance by each Seller of this
Agreement and the consummation by each Seller of the transactions contemplated
hereby requires no action on the part of either Seller by or in respect of, or
filing with, any governmental body, agency, official or authority, domestic,
foreign or supranational.
Section 4.04. Non-contravention. The execution, delivery and performance
by the Company and the Sellers of this Agreement, and the consummation of the
transactions contemplated hereby does not and will not (i) contravene, conflict
with, or result in any violation or breach of any provision of the Articles of
Incorporation or bylaws (or comparable document in the case of Mitsubishi
Corporation) of the Company or the Sellers, (ii) assuming compliance with the
matters referred to in Section 4.03, contravene, conflict with, or result in a
material violation or breach of any provision of any applicable law, statute,
ordinance, rule, regulation, judgment, injunction, order or decree, (iii)
require any consent or other action by any Person under, constitute a default,
or an event that, with or without notice or lapse of time or both, could become
a default, under, or cause or permit the termination, cancellation, acceleration
or other change of any material right or obligation or the loss of any material
benefit to which the Sellers or the Company are entitled under any provision of
any agreement or other instrument binding upon the Sellers or the Company or any
material license, franchise, permit, certificate, approval or other similar
authorization affecting, or relating in any way to, the assets or business of
the Sellers or the Company or (iv)
13
result in the creation or imposition of any Lien on any asset of the Sellers or
the Company other than Permitted Liens.
Section 4.05. Capitalization. (a) The authorized capital stock of the
Company consists of 10,000,000 shares of Common Stock, no par value. There are
issued and outstanding 3,680,000 shares of Company Common Stock, all of which
are owned by the Sellers (the "OUTSTANDING COMMON"). All outstanding shares of
capital stock of the Company are duly authorized and validly issued, and are
fully paid and nonassessable. Schedule 4.05 contains a complete and accurate
list of every holder of Company Common Stock and the number of shares each such
holder holds.
(b) At the Effective Time there will be no outstanding (i) shares of
capital stock or voting securities of the Company other than the Outstanding
Common, (ii) securities of the Company convertible into or exchangeable for
shares of capital stock or voting securities of the Company, (iii) options,
warrants or other rights to acquire from the Company or other obligation of the
Company to issue, any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of the Company or
(iv) phantom stock, tracking stock or other securities or rights to receive
economic value equivalent to the capital stock of the Company (the items in
clauses (i), (ii), (iii) and (iv) being referred to collectively as the "COMPANY
SECURITIES"). There are no outstanding obligations of the Company to repurchase,
redeem or otherwise acquire any of the Company Securities.
(c) At the Effective Time, all options granted under the Company Stock
Option Plan will terminate, expire and be of no further force or effect pursuant
to the terms of the Company Stock Option Plan and the holders of such options
will have no rights with respect thereto.
(d) None of the Shares were issued or will be issued in violation of the
1933 Act, California Law or other state securities laws or regulations or any
preemptive rights.
Section 4.06. Subsidiaries. The Company does not have, and has never had,
any subsidiaries, nor does it own any equity interest in any other Person.
Section 4.07. Financial Statements. The audited balance sheets as of
December 31, 1999, 2000 and 2001 and related audited statements of income and
cash flows for each of the years ended December 31, 1999, 2000 and 2001 and
unaudited interim financial statements for the nine months ended September 30,
2002 (subject to normal reconciling adjustments) of the Company provided to
Parent and attached hereto as Schedule 4.07 fairly present, in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent basis
(except as may be indicated in the notes thereto), the financial position of the
Company as of the dates thereof and the results of operations and cash flows for
the periods then ended (subject only to normal year-end adjustments and an
14
absence of footnotes in the case of any unaudited interim financial statements).
Such financial statements include all adjustments that are necessary for a fair
presentation of the financial position and results of operations of the Company
as of the dates thereof and for the periods covered thereby.
Section 4.08. Absence of Certain Changes. Since the Company Balance Sheet
Date, the business of the Company has been conducted in all material respects in
the ordinary course consistent with past practices and there has not been:
(a) any event, occurrence, development or state of circumstances or facts
that has had or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or any
repurchase, redemption or other acquisition by the Company of any outstanding
shares of capital stock or other securities of, or other ownership interests in,
the Company;
(c) any amendment of any material term of any outstanding security of the
Company;
(d) any incurrence, assumption or guarantee by the Company of any
indebtedness for borrowed money except for draws by the Company under the Loan
Agreements;
(e) any creation or other incurrence by the Company of any Lien on any
asset, other than Permitted Liens;
(f) any making of any loan, advance or capital contributions to or
investment in any Person, except for reasonable advances to employees and
consultants for travel and business expenses in the ordinary course of business
consistent with past practices;
(g) any damage, destruction or other casualty loss (whether or not covered
by insurance) affecting the business or assets of the Company that has had or
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company;
(h) any transaction or commitment made, or any contract or agreement
entered into, by the Company relating to its assets or business (including the
acquisition or disposition of any assets) or any relinquishment by the Company
of any contract or other right, in either case, material to the Company other
than those contemplated by this Agreement and transactions and commitments in
the ordinary course of business consistent with past practices;
15
(i) any change in any method of accounting, method of tax accounting or
accounting principles or practice by the Company, except for any such change
required by reason of a concurrent change in GAAP;
(j) any (i) grant of any severance or termination pay to (or amendment to
any existing arrangement with) any director, officer or employee of the Company,
(ii) increase in benefits payable under any existing severance or termination
pay policies or employment agreements, (iii) entering into any employment,
deferred compensation or other similar agreement (or any amendment to any such
existing agreement) with any director, officer or employee of the Company, (iv)
establishment, adoption or amendment (except as required by applicable law) of
any collective bargaining, bonus, profit-sharing, thrift, pension, retirement,
deferred compensation, compensation, stock option, restricted stock or other
benefit plan or arrangement covering any director, officer or employee of the
Company, or (v) increase in compensation, bonus or other benefits payable to any
director or officer or, other than in the ordinary course of business consistent
with past practices, any other employee of the Company;
(k) any labor dispute, other than routine individual grievances, or, to
the Knowledge of the Company or Sellers, any activity or proceeding by a labor
union or representative thereof to organize any employees of the Company, which
employees were not subject to a collective bargaining agreement at the Company
Balance Sheet Date, or any lockouts, strikes, slowdowns, work stoppages or
threats thereof by or with respect to such employees;
(l) any payment, reimbursement, refund, or other fund transfer to Sellers
or any Affiliate, other than the payment of salaries to officers or employees
and payments for excess liability insurance and employee medical and dental
insurance provided by MIC, all made in the ordinary course of business
consistent with past practices; or
(m) any agreement or commitment to do any of the foregoing.
Section 4.09. No Undisclosed Liabilities. There are no liabilities or
obligations of the Company of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, and there is no existing
condition, situation or set of circumstances that could reasonably be expected
to result in such a liability or obligation, other than:
(a) liabilities or obligations disclosed and provided for in the Company
Balance Sheet or in the notes thereto, and
(b) liabilities or obligations incurred since the Company Balance Sheet
Date that could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
16
Section 4.10. Compliance with Laws and Court Orders. The business of the
Company is and has been conducted in compliance in all material respects with,
and to the Knowledge of the Company and the Sellers is not under investigation
with respect to, and has not been threatened to be charged with or given notice
of any violation of, any material applicable law, statute, ordinance, rule,
regulation, judgment, injunction, order or decree.
Section 4.11. Material Contracts. (a) Except for the Contracts disclosed
in Schedule 4.11 (the "MATERIAL CONTRACTS"), the Company is not a party to or
bound by:
(i) any lease or sublease (whether of real or personal property)
providing for annual rentals of $15,000 or more;
(ii) any agreement (including purchase orders) for the purchase of
materials, supplies, goods, services, equipment or other assets providing
for either (A) annual payments by the Company of $50,000 or more or (B)
aggregate payments by the Company of $75,000 or more;
(iii) any sales, distribution or other similar agreement providing
for the sale or license by the Company of materials, supplies, goods,
services, equipment or other assets or license that provides for either
(A) annual payments to the Company of $15,000 or more or (B) aggregate
payments to the Company of $25,000 or more;
(iv) any partnership, joint venture or other similar agreement or
arrangement;
(v) any agreement relating to the acquisition or disposition of any
business (whether by merger, sale of stock, sale of assets or otherwise);
(vi) any agreement relating to indebtedness for borrowed money or
the deferred purchase price of property (in either case, whether incurred,
assumed, guaranteed or secured by any asset), except any such agreement
with an aggregate outstanding principal amount not exceeding $10,000 and
which may be prepaid on not more than 30 days notice without the payment
of any penalty;
(vii) any material option, license, franchise or similar agreement;
(viii) any material agency, dealer, sales representative, marketing,
distribution or other similar agreement;
(ix) any agreement that limits the freedom of the Company to compete
in any line of business or with any Person or in any area or which
17
could reasonably be expected to so limit the freedom of the Company after
the Closing Date;
(x) any agreement with any Affiliate of the Company, with any
director or officer of the Company, or with any "associate" or any member
of the "immediate family" (as such terms are respectively defined in Rules
12b-2 and 16a-1 of the 0000 Xxx) of any such director or officer;
(xi) any employment agreement, or any agreement with severance,
change in control or similar arrangements that will result in any
obligation (absolute or contingent) of the Company to make any payment as
a result of the consummation of the Merger, termination of employment or
both; or
(xii) any other agreement, commitment, arrangement or plan not made
in the ordinary course of business that is material to the Company,
including, without limitation, any agreement involving annual payments by
any customer to the Company in excess of $500,000.
(b) Each agreement, contract, plan, lease, arrangement or commitment
disclosed in any Schedule to this Agreement or required to be disclosed pursuant
to this Section is a valid and binding agreement of the Company and is in full
force and effect with respect to the Company and, to the Knowledge of the
Sellers and the Company, any other party thereto, and neither the Company nor,
to the Knowledge of the Sellers and the Company, any other party thereto is in
default or breach in any material respect under the terms of any such agreement,
contract, plan, lease, arrangement or commitment, and no event or circumstance
has occurred that, with notice or lapse of time or both, could reasonably be
expected to constitute any material event of default thereunder. True and
complete copies of each such agreement, contract, plan, lease, arrangement or
commitment have been delivered or made available to Parent.
(c) The Company has fulfilled in all material respects all obligations
required pursuant to each Material Contract to have been performed by the
Company prior to the date hereof, and the Sellers and the Company have no reason
to believe that the Company will not be able to fulfill, when due, all of its
obligations under the Material Contracts that remain to be performed after the
date hereof.
(d) The Company has complied with all terms contained in any Material
Contract that provide for pricing or other contract terms on a "most favored
nation" or similar basis, and no refunds of any past payments are or will become
due.
Section 4.12. Litigation. There is no action, suit, investigation or
proceeding (or, to the Knowledge of the Company or the Sellers, are there any
facts or conditions that could reasonably be expected to be the basis therefore)
18
pending against, or, to the Knowledge of the Sellers or the Company, threatened
against or affecting, the Company, any present or former officer, director or
employee of the Company or any other Person for whom the Company may be liable
or any of their respective properties or that in any manner challenges or seeks
to prevent, enjoin, alter or materially delay the Merger or any of the other
transactions contemplated hereby before any court or arbitrator or before or by
any governmental body, agency or official, domestic, foreign or supranational.
Section 4.13. Finders' Fees. There is no investment banker, broker, finder
or other intermediary that has been retained by or is authorized to act on
behalf of the Sellers or the Company who might be entitled to any fee or
commission from the Company or any of its Affiliates in connection with the
transactions contemplated by this Agreement.
Section 4.14. Consents. Schedule 4.14 sets forth each material agreement,
contract or other instrument (including, without limitation, any Material
Contract) binding upon Sellers or the Company requiring a consent or other
action by any Person as a result of the execution, delivery and performance of
this Agreement (the "CONSENTS").
Section 4.15. Employee Benefit Plans. (a) Schedule 4.15(a) contains a
correct and complete list identifying each "employee benefit plan", as defined
in Section 3(3) of ERISA, each employment, severance or similar contract, plan,
arrangement or policy and each other plan or arrangement (written or oral)
providing for compensation, bonuses, profit-sharing, stock option or other stock
related rights or other forms of incentive or deferred compensation, vacation
benefits, insurance (including any self-insured arrangements), health or medical
benefits, employee assistance program, disability or sick leave benefits,
workers' compensation, supplemental unemployment benefits, severance benefits
and post-employment or retirement benefits (including compensation, pension,
health, medical or life insurance benefits) which is maintained, administered or
contributed to by the Company or any ERISA Affiliate and covers any employee or
former employee of the Company, or with respect to which the Company has any
liability. Copies of such plans (and, if applicable, related trust or funding
agreements or insurance policies) and all amendments thereto and written
interpretations thereof have been furnished or made available to Parent together
with the most recent annual report (Form 5500 including, if applicable, Schedule
B thereto) and tax return (Form 990) prepared in connection with any such plan
or trust. Such plans are referred to collectively herein as the "EMPLOYEE
PLANS".
(b) Neither the Company nor any ERISA Affiliate nor any predecessor
thereof sponsors, maintains or contributes to, or has in the past sponsored,
maintained or contributed to, any Employee Plan subject to Title IV of ERISA.
(c) Neither the Company nor any ERISA Affiliate nor any predecessor
thereof contributes to, or has in the past contributed to, any multiemployer
plan, as defined in Section 3(37) of ERISA (a "MULTIEMPLOYER PLAN").
19
(d) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code has received a favorable determination or opinion letter, as
applicable, or has pending or has time remaining in which to file, an
application for such determination from the Internal Revenue Service, and the
Company is not aware of any reason why any such determination or opinion letter
should be revoked or not be issued. The Company has made available to Parent
copies of the most recent Internal Revenue Service determination or opinion
letters with respect to each such Employee Plan. Each Employee Plan has been
maintained in material compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations, including but
not limited to ERISA and the Code, which are applicable to such Employee Plan.
No material events have occurred with respect to any Employee Plan that could
result in payment or assessment by or against the Company of any material excise
taxes under Sections 4972, 4975, 4976, 4977, 4979, 4980B, 4980D, 4980E or 5000
of the Code.
(e) The consummation of the transactions contemplated by this Agreement
will not (either alone or together with any other event) entitle any employee,
former employee or independent contractor of the Company to severance pay,
bonus, retirement, job security or similar benefit or accelerate the time of
payment or vesting or trigger any payment of funding (through a grantor trust or
otherwise) of compensation or benefits under, increase the amount payable or
trigger any other material obligation pursuant to, any Employee Plan or any
other employment or benefit arrangement. There is no contract, plan or
arrangement (written or otherwise) covering any employee or former employee of
the Company that, individually or collectively, could entitle any employee or
former employee to any severance or other payment solely as a result of the
transactions contemplated hereby, or could give rise to the payment of any
amount that would not be deductible pursuant to the terms of Section 280G or
162(m) of the Code.
(f) The Company has no liability in respect of post-retirement health,
medical or life insurance benefits for retired, former or current employees of
the Company except as required to avoid excise tax under Section 4980B of the
Code.
(g) To the Knowledge of the Company and the Sellers, there has been no
amendment to, written interpretation or announcement (whether or not written) by
the Company or any of its Affiliates relating to, or change in employee
participation or coverage under, an Employee Plan which could increase
materially the expense of maintaining such Employee Plan above the level of the
expense incurred in respect thereof for the fiscal year ended December 31, 2001.
(h) The Company is not a party to or subject to, or is currently
negotiating in connection with entering into, any collective bargaining
agreement or other contract or understanding with a labor union or organization.
20
(i) All contributions and payments accrued under each Employee Plan,
determined in accordance with prior funding and accrual practices, as adjusted
to include proportional accruals for the period ending as of the date hereof,
have been discharged and paid on or prior to the date hereof except to the
extent reflected as a liability on the Company Balance Sheet.
(j) There is no action, suit, investigation, audit or proceeding pending
against or involving or, to the Knowledge of the Company and the Sellers,
threatened against or involving, any Employee Plan before any court or
arbitrator or any state, federal or local governmental body, agency or official.
(k) Except as set forth in Schedule 4.15, the Company has not engaged in
any workforce reduction within the last 90 days which, alone or when aggregated
with any other workforce reduction before or after the date hereof, would
trigger obligations under the Worker Adjustment and Retraining Notification Act
with respect to its employees.
Section 4.16. Properties. (a) The Company has good and marketable,
indefeasible, fee simple title to, or in the case of leased property and assets
have valid leasehold interests in, all property and assets (whether real,
personal, tangible or intangible) reflected on the Company Balance Sheet or
acquired after the Company Balance Sheet Date, except for (i) such imperfections
of title and encumbrances, if any, which do not materially detract from the
value or interfere with the use of the property subject thereto or affected
thereby and (ii) properties and assets sold since the Company Balance Sheet Date
in the ordinary course of business consistent with past practices. None of such
property or assets is subject to any Lien, except for the Permitted Liens, which
are defined as:
(i) Liens disclosed on the Company Balance Sheet;
(ii) Liens for taxes not yet due or being contested in good faith
(and for which adequate accruals or reserves have been established on the
Company Balance Sheet);
(iii) Mechanics', materialmen's, worker's and other like liens in
respect of amounts that are not yet due and payable; or
(iv) Such Liens, if any, which do not materially detract from the
value or interfere with the use of the property subject thereto or
affected thereby.
(b) There are no developments affecting any such property or assets
pending or, to the Knowledge of the Sellers or the Company threatened, which
could reasonably be expected to materially detract from the value, materially
interfere with any present or intended use or materially adversely affect the
marketability of any such property or assets.
21
(c) All leases of such real property and material personal property are in
good standing and are valid, binding and enforceable in accordance with their
respective terms, except as such enforceability may be subject to the laws of
general application relating to bankruptcy, insolvency, reorganization,
arrangement, moratorium and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies, and there
does not exist under any such lease any material default by the Company or any
event which with notice or lapse of time or both could reasonably be expected to
constitute a material default by the Company thereunder, or, to the Knowledge of
the Company or Sellers, any other party thereto.
(d) The plants, buildings, structures and equipment owned or leased by the
Company have no material defects, are in good operating condition and repair and
have been reasonably maintained consistent with standards generally followed in
the industry (giving due account to the age and length of use of same, ordinary
wear and tear excepted), are adequate and suitable for their present uses and,
in the case of plants, buildings and other structures (including, without
limitation, the roofs thereof), are structurally sound, except for such defects
that do not have, and can not reasonably be expected to have, a Material Adverse
Effect.
(e) The plants, buildings and structures owned or leased by the Company
currently have access to (i) public roads or valid easements over private
streets or private property for such ingress to and egress from all such plants,
buildings and structures and (ii) water supply, storm and sanitary sewer
facilities, telephone, gas and electrical connections, fire protection, drainage
and other public utilities, in each case as is necessary in all material
respects for the conduct of the businesses of the Company as heretofore
conducted and as presently planned to be conducted by Parent. None of the
structures on any such owned or leased real property encroaches upon real
property of another Person, and no structure of any other Person substantially
encroaches upon any of such owned or leased real property.
(f) Such real property, and its continued use, occupancy and operation as
currently used, occupied and operated, does not constitute a material
nonconforming use under any applicable building, zoning, subdivision and other
land use and similar law, regulation or ordinance.
(g) The property and assets owned or leased by the Company, or which they
otherwise have the right to use, constitute all of the property and assets used
or held for use in connection with the businesses of the Company and are
adequate to conduct such businesses as currently conducted.
Section 4.17. Intentionally Left Blank.
Section 4.18. Intellectual Property. (a) Schedule 4.18(a) contains a true
and complete list of each of the registrations, applications for registration
made by
22
or on behalf of the Company with any governmental authority anywhere in the
world of any patents, copyrights, mask works, trademarks, service marks or
rights in Internet or World Wide Web domain names or URL or addresses,
specifying as to each such registration, application or Intellectual Property
Right, as applicable, (i) the nature of such Intellectual Property Right, (ii)
the owner of such Intellectual Property Right, (iii) the jurisdictions by or in
which such Intellectual Property Right has been issued or registered or in which
an application for such issuance or registration has been filed, (iv) the
registration or application numbers thereof, (v) the termination or expiration
dates thereof and (vi) all agreements related to such Intellectual Property
Right, including (A) the date of any license or agreement, (B) the identity of
all parties thereto, (C) a description of the nature and subject matter thereof,
and (D) the term thereof.
(b) The Licensed Intellectual Property Rights and the Owned Intellectual
Property Rights together constitute all of the material Intellectual Property
Rights necessary for, or used or held for use in, the conduct of the business of
the Company as currently conducted. Except as set forth on Schedule 4.18(a),
there exist no restrictions on the disclosure, use or transfer of the Owned
Intellectual Property Rights that materially adversely affects the business of
the Company as currently conducted. The consummation of the transactions
contemplated by this Agreement will not, in any material respect, alter, impair
or extinguish any Owned Intellectual Property Rights or Licensed Intellectual
Property Rights. The conduct of the Company's business as currently conducted
does not infringe upon any intellectual property of Motoyama Engineering Works,
Ltd. ("MOTOYAMA"), nor require any license or other right to use intellectual
property owned by Motoyama.
(c) Except pursuant to written agreements substantially in the form of the
Company's standard form sale agreement (a copy of which is set forth in Schedule
4.18(c)) or as set forth in Schedule 4.18(c), the Company has not given an
indemnity in connection with any Intellectual Property Right to any Person.
(d) The Company has not infringed, misappropriated or otherwise violated
any Intellectual Property Right of any Third Party except such violations as
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company. There is no claim, action, suit,
investigation or proceeding pending against, or, to the Knowledge of the Sellers
or the Company, threatened against or affecting, the Company, or any present or
former officer, director or employee of the Company (i) based upon, or
challenging or seeking to deny or restrict, the rights of the Company in any of
the Owned Intellectual Property Rights and the Licensed Intellectual Property
Rights, (ii) alleging that the use by the Company of the Owned Intellectual
Property Rights or the Licensed Intellectual Property Rights or any services
provided, processes used or products manufactured, used, imported or sold by the
Company do or may conflict with, misappropriate, infringe or otherwise violate
any Intellectual Property
23
Right of any Third Party or (iii) alleging that the Company has infringed,
misappropriated or otherwise violated any Intellectual Property Right of any
Third Party. Except as set forth in Schedule 4.18(d)), the Company has not
received any offer for a license of Intellectual Property Rights from any Third
Party.
(e) None of the Owned Intellectual Property Rights and Licensed
Intellectual Property Rights has been adjudged invalid or unenforceable in whole
or part.
(f) The Company holds all right, title and interest in and to all Owned
Intellectual Property Rights and all of the Company's rights to use the Licensed
Intellectual Property Rights (except with respect to Patents for which this
representation is the right to exclude the use by others), free and clear of any
Lien, except for Permitted Liens and where the failure to hold such right, title
and interest would not have a Material Adverse Effect on the Company. In each
case where a patent or patent application, trademark registration or trademark
application, service xxxx registration or service xxxx application, or copyright
registration or copyright application included in the Owned Intellectual
Property is held by assignment, the assignment has been duly recorded with the
governmental authority from which the patent or registration issued or before
which the application or application for registration is pending. The Company
has taken all commercially reasonable actions necessary to maintain and protect
the Owned Intellectual Property Rights and their rights in the Licensed
Intellectual Property Rights, including payment of applicable maintenance fees
and filing of applicable statements of use.
(g) To the Knowledge of the Sellers and the Company, no Person has
infringed, misappropriated or otherwise violated any material Owned Intellectual
Property Right or material Licensed Intellectual Property Right. The Company has
taken commercially reasonable steps in accordance with normal industry practice
to maintain the confidentiality of all of the Company's material trade secrets
included in the Owned Intellectual Property Rights and the Licensed Intellectual
Property Rights. None of the material Intellectual Property Rights of the
Company, the value of which to the Company is contingent upon maintaining the
confidentiality thereof, has been disclosed other than to employees,
representatives and agents of the Company all of whom are bound by written
confidentiality agreements substantially in the form previously disclosed to
Parent.
(h) The Company has taken reasonable steps in accordance with normal
industry practice to preserve and maintain reasonably complete (i) notes and
records relating to the Owned Intellectual Property Rights and (ii) evidence of
the Company's rights in the Licensed Intellectual Property Rights.
(i) With respect to pending applications and applications for registration
of the Owned Intellectual Property Rights and the Licensed Intellectual Property
Rights, neither the Sellers nor the Company is aware of any reason that could
reasonably be expected to prevent any such application or
24
application for registration from being granted with coverage substantially
equivalent to the latest amended version of the pending application or
application for registration. None of the trademarks, service marks,
applications for trademarks and applications for service marks included in the
Owned Intellectual Property Rights have been the subject of an opposition or
cancellation procedure. None of the patents and patent applications included in
the Owned Intellectual Property Rights have been the subject of an interference,
protest, public use proceeding or Third Party reexamination request.
(j) All products sold or licensed by the Company, or any licensee of the
Company and covered by a patent, trademark or copyright included in the Owned
Intellectual Property Rights have been marked with the notice (applicable as of
the date hereof) of all nations requiring such notice in order to collect
damages except to extent that failure to do so would not reasonably be expected
to have a Material Adverse Effect on the Company.
(k) All directors, officers, employees and contractors of the Company have
entered into Proprietary Rights, Confidentiality and Non-Competition Agreements
with the Company in a form substantially similar to that provided to Parent.
Section 4.19. Insurance Coverage. Schedule 4.19 contains a complete and
accurate list of, and the Company has furnished or made available to Parent true
and complete copies of, all insurance policies and fidelity bonds relating to
the assets, business, operations, employees, officers or directors of the
Company. There is no material claim by the Company pending under any of such
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds or in respect of which such
underwriters have reserved their rights. All premiums payable under all such
policies and bonds have been timely paid and the Company has otherwise complied
fully with the terms and conditions of all such policies and bonds. Such
policies of insurance and bonds (or other policies and bonds providing
substantially similar insurance coverage) have been in effect since 1996 and
remain in full force and effect. Neither the Sellers nor the Company have
Knowledge of any threatened termination of, premium increase with respect to, or
material alteration of coverage under, any of such policies or bonds. The
Company shall after the Closing continue to have coverage under such policies
and bonds with respect to events occurring prior to the Closing.
Section 4.20. Licenses and Permits. Schedule 4.20 correctly describes each
material license, franchise, permit, certificate, approval or other similar
authorization affecting, or relating in any way to, the assets or business of
the Company, including Environmental Permits (the "PERMITS"), together with the
name of the government agency or entity issuing such Permit. The Permits are
valid and in full force and effect. The Company is not in material default
under, and no condition exists that with notice or lapse of time or both could
constitute a material default under, the Permits. None of the Permits will be
terminated or
25
impaired or become terminable, in whole or in part, as a result of the
transactions contemplated hereby. The Company has made all filings with
governmental entities and has received all material permits, registrations,
licenses, franchises, certifications and other approvals necessary to conduct
and operate its business as currently conducted or operated by it and to permit
the Company to own or use its assets in the manner in which such assets are
currently owned or used.
Section 4.21. Receivables. All accounts, notes receivable and other
receivables (other than receivables collected since the Company Balance Sheet
Date or Interim Balance Sheet Date) reflected on the Company Balance Sheet and
Interim Balance Sheet are, and all accounts and notes receivable arising from or
otherwise relating to the business of the Company as of the Closing Date will
have arisen in the ordinary course of business and represent good faith claims
against the debtors thereof. All accounts, notes receivable and other
receivables arising out of or relating to the business of the Company as of the
Company Balance Sheet Date or Interim Balance Sheet Date have been included in
the Company Balance Sheet and Interim Balance Sheet and all reserves for
doubtful accounts reflected thereon were taken in accordance with GAAP applied
on a consistent basis.
Section 4.22. Debt. Schedule 4.22 contains a complete and accurate list of
the outstanding principal, any accrued interest, and any other amounts
outstanding under any loan agreement, line of credit, note, indebtedness for
borrowed money, advances, guarantees or any other debt of the Company
(including, but not limited to, the Loan Agreements).
Section 4.23. Employees. The Company has previously provided to Parent a
schedule setting forth a true and complete list of the names, titles, annual
salaries and other compensation of all officers of the Company and all other
employees of the Company. Neither the Sellers nor the Company have Knowledge
that any of such employees or any other key employee of the Company other than
Xxxxxxxxx Xxxxxxx intends to resign or retire as a result of the transactions
contemplated by this Agreement or otherwise within one year after the Closing
Date.
Section 4.24. Labor Matters. The Company is in material compliance with
all currently applicable laws respecting employment and employment practices,
terms and conditions of employment and wages and hours, and are not engaged in
any unfair labor practice. There is no unfair labor practice complaint pending
or, to the Knowledge of the Sellers or the Company, threatened against the
Company before the National Labor Relations Board.
Section 4.25. Environmental Matters. (a) Except as disclosed in Schedule
4.25:
(i) no notice, notification, demand, request for information,
citation, summons or order has been received, no complaint has been filed,
26
no unresolved penalty has been assessed, and no investigation, action,
claim, suit, proceeding or review is pending or, to the Knowledge of the
Sellers or the Company, is threatened by any governmental entity or other
Person relating to or arising out of any Environmental Law;
(ii) the Company is and has been in material compliance with all
Environmental Laws and all Environmental Permits;
(iii) no property now or previously owned or operated by the Company
nor any property to which the Company has, directly or indirectly,
transported or arranged for the transportation of any Hazardous Substances
is listed or, to the Company's or Seller's Knowledge, proposed for
listing, on the National Priorities List promulgated pursuant to the
Comprehensive, Environmental Response, Conservation and Liability Act
("CERCLA") or CERCLIS (as defined in CERCLA) or on any similar federal,
state or foreign list of sites requiring investigation or clean-up; and
(iv) there are no material liabilities or obligations of the Company
of any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise arising under or relating to any Environmental
Law, and there are no facts, conditions, situations or set of
circumstances that could reasonably be expected to result in or be the
basis for any such material liability or obligation.
(b) There has been no environmental investigation, study, audit, test,
review or other analysis conducted of which the Sellers or the Company have
Knowledge in relation to the current or prior business of the Company or any
property or facility now or previously owned or operated by the Company that has
not been delivered to Parent at least ten days prior to the date hereof.
(c) For purposes of this Section 4.25, the terms "Company" shall include
any entity that is, in whole or in part, a predecessor of the Company.
Section 4.26. Certain Interests.
(a) To the Knowledge of the Sellers or the Company, none of the
Shareholders of the Company or any officer or director of the Company and no
spouse of any such Person:
(i) Has been an officer, director or shareholder of any significant
supplier or customer of the Company, or of any company which holds,
directly or indirectly, 50% or more of the outstanding shares of any such
supplier or customer, provided, however, that the ownership of securities
representing not more than 5% of the outstanding voting power of any
supplier or customer, and which are listed on any national securities
exchange or traded actively in the national over-the-counter market, shall
not be deemed to be a "shareholder" as long as the person owning such
27
securities has no other connection or relationship with such supplier or
customer;
(ii) owns, directly or indirectly, in whole or in part, or has any
other interest in any tangible or intangible property which the Company
uses or has used in the conduct of its business or otherwise (except for
any such ownership or interest resulting from the ownership of securities
in a public company); or
(iii) has any outstanding indebtedness to the Company.
(b) Except for the payment of employee compensation in the ordinary course
of business, payments owed for excess liability insurance and employee medical
and dental insurance provided by MIC and the Loan Agreement with MIC, the
Company has no material liability or any other obligation of any nature
whatsoever to any shareholder of the Company or any affiliate thereof, or to any
officer or director of the Company, or, to the Knowledge of the Sellers or the
Company, to any immediate relative or spouse (or immediate relative of such
spouse) of any such officer or director.
(c) There have been no material transactions between the Company and any
Affiliate since the Company Balance Sheet Date, other than the payment of
salaries to officers or employees and payments for excess liability insurance
and employee medical and dental insurance provided by MIC, all made in the
ordinary course of business consistent with past practices. There are no
material agreements or understandings now in effect between the Company and any
Affiliate. The Company Disclosure Schedule (x) states the amounts due from the
Company to any Affiliate and the amounts due from any Affiliate to the Company,
(y) describes the transactions out of which such amounts arose and (z) describes
any interest of any Affiliate in any supplier or customer of, or any other
entity that has had business dealings with the Company since the Company Balance
Sheet Date. After the Closing, there will be no obligations or other
liabilities, including inter-company obligations, between the Company, on the
one hand, and any of its Affiliates, on the other hand.
Section 4.27. Customers; Suppliers. (a) Schedule 4.27 sets forth the names
of the ten most significant customers (by dollar amount of sales) of the Company
for the year ended December 31, 2001, and the period from January 1, 2002
through September 30, 2002, and the dollar amount of sales for each such
customer during such periods. Neither the Sellers nor the Company have received
notice and have no Knowledge that any such significant customer of the Company
has ceased, will cease, or is reasonably likely to cease to purchase the
products of the Company, or has substantially reduced, intends to substantially
reduce, or is reasonably likely to substantially reduce the purchase of such
products from the Company other than as a result of general economic conditions
or events affecting the Company's industry generally.
28
(b) Other than as disclosed on Schedule 4.27(b), within the past one (1)
year, neither the Sellers nor the Company have received any communication from
any such significant customer regarding any material complaints or concerns
regarding or related to the Company's products, performance or services
(including with respect to their quality or conformity with specifications), or
regarding or related to the pricing or other contract terms contained in any
agreement between such significant customer and the Company.
Section 4.28. Books And Records. The books of account and other financial
records of the Company have been maintained in accordance with sound business
practices, including the maintenance of an adequate system of internal controls.
The minute books of the Company contain complete, correct and accurate records
of all corporate action taken by the shareholders, the Boards of Directors and
any committees of the Board of Directors of the Company. At the Closing, all of
those books and records will be in the possession of the Company. The Company
has previously disclosed all of these books, records and accounts to Parent.
Section 4.29. Inventories. The inventories set forth in the Interim
Balance Sheet were properly stated therein at the lesser of cost or fair market
value determined in accordance with generally accepted accounting principles
consistently maintained and applied by the Company. Since the Interim Balance
Sheet Date, the inventories related to the Business have been maintained in the
ordinary course of business. All such inventories are owned free and clear of
all Liens. All of the inventories recorded on the Interim Balance Sheet consist
of, and all inventories related to the Business on the Closing Date will consist
of, items of a quality usable or saleable in the normal course of the Business
consistent with past practices and are and will be in quantities sufficient for
the normal operation of the Business in accordance with past practice.
Section 4.30. State Takeover Statutes. The Board of Directors of the
Company has taken all action necessary to ensure that any restrictions on
business combinations contained in the California Law will not apply to the
Merger and the other transactions contemplated by this Agreement. No other state
takeover statute is applicable to the Merger or the other transactions
contemplated by this Agreement.
ARTICLE 5
Representations and Warranties of Parent
Parent represents and warrants to the Company that:
Section 5.01. Corporate Existence and Power. Each of Parent and Merger
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
corporate powers and all governmental licenses, authorizations, permits,
consents and
29
approvals required to carry on its business as now conducted, except for those
licenses, authorizations, permits, consents and approvals the absence of which
would not have, individually or in the aggregate, a Material Adverse Effect on
Parent. Since the date of its incorporation, Merger Subsidiary has not engaged
in any activities other than in connection with or as contemplated by this
Agreement or in connection with arranging any financing related to the
transactions contemplated hereby. Neither Parent nor Merger Subsidiary has
conducted any business activities except for entering into this Agreement and
matters related thereto.
Section 5.02. Corporate Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby are within the corporate powers of Parent and Merger Subsidiary and have
been duly authorized by all necessary corporate action. This Agreement
constitutes a valid and binding agreement of each of Parent and Merger
Subsidiary enforceable against Parent and Merger Subsidiary in accordance with
its terms.
Section 5.03. Governmental Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby require no action by or in respect of, or filing with, any governmental
body, agency, official or authority, domestic, foreign or supranational, other
than (i) the filing of an agreement of merger with respect to the Merger with
the Secretary of State of the State of California, a certificate of merger with
the Delaware Secretary of State, and appropriate documents with the relevant
authorities of other states in which Parent is qualified to do business, (ii)
compliance with any applicable requirements of the 1933 Act, the 1934 Act and
any other applicable securities or takeover laws, whether state or foreign, and
(iii) any actions or filings the absence of which could not be reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect on
Parent or materially to impair the ability of Parent and Merger Subsidiary to
consummate the transactions contemplated by this Agreement.
Section 5.04. Non-contravention. The execution, delivery and performance
by Parent and Merger Subsidiary of this Agreement and the consummation by Parent
and Merger Subsidiary of the transactions contemplated hereby do not and will
not (i) contravene, conflict with, or result in any violation or breach of any
provision of the certificate of incorporation or bylaws of Parent or the
certificate of incorporation or bylaws of Merger Subsidiary, (ii) result in a
breach of or default under any term or provision of any contract or agreement to
which Parent or any of its Affiliates is a party, which breach or default would
prevent Parent from consummating the transactions contemplated by this
Agreement, and (iii) assuming compliance with the matters referred to in Section
5.03, contravene, conflict with, or result in any violation or breach of any
provision of any law, rule, regulation, judgment, injunction, order or decree,
30
except for such contraventions, conflicts and violations that would not be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent or materially to impair the ability of Parent and
Merger Subsidiary to consummate the transactions contemplated by this Agreement.
Section 5.05. Finders' Fees. There is no investment banker, broker, finder
or other intermediary that has been retained by or is authorized to act on
behalf of Parent who might be entitled to any fee or commission from the
Company, Sellers or any of their Affiliates upon consummation of the
transactions contemplated by this Agreement.
Section 5.06. Financing. Parent has cash on hand or has received a
commitment from Francisco Partners (the "COMMITMENT") to provide, in the
aggregate, monies sufficient to fund the consummation of the transactions
contemplated by this Agreement, and to satisfy all other costs and expenses
arising in connection therewith (the "FINANCING"). The Commitment is in full
force and effect, and there is no breach or default by any party thereto
existing, or which, with notice or the passage of time, or both, may exist under
the Commitment. Parent does not need to obtain the consent of any Third Party to
fulfill its obligations hereunder with respect to payment of the Merger
Consideration.
Section 5.07. Litigation. To the Knowledge of Parent, there are no
actions, suits, claims investigations or proceedings pending or threatened in
writing) against Parent or any Affiliate of Parent which: (a) if adversely
determined, would reasonably be expected to hinder or impair the ability of
Parent to perform its obligations hereunder, or (b) that seek to enjoin or
obtain damages in respect of the consummation of the transactions contemplated
hereby. None of Parent or any of its Affiliates is subject to any outstanding
orders, rulings, judgments or decrees that would have a material adverse effect
on the ability of Parent to perform its obligations under this Agreement.
Section 5.08. Solvency. Immediately after the Effective Time, and based in
part upon the representations and warranties of the Company and Sellers, Parent
expects the Company to be able to pay its debts as they become due in the
ordinary course of business and to be adequately capitalized.
ARTICLE 6
Covenants of the Company and Sellers
The Company and Sellers agree that:
Section 6.01. Conduct of the Company. Except as contemplated by this
Agreement or as set forth on Schedule 6.01, or with the prior written consent of
Parent, from the date hereof until the Effective Time, the Company shall conduct
its business in the ordinary course consistent with past practice and shall use
its
31
commercially reasonable efforts to preserve intact its business organizations
and relationships with third parties, maintain the properties in good operating
condition, and keep available the services of its present officers and
employees. Without limiting the generality of the foregoing, from the date
hereof until the Effective Time, except as contemplated by this Agreement or as
set forth in Schedule 6.01, or with the prior written consent of Parent, the
Company will not:
(a) adopt or propose any change to its articles of incorporation or
bylaws;
(b) except for the issuance of Shares upon the exercise of Company Stock
Options in accordance with their terms, issue, sell, pledge, license, dispose
of, grant, encumber, or authorize the issuance, sale, pledge, disposition, grant
or encumbrance of (i) any shares of its capital stock of any class, or any
options, warrants, convertible securities or other rights of any kind to acquire
any shares of such capital stock, or any other ownership interest (including,
without limitation, any phantom interest), of the Company, or (ii) any assets,
securities or property of the Company other than inventory in the ordinary
course of business consistent with past practices, or pursuant to contracts or
commitments which have been disclosed to Parent;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock;
(d) make any payment, reimbursement, refund, or other fund transfer to
Sellers or any Affiliate, other than the payment of salaries to officers or
employees in the ordinary course consistent with past practices;
(e) reclassify, combine, split, subdivide or redeem, purchase, repurchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(f) acquire (including, without limitation, by merger, consolidation, or
acquisition of stock or assets) any interest in any corporation, partnership,
other business organization or any division thereof or any assets (except for
assets which are both not material and are acquired in the ordinary course of
business consistent with past practices);
(g) incur any indebtedness for borrowed money or issue any debt securities
or assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person, or make any loans or advances,
except for indebtedness incurred in the ordinary course of business and
consistent with past practice;
(h) repay, pay down or otherwise reduce any existing debt (including, but
not limited to, the Loan Agreements, but excluding trade payables incurred in
the ordinary course of business consistent with past practices) of the Company;
32
(i) enter into any contract or agreement material to the business, results
of operations or financial condition of the Company (including, without
limitation, agreements with customers) other than in the ordinary course of
business, consistent with past practice;
(j) authorize or enter into any agreements or commitments with respect to
any capital expenditure in excess of $750,000, individually or in the aggregate;
(k) shorten or lengthen the customary payment terms or other terms of any
contracts with customers or suppliers;
(l) amend any contract, agreement, commitment or arrangement in such a way
that, if fully performed, would not be permitted under this Section 6.01;
(m) increase the compensation payable or to become payable to its officers
or, except in the ordinary course of business consistent with past practice,
other employees, or grant any severance or termination pay to, or enter into any
employment or severance agreement with, any director, officer or other employee
of the Company (except that Parent shall not unreasonably withhold its consent
with respect to the hiring of new employees and the Company entering into
employment agreements or arrangements with such new employees in the ordinary
course of business consistent with past practice), or establish, adopt, enter
into or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer or
employee;
(n) enter into any material licensing, distribution, sponsorship,
advertising, merchant program or other similar contracts, agreements, or
obligations, other than end-user license and maintenance contracts and
agreements with customers in the ordinary course of business consistent with
past practice;
(o) take any action to prevent, or fail to take any action to cause, the
accelerated vesting, exercisability, expiration and cancellation of any and all
Company Stock Options as provided under the terms of the Company Stock Option
Plan;
(p) take any action, other than actions in the ordinary course of business
and consistent with past practice, with respect to accounting policies or
procedures except for any such action required by a concurrent change in GAAP;
(q) merge or consolidate with any other Person;
(r) enter into any lease, contract or agreement with regard to real
property;
33
(s) except as required by applicable law, take any action that would make
any representation and warranty of the Company hereunder inaccurate in any
respect or, as of any time prior to the Effective Time or knowingly omit to take
any action necessary to prevent any such representation or warranty from being
inaccurate in any respect at any such time; or
(t) agree or commit to do any of the foregoing.
Section 6.02 Shareholder Approval. The Company shall submit this Agreement
and the Merger to its shareholders as soon as reasonably practicable for
approval and adoption. Unless California Law does not require such a vote for
consummation of the Merger, the Company shall seek the affirmative vote of the
holders of a majority of the outstanding Shares. The Board of Directors of the
Company shall recommend approval and adoption of this Agreement and the Merger
by the Company's shareholders. In connection with such meeting or action by
written consent, the Company will (a) use its reasonable efforts to obtain the
necessary approvals by shareholders of the Company of this Agreement and the
transactions contemplated hereby and (b) otherwise comply with all applicable
legal requirements.
Section 6.03. Access to Information. From the date hereof until the
Effective Time and subject to applicable law and the confidentiality provisions
of the letter agreement dated as of August 6, 2002 between the Company, Sellers
and Francisco Partners, L.P. (the "CONFIDENTIALITY AGREEMENT"), the Company and
Sellers shall (i) give Parent, its counsel, financial advisors, auditors and
other authorized representatives reasonable access to the offices, properties,
books, work papers, assets, contracts and records of the Company (including
access to perform physical examinations), (ii) furnish or make available to
Parent, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as such
Persons may reasonably request and (iii) instruct the employees, counsel,
financial advisors, auditors and other authorized representatives of the Sellers
and the Company to cooperate with Parent in its investigation of the Company.
Any investigation pursuant to this Section shall be conducted in such manner as
not to interfere unreasonably with the conduct of the business of the Company.
No information or Knowledge obtained by Parent in any investigation pursuant to
this Section shall affect or be deemed to modify any representation or warranty
made by the Company or the Sellers hereunder.
Section 6.04. No Solicitation. Neither the Sellers nor the Company shall,
nor shall the Sellers or the Company authorize, and the Sellers and the Company
shall use reasonable efforts to prevent, any of their officers, directors,
employees, investment bankers, attorneys, accountants, consultants or other
agents or advisors to, directly or indirectly, (i) solicit, initiate or take any
action which has as one of its purposes or reasonably likely consequences to
facilitate or encourage the submission of any Acquisition Proposal, (ii) enter
into or participate in any discussions or negotiations with, furnish any
information relating to the Company
34
or afford access to the business, properties, assets, books or records of the
Company to, otherwise cooperate in any way with, or knowingly assist,
participate in, facilitate or encourage any effort by any Third Party that is
believed by the Sellers or the Company to be seeking to make, can be reasonably
expected to make, or has made, an Acquisition Proposal, or (iii) grant any
waiver or release under any standstill or similar agreement with respect to any
class of equity securities of the Company. The Company and Sellers shall notify
Parent promptly if any such proposal or offer, or any inquiry or other contract
with any Person with respect thereto is made and shall in any such notice to
Parent indicate in reasonable detail the identity of the Person making such
proposal, offer, inquiry or contact and the terms and conditions of such
proposal, offer, inquiry or other contract.
Section 6.05. Notices of Certain Events. The Company and the Sellers shall
promptly notify Parent of:
(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the transactions
contemplated by this Agreement;
(b) any notice or other communication from any governmental or regulatory
agency or authority in connection with the transactions contemplated by this
Agreement;
(c) any actions, suits, claims, investigations or proceedings commenced
or, to the Knowledge of the Company or the Sellers, threatened against, relating
to or involving or otherwise affecting the Company that, if pending on the date
of this Agreement, could have been required to have been disclosed pursuant to
Section 4.12, Section 4.15, Section 4.16, Section 4.18, Section 4.24, Section
4.25, or Article 12 as the case may be, or that relate to the consummation of
the transactions contemplated by this Agreement; and
(d) any Person holding options or other rights to acquire equity
securities of the Company electing to or attempting to exercise those rights.
Section 6.06. Resignations. The Company and the Sellers will deliver to
Parent the resignations of all officers and directors of the Company who will be
officers, directors or employees of either Seller or any of their Affiliates
after the Effective Time from their positions with the Company at or prior to
the Effective Time.
Section 6.07. Noncompetition. (a) MC, for itself only, and limited to the
activities conducted by the Metals Group of Mitsubishi Corporation or any
successor agrees that for a period of two (2) full years from the Effective
Time, the Metals Group of Mitsubishi Corporation shall not engage, either
directly or indirectly, as a principal or for its own account or solely or
jointly with others, or as stockholders in any corporation or joint stock
association, in the business of
35
manufacturing gas panels for use in semiconductor manufacturing equipment, as
conducted by the Company on the Closing Date; provided that nothing herein shall
prevent the Sellers or their Affiliates from purchasing or holding up to 5% of
any publicly traded corporation engaged in such business.
(b) Each Seller agrees that for a period of two (2) full years from the
Effective Time, neither it nor any of its Affiliates shall employ or solicit, or
receive or accept the performance of services by any current employee of the
Company other than Xxxxxxxxx Xxxxxxx; provided, however, that no general
solicitation that is not designed to or intended to solicit employees of the
Company shall be considered a solicitation for purposes of this covenant.
(c) If any provision contained in this Section shall for any reason be
held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
Section, but this Section shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. It is the intention of
the parties that if any of the restrictions or covenants contained herein is
held to cover a geographic area or to be for a length of time which is not
permitted by applicable law, or in any way construed to be too broad or to any
extent invalid, such provision shall not be construed to be null, void and of no
effect, but to the extent such provision would be valid or enforceable under
applicable law, a court of competent jurisdiction shall construe and interpret
or reform this Section to provide for a covenant having the maximum enforceable
geographic area, time period and other provisions (not greater than those
contained herein) as shall be valid and enforceable under such applicable law.
Each Seller acknowledges that Parent would be irreparably harmed by any breach
of this Section and that there would be no adequate remedy at law or in damages
to compensate Parent for any such breach. Each Seller agrees that Parent shall
be entitled to injunctive relief requiring specific performance by either Seller
of this Section, and each Seller consents to the entry thereof.
Section 6.08. Intercompany Accounts. Except for the Existing Debt, which
shall be addressed as provided in Section 2.07, all intercompany accounts
between either Seller or their Affiliates, on the one hand, and the Company, on
the other hand, as of the date hereof shall be settled (irrespective of the
terms of payment of such intercompany accounts) in the manner provided in this
Section. At least ten business days prior to the Effective Time, Sellers shall
prepare and deliver to Parent a statement setting out in reasonable detail the
calculation of all such intercompany account balances and, to the extent
requested by Parent, provide Parent with supporting documentation to verify the
underlying intercompany charges and transactions. All such intercompany account
balances shall be paid in full in cash at least five business days prior to the
Effective Time.
Section 6.09. Company Stock Option Plan. Sellers and the Company will
terminate the Company Stock Option Plan, effective at the Effective Time.
36
Section 6.10. Applied Materials. The Company will not enter into any new
Global Supply Agreement or similar agreement with Applied Materials, Inc.
without the consent of Parent, such consent not to be unreasonably withheld.
Section 6.11. Voting Of Common Stock; Proxy. (a) Sellers and each of their
Affiliates will vote all shares of Common Stock of the Company which such Person
is entitled to vote to approve this Agreement and the transactions contemplated
hereby at any meeting or meetings of the stockholders of the Company, and at any
adjournment thereof or through any written consent, at which this Agreement or
any amended version thereof are submitted for the consideration and vote of the
stockholders of the Company.
(b) Neither Sellers nor any of their Affiliates will (i) vote any shares
of Common Stock of the Company in favor of the approval of any other sale of
stock, merger, consolidation, sale of assets, reorganization, recapitalization,
liquidation or winding up of the Company or any other extraordinary transaction
involving the Company or any matters in connection therewith, or any corporate
action the consummation of which would either frustrate the purposes of, or
prevent or delay the consummation of, the transactions contemplated by this
Agreement or (ii) sell, assign, transfer, encumber or otherwise dispose of, or
enter into any contract, option or other arrangement or understanding with
respect to the direct or indirect sale, assignment, transfer, encumbrance or
other disposition of, any shares of Common Stock of the Company.
ARTICLE 7
Covenants of Parent
Parent agrees that:
Section 7.01. Obligations Of Merger Subsidiary. Parent will take all
action necessary to cause Merger Subsidiary to perform its obligations under
this Agreement and to consummate the Merger on the terms and conditions set
forth in this Agreement.
Section 7.02. Confidentiality. Parent will comply, and will cause Merger
Subsidiary and any Affiliate of Parent to comply with the Confidentiality
Agreement.
ARTICLE 8
Covenants of Parent, Merger Subsidiary, the Sellers and the Company
The parties hereto agree that:
Section 8.01. Reasonable Efforts. Subject to the terms and conditions of
this Agreement, the Company, Merger Subsidiary, the Sellers and Parent will use
37
all commercially reasonable efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate the transactions contemplated by
this Agreement.
Section 8.02. Certain Filings. The Company, Merger Subsidiary, Sellers and
Parent shall cooperate with one another (i) in determining whether any action by
or in respect of, or filing with, any governmental body, agency, official, or
authority is required, or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts, in connection
with the consummation of the transactions contemplated by this Agreement and
(ii) in taking such actions or making any such filings, furnishing information
required in connection therewith and seeking timely to obtain any such actions,
consents, approvals or waivers.
Section 8.03. Public Announcements. Parent, Merger Subsidiary, the Sellers
and the Company will consult with each other before issuing any press release or
making any public statement with respect to this Agreement or the transactions
contemplated hereby and each party will not issue any such press release or make
any such public statement without the consent of the other parties to this
Agreement, such consent not to be unreasonably withheld.
Section 8.04. Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger.
Section 8.05. Notifications. From the date hereof through the Effective
Time, (a) the Company will promptly notify Parent in writing if the Sellers or
the Company become aware of any fact or condition that could reasonably be
expected to cause any of Parent's conditions to the Merger not to be satisfied
or which constitutes a breach of any of the representations and warranties or
covenants of the Sellers or the Company and (b) Parent will promptly notify
Sellers and the Company in writing if Parent becomes aware of any fact or
condition that could reasonably be expected to cause any of the Company's or
Seller's conditions to the Merger not to be satisfied or which constitutes a
breach of any of the representations, warranties or covenants of Parent.
38
ARTICLE 9
Conditions to the Merger
Section 9.01. Conditions to Obligations of Each Party. The obligations of
the Company, Parent, Merger Subsidiary and the Sellers to consummate the Merger
are subject to the satisfaction of the following conditions:
(a) if required by California Law, this Agreement shall have been approved
and adopted by the holders of a majority of the Shares, in accordance with such
law; and
(b) no provision of any applicable law or regulation and no judgment,
injunction, order or decree issued by any court or governmental body having
competent jurisdiction shall prohibit the consummation of the Merger.
Section 9.02. Conditions to the Obligations of Parent and Merger
Subsidiary. The obligations of Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following further conditions:
(a) Each of the representations and warranties of the Company and the
Sellers contained in this Agreement shall have been true and correct in all
material respects when made and shall be true and correct in all material
respects as of the Closing Date with the same force and effect as if made as of
the Closing Date, other than such representations and warranties as are made as
of another date, which shall be true and correct in all material respects as of
such date (provided, however, that if any portion of any representation or
warranty is already qualified by materiality or Material Adverse Effect for
purposes of determining whether Section 9.02(a) has been satisfied with respect
to such portion of such representation or warranty, such portion of such
representation or warranty as so qualified must be true and correct in all
respects and provided further that the representations and warranties contained
in Sections 4.05, 4.08(b), 4.08(d), 4.08(f), 4.08(l), 4.22 and 4.27 shall be
true and correct when made and true and correct as of the Closing Date with the
same force and effect as if made as of the Closing Date) and each of the
covenants and agreements contained in this Agreement to be complied with by the
Company and the Sellers on or before the Closing Date shall have been complied
with in all material respects, and Parent shall have received a certificate
signed by the President and Chief Operating Officer of the Company and a
certificate signed by an authorized officer of each of the Sellers to such
effect.
(b) No claim, action, suit, arbitration, inquiry, proceeding or
investigation by or before any United States, federal, state or local or any
foreign government, governmental, regulatory or administrative authority, agency
or commission or any court, tribunal or judicial or arbitral body (each, a
"GOVERNMENTAL AUTHORITY") shall have been threatened by, or commenced before,
any Governmental Authority against the Company, the Sellers, the Merger
Subsidiary or Parent, seeking to restrain or materially and adversely alter the
39
transactions contemplated hereby which is reasonably likely to render it
impossible or unlawful to consummate the transactions contemplated by this
Agreement or which could reasonably be expected to have a Material Adverse
Effect on the Company or Parent.
(c) There shall not have been any action taken, or any statute, rule,
regulation, injunction, order or decree proposed, enacted, enforced,
promulgated, issued or deemed applicable to the Merger by any court, government
or governmental authority or agency, domestic or foreign, that, in the
reasonable judgment of Parent could, directly or indirectly, result in any of
the consequences referred to in Section 9.02(b) above.
(d) Parent shall have received an opinion of Xxxx & Sharp, counsel to the
Company, dated the Closing Date in substantially the form attached hereto as
Exhibit B. In rendering such opinion, such counsel may rely upon certificates of
public officers, as to matters governed by the laws of jurisdictions other than
California or the Federal laws of the United States of America, upon opinions of
counsel reasonably satisfactory to Parent, and, as to matters of fact, upon
certificates of officers of the Company, copies of which opinions and
certificates shall be contemporaneously delivered to Parent.
(e) The Company shall have received all consents, authorizations or
approvals from the governmental agencies referred to in Section 4.03, in each
case in form and substance reasonably satisfactory to Parent, and no such
consent, authorization or approval shall have been revoked.
(f) The Company shall have received all consents and approvals referred to
in Section 4.14, including but not limited to Applied Materials and Xxx Research
or otherwise necessary in connection with the consummation of the transactions
contemplated by this Agreement or to enable the Company to continue to carry on
its business as currently conducted.
(g) Parent shall have received certified articles of incorporation and
bylaws, and good standing certificates in respect of the Company and certified
board resolutions in respect of the transactions contemplated hereby, all in
form and substance reasonably satisfactory to Parent.
(h) The Company shall have delivered to Parent a certification pursuant to
Treasury Regulations Sections 1.897-2(h) and 1.1445-2(c), signed by the Company
and dated not more than 15 days prior to the Closing Date to the effect that the
Company is not nor has it been within five (5) years of the date of the
certification a "United States real property holding corporation" as defined in
Section 897 of the Code.
(i) Parent shall have timely received estoppel letters from each of the
Lenders establishing the total amount of all principal and accrued interest
required to be paid at the Effective Time in order to completely repay and
cancel each of
40
the Loan Agreements and certifying that there will be no further financial
obligations under the Loan Agreements, and no further payments, penalties or
fees due as a result of the payment or prepayment of the Loans.
(j) Parent shall have received all documents it may reasonably request
relating to the existence of the Sellers or the Company and the authority of the
Sellers and the Company for this Agreement, all in form and substance reasonably
satisfactory to Parent.
(k) Parent shall have received a letter from Motoyama in substantially the
form attached hereto as Exhibit C.
(l) All Persons holding options having an exercise price per share less
than the Merger Consideration shall have entered into Option Termination
Agreements in substantially in the form attached hereto as Exhibit D. Copies of
each executed Option Termination Agreement shall have been delivered to Parent.
At least two days before the Closing, Sellers shall prepare and deliver to
Parent a schedule (such schedule to be subject to Parent's reasonable approval)
setting forth the amounts due to each person who has entered into an Option
Termination Agreement.
(m) Parent and the Company shall have received an executed release from
U.S. Bancorp Xxxxx Xxxxxxx Inc. confirming that Sellers have paid any fees and
expenses due and releasing any and all claims U.S. Bancorp Xxxxx Xxxxxxx Inc.
may have for any fees, expenses or other payment due as a result of the Merger
or otherwise due from the Company or Parent.
Section 9.03 Conditions to Obligations of the Company and the Sellers. The
obligation of the Company and the Sellers to consummate the Merger is subject to
the satisfaction of the following further conditions:
(a) The representations and warranties of Parent contained in this
Agreement shall have been true and correct in all material respects when made
and shall be true and correct in all material respects as of the Closing Date
with the same force and effect as if made as of the Closing Date other than such
representations and warranties as are made as of another date, which shall be
true and correct in all material respects as of such date (provided, however,
that if any portion of any representation or warranty is already qualified by
materiality or Material Adverse Effect for purposes of determining whether
Section 9.03(a) has been satisfied with respect to such portion of such
representation or warranty, such portion of such representation or warranty as
so qualified must be true and correct in all respects), and the covenants and
agreements contained in this Agreement to be complied with by Parent on or
before the Closing Date shall have been complied with in all material respects
and Sellers shall have received a certificate signed by the Chief Executive
Officer of Parent to such effect.
41
(b) No claim, action, suit, arbitration, inquiry, proceeding or
investigation by or before any Governmental Authority shall have been threatened
by, or commenced before, any Governmental Authority against the Company, the
Sellers, Merger Subsidiary or Parent, seeking to restrain or materially and
adversely alter the transactions contemplated hereby which is reasonably likely
to render it impossible or unlawful to consummate the transactions contemplated
by this Agreement or which could reasonably be expected to have a Material
Adverse Effect on the Company or the Sellers.
(c) There shall not have been any action taken, or any statute, rule,
regulation, injunction, order or decree proposed, enacted, enforced,
promulgated, issued or deemed applicable to the Merger by any court, government
or governmental authority or agency, domestic or foreign, that, in the
reasonable judgment of Sellers could, directly or indirectly, result in any of
the consequences referred to in Section 9.02(b) above.
(d) The Company shall have received all consents, authorizations or
approvals from the governmental agencies referred to in Section 4.03, in each
case in form and substance reasonably satisfactory to Sellers, and no such
consent, authorization or approval shall have been revoked.
(e) Sellers shall have received certified certificate of incorporation and
bylaws, and good standing certificates in respect of Parent and Merger
Subsidiary and certified board resolutions in respect of the transactions
contemplated hereby, all in form and substance reasonably satisfactory to
Sellers.
(f) Sellers shall have received all documents it may reasonably request
relating to the existence of the Parent and Merger Subsidiary and the authority
of Parent and Merger Subsidiary for this Agreement, all in form and substance
reasonably satisfactory to Sellers.
ARTICLE 10
Termination
Section 10.01. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time (notwithstanding
any approval of this Agreement by the shareholders of the Company):
(a) by mutual written agreement of the Company, the Sellers, and Parent;
(b) by the Company, the Sellers, or Parent, if there shall be any law or
regulation that makes acceptance for payment of, and payment for, the Shares
pursuant to the Merger illegal or otherwise prohibited or any judgment,
injunction, order or decree of any court or governmental body having competent
42
jurisdiction enjoining Merger Subsidiary, the Company, the Sellers, or Parent
from consummating the Merger and such judgment, injunction, order or decree
shall have become final and nonappealable;
(c) by Parent, if a breach of any representation or warranty or failure to
perform any covenant or agreement on the part of the Company or the Sellers set
forth in this Agreement shall have occurred that would cause the condition set
forth in Section 9.02(a) not to be satisfied and, in the reasonable judgment of
Parent, such condition is incapable of being satisfied by the End Date, or by
Sellers if a breach of any representation or warranty or failure to perform any
covenant or agreement on the payment of the Parent set forth in this Agreement
shall have occurred that would cause the condition set forth in 9.02(a) not to
be satisfied and, in the reasonable judgment of Sellers, such condition is
incapable of being satisfied by the End Date;
(d) by any party if the Closing has not occurred by 5:00 P.M., California
time, on November 27, 2002 (the "END DATE"), or such later date as the Company,
the Sellers, and Parent may agree; and
(e) provided, however, that the right to terminate this Agreement under
Section 10.01(d) shall not be available to any party whose action or failure to
act was a principal cause of, or resulted in the failure of, this Merger to
occur on or before such date and such action or failure to act constitutes a
breach of this Agreement.
The party desiring to terminate this Agreement pursuant to this Section
10.01 shall give three (3) business days prior written notice of such
termination to the other party.
Section 10.02. Effect of Termination. If this Agreement is terminated
pursuant to Section 10.01, this Agreement shall become void and of no effect
with no liability on the part of any party (or any stockholder, director,
officer, employee, agent, consultant or representative of such party) to the
other party hereto, provided that, if such termination shall result from the
willful failure of any party to perform a covenant hereof, such party shall be
fully liable for any and all liabilities and damages incurred or suffered by the
other party or parties as a result of such failure. The provisions of Section
8.03 and Section 11.05 shall survive any termination hereof pursuant to Section
10.01.
ARTICLE 11
Miscellaneous
Section 11.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission) and
shall be given or made (and shall deemed to have been duly given or made upon
receipt) by delivery in person, by cable, telecopy, facsimile, telegram, telex
or
43
courier or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 11.01):
if to Parent or Merger Subsidiary, to:
Xxxxxxxx Xxx
Francisco Partners
0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Fax: 000-000-0000
with a copy to:
Xxxx X. Xxxxxxxxx
Xxxxx Xxxx & Xxxxxxxx
0000 Xx Xxxxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Fax: 000-000-0000
if to the Company, to:
Xxxxxxxx X. Xxxxxxx
Ultra Clean Technology Systems and Service, Inc.
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
Fax: 000-000-0000
with a copy to:
Xxxxx X. Xxxx
Xxxx & Sharp P.C.
000 X. Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Fax: 000-000-0000
if to the Sellers, to:
Xxxxxxx Xxxx
Mitsubishi Corporation
Steel Products Business Xxxx
0-0, Xxxxxxxxxx 0-Xxxxx,
Xxxxxxxxx, Xxxxx 000-0000 Xxxxx
44
with a copy to:
Xxxxx X. Xxxx
Xxxx & Xxxxx P.C.
000 X. Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Fax: 000-000-0000
or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties hereto. All such notices,
requests and other communications shall be deemed received on the date of
receipt by the recipient thereof if received prior to 5:00 p.m. in the place of
receipt and such day is a Business Day in the place of receipt. Otherwise, any
such notice, request or communication shall be deemed not to have been received
until the next succeeding Business Day in the place of receipt.
Section 11.02. Survival of Representations and Warranties;
Indemnification. (a) Except as provided in Article 12, the covenants and the
representations and warranties contained in this Agreement, shall survive the
Effective Time until eighteen (18) months after the Effective Time; provided
that the representations and warranties made by Sellers and the Company in
Section 4.05 shall survive indefinitely and the representations and warranties
made by the Sellers and the Company in Section 4.25 shall survive until the
third anniversary of the Effective Time. Neither the period of survival nor the
liability of a party hereto with respect to such party's representations and
warranties shall be reduced by any investigation made at any time by or on
behalf of another party hereto. If written notice of a claim has been given
prior to the expiration of the applicable representations and warranties by a
party hereto to another party hereto (which notice shall indicate with
reasonable specificity the amount and nature of the claim and the representation
on which it is based), then the relevant representations and warranties shall
survive as to such claim until such claim has been finally resolved.
(b) After the Effective Time, Parent and its Affiliates (including, after
the Effective Time, the Surviving Corporation), officers, directors, employees,
agents, successors and assigns (collectively, the "PARENT INDEMNIFIED PARTIES")
shall be jointly and severally indemnified and held harmless by each of the
Sellers for any and all liabilities, losses, damages, claims, costs and
expenses, interest, awards, judgments and penalties (including, without
limitation, reasonable attorneys' and consultants' fees and expenses and
including any such expenses incurred in connection with investigating, defending
against or settling any such claims) actually suffered or incurred by them
(including, without limitation, in connection with any action brought or
otherwise initiated by any of them) arising out of or resulting from the breach
of any representation, warranty or covenant (without giving effect to any
qualification as to materiality contained therein in determining the amount of
any loss) (hereinafter, a "LOSS"), made by the Company or the
45
Sellers in this Agreement, provided that indemnification in respect of any Tax
Loss shall be governed exclusively by the provisions of Article 12.
(c) Any Parent Indemnified Party seeking indemnification from the Sellers
(the "INDEMNIFYING PARTY") under this Section 11.02 shall give the Sellers
notice of any matter which such Parent Indemnified Party has determined has
given rise to a right of indemnification under this Agreement, prior to the
expiration of the applicable representations and warranties as set forth in this
Section 11.02, stating the amount of the Loss, if known, and method of
computation thereof, and containing a reference to the specific provisions of
this Agreement in respect of which such right of indemnification is claimed or
arises.
(d) Except as to liability arising out of or relating to the
representations and warranties set forth in Article 12, Section 4.05, Section
4.08(b), Section 4.08(d), Section 4.08(f), and Section 4.08(l), or liability
arising from or relating to fraud, the Sellers shall have no liability under
Section 11.02(b) unless and until the aggregate of all Losses relating thereto
exceeds $250,000 and then only to the extent such Losses exceed said amount.
Except for liabilities arising out of or relating to the representations and
warranties set forth in Article 12, Section 4.05, Section 4.08(b), Section
4.08(d), Section 4.08(f), and Section 4.08(l), or liabilities arising from or
relating to fraud, and exclusive of any purchase price adjustment in accordance
with Section 2.06, the Sellers shall have no liability under Section 11.02(b) or
for any liability arising out of or relating to the representations, warranties
and covenants and agreements to be performed by Sellers or the Company hereunder
after Sellers have paid Losses in an amount equal to $12,000,000 (the "INDEMNITY
CAP").
(e) After the Effective Time, Sellers and their Affiliates, officers,
directors, employees, agents, successors and assigns (collectively, the "SELLER
INDEMNIFIED PARTIES") shall be jointly and severally indemnified and held
harmless by each of Parent and the Surviving Corporation for any and all Losses
arising out of or resulting from the breach of any representation, warranty or
covenant (without giving effect to any qualification as to materiality contained
therein in determining the amount of any Loss), made by Parent in this
Agreement, provided, however, that Parent shall have no liability under Section
11.02(e) unless and until the aggregate of all Losses relating thereto exceeds
$250,000 and then only to the extent such Losses exceed said amount. Parent
shall have no liability under Section 11.02(e) or for any liability arising out
of or relating to the representations, warranties and covenants and agreements
to be performed by Parent hereunder after Parent has paid Losses in an amount
equal to $12,000,000.
(f) To the extent that any Claim is covered by insurance held by the
Parent Indemnified Party or the Seller Indemnified Party (each, an "INDEMNIFIED
PARTY"), such Indemnified Party shall be entitled to indemnification hereunder
only with respect to the amount of Losses that are in excess of the cash
proceeds received by such Indemnified Party pursuant to such insurance (net of
any
46
deductible or copayment). If such Indemnified Party receives such cash insurance
proceeds prior to the time such indemnification is paid, then the amount payable
by the Indemnifying Party pursuant to such indemnification shall be reduced by
the amount of such insurance proceeds. To the extent that any Claim is paid in
full or in part by cash insurance proceeds, such cash insurance proceeds shall
not be applied to the Indemnity Cap. If such Indemnified Party receives such
cash insurance proceeds after such indemnification is paid, then upon receipt by
the Indemnified Party of any cash proceeds pursuant to such insurance with
respect to such indemnification, such Indemnified Party shall repay any portion
of such amount which was previously paid by the Indemnifying Party to the
Indemnified Party in satisfaction of such indemnification and such amount will
not be applied to the Indemnity Cap. Notwithstanding the foregoing, the amount
of any such insurance proceeds shall not reduce the amount of Losses for which
the Indemnifying Party is responsible to the extent that the Company can
establish that the recovery of such proceeds results in the termination of the
applicable insurance policy or a prospective, retrospective or retroactive
premium adjustment as a result of such claim.
(g) Subsequent to the Effective Time, with respect to any matter as to
which indemnification is provided pursuant to this Section 11.02(b), such
indemnification shall be the sole remedy available to the indemnified party and
the parties hereto waive, to the maximum extent permitted by law, any other
remedies available to them; provided, however, that the parties do not waive any
rights or remedies for any claim, loss or other action arising from or relating
to fraud. Notwithstanding the foregoing the parties hereto may exercise their
rights under this Agreement and applicable law to equitable remedies, including,
without limitation specific performance and injunction.
Section 11.03. Defense Of Claims. In connection with any claim giving rise
to indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a third party, the Indemnified Party shall give the Indemnifying
Party prompt notice of such claim and the Indemnifying Party at its sole cost
and expense and with counsel reasonably satisfactory to the Indemnified Party
may, upon written notice to the Indemnified Party, assume the defense of any
such claim or legal proceeding if (1) the third-party claim does not seek an
injunction or other equitable relief against or adversely affecting a
Indemnified Party, (2) the Indemnifying Party acknowledges in writing its
obligation to indemnify the Indemnified Party against any Losses that may result
from the third-party claim, and (3) the Indemnifying Party agrees in writing not
to settle such claim or proceeding without the prior written consent of the
Indemnified Party, which consent shall not be unreasonably withheld. The
Indemnified Party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel at its own expense; provided,
however, that if there are one or more legal defenses available to the
Indemnified Party that conflict with those available to the Indemnifying Party,
or the Indemnifying Party fails to take reasonable steps necessary to defend
diligently the claim after receiving notice from the
47
Indemnified Party that it believes that the Indemnifying Party has failed to do
so, the Indemnified Party may assume the defense of such claim; and provided
further, that the Indemnified Party may not settle such claim without the prior
written consent of the Indemnifying Party, which consent may not be unreasonably
withheld. If the Indemnified Party assumes the defense of the claim, the
Indemnified Party shall be reimbursed by the Indemnifying Party on a monthly
basis for reasonable fees and expenses of counsel retained by the Indemnified
Party and the Indemnifying Party shall be entitled to participate in (but not
control) the defense of such claim, with its counsel at its own expense. If the
Indemnifying Party thereafter seeks to question the manner in which the
Indemnified Party defended such third party claim or the amount or nature of any
such settlement, the Indemnifying Party shall have the burden to prove, by a
preponderance of the evidence, that the Indemnified Party did not defend or
settle such third-party claim in a reasonable, prudent manner. The parties agree
to render, without compensation, to each other such assistance as they may
reasonably require of each other and to cooperate in good faith with each other,
including providing such documents and records as may be pertinent and the time
and attention of such personnel as may reasonably be necessary, in order to
ensure the proper and adequate defense of any action , suit or proceeding,
whether or not subject to indemnification hereunder.
Section 11.04. Amendments; No Waivers. (a) Any provision of this Agreement
may be amended or waived prior to the Effective Time if, but only if, such
amendment or waiver is in writing and is signed, in the case of an amendment, by
each party to this Agreement or, in the case of a waiver, by each party against
whom the waiver is to be effective, provided that, after the adoption of this
Agreement by the shareholders of the Company and without their further approval,
no such amendment or waiver shall reduce the amount or change the kind of
consideration to be received in exchange for the Shares.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 11.05. Expenses. (a) All fees and expenses (or other payments due)
of Xxxx & Sharp, P.C., MC Financial Services, Ltd. and U.S. Bancorp Xxxxx
Xxxxxxx shall be paid by Sellers; all fees and expenses of the Company and the
Sellers related to, arising out of, or connected to the Merger and the
transactions contemplated by this Agreement (including, but not limited to, the
fees and expenses of Fenwick & West and Deloitte & Touche) shall be paid by the
Sellers.
(b) Except as otherwise provided in this Section, or as provided in
Sections 2.05(c) or 12.07, all other costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such cost or expense;
provided, however, that if any action or arbitration is brought with regards to
any
48
dispute arising out of or in connection with this Agreement, the losing party in
any such action or arbitration shall be required to pay all reasonable expenses
of both parties, including any expenses or fees of the arbitrator or
arbitrators.
Section 11.06. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto.
Section 11.07. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without regard
to the conflicts of law rules of such state.
Section 11.08. Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby may be brought in
any federal court located in the State of California, and each of the parties
hereby consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection that
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding in any such court or that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient form. Process in
any such suit, action or proceeding may be served on any party anywhere in the
world, whether within or without the jurisdiction of any such court. Without
limiting the foregoing, each party agrees that service of process on such party
as provided in Section 11.01 shall be deemed effective service of process on
such party.
Section 11.09. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 11.10. Counterparts; Effectiveness; Benefit. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto. No
provision of this Agreement is intended to confer any rights, benefits,
remedies, obligations, or liabilities hereunder upon any Person other than the
parties hereto and their respective successors and assigns.
Section 11.11. Entire Agreement. This Agreement and the Confidentiality
Agreement constitute the entire agreement between the parties with respect to
the subject matter of this Agreement and supersedes all prior
49
agreements and understandings, both oral and written, between the parties with
respect to the subject matter of this Agreement.
Section 11.12. Captions. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof.
Section 11.13. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated so
long as the economic or legal substance of the transactions contemplated hereby
is not affected in any manner materially adverse to any party. Upon such a
determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.
Section 11.14. Specific Performance. The parties hereto agree that
irreparable damage would occur if any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
or to enforce specifically the performance of the terms and provisions hereof in
any federal court located in the State of California or any California state
court, in addition to any other remedy to which they are entitled at law or in
equity.
Section 11.15. Arbitration. (a) Any dispute arising out of or in
connection with this Agreement shall be submitted to arbitration. The
arbitration shall be conducted according to the Commercial Arbitration Rules of
the American Arbitration Association. The place of arbitration shall be San
Jose, California or such other place as may be agreed upon by the parties. Both
parties shall attempt to agree upon one arbitrator, but if they are unable to
agree, each shall appoint an arbitrator and these two shall appoint a third
arbitrator. Expenses of the arbitrator(s) shall be divided equally between the
parties.
(b) Judgment upon the award rendered by the arbitrator(s) may be entered
in any court having jurisdiction thereof, and shall be enforceable against the
parties in accordance with the 1958 Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, as amended.
ARTICLE 12
Tax Matters
Section 12.01. Tax Definition. The following terms, as used herein, have
the following meanings:
50
"BUYER INDEMNITEE" means Parent, any of its Affiliates and, effective upon
the Closing, the Company.
"POST-CLOSING TAX PERIOD" means any Tax period beginning after the Closing
Date; and, with respect to a Tax period that begins on or before the Closing
Date and ends thereafter, the portion of such Tax period beginning after the
Closing Date.
"PRE-CLOSING TAX PERIOD" means any Tax period ending on or before the
Closing Date; and, with respect to a Tax period that begins on or before the
Closing Date and ends thereafter, the portion of such Tax period ending on the
Closing Date.
"TAX" means (i) any tax, governmental fee or other like assessment or
charge of any kind whatsoever (including, but not limited to, withholding on
amounts paid to or by any Person), together with any interest, penalty, addition
to tax or additional amount imposed by any governmental authority (a "TAXING
AUTHORITY") responsible for the imposition of any such tax (domestic or
foreign), and any liability for any of the foregoing as transferee, (ii) in the
case of the Company, liability for the payment of any amount of the type
described in clause (i) as a result of being or having been before the Closing
Date a member of an affiliated, consolidated, combined or unitary group, or a
party to any agreement or arrangement, as a result of which liability of the
Company to a Taxing Authority is determined or taken into account with reference
to the activities of any other Person, and (iii) liability of the Company for
the payment of any amount as a result of being party to any Tax Sharing
Agreement or with respect to the payment of any amount imposed on any person of
the type described in (i) or (ii) as a result of any existing express or implied
agreement or arrangement (including, but not limited to, an indemnification
agreement or arrangement).
"TAX ASSET" means any net operating loss, net capital loss, investment tax
credit, foreign tax credit, charitable deduction or any other credit or tax
attribute that could be carried forward or back to reduce Taxes (including
without limitation deductions and credits related to alternative minimum Taxes).
"TAX SHARING AGREEMENTS" means all existing agreements or arrangements
(whether or not written) binding the Company that provide for the allocation,
apportionment, sharing or assignment of any Tax liability or benefit, or the
transfer or assignment of income, revenues, receipts, or gains for the purpose
of determining any person's Tax liability.
Section 12.02. Tax Representations. The Company and Sellers represent and
warrant to Parent and Merger Subsidiary as of the date hereof and as of the
Closing Date that:
(a) Filing and Payment. Except as set forth on Schedule 12.02(a), (i) all
Tax returns, statements, reports, elections, declarations, disclosures,
schedules and
51
forms (including estimated tax or information returns and reports) filed or
required to be filed with any Taxing Authority with respect to any Pre-Closing
Tax Period by or on behalf of the Company (collectively, the "Returns"), have,
to the extent required to be filed on or before the date hereof, been filed when
due in accordance with all applicable laws; (ii) as of the time of filing, the
Returns were true and complete in all material respects; and (iii) all Taxes
shown as due and payable on the Returns that have been filed have been timely
paid, or withheld and remitted to the appropriate Taxing Authority.
(b) Financial Records. Except as set forth on Schedule 12.02(b), (i) the
charges, accruals and reserves for Taxes with respect to the Company reflected
on the books of the Company (excluding any provision for deferred income taxes
reflecting either differences between the treatment of items for accounting and
income tax purposes or carryforwards) are adequate to cover Tax liabilities
accruing through the end of the last period for which the Company ordinarily
records items on its books; and (ii) since the end of the last period for which
the Company ordinarily records items on its books, the Company has not engaged
in any transaction, or taken any other action, other than in the ordinary course
of business, except for this Agreement.
(c) Procedure and Compliance. Except as set forth on Schedule 12.02(c),
(i) all material Returns filed with respect to all Tax years of the Company have
been examined and closed or are Returns with respect to which the applicable
period for assessment under applicable law, after giving effect to extensions or
waivers, has expired; (ii) the Company is not delinquent in the payment of any
Tax or has requested any extension of time within which to file any Return and
has not yet filed such Return; (iii) there is no claim, audit, action, suit,
proceeding, or investigation now pending or threatened against or with respect
to the Company in respect of any Tax or Tax Asset and (iv) during the five-year
period ending on the date hereof, the Company has not made or changed any tax
election, changed any annual tax accounting period, or adopted or changed any
method of tax accounting, nor has it filed any amended Return, entered into any
closing agreement, settled any Tax claim or assessment, or surrendered any right
to claim a Tax refund, offset or other reduction in Tax liability.
(d) Taxing Jurisdictions. Schedule 12.02(d) contains a list of all
jurisdictions (whether foreign or domestic) in which the Company regularly files
Returns. The Company is not required to regularly file Returns in any
jurisdiction other than those set forth on Schedule 12.02(d), and no
jurisdiction in which the Company does not regularly file Returns has asserted
that the Company is required to do so.
(e) Tax Sharing, Consolidation and Similar Arrangements. Except as set
forth on Schedule 12.02(e), (i) the Company has not been a member of an
affiliated, consolidated, combined or unitary group other than one of which the
Company was the common parent; (ii) the Company is not party to any Tax
52
Sharing Agreement or to any other agreement or arrangement referred to in clause
(ii) or (iii) of the definition of "Tax"; (iii) no amount of the type described
in clause (ii) or (iii) of the definition of "Tax" is currently payable by
either the Company, regardless of whether such Tax is imposed on the Company;
and (iv) the Company has not entered into any agreement or arrangement with any
Taxing Authority with regard to the Tax liability of the Company affecting any
Tax period for which the applicable statute of limitations, after giving effect
to extensions or waivers, has not expired.
(f) Certain Elections, Agreements and Arrangements. Except as set forth on
Schedule 12.02(f), (i) no election has been made under Treasury Regulations
Section 1.7701-3 or any similar provision of Tax law to treat the Company as an
association, corporation or partnership; (ii) the Company is not disregarded as
an entity for Tax purposes; and (iii) during the five-year period ending on the
date hereof, the Company was not a distributing corporation or a controlled
corporation in a transaction intended to be governed by Section 355 of the Code.
(g) Property and Leases. Except as set forth on Schedule 12.02(g), (i) the
Company does not own an interest in real property in any jurisdiction in which a
Tax is imposed, or the value of the interest is reassessed, on the transfer of
an interest in real property and which treats the transfer of an interest in an
entity that owns an interest in real property as a transfer of the interest in
real property.
Section 12.03. Covenants. (a) Without the prior written consent of Parent,
the Company shall not, nor shall Sellers cause or permit the Company, on or
prior to the Closing Date, to, make or change any Tax election, change any
annual Tax accounting period, adopt or change any method of Tax accounting, file
any amended Return, enter into any closing agreement, settle any Tax claim or
assessment, surrender any right to claim a Tax refund, offset or other reduction
in Tax liability, consent to any extension or waiver of the limitations period
applicable to any Tax claim or assessment or take or omit to take any other
action, if any such action or omission would have the effect of increasing the
Tax liability or reducing any Tax Asset of the Company.
(b) The Company shall not, nor shall Sellers cause or permit the Company
to, on or prior to the Closing Date, make any payment of, or in respect of, any
Tax to any person or any Taxing Authority, except to the extent such payment is
in respect of a Tax that is due or payable or has been properly estimated in
accordance with applicable law as applied in a manner consistent with past
practice of the Company.
(c) Without the prior written consent of Sellers, which consent shall not
be unreasonably withheld, the Company shall not, and Parent shall not permit the
Company to, file any amended Return or make any election, in each case with
respect to any Pre-Closing Tax Period, that would have the effect of increasing
53
the liability of the Company for Taxes in any Pre-Closing Tax Period for which
Sellers would be required to indemnify any Buyer Indemnitee under this Agreement
unless required to do so by any Taxing Authority.
(d) Parent shall pay, or cause the Company to pay, to Sellers an amount
equal to any refund of Taxes of the Company in respect of any Pre-Closing Tax
Period except to the extent that the accrual or receipt of any such refund (u)
arises out of or relates to any Tax benefit that is reflected in the Tax Benefit
Item Schedule, (v) arises out of or relates to any Tax benefit that gave rise to
a reduction in any amount otherwise payable by Sellers to Parent under Section
12.06, (w) arises out of or relates to any Tax benefit that is offset by any
increase in Taxes of the Company in respect of any Post-Closing Tax Period, (x)
arises out of or relates to any Tax benefit that results in the reduction of any
Tax Asset or the ability of the Company to utilize any Tax Asset in respect of
any Post-Closing Tax Period, (y) arises out of or relates to the utilization or
realization of any deduction or Tax benefit arising out of or related to any
act, event or occurrence described in clause (ii) of the adjustments to the
definition of "Closing Working Capital" or (z) arises out of or relates to the
carryback of any Tax Asset of the Company from a Post-Closing Tax Period. To the
extent that any refund that would otherwise be payable to Sellers pursuant to
this paragraph is offset by any corresponding increase in Taxes or reduction in
any Tax Asset, in each case, of any Buyer Indemnitee in respect of any
Pre-Closing Period that would be subject to indemnification by Sellers under
this Article 12, Parent may, instead of paying such refund to Sellers, offset
the amount of such payment against the amount of such indemnification
obligation. If any refund in respect of which Parent or the Company has made
payment to Sellers is subsequently disallowed by the relevant Taxing Authority,
Sellers jointly and severally agree to pay to Parent (or, at the direction of
Parent, to the Company) an amount equal to the amount of such disallowance, plus
any applicable interest and penalties.
(e) All transfer, documentary, sales, use, stamp, registration, value
added and other such Taxes and fees (including any penalties and interest)
incurred in connection with transactions contemplated by this Agreement
(including any real property transfer tax and any similar Tax) ("TRANSFER
TAXES") shall be borne by Sellers. Sellers shall pay any such Transfer Taxes
when due, and will file all necessary Tax returns and other documentation with
respect to all such Taxes and fees. If required by applicable law, Parent will,
and will cause its Affiliates to, join in the execution of any such Tax returns
and other documentation.
Section 12.04. Tax Sharing. Any and all existing Tax Sharing Agreements
shall be terminated as of the Closing Date. After the Closing Date, the Company
shall not have any further rights or liabilities thereunder. This Agreement
shall be the sole Tax sharing agreement relating to the Company.
Section 12.05. Filing of Tax Returns; Cooperation On Tax Matters. (a)
Sellers shall, consistent with past practices of the Company, prepare, or cause
to
54
be prepared, all income tax Returns relating to taxable periods that end on or
prior to the Closing Date and shall provide a draft of each such Return and all
accompanying workpapers to Parent on or prior to March 1, 2003. If Parent,
within 30 days of its receipt of such draft Return and the accompanying
workpapers, notifies Sellers in writing that it objects to any of the items
reflected on such draft Return, the parties shall attempt in good faith to
resolve the dispute and, if they are unable to do so, the disputed items shall
be resolved (within a reasonable time, taking into account the deadline for
filing the relevant Return), by the Accounting Referee. The Accounting Referee's
determination of the disputed items shall be binding on the Company, Buyer and
Sellers, and the costs of engaging the Accounting Referee for this purpose shall
be borne equally by Buyer and Sellers. Parent shall timely file the relevant
Return with the appropriate Taxing Authority, provided that, if there are any
disputed items that have not been resolved by the time of the filing of any
Return, then, if necessary, an amended Return shall be filed promptly after such
disputed items are resolved.
(b) Parent agrees to give prompt notice to Sellers of the assertion of any
claim or the commencement of any audit, action or proceeding by any Taxing
Authority relating to any actual or potential Tax Loss in respect of which
indemnity may be sought under Section 12.06. Sellers may, at their own cost and
expense, participate in and, upon acknowledgment of their joint and several
liability to indemnify Parent pursuant to Section 12.06 in respect of any Tax
Loss arising out of such claim, audit, action or proceeding, assume the defense
of such claim, audit, action or proceeding, provided, that no Seller shall agree
to settle any liability for any such Tax Loss if such settlement would increase
any Tax liability or reduce any Tax Asset of the Company unless Sellers jointly
and severally agree to indemnify and hold harmless the Buyer Indemnitees in
respect of such increased Tax liability or to compensate Parent and the Company
for the reduction of such Tax Asset. If Sellers assume any such defense, Parent
shall have the right (but not the obligation), at its own cost and expense, to
participate in such defense. The failure of Parent to notify Sellers under this
paragraph shall not relieve Sellers of their indemnification obligations under
this Article except to the extent such failure shall have adversely prejudiced
Sellers.
(c) Parent and Sellers shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the preparation and
filing of any Tax return, statement, report or form (including any report
required pursuant to Section 6043 of the Code and all Treasury Regulations
promulgated thereunder), any audit, litigation or other proceeding with respect
to Taxes. Such cooperation shall include the retention and (upon the other
party's request) the provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Parent and Sellers agree (i) to
retain all books and records with respect to Tax matters pertinent to the
Company relating to any Pre-Closing Tax Period, and to abide by all record
retention agreements entered
55
into with any Taxing Authority, and (ii) to give the other party reasonable
written notice prior to destroying or discarding any such books and records and,
if the other party so requests, Parent or Sellers, as the case may be, shall
allow the other party to take possession of such books and records.
(d) Parent and Sellers further agree, upon request, to use all reasonable
efforts to obtain any certificate or other document from any governmental
authority or customer of the Company or any other person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including but not
limited to with respect to the transactions contemplated hereby).
Section 12.06. Tax Indemnification. (a) Sellers hereby jointly and
severally indemnify each Buyer Indemnitee against and agrees to hold each Buyer
Indemnitee harmless from any (u) Tax of the Company described in clause (i) of
the definition of Tax related to a Pre-Closing Tax Period, (v) Tax described in
clause (ii) or (iii) of the definition of Tax, (w) Tax of the Company resulting
from a breach of the provisions of Section 12.02 or any of Section 12.03(a),
12.03(b) or 12.03(e), (x) Tax resulting from the application of Section 280G of
the Code to any payment made pursuant to this Agreement or to any payment made
as a result of, or in connection with, any transaction contemplated by this
Agreement, (y) any reduction or disallowance of any Tax Benefit item that is
reflected in the Tax Benefit Item Schedule, and (z) liabilities, costs, expenses
(including, without limitation, reasonable expenses of investigation and
attorneys' fees and expenses), losses, damages, assessments, settlements or
judgments arising out of or incident to the imposition, assessment or assertion
of any Tax described in (u), (v), (w), (x), (y) or (z), (each of (u), (v), (w),
(x), (y) and (z) being referred to herein as a "TAX LOSS"); provided that in the
case of a Tax Loss attributable to any Tax, Sellers shall have no liability for
the payment of such Tax Loss to the extent that such Tax Loss is set forth in
the Tax Liability Item Schedule. The calculation of any Tax Loss described in
this Section 12.06(a) that is subject to indemnification hereunder shall (A) be
made on a hypothetical basis without taking into account (x) the Tax effect of
any act, event or occurrence described in clause (ii) of the adjustments to the
definition of "Closing Working Capital" or (y) any carryback of any Tax Asset
from a Post-Closing Tax Period and (B) shall be reduced to the extent that the
payment of such Tax Loss to the relevant Taxing Authority gives rise to a
deduction, credit or similar Tax benefit in the taxable year in which such
payment is made that actually reduces Taxes that would otherwise have been
payable by any Buyer Indemnitee in respect of such taxable year.
(b) For purposes of this Section 12.06, in the case of any Taxes that are
imposed on a periodic basis and are payable for a Tax period that includes (but
does not end on) the Closing Date, the portion of such Tax related to the
portion of such Tax period ending on and including the Closing Date shall (x) in
the case of any Taxes other than gross receipts, sales or use Taxes and Taxes
based upon or related to income, be deemed to be the amount of such Tax for the
entire Tax period multiplied by a fraction the numerator of which is the number
of days in the Tax period ending on and including the Closing Date and the
denominator of
56
which is the number of days in the entire Tax period, and (y) in the case of any
Tax based upon or related to income and any gross receipts, sales or use Tax, be
deemed equal to the amount which would be payable if the relevant Tax period
ended on and included the Closing Date. All determinations necessary to give
effect to the allocation set forth in the foregoing clause (y) shall be made in
a manner consistent with prior practice of the Company.
(c) Not later than five (5) days after receipt by Sellers of written
notice from Parent stating that any Tax Loss has been incurred by a Buyer
Indemnitee and the amount thereof and of the indemnity payment requested,
Sellers shall discharge their obligation to indemnify the Buyer Indemnitee
against such Tax Loss by paying to Parent an amount equal to the amount of such
Tax Loss. Notwithstanding the foregoing, if Parent provides Sellers with written
notice of the accrual of a Tax Loss at least 30 days prior to the date on which
the relevant Tax Loss is required to be paid by any Buyer Indemnitee, within
that 30-day period Sellers shall discharge their obligation to indemnify the
Buyer Indemnitee against such Tax Loss by making payments to the relevant Taxing
Authority or Parent, as directed by Parent, in an aggregate amount equal to the
amount of such Tax Loss. If Sellers elect, pursuant to Section 12.05(b), to
assume the defense of any claim, audit, action or proceeding with respect to any
Tax Loss, Sellers may, in lieu of making an advance payment in the manner
described in the preceding sentence, make a deposit or similar payment to the
relevant Tax Authority in order to toll the accrual of interest in respect of
such Tax Loss while such claim, audit, action or proceeding is being contested.
The payment by a Buyer Indemnitee of any Tax Loss shall not relieve Sellers of
their obligations under this Section 12.06.
(d) Any claim of any Buyer Indemnitee (other than Parent) under this
Section may be made and enforced by Parent on behalf of such Buyer Indemnitee.
Section 12.07. Certain Disputes. Disputes arising under Section 12.06 and
not resolved by mutual agreement within 30 days shall be resolved by a
nationally recognized accounting firm with no material relationship with Parent,
Sellers or their Affiliates (the "ACCOUNTING REFEREE"), chosen and mutually
acceptable to both Parent and Sellers within five days of the date on which the
need to choose the Accounting Referee arises. The Accounting Referee shall
resolve any disputed items within 30 days of having the item referred to it
pursuant to such procedures as it may require. The costs, fees and expenses of
the Accounting Referee shall be borne equally by Buyer Indemnitee and Sellers.
Section 12.08. Purchase Price Adjustment. Any amount paid by Sellers or
Parent under Section 2.06, Article 11 or this Article 12 will be treated as an
adjustment to the Merger Consideration.
Section 12.09. Survival. Notwithstanding anything in this Agreement to the
contrary, the provisions of this Article 12 shall survive for the full period of
all
57
applicable statutes of limitations (giving effect to any waiver, mitigation or
extension thereof).
58
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger to be duly executed by their respective authorized officers as of the
day and year first above written.
ULTRA CLEAN TECHNOLOGY SYSTEMS & SERVICE, INC.
By: /s/ Xxxxxxxxx Xxxxxxx
-----------------------------------------
Name: Xxxxxxxxx Xxxxxxx
Title: Chairman and Chief Executive
Officer
MITSUBISHI CORPORATION
By: /s/ Xxxxxxxxx Xxxxxxx
-----------------------------------------
Name: Xxxxxxxxx Xxxxxxx
Title: Authorized Agent
MITSUBISHI INTERNATIONAL CORPORATION
By: /s/ Xxxxxxxxx Xxxxxxx
-----------------------------------------
Name: Xxxxxxxxx Xxxxxxx
Title: Authorized Agent
ULTRA CLEAN HOLDINGS, INC.
By: /s/ Xxxxx xxxXxx
-----------------------------------------
Name: Xxxxx xxxXxx
Title: Secretary and Treasurer
CLEAN MERGER COMPANY
By: /s/ Xxxxx xxxXxx
-----------------------------------------
Name: Xxxxx xxxXxx
Title: Secretary
