STOCK PURCHASE AGREEMENT
BETWEEN
XXXXX SYSTEMS, INC.
AND
UNR INDUSTRIES, INC.
DECEMBER 16, 1996
TABLE OF CONTENTS
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ARTICLE I TERMS OF PURCHASE AND SALE. . . . . . . . . . . . . . . . . . . . 1
1.01. Sale of the Shares. . . . . . . . . . . . . . . . . . . . . 1
1.02. The Closing . . . . . . . . . . . . . . . . . . . . . . . . 1
1.03. Purchase Price and Payment. . . . . . . . . . . . . . . . . 3
1.04. Purchase Price Adjustment . . . . . . . . . . . . . . . . . 3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . 5
2.01. Organization. . . . . . . . . . . . . . . . . . . . . . . . 5
2.02. Corporate Power and Authority; Effect of Agreement. . . . . 5
2.03. Capitalization. . . . . . . . . . . . . . . . . . . . . . . 6
2.04. Title to Shares . . . . . . . . . . . . . . . . . . . . . . 6
2.05. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 6
2.06. Financial Statements. . . . . . . . . . . . . . . . . . . . 6
2.07. Absence of Certain Changes or Events. . . . . . . . . . . . 7
2.08. No Undisclosed Liabilities. . . . . . . . . . . . . . . . . 7
2.09. Accounts Receivable . . . . . . . . . . . . . . . . . . . . 7
2.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.11. Compliance with Laws. . . . . . . . . . . . . . . . . . . .10
2.12. Employee Benefit Plans. . . . . . . . . . . . . . . . . . .12
2.13. Title to Assets . . . . . . . . . . . . . . . . . . . . . .15
2.14. Inventory and Supplies. . . . . . . . . . . . . . . . . . .16
2.15. Intellectual Property . . . . . . . . . . . . . . . . . . .16
2.16. Commitments . . . . . . . . . . . . . . . . . . . . . . . .18
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2.17. Litigation. . . . . . . . . . . . . . . . . . . . . . . . .19
2.18. Consents. . . . . . . . . . . . . . . . . . . . . . . . . .20
2.19. Insurance . . . . . . . . . . . . . . . . . . . . . . . . .20
2.20. Labor Practices . . . . . . . . . . . . . . . . . . . . . .20
2.21. Absence of Certain Commercial Practices . . . . . . . . . .21
2.22. Customers and Suppliers . . . . . . . . . . . . . . . . . .21
2.23. Adequacy of Assets. . . . . . . . . . . . . . . . . . . . .21
2.24. Product Recalls . . . . . . . . . . . . . . . . . . . . . .21
2.25. Product Liability . . . . . . . . . . . . . . . . . . . . .22
2.26. Intercompany Transactions . . . . . . . . . . . . . . . . .22
2.27. Bank Accounts . . . . . . . . . . . . . . . . . . . . . . .22
2.28. Books and Records . . . . . . . . . . . . . . . . . . . . .22
2.29. No Brokers. . . . . . . . . . . . . . . . . . . . . . . . .22
2.30. Backlog . . . . . . . . . . . . . . . . . . . . . . . . . .22
2.31. No Misrepresentations . . . . . . . . . . . . . . . . . . .22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . .23
3.01. Organization. . . . . . . . . . . . . . . . . . . . . . . .23
3.02. Corporate Power and Authority; Effect of Agreement. . . . .23
3.03. Consents. . . . . . . . . . . . . . . . . . . . . . . . . .23
3.04. No Brokers. . . . . . . . . . . . . . . . . . . . . . . . .23
3.05. Status of Buyer . . . . . . . . . . . . . . . . . . . . . .24
ARTICLE IV COVENANTS OF SELLER AND THE COMPANY. . . . . . . . . . . . . . .24
4.01. Cooperation by Seller . . . . . . . . . . . . . . . . . . .24
4.02. Conduct of Business . . . . . . . . . . . . . . . . . . . .24
4.03. Access. . . . . . . . . . . . . . . . . . . . . . . . . . .26
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4.04. Further Assurances. . . . . . . . . . . . . . . . . . . . .27
4.05. No Solicitation . . . . . . . . . . . . . . . . . . . . . .27
4.06. Financial Reports . . . . . . . . . . . . . . . . . . . . .27
ARTICLE V COVENANTS OF BUYER. . . . . . . . . . . . . . . . . . . . . . . .27
5.01. Cooperation by Buyer. . . . . . . . . . . . . . . . . . . .27
5.02. Books and Records; Personnel. . . . . . . . . . . . . . . .28
5.03. Collection of Aged Receivables. . . . . . . . . . . . . . .28
5.04. Further Assurances. . . . . . . . . . . . . . . . . . . . .28
ARTICLE VI ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . . . . .28
6.01. Termination of Commitments of Company with Seller or
Seller's Affiliates . . . . . . . . . . . . . . . . . . . .28
6.02. Transition. . . . . . . . . . . . . . . . . . . . . . . . .29
6.03. Excluded Liabilities. . . . . . . . . . . . . . . . . . . .29
6.04. Diligence in Pursuit of Conditions Precedent. . . . . . . .29
6.05. Employment. . . . . . . . . . . . . . . . . . . . . . . . .29
6.06. Severance . . . . . . . . . . . . . . . . . . . . . . . . .30
6.07. Change of Control Payments. . . . . . . . . . . . . . . . .30
6.08. Special Bonus . . . . . . . . . . . . . . . . . . . . . . .31
6.09. Section 338(h)(10) Election . . . . . . . . . . . . . . . .31
6.10. Confidentiality . . . . . . . . . . . . . . . . . . . . . .31
ARTICLE VII CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . .32
7.01. Conditions to Buyer's Obligations . . . . . . . . . . . . .32
7.02. Conditions to Seller's Obligations. . . . . . . . . . . . .33
ARTICLE VIII TERMINATION PRIOR TO CLOSING . . . . . . . . . . . . . . . . .33
8.01. Termination . . . . . . . . . . . . . . . . . . . . . . . .33
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8.02. Effect on Obligations . . . . . . . . . . . . . . . . . . .33
ARTICLE IX INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . .34
9.01. Survival of Representations, Warranties and Covenants . . .34
9.02. Indemnification . . . . . . . . . . . . . . . . . . . . . .34
9.03. Limitations on Indemnification. . . . . . . . . . . . . . .35
9.04. Indemnification Procedure . . . . . . . . . . . . . . . . .35
9.05. Indemnification For Taxes . . . . . . . . . . . . . . . . .37
ARTICLE X TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
10.01. Tax Indemnity. . . . . . . . . . . . . . . . . . . . . . .37
10.02. Purchase Price Adjustment. . . . . . . . . . . . . . . . .39
ARTICLE XI MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . .40
11.01. Interpretive Provisions. . . . . . . . . . . . . . . . . .40
11.02. Entire Agreement . . . . . . . . . . . . . . . . . . . . .40
11.03. Successors and Assigns . . . . . . . . . . . . . . . . . .40
11.04. Headings . . . . . . . . . . . . . . . . . . . . . . . . .40
11.05. Modification and Waiver. . . . . . . . . . . . . . . . . .40
11.06. Expenses . . . . . . . . . . . . . . . . . . . . . . . . .40
11.07. Notices. . . . . . . . . . . . . . . . . . . . . . . . . .41
11.08. Governing Law. . . . . . . . . . . . . . . . . . . . . . .42
11.09. Public Announcements . . . . . . . . . . . . . . . . . . .42
11.10. Third Party Beneficiaries. . . . . . . . . . . . . . . . .42
11.11. Severability . . . . . . . . . . . . . . . . . . . . . . .42
11.12. Knowledge. . . . . . . . . . . . . . . . . . . . . . . . .42
11.13. Dispute Resolution . . . . . . . . . . . . . . . . . . . .42
11.14. Counterparts . . . . . . . . . . . . . . . . . . . . . . .43
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SCHEDULES
Schedule 1.03 Checks and Bank Overdrafts
Schedule 2.01 Qualification to do Business as a Foreign Corporation
Schedule 2.02 Violations, Breaches or Defaults under Material
Commitments
Schedule 2.07 Absence of Certain Changes or Events
Schedule 2.09 Schedule of Accounts Receivable
Schedule 2.10(d) Pending Audits and Examinations of Tax Returns
Schedule 2.10(e) Tax Examinations
Schedule 2.10(f) Tax Deficiencies or Assessments
Schedule 2.10(j) Affiliated Corporations and Dividend Election
Schedule 2.10(o) Foreign Income
Schedule 2.11(a) Hazardous Materials
Schedule 2.12(a) Employee Plans and Benefit Arrangements
Schedule 2.13 Leased Real Property
Schedule 2.15 Intellectual Property
Schedule 2.16(a) Commitments
Schedule 2.17 Litigation
Schedule 2.19 Certificates of Insurance
Schedule 2.20(a) Ten Most Highly Compensated Employees
Schedule 2.20(b) Employment Contracts
Schedule 2.22 Customers and Suppliers
Schedule 2.25 Product Liability
Schedule 2.26 Intercompany Transactions
Schedule 2.27 List of Bank Accounts
Schedule 2.30 Backlog
Schedule 6.07 Change of Control Liabilities
Schedule 11.12 Persons with Knowledge
EXHIBITS
Exhibit A Opinion of Seller's counsel, Xxxx, Xxxx & Xxxxx
Exhibit B Opinion of Buyer's counsel, Xxxxxx, Xxxx & Xxxxxxxx LLP
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made and entered into
as of December 16, 1996 between Xxxxx Systems, Inc., a Delaware corporation
("Buyer") and UNR Industries, Inc., a Delaware corporation ("Seller").
RECITALS
WHEREAS, Seller is the owner of all of the issued and outstanding shares of
capital stock of Real Time Solutions, Inc., a Delaware corporation and wholly-
owned subsidiary of Seller (the "Company"), consisting of 1,000 shares of common
stock, par value $.01 per share (collectively, the "Shares"); and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, the Shares.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements, and upon the terms and subject to the conditions,
hereinafter set forth, the parties hereby agree as follows:
ARTICLE I
TERMS OF PURCHASE AND SALE
1.01. SALE OF THE SHARES. At the Closing (as defined in Section 1.02),
upon the terms and subject to the conditions set forth herein, Seller shall sell
to Buyer, and Buyer shall purchase from Seller, all of the issued and
outstanding capital stock of the Company.
1.02. THE CLOSING.
(a) The closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of Xxxxxx, Xxxx & Xxxxxxxx LLP, 000
Xxxxx Xxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx, commencing at 10:00 a.m. local
time, on December 19, 1996, or at such other time and/or place, as the parties
may mutually agree (the "Closing Date").
(b) On the business day immediately preceding the Closing Date,
the parties shall conduct a pre-closing at the offices of Xxxxxx, Xxxx &
Xxxxxxxx LLP, commencing at 10:00 a.m. at which each party shall present for
review by the other parties copies, in execution form, of all documents required
to be delivered by such party at the Closing.
(c) At the Closing, upon the terms and subject to the conditions
set forth herein, Seller shall deliver or cause to be delivered to Buyer:
(i) certificates representing the Shares, duly endorsed in blank
for transfer or accompanied by duly executed stock powers assigning the
Shares in blank, which certificates shall not bear any legend
restricting the transfer of the Shares;
(ii) a long-form certificate of good standing and a
certificate of tax good standing for the Company issued by the Secretary
of State of the State of Delaware, certifying that the Company is in
good standing upon the records of its offices, together with
certificate(s) to transact business as a foreign corporation in each
state in which the Company is so qualified, each as of a date reasonably
close to the Closing Date;
(iii) copies of the Certificate of Incorporation and Bylaws
of the Company, in each case as amended to date, certified by the
secretary or an assistant secretary of the Company;
(iv) the written opinion of special counsel to Seller, Xxxx,
Xxxx & Xxxxx, substantially in the form attached hereto as Exhibit A
which shall expressly state that Buyer (and Buyer's senior lenders) is
entitled to rely on such opinion;
(v) resignations, or removals by Seller, of the directors
of the Company;
(vi) the official stock register and minute books of the
Company, certified by the secretary or an assistant secretary of the
Company;
(vii) the certificate required by Section 7. 01 (a) hereof;
(viii) true and correct copies of real property leases,
specified material contracts, licenses, permits, governmental decrees,
and patent, copyright and trademark licenses, to the extent not
previously delivered;
(ix) any consents, approvals or other authorizations
necessary to effect the transactions contemplated hereby;
(x) such other documents and instruments as Buyer or its
counsel deems reasonably necessary or desirable to effectuate the
transactions contemplated by this Agreement.
(d) At the Closing, upon the terms and subject to the conditions of this
Agreement, Buyer shall deliver to Seller:
(i) a long-form certificate of good standing for Buyer issued by
the Secretary of State of Delaware, as of a date reasonably close to the
Closing Date, certifying that Buyer is in good standing upon the records of
its office;
(ii) a certified copy of resolutions of the Board of Directors of
Buyer authorizing all actions necessary to consummate the transactions
contemplated by this Agreement;
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(iii) the Purchase Price (as defined in Section 1.03);
(iv) the certificate required by Section 7.02(a) hereof-,
(v) the written opinion of Xxxxxx, Xxxx & Xxxxxxxx LLP, special
counsel to Pinnacle and Buyer, substantially in the form attached hereto as
EXHIBIT B; and
(vi) such other documents and instruments as Seller or its counsel
deem reasonably necessary or desirable to effectuate the transactions
contemplated hereby.
1.03. PURCHASE PRICE AND PAYMENT. The aggregate purchase price to be paid
by Buyer to Seller for the Shares shall be equal to $5,333,582 in cash (giving
effect to the contribution to capital of the Intercompany Debt) minus the sum of
the dollar amount associated with (a) Excess Inventory (as defined in Section
1.04(c)), (b) Obsolete Inventory (as defined in Section 1.04(c)), (c) Book-to-
Physical Inventory Adjustment (as defined in Section 1.04(c)), (d) Aged Accounts
Receivable Adjustment (as defined in Section 1.04(c)) and (e) any Company checks
or bank overdrafts which have not been cleared as of the Closing Date, as set
forth on Schedule 1.03 (the "Purchase Price"). If the Book-to-Physical
Inventory Adjustment is negative (as defined in Section 1.04(c)) and is a number
greater than the sum of Excess Inventory, Obsolete Inventory and Aged Accounts
Receivables, such excess shall be added to the Purchase Price and paid promptly
to Seller by Buyer. Payment to Seller of the Purchase Price shall be made on
the Closing Date by wire transfer of immediately available funds to an account
or accounts of Seller at a bank or banks specified by Seller no later than three
business days prior to the Closing Date.
1.04. PURCHASE PRICE ADJUSTMENT.
(a) As of a mutually agreed-upon date not to exceed 5 business days
prior to the Closing Date, Seller will cause a physical count of the inventory
to be taken, at which Buyer and its representatives and accountants may be
present and participate. The quantities of inventory per this physical count
will be valued at the lower of average cost (which approximates first-in, first-
out) or market (where market does not exceed net realizable value) and inventory
is to be considered on a part number basis in reaching such determinations
regarding the lower of cost or market. Following such physical inventory,
Seller shall prepare and present to Buyer a Purchase Price Adjustment Statement
(the "Purchase Price Adjustment Statement") by 8:00 AM Central Standard Time on
the day immediately preceding the Closing Date which will reflect the dollar
value of the Company's Excess Inventory, Obsolete Inventory, if available, Book-
to-Physical Inventory Adjustment, as of the date of the physical inventory, and
Aged Accounts Receivable Adjustment, as of the day immediately preceding the
presentation of the Purchase Price Adjustment Statement. The Purchase Price
Adjustment Statement shall also include footnotes which provide detailed
descriptions and calculations regarding the amount of Excess Inventory, Obsolete
Inventory, Book-to-Physical Inventory Adjustment and Aged Accounts Receivable
Adjustment. If the values for Excess Inventory and Obsolete Inventory are not
available on the day immediately preceeding the Closing Date, a supplemental
Purchase Price Adjustment Statement containing Excess Inventory and Obsolete
Inventory values shall be submitted by Seller to Buyer within 10 business days
after the Closing Date, together with Seller's
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wire transfer to Buyer of immediately available funds in the amount of Excess
Inventory and Obsolete Inventory values reflected thereon.
(b) Buyer and its representatives and accountants shall have the
right to review the workpapers of Seller and its accountants used in preparing
and auditing the Purchase Price Adjustment Statement referred to in
Section 1.04(a) hereof, and shall have full access to the books, records,
working papers and personnel of Seller and Seller's accountants for purposes of
reviewing the accuracy and fairness of presentation of the Purchase Price
Adjustment Statement. The Purchase Price Adjustment Statement shall be binding
upon each of Buyer and Seller for all purposes unless Buyer and its
representative and independent accountants gives written notice of disagreement
with any of said values or amounts within thirty (30) days after the receipt by
Buyer of such Purchase Price Adjustment Statement specifying in reasonable
detail, insofar as possible, the nature and extent of such disagreement. If
Buyer and Seller are unable to resolve any such disagreement within thirty (30)
days after Buyer gives Seller notice thereof, the disagreement shall be referred
for final determination to Deloitte & Touche LLP or, if such firm declines to
act, to any other accounting firm of national reputation as may be reasonably
acceptable to Buyer and Seller. Buyer and Seller may submit to such accounting
firm any facts which they deem relevant to the determination, and the
determination of such accounting firm shall be conclusive, non-appealable and
binding upon Buyer and Seller for all purposes. Such accounting firm shall
resolve any disputes in an informal proceeding with rules to be established by
such firm. Buyer and Seller agree that judgment may be entered upon the
determination of such accounting firm in any court having jurisdiction over the
party against which such determination is to be enforced. Seller and Buyer
shall each pay the fees and disbursements of their respective internal and
independent accountants and other personnel incurred in the initial preparation,
review and final determination of the Purchase Price Adjustment Statement. The
fees and disbursements of the accounting firm to which any disagreement is
referred to above shall be borne equally by Seller and Buyer.
(c) As used in this Agreement, "Excess Inventory" means the sum of
(i) to the extent the Stated Inventory Amount (as defined below) is between
100% and 200% of the Normal Usage Amount (as defined below), 50% of the amount
that the Stated Inventory Amount exceeds the Normal Usage Amount and (ii) 100%
of the amount, if any, by which the Stated Inventory Amount exceeds 200% of the
Normal Usage Amount, in each case determined on the basis of the physical count
of the inventory to be taken in accordance with Section 1.04(a) hereof. "Stated
Inventory Amount" means the dollar value of the Company's inventory on a part
number basis as of the date of completion of the physical count of inventory to
be taken pursuant to Section 1.04(a) hereof, prior to adjustment for Excess
Inventory or Obsolete Inventory. "Normal Usage Amount" means the quantity of
inventory valued at the lower of average cost (which approximates first-in,
first-out) or market considered on a part number basis, used by the Company in
the ordinary course of business for the twelve months ended November 30, 1996,
PROVIDED, HOWEVER, that Normal Usage Amount for a new product that was first
sold less than twelve months prior to Closing shall be the reasonably
anticipated usage for the twelve months after Closing. "Obsolete Inventory"
means 100% of any portion of the Stated Inventory Amount as may be determined to
be obsolete, unmerchantable or otherwise below standard quality. "Book-to-
Physical Inventory Adjustment" means the amount by which the dollar value of the
Company's inventory reflected on the Company's inventory records as of the date
of the physical inventory, taken pursuant to Section 1.04(a) hereof, exceeds or
is less than the aggregate Stated
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Inventory Amount, prior to adjustment for Excess Inventory or Obsolete
Inventory. If the dollar value of the Company's inventory reflected on the
November 30, 1996 financial statements is greater than the Stated Inventory
Amount, the Book-to-Physical Inventory Adjustment is a positive number. If the
Stated Inventory Amount exceeds the dollar value of the Company's inventory
reflected on the November 30, 1996 financial statements, the Book-to-Physical
Inventory Adjustment is a negative number. "Aged Accounts Receivable
Adjustment" means any accounts receivable of the Company which are carried on
the books and records of the Company and which have been outstanding 60 days on
the day immediately preceding the delivery of the Purchase Price Adjustment
Statement (each such receivable being herein referred to as an "Aged
Receivable").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
2.01. ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own its properties and
carry on its business as it is now being conducted. The Company is duly
qualified to do business and is in good standing as a foreign corporation in all
jurisdictions where the nature of the business conducted by it makes such
qualification necessary and the absence of such qualification could,
individually or in the aggregate, have a material adverse effect on the
financial condition, business, results of operations, prospects or properties,
whether or not arising in the ordinary course of business, of the Company (a
"Material Adverse Effect"). Schedule 2.01 lists (i) each state in which the
Company is qualified to do business as a foreign corporation and (ii) each state
in which the Company has (A) any sales office or (B) any distributor. True,
correct and complete copies of the Certificate of Incorporation and Bylaws of
the Company, in each case as amended to date, have been previously delivered to
Buyer.
2.02. CORPORATE POWER AND AUTHORITY; EFFECT OF AGREEMENT. Each of
the Seller and the Company has all requisite power and authority to execute,
deliver and perform this Agreement and the agreements, certificates,
instruments or other documents to be executed and delivered in connection
herewith (collectively, the "Ancillary Documents") by each of the Seller and
the Company and to consummate the transactions contemplated hereby and
thereby. This Agreement has been duly and validly executed and delivered by
each of the Seller and the Company and constitutes the valid and binding
obligation of each of the Seller and the Company, and such Ancillary
Documents, upon execution and delivery by each of the Seller and the Company,
will constitute valid and binding obligations of each of the Seller and the
Company, in each case enforceable against each of the Seller and the Company
in accordance with its terms, except to the extent that such enforceability
(i) may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to creditors' rights generally and (ii) is
subject to general principles of equity. The execution, delivery and
performance by each of the Seller and the Company of this Agreement and such
Ancillary Documents and the consummation by each of the Seller and the
Company of the transactions contemplated hereby and thereby will
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not, with or without the giving of notice or the lapse of time, or both,
(A) violate or conflict with any provision of law, rule or regulation to which
Seller or the Company is subject or by which any of the property of Seller or
the Company is bound or (B) violate or conflict with any order, judgment or
decree applicable to Seller or the Company (C) violate or conflict with any
provision of the Certificate of Incorporation or the Bylaws of the Seller or the
Company or (D) except as set forth on Schedule 2.02, result in a violation or
breach of, or permit any third party to modify, terminate or rescind any term or
provision of, or constitute a default under, any material Commitment (as defined
in Section 2.15), including, without limitation, any indenture, mortgage, deed
of trust, promissory note or industrial revenue bond, if any, to which the
Company is a party or by which any of the property of the Company is bound, or
result in the creation of an Encumbrance on any of the assets of the Company.
2.03. CAPITALIZATION. The authorized capital stock of the Company
consists solely of 1,000 shares of common stock, $.01 par value per share, of
which 1,000 Shares are issued and outstanding and owned of record and
beneficially by Seller. All of the Shares have been duly authorized and are
validly issued, fully paid and non-assessable. There are outstanding no
securities convertible into, exchangeable for, or carrying the right to acquire,
equity securities of the Company, or subscriptions, warrants, options, rights,
calls, agreements, demands or other arrangements or commitments of any character
obligating the Company to issue or dispose of any of its equity securities or
any ownership interest therein or otherwise relating to the capital stock of the
Company.
2.04. TITLE TO SHARES. The sale and delivery of the Shares to Buyer
pursuant to Article I hereof will vest in Buyer legal and valid title to such
Shares, free and clear of any and all liens, security interests, pledges,
mortgages, charges, limitation, claims, restrictions, rights of first refusal,
rights of first offer, rights of first negotiation or other encumbrances of any
kind or nature whatsoever (collectively, "Encumbrances"), other than
Encumbrances created by Buyer.
2.05. SUBSIDIARIES. The Company does not hold a direct, indirect or
beneficial interest in any entity (corporation, partnership, joint venture,
association or other business enterprise).
2.06. FINANCIAL STATEMENTS.
(a) Seller has heretofore delivered to Buyer unaudited balance sheets
of the Company as of December 31, 1994 and 1995 (collectively, the "Balance
Sheets;" the balance sheet as of December 31, 1995 is referred to as the " 1995
Balance Sheet") and the related unaudited consolidated income statements for the
fiscal years then ended (collectively, the "Income Statements"). The Balance
Sheets and the Income Statements (collectively, the "Financial Statements") were
prepared in accordance with the books and records of the Company and
incorporated in the Seller's consolidated financial reports to stockholders.
Seller has provided Buyer and Buyer's auditors, Price Waterhouse LLP ("Buyer's
Auditor's") with full access to, and true and correct copies of, the Company's
financial books and records.
(b) Seller has heretofore delivered to Buyer an unaudited balance
sheet of the Company as of September 30, 1996 (the "Interim Balance Sheet") and
the related unaudited
6
income statement for the nine months then ended (together, the "Interim
Financial Statements"), copies of which are included on Schedule 2.06. The
Interim Financial Statements were prepared in accordance with the books and
records of the Company and incorporated in the Seller's consolidated financial
reports to stockholders.
2.07. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as expressly
permitted by this Agreement or as disclosed on Schedule 2.07, since the date of
the Interim Balance Sheet, the Company has not (a) suffered any damage,
destruction or casualty loss, whether or not covered by insurance, adversely
affecting the Company's business, (b) incurred or discharged, in whole or in
part, any obligation or liability or entered into any other transaction except
in the ordinary course of business, (c) suffered any change having a Material
Adverse Effect, (d) increased the rate or terms of compensation payable or to
become payable by the Company to its directors, officers or key employees or
increased the rate or terms of any bonus, pension or other employee benefit plan
covering any of its directors, officers or key employees, except in each case
increases occurring in the ordinary course of business in accordance with the
Company's customary practices (including normal periodic performance reviews and
related compensation and benefit increases) and except as contemplated by
Section 6.07 hereof, (e) paid or declared any distribution of cash or any other
asset, in the nature of a dividend, in redemption or as the purchase price of
any of its capital stock or in discharge or cancellation, in whole or in part,
of any indebtedness owing to its shareholders, or made any purchase, redemption,
retirement, sale, issuance or other acquisition of any stock, notes or other
securities, (f) sold or transferred any asset of the Company except in the
ordinary course of business, (g) created or permitted to arise any Encumbrance
upon any of the assets of the Company, except for Encumbrances for Taxes (as
defined in Section 2.10) not due, purchase money security interests and
mechanics' liens being disputed by the Company in good faith and by appropriate
proceedings, (h) altered the manner of keeping the Company's books, accounts or
records or the accounting practices reflected therein, (i) changed the nature
of customer contracts, licensing arrangements or billing practices or
(j) reduced the amount of any reserve or accrued liability balance, except to
the extent of cash payments related thereto. The Company has no knowledge of
any threat or intention on the part of any significant customer, supplier or
distributor to reduce materially the volume of its purchases from or sales to
the Company or otherwise materially modify its business relationship with the
Company.
2.08. NO UNDISCLOSED LIABILITIES. Except as reflected on the
Schedules hereto and except for potential losses on certain contracts to supply
DMS projects, the Company has no liabilities or obligations of any nature
(absolute, accrued, contingent or otherwise), and whether due or to become due
(including, without limitation, any liability for taxes and interest, penalties
or other charges payable with respect to any such liability or obligation), that
were not fully reflected or reserved against in the Interim Balance Sheet
(whether or not required to be so reserved by generally accepted accounting
principles ("GAAP")), except for liabilities and obligations incurred in the
ordinary course of business since the date thereof.
2.09. ACCOUNTS RECEIVABLE. The accounts receivable of the Company as
shown on the Interim Financial Statements and all accounts receivables which
have arisen subsequent to September 30, 1996 have been collected or are
collectible in the ordinary course of business net of reserves specifically
identified on the Interim Financial Statements or the notes thereto, except
7
for the Aged Accounts Receivable. Schedule 2.09 includes a complete and
accurate aging schedule of all accounts receivable reflected on the Interim
Balance Sheet.
2.10. TAXES.
(a) For purposes of this Agreement:
(i) the term "Taxes" means (A) all federal, state, local,
foreign and other net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, lease, service, service
use, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, windfall profits, customs, duties or other
taxes, fees, assessments or charges of any kind whatsoever, together with
any interest and any penalties, additions to tax or additional amounts with
respect thereto, (B) any liability for payment of amounts described in
clause (A) whether as a result of transferee liability, of being a member
of an affiliated, consolidated, combined or unitary group for any period,
or otherwise through operation of law and (C) any liability for the payment
of amounts described in clauses (A) or (B) as a result of any tax sharing,
tax indemnity or tax allocation agreement or any other express or implied
agreement to indemnify any other person; and the term "Tax" means any one
of the foregoing Taxes;
(ii) the term "Returns" means all returns, declarations,
reports, statements and other documents required to be filed in respect of
Taxes, and the term "Return" means any one of the foregoing Returns; and
(iii) the term "Tax Affiliate" means each member of a
consolidated, combined, unitary, or other similar group for Tax purposes
(for the period during which the Company and such member were included in
that group).
(b) The Company and Tax Affiliates have accurately prepared and
timely filed all Returns required to be filed on or prior to the date hereof.
The Returns are accurate and correct in all material respects and do not contain
a disclosure statement under Section 6662 of the Internal Revenue Code of 1986,
as amended (the "Code") (or any predecessor provision or comparable provision of
state, local or foreign law).
(c) The Company and Tax Affiliates have paid all Taxes required to
have been paid by them before the date hereof.
(d) Except as set forth in Schedule 2.10(d):
(i) There is no pending claim for refund made by the Company
with respect to Taxes previously paid;
(ii) no claim has been made by any taxing authority in any
jurisdiction where the Company does not file Returns that any of them is or
may be subject to Tax by that jurisdiction; and
8
(iii) no extensions or waivers of statutes of limitations with
respect to the Returns have been given by or requested from the Company or
any Tax Affiliate.
(e) Schedule 2.10(e) sets forth a complete list of all pending
audits, proceedings and examinations with respect to Taxes that involve the
Company or for which the Company could be liable. To the best knowledge of the
Seller and the Company, no other such audits, proceedings or examinations are
threatened or contemplated.
(f) Except to the extent indicated in Schedule 2.10(f), all
deficiencies asserted or assessments made as a result of any examinations by any
taxing authority have been fully paid or are fully reflected as a liability in
the Interim Balance Sheet.
(g) There are no liens for Taxes (other than for current Taxes not
yet due and payable) upon the assets of the Company.
(h) The Company is not a party to or bound by any tax indemnity, tax
sharing or tax allocation agreement.
(i) The Company is not a party to or bound by any closing agreement
or offer in compromise with any taxing authority, other than the closing
agreement between the Seller and the Internal Revenue Service with respect to
the federal income tax audit of the Seller and its subsidiaries for the taxable
year ended December 31, 1993.
(j) Except to the extent indicated in Schedule 2.10(j):
(i) the Company has never been a member of an affiliated group
of corporations, within the meaning of Section 1504 of the Code, or a
member of combined, consolidated or unitary group for state, local or
foreign Tax purposes (other than the group the common parent of which is
Seller);
(ii) the Company has not filed a consent pursuant to the
collapsible corporation provisions of Section 341(f) of the Code (or any
corresponding provision of state, local or foreign income Tax law) or
agreed to have Section 341(f)(2) of the Code (or any corresponding
provision of state, local or foreign income Tax law) apply to any
disposition of any asset owned by it;
(iii) the Company has not made a consent dividend election under
Section 565 of the Code; and
(iv) the Company has not been a personal holding company under
Section 542 of the Code.
(k) None of the assets of the Company is property that the Company is
required to treat as being owned by any other person pursuant to the so-called
"safe harbor lease" provisions of former Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended- none of the assets of the Company directly or
indirectly secures any debt the interest on which is tax
9
exempt under Section 103(a) of the Code; none of the assets of the Company is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(l) The Company has neither agreed to make, nor is it required to
make, any adjustment under Sections 48 1 (a) or 263A of the Code or any
comparable provision of state or foreign tax laws by reason of a change in
accounting method or otherwise. The Company has not taken action which is not
in accordance with past practice that could defer a liability for Taxes of the
Company from any taxable period ending on or before the date hereof to any
taxable period ending after such date.
(m) The Company is not a party to any agreement, contract,
arrangement or plan that has resulted or would result, separately or in the
aggregate, in connection with this Agreement or any change of control of the
Company, in the payment of any "excess parachute payments" within the meaning of
Section 280G of the Code.
(n) The Company is not, and has not been, a United States real
property holding corporation (as defined in Section 897(c)(2) of the Code)
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(o) The Company does not have and has not had a permanent
establishment in any foreign country, as defined in any applicable Tax treaty or
convention between the United States and such foreign country and, except as set
forth on Schedule 2.10(o), the Company has not engaged in a trade or business
within, or derived any income from, any foreign country.
(p) The Company is not party to any joint venture, partnership, or
other arrangement or contract which could be treated as a partnership for
federal income tax purposes.
(q) The provisions for Taxes currently payable on the Interim Balance
Sheet are at least equal, as of the date thereof, to all unpaid Taxes of the
Company, whether or not disputed (other than income Taxes that are provided for
by the Seller).
(r) None of the income recognized, for federal, state, local or
foreign income tax purposes, by the Company during the period commencing on the
date hereof and ending on the Closing Date will be derived other than in the
ordinary course of business.
(s) There are no deferred intercompany gains or losses, or
intercompany items, as such terms are defined in the Treasury Regulations, or
other similar amounts that will be required to be recognized or otherwise taken
into account by the Company as a result of the acquisition of the Shares
pursuant to this Agreement.
2.11. COMPLIANCE WITH LAWS.
(a) The Company is in compliance, in all material respects, with all
federal, state and local laws, ordinances, rules and regulations applicable to
its business or properties (including, without limitation, Environmental Laws
(as defined in Section 2.11(d)) currently in effect. Neither Seller nor the
Company has received any notification of any asserted present or past failure by
the Company to comply with any such law, rule or regulation. The Company has
10
at all times possessed, has been, and is in compliance with, all governmental
permits, licenses and authorizations (including all Environmental Permits (as
defined in Section 2.11(d)) necessary for the conduct of its business on and
prior to the Closing Date and the failure to possess, or be in compliance with,
which would have a Material Adverse Effect. All of such permits, licenses and
authorizations are, and on the Closing Date will be, valid and in full force and
effect. The Company is in compliance, in all material respects, with all
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in the Environmental Laws or
contained in any regulation, code, plan, order, decree, judgment, notice or
demand letter issued, entered, promulgated or approved thereunder. Except as
disclosed on Schedule 2.11(a), no Hazardous Material (as defined in Section
2.11(d)) has been treated, stored, released, disposed of, or discharged into the
environment, on or from the current or any prior premises of the Company nor has
any Hazardous Material been released on or from any locations at which the
Company arranged, by contract, agreement or otherwise, for disposal, treatment,
transport for disposal or treatment, of any Hazardous Material. There is no
(i) Environmental Condition (as defined in Section 2.11(d)), (ii) asbestos-
containing material installed at any premises leased by the Company (a "Company
Facility") or (iii) polychlorinated biphenyls deposited or contained in any
existing equipment or otherwise located at any Company Facility. The Company is
not aware of any liability to any third party for any Personal Injury (as
defined in Section 2.11(d)) of any person, including, without limitation, any
employee or former employee of the Company (A) in any way arising out of any
exposure prior to the Closing to any Hazardous Material present at or generated
by any Company Facility at or prior to the Closing or (B) in any way arising out
of any exposure after the Closing to any Hazardous Material that was present at
or generated by any Company Facility at or prior to the Closing. The Company
has received all regulatory and other Federal, state or local licenses,
approvals, permits and authorizations necessary in connection with the
manufacture, storage or sale of its products prior to the Closing Date. All
such permits, licenses and approvals are, and on the Closing Date will be, in
full force and effect, the Company is in compliance with their requirements and
no proceeding is pending or, to the best knowledge of the Seller and the
Company, threatened to revoke or amend any of them. None of such licenses,
approvals, permits and authorizations are or will be impaired or in any way
affected by the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby.
(b) True, correct and complete copies of all environmental reports in
the possession of Seller or the Company, if any, relating to any real property
leased by the Company have been delivered concurrently herewith to Buyer.
(c) There are no off-site locations to which or at which the Company
or any agent of the Company, including any employee or former employee of the
Company, has ever generated or disposed of any Hazardous Material.
(d) As used in this Agreement, the following terms shall have the
following meanings:
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended (42 U.S.C. Section 9601 ET SEQ.).
11
"ENVIRONMENTAL CONDITION" means (i) any condition arising out of any
release or threatened release of Hazardous Materials from or onto any Company
Facility, (ii) any condition at any location arising out of any release or
threatened release of Hazardous Materials that the Company generated, (iii) any
violation by the Company of any Environmental Permit or of any Environmental Law
or (iv) any condition at any Company Facility requiring remediation under any
Environmental Law.
"ENVIRONMENTAL LAWS" means, in each case as in effect on the
applicable date prior to the Closing Date, 42 U.S.C. Section 9607 and 9613(f) of
CERCLA, the Hazardous Material Transportation Act (49 U.S.C. Section 1801 ET
SEQ.), the Clean Water Act (33 U. S. C. Section 1251 ET SEQ.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 ET SEQ.), the Clean Air
Act (42 U.S.C. Section 7401 ET SEQ.), the Toxic Substances Control Act, as
amended (15 U. S. C. Section 2601 ET SEQ.) the Federal Insecticide, Fungicide,
and Rodenticide Act (7 U.S.C. Section 136 ET SEQ.), the Occupational Safety and
Health Act (29 U.S.C. Section 651 ET SEQ.) and any other federal, state or local
law relating to Environmental Matters, the rules and regulations promulgated
under any thereof, and any provisions of common law providing for any remedy or
right of recovery with respect to Environmental Matters.
"ENVIRONMENTAL MATTERS" means any matter arising out of or relating to
the production, storage, handling, use, emission, disposal, discharge,
transportation, or release of any contaminant, waste, or hazardous or toxic
material, or other substance or material regulated by law, or otherwise arising
out of or relating to safety, health, sanitation or the environment, and shall
include, without limitation, the costs of investigating and remediating the
same, any fines and penalties arising in connection therewith, and any claim in
respect thereof for damages or injunctive relief for alleged Personal Injury,
property damage or damage to natural resources under common law or Environmental
Law.
"ENVIRONMENTAL PERMIT" means each permit, license, order, variance,
registration or other authorization of any federal, state or local governmental
agency issued, approved or required to be obtained under any Environmental Law.
"HAZARDOUS MATERIAL" means (i) any pollutant, contaminant, petroleum,
crude oil or any fraction thereof or hazardous waste or hazardous substance,
within the meaning of such terms under CERCLA or any other Environmental Law and
(ii) any other hazardous or toxic substance or material, or any material
requiring remediation, within the meaning of any Environmental Law applicable
to the Company or to which its properties or other assets are subject.
"PERSONAL INJURY" means any illness, disability, injury or death.
2.12. EMPLOYEE BENEFIT PLANS.
(a) COMPANY EMPLOYEE PLANS AND BENEFIT ARRANGEMENTS. Schedule
2.12(a) lists each Company Employee Plan and Company Benefit Arrangement. The
Company has made available to Buyer with respect to each Company Employee Plan
and Company Benefit Arrangement true and complete copies of (i) all written
documents comprising such plans and arrangements (including trust agreements,
annuity contracts, funding instruments, amendments
12
and individual agreements relating thereto), (ii) the three most recently filed
IRS Form 5500 series (including all schedules thereto) with respect to each
Company Employee Plan required to file such Form, (iii) the most recent
financial statements, if any, pertaining to such plans and arrangements, (iv) if
applicable, the summary plan description currently in effect and all material
modifications thereto, if any, for each Company Employee Plan and (v) if
applicable, the most recent IRS letter as to the qualification of each plan
listed in Schedule 2.12(a). Schedule 2.12(a) shall categorize whether each plan
is a Pension Plan or a Welfare Plan, and whether each plan covers employees or
former employees other than employees or former employees of the Company.
(b) MULTIEMPLOYER WELFARE FUNDS. The Company has never contributed
to a multiemployer welfare benefit fund maintained pursuant to any Welfare Plan.
(c) RETIREE WELFARE PLANS. Except pursuant to the provisions of
COBRA, the Company maintains no Company Employee Plan that provides, or has
otherwise promised to provide, benefits described in Section 3(l) of ERISA to
any former employees or retirees of the Company. The Company does not have any
liability, absolute, contingent, matured or unmatured, in respect of retiree
medical, life insurance or other benefits which is not reflected on the
Financial Statements.
(d) PENSION PLANS. The IRS has issued favorable opinion letters with
respect to all Company Employee Plans that are Pension Plans intended to be
qualified under Code Section 401. To the knowledge of the Company, no condition
exists and no event has occurred since the date of any such opinion letters
which could reasonably be expected to result in revocation of any such opinion
letters, and true and correct copies of such opinion letters have been made
available to Buyer. No reportable event as defined in Section 4043(b) of ERISA,
whether or not the reporting requirements have been waived by the Pension
Benefit Guaranty Corporation ("PBGC"), has occurred or is continuing with
respect to any Company Employee Plans that are Pension Plans, other than events
which have been reported on the Company's IRS Form 5500 series, (including all
schedules thereto) with respect to each Company Employee Plan required to file
such form.
(e) PROHIBITED TRANSACTIONS AND FIDUCIARY RESPONSIBILITY. On and
after January 1, 1990, neither the Company nor any ERISA Affiliate, nor to the
Company's knowledge, any fiduciary of any Company Employee Plan has engaged in
or been a party to any Prohibited Transaction with respect to any Company
Employee Plan that could reasonably be expected to result in the imposition on
the Company of a material penalty pursuant to Section 502(i) of ERISA, material
damages pursuant to Section 409 of ERISA or a material tax pursuant to Section
4975(a) of the Code. No officer, director or employee of the Company has
committed a material breach of any responsibility or obligation imposed upon
fiduciaries by Title I of ERISA with respect to any Company Employee Plan.
(f) LIENS AND PENALTIES. The Company has no liability with respect
to any Company Employee Plan and no event has occurred which could lead to
liability (i) for any lien imposed under Section 302(f) of ERISA or Section
412(n) of the Code, (ii) for any interest payments required under Section 302(e)
of ERISA or Section 412(m) of the Code, (iii) for any
13
excise tax imposed by Chapter 43 of Subtitle D of the Internal Revenue Code or
(iv) for any failure to make any minimum funding contributions under Section
302(c)(11) of ERISA or Section 412(c)(11) of the Code.
(g) LIABILITY OF ERISA AFFILIATES. No ERISA Affiliate has any
liability, and no event has occurred which could result in any liability of an
ERISA Affiliate, under Title I, II or IV of ERISA or Section 4980B of the Code
to any pension plan or to the PBGC or the IRS for which the Company could be
liable or which could be a lien on the Company's assets.
(h) COBRA. The Company has complied in all material respects with
the provisions of COBRA with respect to all Company Employee Plans that are
Group Health Plans, and the Company has no liability pursuant to Section 4980B
of the Code, including, but not limited to, liability for any Tax under Section
4980B(a) of the Code.
(i) ADDITIONAL BENEFITS. Except as set forth in Schedule 2.12(j), no
individual shall accrue or receive additional benefit or service credit or
accelerated rights to payments of benefits under any Company Plan, including the
right to receive any parachute payment, as defined in Section 28OG of the Code,
or become entitled to severance, termination allowance or similar payments as a
direct result of the transactions contemplated by this Agreement.
(j) CLAIMS. Other than claims for benefits in the ordinary course,
there is no material action, suit or claim pending or to the knowledge of the
Company threatened, involving any Company Employee Plan or the assets of any
Company Employee Plan by any person against such plan or the Company or any
ERISA Affiliate. There is no pending or threatened proceeding involving any
Company Employee Plan before the Internal Revenue Service, the United States
Department of Labor or any other governmental or quasigovernmental authority.
(k) COMPLIANCE WITH LAWS, CONTRIBUTIONS. Each Company Plan has at
all times prior hereto been maintained in all material respects in accordance
with its terms and in substantial compliance with all applicable laws,
including, but not limited to, all material reporting or disclosure requirements
applicable to any such plans. The Company has made full and timely payment of
all amounts required to be contributed under the terms of, and applicable law,
of each Company Plan that is a Pension Plan or required to be paid as expenses
under such Company Plan, and the Company shall continue to do so through the
Closing Date.
(1) WARN LIABILITY. The Company has complied in all respects
with the requirements of the Workers Adjustment and Retraining Notification Act
("WARN") and no claim under WARN is pending against the Company or overtly
threatened, nor is there any reasonable basis to anticipate any such claim.
(m) DEFINITIONS.
(i) "COBRA" means the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, as set forth in Section 4980B of the Code and Part
6 of Title I of ERISA.
(ii) "CODE" shall have the meaning given to it in Section 2. 10
above.
14
(iii) "COMPANY BENEFIT ARRANGEMENT" means any material benefit
arrangement that is not an Employee Benefit Plan, including but not limited
to (A) each employment or consulting agreement, (B) each incentive bonus or
deferred bonus arrangement, (C) each arrangement providing termination
allowance, severance or similar benefits, (D) each equity compensation
plan, (E) each deferred compensation plan and (F) each compensation policy
and practice currently maintained, or previously maintained, by the Company
covering the employees, former employees, directors or former directors of
the Company, or the beneficiaries of such persons.
(iv) "COMPANY EMPLOYEE PLAN" means any material Employee
Benefit Plan that is sponsored or contributed, or has in the past been
sponsored or contributed to, by the Company covering employees or former
employees of the Company.
(v) "COMPANY PLAN" means any Company Employee Plan or Company
Benefit Arrangement.
(vi) "EMPLOYEE BENEFIT PLAN" means any employee benefit plan, as
defined in Section 3(3) of ERISA.
(vii) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any regulations thereunder.
(viii) "ERISA AFFILIATE" means any person (as defined in Section
3(9) of ERISA) that, together with the Company as of the relevant measuring
date under ERISA, was or is required to be treated as a single employer
under Section 414(b) or (c) of the Code.
(ix) "GROUP HEALTH PLAN" means any group health plan, as defined
in Section 5000(b)(1) of the Code.
(x) "IRS" shall have the meaning given to it in Section 2.10
above.
(xi) "PENSION PLAN" means any employee pension benefit plan, as
defined in Section 3(2) of ERISA.
(xii) "PROHIBITED TRANSACTION" means a "prohibited transaction" as
defined under Section 4975 of the Code or a transaction in violation of
Section 406 of ERISA for which no exemption is available under Section 4975
of the Code or Section 408 of ERISA, respectively.
(xiii) "WELFARE PLAN" means any employee welfare benefit plan, as
defined in Section 3(1) of ERISA.
2.13. TITLE TO ASSETS.
(a) Except with respect to the Intellectual Property which is
covered in Section 2.15 below, the Company has good and valid title to, or a
valid leasehold in, all of the assets and
15
properties that are used in the business or otherwise material to the financial
condition of the Company, free and clear of any and all Encumbrances, except
(i) liens for Taxes not yet due or being contested in good faith by appropriate
proceedings. and (ii) such encumbrances as are not substantial in amount,
character or extent and do not detract from the value or interfere with the use
of assets or impair the operations of the Company in any material respect
("Permitted Encumbrances"). The assets and properties (whether owned or leased)
of the Company, in the aggregate, are in good operating condition, ordinary wear
and tear excepted. The Interim Balance Sheet reflects all tangible assets and
properties, real or personal, utilized by the Company in the conduct of its
business, except to the extent such assets and properties have been sold or
transferred in the ordinary course of business since the date of the Interim
Balance Sheet.
(b) The Company does not own any real property. Schedule 2.13 sets
forth a list of all real properties in which the Company holds a leasehold
interest (the "Real Property"). For purposes of this Agreement, the agreements
under which the Company is occupying Real Property are collectively referred to
as the "Leases." The Company has previously delivered to Buyer a true, correct
and complete copy of each of the Leases, as amended to date. Each of the Leases
is in full force and effect. No Lease has been modified or amended since the
Interim Balance Sheet. No party to any Lease has given the Company written or,
to the Company's knowledge, oral notice of or made any claim with respect to any
breach or default with respect to any such Lease. The Company has not entered
into any sublease, license or other agreement granting to any person or entity
any right to the use, occupancy or enjoyment of the Real Property or any portion
thereof, or the right to purchase the Real Property or any portion thereof All
material certificates of occupancy, permits and licenses of all governmental
authorities having jurisdiction over the Real Property required to have been
issued to the Company, to enable the Real Property to be lawfully occupied and
used for all of the purposes for which the Real Property is currently occupied
and used have been lawfully issued and are in full force and effect. Neither
Seller nor the Company has received any notification of any pending, threatened
or contemplated condemnation proceeding affecting the Real Property or any
portion thereof
2.14. INVENTORY AND SUPPLIES. The inventory and supplies of the Company
consist of items of a quality and quantity usable and saleable in the normal
course of the Company's business at values at least equal to the values at which
such items are carried on its books. The values of obsolete or slow-moving
inventory and inventory of below standard quality, if any, have been written
down to the lower of cost or realizable market value or have been written off.
The value at which such obsolete or slow-moving inventory is carried on the
Interim Balance Sheet reflects the normal inventory valuation policies of the
Company, stating inventory at the lower of market or average cost, which
approximates a first-in first-out basis, all determined in accordance with GAAP.
2.15. INTELLECTUAL PROPERTY.
(a) Schedule 2.15 sets forth a list of all United States and foreign
patents, patent applications, registered and unregistered trademarks, trade
names, logos, registered copyrights, and applications therefor, material
unregistered copyrights, algorithms, not embodied in software, and models, not
embodied in software, in which the Company has any colorable claim of ownership,
including, without limitation, all copyrights in software programs (except for
mass-
16
marketed third party PC software), owned or used by the Company in the conduct
of its business (the "Intellectual Property Rights"), together with a listing of
all licenses, franchises, licensing agreements (whether as licensor or licensee)
to which the Company is a party, and any other arrangement with respect to such
Intellectual Property Rights. Except as disclosed to Buyer in Schedule 2.15,
the Company has full title and ownership of or rights to use all Intellectual
Property Rights, trade secrets, technology and know-how without any infringement
of the rights of others. All of the Intellectual Property Rights, trade
secrets, technology and know-how owned by the Company are free and clear of any
and all Encumbrances except as set forth on Schedule 2.15.
(b) To the best of the Company's knowledge, all Intellectual Property
Rights, trade secrets, technology and know-how are valid, subsisting, unexpired
and enforceable and have not been abandoned. All licenses, if any, of the
Company's Intellectual Property Rights are in force and, to the best knowledge
of the Company, not in default.
(c) No proceedings have been instituted or are pending or, to the
best knowledge of Seller and the Company, threatened, that challenge the rights
of the Company to use or register, or maintain any registration of, any of the
Intellectual Property Rights, trade secrets and technology. None of the
products, processes, software (except for third party software), machines or
services made, used or furnished by the Company infringes any valid patent,
copyright, registered trademark or other legally recognized intellectual
property rights owned by others. No holding, decision or judgment has been
rendered by any governmental authority which would limit, cancel or question the
validity of any Intellectual Property Right, trade secret or the Company's
technology or business know-how. The Company has used and uses its commercially
reasonable efforts to prevent any infringement by third parties of its
Intellectual Property Rights, trade secrets and technology. Neither Seller nor
the Company has received a notice of conflict with the asserted rights of others
with regard to any Intellectual Property, trade secret or technology within the
last three years.
(d) Neither Seller nor the Company is making or has made use of any
confidential information of third parties (except for such confidential
information as may be embodied in third party software which Seller and/or the
Company is or was, as the case may be, lawfully entitled to use and for which
Seller and/or the Company is paying or has paid all licensing or other fees
necessary in connection with the use of such third party software) nor any
confidential information in which any of its present or past employees or other
service providers has claimed a proprietary interest, other than information
which Seller or the Company is authorized to use, and Seller and the Company are
not aware of any facts that would give rise to such a claim.
(e) To the best knowledge of Seller and the Company, with respect to
each material published work distributed, the Company has used on every copy
such notice as may be required under the copyright laws. The Company has not
done any act, or omitted to do any act, which would cause any material copyright
used or owned by the Company to become injected into the public domain.
17
(f) Each software program published or distributed by the Company in
the conduct of its business is a "work made for hire," as defined by the
Copyright Act of 1976, as amended, or is subject to a copyright which has been
assigned exclusively to the Company by an instrument in writing. Each past and
present employee or any independent consultant, participating in the development
of any such software is bound by a confidentiality and nondisclosure agreement
executed by such employee or independent consultant and the Company, which
agreement prohibits the disclosure of any confidential information of the
Company.
(g) All past and present employees who have been engaged in research
and development for the Company have executed an instrument assigning to the
Company all of their right, title and interest in and to any inventions created
or developed during, and within the scope of, their employment by the Company,
and obligating them to disclose to the Company all such inventions.
2.16. COMMITMENTS.
(a) Schedule 2.16(a) contains a true, correct and complete list of
each of the following contracts or agreements, whether written or oral
(including any and all amendments thereto), to which the Company is a party
(collectively, the "Commitments"):
(i) any software or other license or cross-license agreement for
more than $5,000;
(ii) any distributorship, agency or manufacturer's representative
agreement;
(iii) any open sales order or contract for more than $25,000;
(iv) any purchase order or contract for more than $25,000;
(v) any equipment lease requiring annual expenditures of more
than $10,000;
(vi) any vehicle lease requiring annual expenditures of more than
$10,000;
(vii) any long-term supply or requirements contract for more than
$10,000;
(viii) any bond (bid, performance or other), letter of credit,
agreement of guarantee, surety or indemnification (other than in favor of
the Company), or any commitment to issue any such bond, letter of credit,
agreement of guarantee, surety or indemnification;
(ix) any maintenance agreement or obligation associated with
software for more than $5,000;
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(x) any agreement or contract that restricts the Company from
competing, directly or indirectly, in any line of business with any other
person or entity anywhere in the world;
(xi) any management, employment, consulting, change of control or
severance contract with any officer, consultant, director, employee or
other person or entity;
(xii) any contract or agreement that involves capital expenditures
of more than $10,000; and
(xiii) any contract or agreement, whether written or oral, that is
material to the business or financial condition of the Company and is not
of the type included in any of the foregoing clauses (i) through (xiv),
including, without limitation, any contract or agreement, whether written
or oral, that obligates the Company to make payments aggregating in excess
of $25,000 in any one year.
(b) Each Commitment is in full force and effect, valid and binding
and enforceable against the Company and, to the best knowledge of Seller and the
Company, each other party thereto, in accordance with its terms. Neither the
Company nor any other party to any of the Commitments, is in material breach or
default with respect to any term or condition thereof, and the Company has not
received any notice that any event has occurred that, with the passage of time
or the giving of notice, or both, would constitute such a material breach or
default thereunder.
(c) No Commitment obligates the Company to (i) purchase goods or
services in excess of reasonably anticipated needs after the Closing Date or on
terms that are materially less favorable than those obtainable from other
suppliers of similar goods or services or (ii) sell goods or services after the
Closing Date that cannot be produced or delivered pursuant to existing
manufacturing or working conditions of the Company at a profit, except certain
contracts to supply DMS projects.
(d) There are no executory contracts under which the Company is
obligated to provide indemnification or to pay consequential or incidental
damages in excess of amounts that would be covered by insurance which have not
been previously provided to Buyer. During the preceding three years, there have
been no claims asserted against the Company for workers' compensation expenses
incurred by an employer other than the Company.
2.17. LITIGATION. Schedule 2.17 sets forth every action, suit,
arbitration, workers' compensation claim or other proceeding in any court or
before any governmental authority ("Litigation") pending or, to the Seller or
the Company's knowledge, threatened, against the Company or any of its assets or
properties, or initiated, as of the date hereof, by the Company against third
parties. No Litigation by any governmental authority or by any entity or person
questions or challenges the validity of this Agreement or any Ancillary Document
or any action taken or to be taken pursuant to this Agreement or any Ancillary
Document or in connection with the transactions contemplated hereby or thereby.
The Company is not subject to any outstanding
19
orders, rulings, judgments or decrees issued by any federal, state, local or
foreign judicial or administrative authority.
2.18. CONSENTS. No consent, approval or authorization of, or exemption
by, or filing with, any governmental department, bureau or agency or other
public board or authority or any other third party is required in connection
with the execution, delivery and performance by Seller of this Agreement or the
Ancillary Documents or the taking of any other action contemplated hereby or
thereby, excluding, however, consents, approvals, authorizations, exemptions and
filings, if any, that Buyer is required to obtain or make.
2.19. INSURANCE. Seller carries insurance, which is adequate in character
and amount, with reputable insurers, covering all assets, properties and
business of the Company, and it has provided all required performance and other
surety bonds. Schedule 2.19 contains certificates of insurance for all
insurance policies presently covering the Company, including policies held by
Seller or the Company and policies held by third parties under which the Company
is a named insured. All such policies are in full force and effect, all
premiums with respect thereto covering all periods up to and including the date
hereof have been paid, and no notice of cancellation or termination has been
received with respect to any such policy or bond. Seller has not received any
notification that material changes are required in the conduct of the Company's
business as a condition to the continuation of coverage or renewal of any such
policy. The Company has not received notification from any insurer, agent or
broker denying or disputing any claim made by the Company or denying or
disputing any coverage for any such claim or the amount of any claim. The
Company has no claim against any of its insurers under any of such policies
pending or anticipated and there has been no occurrence of any kind which would
give rise to any such claim. Seller has heretofore made available to Buyer true
and complete copies of all such policy summaries.
2.20. LABOR PRACTICES.
(a) Schedule 2.20(a) contains a true and correct list of the ten most
highly compensated employees of the Company (based on annual salary and
historical bonus). The Company is not a party to or otherwise bound by any
collective bargaining agreement. There are no claims for unfair labor practices
pending or, to the best knowledge of Seller and the Company, threatened, between
the Company and any of its employees. No strikes, work stoppages or other labor
disputes involving the Company's employees are pending or, to the knowledge of
the Company, threatened. There is not pending any grievance procedure or
arbitration proceeding under any collective bargaining agreement covering the
Company's employees or former employees. There is no labor strike, dispute,
slowdown or stoppage actually pending or, to the best knowledge of Seller and
the Company, threatened against the Company. The Company has not experienced
any work stoppage or other similar type of labor difficulty.
(b) Except as set forth on Schedule 2.20(b), none of the employees of
the Company is covered by employment contracts except customary written and
nonwritten understandings concerning employment terminable at will without cost
or other liability nor are any of the employees of the Company members of any
union or covered by union contracts.
20
(c) The Company is in compliance with the Immigration Reform and
Control Act of 1986, as amended, and the Company has complied with all
applicable federal, state and local laws relating to the employment of labor,
including without limitation, the provisions thereof relating to wages, non-
discriminatory hiring, promotional and employment practices and procedures,
collective bargaining and payment of Social Security, unemployment compensation,
worker's compensation and similar taxes, and the Company is not presently liable
to any person or governmental agency for any arrears of wages or subject to any
liabilities or penalties for failure to comply with any of the foregoing laws.
There are no charges, audits, investigations, complaints or claims against the
Company or any of its officers, directors, agents or employees pending before
any federal, state or local agency responsible for the prevention of unlawful
employment practices nor, has there been any threat of any such claim or charge.
2.21. ABSENCE OF CERTAIN COMMERCIAL PRACTICES. The Company has not, and
no director, officer or, to the best knowledge of Seller and the Company, any
agent, employee or other person acting on behalf of the Company has, (i) given
or agreed to give any gift or similar benefit or more than nominal value to any
customer, supplier or governmental employee or official or any other person who
is in a position to help or hinder the Company or assist the Company in
connection with any proposed transaction, which gift or similar benefit, if not
continued in the future, might have a Material Adverse Effect or (ii) used any
corporate or other funds for unlawful contributions, payments, gifts or
entertainment, or made any unlawful expenditures relating to political activity
to governmental officials or others or established or maintained any unlawful or
unrecorded funds in violation of Section 3 OA of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The Company has not, and no director or
officer, and to the best knowledge of Seller and the Company, no agent, employee
or other person acting on behalf of the Company has accepted or received any
unlawful contributions, payments, gifts or expenditures.
2.22. CUSTOMERS AND SUPPLIERS. Schedule 2.22 sets forth: (a) a list of
the five largest customers of the Company in terms of sales during the fiscal
year ended December 31, 1995, showing the approximate total sales by the Company
to each such customer during such fiscal year; and (b) a list of the five
largest suppliers of the Company in terms of purchases during the fiscal year
ended December 31, 1995, showing the approximate total purchases by the Company
from each such supplier during such fiscal year. Except for the customers named
on Schedule 2.22, the Company had no customer who accounted for more than 5% of
the Company's sales during the period from January 1, 1995 to September 30,
1996. Except for the suppliers named on Schedule 2.22, there is no supplier
from whom the Company purchased more than 5% of the goods or services that it
purchased during the period January 1, 1995 to September 30, 1996. No
significant customer of the Company has notified the Company of any intention to
change its current business relationship with the Company.
2.23. ADEQUACY OF ASSETS. The assets and properties of the Company
constitute, in the aggregate, all of the property necessary for the conduct of
the Company's business in the manner in which and to the extent to which it is
currently being conducted.
2.24. PRODUCT RECALLS. Since April 1993, there has not been any product
recall, or post-sale warning or similar action (collectively, "Recalls")
conducted with respect to any
21
product manufactured, shipped, delivered or sold by the Company, or any
investigation or consideration of whether or not to undertake any Recalls.
2.25. PRODUCT LIABILITY. Except as set forth on Schedule 2.25, there is
no action, suit, inquiry, proceeding or, to the knowledge of Seller or the
Company, investigation by or before any court or governmental body pending or,
to the best knowledge of the Company, threatened against or involving the
Company relating to any product alleged to have been manufactured or sold by the
Company and alleged to have been defective, or improperly designed or
manufactured (including actions, proceedings or investigations based on
negligence, breach of implied or express warranty, strict liability, defective
product or product in an unreasonably dangerous condition, failure to warn or
inadequate warning, careless, reckless, willful, wanton, gross and/or
intentional conduct substantially certain to result in personal injury or
damage), nor is there any valid basis for any such action, proceeding or
investigation.
2.26. INTERCOMPANY TRANSACTIONS. Schedule 2.26 contains a list of all
transactions between Seller or any person or entity related to or directly or
indirectly controlling, controlled by or under common control with, Seller (a
"Seller Affiliate"), on the one hand, and the Company, on the other hand, that
remain executory on the date hereof and all liabilities or obligations of Seller
or any Seller Affiliate to the Company, and all liabilities and obligations of
the Company to Seller or any Seller Affiliate.
2.27. BANK ACCOUNTS. Schedule 2.27 contains a list of all bank accounts
maintained by the Company, including each account number and the name and
address of each bank and the name of each person who has signature power with
respect to each such account.
2.28. BOOKS AND RECORDS. To the extent prepared since April 1, 1993, the
minute books and stock records of the Company, which have been or will be made
available to Buyer, Buyer's counsel and Buyer's auditors are complete and
correct. At the Closing, all of those books and records will be in the
possession of the Company.
2.29. NO BROKERS. Neither Seller nor the Company has employed any broker
or finder or incurred any liability for any brokerage fees, commissions or
finders' fees in connection with the transactions contemplated by this Agreement
or any of the Ancillary Documents, except for X.X. Xxxxxx Securities Inc.,
whose fees shall be paid solely by Seller.
2.30. BACKLOG. Schedule 2.30 lists the Company's backlog prepared as of
the most recent practicable date. Such backlog consists of orders by the
Company's customers and has been calculated in a manner consistent with the
Company's past practices. Neither Seller nor the Company has reason to believe
that the backlog is not firm or will otherwise fail to result in completed sales
as contemplated.
2.31. NO MISREPRESENTATIONS. No representation, warranty or statement
made, or information provided, by Seller or the Company in this Agreement or in
any other document furnished or to be furnished by or on behalf of Seller or the
Company pursuant hereto or as contemplated hereby, including, without
limitation, the Prospect List (as defined in Section 4.03),
22
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
3.01. ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware, and has
all requisite corporate power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby, and is duly
qualified to transact business as a foreign corporation and is in good standing
in the State of California.
3.02. CORPORATE POWER AND AUTHORITY; EFFECT OF AGREEMENT. The execution,
delivery and performance by Buyer of this Agreement and the Ancillary Documents
and the consummation by Buyer of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of Buyer. This Agreement has been duly and validly executed and delivered by
Buyer and constitutes a valid and binding obligation of Buyer, and the Ancillary
Documents, upon execution and delivery by Buyer, will constitute valid and
binding obligations of Buyer, in each case enforceable against Buyer, as the
case may be, in accordance with its terms, except to the extent that such
enforceability (i) may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally and
(ii) is subject to general principles of equity. The execution, delivery and
performance by Buyer of this Agreement and the Ancillary Documents and the
consummation by Buyer of the transactions contemplated hereby and thereby will
not, with or without the giving of notice or the lapse of time, or both,
(A) violate or conflict with any provision of law, rule or regulation to which
Buyer is subject, (B) violate or conflict with any order, judgment or decree
applicable to Buyer or (C) violate or conflict with any provision of the
Certificate of Incorporation or the Bylaws of Buyer.
3.03. CONSENTS. No consent, approval or authorization of, or exemption by,
or filing with, any governmental department, bureau or agency or other public
board or authority is required in connection with the execution, delivery and
performance by Buyer of this Agreement or the Ancillary Agreements, or the
taking of any other action contemplated hereby, excluding, however, consents,
approvals, authorizations, exemptions and filings, if any, that Seller or the
Company is required to obtain or make.
3.04. NO BROKERS. Buyer has not employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement or the Ancillary Documents,
except for Mammoth Capital, Inc., whose fees shall be paid solely by Buyer.
23
3.05. STATUS OF BUYER. Buyer is, and at the Closing will be (i) an
"accredited investor" as defined in Rule 501 (a) promulgated under the
Securities Act of 1933 and (ii) financially capable, without restriction, of
purchasing the Shares pursuant hereto.
ARTICLE IV
COVENANTS OF SELLER AND THE COMPANY
Seller and the Company hereby covenant and agree with Buyer as follows:
4.01. COOPERATION BY SELLER. From the date hereof and prior to the
Closing, Seller and the Company will use all reasonable efforts, and will
cooperate with Buyer, to secure all necessary consents, approvals,
authorizations, exemptions and waivers from third parties as shall be required
in order to effectuate the transactions contemplated hereby, and will otherwise
use all reasonable efforts to cause the consummation of such transactions in
accordance with the terms and conditions hereof
4.02. CONDUCT OF BUSINESS. Except as may be otherwise expressly permitted
by this Agreement or with the prior written consent of Buyer, from the date
hereof and prior to the Closing, Seller will cause the Company to, and the
Company shall: (a) operate its business only in the ordinary course; (b) use all
reasonable efforts to preserve intact its business organization; (c) continue in
full force and effect all existing insurance policies (or comparable insurance)
of or relating to the Company; (d) use all reasonable efforts to preserve its
relationships with its lenders, suppliers, customers, licensors and licensees
and others having business dealings with the Company. Without limiting the
generality of the foregoing, and except as may be otherwise expressly permitted
by this Agreement or with the prior written consent of Buyer, from the date
hereof through the Closing, Seller shall not permit the Company to, and the
Company shall not:
(i) borrow any funds or otherwise become subject to, whether
directly or by way of guaranty or otherwise, any indebtedness for borrowed
money, including without limitation, any Inter-Company Debt, or be a party
to any transfer of cash or cash equivalents by and between Seller and the
Company, except for such transfers of cash or cash equivalents by and
between Seller and the Company made in the ordinary course of the Company's
business and which are reflected on the Daily Statements (as defined in
Section 4.06);
(ii) sell, lease, license or otherwise dispose of any of its
properties or assets (including, but not limited to, rights with respect to
Intellectual Property), except for sales of finished inventory in the
ordinary course of business and consistent with past practice;
(iii) create, or permit to be created, an Encumbrance upon any of
the properties or assets of the Company, except (x) liens for Taxes not
due, (y) mechanics' liens being disputed in good faith and (z) Permitted
Encumbrances;
24
(iv) make any increase in, or any commitment to increase, the
compensation payable to, any employee of the Company, other than salary
increases for any such employee (which employee is not an officer or a
management employee) of the Company resulting from promotions and routine
pay raises in the ordinary course of business consistent with past
practices;
(v) alter (x) the manner of keeping its books, accounts or
records or the accounting practices therein reflected or (y) the timing of
the payment of its payables from the Company's past practices;
(vi) create or modify any bonus, deferred compensations,
pension, profit sharing, retirement, insurance, stock purchase, stock
option or other fringe benefit plan, arrangement or practice or any other
employee benefit plan (as defined in Section 3(3) of ERISA), whether formal
or informal;
(vii) post or provide any additional bid or performance bonds or
letters of credit;
(viii) issue, sell or otherwise dispose of any of its capital
stock, or create, sell orotherwise dispose of any options, rights,
conversion rights or
other agreements or commitments of any kind relating to the issuance,
sale or disposition of any of its capital stock;
(ix) declare or pay any dividends in cash, securities or other
property, make any other distribution with respect to its capital stock or
acquire, directly or indirectly, by redemption or otherwise, any of its
capital stock;
(x) change its practices or policies from those in effect on
September 30, 1996 with respect to the collection of receivables or the
payment of payables or other debts or obligations, including any change
that would have the effect of accelerating or delaying any such collection
or payment;
(xi) reclassify, split up or otherwise change any of its capital
stock;
(xii) be party to any merger, consolidation or other business
combination;
(xiii) organize any new subsidiary or acquire any capital stock of
any person or any equity or ownership interest in any business;
(xiv) prepay any obligation having a maturity of more than 90
days from the date it was issued and incurred;
(xv) change the nature of customer contracts, licensing
arrangements or billing practices (other than in the ordinary course of
business);
25
(xvi) enter into or modify any employment agreement or similar
commitment;
(xvii) enter into or modify, or engage in any negotiations with
respect to, any collective bargaining, union agreement or similar
commitment;
(xviii) enter into any agreement or commitment having a term in
excess of one year;
(xix) enter into any agreement or commitment that restricts the
Company from carryingon its business anywhere in the world;
(xx) pay, discharge or satisfy any claim, liability or
obligation, absolute, accrued, contingent or otherwise, other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities or obligations reflected on
the Interim Balance Sheet or incurred in the ordinary course of business
and consistent with past practices since the date of the Interim Balance
Sheet-,
(xxi) cancel any debts or waive any claims or rights of
substantial value;
(xxii) provide, or commit to provide, any service or supplies to
any customer who has an outstanding invoice from the Company unless such
customer is charged for such additional service or supplies at the
Company's standard rates;
(xxiii) agree or otherwise commit, whether in writing or otherwise,
to do any of the foregoing; or
(xxiv) reduce the amount of any reserve or accrued liability
balance except to the extent of cash payments made by the Company in its
ordinary course of business related thereto.
4.03. ACCESS. From the date hereof and prior to the Closing, Seller and
the Company shall (a) provide Buyer and its representatives with such
information as Buyer or its representatives may from time to time reasonably
request with respect to the Company and the transactions contemplated by this
Agreement, (b) provide Buyer and its representatives reasonable access during
regular business hours and upon reasonable notice to the properties, books and
records of the Company as Buyer or its representatives may from time to time
reasonably request, (c) cooperate in providing access to all information
necessary or advisable in order to permit Buyer's Auditors to conduct an audit
of the Financial Statements (if Buyer so elects) and (d) with the prior consent
of Seller, permit Buyer and its representatives to discuss the business of the
Company with the Company's officers, employees, distributors and suppliers;
provided that Buyer will hold in confidence all documents and information
concerning the Company so furnished, and, if the sale of the Shares pursuant
hereto shall not be consummated, such confidence shall be maintained in
accordance with the confidentiality agreement between Pinnacle Automation, Inc.
("Pinnacle") and X.X. Xxxxxx Securities Inc. dated April 26, 1996 (the
"Confidentiality Agreement"). Without limiting the generality of the foregoing,
Seller and the Company shall provide to Buyer a list of the projects on which
the Company has outstanding bids (including
26
expected revenues with respect thereto) and the Company's prospect list (all
such information, collectively, the "Prospect List"). Seller and the Company
will continue to advise Buyer of any changes to the Prospect List throughout
the diligence process.
4.04. FURTHER ASSURANCES. At any time or from time to time after the
Closing, Seller shall, at the request of Buyer or Buyer's counsel, execute and
deliver any further instruments or documents and take all such further action as
Buyer or Buyer's counsel may reasonably request in order to evidence or
otherwise facilitate the consummation of the transactions contemplated hereby.
4.05. NO SOLICITATION. Between the date hereof and the earlier to occur
of the Closing Date or the termination of this Agreement, neither Seller or any
of its Affiliates, representatives or agents, nor the Company or any of its
directors, officers, employees, representatives or agents, shall solicit,
encourage (including by way of furnishing any nonpublic information concerning
all or any portion of the Company's business) or consider any other Acquisition
Proposal. As used in this Section 4.05, "Acquisition Proposal" shall mean a
proposal (whether or not such proposal shall constitute a binding offer to
purchase) for the acquisition of all or any portion of the Company or its
business (whether by merger, stock purchase or otherwise) or all or a
substantial portion of the assets of the Company or its business.
4.06. FINANCIAL REPORTS. Commencing with the month ended October 31,
1996, Seller shall cause the Company to, and the Company shall, prepare
(i) monthly income statements and balance sheets for the Company and shall
deliver such monthly financial statements to Buyer as promptly as practicable,
but in no event later than five days after their normal completion date,
(ii) monthly schedules showing the Company's outstanding payables (including a
description of the nature of the goods or services giving rise to the payable
and the anticipated payment date) and (iii) updates of the Company's Prospect
List. Such monthly financial statements shall be prepared as mutually agreed
upon with the Buyer. From December 3, 1996 up to and including the Closing
Date, Seller shall prepare a daily statement of all cash receipts and
disbursements ("Daily Statement") and shall deliver such Daily Statements to
Buyer the day following their preparation no later than 12:00 P.M. EST.
ARTICLE V
COVENANTS OF BUYER
Buyer hereby covenants and agrees with Seller as follows:
5.01. COOPERATION BY BUYER. From the date hereof and prior to the
Closing, Buyer shall use its best efforts, and will cooperate with Seller and
the Company, to secure all necessary consents, approvals, authorizations,
exemptions and waivers from third parties as shall be required in order to
effectuate the transactions contemplated hereby, and shall otherwise use all
reasonable efforts to cause the consummation of such transactions in accordance
with the terms and conditions hereof.
27
5.02. BOOKS AND RECORDS; PERSONNEL. For a period of seven years from the
Closing Date, Buyer shall not, and shall cause the Company not to, dispose of or
destroy any of the books and records of the Company relating to periods prior
to the Closing ("Books and Records") without first offering to turn over
possession thereof to Seller by written notice to Seller at least 30 days prior
to the proposed date of such disposition or destruction. From and after the
Closing, Buyer shall, and shall cause the Company to, allow Seller and its
agents access to all Books and Records during normal working hours at Buyer's
principal place of business or at any location where any Books and Records are
stored, and Seller shall have the right, at their own expense, to make copies of
any Books and Records; PROVIDED, HOWEVER, that any such access or copying shall
be had or done in such a manner so as not to interfere with the normal conduct
of Buyer's business. Buyer shall, and shall cause the Company to, make
available to Seller upon written request (i) copies of any Books and Records,
(ii) Buyer's and the Company's personnel to assist Seller in locating and
obtaining any Books and Records and (iii) any of Buyer's and the Company's
personnel whose assistance or participation is reasonably required by Seller or
any of their Affiliates in anticipation of, or preparation for, existing or
future Litigation, financial statements, tax returns or other matters in which
Seller or any of their Affiliates are involved. Seller shall reimburse Buyer or
the Company promptly, but in any event within 30 days of the receipt of an
invoice from the Company, for the reasonable out-of-pocket expenses incurred by
any of them in performing the covenants contained in this Section 5.02.
5.03. COLLECTION OF AGED RECEIVABLES. Buyer hereby covenants that
subsequent to Closing, Buyer will use its reasonable best efforts to collect the
Aged Receivables, which upon collection shall be applied toward satisfaction of
the oldest Aged Receivable unless there is a dispute of any sort relating to the
oldest Aged Receivable or the customer requests that its payment be attributed
to a specific Aged Receivable. Promptly upon receipt of any payment of such
outstanding Aged Receivables, whether in part or whole satisfaction of such
balances owed, Buyer shall remit to Seller, on a monthly basis, any and all such
money collected; PROVIDED, HOWEVER, if such payments received by Buyer exceed
$50,000, Buyer shall remit any and all such money collected to Seller on a
weekly basis. After the first anniversary of the Closing Date, Buyer may assign
to Seller any and all Aged Receivables in complete satisfaction of this
Section 5.03.
5.04. FURTHER ASSURANCES. At any time or from time to time after the
Closing, Buyer shall, at the request of Seller or Seller's counsel, execute and
deliver any further instruments or documents and take all such further action as
Seller or Seller's counsel may reasonably request in order to evidence or
otherwise facilitate the consummation of the transactions contemplated hereby.
ARTICLE VI
ADDITIONAL COVENANTS
Buyer hereby covenants and agrees with Seller as follows:
6.01. TERMINATION OF COMMITMENTS OF COMPANY WITH SELLER OR SELLER'S
AFFILIATES. Subject to Section 6.05, and except for the Company's employment
28
agreements and confidentiality agreements with Seller (copies of which have been
provided to Buyer), on or prior to the Closing Date Seller shall cause all
Commitments between the Company and Seller and/or any of Seller's Affiliates to
be terminated, and neither the Company nor Buyer shall have any interest or
right with respect to the subject matter of any such Commitment, except that,
unless Buyer objects, those Commitments (if any) representing arm's-length
purchase and sale agreements shall not be terminated.
6.02. TRANSITION. Prior to the Closing, Buyer, the Company and Seller
shall use all reasonable efforts to identify and make appropriate arrangements
for dealing with any transition problems that may be involved in the transfer of
the Shares to Buyer and Buyer's commencement of operations of the Company's
business.
6.03. EXCLUDED LIABILITIES. Notwithstanding anything herein to the
contrary, Seller shallassume all liability and responsibility for any and all
Litigation and other third party claims in the nature of Litigation or
threatened Litigation against the Company or any of its Affiliates (whether or
not listed on Schedule 2.17 or 2.25) arising out of events occurring at any time
on or before the Closing Date, excluding claims arising solely by reason of
Buyer's nonperformance of Commitments and including, without limitation, claims
for Personal Injury or damage based on allegedly defective products including,
without limitation, claims based on negligence, breach of implied or express
warranty, strict liability, defective product or product in an unreasonably
dangerous condition, failure to warn or inadequate warning, careless, reckless,
willful, wanton, gross and/or intentional conduct substantially certain to
result in Personal Injury or damage, and including any of the matters disclosed
in any of the Schedules to this Agreement (collectively, the "Excluded
Liabilities"), and Seller shall, in accordance with the provisions of Section
9.02(a), indemnify Buyer and the Company and their respective Affiliates,
agents, representatives and employees and defend and hold each of them harmless
from and against any liability, loss, damage, claim, judgment, fine, penalty,
amount paid in settlement, cost or expense (including, without limitation,
reasonable fees and expenses of counsel and outside accountants and other
reasonable out-of-pocket expenses for investigation or defending any action or
threatened action) (each a "Loss" and collectively "Losses") incurred or
suffered by any of them in respect of or arising, directly or indirectly, out of
any of the Excluded Liabilities.
6.04. DILIGENCE IN PURSUIT OF CONDITIONS PRECEDENT. Buyer, the Company
and Seller shall each exercise all reasonable diligence to fulfill their
respective obligations hereunder and shall cooperate fully with the other
parties in regard to same to accomplish the Closing. Seller and the Company
shall use all reasonable efforts to obtain all necessary third-party consents to
the consummation of the transactions contemplated hereby, including, without
limitation, any consents required under or in connection with any of the
Commitments or any other documents by reason of the change in control of the
Company effected by the sale of the Shares to Buyer, by operation of law or
otherwise.
6.05. EMPLOYMENT. Buyer shall cause the Company to continue to employ a
substantial number of current employees at substantially the same salaries and
wages (including bonus, commission and sales incentive programs) and on terms
and conditions (including Benefit Arrangements) that are in the aggregate
substantially the same as those in effect immediately prior to the Closing Date.
Nothing herein shall preclude Buyer from making changes following the
29
Closing as may be necessary, desirable or appropriate in light of the then-
prevailing circumstances. Buyer shall cause the Company to perform all
obligations of the Company under all agreements (including, but not limited to,
employment and consulting and severance agreements listed in Schedule 2.20(b))
with any employee or former employee which relate to employment or compensation
or benefits; PROVIDED, HOWEVER, all ongoing obligations of the Company with
regard to payment to Xxxxxx X. Xxxx ("Xxxx"), Xxxx Xxxx ("Xxxx") and/or Xxxxxx
Xxxxx ("Xxxxx") of any and all severance or change of control payments shall be
satisfied as provided in Sections 6.07, 6.06(b) and 6.06(c), respectively.
6.06. SEVERANCE.
(a) Not later than five business days prior to the Closing Date,
Buyer shall identify to Seller any employees, not to exceed five persons, whom
Buyer does not wish to employ, and Seller shall cause the Company to terminate
the employment of such employees prior to the Closing. Seller shall indemnify,
defend and hold harmless Buyer, the Company, their Affiliates and their
representatives, agents and employees in accordance with the provisions of
Section 9.02 from and against any and all Losses arising, directly or
indirectly, out of such terminations, including the costs of any severance
payments, except for such payments made by Buyer to King, Hein and/or Xxxxx
pursuant to Sections 6.07, 6.06(b) and 6.06(c) hereof.
(b) Buyer intends to offer a consulting agreement to Xxxx which shall
supersede any and all prior oral or written agreements between Xxxx and the
Company. In the event Xxxx enters into such consulting agreement with the
Company any and all Losses relating to the costs of any severance payments made
in the normal course to Xxxx shall be shared equally by Buyer and Seller. In
the event Xxxx declines to enter into such consulting agreement with the
Company, Seller covenants that Seller shall indemnify, defend and hold harmless
Buyer, the Company, their Affiliates and their representatives, agents and
employees in accordance with the provisions of Section 9.02 from any and all
Losses relating to or arising from the costs of any severance payments made to
Xxxx.
(c) In the event Buyer shall fire Xxxxx within six months of the
Closing Date, Seller shall indemnify, defend and hold harmless Buyer, the
Company, their Affiliates and their representatives, agents and employees in
accordance with the provisions of Section 9.02 from and against any and all
Losses arising, directly or indirectly, out of such termination, including the
cost of any severance payments.
6.07. CHANGE OF CONTROL PAYMENTS. Seller has previously entered into
certain Change of Control Agreements, dated February 6, 1996, as set forth in
Schedule 2.20(b) hereto. These Change of Control Agreements obligate Seller to
pay to King and Xxxxxx Xxxxx ("Xxxxx") xxxxxxxxx pay in the aggregate amounts
set forth on Schedule 6.07 upon the occurrence of certain conditions specified
therein. Buyer shall offer a new employment agreement to King which shall
supersede any and all prior oral or written agreements between King and the
Company. In the event King declines to enter into such new employment agreement
with the Company, but continues to work for the Company after the Closing Date,
then Buyer shall share equally with Seller any Losses arising from, directly or
indirectly, any claims made by King under either his Change of Control Agreement
or current employment agreement with the Company; PROVIDED,
30
HOWEVER, that if King makes a claim under both his change of Control Agreement
and his current employment agreement, Buyer shall share equally with Seller the
payment under the agreement requiring the larger payment, but in no event
payment under both agreements. If King declines to enter into such new
employment agreement with the Company and ceases to work for the Company as of
the Closing Date, Seller covenants that if any payment shall be owing under
either or both of the King and Capel Change of Control Agreements, such payments
shall be the sole obligation of Seller and any payments made by Buyer in
satisfaction of any claims arising from or relating to either or both of these
Change of Control Agreements are for the account of Seller and, without
limitation, Seller shall fully indemnify, and hold Buyer and the Company
harmless from and against, any liability or payments made in satisfaction of
such claims.
6.08. SPECIAL BONUS. Seller intends to provide a special bonus pool in an
amount not to exceed $200,000 for the benefit of the Company's employees
following the Closing and final determination of the Purchase Price (as adjusted
pursuant to Section 1.04 above). Seller shall determine the amount of such
bonus pool and, in consultation with Xxxxxx X. Xxxx, shall determine the bonus
amount to be allocated to individual Company employees, which bonus shall relate
to services provided by the Company's employees for periods prior to the Closing
Date. Seller shall provide to the Company sufficient funds to pay such bonuses,
and any applicable withholding or other Taxes required to be paid with respect
to such bonuses, and Buyer shall cause the Company to pay such bonuses (net of
any and all applicable Taxes).
6.09. SECTION 338(H)(10) ELECTION. Buyer shall not make, or permit to be
made, the election permitted by Section 338(h)(10) of the Code with respect to
its acquisition of the Company.
6.10. CONFIDENTIALITY. Prior to and for a period of five years following
the Closing, Seller shall keep confidential and not disclose (other than to its
attorneys, accountants and advisers) or use (except in connection with preparing
Tax Returns, conducting proceedings relating to Taxes and, prior to the Closing
Date, as required in the conduct of the business of the Company in the ordinary
course and consistent with past practice) any non-public information relating to
the Company, whether or not obtained pursuant to or in connection with the
transactions contemplated by this Agreement; PROVIDED, HOWEVER, that with
respect to trade secrets of the Company (including, but not limited to,
Intellectual Property, technology and know-how), the obligation of Seller under
this sentence shall survive indefinitely from the date of this Agreement. This
Section 6.10 shall not be violated by disclosure pursuant to court order or as
otherwise required by law or in any other proceeding, on condition that notice
of the requirement for such disclosure is given to Buyer prior to making any
disclosure and Seller cooperates as Buyer may reasonably request in resisting
it. Seller shall use all reasonable efforts to cause its respective
representatives, employees, attorneys, accountants and advisers to whom
information is disclosed pursuant to this Section 6.10 to comply with the
provisions of this Section 6.10.
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ARTICLE VII
CONDITIONS TO CLOSING
7.01. CONDITIONS TO BUYER'S OBLIGATIONS. The obligations of Buyer to
purchase the Shares shall be subject to the satisfaction (or waiver) on or prior
to the Closing Date of all of the following conditions:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER AND THE
COMPANY. Seller and the Company shall have complied in all material respects
with each of their agreements and covenants contained herein to be performed on
or prior to the Closing Date, and all the representations and warranties of
Seller and the Company contained herein shall be true in all material respects
on and as of the Closing Date with the same effect as though made on and as of
the Closing Date, except (i) as otherwise expressly contemplated hereby and
(ii) to the extent such representations and warranties were made as of a
specified date and as to such representations and warranties the same shall
continue on the Closing Date to have been true, in all material respects, as of
the specified date. Buyer shall have received a certificate of the Company,
dated the Closing Date, certifying as to the fulfillment of the conditions set
forth in this Section 7.01.
(b) NO ORDER. No order of any court or administrative agency shall
be in effect that temporarily, provisionally or permanently prohibits Buyer from
consummating the transactions contemplated hereby.
(c) CONSENTS. There shall have been obtained all necessary third-
party consents (other than third party consents necessitated by reason of Buyer)
to the consummation of the transactions contemplated hereby, including, without
limitation, any consents required under or in connection with any of the
Commitments or any other document by reason of the change in control of the
Company effected by the sale of the Shares to Buyer, by operation of law or
otherwise.
(d) ABSENCE OF MATERIAL ADVERSE CHANGES. There shall not have
occurred between the date hereof and the Closing Date any change having a
Material Adverse Effect.
(e) ENVIRONMENTAL DILIGENCE. Buyer shall have received, to its
reasonable satisfaction, an environmental report from Xxxxxxxxxx Xxxxxx,
Buyer's environmental consultant, relating to Xxxxxxxxxx Xxxxxx'x Phase I site
assessments of the Company's Napa and Berkeley facilities; PROVIDED, HOWEVER,
that this condition shall be deemed satisfied unless Buyer notifies Seller no
later than December 15, 1996 that Seller has received a report from Xxxxxxxxxx
Xxxxxx which is not to Seller's reasonable satisfaction.
(f) OPINION OF COUNSEL. Buyer shall have received an opinion dated
the Closing Date from Xxxx, Xxxx & Xxxxx, special counsel for Seller, in form
and substance as set forth in EXHIBIT A attached hereto.
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7.02. CONDITIONS TO SELLER'S OBLIGATIONS. The obligations of Seller to
sell the Shares shall be subject to the satisfaction (or waiver) on or prior to
the Closing Date of all of the following conditions:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER. Buyer shall
have complied in all material respects with each of its agreements and covenants
contained herein to be performed on or prior to the Closing Date, and all of the
representations and warranties of Buyer contained herein shall be true in all
material respects on and as of the Closing Date with the same effect as though
made on and as of the Closing Date, except (i) as otherwise expressly
contemplated hereby and (ii) to the extent that such representations and
warranties were made as of a specified date and as to such representations and
warranties the same shall continue on the Closing Date to have been true as of
the specified date. Seller shall have received a certificate of Buyer, dated
the Closing Date, certifying as to the fulfillment of the conditions set forth
in this Section 7.02.
(b) NO ORDER. No order of any court or administrative agency shall
be in effect that temporarily, provisionally or permanently prohibits Seller
from consummating the transaction contemplated hereby.
(c) OPINION OF COUNSEL. Seller shall have received an opinion dated
the Closing Date from Xxxxxx, Xxxx & Xxxxxxxx LLP, special counsel for Buyer, in
form and substance as set forth in EXHIBIT B attached hereto.
ARTICLE VIII
TERMINATION PRIOR TO CLOSING
8.01. TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
(a) By the mutual written consent of Buyer and Seller; or
(b) By either Seller or Buyer by written notice, without liability to
the terminating party on account of such termination (provided the terminating
party is not otherwise in default or in breach of this Agreement), if the
Closing shall not have occurred on or before December 31, 1996; or
(c) By either Seller or Buyer by written notice, without liability to
the terminating party on account of such termination (provided the terminating
party is not other-wise in default or in breach of this Agreement), if there
shall have been (i) a material breach by the other party of any of its
representations, warranties, covenants or agreements contained herein or (ii) a
breach by the other party of any of its representations, warranties, covenants
or agreements contained herein, which breach results in a failure to satisfy a
condition to the terminating party's obligation to consummate the transactions
provided herein.
8.02. EFFECT ON OBLIGATIONS. Termination of this Agreement pursuant to
this Article VIII shall terminate all obligations of the parties hereunder,
except for their obligations
33
under Section 11.06 and 11.13; PROVIDED, HOWEVER, that termination pursuant to
clause (b) or (c) of Section 8.01 shall not relieve the defaulting or breaching
party from any liability to the other party hereto.
ARTICLE IX
INDEMNIFICATION
9.01. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties made in this Agreement or in any Ancillary
Document shall survive the Closing for a period of two (2) years after the
Closing Date (except for (i) the representations and warranties set forth in
Sections 2.03 and 2.04, which representations and warranties shall survive
indefinitely without limitation, (ii) the representations and warranties
contained in section 2.1 1, which shall survive for a period of five (5) years
and (iii) the representations and warranties with respect to Taxes, which
representations and warranties shall survive until the applicable statute of
limitation (including any extensions thereof) has expired and shall thereupon
expire together with any right to indemnification for breach thereof (except to
the extent a written notice asserting a claim for breach of any such
representation or warranty shall have been given prior to such date to the party
that made such representation or warranty, in which case such representation and
warranty shall survive, to the extent of such claim only, until such claim is
resolved). The covenants and agreements contained herein to be performed or
complied with prior to the Closing shall expire at the Closing. The covenants
and agreements contained herein to be performed or complied with at or after the
Closing, other than the covenant and agreement to indemnify against breaches of
representations and warranties, shall survive the Closing until the expiration
of the applicable statute of limitations. The limitations set forth above
regarding the survival of claims for breach of representation and warranty shall
not apply to any claims arising out of fraud in the making of the
representations and warranties set forth herein which shall survive until any
applicable statute of limitations expires.
9.02. INDEMNIFICATION.
(a) From and after the Closing Date, Seller shall severally
indemnify, defend and hold harmless Buyer and its respective officers,
directors, stockholders, employees, representatives and agents (collectively,
"Affiliates") (including the Company) from and against all Losses that are
incurred or suffered by any of them by reason of (i) the breach by Seller or the
Company of any of the representations or warranties or (ii) the failure to
comply with any covenants, made by Seller or the Company herein; PROVIDED,
HOWEVER, in determining whether there has been a breach of Section 2.11 hereto,
such determination shall be made without regard to any limitation or
qualification regarding materiality.
(b) From and after the Closing Date, Buyer shall indemnify, defend
and hold harmless Seller from and against all Losses that are incurred or
suffered by Seller by reason of (i) the breach by Buyer of any of the
representations or warranties or (ii) the failure to comply with any covenants,
made by Buyer herein.
34
(c) Any person or entity entitled to indemnification hereunder is
referred to herein as an "Indemnitee" and any person or entity required to
provide indemnification hereunder is referred to herein as an "Indemnitor."
Buyer and its Affiliates are sometimes referred to as the "Buyer Indemnitee
Group" and Seller is sometimes referred to as the "Seller Indemnitee Group."
9.03. LIMITATIONS ON INDEMNIFICATION.
(a) Notwithstanding Section 9.02, the rights of the Indemnitees and
the obligations of the Indemnitors are subject to the following:
(1) an Indemnitee shall not be entitled to any recovery unless a
claim for indemnification is made in accordance with of Section 9.04(a) and
within the time period of survival set forth in Section 9.01 and the person
seeking indemnification complies with the procedures set forth in Section
9.04(b) and(c);
(2) the Buyer Indemnitee Group, on the one hand, and the Seller
Indemnitee Group, on the other hand, shall not be entitled to any
indemnification hereunder unless and until the Losses that the relevant
group are entitled to recover hereunder exceed, in the aggregate,
($100,000) (the "Threshold"), in which event (subject to clause (3) below)
the relevant group shall be entitled to recover the Losses in excess of
$50,000; and
(3) the maximum amount recoverable by the Buyer Indemnitee
Group, on the one hand, and the Seller Indemnitee Group, on the other hand,
for indemnification claims is $5,250,000 less the amount of the Purchase
Price Adjustment (the "Cap").
Notwithstanding the provisions of clauses (2) and (3) of the preceding
sentence, Losses arising from a breach of the representations and warranties set
forth in Sections 2.03 and 2.04 or from a breach of covenants set forth in
Article X shall be indemnifiable from the first dollar without regard to the
Threshold or Cap. Notwithstanding anything herein to the contrary, the
limitations set forth in this Section 9.03 shall not apply to any claims arising
out of fraud or intentional misconduct in the making of representations and
warranties set forth herein.
(b) The indemnification provisions in this Article IX and Article X
shall be the exclusive remedy for any breach of the representations and
warranties set forth in this Agreement.
35
9.04. INDEMNIFICATION PROCEDURE.
(a) An Indemnitee shall assert a claim for indemnification by written
notice (a "Notice") to the Indemnitor(s) stating the nature and basis of such
claim. In the case of Losses arising by reason of any third party claim, the
Notice shall be given within 20 days of the filing of any such claim against the
Indemnitee or the determination by the Indemnitee
that a claim will ripen into a claim for which indemnification will be
sought, but the failure of the Indemnitee to give the Notice within such time
period shall not relieve the Indemnitor of any liability that the Indemnitor may
have to the Indemnitee except to the extent that the Indemnitor is prejudiced
thereby and then only to the extent of such prejudice.
(b) The Indemnitee shall provide to the Indemnitor on request all
information and documentation reasonably necessary to support and verify any
Losses that the Indemnitee believes give rise to a claim for indemnification
hereunder and shall give the Indemnitor reasonable access to all books, records
and personnel in the possession or under the control of the Indemnitee that
would have bearing on such claim.
(c) In the case of third party claims for which indemnification is
sought, the Indemnitor shall have the option (i) to conduct any proceedings or
negotiations in connection therewith, (ii) to take all other steps to settle or
defend any such claim (provided that the Indemnitor shall not, without the
consent of the Indemnitee, settle any such claim on terms that provide for (A) a
criminal sanction or fine, (B) injunctive relief or (C) monetary damages in
excess of the amount that the Indemnitor is required to pay hereunder) and (iii)
to employ counsel to contest any such claim or liability in the name of the
Indemnitee or otherwise. In any event, the Indemnitee shall be entitled to
participate at its own expense and by its own counsel in any proceedings
relating to any third party claim; PROVIDED, however that if the defendants in
any such action or claim include both the Indemnitee and the Indemnitor and the
Indemnitee shall have reasonably concluded that there would be a conflict of
interest under applicable federal or state law were the same counsel to
represent the Indemnitee and the Indemnitor, the Indemnitee shall be entitled to
be represented by separate counsel at the Indemnitor's expense; PROVIDED
FURTHER, HOWEVER, that such action or claim shall not be settled without the
Indemnitor's consent, which shall not be unreasonably withheld. The Indemnitor
shall, within 30 days of receipt of the Notice, notify the Indemnitee of its
intention to assume the defense of such claim. Until the Indemnitee has
received notice of the Indemnitor's election whether to defend any claim, the
Indemnitee shall take reasonable steps to defend (but may not settle) such
claim. If the Indemnitor shall decline to assume the defense of any such claim,
or shall fail to notify the Indemnitee within 30 days after receipt of the
Notice of the Indemnitor's election to defend such claim, the Indemnitee shall
defend against such claim (provided that the Indemnitee shall not settle such
claim without the consent of the Indemnitor, which consent shall not be
unreasonably withheld). The expenses of all proceedings, contests or lawsuits
in respect of the claims described in the preceding sentence shall be borne by
the Indemnitor but only if the Indemnitor is responsible pursuant hereto to
indemnify the Indemnitee in respect of the third party claim. Regardless of
which party shall assume the defense of the claim, the parties agree to
cooperate fully with one another in connection therewith.
(d) If (and to the extent) the Indemnitor is responsible pursuant
hereto to indemnify the Indemnitee in respect of the third party claim, then
within ten days after the occurrence of a final non-appealable determination
with respect to such third party claim (or sooner if required by such
determination), the Indemnitor shall pay the Indemnitee, in immediately
available funds, the amount of any Losses (or such portion thereof as the
Indemnitor shall be responsible for pursuant to the provisions hereof). In the
event that any
Losses incurred by the Indemnitee do not involve payment by the
Indemnitee of a third party claim, then, if (and to the extent) the Indemnitor
is responsible pursuant hereto to indemnify the Indemnitee against such Losses,
the Indemnitor shall within ten days after agreement on the amount of Losses or
the occurrence of a final non-appealable determination of
36
such amount pay to the Indemnitee, in immediately available funds, the amount of
such Losses (or such portion thereof as the Indemnitor shall be responsible for
pursuant to the provisions hereof).
(e) In any action, suit or proceeding brought under this Agreement
the prevailing party shall be entitled to recover the reasonable fees and
expenses of its counsel.
9.05. INDEMNIFICATION FOR TAXES. Except to the extent otherwise provided
in this Article IX, indemnification for Taxes shall be governed solely by
Article X.
ARTICLE X
TAXES
10.01. TAX INDEMNITY.
(a) For purposes of this Article X, the term "Tax Indemnitee" shall
mean and include Buyer and any corporation or other entity that is, directly or
indirectly, controlled by, or in control of, Buyer or any successor in interest
to, or transferee of Buyer, as the case may be, as determined from time to time,
including, without limitation, the Company and any successor in interest to, or
transferee of, the Company.
(b) Seller agrees to and shall indemnify and hold harmless each Tax
Indemnitee on an after-Tax basis from and against:
(1) any liability for Taxes resulting from the breach of any
representation and warranty contained in Section 2.10; and
(2) any Taxes of the Company, any predecessor in interest or any
Tax Affiliate with respect to any period prior to the Closing Date (the
"Pre-Closing Period").
Pre-Closing Period is any taxable year or period beginning prior to and ending
on or before the Closing Date and, with respect to any taxable year or period
beginning before and ending after the Closing Date, the portion of such taxable
year or period ending on the Closing Date. For purposes of this subsection (b),
Taxes shall be computed based on the closing of the books method as of the
Closing Date; PROVIDED, HOWEVER, in the case of any Tax imposed upon the
ownership or holding of real or personal property, such Taxes shall be prorated
based on the percentage of the actual period to which such Taxes relate that
precedes the Closing Date; and PROVIDED, HOWEVER, that the amount of the
Company's income included in the consolidated combined or unitary Return of the
Seller for the year that includes the Closing Date shall be determined in
accordance with the applicable law and regulations.
(c) Seller shall cause to be prepared all Returns that are in respect
of Taxes of the Company or any predecessor in interest for taxable years or
periods ending on or prior to the Closing Date but which are due to be filed
(taking into account any applicable extensions of time for filing) after the
Closing Date and (ii) all consolidated combined or unitary Returns for taxable
years of periods including the Closing Date with respect to which the Company is
includable for such years or periods. In preparing such Returns, Seller shall
exercise its judgment relating to the
37
determination of the timing of items of income and deduction in good faith and
in a means consistent with prior practice. All such Returns shall be submitted
to Buyer no later than thirty (30) days prior to the due date and filing thereof
(including extensions), and Buyer shall have the right to review and comment
thereon (without reduction of Seller's obligation to indemnify under this
Article X). In the case of any such Return, Seller shall timely file such
Return and make payment of any Tax due.
(d) Buyer shall cause the Company to promptly remit to Seller any
amounts the Company receives for the pending refund claims identified on
Schedule 2.10(d) to the extent such amounts are not accrued or otherwise
reflected on the Interim Balance Sheet. The Tax Indemnitee shall prepare or
cause to be prepared all Returns of the Company for any and all taxable years or
periods which include and end after the Closing Date (other than consolidated,
combined or similar Returns) (the "Overlap Period"). Any such Return shall be
submitted to Seller not later than thirty (30) days prior to the due date
thereof (including extensions), and Seller shall have the right to review and
comment thereon. Tax Indemnitee, upon proper notification and satisfactory
documentation and payment by Seller of the amount of Tax due with respect to the
Return in question that is properly allocated to Seller pursuant to
Section 10.01(b)(2) (but only to the extent it exceeds the amount specifically
reserved for payment of such Tax on the Interim Balance Sheet), which payment
shall be paid by Seller within three days of demand by the Tax Indemnitee, shall
timely file such Return and make payment of any Tax due.
(e) From and after the date hereof, Seller and its affiliates shall
not file or cause to be filed any amended (other than consolidated, combined or
similar Returns) Return with respect to the Company, and Seller and its
affiliates shall not file a claim for refund of Taxes paid by or on behalf of
the Company without the prior written consent of the Tax Indemnitee (not to be
unreasonably withheld); PROVIDED, HOWEVER, that Seller shall pay promptly to Tax
Indemnitee the amount of any refund claim recovered to the extent accrued or
otherwise reflected in the reserves for Taxes on the Interim Balance Sheet, and
PROVIDED, FURTHER that Seller shall pay promptly to Tax Indemnitee the amount of
any Tax benefit realized by Seller or any Tax Affiliate with respect to any Pre-
Closing Period as a result of the filing of any amended Return or claim for
refund to the extent such Tax benefit is attributable to the Company's portion
of any consolidated, combined, unitary or similar carryovers or carrybacks of
net operating loss or net capital loss reflected in the Returns of the Company
or its Tax Affiliates filed as of the date hereof. The determination of any
such Tax benefit shall be made in good faith by the Seller and, if requested by
the Tax Indemnitee, shall at the Seller's expense, be verified in writing by an
independent certified public accounting firm selected by the Tax Indemnitee.
Seller shall not make an election under Treasury Regulations Section 1.1502-
20(g) to reattribute to itself any portion of any net operating loss carryover
or net capital loss carryover attributable to the Company.
(f) Neither Seller nor the Company shall make any material election
with respect to Taxes of the Company following the date hereof without the prior
written approval of Buyer, nor shall Tax Indemnitee or the Company make any
election on or after the Closing Date that would materially affect the amount of
Tax allocated to Seller pursuant to Section 10.01(b)(2) without the prior
written approval of Seller (such approval in either case not to be unreasonably
withheld).
38
(g) The Tax Indemnitee and Seller shall cooperate with each other in
the conduct of any audit or other proceedings involving the Company or any
entity with which it is consolidated or combined for any Tax purposes. In the
event a written claim shall be made by any governmental authority that, if
successful, would result in an obligation on the part of Seller to indemnify any
Tax Indemnitee pursuant to this section, the Tax Indemnitee shall within ten
days of receipt of such claim give notice to Seller of the same in writing
specifying in reasonable detail the basis of such claim, action or suit and the
facts pertaining thereto, and shall not make payment of the Tax claimed for at
least 30 days after the giving of such notice. If Seller wishes to contest such
claim Seller shall promptly inform the Tax Indemnitee. Seller shall have the
right to control and make all decisions regarding such audit or contest,
including selection of a forum for contest, and the Tax Indemnitee agrees that
in such event it shall execute, deliver and file a power of attorney naming
Seller and its counsel or appropriate agent as attorneys-in-fact for such audit
or contest and such other instruments or documents as may be reasonably
requested by Seller to carry out the provisions of this paragraph. Neither the
Tax Indemnitee nor any affiliate thereof (including the Company) nor the duly
appointed representatives of any of the foregoing shall, without the prior
written consent of Seller enter into any settlement of any contest or otherwise
compromise any issue that affects or may affect the Tax liability of Seller or
any of its affiliates (including the Company) for any Pre-Closing Period or the
liability of Seller under this Article X. Seller shall not, without the prior
written consent of Buyer, enter into any settlement of any contest or otherwise
compromise any issue that affects or may affect the Tax liability of the Company
if such settlement or compromise would have a Material Adverse Effect on the
Company for any taxable year or period ending after the Closing Date. Any
actions taken by Seller shall be binding on Seller.
(h) Seller and the Tax Indemnitee shall cause the Company to provide
the requesting party with such assistance as may be reasonably requested by such
party in connection with the preparation of any Return, any audit, or any
judicial or administrative proceeding or determination relating to liability for
Taxes of the Company, including but not limited to, access to the books and
records of the Company and the affiliates of the Company. The Tax Indemnitees
shall cause the Company to retain all Returns, schedules, work papers and all
material records or other documents relating to Tax matters of the Company for
the first taxable year or other taxable period ending after the Closing Date and
for all prior taxable years or other taxable periods until the later of (i)
seven (7) years after the later of filing or the due date of such Return or (ii)
the expiration of all applicable statutes of limitation (including any
extensions), and provide the other party with any record or information
(including making employees available to such other party for reasonable periods
of time) which may be relevant to such Return, audit, proceeding or
determination.
(i) Seller shall bear any costs and expenses, including reasonable
professional fees, associated with the defense of any claim for which any Tax
Indemnitee is entitled to indemnification under this Article X.
10.02. PURCHASE PRICE ADJUSTMENT. Any indemnification payments made
pursuant to this Agreement shall be treated by the parties, to the extent
permitted by applicable law, as a purchase price adjustment unless determined
otherwise in a final determination as defined in Section 1313 of the Code.
39
ARTICLE XI
MISCELLANEOUS
11.01. INTERPRETIVE PROVISIONS. For purposes of this Agreement, the
Company shall be deemed to be an Affiliate of Seller prior to the Closing and an
Affiliate of Buyer after the Closing. The language in all parts of this
Agreement shall in all cases be construed according to its fair meaning, and not
strictly for or against any party hereto.
11.02. ENTIRE AGREEMENT. Except for the Confidentiality Agreement, this
Agreement (including all of the Schedules and Exhibits hereto) constitutes the
sole and entire understanding of the parties with respect to the subject matter
hereof and supersedes all prior oral or written agreements and all
contemporaneous oral agreements between the parties with respect to the subject
matter hereof, including, without limitation, that certain letter of intent
dated November 6, 1996 between Pinnacle and Seller.
11.03. SUCCESSORS AND ASSIGNS. This Agreement may not be assigned by any
party hereto without the prior written consent of the other parties hereto;
PROVIDED, HOWEVER, that Buyer may, at its election, (a) assign this Agreement to
any direct or indirect, wholly-owned subsidiary; PROVIDED, HOWEVER, that any
such assignment shall not relieve Buyer of its obligations hereunder and/or
(b) assign, to its lenders, all or any portion of its rights under this
Agreement (including, without limitation, its rights to indemnification
hereunder) or otherwise appurtenant to the Shares. Any assignee pursuant to
clause (a) of this Section 11.03 shall execute a counterpart of this Agreement
agreeing to be bound by the provisions hereof as "Buyer," and, if there is more
than one assignee, agreeing to be jointly and severally liable for all of the
obligations of Buyer hereunder. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors,
executors, beneficiaries and permitted assigns of the parties hereto.
11.04. HEADINGS. The headings of the articles, sections and paragraphs of
this Agreement are inserted for convenience of reference only and shall not be
deemed to constitute part of this Agreement or to affect the construction hereof
11.05. MODIFICATION AND WAIVER. No amendment, modification, alterations
or supplement of the terms or provisions of this Agreement shall be binding
unless the same shall be in writing and duly executed by the parties hereto,
except that any of the terms or provisions of this Agreement may be waived in
writing at any time by the party that is entitled to the benefits of such waived
terms or provisions. No waiver of any of the provisions of this Agreement
shall be deemed to or shall constitute a waiver of any other provision hereof
(whether or not similar). No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof
11.06. EXPENSES. Except as otherwise provided herein, Buyer shall pay all
costs and expenses incurred by or on behalf of Buyer, and Seller shall pay all
costs and expenses incurred by or on behalf of Seller or the Company, in
connection with the negotiation of this Agreement and the performance of the
transactions contemplated hereby, including, without
40
limiting the generality of the foregoing, fees and expenses of its and their
financial consultants, accountants and legal counsel. Buyer and Seller shall
split the cost of any and all documentary, stamp, sales, excise, transfer or
other taxes payable in respect of the sale of the Shares.
11.07. NOTICES. Any notice, request, instruction or other document to be
given hereunder by any party hereto to any other party shall be in writing and
shall be given (and will be deemed to have been duly given upon receipt) by
delivery in person, by electronic facsimile transmission, cable, telegram, telex
or other standard forms of written telecommunications, by overnight courier or
by registered or certified mail, postage prepaid,
if to Seller or the Company, to:
UNR Industries, Inc.
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: General Counsel
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
in each case, with a copy to:
Xxxx, Xxxx & Xxxxx
Three First Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
if to Buyer, to:
Pinnacle Automation, Inc.
000 Xxxxx Xxxxxx Xxxx, Xxxxx 0000
Xx. Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
or at such other address for a party as shall be specified by like notice.
41
11.08. GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the laws of the State of Delaware applicable to agreements
made and to be performed wholly within such jurisdiction.
11.09. PUBLIC ANNOUNCEMENTS. Prior to the Closing, neither Seller nor
Buyer shall make any public statements, including, without limitation, any press
releases, with respect to this Agreement and the transactions contemplated
hereby without the prior written consent of the other parties (which consent
shall not be unreasonably withheld) except as may be required by law. If a
public statement is required to be made by law, the parties shall consult with
each other in advance as to the contents and timing thereof
11.10. THIRD PARTY BENEFICIARIES. Nothing herein expressed or implied is
intended to or shall be construed to confer upon or give any person or entity,
other than the parties hereto, and their respective successors, executors,
beneficiaries, permitted assigns and Affiliates, any rights or remedies under or
by reason of this Agreement
11.11. SEVERABILITY. If any portion of this Agreement is declared by a
court of competent jurisdiction to be invalid or unenforceable after all appeals
have either been exhausted or the time for any appeals to be taken has expired,
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.
11.12. KNOWLEDGE. For purposes of this Agreement, references to
"knowledge" of Seller or the Company shall mean the actual knowledge of the
individuals listed on Schedule 11.12 hereto, or knowledge such persons would
have had had they made reasonable inquiry of the responsible officers or
employees of the Company.
11.13. DISPUTE RESOLUTION.
(a) To the fullest extent permitted by applicable law, any
controversy, dispute or claim arising out of, in connection with, or in relation
to the interpretation, performance or breach of this Agreement or any Ancillary
Document (except as specifically provided otherwise in any such Ancillary
Document) or otherwise arising out of the execution of any of the foregoing,
including any claim based on contract, tort or statute, shall be determined, at
the request of any party, by arbitration conducted in New York, New York in
accordance with and to the extent permitted by the Rules for Commercial
Arbitration of the American Arbitration Association (the "AAA"), as amended and
in effect on the date the demand for such arbitration is filed with the AAA.
The arbitrator shall set forth his determination in writing (which shall be sent
to each party to such arbitration) and shall enumerate in reasonable detail the
basis of his determination. To the fullest extent permitted by applicable law,
any judgment or award rendered by the arbitrator will be final, conclusive and
binding. Judgment may be entered on any final arbitration award by any federal
or state court or any other court having jurisdiction thereof. The arbitrator
shall have authority in his discretion to grant injunctive relief, award
specific performance and impose sanctions upon any party to any such
arbitration, but not to award punitive or exemplary damages.
42
(b) The pendency of any arbitration under this Section 11.13 shall
not relieve any party of its obligations under this Agreement. To the fullest
extent permitted by applicable law, any controversy concerning whether a dispute
is an arbitrable dispute or as to the interpretation or enforceability of this
Section 11.13 shall be determined by the arbitrator. To the fullest extent
permitted by applicable law, if any party hereto shall resort to legal
proceedings for injunctive or any other similar relief pending the outcome of
any such arbitration proceeding or prior to the initiation thereof, such party
shall not be deemed to have waived its rights to cause such matter or any other
matter to be referred to arbitration pursuant to this Section 11.13.
(c) The arbitrator shall be a retired or former judge of any
appellate court or trial of the State of New York, any United States appellate
court or the United States District Court for the applicable District around New
York, New York, provided such individual has substantial professional experience
with regard to corporate and transactional legal matters.
(d) In his or her award, the arbitrator shall allocate, in his or her
discretion, among the parties to the arbitration all costs of arbitration,
including the fees and expenses of the arbitrator and reasonable attorneys'
fees, costs and expert witness expenses of the parties.
(e) It is intended that this agreement to arbitrate be valid,
enforceable and irrevocable.
11.14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall together constitute one and the same instrument.
43
IN WITNESS WHEREOF, each of the parties hereto has executed this Stock
Purchase Agreement as of the date first above written.
XXXXX SYSTEMS, INC.
By: /s/ XXXXXXX X. XXXXXXXX
---------------------------------------
Xxxxxxx X. Xxxxxxxx, Chairman and
Chief Executive Officer
UNR INDUSTRIES, INC.
By: /s/ XXXXXX X. XXXXXXXXX
--------------------------------------
Xxxxxx X. Xxxxxxxxx, President
44
EXHIBIT A
FORM OF OPINION OF XXXX, XXXX & XXXXX
1. The authorized capital stock of the Company consists solely of 1,000
shares of common stock, of which 1,000 Shares are issued and outstanding and
owned of record by Seller. All of the Shares have been duly authorized and are
validly issued, fully paid and non-assessable. To our knowledge, there are
outstanding no securities convertible into, exchangeable for or carrying the
right to acquire equity securities of the Company, or subscriptions, warrants,
options, rights, calls, agreements, demands or other arrangements or commitments
of any character obligating the Company to issue or dispose of any of its equity
securities or any ownership interests therein or otherwise relating to the
capital stock of the Company.
2. Assuming the Buyer is acquiring the Shares in good faith without
notice of any adverse claim, the sale and delivery of the Shares to Buyer
pursuant to Article I of the Agreement will vest in Buyer valid title to the
Shares, free and clear of any adverse claim.
3. The Company does not hold a direct, indirect or beneficial interest in
any entity (corporation, partnership, joint venture, association or other
business enterprise).
4. No consent, approval or authorization of, or filing with any state or
federal government department, bureau or agency or other governmental board or
authority by the Company, or to our knowledge, Seller are required in connection
with the execution, delivery and performance by Seller of the Agreement or the
taking of any other action contemplated thereby.
5. The execution, delivery and performance by Seller of the Agreement and
the consummation by Seller of the transactions contemplated thereby will not,
with or without the giving of notice or the lapse of time, or both, (i) violate
or conflict with any provision of state or federal law, rule or regulation to
which the Company or Seller is subject or by which any of the property of the
Company or Seller is bound, including, to our knowledge, any order, judgment or
decree of any court or other governmental authority applicable to or binding
upon the Company or Seller, (ii) violate or conflict with any provision of the
Certificate of Incorporation or the Bylaws of Seller or the Company or
(iii) result in a violation or breach of, or permit any third party to modify,
terminate or rescind any term or provision of, or constitute a default under,
any material Commitment of which we are aware, including, without limitation,
any indenture, mortgage, deed of trust, promissory note or industrial revenue
bond, if any, to which Seller or the Company is a party or by which any of the
property of the Company is bound, or result in the creation of an Encumbrance on
any of the assets of the Company.
6. Seller has all requisite corporate power and authority (i) to execute
and deliver the Agreement and the Ancillary Documents, (ii) to perform its
obligations thereunder and (iii) to consummate the transactions contemplated
thereunder. The Agreement has been duly and validly executed and delivered by
Seller and constitutes the valid and binding obligation of Seller enforceable
against Seller in accordance with its terms except as enforcement thereof may be
limited by bankruptcy, insolvency, reorganization and other similar laws
affecting creditors' rights
A-2-1
generally or by general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
A-2-2
EXHIBIT B
FORM OF OPINION OF XXXXXX, XXXX & XXXXXXXX LLP
1. Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has all requisite
corporate power and authority to execute, deliver and perform the Agreement and
to consummate the transactions contemplated thereunder. The execution, delivery
and performance by Buyer of the Agreement and the consummation by Buyer of the
transactions contemplated thereby have been duly authorized by all necessary
corporate action on the part of Buyer. The Agreement has been duly and validly
executed and delivered by Buyer constitutes the valid and binding obligations of
Buyer, enforceable against Buyer in accordance with its terms.
2. The execution, delivery and performance by Buyer of the Agreement
and the consummation by Buyer of the transactions contemplated thereby will not,
with or without the giving of notice or the lapse of time, or both, (i) violate
or conflict with any provision of state or federal law, rule or regulation to
which Buyer is subject, (ii) to our knowledge, violate or conflict with any
order, judgment or decree applicable to Buyer, (iii) violate or conflict with
any provision of the Certificates or Articles of Incorporation or the Bylaws of
Buyer or (iv) result in a violation or breach of, or constitute a default under,
any material agreement of Buyer of which we are aware.
4. No consent, approval or authorization of, or exemption by, or filing
with, any governmental department, bureau or agency or other governmental board
or authority is required in connection with the execution, delivery and
performance by Buyer of the Agreement or the taking of any other action
contemplated thereby, excluding, however, consents, approvals, authorizations,
exemptions and filings, if any, that Seller or the Company are required to
obtain or make.
----------------------
Note: The opinions in paragraphs (1) and (2) will be subject to customary
exceptions to enforceability.
B-1