AGREEMENT AND PLAN OF MERGER
among
PCT Holdings, Inc., a Nevada corporation,
Xxxxx Acquisition Corporation, a Washington corporation,
Xxxxx Industries, Inc., a Washington corporation,
Xxxxxxx X. Xxxxx
and
Xxxx Xxxxx
Dated as of November 30, 1995
ii
TABLE OF CONTENTS
ARTICLE 1. THE MERGER. . . . . . . . . . . . . . . . . . 1
1.1 Effective Date . . . . . . . . . . . . . . . . . . 1
1.2 Conversion of Acquisition Stock. . . . . . . . . . 1
1.3 Conversion of Xxxxx Common Stock . . . . . . . . . 2
1.4 Surrender of Xxxxx Common Stock Certificates . . . 2
1.5 Effect of Merger . . . . . . . . . . . . . . . . . 2
1.5.1 Rights and Interests . . . . . . . . . . 2
1.5.2 Liabilities and Obligations. . . . . . . 2
1.6 Corporate Matters. . . . . . . . . . . . . . . . . 2
1.6.1 Articles of Incorporation. . . . . . . . 2
1.6.2 Bylaws . . . . . . . . . . . . . . . . . 2
1.6.3 Directors. . . . . . . . . . . . . . . . 3
1.6.4 Officers . . . . . . . . . . . . . . . . 3
1.6.5 Principal Offices. . . . . . . . . . . . 3
1.7 Closing. . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2. REPRESENTATIONS AND WARRANTIES. . . . . . . . 3
2.1 Representations and Warranties of Xxxxx and the
Shareholders . . . . . . . . . . . . . . . . . . . 3
2.1.1 Incorporation; Qualification; Articles
and Bylaws . . . . . . . . . . . . . . . . 3
2.1.2 Capitalization and Title to
Outstanding Capital Stock. . . . . . . . . 3
2.1.3 No Subsidiaries. . . . . . . . . . . . . . 4
2.1.4 Authority; Authorization . . . . . . . . . 4
2.1.5 Financial Matters. . . . . . . . . . . . . 4
2.1.6 Litigation . . . . . . . . . . . . . . . . 5
2.1.7 Absence of Changes . . . . . . . . . . . . 6
2.1.8 Taxes. . . . . . . . . . . . . . . . . . . 7
2.1.9 Compliance with Laws . . . . . . . . . . . 8
2.1.10 Contracts. . . . . . . . . . . . . . . . . 8
2.1.11 Intellectual Property. . . . . . . . . . . 9
2.1.12 Insurance. . . . . . . . . . . . . . . . . 9
2.1.13 Environmental Matters. . . . . . . . . . . 9
2.1.14 Labor Matters. . . . . . . . . . . . . . . 10
2.1.15 Employee Benefit Matters . . . . . . . . . 11
2.1.16 Other Employee Matters . . . . . . . . . . 12
2.1.17 Title to and Condition of Property . . . . 12
2.1.18 Permits and Licenses . . . . . . . . . . . 13
2.1.19 Certain Interests. . . . . . . . . . . . . 13
2.1.20 Certain Payments . . . . . . . . . . . . . 13
2.1.21 Consents and Approvals . . . . . . . . . . 13
2.1.22 Records. . . . . . . . . . . . . . . . . . 13
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2.1.23 Product Warranties, Recalls and
Liabilities . . . . . . . . . . . . . . . 13
2.1.24 Brokers and Finders. . . . . . . . . . . . 14
2.1.25 Customers and Suppliers. . . . . . . . . . 14
2.1.26 Restrictive Covenants. . . . . . . . . . . 14
2.1.27 Reliance . . . . . . . . . . . . . . . . . 14
2.2 Representations and Warranties of PCTH and
Acquisition. . . . . . . . . . . . . . . . . . . . 14
2.2.1 Incorporation; Qualification; Articles
and Bylaws . . . . . . . . . . . . . . . . 14
2.2.2 Capitalization and Title to
Outstanding Capital Stock. . . . . . . . . 14
2.2.3 Title to Shares. . . . . . . . . . . . . . 15
2.2.4 Authority; Authorization . . . . . . . . . 15
2.2.5 Financial Matters. . . . . . . . . . . . . 15
2.2.6 Litigation . . . . . . . . . . . . . . . . 16
2.2.7 Absence of Changes . . . . . . . . . . . . 16
2.2.8 Consents and Approvals . . . . . . . . . . 16
2.2.9 Brokers and Finders. . . . . . . . . . . . 17
2.2.10 Accuracy of Federal and State
Securities Filings . . . . . . . . . . . . 17
ARTICLE 3. PRE-CLOSING CONDUCT AND AGREEMENTS. . . . . . 17
3.1 Representations and Warranties . . . . . . . . . . 17
3.2 Properties and Records . . . . . . . . . . . . . . 17
3.2.1 Access . . . . . . . . . . . . . . . . . . 17
3.2.2 Confidentiality. . . . . . . . . . . . . . 17
3.3 Corporate Issues . . . . . . . . . . . . . . . . . 18
3.3.1 Governing Documents. . . . . . . . . . . . 18
3.3.2 Capital Stock. . . . . . . . . . . . . . . 18
3.4 Conduct of Xxxxx'x Business. . . . . . . . . . . . 18
3.4.1 Properties and Assets. . . . . . . . . . . 18
3.4.2 Compensation . . . . . . . . . . . . . . . 18
3.4.3 Indebtedness . . . . . . . . . . . . . . . 19
3.4.4 Leases . . . . . . . . . . . . . . . . . . 19
3.4.5 Payments . . . . . . . . . . . . . . . . . 19
3.4.6 Contracts and Agreements . . . . . . . . . 19
3.4.7 Shipments. . . . . . . . . . . . . . . . . 19
3.4.8 Insurance. . . . . . . . . . . . . . . . . 19
3.5 Public Announcements . . . . . . . . . . . . . . . 19
3.6 Notice of Breach . . . . . . . . . . . . . . . . . 19
3.6.1 By Xxxxx and the Shareholders. . . . . . . 19
3.6.2 By PCTH and Acquisition. . . . . . . . . . 19
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ARTICLE 4. CONDITIONS TO CLOSING . . . . . . . . . . . . 20
4.1 Conditions to the Obligations of PCTH and
Acquisition. . . . . . . . . . . . . . . . . . . . 20
4.1.1 Authority. . . . . . . . . . . . . . . . . 20
4.1.2 Representations and Warranties . . . . . . 20
4.1.3 Xxxxx'x and Shareholders' Performance. . . 20
4.1.4 No Material Adverse Change . . . . . . . . 20
4.1.5 Approvals; Consents. . . . . . . . . . . . 20
4.1.6 Certificate. . . . . . . . . . . . . . . . 20
4.1.7 Capital Stock. . . . . . . . . . . . . . . 20
4.1.8 Xxxx Xxxxx Debt. . . . . . . . . . . . . . 20
4.1.9 Shareholders' Accounts Receivable. . . . . 20
4.1.10 Shareholders Agreement . . . . . . . . . . 21
4.1.11 Employment Agreements. . . . . . . . . . . 21
4.1.12 Further Documents. . . . . . . . . . . . . 21
4.2 Conditions to the Obligations of Xxxxx and the
Shareholders . . . . . . . . . . . . . . . . . . . 21
4.2.1 Authority. . . . . . . . . . . . . . . . . 21
4.2.2 Securities Filings . . . . . . . . . . . . 21
4.2.3 Representations and Warranties True at
the Effective Date . . . . . . . . . . . . 21
4.2.4 PCTH's and Acquisition's Performance . . . 21
4.2.5 President's Certificate. . . . . . . . . . 21
4.2.6 Delivery of Shares . . . . . . . . . . . . 21
4.2.7 Registration Rights Agreement. . . . . . . 21
4.2.8 Employment Agreements. . . . . . . . . . . 22
4.2.9 Further Documents. . . . . . . . . . . . . 22
ARTICLE 5. POST-CLOSING CONDUCT AND AGREEMENTS . . . . . 22
5.1 PCTH Contribution. . . . . . . . . . . . . . . . . 22
5.1.1 Specific Debts . . . . . . . . . . . . . . 22
5.1.2 Working Capital. . . . . . . . . . . . . . 22
5.1.3 Characterization . . . . . . . . . . . . . 22
5.2 Boards of Directors. . . . . . . . . . . . . . . . 22
5.3 Personal Property. . . . . . . . . . . . . . . . . 22
5.4 Insurance. . . . . . . . . . . . . . . . . . . . . 22
5.5 Employee Plans . . . . . . . . . . . . . . . . . . 22
5.6 Attorneys' Fees. . . . . . . . . . . . . . . . . . 23
5.7 Further Actions. . . . . . . . . . . . . . . . . . 23
ARTICLE 6. INDEMNIFICATION . . . . . . . . . . . . . . . 23
6.1 Indemnification by the Shareholders. . . . . . . . 23
6.1.1 General Indemnification. . . . . . . . . . 23
6.1.2 Specific Indemnification . . . . . . . . . 23
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6.2 Indemnification by PCTH. . . . . . . . . . . . . . 23
6.3 Limits on Indemnification. . . . . . . . . . . . . 24
6.3.1 Limits on Liability of the
Shareholders . . . . . . . . . . . . . . . 24
6.3.2 Limits on Liability of PCTH. . . . . . . . 24
6.4 Indemnification Procedure. . . . . . . . . . . . . 25
6.4.1 Third Party Claims . . . . . . . . . . . . 25
6.4.2 Non-Third Party Claims . . . . . . . . . . 25
6.5 Rights Not Exclusive . . . . . . . . . . . . . . . 26
ARTICLE 7. TERMINATION . . . . . . . . . . . . . . . . . 26
7.1 Right to Terminate . . . . . . . . . . . . . . . . 26
7.1.1 Mutual Consent . . . . . . . . . . . . . . 26
7.1.2 Delay. . . . . . . . . . . . . . . . . . . 26
7.1.3 Breach by PCTH or Acquisition. . . . . . . 26
7.1.4 Breach by Xxxxx or the Shareholders. . . . 26
7.2 Certain Obligations to Cease . . . . . . . . . . . 26
ARTICLE 8. MISCELLANEOUS PROVISIONS. . . . . . . . . . . 26
8.1 Exhibits; Schedules. . . . . . . . . . . . . . . . 26
8.2 Governing Law. . . . . . . . . . . . . . . . . . . 27
8.3 Notices. . . . . . . . . . . . . . . . . . . . . . 27
8.4 No Assignment. . . . . . . . . . . . . . . . . . . 28
8.5 Titles and Captions. . . . . . . . . . . . . . . . 28
8.6 Waiver . . . . . . . . . . . . . . . . . . . . . . 28
8.7 Amendment. . . . . . . . . . . . . . . . . . . . . 28
8.8 Severability . . . . . . . . . . . . . . . . . . . 28
8.9 Rights and Remedies. . . . . . . . . . . . . . . . 29
8.10 Attorneys' Fees. . . . . . . . . . . . . . . . . . 29
8.11 Counterparts . . . . . . . . . . . . . . . . . . . 29
8.12 Entire Agreement . . . . . . . . . . . . . . . . . 29
EXHIBITS:
Exhibit A - Articles of Merger
Exhibit B - Bylaws of Surviving Corporation
Exhibit C - Registration Rights Agreement
Exhibit D - Xxxx Xxxxx Promissory Note
Exhibit E - Xxxxxxx X. Xxxxx Employment Agreement
Exhibit F - Xxxx Xxxxx Employment Agreement
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SCHEDULES:
Schedule 2.1.2 Capitalization
Schedule 2.1.5(b) Absence of Undisclosed Liabilities
Schedule 2.1.5(c) Accounts Receivable
Schedule 2.1.6 Litigation
Schedule 2.1.7 Absence of Changes
Schedule 2.1.8 Taxes
Schedule 2.1.9 Compliance With Laws
Schedule 2.1.10 Contracts
Schedule 2.1.12 Insurance Policies
Schedule 2.1.13 Environmental Matters
Schedule 2.1.14 Labor Matters
Schedule 2.1.15 Employee Benefit Matters
Schedule 2.1.17(a) Real Property
Schedule 2.1.17(b) Tangible Personal Property
Schedule 2.1.18 Permits & Licenses
Schedule 2.1.19 Certain Interests
Schedule 2.1.21 Consents and Approvals
Schedule 2.1.22 Records
Schedule 2.1.23 Product Warranties, Recall and Liabilities
Schedule 2.1.25 Customers and Suppliers
Schedule 2.2.2 Capital Stock of PCTH
Schedule 2.2.7 Absence of Changes (PCTH)
Schedule 2.2.8 Consents and Approvals (PCTH)
Schedule 5.1 Partial Use of Proceeds from PCTH
Capital Contribution
Schedule 5.3 Shareholder's Personal Property
1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made and
entered into as of November 30, 1995, by and among PCT HOLDINGS, INC., a
Nevada corporation ("PCTH"), XXXXX ACQUISITION CORPORATION, a Washington
corporation and wholly owned subsidiary of PCTH ("Acquisition"), XXXXX
INDUSTRIES, INC., a Washington corporation ("Xxxxx"), and XXXXXXX X. XXXXX
and XXXX XXXXX (together, the "Shareholders"). Acquisition and Xxxxx are
sometimes referred to in this Agreement as the "Merging Corporations."
RECITALS
--------
X. Xxxxx is the owner and operator of an aluminum casting
foundry located in Entiat, Washington.
B. The Boards of Directors of Xxxxx, Acquisition and PCTH have
determined that it is advisable and in the best interests of the respective
corporations for Acquisition to merge with and into Xxxxx, with Xxxxx being
the survivor and becoming a wholly-owned subsidiary of PCTH, in
consideration for which all 416 issued and outstanding shares of Xxxxx'x
voting common stock (the "Xxxxx Common Stock") would be converted into
common stock, $.001 par value, of PCTH (the "PCTH Common Stock"), as
described in this Agreement (the "Merger"), in a statutory merger pursuant
to Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended
(the "Code"), and in accordance with the applicable merger provisions of
the Washington Business Corporation Act (the "Washington Act").
C. The Shareholders are the holders of all of the Xxxxx Common Stock,
and, under Xxxxx'x Articles of Incorporation and Washington law, are the
only shareholders of Xxxxx entitled to vote upon the Merger.
AGREEMENT
---------
For valuable consideration, the receipt and sufficiency of which the
parties acknowledge, the parties agree as follows:
ARTICLE 1.
THE MERGER
1.1 Effective Date. The Merger shall be effective on the date on which
Articles of Merger and a Plan of Merger, in substantially the form attached
as Exhibit A (together, the "Articles of Merger") are filed with the office
of the Secretary of State of the State of Washington (the "Effective
Date"). On the Effective Date, Acquisition shall be merged with and into
Xxxxx, the separate existence of Acquisition shall cease, and the Merging
Corporations shall become a single corporation named "Xxxxx Industries,
Inc.," which shall be referred to in this Agreement as the "Surviving
Corporation."
1.2 Conversion of Acquisition Stock. Upon effectiveness
of the Merger, each share of the common stock of Acquisition
issued and outstanding immediately prior to the effectiveness of
the Merger shall, by virtue of the Merger and without any action
on the part
2
of the holder thereof, be converted into one share of Xxxxx Common Stock.
All such shares of Xxxxx Common Stock shall be fully paid and nonassessable
and shall be held by PCTH as of the effectiveness of the Merger.
1.3 Conversion of Xxxxx Common Stock. As consideration to the
Shareholders for the Merger, each share of Xxxxx Common Stock issued and
outstanding immediately prior to the effectiveness of the Merger shall, by
virtue of the Merger and without any action on the part of the
Shareholders, be converted into and exchanged for 2,163.461 shares of PCTH
Common Stock, for an aggregate of 900,000 shares of PCTH Common Stock (the
"Shares").
1.4 Surrender of Xxxxx Common Stock Certificates. At the Closing (as
defined in Section 1.7), the Shareholders shall surrender for cancellation
their certificates representing all of the Xxxxx Common Stock to PCTH or to
its agent designated for such purpose, and the Shareholders shall be
entitled to receive certificates representing the Shares.
1.5 Effect of Merger.
1.5.1 Rights and Interests. As of the Effective Date, (a)
Surviving Corporation shall possess all of the rights, privileges, powers
and franchises of each of the Merging Corporations, of a public as well as
a private nature, (b) Surviving Corporation shall become subject to all of
the restrictions, disabilities and duties of each of the Merging
Corporations, (c) all the singular rights, privileges, powers and
franchises of each of the Merging Corporations and all property, real,
personal and mixed, and all debts due to each of the Merging Corporations,
on whatever account, as well as all other things in action or belonging to
each of the Merging Corporations shall be vested in Surviving Corporation,
and (d) all property, assets, rights, privileges, powers, franchises,
immunities, and all and every other interest of the respective Merging
Corporations, shall become the property of Surviving Corporation. The title
to any real estate vested by deed or otherwise, in either of the Merging
Corporations, shall not revert or be in any way impaired by reason of the
Merger.
1.5.2 Liabilities and Obligations. As of the Effective Date, all
debts, liabilities and duties of the Merging Corporations shall attach to
Surviving Corporation and may be enforced against it to the same extent as
if said debts, liabilities, obligations, and duties had been incurred or
contracted by Surviving Corporation. All rights of creditors and all liens
upon any property of either of the Merging Corporations shall be preserved
unimpaired after the Merger.
1.6 Corporate Matters.
1.6.1 Articles of Incorporation. On the Effective Date, the
Articles of Incorporation of Surviving Corporation shall be repealed in
their entirety, and the Articles of Incorporation attached to the Articles
of Merger shall be adopted as the Articles of Incorporation of the
Surviving Corporation.
1.6.2 Bylaws. On or immediately after the Effective Date, the
Bylaws of the Surviving Corporation shall be repealed in their entirety and
the Amended and Restated Bylaws, in substantially the form attached as
Exhibit B, shall be adopted as the Bylaws of Surviving Corporation.
3
1.6.3 Directors. On the Effective Date, the following individuals
shall be elected as the directors of Surviving Corporation and shall serve
for the term specified in the Bylaws of the Surviving Corporation:
Xxxxxx X. Xxxxxx
Xxxxxx X. "Xxxx" Xxxxx
Xxxx X. Xxxxx
Xxxxxxx X. Xxxxx
Xxxx Xxxxx
1.6.4 Officers. On the Effective Date, the following individuals
shall be elected as the officers of Surviving Corporation, to serve at the
pleasure of the Board of Directors and in accordance with the Bylaws of
Surviving Corporation:
President -- Xxxxxxx X. Xxxxx
Executive V.P. -- Xxxxxx X. Xxxxxx
V.P. Sales -- Xxxx Xxxxx
V.P. Finance and
Secretary -- Xxxx X. Xxxxx
1.6.5 Principal Offices. The principal office of
Surviving Corporation shall be the principal offices of PCTH,
located at 000 Xxxx Xxxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxxx.
1.7 Closing. The closing of the transaction contemplated in this
Agreement (the "Closing") shall take place at the office of Stoel Rives,
3600 One Union Square, 000 Xxxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx, at 11:00
a.m. on December 1, 1995, or at such other place and time as the parties
shall agree (the "Closing Date").
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Xxxxx and the Shareholders.
Xxxxx and each of the Shareholders represent and warrant, jointly and
severally, to PCTH and Acquisition, that:
2.1.1 Incorporation; Qualification; Articles and Bylaws. Xxxxx is
a corporation duly organized and validly existing under the laws of the
State of Washington and has all requisite corporate power and authority to
own, operate, and lease its assets and properties and to carry on its
business as it is now being conducted and as proposed to be conducted.
Xxxxx is not qualified as a foreign corporation in any jurisdiction. Xxxxx
has not received any written or oral notice within the last three years
from any governmental official of any jurisdiction to the effect that Xxxxx
is required to be qualified or authorized to do business therein. The
failure to qualify to do business in any jurisdiction has not had, and will
not have, a material adverse effect on the business or financial condition
of Xxxxx. Xxxxx has delivered to PCTH complete and accurate copies of
Xxxxx'x Articles of Incorporation and Bylaws, each as amended to the date
of this Agreement.
2.1.2 Capitalization and Title to Outstanding Capital
Stock. Xxxxx has authorized capital stock consisting of 2,500
shares of common stock, $100 par value ("Xxxxx Common Stock") and
2,500 shares of non-voting common stock, $2,000 par value ("Non-
4
voting Stock"). The Non-voting Stock evidences only the right to receive
repayment of a debt to the holder thereof. On the date of this Agreement,
416 shares of Xxxxx Common Stock and 87.5 shares of Non-voting Stock are
outstanding. All of the Nonvoting Stock will have been retired before
Closing. All of the outstanding shares of capital stock of Xxxxx have been
duly authorized and are validly issued, fully paid and nonassessable. No
shares of capital stock of Xxxxx have been issued in violation of or are
subject to any preemptive or similar rights granted to any former or
existing shareholder pursuant to law, Xxxxx'x Articles of Incorporation,
Bylaws or otherwise. Other than pursuant to this Agreement or as described
in Schedule 2.1.2, (a) there is no subscription, option, warrant, call,
right, agreement or commitment granted or issued by or binding upon Xxxxx
or any shareholder of Xxxxx (i) relating to the issuance, sale, delivery,
voting, transfer, ownership or other rights to or affecting any shares of
Xxxxx'x capital stock or any other securities convertible into,
exchangeable for, or evidencing the right to subscribe for shares of
Xxxxx'x capital stock, or (ii) relating to the payment of amounts measured
by changes in the value or price of any capital stock of Xxxxx, and (b)
Xxxxx has no obligation of any kind to issue any additional securities.
Except as described on Schedule 2.1.2, with respect to the Nonvoting Stock,
Xxxxx has no outstanding obligations to repurchase, redeem or otherwise
acquire any of its outstanding shares of capital stock. Schedule 2.1.2 sets
forth a complete and accurate list of the shareholders of Xxxxx as of the
date hereof, indicating the number of shares of Xxxxx Common Stock and
Nonvoting Stock held by each. Except as set forth on Schedule 2.1.2, all of
the outstanding shares of capital stock of Xxxxx are owned beneficially and
of record as set forth on the Schedule 2.1.2, free and clear of all
pledges, security interests, liens, charges, encumbrances, equities,
claims, options or limitations.
2.1.3 No Subsidiaries. Xxxxx does not own and has never owned,
directly or indirectly, any outstanding capital stock or other ownership
interest (or securities, rights or other interests convertible into capital
stock or other ownership interest) in any other entity.
2.1.4 Authority; Authorization. Xxxxx has full corporate power
and corporate authority, and each Shareholder has full power and authority,
to execute and deliver this Agreement, to consummate the transactions
contemplated in this Agreement, and to carry out its obligations under this
Agreement. This Agreement has been duly and validly authorized by the Board
of Directors and shareholders of Xxxxx, has been duly and validly executed
and delivered by Xxxxx and the Shareholders, and constitutes the valid and
binding obligation of Xxxxx and each of the Shareholders, enforceable in
accordance with its terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other
laws of general application affecting the enforcement of creditors' rights,
and except that the availability of the equitable remedies of specific
performance and injunctive relief may be subject to the discretion of the
court before which any proceeding may be brought. To the best knowledge of
Xxxxx and the Shareholders, other than the Articles of Merger, no
declaration, filing, or registration with, or notice to, or authorization,
consent, or approval of, any governmental or regulatory body or authority
is necessary for the execution and delivery of this Agreement by Xxxxx or
the consummation by Xxxxx of the transactions contemplated in this
Agreement.
2.1.5 Financial Matters.
a. Financial Statements. Xxxxx has provided to
PCTH true and correct copies of the its (a) reviewed balance
sheets, statements of income and statements of cash flow for the
fiscal years ended June 30, 1994, 1993 and 1992, and its audited
balance
5
sheet, statement and income and statement of cash flow for the fiscal year
ended June 30, 1995, including the related notes (collectively, the
"Historical Financial Statements"), and (b) balance sheet as of September
30, 1995 (the "Current Balance Sheet") and the related statement of income
and statement of cash flows for the period then ended (collectively, the
"Current Financial Statements"). The Historical Financial Statements and
the Current Financial Statements are collectively referred to as the "Xxxxx
Financial Statements." The Xxxxx Financial Statements are, to the best
knowledge of the Xxxxx and the Shareholders after discussions with Xxxxx'x
auditors, complete and accurate and, as of their respective dates, present
fairly the financial position, results of operations, and changes in
financial position of Xxxxx as of the dates and for the periods indicated
therein in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods indicated,
except as otherwise indicated therein or in the notes thereto, subject, in
the case of the Current Financial Statements, to year-end audit adjustments
and any other adjustments described therein.
b. Absence of Undisclosed Liabilities. Except as set forth
on Schedule 2.1.5(b), and except for current liabilities incurred after
September 30, 1995, in the ordinary course of business and of a type and in
an amount consistent with past practices, Xxxxx does not have any liability
or obligation (whether absolute, accrued, contingent or otherwise, and
whether due or to become due) that is not accrued, reserved against, or
disclosed in the Xxxxx Financial Statements.
c. Accounts Receivable. Schedule 2.1.5(c) contains a
complete and accurate list of all of the receivables of Xxxxx (including
accounts receivable, notes receivable and advances) that are reflected in
the Current Balance Sheet or that have been billed since the date of the
Current Balance Sheet (collectively, the "Receivables"). Except as set
forth on Schedule 2.1.5(c), all of the Receivables reflect actual bona fide
transactions and arose in the ordinary course of business. Each of the
Receivables can be fully collected when due and in any event within 120
days after Closing, without resort to litigation and without offset,
deduction or counterclaim, except to the extent of the normal allowance for
doubtful accounts with respect to accounts receivable, consistent with
Xxxxx'x prior practices, as reflected in the Current Balance Sheet.
d. Inventories. The inventories of Xxxxx, whether finished
goods, work in process or raw materials, shown on the Current Balance Sheet
or thereafter acquired, are all items of a quality usable or saleable in
the ordinary and usual course of business, except for inventory items that
have been written down to an amount not in excess of realizable market
value or for which adequate reserves or allowances have been provided. The
present quantities of all inventories of Xxxxx are reasonable and warranted
in the present circumstances of its business, in accordance with the past
practices of Xxxxx.
2.1.6 Litigation. Except as set forth on Schedule 2.1.6, there is
no material claim, litigation, proceeding or investigation of any kind
pending by Xxxxx or against Xxxxx or the officers or directors of Xxxxx in
their capacities as such, or against the properties or business of Xxxxx,
and, to the best knowledge of Xxxxx and the Shareholders, no such claim,
litigation, proceeding or investigation has been threatened, and there is
no basis for any such claim, litigation, proceeding or investigation. There
are no actions, proceedings, suits, investigations, or inquiries pending,
or to the best knowledge of Xxxxx and the Shareholders, threatened, that
question the validity of this Agreement or any actions taken or to be taken
6
pursuant hereto. For purposes of this Section 2.1.6, "material claim" means
any claim exceeding $10,000, exclusive of interest and attorney fees.
2.1.7 Absence of Changes. Except as set forth on
Schedule 2.1.7, since June 30, 1995, Xxxxx has not:
a. Adverse Changes. Suffered or been threatened
with any adverse change in its business, results of operations,
financial condition, properties, assets or prospects;
b. Damage. Suffered any damage, destruction,
requisition, taking or casualty loss, whether or not covered by
insurance, of or to any of its assets or properties;
c. Dividends. Declared, set aside or paid any
dividend or other distribution (whether in cash, stock, property
or any combination thereof) in respect of its capital stock, or
directly or indirectly repurchased, redeemed or otherwise
acquired any shares of its capital stock, or made any other
payment to or for the account of its shareholders;
d. Compensation. Increased the rate or terms of compensation
payable or to become payable to any director, officer or key employee;
changed the rate or terms of any bonus, insurance, pension or other
employee benefit plan, payment, severance or arrangement made to, for or
with any employee; paid any special bonus or remuneration; executed or
amended any written employment contract; or made any change in personnel
policies;
e. Expenditures. Entered into any agreement, commitment or
transaction (including without limitation any borrowing, capital
expenditure or capital financing; any purchase, acquisition, sale or other
disposition of assets; any lease or sublease; any guaranty, assumption or
endorsement of payment or performance of any loan or obligation of another;
or any amendment, modification or termination of any existing agreement,
commitment or transaction), except agreements, commitments or transactions
in the ordinary course of business or as contemplated in this Agreement
that will be performed in less than one year and do not involve the payment
of, or obligation to pay, an amount greater than $10,000 in respect of any
such agreement, commitment or transaction;
f. Accounting Changes. Made any change in
accounting methods, principles or practices;
g. Sales of Stock. Issued or sold any capital stock or
issued or granted any option, warrant or right to purchase any capital
stock or any security exercisable for the purchase of or convertible into
capital stock or relating to the payment of amounts measured by changes in
the value or price of any capital stock, or made any commitment to do any
of the foregoing;
h. Articles and Bylaws. Amended its Articles
of Incorporation or Bylaws;
i. Business Not in the Ordinary Course.
Conducted any business which is outside the ordinary course of
business or not substantially in the manner that it previously
conducted its businesses;
7
j. Liabilities. Except as set forth on Schedules 2.1.5(b)
and 2.1.6, incurred any material liability which, either individually or in
the aggregate, is material to its business, results of operations,
financial condition, properties, assets or prospects. For purposes of this
Section 2.1.7(j), "material liability" means any liability exceeding
$10,000, exclusive of interest and attorney fees.
k. Encumbrances. Encumbered or consented to the
encumbrance of any of its property or assets, except in the
ordinary course of business;
l. Labor. Experienced pending or threatened
labor disputes, organizational activities or disturbances
affecting in an adverse manner its business, results of
operations, financial condition, properties, assets or prospects;
m. Customers. Received any indication from any
customer that such customer intends to, is desirous of, or is
actively considering terminating or reducing its purchases from
Xxxxx in any material amount for any reason other than normal
business activity; or
n. Further Adverse Changes. Experienced or been threatened
with any change in its assets, liabilities, licenses, permits or
franchises, or in any agreement to which it is a party or is bound, which,
either individually or in the aggregate, has had or reasonably could be
expected to have an adverse effect on its business, results of operations,
financial condition, properties, assets or prospects.
2.1.8 Taxes. Except as set forth on Schedule 2.1.8,
with respect to Taxes (as defined below):
a. Returns. Xxxxx has filed, within the time and in the
manner prescribed by law, all returns, declarations, reports, estimates,
information returns and statements ("Returns") required to be filed under
federal, state, local or any foreign laws by Xxxxx, and all such Returns
are true, correct and complete in all material respects. There are not now
any extensions of time in effect with respect to the dates on which any
Returns were or are due to be filed.
b. Payment. Xxxxx has, within the time and in
the manner prescribed by law, paid (and until Closing will pay,
within the time and in the manner prescribed by law) all Taxes
that are due and payable by Xxxxx.
c. Tax Liens. There are no liens for Taxes upon
the assets of Xxxxx, except liens for Taxes not yet due.
d. Statute of Limitations; Deficiencies. Either the statute
of limitations for the assessment of federal income tax has expired for all
federal income tax returns of Xxxxx or such returns have been examined by
the Internal Revenue Service, for all periods through June 30, 1992. Xxxxx
has not given any outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any Taxes or
Returns. No deficiency for any Taxes has been proposed, asserted or
assessed against Xxxxx which has not been resolved and paid in full. No
issue has been raised through the date of this representation which
reasonably could be expected to result in a deficiency.
8
e. Withholding. Xxxxx has complied (and until Closing will
comply) in all respects with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes and has, within the time
and in the manner prescribed by law, withheld from wages and other amounts
paid or owing to any employee, creditor, independent contractor or any
third party, and paid over to the proper government authorities, all
amounts required to be so withheld and paid over under all applicable laws.
f. Copies of Returns. Xxxxx has delivered to
PCTH true and complete copies of all federal, state and foreign
tax returns filed by Xxxxx for taxable years ending subsequent
to 1991.
g. Definition. For purposes of this Agreement, "Taxes" shall
mean all taxes, charges, fees, levies or other assessments of whatever
kind, or including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, estimated, severance, stamp,
occupancy or property taxes, customs duties, fees, assessments or charges
(together with any interest and any penalties) imposed by any taxing
authority (domestic or foreign) upon or payable by Xxxxx.
2.1.9 Compliance with Laws. Except as set forth on Schedule
2.1.9, Xxxxx has at all relevant times conducted its business in compliance
with the provisions of its Articles of Incorporation, Bylaws, and all
applicable laws and regulations. Xxxxx is not in violation of any
applicable laws or regulations. Xxxxx is not subject to any outstanding
judgment, order, writ, injunction or decree and has not been charged with,
or threatened with a charge of, a violation of any provision of any
applicable law or regulation.
2.1.10 Contracts.
a. Contracts and Commitments. Schedule 2.1.10 contains a
list of all of the contracts or agreements to which Xxxxx is a party or by
which it or any of its property is subject or bound in the following
categories: (i) notes, mortgages, deeds of trust, loan agreements, security
agreements, guaranties, debentures, indentures, credit agreements and other
evidences of indebtedness with respect to any indebtedness the principal
amount of which exceeds $20,000; (ii) contracts or agreements with any
director, officer or shareholder of Xxxxx; (iii) leases of real property
and leases of equipment or other personal property under which Xxxxx is the
lessee and under which rental payments exceed $10,000 annually; (iv)
letters of intent, commitments, option agreements, xxxxxxx money
agreements, or other similar agreements pertaining to the lease, purchase
or sale of any real property; (v) licenses and sublicenses material to
Xxxxx; (vi) contracts or agreements providing for payments to or by Xxxxx
in excess of $10,000 on an annual basis or any contract with a term
exceeding one year; and (vii) any contract or agreement not falling within
any of the foregoing categories but nevertheless material to Xxxxx
(collectively, the "Contracts").
b. Validity; Absence of Defaults. To the best knowledge of
Xxxxx and the Shareholders, all of the Contracts are valid, binding and
enforceable in accordance with their terms. To the best knowledge of Xxxxx
and the Shareholders, Xxxxx is not in default under or in violation of any
provision of any Contract. No third party has asserted any claim, dispute
or controversy with Xxxxx or withheld payments from or performance to Xxxxx
with respect to any Contract that has not been resolved. Xxxxx has received
no notice or warning of alleged nonperformance or other noncompliance with
respect to its obligations under any
9
Contract or any notice that any such Contract may be totally or partially
terminated or suspended by the other party or parties thereto. Provided
that Xxxxx shall have obtained and delivered to PCTH any consents and
approvals to the transactions contemplated in this Agreement, as specified
in Schedule 2.1.21 and required under the Contracts, neither the execution
and delivery of this Agreement by Xxxxx nor the consummation by it of the
transactions contemplated hereby will conflict with, violate, result in a
breach of, or constitute a default under any of the Contracts or result in
the creation of any lien or encumbrance upon the assets of Xxxxx.
2.1.11 Intellectual Property. Xxxxx owns no patents. Except for
the patterns, forms and tooling that belong to customers and are used in
the ordinary course of business, Xxxxx owns, or has a valid and binding
license or licenses (as to which there are no defaults by any of the
parties thereto) to use, all trademarks, service marks, trade names,
copyrights, trade secrets, technology, know-how and other intellectual
property (the "Intellectual Property") necessary to or used in the conduct
of Xxxxx'x business as now conducted and as proposed to be conducted.
There are no licenses or other agreements under which Xxxxx has sold or
granted a right to use any Intellectual Property. All Intellectual Property
owned by Xxxxx is owned by it free and clear of all liens, claims,
encumbrances or adverse claims of any third party. The conduct of the
business of Xxxxx does not conflict with or infringe upon any Intellectual
Property rights of any other person, and no claims of conflict or
infringement are pending or threatened against Xxxxx.
2.1.12 Insurance. Schedule 2.1.12 contains a complete and
accurate list of all insurance policies maintained by Xxxxx covering any
property or asset of, or otherwise insuring, Xxxxx. All such policies are
in full force and effect, all premiums covering all periods up to and
including the date as of which this representation is being made have been
paid, and no notice of cancellation or termination has been received with
respect to any such policy. Such insurance policies are valid and currently
in force. Such insurance policies are sufficient for compliance with all
requirements of law and agreements to which Xxxxx is a party and provide
insurance coverage comparable to that of companies similarly situated.
Xxxxx has not been refused any insurance with respect to its assets or
operations or had its coverage limited by any insurance carrier during the
past three-year period. Complete and accurate copies of all policies and
endorsements thereto have been delivered to PCTH.
2.1.13 Environmental Matters.
a. Definitions. "Environmental Law" means any federal, state
or local statute, regulation or ordinance pertaining to the protection of
human health or the environment and any applicable orders, judgments,
decrees, permits, licenses or other authorizations or mandates under such
laws. "Hazardous Substance" means any hazardous, toxic, radioactive or
infectious substance, material or waste as defined, listed or regulated
under any Environmental Law, and includes without limitation petroleum oil
and its fractions. "Asbestos-Containing Material" means any material
containing more than one percent by weight of asbestos. "Prior Property"
means any real property previously owned, leased, controlled, operated or
occupied by Xxxxx.
b. Hazardous Substances. Except as specifically
described in Schedule 2.1.13, no Hazardous Substance has been
disposed of, spilled, leaked or otherwise released in, on, under
or from the Real Property (as defined in Section 2.1.17(a) below)
or the Prior Property. Except as described in Schedule 2.1.13,
no Hazardous Substance (i) is or has
10
been used, treated, stored, generated, manufactured or otherwise handled on
the Real Property or the Prior Property, or (ii) has otherwise come to be
located in, on or under the Real Property or the Prior Property. To the
best knowledge of Xxxxx and the Shareholders, no Hazardous Substance has
been disposed of, spilled, leaked or otherwise released in, on, under or
from property adjacent to or in the immediate vicinity of the Real Property
or the Prior Property.
c. Asbestos; PCBs; Underground Storage Tanks. None of the
buildings, structures, fixtures or equipment on the Real Property contains
any Asbestos-Containing Material, urea formaldehyde foam insulation,
polycholorinated biphenyls in concentrations greater than 50 parts per
million (including in any electrical equipment located on the Real
Property), or any other Hazardous Substance which is prohibited or
regulated when present in buildings, structures, fixtures or equipment.
Except as set forth on Schedule 2.1.13, there are no underground storage
tanks (whether or not excluded from regulation under any Environmental Law)
on the Real Property, including any underground storage tanks in use, out
of service, closed or decommissioned in place. Except as set forth on
Schedule 2.1.13, all underground storage tanks previously on the Real
Property or previously owned or operated by Xxxxx have been properly
decommissioned in compliance with all applicable Environmental Laws.
d. Waste Disposal. All wastes generated by the business of
Xxxxx are and have been properly transported off site and disposed of in
compliance with all applicable Environmental Laws. Except as described on
Schedule 2.1.13, Xxxxx has not arranged for the disposal or treatment of
Hazardous Substances at, and has not transported or arranged for
transportation on behalf of itself or any third party any Hazardous
Substances to, any facility listed or proposed for listing on the National
Priority List ("NPL") or the Comprehensive Environmental Response,
Compensation, Liability Information System list ("CERCLIS") compiled by the
Environmental Protection Agency or any similar or comparable list compiled
or maintained by any state or local governmental authority.
e. Site Lists. No portion of the Real Property or the Prior
Property is listed or proposed for listing on the CERCLIS or the NPL, or
any similar or comparable list compiled or maintained by any state or local
governmental authority. Except as described on Schedule 2.1.13, neither
Xxxxx nor the Shareholders have received notice, or have knowledge, of any
claim that Xxxxx is a potentially responsible party under Section 107 of
the Comprehensive Environmental Response, Compensation and Liability Act or
any similar or comparable state or local Environmental Law.
f. Environmental Reports. Xxxxx has disclosed and made
available to PCTH true, complete and correct copies or results of any
reports, studies, analyses, tests or monitoring in the possession of or
initiated by Xxxxx pertaining to the existence of Hazardous Substances and
any other environmental concerns relating to any of the Real Property, the
Prior Property or the business of Xxxxx.
2.1.14 Labor Matters. Schedule 2.1.14 describes the status of
Xxxxx'x only collective bargaining agreement with any labor union. Since
January 1, 1992, there has not been any strike, slowdown, picketing or work
stoppage by employees of Xxxxx and no unfair labor practice charge,
complaint or proceeding has been brought against Xxxxx. Xxxxx has complied
in all material respects with all material laws relating to the employment
of labor, including, without limitation, any provisions thereof relating to
wages, hours, collective
11
bargaining, employment termination, occupational safety, equal opportunity
and discrimination, plant closures and layoffs and notice thereof, hiring
of non-U.S. citizens and the payment of social security and similar taxes,
and no person has asserted, and to the knowledge of Xxxxx and the
Shareholders there is no basis for any person to assert, that Xxxxx is
liable in any material amount for any arrears of wages or any taxes or
penalties for failure to comply with any of the foregoing. For purposes of
this Section 2.1.14, "material amount" means an amount exceeding $10,000,
exclusive of interest and attorney fees.
2.1.15 Employee Benefit Matters. With respect to the
employees of Xxxxx:
a. Plans. Schedule 2.1.15 contains a true and complete list
of each bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance or termination pay, hospitalization or
other medical, life or other insurance, supplemental unemployment benefit,
profit-sharing, savings, pension, or retirement plan, program, agreement or
arrangement (collectively, the "Plans"), sponsored, maintained or
contributed to or required to be contributed to by Xxxxx for the benefit of
any employee or former employee;
b. Information Regarding Plans. With respect to each of the
Plans, Xxxxx has heretofore delivered to PCTH true and complete copies of
each of the following documents: (i) a copy of such Plan (including all
amendments thereto); (ii) a copy of the annual report, if required under
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
with respect to such Plan for the last two years; (iii) a copy of the
actuarial report, if required under ERISA with respect to such Plan for the
last two years; (iv) a copy of the most recent Summary Plan Description,
together with each Summary of Material Modifications, if required under
ERISA, with respect to such Plan, and all material employee communications
relating to such Plan; (v) if such Plan is funded through a trust or any
third party funding vehicle, a copy of the trust or other funding agreement
(including all amendments thereto) and the latest financial statements
thereof; (vi) all contracts relating to such Plan, including without
limitation service provider agreements, insurance contracts, investment
management agreements, subscription and participation agreements and record
keeping agreements; and (vii) the most recent determination letter received
from the IRS with respect to such Plan if it is intended to be qualified
under Section 401 of the Code.
c. New Plans; Modifications. Xxxxx has no plan or
commitment, whether legally binding or not, to create any additional
employee welfare benefit plan (as defined in Section 3(1) of ERISA) or
employee pension benefit plan (as defined in Section 3(2) of ERISA), and
has no plan or commitment to modify or change any existing pension plan or
welfare benefit plan, other than changes to comply with applicable law,
that would affect any employee of Xxxxx;
d. Continuing Benefits. Except for governmental plans and
obligations, including but not limited to COBRA, no Plan provides death,
medical or health benefits (whether or not insured) with respect to current
or former employees of Xxxxx after any such employee's retirement or other
termination of service (other than (i) benefit coverage mandated by
applicable law, including, without limitation, coverage provided pursuant
to section 4980B of the Code, (ii) death benefits or retirement benefits
under any pension plan, (iii) deferred compensation benefits accrued as
liabilities on the books of Xxxxx, or (iv) benefits the full cost of which
is borne by the current or former employee (or the employee's beneficiary).
"COBRA" means the continuation coverage requirements of Section 4980B of
the Internal Revenue Code and Part 6 of Title I of ERISA.
12
e. Determinations. Each Plan that is intended
to be "qualified" within the meaning of Section 401(a) of the
Code has been determined by the IRS to be so qualified, and there
is no fact or circumstance that would materially and adversely
affect such qualification; and
f. Compliance. Each of the Plans has been and is maintained,
operated and administered in all material respects in compliance with its
terms and any related documents or agreements and in accordance with all
applicable laws, including but not limited to applicable provisions of
ERISA and the Code. Neither Xxxxx nor the Shareholders are aware of any
pending or threatened assessment, complaint, proceeding or investigation
with respect to any Plan.
2.1.16 Other Employee Matters. Xxxxx is not bound by or subject
to (and none of its properties is bound by or subject to) any material
written or oral, express or implied, employment contract, commitment or
arrangement with any employee, including, without limitation any "golden
parachute" agreement, and all employees of Xxxxx are employees at will.
Xxxxx has provided PCTH with copies of and all relevant information
regarding (i) vacation, holiday or sick leave policies or arrangements with
employees, and (ii) compensation arrangements with employees and
consultants, including compensation in the form of benefits, allowances,
perquisites or otherwise.
2.1.17 Title to and Condition of Property.
a. Title to and Condition of Real Property. Schedule
2.1.17(a) contains a list of all real property owned or leased by Xxxxx
(the "Real Property"), including the dates of and parties to all leases and
any amendments thereof. Except as described on Schedule 2.1.17(a), Xxxxx
has good and marketable fee simple title to any Real Property listed as
owned by it on Schedule 2.1.17(a), free and clear of all liens, mortgages,
pledges, covenants, easements, restrictions, leases, charges, and other
claims and encumbrances of any nature, except covenants, easements and
restrictions of record. All Real Property (including improvements thereon)
is in satisfactory condition and repair consistent with its present use,
and is available for immediate use in the conduct of the business of the
Surviving Corporation. To the best knowledge of Xxxxx and the Shareholders,
neither the operations of Xxxxx on any Real Property nor any improvements
on the Real Property violate any applicable building or zoning code or
regulation of any governmental authority having jurisdiction.
b. Title to and Condition of Tangible Personal Property.
Schedule 2.1.17(b) contains a complete and accurate list of all tangible
personal property with a value in excess of $10,000 owned or leased by
Xxxxx (the "Tangible Personal Property"), including the dates of and
parties to all leases and any amendments thereof. Xxxxx has good and
marketable title to all of the Tangible Personal Property listed as owned
by it on Schedule 2.1.17(b), free and clear of all liens, mortgages,
pledges, leases, restrictions and other claims and encumbrances of any
nature, except as set forth on Schedule 2.1.17(b). Except as set forth on
Schedule 2.1.17(b), the Tangible Personal Property is in good operating
condition and repair (ordinary wear and tear excepted), is performing
satisfactorily, and is adequate for the conduct of the business of the
Surviving Corporation. To the best knowledge of the Shareholders, all
Tangible Personal Property and the state of maintenance thereof are in
compliance with all applicable laws and regulations.
13
2.1.18 Permits and Licenses. Schedule 2.1.18 contains a complete
and accurate list of all governmental licenses, permits and authorizations
(collectively, "Permits") held by Xxxxx. Except as set forth on Schedule
2.1.18, Xxxxx holds all Permits necessary for the lawful conduct of its
business pursuant to all applicable statutes, laws, ordinances, rules and
regulations of all governmental bodies, agencies and other authorities
having jurisdiction over it or any part of its operations. Xxxxx is in
compliance with each of the terms of each of the Permits, and there are no
claims of violation by Xxxxx of any Permit. Complete and accurate copies of
all Permits held by Xxxxx have been delivered to PCTH.
2.1.19 Certain Interests. Except as set forth on Schedule 2.1.19,
no current or former shareholder of Xxxxx and no entity owned or controlled
by any of them (a) has any material interest in any property, real or
personal, tangible or intangible, used in or pertaining to the business of
Xxxxx, (b) is indebted to Xxxxx, or (c) has any financial interest, direct
or indirect, in any supplier or customer of, or other outside business
which has any transactions with, Xxxxx. Except as set forth on Schedule
2.1.19, Xxxxx is not indebted to any shareholder, director or officer of
Xxxxx (or any entity owned or controlled by one or more of such parties),
except for amounts due under normal salary arrangements and for
reimbursement of ordinary business expenses. The consummation of the
transactions contemplated by this Agreement will not (either alone or upon
the occurrence of any act or event, or with the lapse of time, or both)
result in any payment (severance or other) becoming due from Xxxxx to any
shareholder, officer, director or employee of Xxxxx (or any entity owned or
controlled by one or more of such parties).
2.1.20 Certain Payments. Neither Xxxxx nor any shareholder,
officer or director of Xxxxx, nor any other person or entity has, directly
or indirectly, on behalf of or with respect to Xxxxx or the business or
operations of Xxxxx (a) made any payment outside the ordinary course of
business to any purchasing or selling agent or person charged with similar
duties of any entity to which Xxxxx sells or from which Xxxxx buys products
for the purpose of influencing such agent or person to buy products from or
sell products to Xxxxx; (b) otherwise made or received any payment that was
not legal to make or receive under any applicable law or regulation of the
United States or any other country or territory; or (c) engaged in any
transaction, maintained any bank account, or used any corporate funds or
assets except for transactions, bank accounts, funds, and assets which have
been and are reflected in the normally maintained books and records of
Xxxxx.
2.1.21 Consents and Approvals. Except as set forth on Schedule
2.1.21 (which includes a list of all consents, approvals, authorizations or
filings to be obtained or made), no consent, approval, or authorization of
any entity or person not a party to this Agreement is required for the
consummation of the transactions described in this Agreement by Xxxxx or
the Shareholders.
2.1.22 Records. Except as described on Schedule 2.1.22, the books
of account of Xxxxx are complete and accurate in all material respects.
Except as described on Schedule 2.1.22, to the best knowledge of Xxxxx and
the Shareholders, complete and accurate copies of the books and records of
Xxxxx have been made available for PCTH's review.
2.1.23 Product Warranties, Recalls and Liabilities. Schedule
2.1.23 contains any standard forms of product warranties provided by Xxxxx.
Xxxxx has not undertaken any performance obligations or made any warranties
or guarantees with respect to its products other than those disclosed on
Schedule 2.1.23.
14
2.1.24 Brokers and Finders. Neither Xxxxx nor any shareholder,
officer, director or employee of Xxxxx has employed any broker, finder or
investment banker, or incurred any liability for any brokerage or
investment banking fees, commissions or finder's fees, in connection with
the transactions contemplated in this Agreement.
2.1.25 Customers and Suppliers. Schedule 2.1.25 sets forth (a) a
true and correct list of the ten largest customers of Xxxxx, in terms of
sales, during the fiscal year ended June 30, 1995, and during the three
months ended September 30, 1995, showing the approximate total sales to
each such customer during such time periods; and (b) a true and correct
list of the ten largest suppliers of Xxxxx, in terms of purchases, during
the fiscal year ended June 30, 1995, and during the three months ended
September 30, 1995, showing the approximate total purchases from each such
supplier during such time periods. There has not been any material adverse
change in the business relationship of Xxxxx with any customer or supplier
named on Schedule 2.1.25. Except as set forth on Schedules 2.1.7 and
2.1.25, neither Xxxxx nor the Shareholders have any reason to believe that
any such customer or supplier intends to materially reduce the amount of
business it conducts with Xxxxx. However, neither Xxxxx nor the
Shareholders have received any assurance from any customer or supplier
causing any such customer or supplier to be contractually obligated to any
level of commitment to Xxxxx.
2.1.26 Restrictive Covenants. Xxxxx is not a party
to any agreement, contract or covenant limiting the freedom of
Xxxxx to compete in any line of business or with any person or
other entity in any geographic area.
2.1.27 Reliance. Xxxxx and the Shareholders recognize and agree
that, notwithstanding any investigation by PCTH, PCTH is relying upon the
representations and warranties made by Xxxxx and the Shareholders in this
Agreement.
2.2 Representations and Warranties of PCTH and Acquisition.
PCTH and Acquisition represent and warrant to Xxxxx and the
Shareholders that:
2.2.1 Incorporation; Qualification; Articles and Bylaws. PCTH is
a corporation duly organized and validly existing under the laws of the
State of Nevada. Acquisition is a corporation duly organized and validly
existing under the laws of the State of Washington. PCTH has all requisite
corporate power and authority to own, operate, and lease its assets and
properties and to carry on its business as it is now being conducted and as
proposed to be conducted. Acquisition was formed for the purpose of
consummating the Merger, conducts no business, and has no liabilities or
assets (other than the initial capital contribution of its sole
shareholder).
2.2.2 Capitalization and Title to Outstanding Capital Stock. PCTH
has authorized capital stock consisting of 100,000,000 shares of common
stock, $.001 par value ("PCTH Common Stock"). On the date of this
Agreement, 6,308,059 shares of PCTH Common Stock are outstanding. There are
no other classes of stock of PCTH. Acquisition has authorized capital stock
consisting of 1,000,000 shares of Common Stock, no par value ("Acquisition
Common Stock"). On the date of this Agreement, 100,000 shares of
Acquisition Common Stock are outstanding and held by PCTH. All of the
outstanding shares of capital stock of PCTH and Acquisition have been duly
authorized and are validly issued, fully paid and nonassessable. No shares
of capital stock of PCTH or Acquisition have been issued in
15
violation of or are subject to any preemptive or similar rights granted to
any former or existing shareholder pursuant to law, their Articles of
Incorporation, Bylaws or otherwise. Other than pursuant to this Agreement
or as described on Schedule 2.2.2, (a) there is no subscription, option,
warrant, call, right, agreement or commitment granted or issued by or
binding upon PCTH or Acquisition (i) relating to the issuance, sale,
delivery, voting, transfer, ownership or other rights to or affecting any
shares of PCTH's, Acquisition's or Surviving Corporation's capital stock or
any other securities convertible into, exchangeable for, or evidencing the
right to subscribe for shares of PCTH's, Acquisition's or Surviving
Corporation's capital stock, or (ii) relating to the payment of amounts
measured by changes in the value or price of any capital stock of PCTH, and
(b) PCTH has no obligation of any kind to issue any additional securities.
2.2.3 Title to Shares. Upon effectiveness of the Merger, the
Shareholders will acquire good title to the Shares issued pursuant to the
Merger, free and clear of all pledges, security interests, liens, charges,
encumbrances, equities, claims, options or limitations of any nature. The
Shares issued to the Shareholders pursuant to the Merger will not be
registered under the Securities Act of 1933, as amended, or pursuant to the
blue sky laws of any state, and, except as provided in the Registration
Rights Agreement set forth as Exhibit C to this Agreement, which provides
certain piggy-back registration rights with respect to up to one-half of
the Shares of each Shareholder, PCTH shall have no obligation to register
the Shares.
2.2.4 Authority; Authorization. PCTH and Acquisition have full
corporate power and corporate authority to execute and deliver this
Agreement, to consummate the transactions contemplated in this Agreement,
and to carry out their obligations under this Agreement. This Agreement has
been duly and validly authorized by the Boards of Directors of PCTH and
Acquisition, has been duly and validly executed and delivered by PCTH and
Acquisition, and constitutes the valid and binding obligation of PCTH and
Acquisition, enforceable in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other laws of general application affecting
the enforcement of creditors' rights, and except that the availability of
the equitable remedies of specific performance and injunctive relief may be
subject to the discretion of the court before which any proceeding may be
brought. To the best knowledge of PCTH and Acquisition, other than
reporting obligations of PCTH under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and filings that may be required to obtain
exemptions from the registration requirements of the Securities Act of
1933, as amended (the "1933 Act"), or from the blue sky laws of any state,
and other than the filing of the Articles of Merger, no declaration,
filing, or registration with, or notice to, or authorization, consent, or
approval of, any governmental or regulatory body or authority is necessary
for the execution and delivery of this Agreement by PCTH or Acquisition or
the consummation by PCTH or Acquisition of the transactions contemplated in
this Agreement.
2.2.5 Financial Matters.
a. Financial Statements. PCTH's annual report
on Form 10-KSB for the fiscal year ended May 31, 1995, contains
true and correct copies of PCTH's (a) audited balance sheets,
statements of income and statements of cash flow for the fiscal
years ended May 31, 1995 and 1994, including the related notes,
each consolidated with respect to PCTH's subsidiaries, and PCTH's
quarterly report on Form 10-QSB for the quarter ended August 31,
1995 (the "Form 10-QSB") contains true and correct copies of
PCTH's balance sheet as of August 31, 1995, and its statement of
income for the three months then ended (collectively, the "PCTH
Financial Statements"). The PCTH Financial Statements are, to
the knowledge of
16
PCTH, complete and accurate and, as of their respective dates, present
fairly the consolidated financial position, results of operations, and
changes in financial position of PCTH and its subsidiaries as of the dates
and for the periods indicated therein in accordance with GAAP applied on a
consistent basis throughout the periods indicated, except as otherwise
indicated therein or in the notes thereto, subject, in the case of the
interim financial statements, to year-end audit adjustments and any other
adjustments described therein.
2.2.6 Litigation. Except as described in the Form 10-QSB, there
is no material claim, litigation, proceeding or investigation pending by
PCTH or against PCTH or the officers or directors of PCTH in their
capacities as such, or against the properties or business of PCTH, and, to
the best knowledge of PCTH, no such claim, litigation, proceeding or
investigation has been threatened and there is no basis for any such claim,
litigation, proceeding or investigation. There are no actions, proceedings,
suits, investigations, or inquiries pending, or to the best knowledge of
PCTH, threatened, that question the validity of this Agreement or any
actions taken or to be taken pursuant hereto.
2.2.7 Absence of Changes. Except as set forth on
Schedule 2.2.7, since August 31, 1995, PCTH has not:
a. Adverse Changes. Suffered or been threatened
with any adverse change in its business, results of operations,
financial condition, properties or assets;
b. Damage. Suffered any damage, destruction,
requisition, taking or casualty loss, whether or not covered by
insurance, of or to any of its assets or properties;
c. Dividends. Declared, set aside or paid any
dividend or other distribution (whether in cash, stock, property
or any combination thereof) in respect of its capital stock, or
directly or indirectly repurchased, redeemed or otherwise
acquired any shares of its capital stock, or made any other
payment to or for the account of its shareholders;
d. Sales of Stock. Issued or sold any capital stock or
issued or granted any option, warrant or right to purchase any capital
stock or any security exercisable for the purchase of or convertible into
capital stock or relating to the payment of amounts measured by changes in
the value or price of any capital stock, or made any commitment to do any
of the foregoing;
e. Articles and Bylaws. Amended its Articles
of Incorporation or Bylaws; or
f. Business Not in the Ordinary Course.
Conducted any business which is outside the ordinary course of
business or not substantially in the manner that it previously
conducted its businesses.
2.2.8 Consents and Approvals. Except as set forth on Schedule
2.2.8 (which includes a list of all consents, approvals, authorizations or
filings to be obtained or made), no consent, approval, or authorization of
any entity or person not a party to this Agreement is required for the
consummation of the transactions described in this Agreement by PCTH or
Acquisition.
17
2.2.9 Brokers and Finders. Neither PCTH nor Acquisition, nor any
shareholder, officer, director or employee of PCTH or Acquisition, has
employed any broker, finder or investment banker, or incurred any liability
for any brokerage or investment banking fees, commissions or finder's fees,
in connection with the transactions contemplated by this Agreement.
2.2.10 Accuracy of Federal and State Securities Filings. To its
best knowledge, no filing submitted by PCTH to any federal or state agency
under the 1934 Act, the 1933 Act or similar state acts contains any false
or misleading statement with respect to any material fact, or omits to
state any material fact necessary in order to make the statements in this
Agreement not false or misleading, in each case at the time such filing
became effective.
ARTICLE 3.
PRE-CLOSING CONDUCT AND AGREEMENTS
From the date of this Agreement until the Effective Date, except
to the extent expressly permitted by this Agreement or otherwise consented
to by an instrument in writing signed by PCTH and Xxxxx, the parties agree
that:
3.1 Representations and Warranties. PCTH, Acquisition, Xxxxx and the
Shareholders each agree not to take any action which would, as of the
Effective Date, cause any warranties or representations contained in this
Agreement and applicable to them to be false or misleading in any material
respect. PCTH, Acquisition, Xxxxx and the Shareholders agree to use their
best efforts to (a) take all actions necessary to render accurate as of the
Effective Date their respective representations and warranties contained in
this Agreement, and (b) perform or cause to be satisfied each covenant or
condition to be performed or satisfied by them prior to the Effective Date.
3.2 Properties and Records.
3.2.1 Access. PCTH and Xxxxx shall each afford to the officers,
employees, attorneys, accountants and other authorized representatives of
the other, free and full access to all of their assets, properties, books
and records, in order to afford as full an opportunity of review,
examination and investigation as they shall desire to make of the affairs
of the other, and each shall be permitted to make extracts from, or take
copies of, such books, records (including the stock record and minute
books) or other documentation or to obtain temporary possession of any
thereof as may be reasonably necessary; and each shall furnish or cause to
be furnished to the other such reasonable financial and operating data and
other information about its business, properties and assets which any of
their respective officers, employees, attorneys, accountants or other
authorized representatives may request.
3.2.2 Confidentiality. Until the Merger has been consummated (and
if the Merger is not consummated, at all times hereafter), PCTH,
Acquisition, Xxxxx and the Shareholders each agree not to disclose or use
any information obtained in the course of their respective investigations.
If the proposed Merger is not consummated, PCTH and Acquisition will return
all returnable data and copies thereof to Xxxxx and the Shareholders, and
Xxxxx and the Shareholders will return all returnable data to PCTH and
Acquisition. Such obligation of confidentiality shall not extend to any
information which is (a) shown to have been previously known by PCTH,
Acquisition, Xxxxx, or the Shareholders, as the case may be, (b) generally
18
known to the public, (c) or made known to PCTH, Acquisition, Xxxxx, the
Shareholders, or the public by a third party.
3.3 Corporate Issues.
3.3.1 Governing Documents. Neither PCTH, Acquisition,
nor Xxxxx will make any change in their respective Articles of
Incorporation or Bylaws.
3.3.2 Capital Stock. Neither PCTH nor Xxxxx will (a) issue or
cause to be issued any additional shares of their capital stock, except
shares of PCTH Common Stock which may be issued as described in Schedule
2.2.2, (b) effect any subdivision of their outstanding capital stock,
purchase or redeem any capital stock, (c) declare, make or pay any
dividend, distribution or payment in respect of their capital stock, or (d)
grant or issue any options, warrants or other rights to acquire any capital
stock or other of their equity securities, whether by conversion or
otherwise, or make any commitment to do any of the above. Notwithstanding
the foregoing, Xxxxx shall modify the terms of its debt to Xxxx Xxxxx by
executing a promissory note in the amount of $200,000, in substantially the
form attached as Exhibit D and canceling the Non-voting Stock certificates
that previously represented such debt.
3.4 Conduct of Xxxxx'x Business. Xxxxx and the Shareholders shall keep
Xxxxx'x business intact and shall not take or permit to be taken or do or
suffer to be done anything other than in the ordinary course of its
business as the same is presently being conducted, and shall use their best
efforts to keep available the services of Xxxxx'x directors, officers,
employees and agents and to maintain the goodwill and reputation associated
with its business. The parties understand and agree that (a) PCTH must be
consulted on every material issue and matter which may affect the business
or operations of Xxxxx after the date of this Agreement, and (b) no such
issue or matter shall be acted on without consent of PCTH. Subject to the
foregoing, Xxxxx and the Shareholders agree as follows (except to the
extent that PCTH gives its prior written consent otherwise):
3.4.1 Properties and Assets.
a. Maintenance. Xxxxx shall exercise its best
efforts to maintain all of its properties and assets, tangible
or intangible, in good operating condition and repair, and take
all steps necessary to keep its operations functioning properly.
b. Liens and Encumbrances. Xxxxx shall not
further encumber or permit to be further encumbered any of its
properties or assets.
c. Disposition. Xxxxx shall not purchase, sell, lease or
dispose of or make any contract for the purchase, sale, lease or
disposition of or subject to lien or security interest any properties or
assets other than in the ordinary and usual course of its business
consistent with the representations and warranties contained in this
Agreement and not in breach of any of the provisions of this Agreement.
3.4.2 Compensation. Xxxxx shall not grant any salary increase to,
or increase the draw of, any of its officers, directors, or employees, or
enter into any new, or amend or alter any existing, bonus, incentive
compensation, deferred compensation, profit sharing, retirement, pension,
stock option, group insurance, death benefit or other fringe benefit plan,
19
trust agreement or other similar or dissimilar arrangement, or
any employment or consulting agreement.
3.4.3 Indebtedness. Xxxxx shall not incur any bank indebtedness
or make any borrowings, except for a $600,000 loan from the City of Entiat
and the Washington Department of Community, Trade and Economic Development.
3.4.4 Leases. Xxxxx shall not enter into any leases.
3.4.5 Payments. Except as otherwise specified in this Agreement,
Xxxxx shall not pay any obligation or liability (fixed or contingent) or
discharge or satisfy any lien or encumbrance, or settle any claim,
liability or suit pending or threatened against it or any of its
properties, except for liabilities on the Current Financial Statements or
current liabilities incurred between September 30, 1995, and the Effective
Date in the ordinary and usual course of business consistent with Xxxxx'x
representations and warranties contained in this Agreement and not in
breach of any of the provisions of this Agreement.
3.4.6 Contracts and Agreements. Xxxxx shall not enter into any
contract, agreement or commitment not in the ordinary course of business,
including without limiting the generality of the foregoing, any contract,
agreement or commitment for the purchase of any materials or supplies.
3.4.7 Shipments. Xxxxx shall not, other than in the ordinary
course of business, curtail purchases or accelerate shipments beyond
customer requirements, nor shall it modify, amend, cancel or terminate any
existing contracts or agreements.
3.4.8 Insurance. Xxxxx shall maintain in full force
and effect its policies of insurance.
3.5 Public Announcements. Promptly after the execution of this
Agreement, PCTH shall issue a press release in a form reasonably
satisfactory to Xxxxx. Thereafter, PCTH and Xxxxx will consult with each
other with respect to any announcement to the public or any statement to
their employees generally concerning or relating to the Merger. No party
will make any announcement to the public without the prior written consent
of the others, except for announcements which a party believes on the
advice of such party's counsel to be required by applicable securities
laws.
3.6 Notice of Breach.
3.6.1 By Xxxxx and the Shareholders. Xxxxx and the Shareholders
will immediately give written notice to PCTH and Acquisition of the
occurrence of any event or the failure of any event to occur that results
in a breach of any representation or warranty by Xxxxx or the Shareholders,
or a failure by Xxxxx or the Shareholders to comply with any covenant,
condition or agreement contained in this Agreement.
3.6.2 By PCTH and Acquisition. PCTH and Acquisition will
immediately give written notice to Xxxxx and the Shareholders of the
occurrence of any event or the failure of any event to occur that results
in a breach of any representation or warranty by PCTH and Acquisition or a
failure by PCTH or Acquisition or to comply with any covenant, condition or
agreement contained in this Agreement.
20
ARTICLE 4.
CONDITIONS TO CLOSING
4.1 Conditions to the Obligations of PCTH and Acquisition. All
obligations of PCTH and Acquisition under this Agreement are subject to the
fulfillment and satisfaction, prior to or at Closing, of each of the
following conditions, any one or more of which may be waived by PCTH in
writing:
4.1.1 Authority. All corporate actions required to be taken by,
or on the part of, Xxxxx or the Shareholders to authorize the execution,
delivery and performance of this Agreement by Xxxxx and the Shareholders,
and the consummation of the transactions contemplated in this Agreement,
shall have been duly and validly taken by the Board of Directors and the
Shareholders.
4.1.2 Representations and Warranties. The representations and
warranties of Xxxxx and the Shareholders contained in this Agreement shall
be true and correct in all material respects at and as of the Closing Date,
with the same effect as though such representations and warranties had been
made at and as of the Closing Date.
4.1.3 Xxxxx'x and Shareholders' Performance. Each of
the obligations of Xxxxx and the Shareholders to be performed on
or before the Effective Date pursuant to the terms of this
Agreement shall have been duly performed.
4.1.4 No Material Adverse Change. There shall have
been, between the date of this Agreement and the Closing, no
material adverse change in the condition, financial or otherwise,
of Xxxxx.
4.1.5 Approvals; Consents. All required approvals, consents and
waivers with regard to the transactions contemplated by this Agreement
shall have been obtained or waived, and PCTH and Acquisition shall have
received copies of such consents and waivers in a form acceptable to PCTH
and Acquisition.
4.1.6 Certificate. Xxxxx and the Shareholders shall have
delivered to PCTH and Acquisition a certificate to the effect of Sections
4.1.1 through 4.1.5, signed by the President of Xxxxx and by the
Shareholders.
4.1.7 Capital Stock. The Shareholders shall have
delivered to PCTH the certificates evidencing the Xxxxx Common
Stock, for cancellation and issuance of stock certificates
representing the Shares.
4.1.8 Xxxx Xxxxx Debt. PCTH and Acquisition shall have received
evidence satisfactory to them that the debt represented by the Non-voting
Stock has been modified by execution of the promissory note referred to in
Section 3.3.2 and cancellation of the Non-voting Stock certificates that
previously represented the debt.
4.1.9 Shareholders' Accounts Receivable. The
outstanding accounts of the Shareholders with Xxxxx, as set forth
on Schedule 2.1.19, shall have been converted into compensation
by Xxxxx'x Board of Directors and paid, and there shall be no
other accounts
21
receivable from or payable to the Shareholders by the Company other than
for compensation coming due in the ordinary course of business.
4.1.10 Shareholders Agreement. PCTH and Acquisition shall have
received evidence satisfactory to them that the Shareholders Agreement
between each of the Shareholders and Xxxxx dated February 1, 1992, has been
terminated.
4.1.11 Employment Agreements. The Shareholders shall
have executed and delivered Employment Agreements in
substantially the forms attached as Exhibits E and F.
4.1.12 Further Documents. Xxxxx and the Shareholders shall have
executed and delivered all such other documents and performances as are, in
the opinion of PCTH and its counsel, consistent with the terms of, and
required to consummate the transactions contemplated by, this Agreement.
4.2 Conditions to the Obligations of Xxxxx and the Shareholders. All
obligations of Xxxxx and the Shareholders under this Agreement are subject
to the fulfillment and satisfaction, prior to or at Closing, of each of the
following conditions, any one or more of which may be waived by Xxxxx or
the Shareholders in writing:
4.2.1 Authority. All actions required to be taken by, or on the
part of, PCTH and Acquisition to authorize the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated by this Agreement shall have been duly and validly taken.
4.2.2 Securities Filings. PCTH shall be current in the filing of
any reports required to be filed by it pursuant to the 1934 Act. No stop
order or similar restraining order shall have been threatened or entered by
the SEC or any state securities administrator.
4.2.3 Representations and Warranties True at the Effective Date.
At the Effective Date, the representations and warranties of PCTH and
Acquisition contained in this Agreement will be true and correct in all
material respects at and as of such time, except to the extent affected by
the transactions contemplated by this Agreement.
4.2.4 PCTH's and Acquisition's Performance. Each of the
obligations of PCTH and Acquisition to be performed by it on or before the
Effective Date pursuant to the terms of this Agreement shall have been duly
performed at the Effective Date.
4.2.5 President's Certificate. PCTH and Acquisition shall have
each delivered to Xxxxx and the Shareholders a certificate to the effect of
Sections 4.2.1 through 4.2.4, signed by the Presidents of PCTH and
Acquisition.
4.2.6 Delivery of Shares. PCTH shall have made arrangements
satisfactory to the Shareholders with its transfer agent for delivery to
the Shareholders of certificates representing the Shares.
4.2.7 Registration Rights Agreement. PCTH shall have
executed and delivered the Registration Rights Agreement, in
substantially the form attached as Exhibit C.
22
4.2.8 Employment Agreements. The Surviving
Corporation shall have executed and delivered the Employment
Agreements in substantially the forms attached as Exhibits E
and F.
4.2.9 Further Documents. PCTH and Acquisition shall have executed
and delivered all such other documents and performances as are consistent
with the terms of, and required to consummate the transactions contemplated
by, this Agreement.
ARTICLE 5.
POST-CLOSING CONDUCT AND AGREEMENTS
5.1 PCTH Contribution. After the Effective Date, PCTH shall contribute
a total of $2,000,000, as and when needed, to Surviving Corporation (the
"Capital Contribution"), as follows:
5.1.1 Specific Debts. PCTH shall pay in full each of
the obligations of Xxxxx set forth on the attached Schedule 5.1
from the Capital Contribution, in the order and at such times as
determined by PCTH in its sole discretion;
5.1.2 Working Capital. PCTH shall contribute the balance, as and
when needed, of the Capital Contribution to Surviving Corporation in cash
or cash equivalent to supplement Surviving Corporation's working capital,
which funds shall be subject to expenditure only upon the approval of
management of PCTH; and
5.1.3 Characterization. Surviving Corporation shall reflect the
amounts of each such payment and cash contribution on its books of account,
at the time each such payment or cash contribution is made, as a capital
contribution by PCTH.
5.2 Boards of Directors. After the Effective Date, PCTH shall use its
best efforts to encourage the Board of Directors of PCT Holdings, Inc., a
Washington corporation and wholly-owned subsidiary of PCTH ("PCTH-WA"), to
nominate each of the Shareholders to the Board of Directors of one of
PCTH-WA's subsidiaries.
5.3 Personal Property. Schedule 5.3 lists the personal property
located on the Xxxxx premises that is not owned by Xxxxx, but that is the
personal property of the Shareholders. At any time after Closing, the
Shareholders may remove such personal property from Xxxxx'x premises.
5.4 Insurance. After the Closing Date, the Shareholders shall be
entitled to coverage under such director's liability insurance policies as
are generally available to the directors of the corporations affiliated
with PCTH upon whose Boards of Directors the Shareholders sit, under the
same terms and conditions as the policies covering the other directors of
such corporations.
5.5 Employee Plans. Unless and until otherwise determined by or with
the authorization of the Board of Directors of the Surviving Corporation,
all pension and retirement plans of Xxxxx and all other plans, agreements,
or arrangements of Xxxxx relating to its employees or any of them, in force
on the Effective Date of the Merger, shall continue in
23
effect and shall be applicable to the persons who would have been covered
thereby as if the Merger in this Agreement had not been effected.
5.6 Attorneys' Fees. PCTH shall pay up to $14,000 of the attorneys'
fees incurred by Xxxxx and the Shareholders in connection with the
transactions contemplated by this Agreement subject to PCTH's approval of
the invoices for such fees. The Shareholders shall be personally
responsible for all attorneys' fees exceeding such amount.
5.7 Further Actions. The parties and the Surviving Corporation shall
each execute all such other documents and shall take all such other actions
as may be necessary or advisable to make this Agreement and the Merger
effective, and to carry out the intent of this Agreement.
ARTICLE 6.
INDEMNIFICATION
6.1 Indemnification by the Shareholders.
6.1.1 General Indemnification. Notwithstanding any investigation
by PCTH and subject to Section 6.3.1, from and after the Closing, the
Shareholders, jointly and severally, shall indemnify, hold harmless and
defend PCTH and its subsidiaries (including without limitation the
Surviving Corporation), shareholders, affiliates, officers, directors,
employees, agents, successors and assigns (the "PCTH Indemnified Persons")
from and against, and reimburse each of them with respect to, any and all
losses, damages, liabilities, costs, and expenses, including without
limitation interest, penalties and reasonable attorneys' fees
(collectively, "Damages") incurred by any of them based on or arising out
of: (a) any material breach or inaccuracy of any representation or warranty
of Xxxxx or the Shareholders made in this Agreement or any exhibit,
schedule, certificate or agreement delivered in accordance with this
Agreement (collectively the "Related Documents"), or (b) any material
failure by Xxxxx or the Shareholders to perform any covenant required to be
performed by them pursuant to this Agreement or Related Documents.
6.1.2 Specific Indemnification. The Shareholders
agree to defend, indemnify and hold the PCTH Indemnified Persons
harmless from (a) any interest in or claim that Xxxx Xxxxx or X.
X. Xxxxxx, Xx. may have against any of Xxxxx'x capital stock,
including without limitation Xxxxx Stock Certificate No. 13, and
(b) any right to repayment or other claim that Xxxx Xxxxx may
have against Xxxxx, including, without limitation, any claim of
a right to repayment under Bond No. 3 between Xxxxx and Xxxx
Xxxxx dated July 1, 1980. This indemnification obligation shall
not be subject to the limitations set forth in Section 6.3.1.
6.2 Indemnification by PCTH. Notwithstanding any investigation by
Xxxxx or the Shareholders, and subject to Section 6.3.2, from and after the
Closing, PCTH shall indemnify, hold harmless and defend the Shareholders
and their agents, successors, heirs and assigns from and against, and
reimburse each of them with respect to, any and all Damages incurred by any
of them based on or arising out of: (a) any material breach or inaccuracy
of any representation or warranty of PCTH or Acquisition made in this
Agreement or any Related Document; or (b) any material failure by PCTH or
Acquisition to perform any covenant required to be performed by it pursuant
to this Agreement or any Related Document.
24
6.3 Limits on Indemnification.
6.3.1 Limits on Liability of the Shareholders. Notwithstanding
the foregoing, the liability of the Shareholders under Section 6.1.1, but
not under Section 6.1.2, shall be subject to the following limitations:
a. Indemnification Period. Except as otherwise specified
herein, no claim for indemnity will be effective if not made within three
years after the Closing Date (the "Indemnification Period"). Claims based
upon the assertion that either of the Shareholders had actual knowledge
that a representation or warranty made by Xxxxx or the Shareholders was
materially false when made or was made with the intent to deceive, and
claims based on Section 6.1.2, may be made at any time up to the applicable
statute of limitations.
b. Amount of Indemnification. The maximum aggregate amount
of each Shareholder's liability for claims made during the Indemnification
Period shall be limited to an amount of cash equal to the Fair Market Value
of a percentage of the Shares received by him pursuant to this Agreement,
on the schedule set forth below:
If claim is made within: % of Shares
----------------------- -----------
0 through 12 Months after Closing 40%
13 through 24 Months after Closing 30%
25 through 36 Months after Closing 20%
37 months after Closing and beyond 0%
The "Fair Market Value" of the Shares shall be deemed to be the closing bid
price of the PCTH Common Stock on the NASDAQ SmallCap Market on the Closing
Date. The Shareholders may pay their liability for any such claims in cash
or by delivering to PCTH Shares having a value equal to the amount of the
claim, based on the Fair Market Value of the Shares. Notwithstanding the
above, there shall be no limit on each Shareholders' liability for claims
based upon the assertion that either of the Shareholders had actual
knowledge that a representation or warranty made by Xxxxx or the
Shareholders was materially false when made or was made with the intent to
deceive, or claims based on Section 6.1.2.
6.3.2 Limits on Liability of PCTH. The liability of
PCTH pursuant to Section 6.2 is limited as follows:
a. Indemnification Period. No claim for indemnity will be
effective if not made within three years after the Closing Date, other than
claims based upon the assertion that PCTH had actual knowledge that a
representation or warranty made by PCTH or Acquisition was materially false
when made or was made with the intent to deceive, which claims may be made
at any time up to the applicable statute of limitations.
b. Amount of Indemnification. The maximum
aggregate amount of PCTH's liability at any given time is limited
to the Fair Market Value of the percentage of the Shares set
forth on the schedule in Section 6.3.1(b).
25
6.4 Indemnification Procedure.
6.4.1 Third Party Claims.
a. Each indemnified party will, promptly after obtaining
knowledge of a claim, provide the indemnifying party with written notice of
all third party actions, suits, proceedings, claims, demands or assessments
that may be subject to the indemnification provisions of this Article 6
(collectively, "Third Party Claims"), including, in reasonable detail, the
basis for the claim, the nature of Damages and a good faith estimate of the
amount of Damages.
b. The indemnifying party shall have 15 days after its
receipt of the claim notice to notify the indemnified party in writing
whether the indemnifying party agrees that the claim is subject to this
indemnification under this Article 6 and, if so, whether the indemnifying
party elects to undertake, conduct and control, through counsel of its
choosing (subject to the consent of the indemnified party, such consent not
to be withheld unreasonably), and at its sole risk and expense, the good
faith settlement or defense of the Third Party Claim.
c. If within 15 days after its receipt of the claim notice
the indemnifying party notifies the indemnified party that it elects to
undertake the good faith settlement or defense of a Third Party Claim, the
indemnified party shall reasonably cooperate with the indemnifying party,
including, without limitation, by making available to the indemnifying
party all relevant information material to the defense of the Third Party
Claim. The indemnified party shall be entitled to participate in the
settlement or defense of the Third Party Claim through counsel chosen by
the indemnified party, at its expense, and to approve any proposed
settlement that would impose any obligation or duty on the indemnified
party, which approval may, in the sole discretion of the indemnified party,
be withheld. So long as the indemnifying party is contesting the Third
Party Claim in good faith and with reasonable diligence, the indemnified
party shall not pay or settle the Third Party Claim. Notwithstanding the
foregoing, the indemnified party shall have the right to pay or settle any
Third Party Claim at any time, if it waives any right to indemnification
therefor by the indemnifying party.
d. If the indemnifying party does not provide notice that it
elects to undertake the good faith settlement or defense of a Third Party
Claim, or if the indemnifying party fails to contest the Third Party Claim
or undertake or approve settlement, in good faith and with reasonable
diligence, the indemnified party shall thereafter have the right to
contest, settle or compromise the Third Party Claim at its exclusive
discretion, at the risk and expense of the indemnifying party.
6.4.2 Non-Third Party Claims.
a. Each indemnified party will, with reasonable promptness,
deliver to the indemnifying party written notice of all claims for
indemnification under this Article 6, other than Third Party Claims,
including, in reasonable detail, the basis for the claim, the nature of
Damages and a good faith estimate of the amount of Damages.
b. The indemnifying party shall have 30 days after its
receipt of the claim notice to notify the indemnified party in writing
whether the indemnifying party accepts liability for all or any part of the
Damages described in the claim notice. If the indemnifying
26
party does not so notify the indemnified party, the indemnifying party
shall be deemed to accept liability for all the Damages described in
the claim notice.
6.5 Rights Not Exclusive. An indemnified party's rights to
indemnification under this Article 6 are in addition to, and not in lieu
of, any other rights to which the indemnified party may be entitled at law
or in equity. A party's failure to give timely notice of a claim will not
constitute a defense (in part or in whole) to any claim for indemnification
by such party, except if, and only to the extent that, such failure results
in any material prejudice to the indemnifying party.
ARTICLE 7.
TERMINATION
7.1 Right to Terminate. Notwithstanding anything to the contrary in
this Agreement, this Agreement may be terminated and the transactions
contemplated herein abandoned at any time prior to the Closing:
7.1.1 Mutual Consent. By mutual consent of PCTH and
Xxxxx.
7.1.2 Delay. By either PCTH or Xxxxx, if the Closing shall not
have occurred by December 31, 1995; provided, however, that the right to
terminate this Agreement under this Section 7.1.2 shall not be available to
any party whose failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of the Closing to occur on
or before such date.
7.1.3 Breach by PCTH or Acquisition. By Xxxxx, if PCTH or
Acquisition breach any of their representations and warranties in any
material respect or fail to comply in any material respect with any of
their agreements contained here.
7.1.4 Breach by Xxxxx or the Shareholders. By PCTH, if Xxxxx or
either of the Shareholders breach any of their representations and
warranties in any material respect or fail to comply in any material
respect with any of their agreements contained herein.
7.2 Certain Obligations to Cease. If this Agreement is terminated
pursuant to Section 7.1, all obligations of the parties to this Agreement
shall terminate and there shall be no liability of any party hereto to any
other party, except: (a) for breaches of Section 3.2; (b) that nothing
herein will relieve any party from liability for any willful breach of this
Agreement; and (c) PCTH shall pay all expenses of Xxxxx for the audit of
its financial statements for the most recent two fiscal years.
Notwithstanding the above, if this Agreement is terminated by PCTH under
Section 7.1.2 due to Xxxxx'x or the Shareholder's failure to close despite
PCTH's willingness to close, subject to the fulfillment or waiver of the
conditions contained in Section 4.2, PCTH shall only pay one-half of such
auditing expenses.
27
ARTICLE 8.
MISCELLANEOUS PROVISIONS
8.1 Exhibits; Schedules. Each Exhibit to this Agreement
and each Schedule delivered pursuant to the terms of this
Agreement is incorporated into this Agreement by reference.
8.2 Governing Law. This Agreement and the Merger shall be
governed by and construed in accordance with the internal laws
of the State of Washington.
8.3 Notices. Any notice or other communications required or permitted
under this Agreement shall be sufficiently given if in writing and shall be
deemed given or made when delivered personally, by facsimile, or by courier
(with signed receipt), or three days after sent by certified or registered
mail, return receipt requested, to the following addresses or to such other
address as a party may designate in writing to the others:
If to Xxxxx (prior to the Effective Date):
Xxxxx Industries, Inc.
00000 Xxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx
Fax No.: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxxxxx, Esq.
Inslee, Best, Doezie & Ryder
000 000xx Xxxxxx X.X., Xxxxx 0000
Xxxxxxxx, XX 00000
Fax No.: (000) 000-0000
If to the Shareholders:
Xxxxxxx X. Xxxxx
000 Xxxxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Fax No.: (000) 000-0000
Xxxx Xxxxx
0000 Xxxxxxxx X.
Xxxxxxxxx, XX 00000
Fax No.: (000) 000-0000
28
with a copy to:
Xxxxxx X. Xxxxxxxxx, Esq.
Inslee, Best, Doezie & Ryder
000 000xx Xxxxxx X.X., Xxxxx 0000
Xxxxxxxx, XX 00000
Fax No.: (000) 000-0000
If to PCTH or to Acquisition:
PCT Holdings, Inc.
000 Xxxx Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, President
Fax No.: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxxx
Stoel Rives
0000 Xxx Xxxxx Xxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Fax No.: (000)000-0000
8.4 No Assignment. This Agreement may not be assigned by
operation of law or otherwise.
8.5 Titles and Captions. The section titles, captions and headings in
this Agreement are for convenience only and shall not be deemed part of
this Agreement or in any way intended to define, limit, extend or define
the scope or intent of any provisions of this Agreement.
8.6 Waiver. No failure by any party hereto to insist upon the strict
performance of any covenant, duty, agreement, or condition of this
Agreement or to exercise any right or remedy consequent upon a breach
thereof shall constitute a waiver of any such breach or of such or any
other covenant, agreement, term or condition. Any party by notice pursuant
to this Agreement may, but shall be under no obligation to, waive any of
its rights or any conditions to its obligations under this Agreement, or
any duty, obligation or covenant of any other party. No waiver shall affect
or alter the remainder of this Agreement but each and every other covenant,
agreement, term and condition of this Agreement shall continue in full
force and effect with respect to any other then existing or subsequently
occurring breach.
8.7 Amendment. This Agreement may be amended with respect to any
provision contained herein by a written instrument duly executed on behalf
of each party hereto.
8.8 Severability. If any condition, covenant or other provision in
this Agreement is held to be invalid, void or unenforceable by a court of
competent jurisdiction, the same shall be deemed severable from the
remainder of this Agreement and shall in no way affect any other covenant,
condition or provision of this Agreement. If such condition, covenant or
other
29
provision shall be deemed invalid due to its scope or breadth, such
provision shall be deemed reformed and valid to the extent of the scope or
breadth permitted by law.
8.9 Rights and Remedies. The rights and remedies of the parties under
this Agreement shall not be mutually exclusive and the exercise of one or
more of the provisions of this Agreement shall not preclude the exercise of
any other provision.
8.10 Attorneys' Fees. In the event of any legal action arising from or
relating to this Agreement, the non-prevailing party shall reimburse the
prevailing party for all of the prevailing party's costs and expenses,
including reasonable attorneys' fees, incurred in legal action.
8.11 Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and
the same agreement.
8.12 Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements or understandings
between parties, written or oral, as to the subject matter of this
Agreement.
Executed as of the date first written above.
XXXXX:
XXXXX INDUSTRIES, INC.
By /s/ XXXXXXX X. XXXXX
-----------------------------
Xxxxxxx X. Xxxxx
Its President
SHAREHOLDERS:
/s/ XXXXXXX X. XXXXX
-------------------------------
XXXXXXX X. XXXXX
/s/ XXXX XXXXX
-------------------------------
XXXX XXXXX
30
PCTH:
PCT HOLDINGS, INC., a Nevada
corporation
By /s/ XXXXXX X. XXXXXX
-----------------------------
Xxxxxx X. Xxxxxx
Its President
ACQUISITION:
XXXXX ACQUISITION CORPORATION
By /s/ XXXXXX X. XXXXXX
-----------------------------
Xxxxxx X. Xxxxxx
Its President
31
SPOUSAL CONSENTS
The undersigned hereby consent to the execution of this Agreement
by their respective spouses, individually and on behalf of their respective
marital communities.
/s/ XXXXXXX X. XXXXX
-----------------------------------
Xxxxxxx X. Xxxxx
/s/ XXXXXX XXXXX
-----------------------------------
Xxxxxx Xxxxx
