EXHIBIT 2.5
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement") is entered into on November
___, 1999, by and among PMCB ACQUISITION CORP., a Delaware corporation (the
"Buyer"), XXXXX INDUSTRIES, INC., a Delaware corporation and parent of Buyer
("Parent"), REDLAKE IMAGING CORPORATION, a California corporation (the
"Company") and the Xxxxxxx X. Xxxxxxx Revocable Family Trust dated July 27,
1992, a trust established under the laws of the State of California and
represented herein by its trustee, Xxxxxxx X. Xxxxxxx (the "Trust"), Xxxxxxx X.
Xxxxxxx, Xxxxx Xxxxxxx , Xxxxxx Xxxxxxx, Xxxx Xxxxx, Xxxxxx Xxxxxx, Xxxxx
Xxxxx, Xxxxxxx Xxxxxxxx and Xxxxxxx Xxxxxxxxxx, each individual residents of the
state of California (each of the latter individuals as well as the Trust, a
"Stockholder"). The Buyer, Parent, the Company and the Stockholders are
referred to collectively herein as the "Parties."
This Agreement contemplates a transaction in which Buyer shall merge with
the Company, with Buyer being the surviving corporation and in connection
therewith, the Stockholders will receive certain consideration in the form of
cash.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows:
1. Definitions.
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, penalties, fines, costs, amounts
paid in settlement, Liabilities, obligations, Taxes, liens, losses, expenses,
and fees, including court costs and reasonable attorneys' fees and expenses;
provided, however, that "Adverse Consequences" shall not include any of the
foregoing attributable to an Indemnified Party's conduct which occurs other than
in its exercise of its reasonable business judgment or in the good faith defense
or contesting of any of the foregoing.
"Affiliated Group" means any affiliated group within the meaning of
Code Sec. 1504(a) (or any similar group defined under a similar provision of
state, local, or foreign law).
"Applicable Rate" means the corporate base rate of interest announced
from time to time by Bank of America.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, occurrence, event, incident, action,
failure to act, or transaction that forms or would probably form the basis for
any specified consequence.
"Business" means the business conducted by the Company on and as of
the Closing Date.
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"Buyer" has the meaning set forth in the preface above.
"California Act" shall mean the General Corporations Law of the State
of California.
"Closing" has the meaning set forth in (S) 2(e) below.
"Closing Date" has the meaning set forth in (S) 2(e) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preface above.
"Company Disclosure Schedule" has the meaning set forth in (S) 3
below.
"Company Loans" means any and all loans of the Company for borrowed
money.
"Company Plans" has the meaning set forth in (S) 3(x)(ii) below.
"Company Shares" means share(s) of the Common Stock, no par value, of
the Company.
"Confidential Information" means: (a) confidential data and
confidential information relating to the business of any Party (the "Protected
Party") which is or has been disclosed to another Party (the "Recipient") or of
which the Recipient became aware as a consequence of or through its relationship
with the Protected Party and which has value to the Protected Party and is not
generally known to its competitors and which is designated by the Protected
Party as confidential or otherwise restricted; and (b) information of the
Protected Party, without regard to form, including, but not limited to,
Intellectual Property, technical or nontechnical data, algorithms, formulas,
patents, compilations, programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, product or service plans or lists of
customers or suppliers which is not commonly known or available to the public
and which information (i) derives economic value from not being generally known
to, and not being readily ascertainable by proper means by, other Persons who
can obtain economic value from its disclosure or use, and (ii) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy.
Notwithstanding anything to the contrary contained herein, Confidential
Information shall not include any data or information that (v) has been
voluntarily disclosed to the public by the Protected Party, (w) has been
independently developed and disclosed to the public by others, (x) otherwise
enters the public domain through lawful means, (y) was already known by
Recipient prior to such disclosure or was lawfully and rightfully disclosed to
Recipient by another Person, or (z) that is required to be disclosed by law or
order.
"Controlled Group of Corporations" has the meaning set forth in Code
Sec. 1563.
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"Delaware Act" shall mean the General Corporation Law of the State of
Delaware, as amended.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan (as defined in ERISA Sec. 3(2)), (b) qualified defined contribution
retirement plan or arrangement which is an Employee Pension Benefit Plan, (c)
qualified defined benefit retirement plan or arrangement which is an Employee
Pension Benefit Plan (including any Multiemployer Plan), or (d) Employee Welfare
Benefit Plan (as defined in ERISA Sec. 3(1)) or material fringe benefit plan or
program.
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, state law rulings, codes, plans, permits, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local and
foreign governments (and all agencies thereof) concerning pollution or
protection of the environment, natural resources, public health and safety, or
employee health and safety, including, but not limited to, laws relating to
emissions, discharges, releases, or threatened releases of Hazardous Substances
in ambient air, surface water, drinking water, wetlands, ground water, or lands
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, recycling, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means SunTrust Bank, Atlanta.
"Escrow Agreement" means the Escrow Agreement dated the Closing Date,
entered into among the Parties and the Escrow Agent with respect to the
indemnification obligations of the Stockholders under (S) 8 of this Agreement,
the form of which is set forth as Exhibit A.
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"Extremely Hazardous Substance" has the meaning set forth in Sec. 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Financial Statements" has the meaning set forth in (S) 3(g)(ii)
below.
"GAAP" means United States generally accepted accounting principles as
in effect as of the date hereof.
"Hazardous Substance" means any substance regulated under or defined
by Environmental, Health, and Safety Laws, including, but not limited to, any
pollutant,
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contaminant, hazardous substance, hazardous constituent, hazardous waste,
special waste, solid waste, industrial waste, petroleum derived substance or
waste, or toxic substance.
"Indemnified Party" has the meaning set forth in (S) 8(d) below.
"Indemnifying Party" has the meaning set forth in (S) 8(d) below.
"Intellectual Property" means, with respect to the Business:
(a) all inventions (whether patentable or unpatentable and whether or
not reduced to practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof;
(b) all trademarks, service marks, trade dress, logos, trade names and
corporate names, together with all translations, adaptations, derivations,
and combinations thereof and including all goodwill associated therewith,
and all applications, registrations, and renewals in connection therewith;
(c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith;
(d) all mask works and all applications, registrations, and renewals
in connection therewith;
(e) all trade secrets and confidential business information (including
ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data,
designs, drawings, specifications, customer and supplier lists, pricing and
cost information, and business and marketing plans and proposals);
(f) all computer software (including data and related documentation);
(g) all other proprietary rights; and
(h) all copies and tangible embodiments thereof (in whatever form or
medium).
"Knowledge" means knowledge of the Stockholders, after due inquiry of
the Company employees with management responsibility in the area of the Company
operations with respect to which the applicable representation or warranty
applies.
"Leased Real Property" has the meaning set forth in (S) 3(l) below
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"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Merger" has the meaning set forth in (S) 2(a) below.
"Merger Consideration" shall have the meaning set forth in (S) 2(c)(i)
hereof.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Option" shall have the meaning set forth in Section 7(e) hereof.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Principal Stockholders" shall mean Xxxxxxx Xxxxxxx, Xxxxx Xxxxxxx,
Xxxxxx Xxxxxxx, Xxxxxx Xxxxxx and Xxxx Xxxxx.
"Process Agent" has the meaning set forth in (S) 9 below.
"Product Warranty Claims" means claims of the Company customers and/or
users made at any time following Closing in the Ordinary Course of Business with
respect to products sold, manufactured, leased or delivered by the Company on or
prior to the Closing Date which (i) are based solely on the Company's written
product warranties disclosed to Buyer, and (ii) are only for the refund, repair
or replacement remedies expressed in such written product warranties.
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406
and Code Sec. 4975.
"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
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"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"September Balance Sheet" has the meaning set forth in Section 3(g)(i)
below.
"Stockholder(s)" has the meaning set forth in the preface above.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Sec. 59A),
customs duties, capital stock, franchise profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Trust" has the meaning set forth in the preface above.
2. Merger.
(a) At the Effective Time (as hereinafter defined) and subject to the
terms and conditions of this Agreement, Buyer shall be merged with and into
the Company (the "Merger"), in accordance with the relevant provisions of
the California Act and the Delaware Act, the separate corporate existence
of the Company shall cease and the Buyer shall continue as the surviving
corporation (the "Surviving Corporation"). The Merger shall otherwise have
the effect set forth in the Delaware Act and the California Act.
(b) At the Closing, the parties hereto shall cause the Merger to be
consummated by delivering articles of merger to the Secretary of State of
California and the Secretary of State of Delaware executed in accordance
with relevant provisions of the California Act and the Delaware Act for
filing thereby (the time of such filing being the "Effective Time"). The
Articles of Incorporation and Bylaws, respectively, of the Buyer as in
effect immediately prior to the Effective Time, shall be the Articles of
Incorporation and Bylaws of the Surviving Corporation; provided, however,
that the name of the
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Surviving Corporation shall be Redlake Imaging
Corporation. The officers and directors of Buyer immediately prior to the
Effective Time shall be the officers and directors of the Surviving
Corporation, in each case, until their respective successors are duly
elected and qualified.
(c) At the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof:
(i) all of the Company Shares shall be converted into, and
represent the right to receive in the manner provided in (S) 2(d) and
(S) 2(e) below, cash in the amount of Seven Million Seven Hundred
Four Thousand Six Hundred Dollars and Eighty Three Cents
($7,704,600.83) (the "Merger Consideration");
(ii) each share of capital stock of the Company that is held in
the treasury of the Company, if any, shall be cancelled and retired
and cease to exist and no consideration shall be issued in exchange
therefor; and
(iii) each issued and outstanding share of capital stock of
Buyer shall be converted into and become one fully paid and non-
assessable share of common stock of the Surviving Corporation.
(d) At the Closing Date, the Merger Consideration shall be allocated
among the Stockholders pro rata based on the number of Company shares held
by each as shall be paid as follows:
(i) One Million Five Hundred Thousand Dollars $1,500,000.00
shall be paid to the Escrow Agent pursuant to the Escrow Agreement to
be held and disbursed as provided in (S) 8 hereof and the Escrow
Agreement, which amount shall be contributed solely by the Principal
Stockholders pro rata based on the number of Company shares held by
each in accordance with the allocation schedule set forth as Section
2(d) of the Company Disclosure Schedule (the "Allocation Schedule");
and
(ii) the balance of the Merger Consideration shall be paid to the
Stockholders, Xxxxxxxxx, Xxxxxxx and Xxxxxx, Professional Corporation
and Alliant Partners as set forth on the Allocation Schedule.
(e) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Powell,
Goldstein, Xxxxxx & Xxxxxx LLP at noon, on November 1, 1999 or such other
date and time as the Parties may agree (the "Closing Date").
(f) Deliveries at the Closing. (i) At the Closing, the Company will
deliver to the Buyer the various certificates, instruments, and documents
referred to in (S) 5(a) below; (ii) the Buyer will deliver to the Company
the various certificates, instruments, and
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documents referred to in (S) 5(b) below; (iii) the Company and the
Stockholders will execute, acknowledge (if appropriate), and deliver to the
Buyer (A) a consent and estoppel with respect to the Leased Real Property
in the forms attached hereto as Exhibit B and (B) such other documents as
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the Buyer and its counsel may reasonably request; (iv) the Buyer will
execute, acknowledge (if appropriate), and deliver to the Company (A) such
documents as the Company and the Stockholders and their counsel reasonably
may request; and (v) the Buyer will deliver to the Company the Merger
Consideration.
3. Representations and Warranties of the Stockholders. The Stockholders
jointly and severally represent and warrant to the Buyer and Parent that the
statements contained in this (S) 3 are correct and complete as of the Closing
Date, except as specified to the contrary in the disclosure schedule prepared by
the Company accompanying this Agreement and initialed by the Company and the
Buyer (the "Company Disclosure Schedule"). The Company Disclosure Schedule will
be arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this (S) 3.
(a) Organization of the Company. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation and is duly qualified to conduct business
in every jurisdiction where such qualification is required. The Company
Shares are held of record and beneficially by the Stockholders as described
in (S) 3(a) of the Company Disclosure Schedule.
(b) Authorization of Transaction. The Company and each Stockholder
has full power and authority (including, with respect to the Company, full
corporate power and authority, and with respect to the Stockholder which is
a trust, full power and authority under the trust agreement and the laws
governing such trust) to execute and deliver this Agreement and to perform
its or his obligations hereunder. Without limiting the generality of the
foregoing, the board of directors of the Company and the stockholders of
the Company have duly authorized the execution, delivery, and performance
of this Agreement by the Company. This Agreement constitutes the valid and
legally binding obligation of the Company, enforceable in accordance with
its terms and conditions. The Company and the stockholders do not need to
give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Company or any
Stockholder is subject or any provision of the charter or bylaws of the
Company, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to
which the Company or any Stockholder is a party or
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by which it is bound or to which any of its assets is subject (or result in
the imposition of any Security Interest upon any of its assets).
(d) Brokers' Fees. Except as set forth on (S) 3(d) of the Company
Disclosure Schedule, neither the Company nor any Stockholder has any
Liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement.
(e) Title to Assets. Each Stockholder has the right to convey, and
upon the transfer of the Company Shares to the Buyer, each Stockholder will
have conveyed, good title and interest in and to the Company Shares free
and clear of all Security Interests. The Company has good title to all of
the assets of the Company free and clear of any Security Interest.
(f) The Company Shares. The Company Shares constitute all of the
issued and outstanding capital stock of the Company, are validly issued,
fully paid and non-assessable and owned, beneficially and of record, by the
Stockholders and no the Company Shares are subject to, nor have any been
issued in violation of, pre-emptive or similar rights. All issuances,
sales and repurchases of equity interests by the Company have been effected
in compliance with all applicable laws, including, without limitation,
applicable federal and state securities laws. The Stockholders have good
title to the Company Shares, free and clear of any Security Interest or
restriction on transfer. The stock ledger and other corporate records of
the Company contain a complete and correct record of all issuance and
transfer of equity interests of the Company. There are no preemptive or
similar rights on the part of any holder of any Company Shares. Except for
the options which are set forth on Section 3(f) of the Company Disclosure
Schedule, no options, warrants, conversion or other rights, agreements,
commitments, arrangements or understandings of any kind obligating the
Company, contingently or otherwise, to issue or sell any shares of its
common stock or any securities convertible into or exchangeable for any
such shares or any other securities, are outstanding, and no authorization
therefor has been given.
(g) Financial Statements.
(i) Attached hereto as Exhibit C-1 is the unaudited balance sheet
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of the Company as of September 30, 1999 (the "September Balance
Sheet"). The September Balance Sheet has been derived from the books
and records of the Company maintained in the Ordinary Course of
Business, and fairly presents the financial position and the results
of operations of the Company, and reflects adequate reserves for all
known liabilities as of September 30, 1999, in accordance with GAAP
and, to the extent consistent with GAAP, Seller's policies (except
that there are no statements of change in financial position or equity
and there are no footnotes).
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(ii) Attached hereto as Exhibit C-2 are each of the unaudited
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income statements and balance sheets of the Company as of and for the
fiscal years ended December 31, 1997 and December 31, 1998 (the
"Financial Statements"). The Financial Statements fairly present the
financial position and the results of the operations of the Company,
and reflect adequate reserves for all known liabilities, for the
respective periods therein stated, in accordance with GAAP
consistently applied, and, to the extent consistent with GAAP,
Seller's policies, except as noted in the footnotes to the Financial
Statements (except that there are no statements of change in financial
position or equity and there are no footnotes).
(iii) The Company does not have any debt, Liability or
obligation of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to become due, that is not reflected or
reserved against in the September Balance Sheet. Accounts payable
reflected in the Financial Statements and the September Balance Sheet
have arisen from bona fide transactions. All debts, Liabilities and
obligations of the Company incurred after the date of the September
Balance Sheet were incurred in the Ordinary Course, arose from bona
fide transactions, and are usual and normal in amount both
individually and in the aggregate. The Company is not, directly or
indirectly, liable to or obligated to provide funds in respect of or
to guaranty or assume any obligation of any person except to the
extent reflected and fully reserved against in the Financial
Statements and the September Balance Sheet. Except as set forth in
the Financial Statements and the September Balance Sheet, all
Liabilities of the Company can be prepaid without penalty at any time.
(h) Subsequent Events.
(i) Since September 30, 1999, there has not been any material
adverse change in the business, financial condition, operations, or
results of operations of the Company. Without limiting the generality
of the foregoing, except as listed on (S) 3(h)(i) of the Company
Disclosure Schedule, since that date, the Company:
(A) has not sold, leased, transferred, or assigned any of
its assets, tangible or intangible outside the Ordinary Course of
Business;
(B) has not entered into any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and
licenses) either involving more than $5,000 or outside the
Ordinary Course of Business;
(C) has not, and to the Knowledge of the Company or any
Stockholder no party has, accelerated, terminated, modified, or
canceled any agreement, contract, lease, or license (or series of
related agreements,
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contracts, leases, and licenses) involving more than $5,000 to
which the Company is a party or by which it is bound;
(D) has not imposed or permitted any Security Interest upon
any of its assets, tangible or intangible;
(E) has not made any capital expenditure (or series of
related capital expenditures) either involving more than $5,000
or outside the Ordinary Course of Business;
(F) has not made any capital investment in, any loan to, or
any acquisition of the securities or assets of, any other Person;
(G) has not issued any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation;
(H) has not delayed or postponed the payment of accounts
payable or other Liabilities outside of the Ordinary Course of
Business;
(I) has not canceled, compromised, waived, or released any
right or claim (or series of related rights and claims) outside
the Ordinary Course of Business;
(J) has not granted any license or sublicense of any rights
under or with respect to any Intellectual Property;
(K) has not changed or authorized any change in its charter
or bylaws;
(L) has not experienced any material damage, destruction, or
loss (whether or not covered by insurance) to its property;
(M) has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees;
(N) has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the
terms of any existing such contract or agreement;
(O) has not granted any increase in the base compensation of
any of its directors, officers, and employees;
(P) has not adopted, amended, modified or terminated any
bonus, profit-sharing incentive, severance, or other plan,
contract, or
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commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other
Employee Benefit Plan);
(Q) has not made any other change in employment terms for
any of its directors, officers, and employees;
(R) has not made or pledged to make any charitable or other
capital contribution;
(S) has not suffered or experienced any other occurrence,
event, incident, action, failure to act, or transaction outside
the Ordinary Course of Business;
(T) has not declared or paid any dividend or other
distribution, whether in cash or other property; and
(U) has not committed to any of the foregoing.
(ii) Except as set forth on (S) 3(h)(ii) of the Company
Disclosure Schedule, since August 1, 1999, the Company has made no
distributions of any kind to any Stockholder, debt holder or other
party, except as set forth on Section 3(h)(ii) of the Company
Disclosure Schedule.
(i) Undisclosed Liabilities. The Company has no Liability (and there
is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against the Acquired Companies
giving rise to any Liability), except for (i) Liabilities set forth on the face
of the Financial Statements or the September Balance Sheet, and (ii) Liabilities
which have arisen after the date of the September Balance Sheet in the Ordinary
Course of Business (none of which results from, arises out of, or was caused by
any breach of contract, breach of warranty claims, product liability, tort,
infringement, or violation of law), (iii) Liabilities which will arise from and
after the Closing Date under contracts, instruments and similar obligations of
the Company to be performed following the Closing Date and (iv) Liabilities set
forth on (S) 3(i) of the Company Disclosure Schedule ("Undisclosed
Liabilities").
(j) Legal Compliance. The Company has complied with all applicable
laws (including rules, regulations, codes, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof), which the failure to comply
with will result in Adverse Consequences the costs of which will exceed
$5,000, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against the
Company alleging any failure so to comply.
(k) Tax Matters.
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(i) The Company has filed all Tax Returns that they were
required to file and were due. All such Tax Returns were correct and
complete in all material respects. All Taxes owed by the Company
(whether or not shown on any Tax Return) have been paid. The Company
currently is not the beneficiary of any extension of time within which
to file any Tax Return. No claim has ever been made by an authority in
a jurisdiction where the Company does not file Tax Returns that such
Company is or may be subject to taxation by that jurisdiction. There
are no Security Interests on any of the assets of any of the Company
that arose in connection with any failure (or alleged failure) to pay
any Tax. The Company has not been a member of an Affiliated Group that
has filed a "consolidated return" within the meaning of Code Sec.
1501, or has filed a combined or consolidated return with another
corporation with any other taxing authority.
(ii) The Company has made all withholdings of Taxes required to
be made in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder, or other third party
and such withholdings have either been paid to the appropriate
governmental agency or set aside in appropriate accounts for such
purpose.
(iii) The Company has not received any notice or other indication
that any authority is considering assessing any additional Taxes for
any period for which Tax Returns have been filed. There is no dispute
or claim concerning any Tax Liability of the Company either (A)
claimed or raised by any authority in writing or (B) as to which the
Company or any Stockholder has knowledge based upon personal contact
with any agent or representative of such authority. (S) 3(k) of the
Company Disclosure Schedule lists all federal, state, local, and
foreign income Tax returns filed with respect to the Company for
taxable periods ended on or after December 31, 1995, indicates those
Tax Returns that have been audited, and indicates those Tax Returns
that currently are the subject of audit. The Company has delivered to
the Buyer correct and complete copies of all federal and foreign
income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Company since
December 31, 1995.
(iv) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a
Tax assessment or deficiency.
(v) The Company has not made any payments, is not obligated to
make any payments, or is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will
not be deductible under Code Sec. 280G. The Company is not a party to
any Tax allocation or sharing agreement. The Company (A) has not been
a member of an Affiliated Group
-13-
filing a consolidated federal income Tax Return (other than a group
the common parent of which was the Company) or (B) has no Liability
for the Taxes of any Person (other than the Company) under Treas. Reg.
(S) 1.1502-6 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or otherwise.
(l) Real Property.
(i) The Company does not own, and has never owned, any real
property.
(ii) (S) 3(l)(ii) of the Company Disclosure Schedule lists and
describes briefly all real property leased to the Company (the "Leased
Real Property"). The Company has delivered to the Buyer correct and
complete copies of the leases for the Leased Real Property (as amended
to date). With respect to each lease for Leased Real Property:
(A) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(B) the Company is not, and to the Knowledge of the Company,
no party to the lease or sublease is, in breach or default, and
no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(C) the Company is not, and to the Knowledge of the Company,
no party to the lease or sublease has, repudiated any provision
thereof;
(D) to the Knowledge of the Company, there are no disputes,
oral agreements, or forbearance programs in effect as to the
lease;
(E) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold; or
(F) to the Knowledge of the Company, all facilities leased
thereunder have received all approvals of governmental
authorities (including licenses and permits) required in
connection with the operation thereof and have been operated and
maintained in all material respects in accordance with applicable
laws, rules, and regulations.
(m) Intellectual Property.
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(i) The Company owns or has the right to use pursuant to
license, sublicense, agreement, or permission of all Intellectual
Property necessary for the operation of the Business as presently
conducted or as proposed to be conducted. Each Stockholder and other
director, officer or employer of the Company has heretofore
transferred to the Company all right, title and interest of such
person in and to any Intellectual Property used, necessary or
desirable for the operation of the Business as presently conducted or
as proposed to be conducted. Each item of Intellectual Property
included among the assets of the Company or owned or used by the
Company or any Stockholder immediately prior to the Closing hereunder
will be owned or available for use by the Buyer on identical terms and
conditions immediately subsequent to the Closing hereunder.
(ii) To the Knowledge of the Stockholders, neither the Company
nor any Stockholder has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties. Neither the Company nor any
Stockholder has ever received any charge, complaint, claim, demand, or
notice alleging any such interference, infringement, misappropriation,
or violation (including any claim that any of the Company or any
Stockholder must license or refrain from using any Intellectual
Property rights of any third party). To the Knowledge of the Company
or any Stockholder, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Company.
(iii) (S) 3(m)(iii) of the Company Disclosure Schedule identifies
each patent or registration which has been issued or transferred to
the Company or any Stockholder with respect to any of its Intellectual
Property, identifies each pending patent application for registration
which the Company or any Stockholder has made with respect to any of
its Intellectual Property, and identifies each license, agreement, or
other permission which the Company or any Stockholder has granted to
any third party with respect to any of its Intellectual Property. The
Company has delivered to the Buyer correct and complete copies of all
such patents, registrations, applications, licenses, agreements, and
permissions (as amended to date) and has made available to the Buyer
correct and complete copies of all other written documentation
evidencing ownership and prosecution (if applicable) of each such
item. (S) 3(m)(iii) of the Company Disclosure Schedule also identifies
each trade name or unregistered trademark used by the Company in
connection with the Business. With respect to each item of
Intellectual Property required to be identified in (S) 3(m)(iii) of
the Company Disclosure Schedule:
(A) the Company possess all right, title, and interest
in and to the item, free and clear of any Security Interest,
license, or other restriction;
(B) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
-15-
(C) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the Knowledge of the
Company threatened, which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) Neither the Company nor any Stockholder has ever agreed to
indemnify any Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(iv) (S) 3(m)(iv) of the Company Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and that the
Company uses pursuant to license, sublicense, agreement, or permission. The
Company has delivered to the Buyer correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended to date).
With respect to each item of Intellectual Property required to be
identified in (S) 3(m)(iv) of the Company Disclosure Schedule;
(A) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full force and
effect;
(B) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation of the
transactions contemplated hereby (including the Merger referred to in
(S) 2 above);
(C) Neither the Company, nor to the Knowledge of the Company, no
other party to the license, sublicense, agreement, or permission, is
in breach or default, and no event has occurred which with notice of
lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(D) The Company has not, and to the Knowledge of the Company, no
other party to the license, sublicense, agreement, or permission has,
repudiated any provision thereof;
(E) with respect to each sublicense, the representations and
warranties set forth in subsections (A) through (D) above are true and
correct with respect to the underlying license;
(F) the underlying item of Intellectual Property is not subject
to any outstanding injunction, judgment, order, decree, ruling, or
charge;
(G) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand is pending or, to the Knowledge of the
-16-
Company, threatened, which challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property;
and
(H) The Company has not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or
permission.
(n) Tangible Assets. The Company owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct
of the Business as presently conducted. Each such tangible asset is free
from any known material defects, has been maintained in accordance with
normal industry practice, is in good operating condition and repair
(subject to normal wear and tear), and is suitable for the purposes for
which it presently is used.
(o) Inventory. The inventory of the Company consists of raw materials
and supplies, manufactured and purchased parts, goods in process, and
finished goods, all of which is merchantable and fit for the purpose for
which it was procured or manufactured, and none of which is slow-moving
(except for parts and components on hand for servicing products already
sold), obsolete, damaged, or defective in excess of the amount reserved
against inventory on the September Balance Sheet.
(p) Contracts. (S) 3(p) of the Company Disclosure Schedule lists the
following contracts and other agreements, written or oral, to which the
Company is a party:
(i) all customer orders, and the purchase prices thereof,
accepted by the Company and in order backlog as of September 30,
1999;
(ii) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for
lease payments in excess of $5,000 per annum;
(iii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services,
the performance of which will extend over a period of more than one
year, or which to the Knowledge of the Company, will result in a loss
to the Company, or which involves consideration, in excess of $5,000;
(iv) any agreement concerning a partnership or joint venture;
(v) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, under which it
has imposed a Security Interest on any of its assets, tangible or
intangible;
(vi) any agreement concerning confidentiality or noncompetition;
-17-
(vii) any agreement involving any Stockholder to which the
Company is a party;
(viii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors,
officers, and employees;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $30,000 or providing severance benefits;
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees;
(xi) any agreement under which the consequences of a default or
termination would have an adverse effect in the amount of $5,000 or
more on the business, financial condition, operations or results of
operations of the Company; or
(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $5,000.
The Company has delivered to the Buyer a correct and complete copy of each
written agreement listed in (S) 3(p) of the Company Disclosure Schedule (as
amended to date) and a written summary setting forth the terms and
conditions of each oral agreement referred to in (S) 3(p) of the Company
Disclosure Schedule. With respect to each such agreement: (A) the
agreement is legal, valid, binding, enforceable, and in full force and
effect, subject to applicable bankruptcy, insolvency, fraudulent conveyance
or transfer, reorganization, arrangement, moratorium or other similar laws
from time to time affecting creditor's rights generally; (B) to the
Knowledge of the Company, the agreement will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in (S) 2 above),
subject to applicable bankruptcy, insolvency, fraudulent conveyance or
transfer, reorganization, arrangement, moratorium or other similar laws
from time to time affecting creditor's rights generally; (C) the Company is
not, and to the Knowledge of the Company, no other party, is in material
breach or default, and no event has occurred which with notice or lapse of
time would constitute a material breach or default, or permit termination,
modification, or acceleration, under the agreements; (D) no party has
repudiated to the other party any provision of the agreement; and (E) such
agreement does not prohibit or require consent in the event of a change of
control of the Company. With respect to each customer order listed in (S)
3(p) of the Company Disclosure Schedule, the Company has no Knowledge of
any basis for cancellation thereof.
-18-
(q) Notes and Accounts Receivable. Notes and accounts receivable of
the Company included among the assets are at least in the amounts reflected
in the Financial Statements and all such notes and accounts receivable are
reflected properly on their books and records, are valid receivables
subject to no setoffs or counterclaims, are current and collectible, and
will be collected in accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts set forth on the face of the
Balance Sheet.
(r) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company.
(s) Insurance. (S) 3(s) of the Company Disclosure Schedule sets forth
the following information with respect to each insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which any Company has been a
party, a named insured, or otherwise the beneficiary of coverage at any
time within the past five 5 years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and
the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage
was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are
calculated and operate) of coverage; and
(v) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such insurance policy: (A) all policy premiums due to
date have been paid in full, and to the Knowledge of the Company, the
policy is legal, valid, binding, enforceable, and in full force and effect
with respect to the periods for which it purports to provide coverage
subject to applicable bankruptcy, insolvency, fraudulent conveyance or
transfer, reorganization, arrangement or moratorium or other similar laws
from time to time affecting creditor's rights generally; (B) the Company
or, to the Knowledge of the Company, any other party to the policy is not
in breach or default (including with respect to the payment of premiums or
the giving of notices), and no event has occurred which, with notice or the
lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (C) no
party to the policy has repudiated any provision thereof. (S) 3(s) of the
Company Disclosure Schedule describes any self-insurance arrangements
affecting the Company.
-19-
(t) Litigation. The Company (i) is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge and (ii) is not a
party nor, to the Knowledge of the Company, is threatened to be made a
party to any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator.
(u) Product Warranty. Each product manufactured, sold, leased, or
delivered by the Company or service provided by the Company has been in
conformity with all applicable contractual commitments and all express and
implied warranties, and the Company has no Liability (and, to the Knowledge
of the Stockholders, there is no Basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against it giving rise to any Liability) for refund, replacement or
repair thereof or other damages in connection therewith in excess of the
amount reserved against product warranty claims on the September Balance
Sheet. Except as otherwise may be provided by applicable law, no product
manufactured, sold, leased, or delivered by the Company is subject to any
guaranty, warranty, or other indemnity beyond the applicable standard terms
and conditions of sale or lease. (S) 3(u) of the Company Disclosure
Schedule includes copies of the standard terms and conditions of sale or
lease for the Company (containing applicable guaranty, warranty, and
indemnity provisions).
(v) Product Liability. There are no existing or, to the Knowledge of
the Company, threatened, claims against the Company arising out of any
injury to individuals or property as a result of the ownership, possession,
or use of any product manufactured, sold, leased, or delivered by the
Company which could result in Liability to the Company and neither the
Company nor the Stockholders have any knowledge of a reasonable basis for
any such claim.
(w) Employees. To the Knowledge of the Company, no executive, key
employee, or group of employees has any plans to terminate employment with
the Company. The Company is not a party to or bound by any collective
bargaining agreement, nor has it experienced any strikes, grievances,
claims of unfair labor practice. The Company has no Knowledge of any
organizational effort presently being made or threatened by or on behalf of
any labor union with respect to its employees. There is no claim
outstanding or, to the Knowledge of the Company, threatened or, to the
Knowledge of the Stockholders, any Basis for a claim respecting employment
of any past or present employee of the Company including, without
limitation, claims of personal injury (unless fully covered by worker's
compensation, liability or indemnity insurance) discrimination, wage, hours
or similar laws or regulations.
(x) Employee Benefits.
(i) No other corporation, trade, business, or other entity,
would, together with the Company, now or in the past 5 years,
constitute a single employer within the meaning of Code (S) 414.
-20-
(ii) (S) 3(x) of the Company Disclosure Schedule contains a
true and complete list of all of the Employee Benefit Plans which are
presently in effect or which have previously been in effect in the
last 5 years for the benefit of current or former employees, officers,
directors or consultants of the Company (the "Company Plans").
(iii) Except as set forth in (S) 3(x) of the Company Disclosure
Schedule, the Company does not maintain and has never maintained an
"employee benefit pension plan," within the meaning of ERISA (S) 3(2),
that is or was subject to Title IV of ERISA.
(iv) There is no lien outstanding upon any Assets pursuant to
Code (S) 412(n) in favor of any of the Company Plans. No Assets or
assets of any Affiliate have been provided as security to any of the
Company Plans pursuant to Code (S) 401(a)(29).
(v) Except as set forth in (S) 3(x) of the Company Disclosure
Schedule, the Company has no past, present or future obligation or
liability to contribute to any Multiemployer Plan.
(vi) The Company has complied in all material respects with the
continuation health coverage requirements of Code (S) 4980B and ERISA
(S)(S) 601 through 608.
(vii) The Company is not obligated, contingently or otherwise,
under any agreement to pay any amount which would be treated as a
"parachute payment," as defined in Code (S) 280G(b) (determined
without regard to Code (S) 280G(b)(2)(A)(ii)).
(viii) With respect to each of the Company Plans, except as set
forth in (S) 3(x) of the Company Disclosure Schedule:
(A) each of the Company Plans has been established,
maintained, funded and administered in all material respects in
accordance with its governing documents, and any applicable
provisions of ERISA, the Code, other applicable law, and all
regulations promulgated thereunder;
(B) none of the Company Plans nor any fiduciary has engaged
in a prohibited transaction as defined in ERISA (S) 406 or Code
(S) 4975 (for which no individual or class exemption exist under
ERISA (S) 408 or Code (S) 4975, respectively);
(C) all filings and reports as to each of the Company Plans
-21-
required to have been made on or before the Closing Date to the
Internal Revenue Service, or to the United States Department of
Labor or to the PBGC, have been or will be duly made by that
date;
(D) each of the Company Plans which is intended to qualify
as a tax-qualified retirement plan under Code (S) 401(a) has
received a favorable determination letter(s) from the Internal
Revenue Service as to qualification of such Company Plan for the
period from its adoption through the Closing Date; nothing has
occurred, whether by action or failure to act, which has resulted
in or would cause the loss of such qualification; and each trust
thereunder is exempt from tax pursuant to Code (S) 501(a);
(E) each of the Company Plans which is required to satisfy
Code (S)(S) 401(k)(3) or 401(m)(2) has been tested for compliance
with, and has satisfied the requirements of, Code (S)(S)
401(k)(3) and 401(m)(2) for each plan year ending prior to the
Closing Date;
(F) no event has occurred and no condition exists relating
to any of the Company Plans that would subject the Company to any
tax or Liability under IRS (S)(S) 4971, 4972 or 4979, or to any
Liability under ERISA (S)(S) 502 or 4071; and
(G) to the extent applicable, each of the Company Plans has
been funded in accordance with its governing documents, ERISA and
the Code, has not experienced any accumulated funding deficiency
(whether or not waived) and has not exceeded its full funding
limitation (within the meaning of Code (S) 412) at any time.
(ix) With respect to the Company Plans which provide group health
benefits to employees of the Company and are subject to the
requirements of Code (S) 4980B and ERISA Title I Part 6 ("COBRA"),
such group health plan has been administered in every material respect
in accordance with its governing documents and COBRA.
(x) With respect to employee benefit matters generally:
(A) the Company (nor any person, firm or corporation which
is or has been under common control within the meaning of Section
4001(b) of ERISA of the Company) does not maintain or contribute
to or has ever maintained or contributed to any Company Plan
subject to Title IV of ERISA;
(B) except as set forth on (S) 3(x) of the Company
Disclosure Schedule, the consummation of the transactions
contemplated hereby will
-22-
not accelerate or increase any Liability under any of the Company
Plans because of an acceleration or increase of any of the rights
or benefits to which Company Plan participants or beneficiaries
may be entitled thereunder;
(C) except as set forth on (S) 3(x) of the Company
Disclosure Schedule, the Company has no obligation to any retired
or former employee or any current employee of the Company upon
retirement or termination of employment under any Company Plans,
other than such obligations imposed by COBRA; and
(D) except as set forth on (S) 3(x) of the Company
Disclosure Schedule, any of the Company Plans which is an
"employee welfare benefit plan," within the meaning of ERISA (S)
3(1), may be terminated prospectively without Liability to the
Company or Parent or Buyer, including, without limitation,
Liability for unreported (e.g., run-off) benefit claims, premium
adjustments or termination charges of any kind.
(y) Guaranties. The Company is not a guarantor or otherwise liable
for any Liability or obligation (including indebtedness) of any other
Person.
(z) Environment, Health, and Safety.
(i) The Company has complied with all Environmental, Health, and
Safety Laws, the failure to comply with which could result in Adverse
Consequences in an amount in excess of $5,000 individually or in the
aggregate, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or
commenced against the Company alleging such failure.
(ii) The Company has no Liability (and the Company has not
handled, used, stored, treated, recycled or disposed of any Hazardous
Substance, arranged for the disposal of any Hazardous Substance,
exposed any employee or other individual to any Hazardous Substance or
condition, or owned or operated any property or facility in any manner
that, to the Knowledge of the Stockholders, could form the Basis for
any present or future action, suit, proceeding, hearing,
investigations, charge, complaint, claim or demand giving rise to any
Liability) for penalties, investigations of or damage to any site,
location, body of water (surface or subsurface), or other natural
resources, for any illness of or personal injury to any employee or
other individual, or for any reason under any Environmental, Health,
and Safety Laws.
(iii) Except as set forth in (S) 3(z) of the Company Disclosure
Schedule, all properties and equipment used in the Business are and in
the past have been free of any amounts of asbestos, PCB's, methylene
chloride, trichlorethylene, 1,2
-23-
trans-dichloroethylene, dioxins, dibenzofurans, and Extremely
Hazardous Substances, the presence of which could result in Adverse
Consequences.
(aa) Certain Business Relationships With the Company. Except as set
forth in (S) 3(aa) of the Company Disclosure Schedule, none of the
Stockholders or their relatives has been involved directly or indirectly in
any business arrangement or relationship with the Company within the past
36 months, and, except for the Real Property, none of Stockholders owns any
asset, tangible or intangible, which is used in the Business.
(bb) Disclosure. To the Knowledge of the Company, the representations
and warranties contained in this (S) 3 (including the Company Disclosure
Schedule) do not as of the Closing Date contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statement and information contained in this (S) 3 not misleading.
4. Representations and Warranties of the Buyer. Parent and Buyer,
jointly and severally, represent and warrant to the Stockholders that the
statements contained in this (S) 4 are correct and complete as of Closing Date.
(a) Organization of the Buyer. Each of Parent and Buyer is a
corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation and is duly qualified as
a foreign corporation to do business in every jurisdiction where such
qualification is required.
(b) Authorization of Transaction. Each of Parent and Buyer has full
power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of Parent and Buyer, enforceable in accordance with its terms
and conditions. Parent and Buyer need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
government or governmental agencies in order for the Parties to consummate
the transactions contemplated by this Agreement (including the assignment
and assumption referred to in (S) 2 above).
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in (S) 2 above) will
(i) violate any constitution, state, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Parent or Buyer is
subject, or any provision of its charter or bylaws or (ii) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract,
lease, license, instrument, or other arrangement to which Parent or Buyer
is a party or by which they are bound or to which any of their assets are
subject.
-24-
(d) Broker's Fees. Neither Parent nor Buyer has Liability or
obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which
the Stockholders could become liable or obligated.
(e) Investment Decision. Parent and Buyer have had an opportunity to
conduct due diligence and ask questions of the Company, and have sufficient
knowledge to decide to enter into this Agreement and participate in the
Merger.
(f) Disclosure. To the Knowledge of Parent and Buyer, the
representations and warranties contained in this (S) 4 do not contain any
untrue statements of a material fact or omit to state any material fact
necessary in order to make the statements contained in this (S) 4 not
misleading.
5. Conditions to Obligation to Close.
(a) Conditions to Obligation of Parent and Buyer. The obligation of
Parent and Buyer to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in (S) 3 above
shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Company and the Stockholders shall have performed and
complied with all of their covenants hereunder in all material
respects through the Closing;
(iii) the Company shall have procured all of the third party
consents specified on Exhibit D hereto, including a consent and
---------
estoppel for the transfer of the Leased Real Property;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, or (C) affect adversely the right of the Buyer to own
the assets of the Company or to operate the Business (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(v) the Company shall have delivered to the Buyer a certificate
to the effect that each of the conditions specified above in (S)
5(a)(i)-(iv) is satisfied in all respects;
-25-
(vi) each of the Principal Stockholders and Xxx Xxxxxxx shall
have entered into a Noncompetition Agreement with a term of five years
prohibiting the manufacture, production or sale of any products which
compete with the products manufactured, produced or sold by the
Company, in form and substance as set forth in Exhibits E attached
----------
hereto and the same shall be in full force and effect;
(vii) each of the Principal Stockholders shall have entered into
an employment agreement in the form of Exhibit F attached hereto;
---------
(viii) each holder of Options shall have executed and delivered
an acknowledgement and release in form and substance satisfactory to
the Buyer;
(ix) the Buyer shall have received from counsel to the Company
an opinion in form and substance as set forth in Exhibit G attached
---------
hereto, addressed to the Buyer, and dated as of the Closing Date;
(x) the Buyer shall have received a spousal consent from each
married Stockholder, in form and substance satisfactory to the Buyer;
(xi) the certificates of merger with respect to the Merger shall
have been filed in accordance with the California Act and the Delaware
Act; and
(xii) all actions to be taken by the Company in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this (S) 5(a) if it executes
a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of Stockholders. The obligation of
Stockholders to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in (S) 4 above
shall be true and correct in all material respects at and as of the
Closing Date;
(ii) Parent and Buyer shall have performed and complied with all
of its covenants hereunder in all material respects through the
Closing;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of
-26-
any of the transactions contemplated by this Agreement or (B) cause
any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(iv) the Buyer shall have delivered to the Company a certificate
to the effect that each of the conditions specified above in (S)
5(b)(i)-(iii) is satisfied in all respects;
(v) the Company shall have received from counsel to the Buyer
an opinion form and substance as set forth in Exhibit H attached
---------
hereto, addressed to the Company, and dated as of the Closing Date;
(vi) the certificates of merger with respect to the Merger shall
have been filed in accordance with the California Act and the Delaware
Act; and
(vii) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Company.
The Stockholders may waive any condition specified in this (S) 5(b) if it
executes a writing so stating at a prior to the Closing.
6. Pre-Closing Covenants. The parties agree as follows with respect to
the period prior to the Closing:
(a) Access and Investigation. Between the date hereof and the Closing
Date, the Company and the Stockholders will, and will cause their
representatives to:
(i) afford the Buyer and its representatives (collectively,
"Buyer's Advisors") reasonable access to the Company and its
personnel, properties (including for purposes of environmental
testing), contracts, books and records, and other documents and data
so as to not unreasonably interfere with the conduct of the Business;
(ii) furnish the Buyer with copies of all such contracts, books
and records, and other existing documents and data as the Buyer may
reasonably request; and
(iii) furnish the Buyer and Buyer's Advisors with such
additional financial, operating and other data and information as the
Buyer may reasonably request.
-27-
(b) Operation of the Businesses of the Company. Between the date
hereof and the Closing Date, the Company and the Stockholders will, and the
Company will cause its representatives to:
(i) conduct the business of the Company and each Company
Subsidiary only in the Ordinary Course of Business or otherwise with
the written consent of the Buyer; provided that there shall be no
transactions between the Stockholders and the Company without the
prior written consent of the Buyer;
(ii) use their best efforts to preserve intact the current
business organization of the Company, keep available the services of
the current officers, employees, and agents of the Company, and
maintain the relations and good will with suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with the Company; and
(iii) confer with the Buyer concerning operational matters of a
material nature and the status of business operations and finances.
(c) Negative Covenant. Except as otherwise expressly permitted by
this Agreement, between the date of this Agreement and the Closing Date,
the Company and the Stockholders will not, without the prior consent of the
Buyer, take any affirmative action, or fail to take any reasonable action
within their or its control, which would cause or result in an inaccuracy
or breach of any of the representations, warranties or covenants of the
Company and the Stockholders set forth in this Agreement, including,
without limitation, any action specified in (S) 3(h) of this Agreement.
Without limiting the generality of the foregoing, the Company agrees that
it shall not, and shall cause each of the Company Subsidiaries not to, take
any of the following actions without the prior written consent of the
Buyer:
(i) amend its Certificate or Articles of Incorporation or
Bylaws; make any change in its authorized, issued or outstanding
capital stock or any other equity security; issue, sell, pledge,
assign or otherwise encumber or dispose of, or purchase, redeem or
otherwise acquire, any of its shares of capital stock or other equity
securities or enter into any agreement, call or commitment of any
character so to do; grant or issue any stock option or warrant
relating to, right to acquire, or security convertible into, shares of
their capital stock or other equity security; purchase, redeem, retire
or otherwise acquire any shares of, or any security convertible into,
capital stock or other equity security of their respective companies,
or agree to do any of the foregoing;
(ii) propose, declare, set aside or pay any dividend or other
distribution in respect of any of its capital stock (including,
without limitation, any stock dividend or distribution);
-28-
(iii) incur any indebtedness other than normal, Ordinary Course
of Business trade payables and accruals;
(iv) make any distribution outside of the Ordinary Course of
Business or any distributions in excess of $5,000; and
(v) commit to any new capital expenditure in excess of $5,000.
(d) Termination of Plans. Prior to the Closing Date, the Company shall
terminate all of its option and equity programs, and all outstanding options
shall be terminated. In addition, the Company shall terminate its tax-qualified
retirement plan immediately prior to the Closing and as soon as practicable
thereafter shall file a request with the appropriate Key District Office of the
Internal Revenue Service seeking a favorable determination that such plan
continues to satisfy applicable tax-qualification requirements upon termination.
The Company shall make all reasonable efforts to secure such a favorable
determination from the Internal Revenue Service and, upon obtaining the same,
shall provide Parent with a copy thereof.
7. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing:
(a) General. In case at any time after the Closing any further action
is necessary to carry out the purposes of this Agreement, each of the
Stockholders and Buyer will take such further action (including the
execution and delivery of such further instruments and documents) as any
other Party reasonably may request, at the sole cost and expense of the
requesting Party (unless the requesting Party is entitled to
indemnification therefor hereunder). The Stockholders acknowledge and
agree that from and after the Closing the Buyer will have the right to
possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort relating to the Company in this
Agreement; provided, however, that the Stockholders shall have the right to
obtain access to such documents, books, records (including Tax records),
agreements, and financial data and make photocopies thereof for a proper
purpose, such as in connection with the preparation of their tax returns.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in connection
with (i) any transaction contemplated under this Agreement or (ii) any
fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or
prior to the Closing Date involving the Surviving Corporation or any
Stockholder, each of the other Parties will reasonably cooperate with the
contesting or defending Party and his or its counsel in the contest or
defense, make available his or its personnel, and provide such testimony
and access to his or its books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of
the contesting or defending Party (unless the contesting or defending Party
is entitled to indemnification therefor under (S) 8 below).
-29-
(c) Transition. Each of the Stockholders will use his best efforts
not to take any action that is designed or intended to have the effect of
discouraging any lessor, licensor, customer, supplier, or other business
associate of the Company from maintaining the same business relationships
with the Surviving Corporation after the Closing as it maintained with the
Company prior to the Closing.
(d) Confidentiality. Each Stockholder will treat and hold as
confidential all of the Confidential Information, refrain from using any of
the Confidential Information and deliver promptly to the Surviving
Corporation or destroy, at the request and option of the Surviving
Corporation, all tangible embodiments (and all copies) of the Confidential
Information which are in his or its possession. In the event that a
Stockholder is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any
Confidential Information, that Party will notify the Surviving Corporation
promptly of the request or requirement so that the Surviving Corporation
may seek an appropriate protective order or waive compliance with the
provisions of this (S) 7(d). If, in the absence of a protective order or
the receipt of a waiver hereunder, a Stockholder is, on the advice of
counsel, compelled to disclose any Confidential Information to any tribunal
or else stand liable for contempt, that Party may disclose the Confidential
Information to the tribunal; provided, however, that a Stockholder shall
use its reasonable efforts to obtain, at the reasonable request of the
Surviving Corporation and at the Surviving Corporation's sole expense, an
order or other assurance that confidential treatment will be accorded to
such portion of the Confidential Information required to be disclosed as
the Surviving Corporation shall designate.
(e) Stock Options. Immediately following the Closing, each then
outstanding option to purchase shares of Company Shares (in each case, an
"Option"), shall be canceled and in consideration of such cancellation,
Parent shall cause the Surviving Corporation to pay to the holders thereof
the amounts set forth on Section 7(e) of the Company Disclosure Schedule.
Such payment shall be less any required withholding Taxes and without
interest.
(f) Tax Matters. Buyer and the Company will provide each other with
such cooperation and information as either of them may reasonably require
of the other in connection with the filing of any Tax Return, including Tax
Returns relating to the application of the successor employer rules for
payroll Tax purposes contained in Code (S)(S) 3121(a)(1) and 3306(b)(1),
the determination of a liability for Taxes or a right to a refund for
Taxes, or the preparation for litigation or investigation of any claim for
Taxes or a right to a refund for Taxes, or the preparation for cooperation
and information shall include all relevant Tax Returns, and other documents
and records, or portions thereof relating to or necessary in connection
with the preparation of records, or portions thereof relating to or
necessary in connection with the preparation of such Tax Returns or other
determination of Tax liability. Each Party shall retain all Tax Returns,
schedules, workpapers, and all other materials, records or documents until
the expiration of the
-30-
statute of limitations for the taxable years to which such Tax Returns and
other documents relate. After expiration of the statute of limitations,
such party shall notify the other party in writing that it desires to
dispose of or destroy the Tax Returns and other documents and shall provide
such other party with the right for thirty (30) days after the tendering of
such notice to copy or take possession of such Tax Returns and other
documents. Any information obtained under this provision shall be kept
confidential by the parties, except as may be necessary in connection with
the filing of such Tax Returns.
8. Remedies for Breaches of this Agreement.
(a) Survival of Representations and Warranties. All of the
representations and warranties contained in (S) 3(g)-(ab), except (S) 3(k)
and 3(x) of this Agreement and of Buyer contained in (S) 4(e)-(g) of this
Agreement shall survive the Closing and continue in full force and effect
for a period of one year thereafter; the representation and warranties
contained in (S) 3(k) and (S) 3(x) shall survive the Closing and continue
in full force and effect for a period of 90 days following the expiration
of the applicable statute of limitations with respect to such matters; and
all of the other representations, warranties, covenants, indemnities, and
other agreements of the Buyer and the Stockholders contained in this
Agreement (including the representations and warranties contained in (S)
3(a)-(f) and (S) 4(a)-(d)) shall survive the Closing and continue in full
force and effect forever thereafter, subject to any applicable statues of
limitations. No action, claim, or proceeding may be brought by any Party
hereto against any other Party resulting from, arising out of, or caused by
a breach of a representation or warranty contained herein, or the failure
to perform any covenant or other obligations hereunder, after the time such
representation, warranty or covenant ceases to survive pursuant to the
preceding sentence, unless written notice of such claim setting forth with
specificity the basis for such claim is delivered to the applicable Party
prior to such time.
(b) Indemnification Provisions for Benefit of the Parent and the
Buyer.
(i) In the event a Stockholder breaches (or in the event any
third party alleges facts that, if true, would mean Stockholder has
breached) any of its representations, warranties, and covenants
contained in this Agreement, and, if there is an applicable survival
period pursuant to (S) 8(a) above, provided that the Buyer makes a
written claim for indemnification setting forth with specificity the
basis for such claim against the Stockholders pursuant to (S) 9(g)
below within such survival period, then each of the Stockholders
jointly and severally agrees to indemnify Parent, Buyer and the
Surviving Corporation, subject to the limitations set forth herein,
from and against the entirety of any Adverse Consequences the Parent,
the Buyer or the Surviving Corporation may suffer through and after
the date of the claim for indemnification (including any Adverse
Consequences the Parent, the Buyer or the Surviving Corporation may
suffer after the end of any applicable survival period) resulting
from, arising out of, or caused by the breach (or the alleged breach);
provided, however, that
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(A) The Stockholders shall not have any obligation to
indemnify the Buyer from and against any Adverse Consequences
resulting from, arising out of, or caused by the breach (or
alleged breach) of any representation, warranty or covenant
contained in (S) 3(g)-(ab) except (S) 3(k) and (S) 3(x) of the
Agreement which exceed the Escrow Fund. No such restriction
shall be applicable to (I) claims for uncollected accounts
receivable in excess of the reserve therefor on the September
Balance Sheet; (II) product warranties claims for amounts in
excess of the reserve therefor on the September Balance Sheet;
and (III) tax liabilities in excess of the amount accrued
therefore on the September Balance Sheet;
(B) The Stockholders shall have no such indemnification
obligation with respect to such (S) 3(g)-(ab) breaches (or
alleged breaches) until the Buyer has suffered Adverse
Consequences by reason thereof (i) for any individual claim or
series of related claims, until the amount of such claim or
claims exceeds $5,000, and (ii) in the aggregate, until the
amount of all claims for breaches exceeds $50,000. No such
restrictions shall be applicable to: (I) claims for breaches of
the representation and warranties as contained in (S)(S) 3(a)-
(f), (S) 3(k) and (S) 3(x); (II) claims for uncollected accounts
receivable in excess of the reserve therefor on the September
Balance Sheet; (III) product warranties claims for amounts in
excess of the reserve therefor on the September Balance Sheet; or
(IV) tax liabilities in excess of the amount accrued therefor on
the September Balance Sheet; and
(C) The Stockholders' liability for a breach of the
covenants contained in Sections 7(c) and 7(d) shall not be joint
and several.
(ii) Each of the Stockholders jointly and severally agrees to
indemnify Parent, Buyer and the Surviving Corporation for any worker's
compensation claims incurred by any employee, consultant, independent
contractor, agent, affiliate or other individual of the Company prior
to Closing, including, without limitation any claims for personal
injuries, property damages and lost wages, except to the extent
coverage is provided for such claims under the Company's applicable
insurance policy.
(iii) Each of the Stockholders jointly and severally, agrees to
indemnify Parent, Buyer and the Surviving Corporation for any damages
(including costs of cleanup, containment, or other remediation)
arising, directly or indirectly from or in connection with any
Environmental, Health, and Safety Laws arising out of or relating to:
(A) the ownership, operation, or condition at any time on or prior to
the Closing Date of any facilities or any other properties and assets
(whether real, personal, or mixed and whether tangible or intangible)
in which the Company has or had an interest, (B) any Hazardous
Substances that were present on the Facilities or such other
properties and assets at any time on or prior to the Closing
-32-
Date, or (C) any Hazardous Substances, wherever located, that were, or
were allegedly, used, generated, recycled, disposed, transported,
stored, treated, released, or otherwise handled by the Company or by
any other person for whose conduct they are or may be held responsible
at any time on or prior to the Closing Date.
(iv) As security for the indemnification obligations of
Stockholders under this Agreement, Parent, Buyer and the Principal
Stockholders shall enter into the Escrow Agreement as of the Closing
Date, which shall be funded with $1,500,000.00 of the Merger
Consideration otherwise payable to the Stockholders (the "Escrow
Fund"). Parent and Buyer shall seek payment for any indemnification
claims hereunder first from the Escrow Fund, however, the Escrow Fund
shall be a nonexclusive source of indemnification hereunder and shall
not limit the liability of the Stockholders with respect to
indemnification under this Agreement. The amount of the Escrow Fund
shall be reduced on the first anniversary of the Closing Date to
$250,000 (plus the amount of any then-outstanding claims) which
remaining amount shall be used solely to fund claims under (S) 3(k)
and (S) 3(x) (and any then-outstanding claims) and shall be held until
the second anniversary of the Closing Date.
(v) Each of the Stockholders jointly and severally agrees to
indemnify and reimburse the Surviving Corporation upon demand for the
full amount of any accounts receivable of the Company which were (A)
invoiced more than ninety (90) days prior to the Closing Date and (B)
remain uncollected by the Surviving Corporation one hundred eighty
(180) days following the Closing Date. Within a reasonable time
following such 180 day period, Parent or the Surviving Corporation
shall provide the Stockholders with a reconciliation of such accounts
receivable and certify to the Stockholders that such receivables
remain unpaid. The Stockholders shall pay to the Surviving
Corporation or Parent such uncollected amount within ten (10) days
following receipt of such reconciliation and certification.
(vi) Notwithstanding any provision of this Agreement to the
contrary, each Stockholder's liability shall be limited to the amount
of his or her pro rata share of the Merger Consideration; provided,
however that Xxxxxxx X. Xxxxxxx and the Trust shall be jointly and
severally liable to the extent of the pro rata share of the Merger
Consideration received by the Trust.
(c) Indemnification Provisions for Benefit of the Stockholders.
In the event Parent or Buyer breaches (or in the event any third party
alleges facts that, if true, would mean Parent or Buyer has breached) any
of their representations, warranties, and covenants contained in this
Agreement, and, if there is an applicable survival period pursuant to (S)
8(a) above or in the event of any third party claim relating to the
operation of the business after the Closing, provided that the Stockholders
makes a
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written claim for indemnification setting forth with specificity the basis
for such claim against Parent or Buyer pursuant to (S) 9(g) below within
such survival period, then Parent and Buyer jointly and severally agree to
indemnify the Stockholders from and against the entirety of any Adverse
Consequences (up to but not in excess of the Merger Consideration) the
Stockholders may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the Stockholders may
suffer after the end of any applicable survival period) resulting from,
arising out of, or caused by the breach (or the alleged breach).
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter ( a "Third Party Claim") which may
give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this (S) 7, then the Indemnified Party
shall promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying
Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its
choice satisfactory to the Indemnified Party so long as (A) the
Indemnifying Party notifies the Indemnified Party in writing within 15
days after the Indemnified Party has given notice of the Third Party
Claim that the Indemnifying Party will indemnify the Indemnified Party
from and against the entirety of any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim, (B) the
Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations hereunder, (C)
the Third Party Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or an adverse
judgment with respect to, the Third Party Claim is not, in the good
faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the continuing
business interest of the Indemnified Party, and (E) the Indemnifying
Party conducts the defense of the Third Party Claim actively and
diligently.
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with (S) 8(d)(ii)
above, (A) the Indemnified Party may retain separate co-counsel at its
sole cost and expense and participate in the defense of the Third
Party Claim, (B) the Indemnified Party will not consent to the entry
of any judgment or enter into any settlement with respect to the Third
Party
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Claim without the prior written consent of the Indemnifying Party (not
to be withheld unreasonably).
(iv) In the event any of the conditions in 8(d)(ii) above is or
becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it may
deem appropriate (and the Indemnified Party need not consult with, or
obtain any consent from, any Indemnifying Party in connection
therewith), (B) the Indemnifying Parties will reimburse the
Indemnified Party promptly and periodically for the costs of defending
against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (C) the Indemnifying Parties will remain
responsible for any Adverse Consequences the Indemnified Party may
suffer resulting, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent provided in this
(S) 8.
(e) Determination of Adverse Consequences. The Parties shall take
into account the time cost of money (using the Applicable Rate as the
discount rate) in determining Adverse Consequences for purposes of this (S)
8. All indemnification payments under this (S) 8 shall be deemed
adjustments to the Merger Consideration.
(f) Post-Closing. Following the Closing, the remedy of the
Stockholders, on the one hand, and Parent and the Buyer on the other hand,
with respect to any breach or threatened breach of a representation,
warranty or covenant contained herein or with respect to any event,
circumstance or condition occurring on or before the Closing shall be
limited to the enforcement of the indemnification obligations set forth in
(S) 8; provided, however, that nothing provided in this (S) 8(f) shall
limit the right of any Party to seek any equitable remedy available to
enforce his or its rights hereunder in accordance with (S) 9 (n).
9. Miscellaneous.
(a) Press Releases and Public Announcements. Neither the Company nor
any Stockholder shall issue any press release or make any public
announcement relating to the subject matter of this Agreement without the
prior written approval of the Parent. Parent, upon prior notice to the
Company, may make any public disclosure it believes in good faith is
required or permitted by applicable law or any listing or trading agreement
concerning its publicly-traded securities.
(b) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties
and supersedes any prior
-35-
understandings, agreements, or representations by or between the Parties,
written or oral, to the extent they related in any way to the subject
matter hereof.
(d) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder without
the prior written approval of the other Party; provided, however, that the
Buyer may (i) assign any or all of its rights and interests hereunder to
one or more of its affiliates and (ii) designate one or more of its
affiliates to perform its obligations hereunder (in any or all of which
cases the Buyer nonetheless shall remain responsible for the performance of
all of its obligations hereunder).
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and
then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to the Company and the Stockholders, to the addresses set forth on Exhibit I
---------
hereto.
If to Buyer:
Xxxxxxx X. Key Copy to: Xxxxxxx X. Xxxxx, Esq.
Xxxxx Industries, Inc. Xxxxx Industries, Inc.
000 Xxx Xxxxxx Xxxx 000 Xxx Xxxxxx Xxxx
Xxxxxx, Xxxxxxx 00000 Xxxxxx, Xxxxxxx 00000
(000) 000-0000 (000) 000-0000
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited
courier, messenger service, telecopy, telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication
shall be deemed to have been duly given unless and until it actually is
received by the intended recipient. Any Party may change the address to
which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Party notice in the
manner herein set forth.
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(h) Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of California without
giving effect to any choice or conflict of law provision or rule (whether
of the State of California or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of
California.
(i) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
each of the Parent, Buyer, the Company and the Stockholders. No waiver by
any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend
to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by
virtue of any prior or subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
(k) Expenses. Buyer and each Stockholder will bear its (his) own
costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
The Stockholders shall bear all such expenses incurred by the Company.
(l) Construction. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
The word "including" shall mean including without limitation. Items set
forth in the Company Disclosure Schedule or the Buyer Disclosure Schedule
shall be deemed an exception only to the representations and warranties for
which they are identified and any other representations or warranties to
which the Company Disclosure Schedule or Buyer Disclosure Schedule with
respect to representations and warranties contain in appropriate cross-
reference.
(m) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
(n) Specific Performance. Each of the Parties acknowledges and agrees
that the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Party shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in
any action instituted in any court of the United States or any state
thereof having, in accordance with
-37-
the terms of this Agreement, jurisdiction over the Parties and the matter,
in addition to any other remedy to which it may be entitled, at law or in
equity.
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in the State of
California in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or proceeding
may be heard and determined in any such court. Each Party also agrees not
to bring any action or proceeding arising out of or relating to this
Agreement in any other court. Each of the Parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be
required of any other Party with respect thereto. Each Party appoints The
Xxxxxxxx-Xxxx Corporation System, Inc. (the "Process Agent") as his or its
agent to receive on is or its behalf service of copies of the summons and
complaint and any other process that might be served in the action or
proceeding. Any Party may make service on any other Party by sending or
delivering a copy of the process (i) to the Party to be served at the
address and in the manner provided for the giving of notices in (S) 9(g)
above or (ii) to the Party to be served in care of the Process Agent at the
address and in the manner provided for the giving of notices in (S) 9(g)
above. Each Party agrees that a final judgment in any action or proceeding
so brought shall be conclusive and may be enforced by suit on the judgment
or in any other manner provided by law or in equity.
(p) Arbitration. Except as otherwise set forth in this Agreement, all
disputes arising out of or under this Agreement shall be settled by
arbitration in a location in the State of California mutually acceptable to
the Parties before a single arbitrator pursuant to the rules of the
American Arbitration Association. Arbitration may be commenced at any time
by any of the parties hereto by giving written notice to each other than
such dispute has been referred to arbitration under this (S) 9(p). The
arbitrator shall be selected by the joint agreement of the Parties, but if
they do not so agree within twenty (20) days after the date of receipt of
the notice referred to above, the selection shall be made pursuant to the
rules from the panels of arbitrators maintained by the American Arbitration
Association. Any award rendered by the arbitrator shall be conclusive and
binding upon the Parties hereto; provided, however, that any such award
shall be accompanied by a written opinion of the arbitrator giving the
reason for the award. This provision for arbitration shall be specifically
enforceable by the Parties and the decision of the arbitrator in accordance
herewith shall be final and binding and there shall be no right of appeal
therefrom. The arbitrator shall assess, as part of his award to the
prevailing Party, all or such part as the arbitrator deems proper of the
arbitration expenses of the prevailing Party (including reasonable
attorneys' fees) and of the arbitrator against the Party that is
unsuccessful in such claim, defense or objection.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the
date first above written.
BUYER
PMCB Acquisition Corp.
By:_______________________________
Name:_____________________________
Title_____________________________
PARENT
Xxxxx Industries, Inc.
By:_______________________________
Name:_____________________________
Title:____________________________
THE COMPANY
Redlake Imaging Corporation
By:_______________________________
Name:_____________________________
Title:____________________________
STOCKHOLDERS
THE XXXXXXX X. XXXXXXX REVOCABLE
FAMILY TRUST
By:_______________________________
Trustee
[signatures continued on following page]
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[signatures continued from previous page]
_________________________________
Xxxxx Xxxxxxx
_________________________________
Xxxxxxx X. Xxxxxxx
_________________________________
Xxxxxx Xxxxxxx
_________________________________
Xxxx Xxxxx
_________________________________
Xxxxxx Xxxxxx
_________________________________
Xxxxx Xxxxx
_________________________________
Xxxxxxx Xxxxxxxx
_________________________________
Xxxxxxx Xxxxxxxxxx
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