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EXHIBIT 2.3
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
PERCEPTION LAMINATES, INC.,
XXXXXX XXXXXXX, SR.,
TERADYNE, INC., AND
T-P ACQUISITION CORPORATION
DATED AS OF AUGUST 1, 2000
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TABLE OF CONTENTS
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ARTICLE I -- DEFINITIONS.....................................................1
1.01. Definitions........................................................1
ARTICLE II -- PURCHASE AND SALE..............................................4
2.01. The Merger.........................................................4
2.02. Effects of the Merger..............................................5
2.03. The Closing........................................................5
2.04. Escrow Shares......................................................6
2.05. Conversion of the Shares...........................................6
ARTICLE III -- REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY........6
3.01. Corporate Existence and Power......................................7
3.02. Corporate Authorization............................................7
3.03. Governmental Authorization; Consents...............................7
3.04. Non-Contravention..................................................7
3.05. Capitalization.....................................................8
3.06. Subsidiaries.......................................................8
3.07. Financial Statements...............................................8
3.08. Absence of Certain Changes.........................................9
3.09. Property and Equipment............................................10
3.10. No Undisclosed Material Liabilities...............................11
3.11. Litigation........................................................11
3.12. Material Contracts................................................11
3.13. Insurance Coverage................................................12
3.14. Compliance with Laws; No Defaults.................................13
3.15. Finder's Fees.....................................................13
3.16. Intellectual Property.............................................13
3.17. Taxes.............................................................14
3.18. Employees.........................................................17
3.19. Environmental Compliance..........................................17
3.20. Customers and Suppliers...........................................19
3.21. Transactions with Affiliates......................................20
3.22. Other Information.................................................20
3.23. Intercompany Arrangements.........................................20
3.24. Inventories.......................................................20
3.25. Receivables.......................................................20
3.26. Products..........................................................21
3.27. Labor Matters.....................................................21
3.28. Affiliate Agreements..............................................21
3.29. Approvals.........................................................21
3.30. Reliance.....................................................21
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES RELATING TO THE SELLER.........22
4.01. Title to and Validity of Shares...................................22
4.02. Authority.........................................................22
4.03. Power To Act as Trustee or Executor...............................22
4.04. Securities Act Representations....................................22
ARTICLE V -- REPRESENTATIONS AND WARRANTIES OF BUYER........................23
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5.01. Organization and Existence........................................23
5.02. Corporate Authorization...........................................24
5.03. Governmental Authorization........................................24
5.04. Non-Contravention.................................................24
5.05. Finders' Fees.....................................................24
5.06. Purchase for Investment...........................................25
5.07. Litigation........................................................25
5.08. Buyer Stock.......................................................25
5.09. Capitalization of Buyer and Merger Sub............................25
5.10 Reports and Financial Statements..................................25
5.11. Absence of Certain Changes and Events.............................26
5.12. Form S-3 Eligibility..............................................26
5.13. Documents Not Misleading..........................................26
5.14. Tax Representation Letter.........................................26
5.15. Reliance..........................................................26
ARTICLE VI -- COVENANTS OF THE COMPANY AND SELLER...........................27
6.01. Conduct of the Company............................................27
6.02. Access to Information.............................................28
6.03. Notices of Certain Events.........................................28
6.04. Resignations......................................................29
6.05. Noncompetition; Nonsolicitation...................................29
6.06. Confidentiality...................................................31
6.07. Continuing Disclosure.............................................31
6.08. Stockholder Approval..............................................31
6.09. Exclusivity; Acquisition Proposals................................31
6.10. The Disclosure Schedule...........................................32
ARTICLE VII -- COVENANTS OF BUYER...........................................33
7.01. Confidentiality...................................................33
7.02. Registration on and Effectiveness of Form S-3.....................33
7.03 Notices of Certain Events.........................................34
ARTICLE VIII -- COVENANTS OF ALL PARTIES....................................34
8.01. Best Efforts......................................................34
8.02. Certain Filings...................................................34
8.03. Public Announcements..............................................35
8.04. Pooling...........................................................35
8.05. Tax Matters.......................................................35
ARTICLE IX -- EMPLOYEE BENEFITS.............................................37
9.01. Employee Benefits Definitions.....................................37
9.02. ERISA Representations.............................................38
9.03. No Third Party Beneficiaries......................................39
ARTICLE X -- CONDITIONS TO CLOSING..........................................40
10.01. Conditions to the Obligations of Each Party......................40
10.02. Conditions to Obligation of Buyer................................40
10.03. Conditions to Obligation of Seller...............................42
ARTICLE XI -- SURVIVAL; INDEMNIFICATION.....................................42
11.01. Survival.........................................................42
11.02. Indemnification..................................................42
11.03. Procedures; No Waiver............................................44
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ARTICLE XII -- TERMINATION..................................................47
12.01. Grounds for Termination..........................................47
12.02. Effect of Termination............................................47
ARTICLE XII -- MISCELLANEOUS................................................48
13.01. Notices..........................................................48
13.02. Amendments; No Waivers...........................................49
13.03. Expenses.........................................................49
13.04. Successors and Assigns...........................................49
13.05. Further Assurances...............................................49
13.06. Governing Law....................................................50
13.07. Counterparts; Effectiveness......................................50
13.08. Entire Agreement.................................................50
13.09. Captions.........................................................50
13.10. Jurisdiction.....................................................50
13.11. Transfer, Sales Documentary, Stamp and Other Similar Taxes.......50
13.12. Severability.....................................................50
13.13. Extension; Waiver................................................50
SCHEDULES
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Schedule 2.03 List of Stockholders
Schedule 3.17 Tax Representation Letter of Company and Seller
Schedule 5.14 Tax Representation Letter of Buyer and Merger Sub
EXHIBITS
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Exhibit A Form of Escrow Agreement
Exhibit B Form of Affiliate Agreement
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AGREEMENT AND PLAN OR REORGANIZATION
AGREEMENT dated as of August 1, 2000 among Perception Laminates, Inc.,
d.b.a. Synthane Xxxxxx, a California corporation (the "COMPANY"); the
stockholder of the Company listed on the signature pages hereto ("SELLER");
Teradyne, Inc., a Massachusetts corporation ("BUYER"); and - T-P Acquisition
Corporation, a Delaware corporation and wholly owned subsidiary of Buyer
("MERGER SUB").
WITNESSETH:
WHEREAS, Buyer desires to obtain from Seller all of the outstanding shares
of capital stock of the Company (the "SHARES");
WHEREAS, the Seller desires to transfer to Buyer all of the Shares owned by
such Seller in exchange for Buyer Stock (as defined below); and
WHEREAS, the exchange of Shares for Buyer Stock is intended to qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue code
of 1986, as amended (the "CODE").
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01. DEFINITIONS. (a) The following terms, as used herein, have the
following meanings:
"AFFILIATE" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such Person.
"ANCILLARY AGREEMENTS" means the Escrow Agreement and the Affiliate
Agreements.
"BALANCE SHEET" means the unaudited balance sheet of the Company as of June
30, 2000 referred to in Section 3.07.
"BALANCE SHEET DATE" means June 30, 2000.
"BUYER STOCK" means the common stock of Buyer, $0.125 par value per share.
"BUYER'S COUNSEL" means the law firm of Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP,
Boston, Massachusetts.
"CLOSING DATE" means the date of the Closing.
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"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock, $10.00 par value, of the Company.
"COMPANY'S PROPRIETARY RIGHTS" means all Proprietary Rights that are owned
or licensed by the Company or any Affiliate of the Company and used or held for
use by the Company or any Subsidiary.
"ESCROW AGENT" means the escrow agent that is a signatory to the Escrow
Agreement.
"ESCROW AGREEMENT" means the Escrow Agreement among Seller, Buyer and the
Escrow Agent in the form set forth in EXHIBIT A.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended.
"KNOWLEDGE" means the actual knowledge after reasonable inquiry of Seller
"KNOWN" means actually known after reasonable inquiry by Seller
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, restriction or encumbrance of any kind in respect of
such asset.
"MATERIAL ADVERSE CHANGE" means a material adverse change in the business,
assets, condition (financial or otherwise), or results of operations of the
Company.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the business,
assets, condition (financial or otherwise), or results or operations of the
Company.
"1934 ACT" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
"PERSON" means an individual, corporation, partnership, association, trust
or other entity or organization, including a government or political subdivision
or an agency or instrumentality thereof.
"PROPRIETARY RIGHTS" means all (A) patents, patent applications, patent
disclosures and all related continuation, continuation-in-part, divisional,
reissue, re-examination, utility, model, certificate of invention and design
patents, patent applications, registrations and applications for registrations,
(B) trademarks, URL addresses and/or domain names, service marks, trade dress,
logos, tradenames, service names and corporate names and registrations and
applications for registration thereof, (C) copyrights and registrations and
applications for registration thereof, (D) mask works and registrations and
applications for registration thereof, (E) computer software, data and
documentation, (F) trade secrets and confidential business information,
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whether patentable or nonpatentable and whether or not reduced to practice,
know-how, manufacturing and product processes and techniques, research and
development information, copyrightable works, financial, marketing and business
data, pricing and cost information, business and marketing plans and customer
and supplier lists and information, (G) other proprietary rights relating to any
of the foregoing (including without limitation associated goodwill and remedies
against infringements thereof and rights of protection of an interest therein
under the laws of all jurisdictions) and (H) copies and tangible embodiments
thereof.
"S CORPORATION TAX LIABILITY" means the aggregate federal and state income
tax liability imposed on the Seller as a result of his ownership of Shares
during the Stub Period determined without regard to any other item of income,
gain, loss deduction or credit.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER'S COUNSEL" means the law firm of Xxxx, Forward, Xxxxxxxx & Scripps,
LLP, San Diego, CA.
"STUB PERIOD" shall mean the period from January 1, 2000 through the date
immediately preceding the Closing Date.
"SUBSIDIARY" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are owned directly or
indirectly by the Company.
"TAX DISTRIBUTION AMOUNT" means the excess, if any, of the S Corporation
Tax Liability over the aggregate amount previously distributed by the Company to
the Seller during the Stub Period with respect to their shares.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
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Acquisition Transaction 6.09
Affiliate Agreement 8.04
Benefit Arrangement 9.01
Buyer Audited Financial Statements 5.10
Cap 11.02
CERCLA 3.19
Closing 2.03
Code Recitals
Commission Filings 5.10
Company Affiliate 3.29
Company Securities 3.05
Customers 6.05
Damages 11.02
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Deductible 11.02
Effective Time 2.01
Engage in Competition 6.05
Employee Plans 9.01
Environment 3.19
Environmental Laws 3.19
Environmental Liabilities 3.19
Environmental Permits 3.19
ERISA 9.01
ERISA Affiliate 9.01
Escrow Shares 2.04
Financial Statements 3.07
Hazardous Substance 3.19
Indemnification 11.03
Indemnified Party 11.03
Indemnifying Party 11.03
Merger 2.01
Merger Documents 2.01
Multiemployer Plan 9.01
Permit 3.14
Registration Statement 7.02
Release 3.19
Reports 5.10
Required Consent 3.03
Surviving Corporation 2.01
Taxes 3.17
Tax Authority 3.17
Tax Return 3.17
Update 2.03
ARTICLE II
MERGER; CLOSING
2.01. THE MERGER. Upon the terms and subject to the conditions of this
Agreement, and in accordance with the General Corporation Law of the State of
Delaware and the California Corporations Code, Merger Sub will be merged with
and into the Company (the "MERGER"). A Certificate of Merger and any other
required documents (collectively, the "MERGER DOCUMENTS"), in such form as shall
be agreed to by the parties, will be duly prepared, executed and acknowledged by
the Company and Merger Sub and thereafter delivered to the Secretary of State of
California for filing in accordance with the California Corporations Code
contemporaneously with the Closing. The Merger will become effective at such
time as the Merger Documents have been filed with the Secretary of State of
California (the "EFFECTIVE TIME"). Following the Merger, the Company will
continue as the surviving corporation (the "SURVIVING CORPORATION")
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of the Merger under the laws of the State of California and the separate
corporate existence of Merger Sub will cease.
2.02. EFFECTS OF THE MERGER. At and after the Effective Time, (i) the
Merger will have all of the effects provided by the Certificate of Merger and
applicable law, (ii) the Articles of Incorporation of the Company will be
amended as provided in the Certificate of Merger until duly further amended,
(iii) the bylaws of the Company will be the bylaws of the Surviving Corporation
until duly amended, (iv) the directors of Merger Sub will be the directors of
the Surviving Corporation, to hold office in accordance with the bylaws of the
Surviving Corporation, (v) the officers of Merger Sub will be the officers of
the Surviving Corporation, to hold office in accordance with the bylaws of the
Surviving Corporation and (vi) the issued and outstanding certificates for
capital stock of Merger Sub will be the issued and outstanding certificates
initially representing all of the issued capital stock of the Surviving
Corporation. The Merger is intended to be a reorganization within the meaning of
Section 368(a) of the Code, and this Agreement is intended to constitute a "plan
of reorganization" within the meaning of the regulations promulgated under
Section 368 of the Code.
2.03. THE CLOSING. The closing (the "CLOSING") of the transactions
contemplated hereby shall take place at the offices of Xxxxx, Xxxxxxx &
Xxxxxxxxx, LLP in Boston, Massachusetts as soon as possible, but in no event
later than five (5) business days after satisfaction or waiver of the conditions
set forth in Article X, or at such other time or place as Buyer and Seller may
agree. If all of the conditions set forth in Article X are determined to be
satisfied (or duly waived) at the Closing, concurrently with the Closing the
parties hereto will cause the Merger to be consummated by the filing of the
Merger Documents with the Secretary of State of California. The Closing will be
deemed to have concluded at the Effective Time. At the Closing,
(a) Buyer shall deliver to Seller a certificate for an aggregate of 270,747
shares of Buyer Stock, registered in the names of Seller for the number of
shares shown in SCHEDULE 2.03.
(b) Buyer shall deliver to the Escrow Agent certificates for an aggregate
of 31,083 shares of Buyer Stock registered in the name of the Seller for the
number of shares shown on SCHEDULE 2.03 under the heading "ESCROW SHARES",
accompanied by an undated stock power or other transfer document covering such
certificates or instruments, duly executed by each Seller in blank.
(c) Seller shall deliver to Buyer a certificate for the Shares duly
endorsed or accompanied by stock powers duly endorsed in blank, with any
required transfer stamps affixed thereto.
(d) The appropriate parties shall enter into the Ancillary Agreements.
(e) In accordance with Section 6.10, the Company and Seller shall deliver
to Buyer a final revised Disclosure Schedule updating and supplementing the
information shown thereon to the Closing Date (the "UPDATE").
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(f) The parties shall execute and deliver any other instruments, documents
and certificates that are required to be delivered pursuant to this Agreement or
as may be reasonably requested by any party in order to consummate the
transactions contemplated by this Agreement.
2.04. ESCROW SHARES. Ten percent (10%) of the Buyer Stock, rounded down to
the nearest whole share (the "ESCROW SHARES") will be deposited and held in
escrow in accordance with the Escrow Agreement attached as EXHIBIT A as the
first source, but not the sole source, of indemnification payments that may
become due to Buyer or the Company pursuant to Article XI. The delivery of the
Escrow Shares will be made on behalf of the Seller in accordance with the
provisions hereof, with the same force and effect as if such shares had been
delivered by Buyer directly to the Seller and subsequently delivered by the
Seller to the Escrow Agent.
2.05. CONVERSION OF THE SHARES.
(a) Subject to the provisions hereof, at the Effective Time, each Share
will automatically, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into 503.05 shares of Buyer Stock, or an
aggregate of 301,830 Shares of Buyer Stock in accordance with SCHEDULE 2.03.
(b) If, between the date of this Agreement and the Closing Date, the
outstanding shares of Buyer Stock shall have been changed into a different
number of shares or a different class by reason of any reclassification,
recapitalization, split-up, stock split, combination, exchange of shares or
similar adjustment, or a stock dividend thereon shall be declared with a record
date prior to the Closing Date, the number of shares or class of Buyer Stock to
be issued and delivered at the Closing to Seller as provided in this Agreement
shall be appropriately adjusted.
(c) No certificates or scrip for fractional shares of Buyer Stock will be
issued (and any such fractional shares shall be rounded up to the nearest whole
share of Buyer Stock), no Buyer stock split or dividend will be paid in respect
of any fractional share interest, and no such fractional share interest will
entitle the owner thereof to vote or to any rights of or as a stockholder of
Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES RELATING TO
THE COMPANY
The Company and the Seller hereby jointly and severally represent and
warrant to Buyer and Merger Sub as of the date hereof and as of the Closing Date
that except as set forth on the Company's disclosure schedules or delivered
pursuant to Section 6.10 (the "DISCLOSURE SCHEDULE") and in the Update, which
Disclosure Schedule and Update shall make specific reference to the section to
which exception is taken:
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3.01. CORPORATE EXISTENCE AND POWER. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted. The Company is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except for those jurisdictions where failure
to be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect. The Company has heretofore delivered to Buyer true and complete
copies of the corporate charter and bylaws of the Company as currently in
effect.
3.02. CORPORATE AUTHORIZATION. The execution, delivery and performance by
the Company of this Agreement and the Ancillary Agreements to which it is a
party and the consummation by the Company of the transactions contemplated
hereby and thereby are within the Company's corporate powers and have been duly
authorized by all necessary corporate action on the part of the Company. The
Company's Board of Directors has approved the Company's execution of this
agreement and consummation of the transactions contemplated hereby. This
Agreement and the Ancillary Agreements to which the Company is a party have been
duly executed and delivered by the Company and constitute valid and binding
agreements of the Company, enforceable in accordance with their terms.
3.03. GOVERNMENTAL AUTHORIZATION; CONSENTS.
(a) The execution, delivery and performance by the Company and Seller of
this Agreement and the Ancillary Agreements require no action by or in respect
of, or filing with, any governmental body, agency, official or authority other
than compliance with any applicable requirements of the HSR Act.
(b) No consent, approval, waiver or other action (each, a "REQUIRED
CONSENT") by any Person (other than any governmental body, agency, official or
authority referred to in (a) above) under any contract, agreement, indenture,
lease, instrument or other document to which the Company is a party or by which
it is bound is required or necessary for the execution, delivery and performance
of this Agreement and the Ancillary Agreements by the Company or the
consummation of the transactions contemplated hereby.
3.04. NON-CONTRAVENTION. The execution, delivery and performance by the
Company of this Agreement and the Ancillary Agreements to which it is a party
and the consummation of the transactions contemplated hereby and thereby do not
and will not (i) contravene or conflict with the corporate charter or bylaws of
the Company, (ii) assuming compliance with the matters referred to in Section
3.03(a), contravene or conflict with any provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to the Company,
(iii) assuming the receipt of all Required Consents, constitute a default under
or give rise to any right of termination, cancellation or acceleration of any
right or obligation of the Company or to a loss of any benefit to which the
Company is entitled under any provision of any agreement, contract or other
instrument binding upon the Company or any permit held by the Company, or (iv)
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assuming the receipt of all Required Consents, result in the creation or
imposition of any Lien on any asset of the Company.
3.05. CAPITALIZATION. THE DISCLOSURE SCHEDULE sets forth (i) the
designation of each class of capital stock of the Company, (ii) the number of
authorized shares of each class of capital stock of the Company, (iii) the
number of outstanding shares of each class of capital stock of the Company, (iv)
the number of outstanding employee stock options, (v) the number of outstanding
employee stock options that are currently exercisable and (vi) all relevant
information regarding any outstanding convertible securities and any other
outstanding options, warrants or other rights to acquire capital stock of, or
other equity interests in, the Company. All outstanding shares of capital stock
of the Company have been duly authorized and validly issued and are fully paid
and are owned by Seller as shown on SCHEDULE 2.03. Except as set forth in this
Section, there are no outstanding (i) shares of capital stock, other securities
or phantom or other equity interests of the Company, (ii) securities of the
Company convertible into or exchangeable for shares of capital stock or other
securities of the Company or (iii) options or other rights to acquire from the
Company any capital stock, other securities or phantom or other equity interests
of the Company (the items in clauses (i), (ii) and (iii) being referred to
collectively as the "COMPANY SECURITIES"). There are no outstanding obligations
of the Company, actual or contingent, to issue or deliver or to repurchase,
redeem or otherwise acquire any Company Securities.
3.06. SUBSIDIARIES. The Company does not have and never has had any
Subsidiaries or any ownership or equity interest in or control of (direct or
indirect) any other Person.
3.07. FINANCIAL STATEMENTS. (a) Attached to the Disclosure Schedule are
true and complete copies of:
(i) the balance sheets of the Company as of December 31, 1999 and
December 31, 1998 and the statements of operations, cash flows and changes
in the stockholder's equity of the Company for the respective fiscal years
then ended, as audited by PricewaterhouseCoopers LLP; and
(ii) the unaudited statements of income, cash flows and changes in the
stockholder's equity of the Company for the six months ended June 30, 2000
(collectively, the "FINANCIAL STATEMENTS").
(b) Each of the balance sheets included in the Financial Statements fairly
presents in all material respects the financial position of the Company as of
its date, and the other statements included in the Financial Statements fairly
present in all material respects the results of operations, cash flows and
stockholders' equity, as the case may be, of the Company for the periods therein
set forth, in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved except as otherwise
stated therein and, with respect to the unaudited interim financial statements,
for the omission of footnote disclosures and, to the extent consistent with
generally accepted accounting principles, normally recurring year-end audit
adjustments.
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3.08. ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date, except as
reflected in the unaudited Financial Statements or in the Disclosure Schedule,
the Company has conducted its business in the ordinary course consistent with
past practices and there has not been:
(a) any Material Adverse Change;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any Company Securities or any repurchase,
redemption or other acquisition by the Company of any outstanding shares of
capital stock or other securities of, or other ownership interests in, the
Company other than distributions that do not exceed, in the aggregate, the
Tax Distribution Amount;
(c) any amendment of any outstanding security of the Company;
(d) any incurrence, assumption or guarantee by the Company of any
indebtedness for borrowed money;
(e) any creation or assumption by the Company of any Lien on any
asset;
(f) any making of any loan, advance or capital contributions to or
investment in any Person;
(g) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the Company that,
individually or in the aggregate, has had a Material Adverse Effect;
(h) any transaction or commitment made, or any contract or agreement
entered into, by the Company relating to its assets or business (including
the acquisition or disposition of any assets) or any relinquishment by the
Company of any contract or other right, in either case, material to the
Company, other than transactions and commitments in the ordinary course of
business consistent with past practices and those contemplated by this
Agreement;
(i) any change in any method of accounting or accounting practice by
the Company;
(j) any (i) grant of any severance or termination pay to any director,
officer or employee of the Company, (ii) entering into of any employment,
deferred compensation or other similar agreement (or any amendment to any
such existing agreement) with any director, officer or employee of the
Company, (iii) change in benefits payable under existing severance or
termination pay policies of the Company or employment agreements to which
the Company is a party or (iv) change, other than in the ordinary course of
business, in compensation, bonus or other benefits payable to directors,
officers
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or employees of the Company or (v) amendment of any Employee Plan or
Benefit Arrangement; or
(k) any labor dispute, other than routine individual grievances, or
any activity or proceeding by a labor union or representation thereof to
organize any employees of the Company, which employees were not subject to
a collective bargaining agreement at the Balance Sheet Date, or any
lockouts, strikes, slowdowns, work stoppages or threats thereof known by
the Company or Seller by or with respect to any employees of the Company.
3.09. PROPERTY AND EQUIPMENT.
(a) The Company has good and marketable indefeasible, fee simple title to,
or in the case of leased property has valid leasehold interests in, all real and
personal property and assets (whether tangible or intangible) reflected on the
Balance Sheet or acquired after the Balance Sheet Date. None of such properties
or assets is subject to any Liens, except:
(i) Liens disclosed on the Balance Sheet;
(ii) Liens for taxes not yet due or being contested in good faith (and for
which adequate accruals or reserves have been established on the
Balance Sheet); or
(iii) Liens which do not materially detract from the value of such property
or assets as now used, or materially interfere with any present or
intended use of such property or assets.
(iv) Such owned and leased real property includes all real property, and
only such real property, as is used or held for use or to be used or
held for use primarily in connection with the conduct of the business
and operations of the Company as heretofore conducted.
(v) All such leases of real property are in good standing and are valid,
binding and enforceable in accordance with their respective terms and
there does not exist under any such lease of real property any
material default or any event which with notice or lapse of time or
both would constitute a material default.
(vi) The plants, buildings and structures reflected on the Balance Sheet
are in good operating condition and repair and have been reasonably
maintained consistent with standards generally followed in the
industry (giving due account to the age and length of the use of same,
ordinary wear and tear excepted), are suitable to the Company for
their present uses and, in the case of plants, buildings and other
structures (including without limitation, the roofs thereof), to the
knowledge of Company and Seller, are structurally sound.
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(vii) The plants, buildings and structures referred to above currently
have access to (1) public roads or valid easements over private
streets or private property for such ingress to and egress from all
such real properties and (2) water supply, storm and sanitary sewer
facilities, telephone, gas and electrical connections, fire
protection, drainage and other public utilities, in each case as is
necessary for the present conduct of the business of the Company by
the Company.
(viii) None of the material structures on such owned or leased real
properties encroaches upon real property of another person, and no
structure of any other person substantially encroaches upon any of
such owned or leased real properties.
(b) There are no developments affecting any of such properties or assets
(exclusive of general economic, political or other similar developments not
unique to such properties or assets) pending or, to the knowledge of Seller,
threatened, that might materially detract from the value of such property or
assets, materially interfere with any present use of any such property or
assets.
(c) To the Company's and Seller's knowledge, the equipment owned by the
Company has no material defects, is in good operating condition and repair
(ordinary wear and tear excepted), and is substantially adequate for the uses to
which it is being put by the Company.
(d) The assets owned or leased by the Company, or which it otherwise has
the right to use, constitute all of the assets held for use or used in
connection with the business of the Company and are generally adequate to
conduct such business as currently conducted.
3.10. NO UNDISCLOSED MATERIAL LIABILITIES. Except as disclosed in the
Financial Statements or the Disclosure Schedule and the Update, there are no
liabilities of the Company of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, and there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a liability, other than liabilities incurred in the ordinary
course of business consistent with past practice since the Balance Sheet Date,
which in the aggregate are not material to the Company.
3.11. LITIGATION. There is no action, suit or proceeding (or any reasonably
known basis therefore) pending against, or, to the knowledge of the Seller, any
of the foregoing or any investigation commenced or threatened against or
affecting, the Company or any of its properties or the transactions contemplated
hereby before any court or arbitrator or any governmental body, agency, official
or authority.
3.12. MATERIAL CONTRACTS.
(a) Except for agreements, contracts, plans, leases, arrangements or
commitments disclosed in the Disclosure Schedule or any other schedule to this
Agreement, as of the date of this Agreement the Company is not a party to or
subject to:
(i) any lease providing for annual rentals of $100,000 or more;
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(ii) any contract relating to indebtedness for borrowed money or the
deferred purchase price of property (whether incurred, assumed, guaranteed
or secured by any asset), except contracts relating to indebtedness
incurred in the ordinary course of business in an amount not exceeding
$50,000;
(iii) any contract for the purchase of materials, supplies, goods,
services, equipment or other assets providing for annual payments by the
Company of $50,000 or more;
(iv) any sales, distribution or other similar agreement providing for
the sale by the Company of materials, supplies, goods, services, equipment
or other assets providing for annual payments to the Company of $50,000 or
more;
(v) any agency, dealer, sales representative or other similar
agreement;
(vi) any employment or consulting agreement;
(vii) any partnership, joint venture or other similar contract,
arrangement or agreement;
(viii) any license agreement, franchise agreement or agreement in
respect of similar rights granted to or held by the Company;
(ix) any contract or other document that limits the freedom of the
Company to compete in any line of business or with any Person or in any
area or which would so limit the freedom of the Company after the Closing
Date; or
(x) any other contract or commitment not made in the ordinary course
of business that is material to the Company.
(b) Each agreement, contract, plan, lease, arrangement and commitment
disclosed in any schedule to this Agreement or required to be disclosed pursuant
to Section 3.12(a) is a valid and binding agreement of the Company and is in
full force and effect, and the Company is not and to the knowledge of the
Company and the Seller, no other party thereto is in default in any material
respect under the terms of any such agreement, contract, plan, lease,
arrangement or commitment.
3.13. INSURANCE COVERAGE. The Company has furnished to Buyer a list of, and
true and complete copies of, all insurance policies and fidelity bonds covering
the assets, business, equipment, properties, operations, employees, officers and
directors of the Company, other than insurance policies which are Employee Plans
or Benefit Arrangements disclosed in the Disclosure Schedule. There is no claim
by the Company pending under any of such policies or bonds as to which coverage
has been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums payable under all such policies and bonds have been paid and
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the Company is in full compliance with the all terms and conditions of all such
policies and bonds, the failure to comply of which could reasonably be expected
to lead to the cancellation of such policies or bonds. Such policies of
insurance and bonds (or other policies and bonds providing substantially similar
insurance coverage) have been in effect since January 1, 1997 and remain in full
force and effect. The Company and Seller have not received any written
threatened termination of, or premium increase with respect to, any of such
policies or bonds.
3.14. COMPLIANCE WITH LAWS; NO DEFAULTS.
(a) The Company is not in violation of, or since, January 1, 1997 has not
violated, any applicable provisions of any laws, statutes, ordinances or
regulations, except for violations that have not had and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
(b) The Disclosure Schedule identifies and correctly describes each license
and permit (a "PERMIT") material to the business of the Company, together with
the name of the governmental agency or entity issuing such license or permit. To
the best of the Company's and Seller's knowledge, such licenses and permits are
valid and in full force and effect, and none of such licenses or permits will be
terminated or become terminable as a result of the consummation of the
transactions contemplated hereby.
(c) The Company is not in default under, and no condition exists that with
notice or lapse of time or both would constitute a default under, any judgment,
order or injunction of any court, arbitrator or governmental body, agency,
official or authority.
3.15. FINDERS' FEES. There is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of the
Seller or the Company who might be entitled to any fee or commission from Buyer,
Merger Sub, the Company or any of their respective Affiliates upon consummation
of the transactions contemplated by this Agreement.
3.16. INTELLECTUAL PROPERTY.
(a) Other than off-the-shelf, commercially available software, the
Disclosure Schedule includes a list of all of the Company's Proprietary Rights
specifying as to each, as applicable: (i) the nature of such right; (ii) the
owner of such right; (iii) the jurisdictions by or in which such right has been
issued or registered or in which an application for such issuance or
registration has been filed, including the respective registration or
application numbers; and (iv) licenses, sublicenses and other agreements as to
which the Company or any of its Affiliates is a party and pursuant to which any
Person is authorized to use any such right, including the identity of all
parties thereto, a description of the nature and subject matter thereof, the
applicable royalty and the term thereof.
(b)(i) Since January 1, 1997, and excluding any infringement by the Company
of which neither it nor the Seller have knowledge, the Company has not been sued
or charged in writing with or been a defendant in any claim, suit, action or
proceeding relating to its business that has
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not been finally terminated prior to the date hereof and that involves a claim
of infringement of any patents, trademarks, service marks or copyrights, and
(ii) the Company and the Seller have no knowledge of any other material claim of
infringement by the Company, and no knowledge of any continuing infringement by
any other Person of any of the Company's Proprietary Rights. No Company
Proprietary Right is subject to any outstanding order, judgment, decree,
stipulation or agreement restricting the use thereof by the Company or
restricting the licensing thereof by the Company to any Person. The Company has
not entered into any agreement to indemnify any other Person against any charge
of infringement of any patent, trademark, service xxxx or copyright.
(c) To the knowledge of the Company and Seller, none of the processes and
formulae, research and development results and other know-how of the Company,
the value of which to the Company is contingent upon maintenance of the
confidentiality thereof, has been disclosed by the Company to any Person other
than Persons (i) that are parties to confidentiality agreements with the Company
or (ii) who are required as a matter of law to maintain the confidentiality of
the processes and formulae, research and development results and other know-how
of the Company.
(d) To the knowledge of the Company and the Seller, no third party has
asserted any claim, or has any reasonable basis to assert any valid claim,
against the Company, which claim the Company reasonably has concluded is likely
to be made, with respect to (i) the continued employment by, or association
with, the Company of any of the present officers, employees of or consultants to
the Company or (ii) the use by the Company or any of such Persons in connection
with their activities for or on behalf of the Company of any information which
the Company or any of such Persons would be prohibited from using under any
prior agreements or arrangements or any laws applicable to unfair competition,
trade secrets or proprietary information.
3.17. TAXES.
(a) The term "TAXES" as used herein means all federal, state, local,
foreign net income, alternative or add-on minimum tax, estimated, gross income,
gross receipts, sales, use, ad valorem, value added, transfer, franchise,
capital profits, lease, service, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property, environmental or
windfall profit taxes, customs, duties and other taxes, governmental fees and
other like assessments and charges of any kind whatsoever, together with all
interest, penalties, additions to tax and additional amounts with respect
thereto, and the term "Tax" means any one of the foregoing Taxes. The term "TAX
RETURNS" as used herein means all returns, declarations, reports, claims for
refund, information statements and other documents relating to Taxes, including
all schedules and attachments thereto, and including all amendments thereof, and
the term "Tax Return" means any one of the foregoing Tax Returns. "TAX
AUTHORITY" means any governmental authority responsible for the imposition of
any Tax.
(b) The Company has timely filed all Tax Returns required to be filed and
has paid all Taxes owed (whether or not shown as due on such returns),
including, without limitation, all Taxes which the Company is obligated to
withhold for amounts paid or owing to employees, creditors and third parties.
All Tax Returns filed by the Company were complete and correct in
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all material respects, and such Tax Returns correctly reflected the facts
regarding the income, business, assets, operations, activities, status and other
matters of the Company and any other information required to be shown thereon.
None of the Tax Returns filed by the Company or Taxes payable by the Company
have been the subject of an audit, action, suit, proceeding, claim, examination,
deficiency or assessment by any governmental authority, and, to the Knowledge of
the Company and Seller, no such audit, action, suit, proceeding, claim,
examination, deficiency or assessment is currently pending or, to the knowledge
of the Company, threatened. The Company is not currently the beneficiary of any
extension of time within which to file any Tax Return, and the Company has not
waived any statute of limitation with respect to any Tax or agreed to any
extension of time with respect to a Tax assessment or deficiency. All material
elections with respect to Taxes affecting the Company, as of the date hereof,
are set forth in the Financial Statements or in the Disclosure Schedule. None of
the Tax Returns filed by the Company contain a disclosure statement under former
Section 6661 of the Code or Section 6662 of the Code (or any similar provision
of state, local or foreign Tax law).
(c) The Company is not a party to any agreement, contract, arrangement or
plan that has resulted or would result, separately or in the aggregate, in the
payment of (i) any "excess parachute payments" within the meaning of Section
280G of the Code (without regard to the exceptions set forth in Sections
280G(b)(4) and 280G(b)(5) of the Code) or (ii) any amount for which a deduction
would be disallowed or deferred under Section 162 or Section 404 of the Code.
The Company has not agreed to make any adjustment under Section 481(a) of the
Code (or any corresponding provision of state, local or foreign Tax law) by
reason of a change in accounting method or otherwise, and will not be required
to make such an adjustment as a result of the transactions contemplated by this
Agreement. The Company is not, and has not been, a U.S. real property holding
company (as defined in Section 897(c)(2) of the Code) during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code.
(d) No claim has ever been made by a Tax Authority in a jurisdiction where
the Company does not file Tax Returns that it is or may be subject to Tax in
that jurisdiction. No portion of the Purchase Price is subject to the Tax
withholding provisions of Section 3406 of the Code, or of Subchapter A of
Chapter 3 of the Code or of any other provision of law. The Company is not a
party to any joint venture, partnership, or other arrangement or contract which
could be treated as a partnership for federal income tax purposes. The Company
does not have, and has not had, a permanent establishment in any foreign
country, as defined in any applicable Tax treaty or convention between the
United States and such foreign country. None of the shares of outstanding
capital stock of the Company are subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code. The Company has never filed a
consent pursuant to Section 341(f) of the Code, relating to collapsible
corporations.
(e) The Company is not a party to any Tax sharing agreement or similar
arrangement. The Company has never been a member of a group filing a
consolidated federal income Tax Return (other than a group the common parent of
which was the Company), and the Company does not have any liability for the
Taxes of any Person (other than the Company) under Treasury Regulation Section
1.1502-6 (or any corresponding provision of state, local or foreign Tax law), as
a transferee or successor, by contract, or otherwise. The Company has no net
operating losses
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or other tax attributes presently subject to limitation under Sections 382, 383
or 384 of the Code, or the federal consolidated return regulations (other than
limitations imposed as a result of the transactions contemplated pursuant to
this Agreement).
(f) There are no liens for Taxes upon any of the assets, other than for ad
valorem Taxes not yet due and payable. The unpaid Taxes of the Company did not,
as of June 30, 2000, exceed the reserve for actual Taxes (as opposed to any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) as shown on the Financial Statements dated June 30, 2000,
and will not exceed such reserve as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of the Company in
filing their Tax Returns. The Company will not incur any liability for Taxes
from June 30, 2000 through the Closing Date other than in the ordinary course of
business and consistent with past practice.
(g) The Disclosure Schedule contains a list of all jurisdictions (whether
foreign or domestic) to which any Tax is properly payable by the Company.
(h) The Company and its shareholder made (i) a valid election for the
Company to be treated as an "S corporation", as that term is defined in Section
1361(a) of the Code, for federal income tax purposes and (ii) a similar valid
election under the laws of California or any other applicable governmental
authority, and all of such elections will be in effect at the Effective Time. An
election under Section 1362(a) of the Code has been in effect with respect to
the Company and any predecessor corporation (within the meaning of Section
1374(c) of the Code) for each of its taxable years. The Disclosure Schedule
lists each such election and a true copy of each such election is attached
thereto; there are no grounds for the revocation of any such election and no
such election will be revoked retroactively or otherwise except at the Effective
Time by reason of the Merger. The Company has been an S corporation at all times
since its inception through the date hereof. Neither the Company nor its
shareholders has taken any action that would cause, or would result in, the
termination of the S corporation status of the Company, other than pursuant to
this Agreement.
(i) The Company's shareholder has timely filed all Tax Returns with respect
to Taxes required to be paid attributable to items of income, gain, deductions,
losses and credits of the Company, and has timely paid all such Taxes (whether
or not shown on such Tax Returns). There has not been any audit of any Tax
Return filed by the shareholder of the Company with respect to, or which may
relate to, items of income, gain, deduction, loss or credit of the Company; and
no such audit of the shareholder of the Company is in progress and such
shareholder has not been notified by any taxing authority that any such audit is
contemplated or pending.
(j) The representations of the Company and Seller set forth in the
representation letter set forth in Schedule 3.17 to this Agreement will be true
and correct as of the Closing.
3.18. EMPLOYEES. SCHEDULE 3.18 sets forth a true and complete list of (a)
the names, titles, annual salaries and other compensation of all salaried
employees of the Company and (b) wage rates for non-salaried employees of the
Company (by classification). None of such
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employees has indicated to the Company or the Seller that he or she intends to
resign or retire as a result of the transactions contemplated by this Agreement.
3.19. ENVIRONMENTAL COMPLIANCE.
(a) ENVIRONMENTAL DEFINITIONS. The following terms, as used herein, have
the following meanings:
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"ENVIRONMENT" means any and all environmental media, including without
limitation ambient air, surface water, ground water, drinking water supply, land
surface or subsurface strata, and also means any indoor location other than any
such location that is intended to contain Hazardous Substances and that is
constructed, maintained and operated in compliance with all applicable
Environmental Laws.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and foreign
statutes, laws (including common or case law), regulations, ordinances, rules,
judgments, judicial decisions, orders, decrees, codes, plans, injunctions,
Environmental Permits, or governmental restrictions, arising thereunder,
relating to the protection of human health or safety or the Environment or to
emissions, discharges or Releases of any Hazardous Substance into the
Environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of any Hazardous
Substance or the containment, removal or remediation thereof.
"ENVIRONMENTAL LIABILITIES" means any and all liabilities arising in
connection with or in any way relating to the Company's business, past or
present, whether contingent or fixed, actual or potential, known or unknown,
which (i) arise under or relate to matters governed by Environmental Laws or
arise in connection with or relate to any matter disclosed in the Disclosure
Schedule and (ii) to the extent they arise from or relate in any way to actions
occurring or conditions existing before the Closing Date.
"ENVIRONMENTAL PERMITS" means any and all governmental permits, licenses,
concessions, grants, franchises, agreements, authorizations, registrations or
other governmental approvals issued or required under any Environmental Laws.
"HAZARDOUS SUBSTANCE" means any and all environmental pollutants and
contaminants, and any and all toxic, caustic, radioactive or otherwise hazardous
materials, substances or wastes that are regulated under any Environmental Laws,
and includes, without limitation, petroleum and its derivatives and by-products,
and any other hydrocarbons.
"RELEASE" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing into
the Environment
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(including, without limitation, the abandonment or discarding of barrels,
containers, and other closed receptacles containing any Hazardous Substance).
(b) ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES.
(i) The Company has complied in all material respects with all
Environmental Laws.
(ii) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or, to
the Company's and the Seller's knowledge, threatened, by any governmental
or other potential claimant with respect to (A) any alleged violation by
the Company of any Environmental Law, or any liability thereunder, (B) any
alleged failure by the Company to have any Environmental Permit, or (C) the
use, generation, treatment, storage, recycling, release, transportation or
disposal of any Hazardous Substance.
(iii) During, or prior to, the Company's use, ownership or lease of
any property now or previously owned, used or leased by the Company there
have been: (A) no urea formaldehyde or polychlorinated biphenyls; (B) no
asbestos or asbestos-containing materials are present; (C)no underground
storage tanks or related piping for Hazardous Substances, active or
abandoned, present and (D) no Hazardous Substance at, on or under any such
property, in a reportable or threshold planning quantity, where such a
quantity has been established by any Environmental Law.
(iv) The Company has not transported or arranged for the
transportation (directly or indirectly) of any Hazardous Substance to any
location which is (A) listed or proposed for listing on the National
Priorities List promulgated pursuant to CERCLA or on any similar state list
of sites requiring investigation or clean-up or (B) the subject of federal,
state or local enforcement actions or other investigations which may lead
to claims against the Company for any Environmental Liabilities including,
without limitation, clean-up costs, remedial work, damages to natural
resources or for personal injury claims, and claims under CERCLA.
(v) No oral or written notification of a Release of a Hazardous
Substance has been filed by or on behalf of the Company and no property now
or previously owned or leased by the Company is listed or, to the Company's
knowledge, proposed for listing, on the National Priorities List
promulgated pursuant to CERCLA or on any similar state list of sites
requiring investigation or clean-up.
(vi) No notice, lien or other restriction relating to the presence of
Hazardous Substances or otherwise arising under and Environmental Law has
been placed on any property or facility now or previously (to the best of
the Company's and Seller's knowledge) previously owned or leased by the
Company, and no governmental actions have been taken or are in process that
could subject any such property or facility to such a
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notice, lien or other restriction. The Company is not required to place any
such notice, lien or other restriction relating to the presence of
Hazardous Substances or otherwise arising under any Environmental Law at
any property used in connection with the operation of its business or in
any deed to such property.
(vii) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by or for the Company,
or which are or were in the Company's possession, in relation to any
property or facility now or previously owned or leased by the Company,
which have not been delivered to Buyer.
(viii) The Company has applied for and received all Environmental
Permits required in connection with its business. The Disclosure Schedule
sets forth a list of all such Environmental Permits, each of which is in
full force and effect. No suspension or cancellation is threatened and
there is no basis for believing that any such Environmental Permit will not
be renewable upon expiration. Each such Environmental Permit will continue
to be in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect immediately prior to the
Closing, and the consummation of the transactions contemplated herein will
not conflict with, result in a violation or breach of or constitute a
default under (or would result in a violation, breach or default with the
giving of notice or the passage of time or both) any such Environmental
Permit.
(ix) The Company has not contracted, or otherwise agreed, to indemnify
any Person, in whole or in part, with respect to any liability, claim,
costs, fees, or demand, known or unknown, arising under, or related to, any
Environmental Law. The Company has not contractually agreed to assume any
liability, costs, expenses, claims or fees arising under any Environmental
Law, nor is it obligated under any agreement to undertake any remediation,
removal, response or site assessment activities at any site, property or
location.
3.20. CUSTOMERS AND SUPPLIERS. The Company has not received notice from a
customer, or group of customers that are under common ownership or control, and
that accounted for 10% or more of the aggregate products and services furnished
by the Company during the past 18 months that such customer or group of
customers has stopped or intends to stop purchasing the Company's products or
services, nor has the Company lost any supplier, or group of suppliers that are
under common ownership or control, the loss of which would be reasonably
expected to have a Material Adverse Effect.
3.21. TRANSACTIONS WITH AFFILIATES. Except as set forth in the Disclosure
Schedule, there are no loans, leases, royalty agreements or other continuing
transactions between the Company and the Seller, any Affiliate of the Seller, or
any member of the Seller's family. To the knowledge of the Company and the
Seller, none of the officers or directors of the Company or Seller (a) has any
material direct or indirect interest in any entity that does business with the
Company; (b) has any direct or indirect interest in any property, asset or right
that is used by the Company in the conduct of its business; or (c) has any
contractual relationship with the Company
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other than such relationships that results solely from being an officer,
director, employee or stockholder of the Company.
3.22. OTHER INFORMATION. None of this Agreement, including the schedules
and exhibits, the Ancillary Agreements, nor the Financial Statements delivered
to Buyer in connection with the transactions contemplated by this Agreement,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein not misleading.
3.23. INTERCOMPANY ARRANGEMENTS. The Company does not own any note, bond,
debenture or other indebtedness, and is not otherwise a creditor of the Seller
or any of its Affiliates. Since the Balance Sheet Date there has not been any
payment by the Company to the Seller or any of its Affiliates, charge by the
Seller or any of its Affiliates to the Company or other transaction between the
Company and the Seller or any of its Affiliates.
3.24. INVENTORIES. The inventories set forth in the Balance Sheet were
properly stated therein at the lesser of cost or net realizable value determined
in accordance with generally accepted accounting principles consistently applied
by the Company. Since the Balance Sheet Date, the inventories of the Company
have been maintained in the ordinary course of business. All such inventory is
owned free and clear of all Liens except as disclosed in the Financial
Statements. All of the inventory recorded on the Balance Sheet consists of, and
all inventory on the Closing Date will consist of, items of a quality usable or
saleable in the ordinary course of business consistent with past practices and
are and will be in quantities sufficient for the normal operation of the
business of the Company in accordance with past practice, except for obsolete
items and items of below standard quality, all of which have been written down
to net realizable value in the Financial Statements.
3.25. RECEIVABLES. All accounts, notes receivable and other receivables
(other than receivables collected since the Balance Sheet Date) reflected on the
Balance Sheet are, and all accounts and notes receivable of the Company at the
Closing Date arose in the ordinary course of business of the Company and in bona
fide transactions and are valid. All accounts, notes receivable and other
receivables of the Company at the Balance Sheet Date have been included in the
Balance Sheet.
3.26. PRODUCTS. Each of the products produced or sold by the Company (i)
is, and at all times has been, in compliance in all material respects with all
applicable federal, state, local and foreign laws and regulations and (ii) is,
and at all relevant times has been, fit for the ordinary purposes for which it
is intended to be used and conforms in all material respects to any promises or
affirmations of fact made on the container or label for such product or in
connection with its sale. There is no known design defect with respect to any of
such products and each of such products contains adequate warnings, presented in
a reasonably prominent manner, in accordance with applicable laws and current
industry practice with respect to its contents and use. The Company has no
products placed with its customers under an understanding permitting their
return to the Company other than pursuant to a breach of warranty.
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3.27. LABOR MATTERS. The Company is in compliance with all currently
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and is not engaged in any unfair
labor practice, failure to comply with which or engagement in which, as the case
may be, would reasonably be expected to have a Material Adverse Effect. There is
no unfair labor practice complaint pending or, to the knowledge of the Seller,
threatened against the Company before the National Labor Relations Board.
3.28. AFFILIATE AGREEMENTS. The Company has consulted with its counsel and
has been advised that all persons who may be deemed "affiliates" of the Company
as such term is used in Rule 145 under the Securities Act, and applicable
accounting pronouncements of the Commission (each such Person, a "COMPANY
AFFILIATE") are listed on SCHEDULE 8.04(b).
3.29 APPROVALS. On or before the Closing, the Agreement and Certificate of
Merger have been duly approved and adopted by the affirmative vote of a number
of the outstanding shares of the Company's capital stock that equals or exceeds
the number of such shares required by law to approve the Agreement and the
Certificate of Merger.
3.30. RELIANCE. The representations and warranties of the Buyer and Merger
Sub set forth in this Agreement, and in any certificate or other writing
delivered by the Buyer or Merger Sub pursuant hereto, constitute all of the
representations and warranties of the Buyer and Merger Sub upon which The
Company and Seller have relied in entering into and performing this Agreement.
ARTICLE IV
REPRESENTATIONS
AND WARRANTIES RELATING TO SELLER
The Seller represents and warrants to, and agrees with, Buyer and Merger
Sub as follows:
4.01. TITLE TO AND VALIDITY OF SHARES. Seller now has, and on the Closing
Date will have, good and marketable title to and unrestricted power to vote and
transfer the Shares designated as owned by such Seller opposite such Seller's
name on SCHEDULE 2.03, free and clear of any Lien and, upon payment therefor and
delivery to Buyer thereof in accordance with the terms of this Agreement, Buyer
will obtain good and marketable title to such Shares free and clear of any Lien.
All Shares owned by such Seller have been duly authorized and validly issued and
are fully paid and non-assessable. All Shares to be sold by such Seller are
registered in the name of such Seller.
4.02. AUTHORITY. Seller has the legal power, right and authority to enter
into and perform this Agreement and the Ancillary Agreements to which he is a
party, and to perform each of his obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement and the Ancillary
Agreements to which he is a party by such Seller (a) require no action by or in
respect of, or filing with, or consent of, any governmental body, agency or
official
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or any other Person and (b) do not contravene, or constitute a default under,
any provision of applicable law or regulation or of any agreement, judgment,
injunction, order, decree or any other instrument binding upon such Seller. This
Agreement and the Ancillary Agreements to which he is a party have been duly
executed and delivered by such Seller and constitute valid and binding
obligations of such Seller, enforceable in accordance with their terms.
4.03. POWER TO ACT AS TRUSTEE OR EXECUTOR. If Seller is serving as trustee
or executor with respect to its Shares, such Seller is duly authorized and
empowered by the instruments creating such trust or trusts or by the will of
which Seller is acting as executor and under applicable law to enter into this
Agreement and the Ancillary Agreements to which he is a party with respect to
the Shares held by Seller and to consummate the transactions contemplated
herein.
4.04. SECURITIES ACT REPRESENTATIONS.
(a) Seller has substantial experience in evaluating and investing in
private placement transactions of securities in companies similar to the Buyer
such that Seller is capable of evaluating the merits and risks of its investment
in the Buyer and has the capacity to protect its own interest. Seller is an
"accredited investor" as that term is defined in Rule 501 promulgated under the
Securities Act.
(b) Seller is acquiring the Buyer Stock for investment for Seller's own
account, not as a nominee or agent, and not with a view to, or for resale in
connection with, any distribution thereof. Seller understands that the Buyer
Stock has not been, and will not be when issued, registered under the Securities
Act and is being issued pursuant to a specific exemption from the registration
provisions of the Securities Act, the availability of which depends upon, among
other things, the bona fide nature of the investment intent and the accuracy of
the representations expressed herein.
(c) Seller acknowledges that the Buyer Stock must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from such registration is available. Seller is aware of the provisions of Rule
145 promulgated under the Securities Act which permit limited resale of shares
received in certain private placements subject to the satisfaction of certain
conditions.
(d) Seller acknowledges that the certificates representing Buyer Stock will
bear a legend substantially as follows:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be sold, transferred or
otherwise disposed of except in accordance with the terms thereof and
unless registered with the Securities and Exchange Commission of the United
States and the securities regulatory authorities of certain states or
unless an exemption from registration is available."
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
Buyer and Merger Sub hereby jointly and severally represent and warrant to
the Company and Seller that:
5.01. ORGANIZATION AND EXISTENCE. Buyer is a corporation duly incorporated,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted. Buyer is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where failure to be so
qualified would not, individually or in the aggregate, have a Material Adverse
Effect. Buyer has heretofore delivered to the Company true and complete copies
of the corporate charter and bylaws of Buyer as currently in effect. Merger Sub
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, is recently organized and has
conducted no business activities other than as contemplated by this Agreement.
5.02. CORPORATE AUTHORIZATION. The execution, delivery and performance by
Buyer and Merger Sub of this Agreement and the Ancillary Agreements to which
they are party and the consummation by Buyer and Merger Sub of the transactions
contemplated hereby and thereby are within the corporate powers of Buyer and
Merger Sub, respectively and have been duly authorized by all necessary
corporate action on the part of such party. Buyer's Board of Directors has
approved Buyer's execution of this Agreement and consummation of the
transactions contemplated hereby. This Agreement and the Ancillary Agreements to
which they are party have been duly executed and delivered by Buyer and Merger
Sub and constitute valid and binding agreements of Buyer and Merger Sub,
respectively.
5.03. GOVERNMENTAL AUTHORIZATION.
(a) The execution, delivery and performance by Buyer and Merger Sub of this
Agreement and the Ancillary Agreements to which they are party require no action
by or in respect of, or filing with, any governmental body, agency, official or
authority other than (i) compliance with any applicable requirements of the HSR
Act; and (ii) compliance with any applicable requirements of the 1934 Act.
(b) No consent, approval, waiver or other action by any Person (other than
any governmental body, agency, official or authority referred to in (a) above)
under any contract, agreement, indenture, lease, instrument or other document to
which Buyer or Merger Sub is a party or by which it is bound is required or
necessary for the execution, delivery and performance of this Agreement of the
Ancillary Agreements to which they are party by Buyer and Merger Sub or the
consummation of the transactions contemplated hereby or thereby.
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5.04. NON-CONTRAVENTION. The execution, delivery and performance by Buyer
and Merger Sub of this Agreement and the Ancillary Agreements to which they are
party and the consummation by Buyer and Merger Sub of the transactions
contemplated hereby and thereby do not and will not (i) contravene or conflict
with the corporate charter or bylaws of Buyer or Merger Sub, (ii) assuming
compliance with the matters referred to in Section 5.03, contravene or conflict
with any provision of any law, regulation, judgment, injunction, order or decree
binding upon or applicable to Buyer or Merger Sub, (iii) violate, conflict with
or constitute a default under any material contract to which Buyer or Merger Sub
is a party or by which Buyer's or Merger Sub's property is bound, or (iv)
require the consent of any party to any material contract to which Buyer or
Merger Sub is a party or by which Buyer's or Merger Sub's property is bound.
5.05. FINDERS' FEES. There is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of
Buyer or Merger Sub who might be entitled to any fee or commission from the
Company, Seller or any Affiliate thereof upon consummation of the transactions
contemplated by this Agreement.
5.06. PURCHASE FOR INVESTMENT. Buyer is acquiring the Shares for investment
for its own account and not with a view to, or for sale in connection with, any
distribution thereof.
5.07. LITIGATION. There is no action, suit, investigation or proceeding
pending against, or to the knowledge of Buyer or Merger Sub threatened against
or affecting, Buyer or any of its subsidiaries or any of their properties or
rights before any court or arbitrator or any governmental body, agency or
official which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated hereby.
5.08. BUYER STOCK. The Buyer Stock has been duly authorized and, when
issued in accordance with this Agreement, will be validly issued, fully paid and
nonassessable shares of Buyer's common stock, $0.125 par value per share, with
no personal liability attaching to the ownership thereof and will be free and
clear of all liens, charges, restrictions, claims and encumbrances imposed by or
through Buyer, except as may arise in connection with or be imposed as a result
of the transactions contemplated hereby.
5.09. CAPITALIZATION OF BUYER AND MERGER SUB. As of July 29, 2000, the
authorized capital stock of Buyer consists of 1 billion shares of common stock.
As of such date 196,957,131 shares of Buyer Stock are issued and outstanding, of
which 23,516,330 shares of Buyer Stock are held in the treasury of Buyer, and
29,979,859 shares of Buyer Stock have been reserved for issuance upon exercise
of options granted or reserved for grant under Buyer's various stock option and
stock purchase plans for its employees and directors. All of the shares of Buyer
Stock have the same voting and other rights.
5.10. REPORTS AND FINANCIAL STATEMENTS. Since January 1, 1998, Buyer has
filed all forms, reports and documents with the Commission required to be filed
by it pursuant to the federal securities laws and the Commission rules and
regulations thereunder, and all such forms, reports and documents filed with the
Commission have complied in all material respects with all
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applicable requirements of the federal securities laws and the Commission rules
and regulations promulgated thereunder. Buyer has heretofore made available to
the Company and the Seller, true and complete copies of its Form 10-K for the
period ended December 31, 1999 and its Quarterly Report on Form 10-Q for the
period ended March 31, 2000, and Buyer shall forward to Seller true and correct
copies of all forms, reports, documents and amendments thereto filed by it with
the Commission after the date hereof prior to Closing all in the form (including
exhibits) so filed (collectively, the "REPORTS"). All forms, reports, documents,
amendments thereto and other filings filed by Buyer with the Commission,
including the Reports, prior to the date hereof are collectively referred to
herein as the "COMMISSION FILINGS". As of their respective dates, the Commission
Filings did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited financial statements of Buyer for its fiscal year
ended December 31, 1999, included in the Commission Filings (the "BUYER AUDITED
FINANCIAL STATEMENTS"), were prepared in accordance with generally accepted
accounting principles consistently applied and fairly present the consolidated
financial position of Buyer as of the dates thereof and the results of its
operations, shareholders' equity and cash flows for the period then ended. The
unaudited financial statements of Buyer for the three-month period ended March
31, 2000 included in the Commission Filings, have been prepared in accordance
with generally accepted accounting principles consistently applied and fairly
present the consolidated financial position of Buyer as of March 31, 2000 and
the results of operations, shareholders' equity and cash flows for the three
month period then ended in accordance with generally accepted accounting
principles consistently applied (subject, in the case of unaudited statements,
to the absence of footnote disclosure and in the case of unaudited interim
statements to year-end adjustments, which will not be material either
individually or in the aggregate).
5.11. ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as expressly disclosed
in the Reports filed since December 31, 1999, there has not been any Material
Adverse Change in the business, assets, condition (financial or otherwise), or
results of operation of Buyer.
5.12. FORM S-3 ELIGIBILITY. Buyer meets the "Registrant Requirements" set
forth in Instruction I.A. of the General Instructions for the use of Form S-3
(Registration Statement under the Securities Act).
5.13. DOCUMENTS NOT MISLEADING. Neither this Agreement, including all
schedules and exhibits, nor the Ancillary Agreements delivered by Buyer or
Merger Sub to Seller and the Company contains any untrue statement of any
material fact or omits to state any material fact required to be stated in order
to make such statement or document not misleading.
5.14. TAX REPRESENTATION LETTER. The representations of Buyer and Merger
Sub set forth in the representation letter set forth in SCHEDULE 5.14 will be
true and correct as of the Closing.
5.15. RELIANCE. The representations and warranties of the Company and
Seller set forth in this Agreement, in the Disclosure Schedule and Update, and
in any certificate or other writing delivered by the Company or Seller pursuant
hereto, constitute all of the representations and
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warranties of the Company and Seller upon which the Buyer and Merger Sub have
relied in entering into and performing this Agreement.
ARTICLE VI
COVENANTS OF THE COMPANY AND SELLER
The Company and the Seller agree that:
6.01. CONDUCT OF THE COMPANY. From the date hereof until the Closing Date,
the Company shall conduct its business in the ordinary course consistent with
past practices and use commercially reasonable efforts to preserve intact its
business organization and relationships with third parties and keep available
the services of its present officers and employees. If requested by Buyer, the
Company will confer on a regular and frequent basis with representatives of
Buyer to report operational matters of a material nature and to report on the
general status of the Company's ongoing operations. Without limiting the
generality of the foregoing, from the date hereof until the Closing Date, the
Company will not:
(a) adopt or propose any change in its corporate charter or bylaws;
(b) merge or consolidate with any other Person or acquire assets of
the business of any other Person for a purchase price in excess of $10,000;
(c) sell, lease, license, encumber or otherwise dispose of any assets
or property except (i) pursuant to existing contracts or commitments and
(ii) in the ordinary course consistent with past practices;
(d) take any action that would adversely affect the parties' ability
to account for the transaction contemplated by this Agreement as a "pooling
of interests" in accordance with United States generally accepted
accounting principles, as acceptable to the Commission or pay any dividend
or make any other distribution of cash, shares or property other than
distributions that do not exceed, in the aggregate, the Tax Distribution
Amount;
(e) grant any bonus, severance or termination pay to any officer,
director or independent contractor or, except in the ordinary course of
business consistent with past practices, to any employee of the Company;
(f) other than in the ordinary course of business consistent with
prior practice, enter into or terminate any contracts, arrangements, plans,
agreements, leases, licenses, franchises, permits, indentures,
authorizations, instruments, or commitments, or amend or otherwise change
in any material respect the terms thereof in a manner adverse to the
Company;
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(g) modify in any material respect existing discounts or other terms
and conditions with dealers, distributors and other resellers of the
Company's products or services in a manner adverse to the Company;
(h) incur any indebtedness for borrowed money by way of direct loan,
sale of debt securities, purchase money obligation, conditional sale,
guarantee or otherwise;
(i) adopt or amend, or modify in any material respect, any Employee
Plan or Benefit Arrangement or pay any pension, other retirement benefit
not required by any existing Employee Plan or Benefit Arrangement; enter
into or modify any employment or severance contracts, increase the
salaries, wage rates or fringe benefits of its officers, directors or
employees;
(j) make or change any material election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent
to any extension or waiver of the limitation period applicable to any claim
or assessment in respect of Taxes; or
(k) agree or commit to do any of the foregoing.
The Company will not (i) take or agree or commit to take any action that would
make any representation and warranty of the Company or the Seller under this
Agreement on the date of its execution and delivery inaccurate in any material
respect at, or as of any time prior to, the Closing Date or (ii) omit or agree
or commit to omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any respect at any such
time.
6.02. ACCESS TO INFORMATION. From the date hereof until the Closing Date,
the Seller and the Company (a) will give Buyer, its counsel, financial advisors,
auditors and other authorized representatives full access to the offices,
properties, books and records of the Company, (b) will furnish Buyer's counsel,
financial advisors, auditors and other authorized representatives such financial
and operating data and other information relating to the Company as such Persons
may reasonably request, and (c) will instruct the employees, counsel and
financial advisors of the Company to cooperate with Buyer in its investigation
of the Company; PROVIDED that no investigation pursuant to this Section shall
affect any representation or warranty given by the Company or the Seller
hereunder.
6.03. NOTICES OF CERTAIN EVENTS. From the date hereof until the Closing
Date, the Company will promptly notify Buyer of:
(i) any notice from any Person alleging that the consent of such
Person is or may be required in connection with the transactions
contemplated by this Agreement;
(ii) any notice from any governmental or regulatory agency or
authority in connection with the transactions contemplated by this
Agreement;
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(iii) any actions, suits, claims or proceedings commenced or, to its
Knowledge, any of the foregoing threatened or any investigation commenced
against the Company or that relate to the consummation of the transactions
contemplated by this Agreement; and
(iv) any event which would or reasonably could be expected to render
any representation or warranty of Company or the Seller untrue or
inaccurate in any material respect or would or might cause Company or the
Seller to fail to comply with its obligations hereunder in any material
respect.
6.04. RESIGNATIONS. The Company will deliver to Buyer the resignations of
all officers and directors of the Company from their positions with the Company
at or prior to the Closing Date, unless otherwise specified by Buyer.
6.05. NONCOMPETITION; NONSOLICITATION.
(a) The Seller agrees that for a period of three (3) full years from the
Closing Date, neither he nor any of its Affiliates shall:
(i) own, manage, operate, join, control, be employed or retained by or
participate in (including permitting such Seller's name or business name to
be associated with) any business that competes with the business of the
Company as it exists on the Closing Date ("Engage in Competition"),
directly or indirectly, or derive any financial benefits whatsoever from,
or be an officer, director, employee, employer, partner, joint venturer,
agent, consultant, member, managing member, independent contractor or
shareholder of, any business which Engages in Competition, or renders
assistance or advice for which Seller, or an Affiliate of Seller, receives
any financial remuneration, directly or indirectly, to any person, firm or
enterprise which it so engages; provided, however, that the Seller shall be
in violation of this covenant solely by reason of his ownership of less
than five percent (5%) of the outstanding stock of a Person, so long as
such Seller has no active participation in the management or business of
such Person; or
(ii) approach, solicit or accept business from, or otherwise do
business or communicate in any way with any customer, supplier, licensee,
sales representative, distributor, dealer, manufacturer, vendor, consultant
or other business relation (collectively "Customers") of Buyer or its
Affiliates thereof with respect to any activity which constitutes Engaging
in Competition or induce or attempt to induce any Customers of Buyer or its
Affiliates to cease doing business with Buyer or its Affiliates.
(b) For the purposes of Section 6.05(a) of this Agreement, a business or
other commercial entity "Engaging in Competition," shall mean a company,
business, or entity whose products or services are similar in function or
capability or otherwise directly competitive to the products or services being
designed, conceived, developed, marketed, manufactured, distributed, provided or
sold by the Company as of the Closing Date, including printed circuit boards and
back panels.
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(c) Seller further agrees that for a period of five (5) full years from the
Closing Date, neither he nor any of his Affiliates shall:
(i) solicit, induce or attempt to induce any person who is then in the
employ of or an independent contractor with Buyer or its Affiliates to
leave the employ of, or terminate his/her or its contractual relationship
with Buyer or its Affiliates, or in any way interfere with the relationship
between Buyer or its Affiliates and any such employee or independent
contractor, or employ or attempt to employ directly or through another
entity any such person or in an activity which constitutes Engaging in
Competition, or approach any such employee or independent contractor for
any of the foregoing purposes;
(ii) aid, assist or counsel any other Person to do any of the above;
or
(iii) engage in a course of conduct for the purpose of circumventing
the provisions of this Section.
(d) Seller hereby agrees that each provision and the subparts of each
provision herein shall be treated as separate and independent clauses, and the
unenforceability of any one clause shall in no way impair the enforceability of
any of the other clauses in this Section. Moreover, if one or more of the
provisions contained in this Section shall for any reason be held to be
excessively broad as to scope, activity, subject or otherwise so as to be
unenforceable at law, such provision or provisions shall be construed by the
appropriate judicial body by limiting or reducing it or them, so as to be
enforceable to the maximum extent compatible with the applicable law as it shall
then appear. Seller hereby further agrees that the language of all parts of this
Section shall in all cases be construed as a whole according to its fair meaning
and not strictly for or against either of the parties. Any waiver by the Buyer
of a breach of any provision of this Section shall not operate or be construed
as a waiver of any subsequent breach of such provision or any other provision
hereof.
(e) Seller's obligations under this Section shall be binding upon their
heirs, executors, administrators and legal representatives.
(f) Seller agrees that any breach of this Section by them will cause
irreparable damage to the Buyer and that in the event of such breach the Buyer
shall have, in addition to any and all remedies of law, the right to an
injunction, specific performance or other equitable relief to prevent the
violation of Seller's obligations hereunder. The Buyer may apply for such
injunctive relief in any court of competent jurisdiction without the necessity
of posting any bond or other security. Buyer agrees that before pursuing any of
its remedies for breach by Seller of this Section 6.05, it shall give such
Seller written notice of such breach and 30 days to cure such breach to the
reasonable satisfaction of Buyer.
6.06. CONFIDENTIALITY. The Company, and Seller and their Affiliates, will
hold, and will use their best efforts to cause their respective officers,
directors, employees, accountants, counsel, consultants, advisors and agents to
hold, in confidence, unless compelled to disclose by
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judicial or administrative process or by other requirements of law, all
confidential documents and information concerning Buyer or Merger Sub furnished
to the Company, or to Seller or their Affiliates, in connection with the
transactions contemplated by this Agreement, and all confidential documents and
information concerning the Company, except to the extent that such information
can be shown to have been (i) previously known on a nonconfidential basis by
Seller, (ii) in the public domain through no fault of Seller or (iii) later
lawfully acquired by Seller from sources other than the Company or Buyer;
PROVIDED that the Company and Seller may disclose such information to their
respective officers, directors, employees, accountants, counsel, consultants,
advisors and agents in connection with the transactions contemplated by this
Agreement so long as such persons are informed by the Company and Seller of the
confidential nature of such information and are directed by the Company and
Seller to treat such information confidentially. The obligation of the Company,
and Seller and their Affiliates, to hold any such information in confidence
shall be satisfied if they exercise the same care with respect to such
information as they would take to preserve the confidentiality of their own
similar information. If this Agreement is terminated, the Company, and Seller
and their Affiliates, will, and will use their best efforts to cause their
respective officers, directors, employees, accountants, counsel, consultants,
advisors and agents to, destroy or deliver to Buyer, upon request, all documents
and other materials, and all copies thereof, obtained by the Company, or by
Seller or their Affiliates, or on their behalf from Buyer in connection with
this Agreement that are subject to such confidence.
6.07. CONTINUING DISCLOSURE. From the date hereof until the Closing Date,
the Company and Seller shall have the continuing obligation promptly to advise
Buyer with respect to any matter hereafter arising or discovered that, if
existing or known at the date of this Agreement, would have been required to be
set forth or described in a schedule to this Agreement, or that constitutes a
breach or prospective breach of this Agreement by the Company or Seller;
provided, however that Buyer shall have no remedy to the extent Buyer is
notified of any such matter prior to Closing and subsequently waives such matter
in writing.
6.08. STOCKHOLDER APPROVAL. To the extent required, Seller in his capacity
as a stockholder agrees to support and to vote all of such Seller's shares of
Company Common Stock for the approval of this Agreement and the Ancillary
Agreements.
6.09. EXCLUSIVITY; ACQUISITION PROPOSALS. Unless and until this Agreement
will have been terminated by either party pursuant to Article XII hereof and
thereafter subject to Section 12.02, neither the Company nor Seller will (and
each will use its reasonable best efforts to ensure that none of its officers,
directors, agents, representatives or affiliates) take or cause or permit any
Person to take, directly or indirectly, any of the following actions with any
party other than Buyer and its designees: (i) solicit, encourage, initiate or
participate in any negotiations, inquiries, or discussions with respect to any
offer or proposal to acquire all or any significant part of the Company's
business, assets or capital stock, whether by merger, consolidation, other
business combination, purchase of assets, tender or exchange offer or otherwise
(each of the foregoing, an "ACQUISITION TRANSACTION"), (ii) disclose, in
connection with an Acquisition Transaction, any information not customarily
disclosed to any Person other than Buyer or its representatives concerning the
Company's business or properties or afford to any Person other than Buyer or its
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representatives access to its properties, books, or records, except in the
ordinary course of business and as required by law or pursuant to a governmental
request for information, (iii) enter into or execute any binding or non-binding
letter of intent, memorandum of understanding or other document or agreement
relating to an Acquisition Transaction. In the event that the Company or Seller
is contacted by any third party expressing an interest in discussing an
Acquisition Transaction, the Company or such Seller will promptly notify Buyer
of such contact and the identity of the party so contacting the Company or such
Seller.
6.10. THE DISCLOSURE SCHEDULE. As soon as practicable, but in no event
later than 5:00 PM Eastern Time on August 4, 2000, the Company and Seller shall
deliver to Buyer the Disclosure Schedule and all schedules and exhibits to be
attached thereto. The Disclosure Schedule shall: (a) contain accurate, true,
correct and complete information and data; (b) be executed by the Company and
Seller and dated the date of this Agreement; (c) be deemed to modify the
representations, warranties and obligations of the Company and Seller made
pursuant to Articles III, IV and IX of this Agreement, or constitute
qualifications or exceptions thereto; and (d) be updated, amended and
supplemented, as appropriate through the final Update. Terms used and defined in
this Agreement shall have the same definition when used in the Disclosure
Schedule and the Update and the schedules and exhibits attached thereto.
The Update and all schedules and exhibits thereto shall include all
information relevant to the disclosures therein which relates to events which
have occurred after the date of the Disclosure Schedule until the Closing Date,
and Seller shall deliver a draft of the Update to Buyer at least five (5) days
prior to the Closing Date and shall deliver the final Update to Buyer on the
Closing Date. The Update shall contain accurate, true, correct and complete
information and data and shall also be deemed to modify the representations,
warranties and obligations of the Company and Seller made pursuant to Articles
III, IV and IX of this Agreement, or constitute qualifications or exceptions
thereto.
As soon as practicable and in any event within seven (7) business days
after its receipt of the Disclosure Schedule, Buyer shall give Company and
Seller notice if, on the basis of any information contained in the Disclosure
Schedule or any schedules or exhibits thereto, or of any information obtained
during the course of Buyer's own investigation through that date, it has
determined that it wishes to terminate this Agreement. Such notice shall specify
the information contained in the Disclosure Schedule, or any schedules or
exhibits thereto, or obtained during such investigation which is the basis for
such decision. The Company and Seller shall have three (3) business days to
review with Buyer such information, and if Buyer does not withdraw its notice by
the end of such three (3) business day period, then all further obligations of
Buyer and of the Company and Seller shall terminate without further liability of
Buyer to Seller or of Company and Seller to Buyer, subject, however, to the
obligations of the parties under Section 12.02. If Buyer does not advise Company
and Seller within seven (7) business days after its receipt of the Disclosure
Schedule that it wishes to terminate the Agreement, Buyer shall be deemed to
have been satisfied with the information relating to the Company and Seller
contained in the Disclosure Schedule, any schedules or exhibits thereto and any
information obtained during the course of Buyer's investigation.
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ARTICLE VII
COVENANTS OF BUYER
Buyer agrees that:
7.01. CONFIDENTIALITY. Prior to the Closing Date and after any termination
of this Agreement, Buyer and its Affiliates will hold, and will use their best
efforts to cause their respective officers, directors, employees, accountants,
counsel, consultants, advisors and agents to hold, in confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
Company and the Subsidiaries furnished to Buyer or its Affiliates in connection
with the transactions contemplated by this Agreement, except to the extent that
such information can be shown to have been (i) previously known on a
nonconfidential basis by Buyer, (ii) in the public domain through no fault of
Buyer or (iii) later lawfully acquired by Buyer from sources other than the
Company or its Subsidiaries; PROVIDED that Buyer may disclose such information
to its officers, directors, employees, accountants, counsel, consultants,
advisors and agents in connection with the transactions contemplated by this
Agreement so long as such Persons are informed by Buyer of the confidential
nature of such information and are directed by Buyer to treat such information
confidentially. The obligation of Buyer and its Affiliates to hold any such
information in confidence shall be satisfied if they exercise the same care with
respect to such information as they would take to preserve the confidentiality
of their own similar information. If this Agreement is terminated, Buyer and its
Affiliates will, and will cause their respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents to, destroy or deliver to
Seller, upon request, all documents and other materials, and all copies thereof,
obtained by Buyer or its Affiliates or on their behalf from Seller, the Company
or the Subsidiaries in connection with this Agreement that are subject to such
confidence.
7.02. REGISTRATION ON AND EFFECTIVENESS OF FORM S-3. Promptly following the
Closing, at the expense of Buyer, Buyer shall file a registration statement on
Form S-3 (the "REGISTRATION STATEMENT") to register the Buyer Stock. Buyer shall
use commercially reasonable efforts to cause the Registration Statement to
become effective (but in no event prior to expiration of any lock-up period
required in order for the transactions contemplated hereby to be accounted for
as a "pooling of interests") and to remain effective until the earlier to occur
of (i) two years from the date such Registration Statement first becomes
effective, and (ii) such time as all Buyer Stock has been sold. Buyer shall use
commercially reasonable efforts to take all reasonable and customary actions in
connection with the filing and effectiveness of the Registration Statement
(including but not limited to the delivery of prospectuses, compliance with blue
sky and notice of any suspension of the Registration Statement) to enable Seller
to sell the Buyer Stock. The Registration Statement shall comply in all material
respects with all applicable requirements of the federal securities laws and the
Commission rules and regulations promulgated thereunder.
7.03 NOTICES OF CERTAIN EVENTS. From the date hereof until the Closing
Date, Buyer will promptly notify the Company and Seller of any event occurring
subsequent to the date of this
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Agreement which would or might render any representation or warranty of Buyer or
Merger Sub untrue or inaccurate in any material respect or would or reasonably
could be expected to cause Buyer or Merger Sub to fail to comply with its
obligations hereunder in any material respect.
7.04 CONTINUITY OF BUSINESS ENTERPRISE. Buyer will cause the Company to
continue its historic business or use a significant portion of its historic
business assets in a business.
ARTICLE VIII
COVENANTS OF ALL PARTIES
The parties hereto agree that:
8.01. BEST EFFORTS. Subject to the terms and conditions of this Agreement,
each party will use its commercially reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary or
desirable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement; provided, however, that no party shall be
required to appeal in a court of law any denial of regulatory approval, to
commence any litigation, or to agree to conditions that may be burdensome to
such party in its reasonable discretion in order to obtain any such approval.
Merger Sub, Seller and Buyer each agree, and Seller, prior to the Closing, and
Buyer, after the Closing, agree to cause the Company, to execute and deliver
such other documents, certificates, agreements and other writings and to take
such other actions as may be necessary or desirable in order to consummate or
implement expeditiously the transactions contemplated by this Agreement.
8.02. CERTAIN FILINGS. The Company, Merger Sub, Seller and Buyer shall
cooperate with each other (a) in determining whether any action by or in respect
of, or filing with, any governmental body, agency, official or authority is
required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement and (b) in
taking such actions or making any such filings, furnishing information required
in connection therewith and seeking timely to obtain any such actions, consents,
approvals or waivers.
8.03. PUBLIC ANNOUNCEMENTS. The parties agree to consult with each other
before issuing any press release or making any public statement with respect to
this Agreement or the transactions contemplated hereby and, except as may be
required by applicable law or any listing agreement with any national securities
exchange, will not issue any such press release or make any such public
statement prior to such consultation.
8.04. POOLING.
(a) Each party will use all reasonable best efforts, will cooperate fully
and will take all actions as are reasonably necessary to allow the transaction
contemplated by this Agreement to
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be accounted for as a "pooling of interests" in accordance with United States
generally accepted accounting principles which will be acceptable to the
Commission.
(b) Seller has executed and delivered to Buyer a written agreement (an
"AFFILIATE AGREEMENT") in the form of EXHIBIT B hereto to the effect that such
Seller (i) has not made and will not make any disposition of any shares of
Company Common Stock or other securities of the Company in the 30-day period
prior to the Closing Date, and (ii) will not make any disposition of any of the
Buyer Stock to be received by such Person after the Closing Date until Buyer
shall have publicly released a report including the combined financial results
of Buyer and the Company for a period of at least 30 days of combined operations
of Buyer and the Company.
8.05. TAX MATTERS.
(a) In the event that it is determined by a finding or order in connection
with any governmental or judicial audit or proceeding, including any settlement
of such a proceeding to which any of the parties hereto are parties that the
Company's S corporation election pursuant to Section 1362 of the Code was not
validly in effect for any period after such election was purportedly made, then
the Seller shall promptly remit to Buyer in cash any federal, state and/or local
Tax liability (including any penalties, additions to Tax or interest assessed
with respect thereto) of the Company in connection with Taxes that are imposed
on the Company or Buyer as a result of such invalid election. Such payment shall
be made within 15 days after the date such Tax liability has been so determined.
The obligations to remit such cash to Buyer as described in this Section shall
be treated as separate from the Seller's other indemnification obligations
hereunder and in addition to amounts that may be owed to Buyer under the Escrow
Agreement. Notwithstanding anything to the contrary contained in this Agreement
or in the Escrow Agreement, the provisions of this Section shall survive the
termination of the Escrow Agreement and shall remain in effect as personal
obligations of the Seller until the applicable statutes of limitations shall
have expired.
(b) Seller and Buyer shall engage PricewaterhouseCoopers ("PWC") to prepare
for filing by the Company all S Corporation Tax Returns (for federal income tax
purposes and for comparable state or local income tax purposes) for all periods
ending prior to or on the Closing Date which are filed after the Closing Date.
Such Tax Returns shall be prepared on a basis consistent with reasonable past
practice, subject to compliance with applicable law including all Tax rules and
regulations. Seller and Buyer shall each review drafts of such Tax Returns and
may provide comments, which shall be reflected in the final Tax Returns to be
filed to the extent agreed upon by all parties. Any disputes between Seller and
Buyer shall be resolved through consultation with PWC or, in the absence of
resolution through such process, shall be resolved by an independent accounting
firm chosen by mutual agreement of Seller and Buyer. Seller and Buyer shall take
all actions necessary and in a timely fashion to ensure that the Company shall
meet its obligations to file such Tax Returns on a timely basis. Seller shall
include any income, gain, loss, deduction, or other tax items for such periods
on their Tax Returns in a manner consistent with the Schedule K-1s (or
comparable state or local materials) furnished by the Company to Seller for such
periods in accordance with the S Corporation Tax Returns.
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(c) If it is determined, based upon the foregoing, that the Company's
distributions to Seller with respect to their Shares during the Stub Period and
through the Closing Date are greater or lesser than the actual S Corporation Tax
Liability, then as the case may be: (i) Seller shall promptly pay to Buyer, on
behalf of the Company, the amount of such distributions in excess of the S
Corporation Tax Liability, if any; and (ii) Buyer shall promptly cause the
Company to pay to Seller the amount by which such distributions are less than
the S Corporation Tax Liability.
(d) Buyer shall not file or cause to be filed an amended Tax Return for
periods ending prior to or on the Closing Date except (i) with the approval of
the Seller, which shall not be unreasonably withheld, (ii) if the previously
filed Tax Return for any such period or periods is contrary to law, including
applicable Tax rules and regulations, or (iii) if PWC (or an alternative
accounting firm selected in accordance with the procedure described in Section
8.05(b)) determines that such amendment is necessary to reasonably reflect the
interests of the parties in accordance with this Agreement.
(e) (i) Buyer, the Company, and Seller shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the filing of
Tax Returns pursuant to this Section and any audit, litigation, or other
proceeding with respect to Taxes. Such cooperation shall include the retention
and (upon the other party's request) the provision of records and information
and access to relevant personnel of the other party which are reasonably
relevant to any such audit, litigation or other proceeding. The Company and
Seller agree to retain all books and records with respect to Tax matters
pertinent to the Company relating to any taxable period beginning before the
Closing Date until the expiration of the statute of limitations (and, to the
extent notified by Buyer or Seller, any extensions thereof) of the respective
taxable periods, and to abide by all record retention agreements entered into
with any Tax Authority. (ii) Buyer will not take any action in connection with
any audit, litigation, or other proceeding encompassing a period covered by an S
Corporation Tax Return that would be inconsistent with the reasonable interests
of the Seller in accordance with this Agreement. Any dispute between Buyer and
the Seller in connection with matters subject to this subsection (d)(ii) shall
be resolved through consultation with PWC (or an alternative accounting firm
selected in accordance with the procedure described in Section 8.05(b)). In the
event the parties are unable to resolve any claim by or dispute with a Tax
Authority in the manner described herein, the parties will follow the procedures
set forth in Section 11.03.
(f) Buyer, Seller, and the Company agree to treat and report the Merger as
a reorganization within the meaning of Section 368(a) of the Code
("Reorganization"), subject to applicable law including all tax rules and
regulations. Each party agrees to use its reasonable best efforts to take such
actions as reasonably required to achieve treatment of the Merger as a
Reorganization and to refrain from taking such actions as would reasonably be
expected to jeopardize the status of the Merger as a Reorganization.
Notwithstanding these covenants, no party shall be viewed as providing any
assurances to any other party with respect to the Tax status or consequences of
the Merger or any related transaction.
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ARTICLE IX
EMPLOYEE BENEFITS
AND EMPLOYEE MATTERS
9.01. EMPLOYEE BENEFITS DEFINITIONS. The following terms, as used herein,
having the following meanings:
"BENEFIT ARRANGEMENT" means each employment, severance or other similar
contract, arrangement or policy (written or oral) and each plan or arrangement
(written or oral) providing for severance benefits, insurance coverage
(including any self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, retirement
benefits or for deferred compensation, profit-sharing, bonuses, stock options,
stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (i) is not an Employee
Plan, (ii) is entered into, maintained or contributed to, as the case may be, by
the Company or any of its ERISA Affiliates and (iii) covers any employee or
former employee of the Company.
"EMPLOYEE PLANS" means each "employee benefit plan", as such term is
defined in Section 3(3) of ERISA, that (i) is subject to any provision of ERISA
and (ii) is maintained or contributed to by the Company or any of its ERISA
Affiliates, as the case may be.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" of any entity means any other entity that, together with
such entity, would be treated as a single employer under Section 414 of the
Code.
"MULTIEMPLOYER PLAN" means each Employee Plan that is a multiemployer plan,
as defined in Section 3(37) of ERISA.
9.02. ERISA REPRESENTATIONS. The Company and Seller, jointly and severally,
hereby represent and warrant to Buyer that:
(a) The Company has provided Buyer with complete salary, service and
related data as of the most recent practicable date for employees of the
Company.
(b) SCHEDULE 9.02 lists each Employee Plan that covers any employee of the
Company, copies of all of which have previously been furnished to Buyer. With
respect to each Employee Plan, the Company has provided the most recently filed
Form 5500 an accurate summary description of such plan; and if applicable, each
ERISA bond, excise tax returns, most recent actuarial and other financial or
testing reports, insurance documents, other funding and investment contracts,
form of COBRA notices and elections, and form of HIPAA notices.
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(c) SCHEDULE 9.02 also includes a list of each Benefit Arrangement of the
Company, copies of which have been made furnished previously to Buyer.
(d) None of the Employee Plans or Benefit Arrangements listed on SCHEDULE
9.02 covers any non-United States employee or former employee of the Company.
(e) No non-exempt "prohibited transaction", as defined in Section 406 of
ERISA or Section 4975 of the Code, has occurred with respect to any Employee
Plan.
(f) No Employee Plan is a Multiemployer Plan. With respect to any Employee
Plan that is subject to Title IV of ERISA, during the six-year period prior to
the date on which this representation is made or deemed made with respect to any
such Employee Plan, no "accumulated funding deficiency" (within the meaning of
Section 412 of the Code or Section 302 of ERISA) has occurred, no termination
has occurred nor has any lien in favor of the PBGC or a Plan arisen, during such
six-year period and the present value of all accrued benefits under each such
Employer Plan (on a plan termination basis) did not, as of the last annual
valuation date prior to the date on which this representation is made or deemed
made, exceed the value of the assets of such Plan allocable to such accrued
benefits. The Company and its Affiliates have not incurred nor do they
reasonably expect to incur any liability under Title IV or ERISA arising in
connection with the termination of any plan covered or previously covered by
Title IV of ERISA.
(g) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the period
from its adoption to date, and each trust forming a part thereof is exempt from
tax pursuant to Section 501(a) of the Code. The Company has furnished to Buyer
copies of the most recent Internal Revenue Service determination letters with
respect to each such plan. Each Employee Plan has been maintained in compliance
with its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations, including but not limited to ERISA and the Code,
which are applicable to such plan.
(h) Each Benefit Arrangement has been maintained in substantial compliance
with its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations which are applicable to such Benefit Arrangement.
(i) With respect to the employees and former employees of the Company,
there are no employee post-retirement medical or health plans in effect, except
as required by Section 4980B of the Code or similar state law.
(j) All contributions and payments required to be made by the Company under
each Employee Plan and Benefit Arrangement, determined in accordance with prior
funding and accrual practices, as adjusted to include proportional accruals for
the period ending on the Closing Date, will be discharged and paid on or prior
to the Closing Date except to the extent (i) reflected on the Closing Balance
Sheet. Except as disclosed in writing to Buyer prior to the date hereof, there
has been no amendment to, written interpretation of or announcement (whether or
not written) by Seller or any of its ERISA Affiliates relating to, or change in
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employee participation or coverage under, any Employee Plan or Benefit
Arrangement that would increase materially the expense of maintaining such
Employee Plan or Benefit Arrangement above the level of the expense incurred in
respect thereof for the fiscal year ended prior to the date hereof.
(k) There is no contract, agreement, plan or arrangement covering any
employee or former employee of the Company that, individually or collectively,
could give rise to the payment of any amount that would not be deductible
pursuant to the terms of Section 280G of the Code.
(l) No tax under Sections 4980B or 4980D of the Code has been incurred in
respect of any Employee Plan that is a group health plan, as defined in Section
5000(b)(1) of the Code.
(m) No employee of the Company will become entitled to any bonus,
retirement, severance or similar benefit or enhanced benefit solely as a result
of the transactions contemplated hereby.
9.03. NO THIRD PARTY BENEFICIARIES. No provision of this Article IX shall
create any third party beneficiary or other rights in any employee or former
employee (including any beneficiary or dependent thereof) of the Company in
respect of continued employment (or resumed employment) with the Company and no
provision of this Article IX shall create any such rights in any such Persons in
respect of any benefits that may be provided, directly or indirectly, under any
Employee Plan or Benefit Arrangement or any plan or arrangement that may be
established by Buyer or any of its Affiliates. No provision of this Agreement
shall constitute a limitation on rights to amend, modify or terminate after the
Closing Date any Employee Plan or Benefit Arrangement. Buyer shall indemnify,
defend and hold the Company and Seller harmless from any claims made by any
Person employed by the Company at the Closing Date arising from actions taken by
the Buyer subsequent to the Closing Date. The Buyer shall pay for and have
complete control of and discretion in prosecuting the defense and/or settlement
of any such claims. The limitations on Buyer's indemnification obligations set
forth in Section 11.02(c) shall be inapplicable to Buyer's indemnification
obligations under this Section 9.03.
ARTICLE X
CONDITIONS TO CLOSING
10.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of
Buyer, the Company and Seller to consummate the Closing are subject to the
satisfaction of the following conditions:
(a) Any applicable waiting period under the HSR Act relating to the
transactions contemplated hereby shall have expired or been terminated.
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(b) No proceeding challenging this Agreement or the transactions
contemplated hereby or seeking to prohibit, alter, prevent or materially delay
the Closing shall have been instituted by any Person before any court,
arbitrator or governmental body, agency or official and be pending.
(c) Each other party to this Agreement shall have executed and delivered
each of the Ancillary Agreements to be entered into by it at Closing, in each
case substantially in the form attached as an exhibit to this Agreement.
(d) All actions by or in respect of or filings with any governmental body,
agency, official or authority required to permit the consummation of the Closing
shall have been obtained.
10.02. CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to
consummate the Closing is subject to the satisfaction of the following further
conditions:
(a)(i) the Company and Seller shall have performed in all material respects
all of his or its obligations hereunder required to be performed on or prior to
the Closing Date, (ii) the representations and warranties of the Company and
Seller contained in this Agreement at the time of its execution and delivery and
in the Disclosure Schedule and the Update, and in any certificate or other
writing delivered by the Company or Seller pursuant hereto shall be true and
correct in every material respect at and as of the Closing Date as if made at
and as of such date and (iii) Buyer shall have received a certificate signed by
the President of the Company and by Seller to the foregoing effect.
(b) No court, arbitrator or governmental body, agency or official shall
have issued any order, and there shall not be any statute, rule or regulation,
restraining the effective operation by Buyer of the business of the Company
after the Closing Date.
(c) Buyer shall have received an opinion of Seller's Counsel, dated the
Closing Date, acceptable to Buyer and its counsel.
(d) Seller shall have executed and delivered an Affiliate Agreement.
(e) The Company shall have received all consents, authorizations or
approvals from the governmental agencies referred to in Section 3.03(a), in each
case in form and substance reasonably satisfactory to Buyer, and no such
consent, authorization or approval shall have been revoked.
(f) Buyer and the Company shall have each received an unqualified written
opinion from their respective independent accountants, to the effect that such
accountants concur that no condition exists that would preclude Buyer from
accounting for the transaction contemplated by this agreement as a "pooling of
interests" under applicable rules and regulations of the Commission.
(g) All stockholders of the Company shall have voted in favor of, or
consented to in writing, the consummation of the transactions contemplated
hereby.
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(h) Buyer shall have received all other closing documents specified in
Section 2.03 of this Agreement and all other closing documents that it may
reasonably request, all in form and substance reasonably satisfactory to Buyer.
(i) The Company's Board of Directors will have passed and not rescinded
resolutions satisfactory to Buyer's counsel effectively terminating the
Company's 401(k) Plan immediately prior to the Closing.
(j) Buyer shall have received a written statement confirming the total
amount(s) distributed to Seller with respect to their Shares during the Stub
Period through the Closing Date, which amount shall not exceed the S Corporation
Tax Liability, determined to the Knowledge of Seller. Such written statement
shall also set forth the basis for the determination of the S Corporation Tax
Liability.
(k) The Company shall have either (i) delivered to Buyer a properly
executed statement satisfying the requirements of Treasury Regulation Sections
1.897-2(h) and 1.1445-2(c)(3) in a form reasonably acceptable to Buyer or (ii)
caused each of the Stockholders to have executed and delivered to Buyer
certificates of non-foreign status satisfying the requirements of Treasury
Regulations Section 1.1445-2(b).
(l) Simultaneously with the Closing, Buyer shall have purchased all of the
outstanding shares of Herco Technology Corp.
(m) Buyer shall have received from the Company and Seller the Update, and
any material additions or changes to the Disclosure Schedules set forth in the
Update shall be in form and substance acceptable to Buyer in its sole
discretion.
10.03. CONDITIONS TO OBLIGATION OF SELLER. The obligation of Seller to
consummate the Closing is subject to the satisfaction of the following further
conditions:
(a)(i) Each of Buyer and Merger Sub shall have performed in all material
respects all of its obligations hereunder required to be performed by it at or
prior to the Closing Date, (ii) the representations and warranties of each of
Buyer and Merger Sub contained in this Agreement at the time of its execution
and delivery and in any certificate or other writing delivered by such party
pursuant hereto shall be true and correct in every material respect at and as of
the Closing Date as if made at and as of such date and (iii) Seller shall have
received a certificate signed by the Vice President and Treasurer of Buyer to
the foregoing effect.
(b) Seller shall have received an opinion of Buyer's Counsel, dated the
Closing Date, satisfactory to Seller and his counsel.
(c) Seller shall have received all items specified in Section 2.02 of this
Agreement and all other closing documents that they may reasonably request, all
in form and substance reasonably satisfactory to them.
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(d) Seller shall have received an opinion of Xxxx, Forward, Xxxxxxxx &
Scripps, LLP to the effect, among other matters, that no gain or loss will be
recognized for federal income tax purposes by Seller as a result of the transfer
of such Seller's shares in the Company in exchange for shares of Buyer stock.
ARTICLE XI
SURVIVAL; INDEMNIFICATION
11.01. SURVIVAL. The covenants, agreements, representations and warranties
of the parties hereto contained in this Agreement or in any certificate or other
writing delivered pursuant hereto or in connection herewith shall survive the
Closing until the first anniversary of the Closing Date or (i) in the case of
Sections 6.05 and 7.02, for the period set forth therein, (ii) in the case of
Sections 6.06 and 7.01, indefinitely, (iii) in the case of the items set forth
in Section 11.02(f), for the periods set forth therein, and (iv) in the case of
the covenants, agreements, representations and warranties contained in Sections
3.17 and 8.05, until the expiration of the applicable statutory period of
limitations (giving effect to any waiver, mitigation or extension thereof), if
later. No claim for indemnity under this Agreement with respect to any breach of
any representations, warranties and/or covenants of Company and/or Seller shall
be made after the applicable period specified in the preceding sentence and all
such claims shall be made in accordance with the applicable provisions of the
Escrow Agreement.
11.02. INDEMNIFICATION.
(a) Seller hereby indemnifies Buyer and Merger Sub and, effective at the
Closing, without duplication, the Company against and agrees to hold them
harmless from any and all damage, loss, liability and expense (including without
limitation reasonable expenses of investigation and reasonable attorneys' fees
and expenses in connection with any action, suit or proceeding) ("DAMAGES")
incurred or suffered by Buyer, Merger Sub or the Company arising out of any
misrepresentation or breach of warranty, representation, covenant or agreement
made or to be performed by the Company or Seller pursuant to this Agreement.
Seller shall not be liable under this Section 11.02(a) with respect to a breach
of representation, warranty or covenant unless the aggregate amount of Damages
with respect to all such breaches of representation or warranty (determined
without regard to any materiality qualification contained in any
representations, warranty or covenant giving rise to claim for indemnity
hereunder) exceeds $250,000 (the "DEDUCTIBLE") and then only to the extent of
such excess; and Seller's maximum liability under this Section 11.02(a) shall
not exceed 10% of the amount paid to such Seller (or the Escrow Agent) with
respect to the Shares transferred by such Seller to Buyer (the "CAP"). Any
individual claim or Damages amounting to $2,500 or less shall be ignored and
disregarded in aggregating Damages for the Deductible or the Cap.
(b) Seller hereby indemnifies Buyer, Merger Sub and, effective at the
Closing, without duplication, the Company and agrees to hold them harmless from
and against all Damages
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incurred or suffered by Buyer, Merger Sub or the Company arising out of any
breach of any covenant or agreement of such Seller pursuant to Article II or the
inaccuracy or breach of any representation, warranty, covenant or agreement made
by such Seller pursuant to Article IV or Sections 3.17 and 8.05.
(c) Buyer hereby indemnifies Seller against and agrees to defend and hold
him harmless from any and all Damages incurred or suffered by Seller arising out
of any misrepresentation or breach of warranty, covenant or agreement made or to
be performed by Buyer pursuant to this Agreement; PROVIDED that (i) Buyer shall
not be liable under this Section 11.02(c) with respect to a breach of
representation or warranty unless the aggregate amount of Damages with respect
to all such breaches of representation or warranty (determined without regard to
any materiality qualification contained in any representations, warranty or
covenant giving rise to the claim for indemnity hereunder) exceeds $250,000 and
then only to the extent of such excess and (ii) Buyer's maximum liability under
this Section 11.02(c) shall not exceed 10% of the aggregate purchase price paid
by Buyer to Seller for the Shares. Any individual claim or Damages amounting to
$2,500 or less shall be ignored and disregarded in aggregating Damages for the
Deductible or the Cap.
(d) Seller shall have no right of indemnification, contribution or
subrogation against the Company with respect to any indemnification by Seller
under this Section 11.02 if the transactions contemplated by this Agreement are
consummated.
(e) Buyer's claims for indemnification pursuant to this Article XI shall be
satisfied first from the escrow established pursuant to the Escrow Agreement and
thereafter against the Seller.
(f) Notwithstanding anything herein to the contrary, and without giving
effect to the limitations set forth in the last two sentences of Section
11.02(a), Seller hereby indemnifies Buyer, Merger Sub and, effective at the
Closing, without duplication, the Company, and agrees to hold them harmless from
and against, all Damages or demands incurred , claimed against, or suffered by
Buyer, Merger Sub or the Company arising out of the following:
(i) any inaccuracy or breach of any representation or warranty in
Section 3.19 (provided that Seller's obligations to indemnify and hold
harmless Buyer and Company shall apply only with respect to claims arising
prior to the tenth anniversary of the Closing);
(ii) any Environmental Liabilities (provided that Seller's obligations
to indemnify and hold harmless Buyer and Company shall apply only with
respect to claims arising prior to the tenth anniversary of the Closing);
(iii) any litigation matters disclosed in the Disclosure Schedule
and/or Update;
(iv) fines, penalties, levies and assessments arising from the failure
of the Company to make any filings, reports or notices with governmental
agencies or participants in respect of the Company's Employee Plans or
Benefit Arrangements;
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(v) any Tax liabilities arising pursuant to Section 8.05(a) or
8.05(c).
(g) Any amounts payable or paid to the Buyer or payable or paid to the
Seller pursuant to Section 11.02, shall be reduced by any insurance recoveries
(net of any premium increases reasonably anticipated to be paid over the
following three years by the recipient of such insurance recovery as a result of
the incident giving rise to such recovery) of the indemnified party with respect
to the incident giving rise to such indemnification obligations. The parties
hereto agree that no indemnified party shall be required to pursue or exhaust
insurance recoveries prior to seeking and recovering indemnification hereunder,
but shall use reasonable efforts to pursue such recoveries and that any such
insurance recoveries received after the related indemnification has been paid
hereunder shall be paid over to the Indemnifying Party (to the extent of such
indemnification payments previously made hereunder) in reimbursement of such
portion of indemnification payments.
11.03. PROCEDURES.
(a) Promptly after receipt of notice of the commencement of any action
against any Person in respect of which indemnification ("INDEMNIFICATION") may
be sought hereunder, the Person receiving such notice (the "INDEMNIFIED PARTY")
shall notify the party from whom Indemnification is sought (the "INDEMNIFYING
PARTY") in writing of the commencement thereof and the basis hereunder upon
which a claim for Indemnification is asserted. In the event of the commencement
of any such action as to which the Indemnified Party notifies the Indemnifying
Party as aforesaid, the Indemnifying Party will be entitled to participate
therein and to assume the defense thereof at the Indemnifying Party's expense,
provided that the Indemnifying Party promptly notifies the Indemnified Party of
such election to assume the defense thereof and acknowledges the Indemnifying
Party's Indemnification obligations pursuant to this Agreement in writing to the
Indemnified Party, and provided further that the Indemnifying Party's interest
in such action does not conflict with the interests of the Indemnified Party,
without regard to the Deductible, the relief sought does not exceed the
Indemnifying Party's maximum Indemnification obligations under Section 11.02(a)
or 11.02(b), and that equitable relief is not being sought against Buyer, Merger
Sub or the Company. Nothing herein shall be construed to create any rights
enforceable by any Person not a party to this Agreement.
(b) The Indemnified Party shall be entitled to participate in the defense
of any action and to be represented at its expense by counsel of its own
selection. If, however, the Indemnifying Party's interest in such action
conflicts with the interests of the Indemnified Party, or the relief sought
exceeds the Indemnifying Party's maximum Indemnification obligations under
Section 11.02(a) or 11.02(b), or if equitable relief is being sought against
Buyer or the Company, then the Indemnified Party shall assume such defense at
the Indemnifying Party's expense. If the attorneys provided for the defense of
the Indemnified Party by the Indemnifying Party withdraw from or are removed by
court order from the Indemnified Party's representation, then the cost of
counsel selected by the Indemnified Party shall be part of the Indemnified
Party's Damages, and the Indemnified Party shall have the right in all respects
to conduct its own defense. If the Indemnified Party otherwise retains its own
counsel, the cost thereof shall be for the account of the Indemnified Party. The
Indemnified Party shall allow the Indemnifying Party
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reasonable access to its personnel, books and records relevant to the claim upon
reasonable advance notice (and subject to the Indemnifying Party's agreement to
maintain such books and records in confidence) to the Indemnified Party, during
normal business hours, and at no cost to the Indemnifying Party.
(c) At to cases in which the Indemnifying Party has assumed and is
providing the defense for the Indemnified Party under Section 11.03(a), the
control of such defense and the right to reach settlement in such action shall
be vested in the Indemnifying Party; provided, that if the Indemnified Party
objects to a settlement which has otherwise been fully agreed to by the
Indemnifying Party, the Indemnified Party may nevertheless prohibit the
Indemnifying Party from making such settlement, in which case the Indemnifying
Party shall pay to the Indemnified Party the proposed cost to the Indemnifying
Party of such settlement (plus any other sum to satisfy the Indemnifying Party's
Indemnification obligations to the Indemnified Party as provided by and
contemplated in this Article XI) (together, the "SETTLEMENT COST"), in cash, and
the Indemnified Party shall thereafter be responsible for such matter and the
Indemnifying Party shall have no further Indemnification obligations with
respect to such matter and shall be indemnified by the Indemnified Party for any
loss or liability in excess of the Settlement Cost imposed on the Indemnifying
Party by any later settlement or adjudication; provided further, that if the
Indemnified Party objects to the continuation of any such action by the
Indemnifying Party, the Indemnified Party may direct the Indemnifying Party to
settle such case, the cost of which shall be paid by the Indemnified Party, and
the Indemnifying Party shall have no further Indemnification obligations for
such settled matter other than litigation costs and professional fees incurred
by the Indemnifying Party therein. As to any action, the party which is
controlling such action shall provide to the other party reasonable information
(including reasonable advance notice of all proceedings and depositions in
respect thereto) regarding the conduct of the action and the right to attend all
proceedings and depositions in respect thereto through its agents and attorneys,
and the right to discuss the action with counsel for the party controlling such
action.
(d) If within twenty (20) days after receipt by the Indemnifying Party of
notice from the Indemnified Party to the Indemnifying Party as to the
commencement of any action in respect of which Indemnification is sought
hereunder, the Indemnifying Party has not notified the Indemnified Party that
the Indemnifying Party assumes the defense of such action and has actually
assumed such defense, then the Indemnified Party shall have the right to defend
such action and to proceed immediately against the Indemnifying Party to enforce
all Indemnification obligations of the Indemnifying Party hereunder (including
but not limited to the costs of defense, as the same may be incurred). The
Indemnification obligations of the Indemnifying Party with respect to such
action shall, however, in no way be diminished by virtue of the forgoing, and
the fact that the Indemnified Party shall have defended, settled, compromised or
otherwise dealt with such action shall not, in any circumstances, be deemed to
constitute any waiver, release or exoneration of the Indemnifying Party from
their Indemnification obligations, regardless of the outcome of such action.
(e) Notwithstanding the foregoing provisions of this Section, and subject
to Section 8.05, in the event that (x) any third party suit, action or
proceeding may, in Buyer's good faith reasonable discretion, have a material
continuing adverse effect on the business and operations
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of the Buyer and/or the Company (it being understood that any action relating to
Environmental Laws, Intellectual Property or Taxes shall be deemed to have a
material continuing adverse effect on the business and operations of the Buyer
and/or the Company), or (y) the Board of Directors of the Buyer determines in
good faith that matters of corporate or management policy or a conflict of
interest make assumption and control by the Buyer of the defense of such claim
advisable, then Buyer (i) shall have the right to assume and control the defense
of the claim by appropriate proceedings with its counsel, (ii) shall be entitled
to reimbursement for reasonable costs of such defense from the Escrow Fund, and
(iii) shall have the authority to negotiate, compromise and settle such claim
with the consent of the Seller which shall not be unreasonably withheld,
conditioned or delayed, and Buyer shall have a right to indemnification with
respect to such claim in accordance with the provisions of this Article XI. The
Seller may participate in the defense, at his sole expense, of any such claim
for which Buyer shall have assumed the defense pursuant to the preceding
sentence, provided that counsel for the Buyer shall act as lead counsel in all
matters pertaining to the defense or settlement of such claims or proceedings.
Buyer will cooperate with Seller and will provide Seller, or Seller's counsel,
without cost, with copies of all notices, pleadings, material communications and
documents relating to the defense of any such claim and reasonable access to and
communication with Buyer's counsel and personnel involved therein.
ARTICLE XII
TERMINATION
12.01. GROUNDS FOR TERMINATION. This Agreement may be terminated at any
time prior to the Closing:
(i) by written agreement of Seller and Buyer;
(ii) by either Seller or Buyer if the Closing shall not have been
consummated on or before August 31, 2000;
(iii) by either Seller or Buyer if there shall be any law or
regulation that makes consummation of the transactions contemplated hereby
illegal or otherwise prohibited or if consummation of the transactions
contemplated hereby would violate any nonappealable final order, decree or
judgment of any court or governmental body having competent jurisdiction;
(iv) by Buyer (provided that it is not then in material breach of any
representation, warranty, covenant or agreement contained in this
Agreement) alone, by means of written notice to the Company, if there has
been a material breach by the Company or Seller of any representation,
warranty, covenant or agreement set forth in this Agreement or the
Ancillary Agreements, which breach would result in a failure to satisfy the
closing
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conditions contained in Section 10.02 and has not been cured within ten
(10) business days following receipt by the Company of notice of such
breach;
(v) by the Company (provided that it is not then in material breach of
any representation, warranty, covenant or agreement contained in this
Agreement) alone, by means of written notice to Buyer, if there has been a
material breach by Buyer of any representation, warranty, covenant or
agreement set forth in the Agreement or the Ancillary Agreements, which
breach would result in a failure to satisfy the closing conditions
contained in Section 10.03 and has not been cured within ten (10) business
days following receipt by Buyer of notice of such breach,
(vi) by Buyer in accordance with Section 6.10.
The party desiring to terminate this Agreement shall give notice of such
termination to the other parties.
12.02. EFFECT OF TERMINATION. If this Agreement is terminated as permitted
by Section 12.01, such termination shall be without liability of either party
(or any shareholder, director, officer, employee, agent, consultant or
representative of such party) to the other party to this Agreement; PROVIDED
that if such termination shall result from the willful failure of any party to
fulfill a condition to the performance of the obligations of another party or to
perform a covenant of this Agreement or from a willful breach by any party to
this Agreement, such party shall be fully liable for any and all Damages
incurred or suffered by the other parties as a result of such failure or breach.
The provisions of Sections 6.06, 7.01, 8.03 and 13.03 (other than Buyer's
obligation to pay Company and Seller's costs thereunder) shall survive any
termination hereof pursuant to Section 6.10 or Section 12.01.
ARTICLE XIII
MISCELLANEOUS
13.01. NOTICES. All notices, requests and other communications to either
party hereunder shall be in writing (including telecopy or similar writing) and
shall be given,
if to Buyer or Merger Sub, to:
Teradyne, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: President
Telecopy: (000) 000-0000
with a copy to:
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Xxxxxxx X. Xxxxx, Xx., Xxx.
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Telecopy: (000) 000-0000
if to the Company, to:
Perception Laminates, Inc.
0000 Xxxxx Xxxxxxx
Xx Xxxx, XX 00000-0000.
Attn: President
Telecopy:
with a copy to:
Xxxx, Forward, Xxxxxxxx & Scripps, LLP
000 Xxxx Xxxxxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx
Telecopy: (000) 000-0000
if to Seller:
at his address shown in
SCHEDULE 2.01
13.02. AMENDMENTS; NO WAIVERS.
(a) Any provision of this Agreement may be amended or waived prior to the
Closing Date if, and only if, such amendment or waiver is in writing and signed
by Buyer, the Company and Seller.
(b) No failure or delay by either party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
13.03. EXPENSES. Buyer shall pay all expenses, and any and all federal,
state and local stamp, stock issuance or similar taxes and other charges, that
may be payable in connection with the preparation, issuance and delivery of
certificates for the Buyer Stock under Section 2.03(a) and any stock listing or
stock quotation application required to be filed by Buyer with respect to
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such for the Buyer Stock. A registration effected under Section 7.02 shall be
effected at the Buyer's expense except for underwriting discounts and
commissions and the fees and the expenses of counsel to the Seller. All costs
and expenses incurred in connection with this Agreement shall be paid by the
party incurring such cost or expense; provided, however, that if the Closing
shall occur, all such costs and expenses of the Company and Seller not exceeding
$10,000 incurred by the Company and Seller shall be paid by Buyer, and Seller
shall bear all such costs in excess of $10,000.
13.04. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; PROVIDED that no party may assign, delegate or otherwise
transfer any of his or its rights or obligations under this Agreement without
the consent of the other parties hereto, except that Buyer may transfer or
assign, in whole or from time to time in part, to one or more of its Affiliates,
the right to purchase all or a portion of the Shares, but no such transfer or
assignment will relieve Buyer of its obligations hereunder.
13.05. FURTHER ASSURANCES. From time to time after the Closing, at the
request of Buyer and without further consideration, Seller will execute and
deliver to Buyer such other documents, and take such other action, as Buyer may
reasonably request in order to consummate more effectively the transactions
contemplated hereby and to vest in Buyer good, valid and marketable title to the
Shares.
13.06. GOVERNING LAW. This Agreement and the Ancillary Agreements shall be
construed in accordance with and governed by the law of the State of California
without regard to the conflicts of law rules of such state.
13.07. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in any
number of counterparts, each of which shall be deemed an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
a counterpart hereof signed by the other parties hereto.
13.08. ENTIRE AGREEMENT. This Agreement and the Ancillary Agreements
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all prior agreements, understandings and
negotiations, both written and oral, between the parties with respect to the
subject matter hereof.
13.09. CAPTIONS. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
13.10. JURISDICTION. Any action or proceeding relating to or arising out
of, or based on this Agreement or arising from or in any manner related to the
relationship between the parties shall only be brought in the state or federal
courts in San Diego, California, and each of the parties hereto submits to the
personal jurisdiction of such court (and of the appropriate appellate courts
wherever located) in any such action or proceeding, and selects the courts in
San Diego, California for proper venue in any such or proceeding.
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13.11. TRANSFER, SALES DOCUMENTARY, STAMP AND OTHER SIMILAR TAXES. Any and
all transfer, sales, documentary, stamp and other similar Taxes imposed in
connection with the transactions contemplated by this Agreement will be paid by
the Seller with respect to which such Tax relates.
13.12. SEVERABILITY. If any provision of this Agreement is held to be
unenforceable for any reason, it will be modified rather than voided, if
possible, in order to achieve the intent of the parties to this Agreement to the
extent possible. In any event, all other provisions of this Agreement will be
deemed valid and enforceable to the full extent.
13.13. EXTENSION; WAIVER. At any time prior to the Effective Time, any
party hereto may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto to
the party extending such time, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements, covenants or conditions for the benefit of such party contained
herein. any agreement on the part of a party hereto to any such extension or
waiver will be valid only if set forth in an instrument in writing signed on
behalf of such party.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
TERADYNE, INC.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President
T-P ACQUISITION CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President
PERCEPTION LAMINATES, INC.
By: /s/ Xxxxxx Xxxxxxx, Sr.
------------------------------
Name: Xxxxxx Xxxxxxx, Sr.
Title: President
/s/ Xxxxxx Xxxxxxx, Sr.
---------------------------------
Xxxxxx Xxxxxxx, Sr.
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SCHEDULE 2.03
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SHARES OF COMPANY SHARES OF
SELLER'S NAME AND ADDRESS COMMON STOCK BUYER STOCK ESCROW SHARES
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Xxxxxx Xxxxxxx, Sr.
0000 Xxxxxxxxx Xxxxx
Xxx Xxxxx, XX 00000 600 270,747 31,083
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