1
EXHIBIT 99.1
AGREEMENT
OF
REORGANIZATION AND MERGER
AMONG
ELECTRO SCIENTIFIC INDUSTRIES, INC.,
AN OREGON CORPORATION,
DYNAMOTION/ATI CORP.,
A NEW YORK CORPORATION,
DYNAMOTION MERGER CORP.,
A NEW YORK CORPORATION,
AND
CERTAIN KEY SHAREHOLDERS OF
DYNAMOTION/ATI CORP.
JANUARY 24, 1997
2
TABLE OF CONTENTS
ARTICLE I
THE MERGER
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Effect of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3.1 Dynamotion Stock . . . . . . . . . . . . . . . . . . . . . . . . 4
1.3.2 Merger Corp. Stock . . . . . . . . . . . . . . . . . . . . . . . 4
1.3.3 Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.4 Surrender and Cancellation of Certificates . . . . . . . . . . . . . . . . . 6
1.4.1 Surrender of Certificates . . . . . . . . . . . . . . . . . . . . 6
1.4.2 Option Agreements . . . . . . . . . . . . . . . . . . . . . . . . 7
1.4.3 No Fractional Shares . . . . . . . . . . . . . . . . . . . . . . 7
1.4.4 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.4.5 Treasury Shares . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.4.6 Escheat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.4.7 Withholding Rights . . . . . . . . . . . . . . . . . . . . . . . 9
1.5 Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.5.1 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.5.2 Rights of Dissenting Shares . . . . . . . . . . . . . . . . . . . 9
1.6 Stock Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.7 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.8 Subsequent Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE II
FURTHER AGREEMENTS
2.1 Employee Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2 Pledge and Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.3 Noncompetition Agreement of Certain Dynamotion Executive Officers . . . . . . 12
2.4 Standstill Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.5 Affiliate Representation Letters . . . . . . . . . . . . . . . . . . . . . . 13
2.6 Voting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.7 Exercise of Class B Warrants . . . . . . . . . . . . . . . . . . . . . . . . 13
2.8 Termination of Agreement Relating to Z Warrants . . . . . . . . . . . . . . . 13
2.9 Termination of Underwriters' Warrants . . . . . . . . . . . . . . . . . . . . 14
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Dynamotion . . . . . . . . . . . . . . . . 14
3.1.1 Organization and Status . . . . . . . . . . . . . . . . . . . . . 14
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3.1.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.1.2.1 Capital Structure . . . . . . . . . . . . . . . . . . . 15
3.1.2.2 Dynamotion Outstanding Securities Holders . . . . . . . 16
3.1.2.3 Redemption of Z Warrants . . . . . . . . . . . . . . . . 16
3.1.2.4 Convertible Debt . . . . . . . . . . . . . . . . . . . . 17
3.1.3 Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . 17
3.1.4 Section 368(a)(2)(D) Asset Requirement . . . . . . . . . . . . . 17
3.1.5 Governmental Filings . . . . . . . . . . . . . . . . . . . . . . 18
3.1.6 Investments; Subsidiaries . . . . . . . . . . . . . . . . . . . . 18
3.1.7 No Adverse Consequences . . . . . . . . . . . . . . . . . . . . . 18
3.1.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . 19
3.1.9 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . 20
3.1.10 Absence of Certain Changes or Events . . . . . . . . . . . . . . 20
3.1.10.1 Absence of Changes or Events Since December 31, 1995 . 20
3.1.10.2 Absence of Changes or Events Since September 30, 1996 . 21
3.1.11 Prohibited Payments . . . . . . . . . . . . . . . . . . . . . . . 23
3.1.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.1.13 Compliance with Laws; Judgments . . . . . . . . . . . . . . . . . 24
3.1.14 Employment Matters . . . . . . . . . . . . . . . . . . . . . . . 24
3.1.14.1 Labor Matters . . . . . . . . . . . . . . . . . . . . 24
3.1.14.2 Employee Benefits . . . . . . . . . . . . . . . . . . 25
3.1.14.3 Employment Agreements . . . . . . . . . . . . . . . . 27
3.1.14.4 Compensation . . . . . . . . . . . . . . . . . . . . . 27
3.1.14.5 Confidentiality and Inventions Agreements . . . . . . 28
3.1.15 Title to and Condition of Real Property . . . . . . . . . . . . . 28
3.1.16 Title to and Condition of Fixed Assets . . . . . . . . . . . . . 29
3.1.17 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . 29
3.1.18 Certain Contracts and Arrangements . . . . . . . . . . . . . . . 30
3.1.19 Status of Contracts . . . . . . . . . . . . . . . . . . . . . . . 31
3.1.20 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.1.21 Permits and Licenses . . . . . . . . . . . . . . . . . . . . . . 33
3.1.22 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.1.22.1 Returns . . . . . . . . . . . . . . . . . . . . . . . 34
3.1.22.2 Taxes Paid or Reserved . . . . . . . . . . . . . . . . 35
3.1.22.3 Net Operating Losses . . . . . . . . . . . . . . . . . 36
3.1.22.4 Definition . . . . . . . . . . . . . . . . . . . . . . 36
3.1.23 Related Party Interests . . . . . . . . . . . . . . . . . . . . . 36
3.1.24 No Powers of Attorney or Restrictions . . . . . . . . . . . . . . 37
3.1.25 Environmental Conditions . . . . . . . . . . . . . . . . . . . . 37
3.1.25.1 Compliance . . . . . . . . . . . . . . . . . . . . . . 37
3.1.25.2 Hazardous Substances . . . . . . . . . . . . . . . . . 38
3.1.25.3 Filings and Notices . . . . . . . . . . . . . . . . . 39
3.1.25.4 Definitions . . . . . . . . . . . . . . . . . . . . . 39
3.1.26 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . 40
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3.1.27 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.1.28 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.1.29 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.1.30 Product Warranties . . . . . . . . . . . . . . . . . . . . . . . 41
3.1.31 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.1.32 Product Liability . . . . . . . . . . . . . . . . . . . . . . . . 42
3.1.33 Customer Information . . . . . . . . . . . . . . . . . . . . . . 42
3.1.34 Accounting Controls . . . . . . . . . . . . . . . . . . . . . . . 43
3.1.35 Liabilities Incurred in Ordinary Course . . . . . . . . . . . . . 43
3.1.36 Continuity of Business Enterprise . . . . . . . . . . . . . . . . 43
3.1.37 Fair Market Value of Dynamotion Assets . . . . . . . . . . . . . 43
3.1.38 No Chapter 11 Proceedings . . . . . . . . . . . . . . . . . . . . 44
3.1.39 Not an Investment Company . . . . . . . . . . . . . . . . . . . . 44
3.1.40 Not a Real Property Holding Company . . . . . . . . . . . . . . . 44
3.1.41 Proxy Statement/Prospectus . . . . . . . . . . . . . . . . . . . 44
3.1.42 Dynamotion SEC Reports . . . . . . . . . . . . . . . . . . . . . 44
3.1.43 Compliance of Conversion Proposal, Etc . . . . . . . . . . . . . 45
3.1.44 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . 46
3.1.45 Accuracy of Representations and Warranties . . . . . . . . . . . 46
3.2 Representations and Warranties of Key Shareholders . . . . . . . . . . . . . 46
3.2.1 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3.2.2 Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
3.2.3 Proxy Statement/Prospectus . . . . . . . . . . . . . . . . . . . 47
3.3 Representations and Warranties of ESI . . . . . . . . . . . . . . . . . . . . 48
3.3.1 Organization and Status . . . . . . . . . . . . . . . . . . . . . 48
3.3.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . 48
3.3.3 Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . 49
3.3.4 Control of Merger Corp Before Merger . . . . . . . . . . . . . . 49
3.3.5 Control of Merger Corp After Merger . . . . . . . . . . . . . . . 49
3.3.6 Continuation of Dynamotion's Business . . . . . . . . . . . . . . 49
3.3.7 No Plan to Reacquire Merger Consideration . . . . . . . . . . . . 49
3.3.8 No Plan to Liquidate or Merge Merger Corp . . . . . . . . . . . . 50
3.3.9 Governmental Filings . . . . . . . . . . . . . . . . . . . . . . 50
3.3.10 ESI SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . 50
3.3.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
3.3.12 No Adverse Consequences . . . . . . . . . . . . . . . . . . . . . 51
3.3.13 Not Investment Companies . . . . . . . . . . . . . . . . . . . . 52
3.3.14 Proxy Statement/Prospectus . . . . . . . . . . . . . . . . . . . 52
3.3.15 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . 52
3.4 Representations and Warranties Relating to Merger Corp. . . . . . . . . . . . 52
3.4.1 Organization and Status . . . . . . . . . . . . . . . . . . . . . 52
3.4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . 53
3.4.3 Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . 53
3.4.4 Governmental Filings . . . . . . . . . . . . . . . . . . . . . . 53
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3.4.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
3.4.6 No Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 54
3.4.7 No Change of Control . . . . . . . . . . . . . . . . . . . . . . 54
3.4.8 Continuation of Dynamotion's Business . . . . . . . . . . . . . . 54
ARTICLE IV
COVENANTS
4.1 Mutual Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
4.1.1 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . 54
4.1.2 Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . . . 54
4.1.3 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
4.1.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . 55
4.2 Covenants of Dynamotion . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
4.2.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . 55
4.2.2 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . 58
4.2.3 Investigations and Customer Visits . . . . . . . . . . . . . . . 59
4.2.4 Dynamotion Shareholders Meeting . . . . . . . . . . . . . . . . . 59
4.2.5 Information for Proxy Statement/Prospectus and
Registration Statement . . . . . . . . . . . . . . . . . . . . . 60
4.2.6 Conversion, Exercise, Redemption, or Termination of
Dynamotion Common Stock Equivalent Securities . . . . . . . . . . 60
4.2.7 Compliance With Convertible Debt Obligations . . . . . . . . . . 61
4.2.8 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
4.3 Covenants of ESI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
4.3.1 Registration Statement . . . . . . . . . . . . . . . . . . . . . 62
4.3.2 Listing of ESI Common Stock . . . . . . . . . . . . . . . . . . . 62
4.3.3 Issuance of Certificates . . . . . . . . . . . . . . . . . . . . 63
4.3.4 Registration and Reservation of Option Shares . . . . . . . . . . 63
4.3.5 Indemnification Provisions of Merger Corp.'s Certificate . . . . 63
4.4 Covenants of Merger Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE V
CONDITIONS
5.1 Conditions to the Obligations of All Parties . . . . . . . . . . . . . . . . 64
5.1.1 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . 64
5.1.2 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
5.1.3 Registration of Securities; Listing . . . . . . . . . . . . . . . 65
5.2 Conditions to the Obligations of Dynamotion and the Key Shareholders . . . . 65
5.2.1 Representations, Warranties and Covenants . . . . . . . . . . . . 65
5.2.2 No Material Adverse Change . . . . . . . . . . . . . . . . . . . 66
5.2.3 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . 66
5.2.4 Dynamotion Shareholder Approval, Etc. . . . . . . . . . . . . . . 66
5.3 Conditions to the Obligations of ESI and Merger Corp. . . . . . . . . . . . . 67
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5.3.1 Representations, Warranties and Covenants . . . . . . . . . . . . 67
5.3.2 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . 68
5.3.3 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . 68
5.3.4 No Material Adverse Change . . . . . . . . . . . . . . . . . . . 68
5.3.5 Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . 68
5.3.6 Related Party and Other Agreements . . . . . . . . . . . . . . . 69
5.3.7 Updated Financial and Other Information . . . . . . . . . . . . . 69
5.3.8 Environmental Report . . . . . . . . . . . . . . . . . . . . . . 69
5.3.9 Dynamotion Shareholder Approval, Etc. . . . . . . . . . . . . . . 70
5.3.10 Dynamotion Dissenters. . . . . . . . . . . . . . . . . . . . . . 70
5.3.11 Conditions Relating to Z Warrants and Convertible Debt . . . . . 70
5.3.12 Xxxxxx Xxxxxxxx LLP Analysis of In-Process
Research and Development. . . . . . . . . . . . . . . . . . . . . 70
5.3.13 Consent of Underwriters . . . . . . . . . . . . . . . . . . . . . 71
5.3.14 Governmental Entity Consents . . . . . . . . . . . . . . . . . . 71
5.3.15 Dynamotion Revised Schedules . . . . . . . . . . . . . . . . . . 71
ARTICLE VI
SURVIVAL AND INDEMNIFICATION
6.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.1.1 Survival of Representations and Warranties . . . . . . . . . . . 71
6.1.2 Survival of Article IV Covenants . . . . . . . . . . . . . . . . 72
6.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.3 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
6.4 Threshold for Indemnity Claims . . . . . . . . . . . . . . . . . . . . . . . 73
6.5 Claim Procedure for Indemnification . . . . . . . . . . . . . . . . . . . . . 73
6.5.1 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
6.5.2 Response to Third Party Claim . . . . . . . . . . . . . . . . . . 74
6.5.3 Diligent Conduct . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE VII
TERMINATION
7.1 Termination by Mutual Consent . . . . . . . . . . . . . . . . . . . . . . . . 75
7.2 Termination Under Certain Other Conditions . . . . . . . . . . . . . . . . . 75
7.2.1 Automatic Termination . . . . . . . . . . . . . . . . . . . . . . 75
7.2.2 Termination by ESI or Dynamotion . . . . . . . . . . . . . . . . 75
7.3 Effect of Termination and Abandonment . . . . . . . . . . . . . . . . . . . . 76
7.4 Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE VIII
MISCELLANEOUS AND GENERAL
8.1 Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
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8.2 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
8.3 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
8.4 Binding Effect; No Third Party Benefit . . . . . . . . . . . . . . . . . . . 77
8.5 Amendment and Modification . . . . . . . . . . . . . . . . . . . . . . . . . 78
8.6 Waiver of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
8.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
8.8 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
8.9 Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
8.10 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
8.11 Choice of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
8.12 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
8.13 Separability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
8.14 Reliance on Dynamotion and Key Shareholder Representations and Warranties . . 81
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EXHIBITS
[S] [C]
A - Plan of Merger
B1 - Form of California ESI Confidentiality and Inventions Agreement
B2 - Form of Standard ESI Confidentiality and Inventions Agreement
C - Form of Pledge and Escrow Agreement
D - Form of Noncompetition Agreement
E - Form of Standstill Agreement
F - Form of Affiliate Representation Letter
G - Form of Voting Agreement
H - Form of Dynamotion Confidentiality and Inventions Agreement
I - Form of Amendments to Dynamotion Certificate of Incorporation
J - Form of Counsel Opinion for ESI
K - Form of Counsel Opinion for Dynamotion
L - Form of Counsel Opinion for Dynamotion Investment L.L.C.
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SCHEDULES
Schedule Page
-------- ----
A Key Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3.3 Schedule of Non-Plan Stock Option Agreements
Between Dynamotion and Certain Dynamotion
Officers and Directors . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Schedule of Shareholders Signing Noncompetition
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.5 Schedule of Affiliates Signing Affiliate Representation
Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.6 Schedule of Shareholders Signing Voting Agreements . . . . . . . . . . 13
3.1-K Reference of Knowledge of Dynamotion . . . . . . . . . . . . . . . . . 16
3.1.2.1 Dynamotion Capital Structure . . . . . . . . . . . . . . . . . . . . . 15
3.1.2.2 Dynamotion Securities Holders . . . . . . . . . . . . . . . . . . . . 16
3.1.2.3(a) Outstanding Z Warrants . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1.2.3(b) Steps Required to Redeem Z Warrants . . . . . . . . . . . . . . . . . 17
3.1.2.4 Issuers of Convertible Debt . . . . . . . . . . . . . . . . . . . . . 17
3.1.5 Dynamotion Governmental Filings . . . . . . . . . . . . . . . . . . . 18
3.1.6(a) Dynamotion Investments . . . . . . . . . . . . . . . . . . . . . . . . 18
3.1.6(b) Previous Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 18
3.1.7 Adverse Consequences . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.1.9 Undisclosed Dynamotion Liabilities . . . . . . . . . . . . . . . . . . 20
3.1.10.1 Changes Since December 31, 1995 . . . . . . . . . . . . . . . . . . . 20
3.1.10.2 Changes Since September 30, 1996 . . . . . . . . . . . . . . . . . . . 21
3.1.12 Pending Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.1.14.2 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.1.14.3 Employment Manuals . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.1.14.4 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.1.15 Leased and Previously Leased Real Property . . . . . . . . . . . . . . 28
3.1.16 Tangible Personal Property . . . . . . . . . . . . . . . . . . . . . . 29
3.1.17(a) Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . 29
3.1.17(b) Intellectual Property Claims and Encumbrances . . . . . . . . . . . . 29
3.1.18 Contracts and Arrangements . . . . . . . . . . . . . . . . . . . . . . 30
3.1.19 Status of Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.1.20 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.1.21(a) Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.1.21(b) List of Permits for Which Consent to Merger Is Needed . . . . . . . . 33
3.1.22.1 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.1.23 Related Party Interests and Agreements . . . . . . . . . . . . . . . . 36
3.1.24 Powers of Attorney and Restrictions . . . . . . . . . . . . . . . . . 37
ix
10
Schedule Page
-------- ----
3.1.25.2 Disclosure Concerning Hazardous Substances and
Underground Tanks . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.1.28(a) Disclosures Concerning Collectibility of Receivables . . . . . . . . . 40
3.1.28(b) Schedule of Accounts Payable Balances . . . . . . . . . . . . . . . . 40
3.1.29 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.1.30 Product Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.1.31 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.1.32 Product Liability . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.1.33 Customer Information . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.1.42 Late or Omitted Dynamotion SEC Filings . . . . . . . . . . . . . . . . 45
3.2 Key Shareholder Disclosure Schedule . . . . . . . . . . . . . . . . . 46
3.3 ESI Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . 48
4.2.1 Changes in Dynamotion's Conduct of Business . . . . . . . . . . . . . 55
5.3.6 Additional Agreements of Dynamotion To Be Terminated . . . . . . . . . 69
5.3.12 In-Process Research Valuation . . . . . . . . . . . . . . . . . . . . 71
6.3 Schedule of Shares of ESI Common Stock To Be Withheld
and Deposited into Escrow . . . . . . . . . . . . . . . . . . . . . 73
8.10 Key Shareholder Representatives . . . . . . . . . . . . . . . . . . . 80
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INDEX OF TERMS
Term Section Page
---- ------- ----
Acquisition Transaction Section 4.2.2 58
Agreement Preamble 1
Adjusted Dynamotion Common Stock Total Section 3.1.2.1 15
Affiliate Representation Letter Section 2.5 13
Average Sale Price Section 1.3(a) 3
Bylaws Section 3.1.1 14
California ESI Confidentiality Agreement Section 2.1 12
Certificate of Incorporation Section 3.1.1 14
Claim Notice Section 6.5.1 74
Claim Threshold Section 6.4 73
Class A Stock Section 1.3(b) 4
Class B Additional Warrant Agreement Section 2.8 14
Class B Stock Section 1.4.1 6
Class B Warrants Section 2.7 13
Closing Section 1.7 11
Closing Date Section 1.7 11
Code Recital B 1
Common Stock Equivalents Section 3.1.2.1 15
Condition Completion Date Section 1.7 11
Confidentiality Agreement Section 4.1.4 55
Contracts Section 3.1.19 31
Conversion Proposal Section 4.2.6 61
Conversion Ratio Section 1.3 3
Conversion Ratio Denominator Section 1.3(b) 4
Conversion Ratio Numerator Section 1.3(a) 3
Convertible Debt Section 3.1.2.4 17
Current Balance Sheet Section 3.1.8 19
Damages Section 6.2 72
DB Plan Section 3.1.14.2 27
Dissenters' Rights Section 1.5.1 9
Dissenting Shareholder Section 1.5.2 10
Dissenting Shares Section 1.5.2 10
Dynamotion Preamble 1
Dynamotion Common Stock Section 1.1 2
Dynamotion Common Stock
Equivalent Securities Section 3.1.2.1 15
Dynamotion Option Plans Section 1.3.3 5
Dynamotion Outstanding Securities Section 3.1.2.1 15
Dynamotion SEC Reports Section 3.1.42 45
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12
Term Section Page
---- ------- ----
Effective Time Section 1.1 2
Environmental Law Section 3.1.25.4(a) 39
ERISA Section 3.1.14.2 00
XXXXX Xxxxx Xxxxxxx 3.1.14.2 26
Escrow Agreement Section 2.2 12
Escrowed Property Section 6.3 73
ESI Preamble 1
ESI Common Stock Section 1.1 2
ESI Disclosure Schedule Section 3.3 48
ESI SEC Reports Section 3.3.10 50
Financial Statements Section 3.1.8 19
Governmental Entity Section 3.1.5 18
Hazardous Substance Section 3.1.25.4(b) 40
Holders Section 3.1.2 16
Indemnified Parties Section 6.2 72
Intellectual Property Section 3.1.17 29
Key Shareholder(s) Preamble 1
Key Shareholder Disclosure Schedule Section 3.2 46
Key Shareholder Representatives Section 8.10 80
Knowledge of Dynamotion Section 3.1.2.2 16
Leased Real Property Section 3.1.15 28
Litigation Reserves Section 3.1.12 23
Merger Section 1.1 2
Merger Consideration Section 1.3 3
Merger Corp. Preamble 1
Merger Corp. Certificate Section 4.3.5 63
Noncompetition Agreement Section 2.3 12
NYBCL Section 1.2 2
Options Section 1.3.3 5
Past CGL Policies Section 3.1.20 33
Permits Section 3.1.21 33
Plan of Merger Section 1.1 2
Policies Section 3.1.20 32
Previous Subsidiaries Section 3.1.6 18
Previously Leased Real Property Section 3.1.15 28
Proxy Statement/Prospectus Section 4.2.4 59
Returns Section 3.1.22.1 34
SEC Section 3.1.42 19
Special Meeting Section 1.5.1 9
Standard ESI Confidentiality Agreement Section 2.1 12
Standstill Agreement Section 2.4 13
Subsidiary Section 8.9 78
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13
Term Section Page
---- ------- ----
Tangible Personal Property Section 3.1.16 29
Taxes Section 3.1.22.3 36
Termination Fee Section 7.4 76
Third Party Claim Section 6.5.2 74
Underwriters Section 4.2.6 61
Underwriters' Warrants Section 2.9 14
Updated Financial Statements Section 5.3.7 69
Voting Agreement Section 2.6 13
Voting Dynamotion Securities Section 4.2.4 60
Warrant Agent Section 4.2.6 61
Z Warrants Section 1.3(b) 4
xiii
14
AGREEMENT
OF
REORGANIZATION AND MERGER
THIS AGREEMENT OF REORGANIZATION AND MERGER (this "Agreement") is
entered into as of January 24, 1997 among Electro Scientific Industries, Inc.,
an Oregon corporation ("ESI"), Dynamotion/ATI Corp., a New York corporation
("Dynamotion"), Dynamotion Merger Corp., a New York corporation ("Merger
Corp."), and the shareholders of Dynamotion listed on Schedule A (each, a "Key
Shareholder" and together, the "Key Shareholders").
RECITALS
A. The Boards of Directors of ESI and Dynamotion have determined
that it is in the best interests of their respective shareholders for ESI to
acquire Dynamotion upon the terms and subject to the conditions set forth in
this Agreement.
B. It is intended that the Merger (as defined below) qualify as a
reorganization under the provisions of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code").
C. It is further intended that certain rights relating to the
acquisition of, or conversion of securities into, the common stock or other
capital stock of Dynamotion (including certain warrants and convertible
preferred stock) will be exercised, converted, or redeemed according to their
respective terms, or will be terminated, before the consummation of the Merger.
15
AGREEMENT
In consideration of the representations, warranties, covenants,
agreements and conditions contained herein, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Pursuant to the laws of the State of New York,
and subject to and in accordance with the terms and conditions of this
Agreement and the Plan of Merger in the form attached hereto as Exhibit A (the
"Plan of Merger"), Dynamotion will be merged with and into Merger Corp., and
all shares of Common Stock of Dynamotion, $0.04 per share par value (the
"Dynamotion Common Stock"), outstanding immediately before the Effective Time
(as defined below), excluding Dissenting Shares (as defined in Section 1.5.2),
will be converted into the right to receive shares of Common Stock of ESI,
without par value (the "ESI Common Stock"), or cash, as provided in Section
1.3. Dynamotion and Merger Corp. will execute a Certificate of Merger to be
filed by the Department of State of the State of New York on the Closing Date
(as defined in Section 1.7) or as soon thereafter as practicable. The merger
of Dynamotion with and into Merger Corp. (the "Merger") will take effect (the
"Effective Time") at the time when the Certificate of Merger is duly filed by
the Department of State of the State of New York or at such other time as the
parties may agree upon in writing pursuant to applicable law.
1.2 Effect of Merger. At the Effective Time, Dynamotion will be
merged with and into Merger Corp. in the manner and with the effect provided by
the New York Business Corporation Law (the "NYBCL"), the separate corporate
existence of Dynamotion will cease,
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and Merger Corp. will be the surviving corporation. From and after the
Effective Time, the Certificate of Incorporation, Bylaws, Board of Directors,
and officers of Merger Corp. in effect or in office, as the case may be,
immediately before the Effective Time will be the Certificate of Incorporation,
Bylaws, Board of Directors, and officers of the surviving corporation;
provided, however, that the Certificate of Incorporation of the surviving
corporation will be amended to effect the name change described in this Section
1.2. The outstanding shares of Dynamotion Common Stock will be converted into
the right to receive shares of ESI Common Stock or cash on the basis, terms
and conditions described in Section 1.3. At the Effective Time, the name of
the surviving corporation will become Dynamotion, Inc.
1.3 Merger Consideration. Each share of Dynamotion Common Stock
outstanding immediately before the Effective Time (excluding each Dissenting
Share) will be converted into the right to receive a fraction of a share of ESI
Common Stock (or cash in lieu of certain fractional shares as provided in
Section 1.4.3) (such ESI Common Stock and/or cash, the "Merger Consideration")
that equals the ratio (the "Conversion Ratio," which will be rounded to the
nearest .0001 of a share) determined by dividing the Conversion Ratio Numerator
by the Conversion Ratio Denominator where:
(a) the "Conversion Ratio Numerator" will be the quotient of
$13,000,000 divided by the per-share price for ESI Common Stock equal to the
average of the high and low sales prices for ESI Common Stock on each of the
five trading days immediately preceding the day before the Closing Date as
reported in The Wall Street Journal (such price, the "Average Sale Price");
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(b) the "Conversion Ratio Denominator" will be equal to
the number of shares of Dynamotion Common Stock outstanding immediately before
the Effective Time (including all shares of Dynamotion Common Stock deemed to
be outstanding upon the effectiveness of the conversion contemplated by the
Conversion Proposal (as that term is defined in Section 4.2.6) immediately
before the Effective Time) plus the number of shares of Dynamotion Common Stock
that are issuable upon the exercise of Z Warrants for which holders of Z
Warrants have given exercise notices by 5:00 p.m., New York time, on the
Closing Date (which date will also be the "Redemption Date," as that term is
defined in the Z Warrants). As used herein, the term "Z Warrants" means all
warrants to purchase shares of Dynamotion Common Stock issued upon the
conversion of Class A Non-Cumulative Redeemable Convertible Preferred Shares of
Dynamotion, $0.01 per share par value (such shares, the "Class A Stock").
1.3.1 Dynamotion Stock. Each share of Dynamotion Common
Stock that is outstanding immediately before the Effective Time and that is not
a Dissenting Share will, by virtue of the Merger and without any action on the
part of the holder thereof, cease to exist and be converted into the right to
receive the Merger Consideration.
1.3.2 Merger Corp. Stock. Each share of Common Stock of
Merger Corp. issued and outstanding immediately before the Effective Time will
remain outstanding without change by virtue of the Merger.
1.3.3 Options. Dynamotion's 1991 Stock Option Plan,
Dynamotion's 1993 Stock Option Plan, Dynamotion's 1995 Comprehensive Stock
Option Plan, Dynamotion's 1995 Executive Stock Option Plan, and the stock
option agreements listed on Schedule 1.3.3 between Dynamotion and certain
current and former officers and directors of Dynamotion are referred
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to herein together as the "Dynamotion Option Plans." Except as otherwise
provided in this Section 1.3.3, the terms and provisions of the stock options
held by those Dynamotion option holders identified in Schedule 3.1.2.2 under
the Dynamotion Option Plans (the "Options") will continue in full force and
effect following the Merger. By virtue of the Merger and at the Effective
Time, and without any further action on the part of any holder thereof, each
Option will be converted into an option to purchase the number of shares of ESI
Common Stock equal to the product (rounded to the nearest whole number) of (x)
the number of shares of Dynamotion Common Stock for which such Option will be
exercisable immediately before the Effective Time multiplied by (y) the
Conversion Ratio. The exercise price per share for each Option after the
Effective Time will be determined by dividing the per share exercise price for
such Option immediately before the Effective Time by the Conversion Ratio. The
term, exercisability, vesting schedule, status as an incentive stock option
under Section 422 of the Code, if applicable, and all other terms and
conditions of each Option will to the extent permitted by law and otherwise
reasonably practicable be unchanged. Notwithstanding the foregoing, the terms
of each Option that is an incentive stock option under Section 422 of the Code
will be adjusted in accordance with the requirements of Section 425(a) of the
Code so as not to constitute a modification, renewal, or extension of such
Option within the meaning of Section 424 of the Code. An optionee's continuous
employment with Dynamotion before the Effective Time will be given credit for
purposes of the vesting of the number of shares of ESI Common Stock subject to
exercise under such optionee's converted Option after the Effective Time.
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1.4 Surrender and Cancellation of Certificates.
1.4.1 Surrender of Certificates. After the Effective Time,
each holder of shares of Dynamotion Common Stock outstanding immediately before
the Effective Time (other than Dissenting Shares), upon surrender to ESI or its
agent designated for such purpose of a certificate or certificates formerly
representing such shares (or a certificate for shares of Class A Stock or Class
B Cumulative Convertible Preferred Shares of Dynamotion, $0.01 per share par
value ("Class B Stock"), that have been converted into shares of Dynamotion
Common Stock pursuant to the Conversion Proposal) will be entitled to receive
(a) a certificate representing the number of shares of ESI Common Stock into
which such shares of Dynamotion Common Stock have been converted pursuant to
the provisions of Section 1.3 less, in the case of each Key Shareholder, the
number of such shares determined to be Escrowed Property (as defined in Section
6.3) and (b) subject to Section 6.3 and the provisions of the Escrow Agreement
(as defined in Section 2.2), a certificate representing the shares of ESI
Common Stock determined to be Escrowed Property. If any certificate for shares
of ESI Common Stock is to be issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the certificate so surrendered be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange pay to ESI or its agent designated for such purpose
any transfer or other taxes required or establish to the reasonable
satisfaction of ESI or its agent that such tax has been paid or is not payable.
If any holder of shares of Dynamotion Common Stock canceled and retired in
accordance with this Agreement is unable to deliver a certificate or
certificates representing such shares, ESI, in the absence of actual notice
that any shares theretofore represented by any such
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certificate have been acquired by a bona fide purchaser, will deliver to such
holder the number of shares of ESI Common Stock to which such holder is
entitled in accordance with the provisions of this Agreement upon the
presentation of the following: (i) evidence reasonably satisfactory to ESI (1)
that such person is the owner of the shares theretofore represented by each
certificate claimed by him or her to be lost, wrongfully taken, or destroyed
and (2) that he or she is the person who would be entitled to present such
certificate for exchange pursuant to this Agreement; and (ii) such security or
indemnity as may be reasonably requested by ESI to indemnify and hold ESI and
its transfer agent harmless with respect to such exchange.
1.4.2 Option Agreements. After the Effective Time, each
holder of an Option outstanding immediately before the Effective Time will be
deemed to hold an option exercisable for ESI Common Stock in accordance with
the provisions of Section 1.3.3.
1.4.3 No Fractional Shares. No certificates or scrip
evidencing fractional shares of ESI Common Stock will be issued in the Merger,
and such fractional share interests will not entitle the owner thereof to any
rights as a shareholder of ESI. In lieu of a fractional share, ESI will pay
any holder of shares of Dynamotion Common Stock who would otherwise have been
entitled to a fraction of a share of ESI Common Stock upon surrender of the
certificates therefor an amount of cash (without interest) determined by
multiplying (a) the Average Sale Price by (b) the fractional share interest in
ESI Common Stock to which such holder would otherwise be entitled. The
provisions of this Section 1.4.3 will apply to the aggregate number of shares
of Dynamotion Common Stock held by each holder thereof and each such holder
will be required to simultaneously surrender all certificates relating to
shares of
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21
Dynamotion Common Stock held by such holder in accordance with the provisions
of Section 1.4 in order to surrender any such certificate.
1.4.4 Cancellation. At the Effective Time all shares of
Dynamotion Common Stock will no longer be outstanding and will automatically be
canceled and retired and will cease to exist, and each certificate previously
evidencing any such shares of Dynamotion Common Stock (and each certificate
representing shares of Class A Stock or Class B Stock that have been converted
into shares of Dynamotion Common Stock) will thereafter represent only the
right to receive the Merger Consideration in accordance with the terms of this
Agreement; provided, however, that in the case of Dissenting Shares, such
certificates will thereafter represent only the right to receive such
consideration as may be determined to be due under the NYBCL. The holders of
such certificates previously evidencing such shares of Dynamotion Common Stock
outstanding immediately before the Effective Time will cease to have any rights
with respect to such shares of Dynamotion Common Stock, except as provided in
this Agreement.
1.4.5 Treasury Shares. At the Effective Time, each share
of Dynamotion Common Stock or other Dynamotion capital stock held in the
treasury of Dynamotion immediately before the Effective Time will be canceled
and extinguished without any conversion thereof and no payment will be made
with respect thereto.
1.4.6 Escheat. Neither ESI nor Merger Corp. will be liable
to any holder of shares of Dynamotion Common Stock for any shares of ESI Common
Stock (or dividends or distributions with respect thereto) or cash delivered to
a public official pursuant to any applicable abandoned property, escheat, or
similar law.
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22
1.4.7 Withholding Rights. ESI will be entitled to deduct
and withhold from the aggregate Merger Consideration deliverable to any
Dynamotion shareholder such amounts as ESI may be required to deduct and
withhold with respect to the making of such delivery under the Code or any
applicable provision of state, local, or foreign tax law. To the extent that
amounts are so withheld by ESI, such withheld amounts will be treated for all
purposes of this Agreement as having been delivered to the holder of the shares
of Dynamotion Common Stock in respect of which such deduction and withholding
was made by ESI.
1.5 Dissenters' Rights.
1.5.1 Notice. Dynamotion shareholders desiring to dissent
from the Merger and obtain payment of the fair value of their shares of
Dynamotion Common Stock (such fair value to be determined as of the day before
the special meeting of Dynamotion shareholders called in accordance with
Section 4.2.4 to approve the Merger and related transactions (the "Special
Meeting")) in lieu of the Merger Consideration may exercise their dissenters'
rights under the provisions of Sections 910 and 623 of the NYBCL ("Dissenters'
Rights"). The Proxy Statement/ Prospectus (as that term is defined in Section
4.2.4) sent by Dynamotion to its shareholders in accordance with Section 4.2.4
will include a notice complying with the provisions of Section 605 of the NYBCL
concerning the rights of shareholders to exercise Dissenters' Rights and a copy
of the provisions of Section 623 of the NYBCL. The notice of Dissenters'
Rights will state that written objection to the Merger must be received by
Dynamotion at or before the Special Meeting as provided in Section 623(a) of
the NYBCL.
1.5.2 Rights of Dissenting Shares. Shares of Dynamotion
Common Stock that are issued and outstanding as of the Effective Time and held
by any shareholder who has, in
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23
accordance with Sections 910 and 623 of the NYBCL, delivered a written notice
of objection and payment demand accompanied by the required certification
("Dissenting Shares") will not be converted as described in Section 1.3 but
will from and after the Effective Time represent only the right to receive such
consideration as may be determined to be due under the NYBCL. Dynamotion will
give ESI prompt notice upon receipt by Dynamotion of any payment demand from
any such shareholder of Dynamotion (a "Dissenting Shareholder"). Dynamotion
will not, before the Effective Time, except with the prior written consent of
ESI (which consent will not unreasonably be withheld), voluntarily make any
payment with respect to, or settle or offer to settle, any request pursuant to
the exercise of Dissenters' Rights. Each Dissenting Shareholder who becomes
entitled, pursuant to the NYBCL, to payment for his, her, or its Dissenting
Shares will receive payment therefor in accordance with the NYBCL.
Notwithstanding the foregoing, if any Dissenting Shareholder rescinds, fails to
perfect, or otherwise loses Dissenters' Rights either before or after the
Effective Time, such shareholder's shares of Dynamotion Common Stock will be
converted into the right to receive ESI Common Stock or cash, as of the
Effective Time, in accordance with the provisions of this Agreement.
1.6 Stock Transfer Books. At the Effective Time, the stock
transfer books of Dynamotion will be closed and there will be no further
registration of transfers of Dynamotion capital stock or other securities
thereafter on the records of Dynamotion. At or after the Effective Time, any
certificates for Dynamotion Common Stock, Class A Stock, or Class B Stock
(other than Dissenting Shares) presented to ESI or its agent for any reason
will be converted into the right to receive the Merger Consideration in
accordance with the provisions of this Agreement.
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1.7 Closing. The closing of the Merger (the "Closing") will take
place at the offices of Stoel Rives LLP, 000 XX Xxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxxx, Xxxxxx 00000 on the Condition Completion Date (as hereinafter
defined), or on such other date and/or at such other place and time as
Dynamotion, ESI and Merger Corp. may agree (the "Closing Date"). The
"Condition Completion Date" will be the day on which the last of the conditions
set forth in Article V has been fulfilled or waived (other than those
conditions that, by their terms, are to be satisfied at the Closing).
1.8 Subsequent Actions. If, at any time after the Effective Time,
Merger Corp. considers or is advised that any deeds, bills of sale,
assignments, assurances, or any other actions or things are necessary or
desirable to vest, perfect, or confirm of record or otherwise in Merger Corp.
its right, title, or interest in, to, or under any of the rights, properties,
or assets of Dynamotion acquired or to be acquired by Merger Corp. as a result
of, or in connection with, the Merger or otherwise to carry out this Agreement,
the officers and directors of Merger Corp. will be authorized to execute and
deliver, in the name and on behalf of Dynamotion, or otherwise, all such deeds,
bills of sale, assignments, and assurances, and to take and do, in the name and
on behalf of Dynamotion, or otherwise, all such other actions and things as may
be necessary or desirable to vest, perfect, or confirm any and all right,
title, and interest in, to, and under such rights, properties, or assets in
Merger Corp. or otherwise to carry out the purposes of this Agreement.
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ARTICLE II
FURTHER AGREEMENTS
2.1 Employee Agreements. At or before the Closing, Dynamotion
will use all reasonable efforts to cause each of its employees located in
California who will become an employee of Merger Corp. to sign a
confidentiality and inventions assignment agreement substantially in the form
attached as Exhibit B1 (the "California ESI Confidentiality Agreement") and
each of its employees located outside of California who will become an employee
of Merger Corp. to sign a confidentiality, noncompete, and inventions
assignment agreement substantially in the form attached as Exhibit B2 (the
"Standard ESI Confidentiality Agreement").
2.2 Pledge and Escrow Agreement. At or before the Closing, ESI,
the Key Shareholders, and the Key Shareholder Representatives (as such term is
defined in Section 8.10) will execute and deliver a Pledge and Escrow Agreement
(the "Escrow Agreement") substantially in the form attached as Exhibit C,
together with stock powers endorsed to ESI relating to the shares of ESI Common
Stock delivered into escrow, and will cause the Escrow Agent (as such term is
defined in the Escrow Agreement) to execute the Escrow Agreement.
2.3 Noncompetition Agreement of Certain Dynamotion Executive
Officers. Dynamotion will use all reasonable efforts to cause the shareholders
who are executive officers of Dynamotion and are listed on Schedule 2.3 to
execute and deliver, at or before the Closing, a Noncompetition Agreement in
the form attached as Exhibit D (the "Noncompetition Agreement") providing for
certain post-employment noncompetition and noninterference obligations.
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2.4 Standstill Agreements. The Key Shareholders will execute and
deliver, at or before the Closing, the Standstill Agreement in the form
attached as Exhibit E (the "Standstill Agreement") providing for, in addition
to the terms of the Escrow Agreement, restrictions on the resale of shares of
ESI Common Stock received by the Key Shareholders as Merger Consideration.
2.5 Affiliate Representation Letters. Dynamotion will use all
reasonable efforts to cause the affiliates of Dynamotion, as listed on Schedule
2.5, to execute and deliver, at or before the Closing, an Affiliate
Representation Letter in the form attached as Exhibit F (the "Affiliate
Representation Letter") providing for certain tax and securities
representations by affiliates of Dynamotion.
2.6 Voting Agreement. Each of the Key Shareholders listed on
Schedule 2.6 will execute and deliver, concurrently with the execution of this
Agreement, a Voting Agreement in the form attached as Exhibit G (the "Voting
Agreement"). Each Voting Agreement provides that the signing holder will vote
all of the shares of Dynamotion Common Stock, Class A Stock, and/or Class B
Stock that such holder is entitled to vote at the Special Meeting in favor of
the Conversion Proposal and the Merger.
2.7 Exercise of Class B Warrants. The Key Shareholders who own
shares of Class B Stock and who hold warrants to purchase shares of Dynamotion
Common Stock (such warrants, the "Class B Warrants") will exercise the Class B
Warrants before the record date for the Special Meeting.
2.8 Termination of Agreement Relating to Z Warrants. At or before
the Closing, Dynamotion and the Key Shareholders who are parties to a letter
agreement dated March 29,
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1996 relating to the exercise of Z Warrants (the "Class B Additional Warrant
Agreement") will terminate the Class B Additional Warrant Agreement.
2.9 Termination of Underwriters' Warrants. Dynamotion will use
its best efforts to cause, at or before Closing, the termination of all
outstanding warrants to purchase shares of Class A Stock or shares of
Dynamotion Common Stock other than Z Warrants (the "Underwriters' Warrants").
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Dynamotion. Dynamotion
hereby represents and warrants to ESI and Merger Corp as follows:
3.1.1 Organization and Status. Dynamotion is a corporation
duly organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation and is duly qualified and in good standing as a
foreign corporation in each jurisdiction where its properties (whether owned,
leased, or operated) or its business conducted require such qualification,
except where the failure to so qualify or be in good standing, when taken
together with all such failures, would not have a material adverse effect on
Dynamotion. Dynamotion has all requisite corporate power and authority to own,
operate, and lease its property and to carry on its businesses as they are now
being conducted. Dynamotion has delivered to ESI complete and accurate copies
of the Certificate of Incorporation ("Certificate of Incorporation") and the
Bylaws of Dynamotion ("Bylaws"), each as amended to the date hereof.
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3.1.2 Capitalization.
3.1.2.1 Capital Structure. The capital structure of
Dynamotion as of January 15, 1997 is as stated on Schedule 3.1.2.1. Schedule
3.1.2.1 shows: (a) the number of shares of Dynamotion Common Stock, (b) the
number of shares of Class A Stock, (c) the number of shares of Class B Stock,
and (d) all other rights of any character relating to the acquisition of, or
conversion of securities into, Dynamotion Common Stock (including all warrants,
options, and convertible debt), in each case outstanding as of January 15, 1997
(the items described in (b), (c), and (d) are referred to herein together as
the "Dynamotion Common Stock Equivalent Securities," and all Dynamotion Common
Stock and Dynamotion Common Stock Equivalent Securities are referred to herein
together as the "Dynamotion Outstanding Securities"). Schedule 3.1.2.1 also
shows as of January 15, 1997 the corresponding "Common Stock Equivalent," which
is the total number of shares of Dynamotion Common Stock that would be
outstanding if all outstanding Dynamotion Common Stock Equivalent Securities of
that type were converted or exercised according to their terms, for each type
of Dynamotion Common Stock Equivalent Security listed on Schedule 3.1.2.1. The
"Adjusted Dynamotion Common Stock Total," which is the sum of all outstanding
Dynamotion Common Stock plus all Common Stock Equivalents combined is
11,170,848. All of the Dynamotion Outstanding Securities have been duly
authorized and are validly issued, fully paid, and nonassessable, and no such
securities were issued in violation of preemptive or similar rights of any
shareholder or in violation of any applicable securities laws. Except as set
forth on Schedule 3.1.2.1, there are no shares of capital stock of Dynamotion
authorized, issued, or outstanding, and, except for Options granted pursuant to
the Dynamotion Option Plans and as set forth on Schedule 3.1.2.1,
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there are no preemptive rights or any outstanding subscriptions, options,
warrants, phantom stock, stock appreciation or similar rights, convertible
securities, or any other rights, agreements, or commitments of Dynamotion of
any character relating to the issued or unissued capital stock or other
securities of Dynamotion. Except as set forth on Schedule 3.1.2.1, there are
no outstanding obligations of Dynamotion to repurchase, redeem, or otherwise
acquire any Dynamotion Outstanding Securities.
3.1.2.2 Dynamotion Outstanding Securities Holders.
Schedule 3.1.2.2 sets forth a complete and accurate list of each shareholder
who, to the Knowledge of Dynamotion, owns (beneficially or of record) five
percent or more of the voting power of any class of Dynamotion capital stock,
as well as all warrant holders (other than holders of publicly-traded Z
Warrants) and Option holders (collectively, "Holders") as of the date hereof,
indicating the number of Dynamotion Outstanding Securities (and their
respective Common Stock Equivalents) held by each Holder. As used in this
Agreement, the term "to the Knowledge of Dynamotion" means to the knowledge,
after due inquiry, of the individuals listed on Schedule 3.1-K
3.1.2.3 Redemption of Z Warrants. Schedule
3.1.2.3(a) states the number of Z Warrants outstanding. Each Z Warrant is
exercisable for .6941 of a share of Dynamotion Common Stock at an exercise
price of $4.37 per share. Upon the effectiveness of the conversion
contemplated by the Conversion Proposal (following the approval of the
Conversion Proposal by holders of the requisite percentages of Dynamotion
Common Stock, Class A Stock, and Class B Stock), the Z Warrants will be
redeemable, without any further
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action required (other than payment of the redemption price) at a redemption
price of $0.05 per Z Warrant, provided that the actions listed in Schedule
3.1.2.3(b) have been taken.
3.1.2.4 Convertible Debt. The convertible debt of
Dynamotion outstanding pursuant to notes issued to the parties listed on
Schedule 3.1.2.4 (the "Convertible Debt") is convertible into shares of
Dynamotion Common Stock only upon Dynamotion's default with respect to the
Convertible Debt. Dynamotion is not in default with respect to the Convertible
Debt except where the holder of the Convertible Debt has signed a written
agreement not to convert until at least 10 business days after the Effective
Time or until this Agreement has been terminated, whichever occurs first.
3.1.3 Corporate Authority. Dynamotion has the corporate
power and authority and has taken all corporate action necessary to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
This Agreement has been duly and validly authorized by the Dynamotion Board of
Directors and validly executed and delivered by Dynamotion. This Agreement
constitutes the valid and binding obligation of Dynamotion, enforceable in
accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting
the enforcement of creditors' rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is subject
to the discretion of the court before which any proceeding may be brought.
3.1.4 Section 368(a)(2)(D) Asset Requirement. Merger Corp.
will acquire at least 90 percent of the fair market value of the net assets and
at least 70 percent of the fair market value of the gross assets held by
Dynamotion immediately before the Merger. For
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purposes of this representation, amounts, if any, paid by Dynamotion to
Dissenting Shareholders, amounts paid by Dynamotion to shareholders who receive
cash or other property, Dynamotion assets used to pay its reorganization
expenses, and all redemptions and distributions (except for regular, normal
dividends) made by Dynamotion immediately preceding the Effective Time will be
included as assets of Dynamotion held immediately before the Merger.
3.1.5 Governmental Filings. Other than the filing of (a)
the Certificate of Merger contemplated by Article I, (b) the Proxy
Statement/Prospectus described in Section 4.2.4, and (c) a Certificate of
Amendment to Dynamotion's Certificate of Incorporation relating to the
Conversion Proposal, no notices, reports or other filings are required to be
made by Dynamotion with, nor, except as set forth on Schedule 3.1.5 are any
consents, registrations, approvals, permits, or authorizations required to be
obtained by Dynamotion from, any domestic or foreign governmental or regulatory
authority, agency, court, commission or other entity ("Governmental Entity") in
connection with the execution and delivery of this Agreement by Dynamotion and
the consummation by Dynamotion of the transactions contemplated hereby.
3.1.6 Investments; Subsidiaries. All direct or indirect
investments of Dynamotion in any corporation, partnership, association, joint
venture or other entity are listed in Schedule 3.1.6(a). Dynamotion has no
subsidiaries. All previously existing subsidiaries of Dynamotion or any
predecessor (each, a "Previous Subsidiary and together, the "Previous
Subsidiaries") are listed on Schedule 3.1.6(b).
3.1.7 No Adverse Consequences. Neither the execution and
delivery of this Agreement by Dynamotion nor the consummation of the
transactions contemplated by this Agreement will (a) result in the creation or
imposition of any lien, charge, encumbrance or
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restriction on any of the assets or properties of Dynamotion, (b) violate any
provision of the Certificate of Incorporation or Bylaws of Dynamotion, (c)
violate any statute, judgment, order, injunction, decree, rule, regulation or
ruling of any Governmental Entity applicable to Dynamotion, or (d) except as
set forth on Schedule 3.1.7, either alone or with the giving of notice or the
passage of time or both, conflict with, constitute grounds for termination of,
accelerate the performance required by, accelerate the maturity of any
indebtedness or obligation under, result in the breach of the terms, conditions
or provisions of, or constitute a default under any mortgage, deed of trust,
indenture, note, bond, lease, license, permit, or other agreement, instrument,
or obligation to which Dynamotion is a party or by which it is bound.
3.1.8 Financial Statements. Dynamotion has furnished to
ESI an audited balance sheet of Dynamotion as of December 31, 1995, and the
related statements of operations, shareholders' equity, and cash flows or the
period then ended, and the unaudited balance sheet of Dynamotion as of
September 30, 1996 (the "Current Balance Sheet") and the related statements of
operations, shareholders' equity, and cash flows for the nine months then
ended, and the Updated Financial Statements delivered at or before the Closing
pursuant to Section 5.3.7 (all such balance sheets and statements collectively,
the "Financial Statements"). The Financial Statements are (or will be, in the
case of the Updated Financial Statements) complete and accurate in all material
respects and present fairly the financial position and operating results of
Dynamotion as of the dates and for the periods indicated therein, and have been
(or will be, in the case of the Updated Financial Statements) prepared in
accordance with generally accepted accounting principles and applicable
accounting rules and regulations of the Securities and Exchange Commission (the
"SEC"). The Financial Statements (including notes
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and schedules) are (or will be, in the case of the Updated Financial
Statements) in accordance with the books and records of the Company.
3.1.9 Undisclosed Liabilities. Except for current
liabilities incurred after September 30, 1996 in the ordinary course of
business and of a type and in an amount consistent with past practices and not
more in the aggregate than $150,000, Dynamotion has no liability or obligation
(whether absolute, accrued, contingent or otherwise, and whether due or to
become due) that is not accrued, reserved against, or identified on the Current
Balance Sheet. Except as set forth on Schedule 3.1.9, there are no rights of
return or other agreements between Dynamotion and any customer that would cause
any sales reflected in the Financial Statements to fail to qualify as sales in
accordance with generally accepted accounting principles, applicable accounting
rules and regulations of the SEC, and Dynamotion's revenue recognition policy
as reflected in the Financial Statements. Notwithstanding the foregoing, as to
any subject matter covered by a specific representation and warranty of
Dynamotion elsewhere in this Agreement, no fact or occurrence that would not
breach Dynamotion's specific representation and warranty covering that subject
matter will be deemed to be a breach of the representation and warranty
contained in this Section 3.1.9.
3.1.10 Absence of Certain Changes or Events.
3.1.10.1 Absence of Changes or Events Since
December 31, 1995. Since December 31, 1995, except as set forth on Schedule
3.1.10.1, there has not been:
(a) Any direct or indirect declaration,
setting aside or payment of any dividend or other distribution (whether in
cash, stock, property or any
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combination thereof) in respect of any Dynamotion Outstanding Securities, or
any direct or indirect repurchase, redemption or other acquisition by
Dynamotion of any of its securities; or
(b) Any change by Dynamotion in
accounting methods, principles or practices.
3.1.10.2 Absence of Changes or Events Since
September 30, 1996. Since September 30, 1996, except as set forth on Schedule
3.1.10.2, there has not been:
(a) Any material adverse change in the
business, results of operations, financial condition, properties, or assets of
Dynamotion;
(b) Any material damage, destruction,
requisition, taking or casualty loss, whether or not covered by insurance, of
or to any of the assets or properties of Dynamotion;
(c) Other than as disclosed pursuant to
Section 3.1.14.4, any increase in the rate or terms of compensation payable or
to become payable by Dynamotion to its directors, officers, or employees; any
change in the rate or terms of any bonus, insurance, pension, or other employee
benefit plan, payment or arrangement made to, for, or with any employees of
Dynamotion; any special bonus or remuneration paid; any written employment
contract executed or amended; or any change in personnel policies;
(d) Any entry into any agreement,
commitment, or transaction (including, without limitation, any license of
intellectual property, any borrowing, capital expenditure or capital financing,
any purchase, acquisition, sale, or other disposition of assets (other than
inventory in the ordinary course of business), any lease or sublease, any
guaranty, assumption, or endorsement of payment or performance of any loan or
obligation of
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another, or any amendment, modification or termination of any existing
agreement, commitment or transaction) by Dynamotion except as contemplated in
this Agreement and except for such agreements, commitments, and transactions as
do not exceed $50,000 singly;
(e) Any issuance or sale of any stock of
Dynamotion (other than issuances pursuant to the exercise of Options) or any
issuance, granting, or creation of any option, warrant, phantom stock, stock
appreciation or similar rights, or any other right to purchase any stock of
Dynamotion or any commitment to do any of the foregoing;
(f) Any amendment to the Certificate of
Incorporation or Bylaws of Dynamotion, except as provided in Section 4.2.6 with
respect to the Conversion Proposal;
(g) Any conduct of business that is
outside the ordinary course of business or not substantially in the manner that
Dynamotion previously conducted its business;
(h) Any encumbrance or consent to
encumbrance of any property or assets;
(i) Any pending or, to the Knowledge of
Dynamotion, threatened labor disputes, organizational activities or
disturbances;
(j) Any communication to Dynamotion from
any customer of Dynamotion that purchased $100,000 or more of products or
services from Dynamotion in the year ended December 31, 1995 that such customer
intends to, is desirous of, or is actively considering terminating or
materially reducing its purchases from Dynamotion for any reason; or
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(k) Any change not described above in
the assets, liabilities, licenses, permits, or franchises of Dynamotion, or in
any agreement to which Dynamotion is a party or by which it is bound, that,
either individually or in the aggregate, has had or is reasonably likely to
have a material adverse effect on the business, results of operations,
financial condition, properties, or assets of Dynamotion.
3.1.11 Prohibited Payments. To the Knowledge of Dynamotion,
neither Dynamotion nor any shareholder, officer, director, or other person or
entity has, directly or indirectly, on behalf of or with respect to the
business or operations of Dynamotion or any Previous Subsidiary, (a) made any
payment outside the ordinary course of business to any purchasing or selling
agent or other person charged with similar duties of any entity to which
Dynamotion sells or from which Dynamotion buys products, for the purpose of
influencing such agent or person to buy products from or sell products to
Dynamotion which payment was not legal to make or receive under any applicable
law or regulation of the United States or any other country or territory; or
(b) engaged in any transaction, maintained any bank account, or used any
corporate funds or assets except for transactions, bank accounts, funds, and
assets that have been and are reflected in the normally maintained books and
records of Dynamotion.
3.1.12 Litigation. Except as listed on Schedule 3.1.12, no
litigation, proceeding, or governmental investigation is pending or, to the
Knowledge of Dynamotion, threatened against or relating to Dynamotion, its
officers, or directors in their capacities as such, or any of Dynamotion's
properties or businesses. No pending litigation or proceeding listed on
Schedule 3.1.12 seeks injunctive relief against Dynamotion. For the purposes
of this Section 3.1.12, the term "Litigation Reserves" means the amounts
specified on Schedule 3.1.12
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as such. The pending litigation and proceedings listed on Schedule 3.1.12 will
not, if settled, decided, or otherwise resolved in favor of the opposing party
or parties, result in any payment obligations of Dynamotion (including without
limitation damages and attorneys' fees) greater, in the aggregate, than the
Litigation Reserves.
3.1.13 Compliance with Laws; Judgments. Dynamotion and each
Previous Subsidiary has at all relevant times conducted its business in
compliance with (a) the provisions of its Certificate or Articles of
Incorporation, Bylaws, and (b) all applicable laws, regulations, and standards,
including without limitation the United States Export Control Act and all
applicable regulations promulgated by the U.S. Department of Health and Human
Services and the Federal Communications Commission and foreign counterparts to
such laws and regulations, other than violations that individually or in the
aggregate do not, and, with the passage of time will not, have a material
adverse effect on its business, financial condition, results of operations,
properties, or assets. Dynamotion is not subject to any outstanding judgment,
order, writ, injunction, or decree and has not been charged with, or, to the
Knowledge of Dynamotion, threatened with a charge of, a violation of any
provision of any applicable law or regulation.
3.1.14 Employment Matters.
3.1.14.1 Labor Matters. Dynamotion is not a
party or otherwise subject to any collective bargaining agreement governing the
wages, hours, or terms of employment of its employees. Dynamotion is, and
Dynamotion and each Previous Subsidiary has been, in compliance with all
applicable laws regarding employment and employment practices, terms and
conditions of employment, wages, and hours and is not and has not been engaged
in any unfair labor practice. There is no (a) unfair labor practice complaint
against
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Dynamotion pending before the National Labor Relations Board or any other
Governmental Entity; (b) labor strike, slowdown or work stoppage actually
occurring or, to the Knowledge of Dynamotion, threatened against Dynamotion;
(c) representation petition respecting the employees of Dynamotion pending
before the National Labor Relations Board or similar agency; or (d) grievance
or any arbitration proceeding pending arising out of or under collective
bargaining agreements applicable to Dynamotion. Dynamotion has not experienced
any primary work stoppage or other organized work stoppage involving its
employees in the past two years. To the Knowledge of Dynamotion, there is no
labor strike, slowdown, or work stoppage occurring or threatened against any of
its principal suppliers that is reasonably likely to have a material adverse
effect on the business, financial condition, results of operations, properties,
or assets of Dynamotion.
3.1.14.2 Employee Benefits. Schedule
3.1.14.2 lists all pension, retirement, profit sharing, deferred compensation,
bonus, commission, incentive compensation (including cash, stock, and option
plans or arrangements), life insurance, health and disability insurance,
hospitalization, and all other employee benefit plans or arrangements
(including, without limitation, any contracts or agreements with trustees,
insurance companies or others relating to any such employee benefit plans or
arrangements) established or maintained by Dynamotion, and Dynamotion has
provided ESI with complete and accurate copies of: (a) all such plans or
arrangements; (b) Dynamotion's most recent annual report (Form 5500 series)
filed with the Internal Revenue Service; (c) the most recent actuarial reports;
and (d) all governmental rulings, determinations, and opinions (and pending
requests for governmental rulings, determinations, and opinions). The employee
welfare benefit plans (within the meaning
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of Section 3(1) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) and the employee pension benefit plans (within the meaning
of Section 3(2) of the ERISA) established and maintained by Dynamotion (the
"ERISA Plans") are listed separately as ERISA Plans on Schedule 3.1.14.2. The
ERISA Plans comply in all material respects with the applicable requirements of
ERISA. Dynamotion has received from the Internal Revenue Service a favorable
determination for each of the ERISA Plans and their related trusts that each of
the ERISA Plans that is an employee pension benefit plan is qualified under
Section 401(a) of the Code and the related trust is tax-exempt under Section
501(a) of the Code. There has been no event subsequent to that determination
that has adversely affected the tax qualified status of the ERISA Plans or the
exemption of the related trusts other than changes in the Code that are not
effective as of the Closing Date. None of the ERISA Plans, its related trusts
or any trustee, investment manager or administrator thereof has engaged in a
nonexempt "prohibited transaction," as such term is defined in Section 406 of
ERISA and Section 4975 of the Code. There are not and have not been any excess
deferrals or excess contributions under any ERISA Plan. Each ERISA Plan is and
has been operated and administered in conformity with the requirements of all
applicable laws and regulations, whether or not the ERISA Plan documents have
been amended to reflect such requirements. Except as set forth on Schedule
3.1.14.2, Dynamotion has no obligation of any kind (whether under the terms of
the ERISA Plans or under any understanding with employees) to make payments
under, or to pay contributions to, any plan, agreement or other arrangement for
deferred compensation of employees, whether or not tax qualified, including,
without limitation, a single employer tax qualified plan, a tax qualified plan
of a controlled group of corporations, a multiemployer pension plan, a "defined
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benefit" plan, a nonqualified deferred compensation plan, an individual
employment or compensation agreement or a commitment to provide medical
benefits to retirees. Dynamotion has never adopted, maintained, or contributed
to any plan or arrangement that is or was subject to Section 412 of the Code or
Title IV of ERISA (a "DB Plan"), nor has Dynamotion ever been a member of a
controlled group of corporations, group of trades or businesses, or affiliated
service group (within the meaning of Sections 414(b), (c), and (m) of the Code)
that has adopted, maintained, or contributed to a DB Plan.
3.1.14.3 Employment Agreements. There are no
employment or other agreements or understandings of any kind between Dynamotion
and any of its employees, including without limitation any agreements or
understandings regarding compensation or commissions of any nature, severance
payments, or retirement benefits, except as reflected in the items listed in
Schedules 3.1.14.2, 3.1.14.3, and 3.1.14.4 and except for standard Dynamotion
confidentiality and assignment agreements as described in Section 3.1.14.5.
Schedule 3.1.14.3 lists all Dynamotion's employment or supervisory manuals,
employment or supervisory policies, and written information generally provided
to employees (such as applications or notices), and complete and accurate
copies of those manuals, policies, and written information have been provided
to ESI.
3.1.14.4 Compensation. Schedule 3.1.14.4
contains a complete and accurate list of all current directors, officers,
employees, or consultants of Dynamotion, specifying their names and job
designations, the total annual amount paid or payable as cash and noncash
compensation to each such person, and the basis of such compensation, whether
fixed or commission or a combination thereof, and the total amount of accrued
benefits (including
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without limitation vacation, sick, or wellness pay, if any) for such persons as
of December 31, 1995 and as of November 30, 1996. Dynamotion has not made any
commitment entitling any employee to any payment in the event of termination or
resignation that would constitute a "parachute payment" within the meaning of
Section 280G of the Code or that would in the aggregate exceed 100 percent of
such person's annual base cash compensation. Dynamotion has no discretionary
bonus plans. The provisions for wages and salaries accrued on the Current
Balance Sheet are adequate for salaries and wages accrued as of the date
thereof, including accrued vacation pay and sick or wellness pay, if any, and
Dynamotion has accrued on its books and records all obligations for wages and
salaries and other compensation to its employees, including but not limited to,
vacation pay and sick or wellness pay, if any, and all commissions and other
fees payable to agents, salesmen, and representatives.
3.1.14.5 Confidentiality and Inventions
Agreements. The employees and consultants of Dynamotion listed on Schedule
3.1.14.5 have previously signed a confidentiality and invention agreement
substantially in the form or forms attached hereto as Exhibit H.
3.1.15 Title to and Condition of Real Property. Neither
Dynamotion nor any Previous Subsidiary has ever owned any real property, and
Dynamotion does not now own any real property. Schedule 3.1.15 contains a list
of all real property currently leased, occupied, or used by Dynamotion (the
"Leased Real Property"), including the dates of and parties to all leases and
any amendments thereof. All real property previously leased, occupied, or used
by Dynamotion, any predecessor company, or any Previous Subsidiary is referred
to herein as the "Previously Leased Real Property." All Leased Real Property
(including improvements thereon)
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is in the same condition (ordinary wear and tear excepted) as it was when
Dynamotion's lease(s), occupancy, or use began, and is available for immediate
use in the conduct of Dynamotion's business. Neither the operations of
Dynamotion on any Leased Real Property, nor any improvements on the Leased Real
Property, violates any applicable building or zoning code or regulation of any
Governmental Entity having jurisdiction. The Leased Real Property includes all
such property necessary to conduct the business of Dynamotion. None of the
Leased Real Property has been condemned or otherwise taken by public authority
and no such condemnation or taking is, to the Knowledge of Dynamotion,
threatened or contemplated.
3.1.16 Title to and Condition of Fixed Assets. Schedule
3.1.16 contains a complete and accurate list of all tangible personal property
(excluding inventory) owned or leased by Dynamotion (the "Tangible Personal
Property"), including the dates of and parties to all leases and any amendments
thereof. Except as noted on Schedule 3.1.16, Dynamotion has good and
marketable title to all of the Tangible Personal Property listed in Schedule
3.1.16, free and clear of all liens, mortgages, pledges, leases, restrictions
and other claims and encumbrances of any nature whatsoever. The Tangible
Personal Property is in good operating condition and repair (ordinary wear and
tear excepted), is performing satisfactorily, and is adequate for the conduct
of the business of Dynamotion. All Tangible Personal Property and the state of
maintenance thereof are in compliance with all applicable laws and regulations.
3.1.17 Intellectual Property. Dynamotion owns, or has a
valid license to use, all patents, trademarks, service marks, trade names,
copyrights, trade secrets, technology, know-how and other intellectual property
(the "Intellectual Property") used in the conduct of the business of Dynamotion
as now conducted. Schedule 3.1.17(a) contains a complete and accurate
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list of all patents, patent applications, trademarks, and service marks and
related applications, trade names, and copyrights owned by or licensed to
Dynamotion. Schedule 3.1.17(a) also contains a description of all agreements
or licenses relating to the acquisition by or license to Dynamotion of such
Intellectual Property or under which Dynamotion has sold or granted a right to
use any Intellectual Property. Except as set forth on Schedule 3.1.17(b), all
Intellectual Property owned by Dynamotion is owned by it free and clear of all
liens, claims, encumbrances or adverse claims of any third party. The conduct
of Dynamotion's business does not conflict with or infringe upon any
Intellectual Property rights of any other person and no claims of conflict or
infringement are pending or, to the Knowledge of Dynamotion, threatened against
Dynamotion. Dynamotion has made all necessary filings and recordations and has
paid all required fees and Taxes to maintain its ownership of its Intellectual
Property that is patented or registered in the United States Patent and
Trademark Office and has made all necessary filings and recordations and has
paid all required fees and Taxes to maintain its ownership of its Intellectual
Property that is patented or registered with applicable foreign agencies.
3.1.18 Certain Contracts and Arrangements. Schedule 3.1.18,
which is organized by type of agreement, contains a complete and accurate list
of each of the following types of agreements or arrangements, including any
amendments thereto, to which Dynamotion is a party or by which it is bound:
(a) any mortgage, note, or other instrument or
agreement relating to the borrowing of money or the incurrence of indebtedness
or the guaranty of any obligation for the borrowing of money;
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(b) any contract, agreement, purchase order, or
acknowledgment form for the purchase, sale, lease or other disposition of
equipment, products, materials or capital assets, or for the performance of
services (including without limitation consulting services), with respect to
which the annual aggregate dollar amount either due to or payable by Dynamotion
exceeds $100,000;
(c) contracts or agreements for the joint
performance of work or services, and all other joint venture agreements;
(d) contracts or agreements with agents, brokers,
consignees, sales representatives, or distributors relating to the sale of
products or services;
(e) confidentiality or inventions assignment
agreements with parties other than employees of Dynamotion; and
(f) any other contract, instrument, agreement, or
obligation not described in any other Schedule that contains unfulfilled
obligations, is not terminable without payment of premium or penalty upon 30
days' notice or less and the annual amount either due to or payable by
Dynamotion exceeds $100,000 for any single contract.
3.1.19 Status of Contracts. Each of the contracts,
agreements, commitments and instruments listed on Schedules 3.1.15, 3.1.16,
3.1.17, and 3.1.18 and the agreements described in Section 3.1.14.5
(collectively, the "Contracts") is in full force and effect and is valid,
binding and enforceable by Dynamotion in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
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discretion of the court before which any proceeding may be brought. Except as
listed in Schedule 3.1.19, there is no existing material default or violation
by Dynamotion under any Contract and no event has occurred that (whether with
or without notice, lapse of time or both) would constitute a material default
of Dynamotion under any Contract. There is no pending or, to the Knowledge of
Dynamotion, threatened proceeding that would interfere with the quiet enjoyment
of any leasehold of which Dynamotion is lessee or sublessee. Except set forth
on Schedule 3.1.19, no consent of the other parties to the Contracts is
necessary for the consummation of the transactions contemplated by this
Agreement. Complete and accurate copies of all Contracts have been delivered
to ESI. To the Knowledge of Dynamotion, there is no default by any other party
to any Contract or any event that (whether with or without notice, lapse of
time or both) would constitute a material default by any other party with
respect to obligations of that party under any Contract, and, to the Knowledge
of Dynamotion, there are no facts that exist indicating that any of the
Contracts may be totally or partially terminated or suspended by the other
parties. Dynamotion has not granted any waiver or forbearance with respect to
any of the Contracts. Dynamotion is not a party to, or bound by, any contract
or agreement that Dynamotion can reasonably foresee will result in any material
loss to Dynamotion upon the performance thereof (including any liability for
penalties or damages, whether liquidated, direct, indirect, incidental, or
consequential).
3.1.20 Insurance. Schedule 3.1.20 contains a complete
and accurate list of all current policies of primary, excess, or umbrella
comprehensive general liability, fire, worker's compensation, or any other form
of insurance insuring Dynamotion, its officers or directors, its assets, or its
operations (the "Policies"), setting forth the applicable deductible amounts.
All
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past primary, excess, or umbrella comprehensive general liability policies or
any other policy insuring Dynamotion or any predecessor or Previous Subsidiary
against liability for third-party bodily or personal injury or property damage
are referred to herein as "Past CGL Policies". All the Policies are valid,
enforceable, and in full force and effect, all premiums with respect to the
Policies covering all periods up to and including the date as of which this
representation is being made have been paid and no notice of cancellation or
termination has been received by Dynamotion with respect to any Policy. The
Policies are sufficient for compliance with all requirements of law and
agreements to which Dynamotion is a party and provide insurance for the risks
and in the amounts and types of coverage usually obtained by persons using or
holding similar properties in similar businesses. Neither the execution of
this Agreement nor the consummation of the Merger will bar or otherwise
interfere with the rights of Merger Corp. to recover under the Policies or Past
CGL Policies for claims arising out of pre-Closing acts or omissions of
Dynamotion or any predecessors or Previous Subsidiary. There have been no
claims made for insurance payment under any of the Policies or Past CGL
Policies in the three years preceding the date of this Agreement. Complete and
accurate copies of the Policies and all endorsements thereto have been
delivered to ESI. Dynamotion has not been refused any insurance coverage and
no insurance coverage has been canceled during the three years preceding the
date of this Agreement.
3.1.21 Permits and Licenses. Schedule 3.1.21(a) contains a
complete and accurate list of all governmental licenses, permits, franchises,
easements, and authorizations (collectively, "Permits") held by Dynamotion,
listed by Governmental Entity. To the Knowledge of Dynamotion, Dynamotion
holds, and at all times each of Dynamotion, its
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predecessors, and each Previous Subsidiary has held, all Permits necessary for
the lawful conduct of its business pursuant to all applicable statutes, laws,
ordinances, rules, and regulations of all Governmental Entities and other
authorities having jurisdiction over it or any part of its operations.
Dynamotion is in compliance with each of the terms of its Permits. Complete
and accurate copies of all Permits held by Dynamotion have been delivered to
ESI. Schedule 3.1.21(b) lists all consents from any Governmental Entities that
have issued any Permits to or with respect to Dynamotion or its business that
are required for the consummation of the transactions contemplated by this
Agreement.
3.1.22 Taxes.
3.1.22.1 Returns. Except as set forth on
Schedule 3.1.22.1, each of Dynamotion and each Previous Subsidiary has filed on
a timely basis all federal, state, foreign and other returns, reports, forms,
declarations, and information returns required to be filed by it with respect
to Taxes (as defined below) that relate to the business, results of operations,
financial condition, properties, or assets of Dynamotion or any Previous
Subsidiary (collectively, the "Returns") and has paid on a timely basis all
Taxes shown to be due on the Returns. Except as set forth on Schedule
3.1.22.1, Dynamotion is not, and neither Dynamotion nor any Previous Subsidiary
has ever been, part of an affiliated group of corporations that files or has
the privilege of filing consolidated tax returns pursuant to Section 1501 of
the Code or any similar provisions of state, local, or foreign law. Except as
set forth on Schedule 3.1.22.1, Dynamotion is not, and neither Dynamotion nor
any Previous Subsidiary has ever been, a party to any tax-sharing or
tax-allocation agreement. Dynamotion does not have any liability for Taxes of
any person (other than itself), whether arising under federal, state, local, or
foreign law, as a
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transferee or successor, by contract, or otherwise. No extensions of time have
been requested for Returns that have not been filed and no statute of
limitations has been waived with respect to any Tax except as set forth on
Schedule 3.1.22.1. Except as set forth on Schedule 3.1.22.1, no Returns have
been examined by the applicable taxing authorities for all periods to and
including the fiscal year ended December 31, 1995 and, except as set forth on
Schedule 3.1.22.1, Dynamotion has not received any notice of claim or audit
from any taxing authority with respect to itself or any Previous Subsidiary and
there are no outstanding agreements or waivers extending the applicable
statutory periods of limitation for such Taxes for any period. All Returns
filed are complete and accurate in all material respects and no additional
Taxes are owed by Dynamotion or any Previous Subsidiary with respect to the
periods covered by the Returns. Dynamotion has provided ESI with complete and
accurate copies of Returns for each of Dynamotion's fiscal years 1991 through
1995 and the Forms 1139 related to any loss or credit or carryback claim for
those years.
3.1.22.2 Taxes Paid or Reserved. The
reserves for Taxes reflected on the Current Balance Sheet are adequate for
payment of Taxes in respect of periods ending on or before the date of the
Current Balance Sheet. All reserves for Taxes have been determined in
accordance with generally accepted accounting principles and applicable
accounting rules and regulations of the SEC consistently applied throughout the
periods involved and with prior periods. All Taxes that Dynamotion has been
required to collect or withhold have been withheld or collected and, to the
extent required, have been paid to the proper taxing authority. Neither
Dynamotion nor any Previous Subsidiary has elected to be treated as a
consenting corporation pursuant to Section 341(f) of the Code.
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3.1.22.3 Net Operating Losses. Dynamotion's
federal net operating loss carry forward as of December 31, 1995 equaled
$6,838,248.
3.1.22.4 Definition. The term "Tax" or
"Taxes" means all federal, state, local, or foreign taxes, charges, fees,
levies, or other assessments, including, without limitation, all net income,
gross income, gross receipts, premium, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
estimated severance, stamp, occupation, property, or other taxes, fees,
assessments, or charges of any kind whatsoever, together with any interest and
any penalties (including penalties for failure to file in accordance with
applicable information reporting requirements), and additions to tax.
3.1.23 Related Party Interests. Except as listed in Schedule
3.1.23, no Holder, officer, or director of Dynamotion (or any entity owned or
controlled by one or more of such parties) (a) is indebted to Dynamotion or (b)
has any other right, arrangement, or agreement binding upon Dynamotion,
including without limitation any registration rights agreement, stock purchase
agreement, or similar arrangement (other than obligations contained in
Dynamotion's Certificate of Incorporation or Bylaws). Except as listed in
Schedule 3.1.23, to the Knowledge of Dynamotion, no Holder, officer, or director
of Dynamotion (or any entity owned or controlled by one or more of such parties)
(i) has any interest in any property, real or personal, tangible or intangible,
used in or pertaining to Dynamotion's business or (ii) has any material
financial interest, direct or indirect, in any supplier or customer of, or other
outside business which has significant transactions with Dynamotion. True and
complete copies of all agreements listed on Schedule 3.1.23 have been provided
to ESI. Dynamotion is not indebted to any of its shareholders, directors, or
officers (or to the Knowledge of Dynamotion any entity owned or
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controlled by one or more of such parties) except for amounts due under normal
salary arrangements and for reimbursement of ordinary business expenses. Except
as specifically referenced in this Agreement, the consummation of the
transactions contemplated by this Agreement will not (either alone or upon the
occurrence of any act or event, or with the lapse of time, or both) result in
any payment (severance or other) becoming due from Dynamotion to any Holder or
any of Dynamotion's, officers, directors, or employees (or, to the Knowledge of
Dynamotion, any entity owned or controlled by one or more of such parties).
3.1.24 No Powers of Attorney or Restrictions. No power of
attorney or similar authorization given by Dynamotion is presently in effect or
outstanding. Except as set forth on Schedule 3.1.24, no contract or agreement
to which Dynamotion is a party or by which it is bound or to which any of its
properties or assets is subject limits the freedom of Dynamotion to compete in
any line of business or with any person. To the Knowledge of Dynamotion, none
of the employees of Dynamotion is obligated under any contract (including
licenses, covenants, or commitments of any nature), or subject to any judgment,
decree, or order of any Governmental Entity, that would interfere with the use
of his or her best efforts to promote the interests of Dynamotion or that would
conflict with the business of Dynamotion as now conducted or proposed to be
conducted.
3.1.25 Environmental Conditions.
3.1.25.1 Compliance. The business, assets,
and operations of Dynamotion, its predecessors and all Previous Subsidiaries,
including without limitation the Leased Real Property and the Previously Leased
Real Property, are and have been in compliance with all Environmental Laws (as
defined below) and all Permits required for the operations of
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Dynamotion, its predecessors, and the Previous Subsidiaries under any
Environmental Law. These Permits are listed separately in Schedule 3.1.21.
There are no pending or, to the Knowledge of Dynamotion, threatened claims,
actions or proceedings against Dynamotion under any Environmental Law or
related Permit. All wastes generated in connection with Dynamotion's business
are, and in the case of Dynamotion, its predecessors, and the Previous
Subsidiaries, have been transported and disposed of off-site in compliance with
all Environmental Laws, and there are no facility logs or manifests relating to
the transportation and disposal of such wastes. No wastes, including hazardous
and solid wastes, have been or are stored on, at, or under the Leased Real
Property or the Previously Leased Real Property in violation of any
Environmental Law or that could result in a remediation obligation.
3.1.25.2 Hazardous Substances. Except for
ordinary household cleaners and office supplies or as set forth on Schedule
3.1.25.2, no Hazardous Substance (as defined below) is present on, at, or under
the Leased Real Property or the Previously Leased Real Property. Except as
would neither violate any Environmental Law nor result in any remediation
obligation, no Hazardous Substance has been disposed of, spilled, leaked,
discharged, or otherwise released on, in, under or has migrated off-site from
the Leased Real Property or the Previously Leased Real Property or has
otherwise come to be located in the soil or water (including surface and ground
water) in, on, under, or adjacent to the Leased Real Property or the Previously
Leased Real Property. Except as would neither violate any Environmental Law
nor result in any remediation obligation, none of the assets of Dynamotion or
the improvements on the Leased Real Property or the Previously Leased Real
Property have incorporated into them any asbestos, urea formaldehyde foam
insulation, polychlorinated
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biphenyls (including in any electrical transformer or capacitor located on such
property), or any other Hazardous Substance that is prohibited, restricted, or
regulated when present in buildings, structures, fixtures, or equipment.
Except for ordinary household cleaners and office supplies or as set forth on
Schedule 3.1.25.2, no Hazardous Substance is or has been generated,
manufactured, treated, stored, transported, used, or otherwise handled on the
Leased Real Property or the Previously Leased Real Property or in connection
with the business or operations of Dynamotion, its predecessors, or the
Previous Subsidiaries. Except as listed on Schedule 3.1.25.2, there are not
and have never been any above-ground or underground storage tanks (whether or
not regulated and whether or not out of service, closed, or decommissioned) on
the Leased Real Property or, during the period of occupancy or use by
Dynamotion, its predecessors, or the Previous Subsidiaries, on the Previously
Leased Real Property.
3.1.25.3 Filings and Notices. Each of
Dynamotion and each Previous Subsidiary has timely filed all required reports,
obtained all required approvals and permits, and generated and maintained all
required data, documentation, and records under all applicable Environmental
Laws. All notifications required by any Environmental Law in respect of any
discharge, release, or emission have been made within the time prescribed by
such Environmental Law, and copies of all such notifications have been provided
to ESI. No part of the Leased Real Property or the Previously Leased Real
Property is listed as a site contaminated by Hazardous Substances pursuant to
any Environmental Law.
3.1.25.4 Definitions. As used in this
Agreement, (a) "Environmental Law" means any federal, state, foreign, or local
statute, ordinance, or regulation pertaining to the protection of human health
or the environment and any applicable orders, judgments,
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decrees, permits, licenses, or other authorizations or mandates under such
statutes, ordinances or regulations, and (b) "Hazardous Substance" means any
hazardous, toxic, radioactive, or infectious substance, material or waste as
defined, listed, or regulated under any Environmental Law, and includes without
limitation radioactive material and petroleum oil and its fractions.
3.1.26 Consents and Approvals. Except as set forth in
Sections 3.1.5 and 5.2.4 and as set forth on Schedule 3.1.21(b), no consent,
approval, or authorization of, or filing or registration with, any Governmental
Entity or any other entity or person not a party to this Agreement is required
to be obtained or made by Dynamotion for the consummation of the transactions
described in this Agreement.
3.1.27 Records. The books of account, minute books, stock
certificate books, and stock transfer ledgers of Dynamotion are complete and
accurate in all respects, and there has been no transaction involving the
business or stock ownership of Dynamotion, or action of Dynamotion's Board of
Directors or shareholders, that properly should have been set forth therein and
has not been accurately so set forth. Complete and accurate copies of such
books, records, and ledgers have been made available to ESI.
3.1.28 Receivables. Each of the receivables of Dynamotion
(including notes receivable, accounts receivable, loans receivable, and
advances) that is reflected on the Current Balance Sheet, and each of the
receivables that has arisen since that date, has arisen only from bona fide
transactions in the ordinary course of Dynamotion's business and will, except
as disclosed on Schedule 3.1.28(a), be fully collected when due, or in the case
of each account receivable, within one year after the Closing Date, without
resort to litigation and without offset or counterclaim, except to the extent
of (a) the allowance for doubtful accounts with respect to
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accounts receivable as reflected on the Current Balance Sheet, plus (b) any
reduction in the accounts payable balances listed on Schedule 3.1.28(b) that
result from negotiations with vendors. The accounts payable listed on Schedule
3.1.28(b) are included in the accounts payable on the Current Balance Sheet.
3.1.29 Bank Accounts. Schedule 3.1.29 contains a complete
and accurate list of all the banks or other financial institutions at which
Dynamotion maintains accounts or safe deposit boxes, together with numbers of
such accounts and boxes and the names of the persons authorized to draw thereon
or permitted access thereto. Except as set forth on Schedule 3.1.29, all cash
in such accounts is held in demand deposits and is not subject to any
restriction or limitation as to withdrawal.
3.1.30 Product Warranties. Schedule 3.1.30 contains
Dynamotion's standard form of product warranty, infringement indemnity, and
limitation of liability provisions and a copy of each negotiated warranty,
indemnity, and limitations provision that differs materially from the standard
form. Neither Dynamotion nor, to the Knowledge of Dynamotion, any predecessor
or Previous Subsidiary, has undertaken any performance obligations or made any
warranties or guarantees with respect to its products other than those
disclosed in Schedule 3.1.30, or sold any products or services without the
limitation of liability provisions disclosed in Schedule 3.1.30. The aggregate
cost to Dynamotion to comply with its product warranties has not exceeded four
percent (4%) of machine revenue, as reported in Dynamotion's general ledger,
for each of the last three fiscal years. Except as set forth on Schedule
3.1.30, all products under warranty as of the date of this Agreement serviced,
distributed, or sold by
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Dynamotion or, to the Knowledge of Dynamotion, any predecessor or Previous
Subsidiary, and the delivery thereof, have been in conformity with Dynamotion's
warranty commitments.
3.1.31 Inventories. Schedule 3.1.31 contains a true and
complete list and summary of all inventory of Dynamotion as of September 30,
1996. All inventories, whether finished goods, work in process, or raw
materials, reflected on the Current Balance Sheet or thereafter acquired, are
all items of a quality usable or saleable in the ordinary and usual course of
Dynamotion's business, except for inventory items that have been written down
to an amount not in excess of realizable market value or for which adequate
reserves or allowances have been provided on the Current Balance Sheet. The
values at which inventories are carried reflect an inventory valuation policy
consistent with Dynamotion's past practice and in accordance with generally
accepted accounting principles and applicable accounting rules and regulations
of the SEC. Except as set forth on Schedule 3.1.31, Dynamotion has good and
marketable title to all its inventories, free and clear of all liens,
mortgages, pledges, leases, restrictions, and other claims and encumbrances of
any nature whatsoever.
3.1.32 Product Liability. Except as set forth on Schedule
3.1.32, Dynamotion has not recalled any products manufactured, serviced,
distributed, leased, or sold by Dynamotion or any predecessor or any Previous
Subsidiary, and, to the Knowledge of Dynamotion, there is no reasonable basis
for any such recall on or after the Closing Date.
3.1.33 Customer Information. Schedule 3.1.33 lists (a)
every outstanding purchase order received by Dynamotion for more than $100,000
by customer as of November 30, 1996 and (b) the top 10 Dynamotion customers for
each of the last two fiscal years, with aggregate annual revenue for each
customer for each year.
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3.1.34 Accounting Controls. Dynamotion maintains a system
of internal accounting controls sufficient to provide reasonable assurances
that (a) transactions are executed in accordance with management's general or
specific authorizations, (b) transactions are accurately and completely
recorded in Dynamotion's general ledger in a manner that facilitates the
preparation of financial statements in conformity with generally accepted
accounting principles and applicable accounting rules and regulations of the
SEC and the maintenance of accountability for assets, (c) access to assets is
permitted only in accordance with management's general or specific
authorization, and (d) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
3.1.35 Liabilities Incurred in Ordinary Course. Except as
otherwise specifically described in this Agreement or the schedules hereto, the
liabilities of Dynamotion and the liabilities to which the assets of Dynamotion
are subject were incurred by Dynamotion in the ordinary course of its business.
3.1.36 Continuity of Business Enterprise. Dynamotion
operates at least one significant historic business line, or owns at least a
significant portion of its historic business assets, in each case within the
meaning of Regulation Section 1.368-1(d) under the Code.
3.1.37 Fair Market Value of Dynamotion Assets. The fair
market value of the assets of Dynamotion transferred to Merger Corp. pursuant
to the Merger at the Effective Time will equal or exceed the sum of the
liabilities assumed by Merger Corp., plus the amount of liabilities, if any, to
which the transferred assets are subject.
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3.1.38 No Chapter 11 Proceedings. Dynamotion is not under
the jurisdiction of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code.
3.1.39 Not an Investment Company. Dynamotion is not an
investment company as defined in Sections 368(a)(2)(F)(iii) and (iv) of the
Code.
3.1.40 Not a Real Property Holding Company. Dynamotion has
not been a United States real property holding company within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
3.1.41 Proxy Statement/Prospectus. The information provided
in writing by Dynamotion (or its representatives) regarding Dynamotion
specifically for inclusion in the Proxy Statement/Prospectus and the
information in the Proxy Statement/Prospectus relating to Dynamotion that is
supplemented or reviewed by Dynamotion (or its representatives) without
objection before the mailing of such Proxy Statement/Prospectus, will be
correct in all material respects and will not omit any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading; provided, however, that no representation or warranty is made by
Dynamotion with respect to information supplied by ESI specifically for
inclusion therein or relating to and reviewed by ESI (or its representatives)
without objection. Dynamotion will promptly inform ESI of the happening of any
event before the Effective Time that would render such information regarding
Dynamotion incorrect in any material respect or require the amendment of the
Proxy Statement/Prospectus.
3.1.42 Dynamotion SEC Reports. Dynamotion has heretofore
furnished ESI with complete copies of all registration statements, reports, and
proxy statements, including amendments thereto, filed with the SEC since
December 31, 1991 and before the date of this
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Agreement (collectively, the "Dynamotion SEC Reports"). Except as set forth on
Schedule 3.1.42, Dynamotion has timely filed with the SEC all registration
statements, reports, proxy statements, and other filings required to be made by
it under applicable laws and regulations. Each of the Dynamotion SEC Reports,
at the time filed or at the time of its effectiveness, if later, (a) did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (b) complied in all respects with the applicable requirements of
the Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as
amended, and the applicable rules and regulations of the SEC thereunder.
3.1.43 Compliance of Conversion Proposal, Etc. None of:
(a) the proposal of, shareholder approval of, or implementation of transactions
contemplated by, the Conversion Proposal as described in this Agreement; (b)
the redemption of the Z Warrants as described in this Agreement after the
actions described in Schedule 3.1.2.3(b) have been taken; (c) the termination
of the Class B Additional Warrant Agreement by mutual agreement of the parties
thereto; (d) the exercise of the Class B Warrants as described in this
Agreement; or (e) the termination of the Underwriters' Warrants by mutual
agreement of the parties thereto; will violate any provision of the Certificate
of Incorporation, the Bylaws, any applicable law or regulation (including
without limitation state and federal securities laws and regulations), or the
terms of any agreement or obligation by which Dynamotion is bound.
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3.1.44 Brokers and Finders. Dynamotion has not incurred any
liability for any brokerage or investment banking fees, commissions or finders'
fees in connection with the Merger.
3.1.45 Accuracy of Representations and Warranties. To the
Knowledge of Dynamotion, none of the representations or warranties of
Dynamotion contained in this Agreement contains or will contain any untrue
statement of any material fact or omits or misstates a material fact necessary
to make the statements contained in this Agreement not misleading. To the
Knowledge of Dynamotion, no fact that has resulted or that, in the reasonable
judgment of Dynamotion is reasonably likely to result, in any material adverse
change in Dynamotion's business, results of operation, financial condition,
properties, or assets that has not been set forth in this Agreement.
3.2 Representations and Warranties of Key Shareholders. Each Key
Shareholder, severally and not jointly, for himself, herself, or itself only,
hereby represents and warrants to ESI and Merger Corp. that, except as
specifically set forth in Schedule 3.2 (the "Key Shareholder Disclosure
Schedule") in a numbered paragraph that corresponds to the section for which
disclosure is made:
3.2.1 Authority. Such Key Shareholder has the authority
and has taken all action necessary, or, with respect to any Key Shareholder
that is a corporation, such Key Shareholder has the corporate power and
authority and has taken all corporate action necessary, to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly authorized and validly executed and
delivered by such Key Shareholder. This Agreement constitutes the valid and
binding obligation of such Key
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Shareholder, enforceable in accordance with its terms, except as enforcement
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought.
3.2.2 Filings. No notices, reports or other filings are
required to be made by such Key Shareholder with, nor are any consents,
registrations, approvals, permits, or authorizations required to be obtained by
such Key Shareholder from, any Governmental Entity or any other person not a
party to this Agreement in connection with the execution and delivery of this
Agreement by such Key Shareholder and the consummation by such Key Shareholder
of the transactions contemplated hereby.
3.2.3 Proxy Statement/Prospectus. The information provided
in writing by such Key Shareholder (or his, her, or its representative)
regarding such Key Shareholder specifically for inclusion in the Proxy
Statement/Prospectus and the information in the Proxy Statement/Prospectus
regarding such Key Shareholder that is reviewed by such Key Shareholder (or
his, her, or its representative) without objection before the mailing of such
Proxy Statement/Prospectus, will be correct in all material respects and will
not omit any material fact required to be stated therein or necessary in order
to make the statements therein not misleading; provided, however, that no
representation or warranty is made by such Key Shareholder with respect to
information supplied by ESI specifically for inclusion therein or relating to
and reviewed by ESI (or its representatives) without objection. Such Key
Shareholder will promptly inform ESI of the happening of any event before the
Effective Time that would render the
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information regarding such Key Shareholder provided by such Key Shareholder
incorrect in any material respect or require the amendment of the Proxy
Statement/Prospectus.
3.3 Representations and Warranties of ESI. ESI hereby represents
and warrants to Dynamotion that, except as specifically set forth in Schedule
3.3 (the "ESI Disclosure Schedule") in a numbered paragraph that corresponds to
the section for which disclosure is made:
3.3.1 Organization and Status. Each of ESI and its
subsidiaries is a corporation duly organized and validly existing under the
laws of its jurisdiction of incorporation and is duly qualified and in good
standing as a foreign corporation in each jurisdiction where the properties
owned, leased, or operated, or the business conducted, by it require such
qualification, except where the failure to so qualify or be in good standing,
when taken together with all such failures, would not have a material adverse
effect on ESI. Each of ESI and its subsidiaries has all requisite corporate
power and authority to own, operate, and lease its property and to carry on its
businesses as they are now being conducted.
3.3.2 Capitalization. ESI has authorized capital stock
consisting of 40,000,000 shares of Common Stock, without par value, of which
8,671,333 shares were outstanding on November 30, 1996 and 1,000,000 shares of
Preferred Stock, of which no shares were outstanding on November 30, 1996. All
of the outstanding shares of capital stock of ESI have been duly authorized and
are validly issued, fully paid, and nonassessable, and no shares were issued in
violation of preemptive or similar rights of any shareholder. Except under the
terms of the various ESI employee or director benefit plans, or as disclosed in
the ESI SEC Reports (defined in Section 3.3.10) there are no subscriptions,
options, warrants, rights,
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convertible securities or other agreements or commitments of any character
obligating ESI to issue any shares of capital stock.
3.3.3 Corporate Authority. ESI has the corporate power and
authority and has taken all corporate action necessary to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly authorized by the Board of Directors of ESI
and duly and validly executed and delivered by ESI. This Agreement constitutes
the valid and binding obligation of ESI, enforceable in accordance with its
terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought.
3.3.4 Control of Merger Corp Before Merger. Before the
Effective Time, ESI will be in control of Merger Corp. within the meaning of
Section 368(c) of the Code.
3.3.5 Control of Merger Corp After Merger. ESI has no plan
or intent to cause Merger Corp. to issue additional shares of its stock
following the Merger that would result in ESI losing control of Merger Corp.
within the meaning of Section 368(c) of the Code.
3.3.6 Continuation of Dynamotion's Business. ESI intends
to cause Merger Corp. to continue the historic business of Dynamotion or use a
significant portion of Dynamotion's business assets in a business following the
Merger.
3.3.7 No Plan to Reacquire Merger Consideration. ESI has
no plan or intention to reacquire any ESI Common Stock issued as Merger
Consideration.
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3.3.8 No Plan to Liquidate or Merge Merger Corp. ESI has
no plan or intention to liquidate Merger Corp., to merge Merger Corp. with and
into another corporation, to sell or otherwise dispose of the stock of Merger
Corp., or to cause Merger Corp. to sell or otherwise dispose of any of the
assets of Dynamotion transferred pursuant to the Merger, except for
dispositions made in the ordinary course of business or transfers described in
Section 368(a)(2)(C) of the Code.
3.3.9 Governmental Filings. Other than the filing of (a)
the Certificate of Merger contemplated by Article I and (b) the Registration
Statement described in Section 4.3.1, no notices, reports or other filings are
required to be made by ESI with, nor are any consents, registrations,
approvals, permits, or authorizations required to be obtained by ESI from, any
Governmental Entity in connection with the execution and delivery of this
Agreement by ESI and the consummation by ESI of the transactions contemplated
hereby.
3.3.10 ESI SEC Reports. ESI has heretofore furnished
Dynamotion with complete copies of all registration statements, reports, and
proxy statements, including amendments thereto, filed with SEC since May 31,
1993 and before the date of this Agreement (collectively, the "ESI SEC
Reports"). ESI has timely filed with the SEC all registration statements,
reports, proxy statements, and other filings required to be made by it under
applicable laws and regulations. Each of the ESI SEC Reports, at the time
filed or at the time of its effectiveness, if later, (a) did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading and (b)
complied in all respects with the applicable requirements of the Securities
Exchange Act of
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1934, as amended, the Securities Act of 1933, as amended, and the applicable
rules and regulations of the SEC thereunder. Since November 30, 1996, there
has been no material adverse change in the business, results of operations,
financial condition, properties, or assets of ESI.
3.3.11 Litigation. Except as set forth in the ESI SEC
Reports, no material litigation, proceeding, or governmental investigation is
pending or, to the knowledge of ESI, threatened against or relating to ESI, its
officers or directors in their capacities as such or any of its subsidiaries,
or their respective properties or businesses.
3.3.12 No Adverse Consequences. Neither the execution and
delivery of this Agreement by ESI nor the consummation of the transactions
contemplated by this Agreement will (a) result in the creation or imposition of
any lien, charge, encumbrance or restriction on any of the assets or properties
of ESI or any subsidiary of ESI, (b) violate any provision of the Articles of
Incorporation or Bylaws of ESI or any subsidiary of ESI, (c) violate any
statute, judgment, order, injunction, decree, rule, regulation, or ruling of
any Governmental Entity applicable to ESI or any subsidiary of ESI, or (d)
either alone or with the giving of notice or the passage of time or both,
conflict with, constitute grounds for termination of, accelerate the
performance required by, accelerate the maturity of any indebtedness or
obligation under, result in the breach of the terms, conditions, or provisions
of, or constitute a default under any mortgage, deed of trust, indenture, note,
bond, lease, license, permit, or other agreement, instrument or obligation to
which either ESI or any subsidiary of ESI is a party or by which any of them is
bound.
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3.3.13 Not Investment Companies. Neither ESI nor Merger
Corp. is an investment company as defined in Section 368(a)(2)(F)(iii) and (iv)
of the Code
3.3.14 Proxy Statement/Prospectus. The information
regarding ESI or Merger Corp. contained in the Proxy Statement/Prospectus will
be correct in all material respects and will not omit any material fact
required to be stated therein or necessary in order to make the statement
therein not misleading; provided, however, that no representation or warranty
is made hereby with respect to information contained in such Proxy
Statement/Prospectus that is furnished in writing by Dynamotion or any Key
Shareholder (or their respective representatives) expressly for use in such
Proxy Statement/Prospectus or information relating to Dynamotion or any Key
Shareholder that is reviewed by Dynamotion with the knowledge that it will be
so used and without objecting to such use. ESI will promptly inform Dynamotion
of the happening of any event before the Effective Time that would render the
information regarding ESI or Merger Corp. incorrect in any material respect or
require the amendment of the Proxy Statement/ Prospectus.
3.3.15 Brokers and Finders. Neither ESI nor any of its
subsidiaries has incurred any liability for any brokerage or investment banking
fees, commissions or finders' fees in connection with the Merger.
3.4 Representations and Warranties Relating to Merger Corp. ESI
and Merger Corp. hereby represent and warrant to Dynamotion that:
3.4.1 Organization and Status. Merger Corp. is a
corporation duly organized and validly existing under the laws of the State of
New York. Merger Corp. does not own any
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properties (other than the initial cash subscription for shares) nor has it
commenced any business or operations.
3.4.2 Capitalization. Merger Corp. has an authorized
capital stock consisting of 100 shares of Common Stock, of which 100 shares
were issued and outstanding on the date of this Agreement. All of the issued
and outstanding shares of capital stock of Merger Corp. are owned by ESI.
3.4.3 Corporate Authority. Merger Corp. has the corporate
power and authority and has taken all corporate action necessary to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The Agreement has been duly and validly authorized by the Board of Directors
and sole shareholder of Merger Corp., duly and validly executed and delivered
by Merger Corp. and constitutes the valid and binding obligation of Merger
Corp., enforceable in accordance with its terms, except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar laws affecting the enforcement of creditors' rights generally and
except that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought.
3.4.4 Governmental Filings. Other than the filing of the
Certificate of Merger contemplated by Article I, no notices, reports, or other
filings are required to be made by Merger Corp. with, nor are any consents,
registrations, approvals, permits or authorizations required to be obtained by
Merger Corp. from, any Governmental Entity in connection with the execution and
delivery of this Agreement by Merger Corp. and the consummation by Merger Corp.
of the transactions contemplated hereby.
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3.4.5 Litigation. No litigation, proceeding or
governmental investigation is pending or, to the knowledge of ESI or Merger
Corp., threatened against or relating to Merger Corp. or its officers or
directors in their capacities as such.
3.4.6 No Operations. Merger Corp. has not conducted active
operations and has no assets or liabilities other than in accordance with this
Agreement.
3.4.7 No Change of Control. Merger Corp. has no plan or
intent to issue additional shares of its stock following the Merger that would
result in ESI losing control of Merger Corp. within the meaning of Section
368(c) of the Code.
3.4.8 Continuation of Dynamotion's Business. Merger Corp.
intends to continue the historic business of Dynamotion or use a significant
portion of Dynamotion's business assets in a business following the Merger.
ARTICLE IV
COVENANTS
4.1 Mutual Covenants.
4.1.1 Consents and Approvals. Each of Dynamotion and ESI
will use all reasonable efforts to secure, and ESI will cause Merger Corp. to
use all reasonable efforts to secure, all consents, approvals, licenses, or
permits that may be required in connection with the Merger, and each will
cooperate with the other to secure all such consents, approvals, licenses, or
permits in forms reasonably satisfactory to Dynamotion and ESI.
4.1.2 Reasonable Efforts. Subject to the terms of this
Agreement, each of Dynamotion and ESI will use all reasonable efforts, and ESI
will cause Merger Corp. to use all
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reasonable efforts, to effectuate the transactions contemplated hereby and to
cause the fulfillment of the conditions to their respective obligations under
this Agreement.
4.1.3 Publicity. Except as required by law or applicable
Nasdaq or stock exchange rules, no party will issue any press releases or
otherwise make any public statements with respect to the transactions
contemplated hereby without the prior written consent of ESI and Dynamotion, in
each case not to be unreasonably withheld.
4.1.4 Confidentiality. The provisions of the
Confidentiality Agreement dated December 4, 1996 between Dynamotion and ESI
(the "Confidentiality Agreement") will apply to all "Confidential Information"
(as defined in the Confidentiality Agreement) obtained by any party pursuant to
this Agreement.
4.2 Covenants of Dynamotion.
4.2.1 Conduct of Business. From the execution of this
Agreement until the Effective Time, Dynamotion will carry on its business in
the ordinary and usual manner and will use all reasonable efforts to maintain
its existing relationships with suppliers, customers, employees, and business
associates, and will not, except as set forth on Schedule 4.2.1 or as
specifically permitted by this Agreement, without the prior written consent of
ESI (which consent will not unreasonably be withheld):
(a) amend its Certificate of Incorporation or
Bylaws except as provided in Section 4.2.6 in connection with the Conversion
Proposal;
(b) enter into any new agreements with, or amend
any plans or arrangements with respect to an increase in compensation or
benefits payable to, its officers or employees, or declare, contribute, or pay
any discretionary amount relating to compensation,
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deferred compensation, or benefits payable to its officers or employees,
including without limitation bonus, profit sharing, incentive, or ERISA Plan
contributions;
(c) split, combine, or reclassify any of the
outstanding shares of its capital stock or otherwise change its authorized
capitalization;
(d) declare, set aside, or pay any dividends
payable in cash, stock or property with respect to shares of its capital stock;
(e) issue, sell, create, pledge, dispose of, or
encumber any additional shares of its capital stock of any class, or any
securities convertible into or exchangeable for, or any options, warrants,
calls, stock appreciation or similar rights, or other commitments or rights of
any kind with respect to, any shares of its capital stock of any class or any
phantom stock other than pursuant to: (i) the exercise of Options, (ii) the
exercise of outstanding Z Warrants, (iii) the conversion of outstanding Class A
Stock, (iv) the conversion of outstanding Class B Stock; (v) the exercise of
the Class B Warrants, and/or (vi) the exercise of the Underwriters' Warrants,
in each case before the Effective Time;
(f) redeem, purchase, or otherwise acquire any
shares of its capital stock, merge into or consolidate with any other
corporation, permit any other corporation to merge into or consolidate with it,
liquidate, sell, or dispose of any of its assets (other than inventory sold in
the ordinary course of business), or close any plant or business operation;
(g) except for short-term indebtedness and
indebtedness incurred pursuant to Dynamotion's revolving credit agreement and
renewals, replacements, and amendments thereof not in excess of the current
maximum credit limit under such credit
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agreement incurred in the ordinary course of business, incur, assume, or
guarantee any indebtedness, or modify or repay any existing indebtedness;
(h) enter into any transaction, make any
commitment (whether or not subject to the approval of the Board of Directors of
Dynamotion) or modify any Contracts, except as otherwise contemplated or
permitted by this Agreement or in the ordinary course of business not exceeding
25,000 singly, or take or omit to take any action that is reasonably likely to
have a material adverse effect on the business, properties, financial
condition, or results of operations of Dynamotion;
(i) transfer, lease, license, guarantee, sell,
mortgage, pledge, or dispose of any property or assets (including without
limitation any intellectual property), encumber any property or assets, or
incur or modify any liability, other than the sale of inventory in the ordinary
course of business or liabilities incurred in the ordinary course of business
and less than $25,000 singly;
(j) authorize capital expenditures other than in
the ordinary course of business, form any subsidiary, or make any acquisition
of, or investment in, assets or stock of any other person or entity;
(k) make any tax election;
(l) permit any insurance policy naming it as a
beneficiary or a loss payable payee to be canceled, terminated, or renewed;
(m) change its method of accounting as in effect
at December 31, 1995, except as required by changes in generally accepted
accounting principles as concurred with by Dynamotion's independent auditors,
or change its fiscal year; or
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(n) authorize or enter into an agreement to do
any of the actions referred to in paragraphs (a) through (m) above.
4.2.2 Acquisition Proposals. Unless and until this
Agreement has been terminated pursuant to Section 7.1 or Section 7.2,
Dynamotion will not directly, or indirectly through any officer, director,
agent, employee, or representative, (a) encourage, initiate, or solicit, on or
after the date hereof, any inquiries or the submission of any proposals or
offers from any person relating to any merger, consolidation, sale of all or
substantially all of its assets, or similar business transaction involving
Dynamotion (each, an "Acquisition Transaction"); (b) participate in any
negotiations regarding, furnish to any other person any information with
respect to, or otherwise assist or participate in, any attempt by any third
party to propose or offer any Acquisition Transaction; (c) enter into or
execute any agreement relating to an Acquisition Transaction; or (d) make or
authorize any public statement, recommendation, or solicitation in support of
any Acquisition Transaction or any proposal or offer relating to an Acquisition
Transaction, in each case other than with respect to the Merger.
Notwithstanding the foregoing, nothing contained herein will prohibit
Dynamotion from taking the actions described above in connection with an
unsolicited third-party proposal or offer of an Acquisition Transaction if and
to the extent that (i) the Board of Directors of Dynamotion determines in good
faith, upon advice of legal counsel, that such action is required for the
directors of Dynamotion to fulfill their fiduciary duties and obligations under
New York law and (ii) before furnishing such information to or entering into
discussions or negotiations with such third party, Dynamotion provides prompt
written notice to ESI of such proposal or offer and, to the extent not
inconsistent with the fiduciary duties of Dynamotion's officers and directors,
provides
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material information concerning such proposal or offer (including proposed
terms and the identity of the person or entity making such proposal or offer)
and thereafter continues to cooperate with ESI by informing ESI of additional
material facts as they arise and furnishing to ESI any additional information
furnished in connection with such proposal or offer.
4.2.3 Investigations and Customer Visits. Dynamotion will
give ESI and its representatives and agents reasonable access to all its
premises, books, records, agreements, and files and will cause the officers of
Dynamotion to furnish ESI with such financial and operating data and other
information in its possession with respect to its business, customers, and
properties as ESI from time to time reasonably requests. Without limitation of
the foregoing, Dynamotion will permit ESI to conduct an operations review at
the plant level during which ESI will have access to the plant managers, sales
and marketing managers, finance officers, and technology, environmental, and
human resource managers of each Dynamotion operating facility, and will make
all reasonable efforts to arrange for ESI (or its representatives or agents) to
visit such Dynamotion customers as ESI may reasonably request. Any such
investigations (a) will be conducted in such a manner as not to interfere
unreasonably with the operation of Dynamotion's business or the businesses of
Dynamotion's customers; and (b) will not diminish any of the representations
and warranties contained in this Agreement.
4.2.4 Dynamotion Shareholders Meeting. Upon receipt from
ESI of a sufficient number of copies of the Proxy Statement/Prospectus relating
to this Agreement (the "Proxy Statement/Prospectus") in the form declared
effective by the SEC, Dynamotion will immediately cause to be duly called and
noticed the Special Meeting of the holders of Dynamotion Common Stock, Class A
Stock, and Class B Stock entitled to vote on the
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Conversion Proposal and the Merger (all such voting securities, the "Voting
Dynamotion Securities") to be held within 50 days (but not less than 20
business days) after such notice for the purpose of considering and approving
the Conversion Proposal, this Agreement, the Plan of Merger, and the
transactions contemplated hereby and thereby. Subject to the fiduciary duties
of the directors of Dynamotion, Dynamotion will recommend to the shareholders
of Dynamotion the approval of the Conversion Proposal, this Agreement, the Plan
of Merger, and the transactions contemplated hereby and thereby.
4.2.5 Information for Proxy Statement/Prospectus and
Registration Statement. Dynamotion will promptly provide to ESI for inclusion
in the Proxy Statement/Prospectus and in the Registration Statement described
in Section 4.3.1, in a form reasonably satisfactory to ESI, such information
concerning the Conversion Proposal, Dynamotion's operations, capitalization,
technology, and securities ownership and such other information as ESI may
reasonably request.
4.2.6 Conversion, Exercise, Redemption, or Termination of
Dynamotion Common Stock Equivalent Securities. Dynamotion will use all
reasonable efforts to cause all of the outstanding Dynamotion Common Stock
Equivalent Securities (other than the Options and the Convertible Debt) to be
converted into or exercised for shares of Dynamotion Common Stock or redeemed
or terminated before the Effective Time, including without limitation: (a)
submitting in the Proxy Statement/Prospectus a proposal to amend Dynamotion's
Certificate of Incorporation to modify the terms of the Class A Stock and Class
B Stock so as to provide for their automatic conversion into shares of
Dynamotion Common Stock immediately before the Effective Time, in accordance
with the form of Certificate of Amendment attached as Exhibit
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I (such proposal, the "Conversion Proposal"); (b) causing the proposal,
shareholder approval, and implementation of the transactions contemplated by
the Conversion Proposal: (i) to comply with its Certificate of Incorporation
and Bylaws, (ii) to comply with applicable laws and regulations (including
without limitation state and federal securities laws) or to satisfy the
requirements for exemption therefrom, and (iii) not to violate the terms of any
agreement or obligation by which Dynamotion is bound; (c) on the first business
day following shareholder approval of the Conversion Proposal delivering for
filing by the Department of State of the State of New York a Certificate of
Amendment to Dynamotion's Certificate of Incorporation substantially in the
form attached as Exhibit I (and, if necessary, using all reasonable efforts to
cause the Department of State of the State of New York to file such Certificate
of Amendment); (d) using all reasonable efforts to cause, within five business
days following the execution of this Agreement, the underwriters for the public
offering of the Class A Stock (the "Underwriters") to consent in writing to the
redemption of the Z Warrants in the manner described in this Agreement; and (e)
delivering a notice of redemption to the warrant agent for the Z Warrants (the
"Warrant Agent") and using all reasonable efforts to cause the Warrant Agent to
deliver a notice of redemption to all holders of all Z Warrants and taking such
other steps in Dynamotion's power as may be necessary or desirable to permit
all outstanding Z Warrants to be redeemed immediately after the effectiveness
of the transactions contemplated by the Conversion Proposal and immediately
before the Effective Time.
4.2.7 Compliance With Convertible Debt Obligations. Between
the execution of this Agreement and the Effective Time, Dynamotion will not
default under the terms of the Convertible Debt nor take any action or omit to
take any action that would cause the Convertible
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Debt to become entitled to convert into Dynamotion Common Stock except where
the holder of the Convertible Debt has signed a written agreement not to
convert until at least 10 business days after the Effective Time or until this
Agreement has been terminated, whichever occurs first.
4.2.8 Consents. Dynamotion will use all reasonable efforts
to obtain, on or before the Closing Date and without modification of the rights
or obligations of Dynamotion, all necessary consents of Governmental Entities
with respect to the Permits listed on Schedule 3.1.21(b) and all necessary
consents with respect to the Contracts as listed on Schedule 3.1.19.
4.3 Covenants of ESI.
4.3.1 Registration Statement. ESI, with Dynamotion's
cooperation, will promptly file with the SEC a Registration Statement on Form
S-4 (including the Proxy Statement/Prospectus) for the purposes of (a)
registering the sale of the shares of ESI Common Stock that the holders of
shares of Dynamotion Common Stock will be entitled to receive pursuant to
Section 1.3 of this Agreement, and (b) soliciting Dynamotion shareholder
approval of the Conversion Proposal and the Merger, and ESI, with Dynamotion's
cooperation, will use all reasonable efforts to cause such Registration
Statement to be declared effective as promptly as practicable.
4.3.2 Listing of ESI Common Stock. Before the Effective
Time, ESI will list the shares of ESI Common Stock that the holders of shares
of Dynamotion Common Stock will be entitled to receive pursuant to the
provisions of this Agreement on the Nasdaq National Market System.
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4.3.3 Issuance of Certificates. After the Effective Time,
ESI will issue and deliver, or will cause to be issued and delivered, in
accordance with the provisions of this Agreement, stock certificates
representing the number of shares of ESI Common Stock to be issued in the
Merger.
4.3.4 Registration and Reservation of Option Shares. ESI
will cause the shares of ESI Common Stock issuable upon exercise of the Options
in accordance with Section 1.3.3 to be issued pursuant to a then-effective
Registration Statement or otherwise to be registered after the Closing Date on
a Registration Statement on Form S-8 to be filed no later than 30 days after
the Closing Date. In addition, from and after the Effective Time, ESI will
reserve and make available and will keep reserved and available for so long as
any Option remains outstanding such number of shares of ESI Common Stock as are
issuable upon the exercise of all outstanding Options.
4.3.5 Indemnification Provisions of Merger Corp.'s
Certificate. ESI will cause the Certificate of Incorporation of Merger Corp.
(the "Merger Corp. Certificate") to include provisions for the indemnification
of Dynamotion's current and former officers and directors to the fullest extent
permitted by the NYBCL, and will not, for a period of five years following the
Effective Time, cause the removal of any such provision in the Merger Corp.
Certificate or permit any such provision to be materially and adversely
modified or amended.
4.4 Covenants of Merger Corp. Merger Corp, except as is
contemplated by this Agreement, will not, before the Effective Time, (a) engage
in any business activities, (b) liquidate or merge into, or consolidate with
any other corporation, (c) permit any other corporation to merge into or
consolidate with it, (d) increase its authorized capital stock, or
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(e) issue options, rights, or warrants to purchase any of its capital stock.
In addition, for a period of five years following the Effective Time, Merger
Corp. will not amend the Merger Corp. Certificate to remove any provision
relating to indemnification of Dynamotion's current or former officers and
directors or materially and adversely modify or amend any such provision.
ARTICLE V
CONDITIONS
5.1 Conditions to the Obligations of All Parties. The obligations
of Dynamotion, ESI and Merger Corp. to consummate the transactions contemplated
by this Agreement are subject to the fulfillment at or before the Closing of
each of the following conditions:
5.1.1 Regulatory Approvals. The parties will have made all
filings with and received all approvals of Governmental Entities of competent
jurisdiction necessary to consummate the Merger, and each of such approvals
will be in full force and effect at the Closing and not subject to any
condition that requires the taking or refraining from taking of any action that
would have a material adverse effect on Dynamotion or on ESI or its
subsidiaries.
5.1.2 Litigation. There will not be in effect any final
order, decree, or injunction of any Governmental Entity of competent
jurisdiction restraining, enjoining, or prohibiting the consummation of the
transactions contemplated by this Agreement (each party agreeing to use its
best efforts, including appeals to higher courts, to have any non-final,
appealable order, decree, or injunction of such import set aside or lifted),
and there will have been no action taken, and no statute, rule, or regulation
enacted, by any state or federal
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government or Governmental Entity in the United States that would prevent the
consummation of the Merger.
5.1.3 Registration of Securities; Listing. The shares of
ESI Common Stock to be issued pursuant to this Agreement will have been
registered under the Securities Act of 1933, as amended, and under the
securities laws of such states as counsel for ESI deems necessary or exemptions
from such state registration or qualification will have been determined by such
counsel to be available, and will have been listed on the Nasdaq National
Market System.
5.2 Conditions to the Obligations of Dynamotion and the Key
Shareholders. The obligations of Dynamotion and the Key Shareholders to
consummate the transactions contemplated by this Agreement are subject to the
fulfillment at or before the Closing of each of the following conditions:
5.2.1 Representations, Warranties and Covenants. The
representations and warranties of ESI and Merger Corp. contained in this
Agreement will be correct (a) at the date of this Agreement and (b) as of the
Closing, with the same effect as though made on and as of such date, except for
(i) representations and warranties made as of a specific date, which
representations and warranties need only be correct as of such date and (ii)
changes specifically contemplated by this Agreement, and ESI and Merger Corp.
will have performed all of their respective covenants and obligations hereunder
to be performed as of the Closing. Dynamotion will have received at the
Closing certificates to the foregoing effect, dated the Closing Date, and
executed on behalf of ESI by an officer of ESI and on behalf of Merger Corp. by
an officer of Merger Corp. For purposes of affirming the accuracy of the
representations and warranties of
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ESI made as of the Closing, the term "ESI SEC Reports" will be deemed to
include all registration statements, reports and proxy statements, including
all amendments thereto, filed by ESI with the SEC after the date of this
Agreement and before Closing.
5.2.2 No Material Adverse Change. Since November 30, 1996
there will have been no material adverse change, or discovery of a condition or
occurrence of an event that has resulted or reasonably can be expected to
result in a material adverse change, in the business, properties, financial
condition, or results of operations of ESI and its subsidiaries taken as a
whole.
5.2.3 Opinion of Counsel. Dynamotion will have received
from Stoel Rives LLP, counsel to ESI, an opinion dated the Closing Date with
respect to the matters described in Exhibit J.
5.2.4 Dynamotion Shareholder Approval, Etc. In accordance
with the applicable provisions of the NYBCL and the Certificate of
Incorporation and Bylaws of Dynamotion, the requisite percentages of the Voting
Dynamotion Securities will have approved the Conversion Proposal, this
Agreement, the Plan of Merger, and the transactions contemplated hereby and
thereby, and amendments of Dynamotion's Certificate of Incorporation will have
been filed by the Department of State of the State of New York effecting the
Conversion Proposal on or before the day immediately preceding the Closing
Date; provided, however, that Dynamotion may rely on this condition to avoid
its obligation to consummate the Merger and the other transactions contemplated
by this Agreement only if Dynamotion has used its best efforts to satisfy all
of the conditions contained in this Section 5.2.4.
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5.2.5 Termination of Underwriters' Warrants. The
Underwriters' Warrants will have been terminated; provided, however, that
Dynamotion may rely on this condition to avoid its obligation to consummate the
Merger and the other transactions contemplated by this Agreement only if
Dynamotion has used its best efforts to cause the termination of the
Underwriter' Warrants.
5.3 Conditions to the Obligations of ESI and Merger Corp. The
obligations of ESI and Merger Corp. to consummate the transactions contemplated
by this Agreement are subject to the fulfillment at or before the Closing of
each of the following conditions:
5.3.1 Representations, Warranties and Covenants. The
representations and warranties of Dynamotion and the Key Shareholders contained
in this Agreement will be correct (a) at the date of this Agreement and (b) as
of the Closing, with the same effect as though made on and as of such date,
except for (i) representations and warranties made as of a specific date which
representations and warranties need only be correct as of such date and (ii)
changes specifically contemplated by this Agreement, and each of Dynamotion and
each Key Shareholder will have performed in all material respects all of its,
his, or her respective covenants and obligations hereunder to be performed as
of the Closing. ESI will have received at the Closing a certificate to the
foregoing effect, dated the Closing Date and executed on behalf of Dynamotion
by an officer of Dynamotion with respect to Dynamotion's representations,
warranties, and covenants, and certificates dated the Closing Date and executed
by or on behalf of each of the Key Shareholders concerning the Key
Shareholders' representations, warranties, and covenants. For purposes of
affirming the accuracy of the representations and warranties of Dynamotion made
as of the Closing, the term "Dynamotion SEC Reports" will be deemed to
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include all registration statements, reports and proxy statements, including
all amendments thereto, filed by Dynamotion with the SEC after the date of this
Agreement and before Closing.
5.3.2 Opinions of Counsel. ESI will have received from
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP, counsel to Dynamotion, an opinion dated
the Closing Date with respect to the matters described in Exhibit K with
respect to Dynamotion and the Key Shareholder specified in Exhibit K and from
Xxxxxxxxxxx & Xxxxxxxx LLP, counsel to Dynamotion Investment L.L.C., an opinion
dated the Closing Date with respect to the matters described in Exhibit L with
respect to Dynamotion Investment L.L.C.
5.3.3 Consents and Approvals. All nongovernmental consents
and approvals required to be obtained by Dynamotion for consummation of the
Merger will have been obtained, other than those that, if not obtained, would
not, either singly or in the aggregate, have a material adverse effect on
Dynamotion.
5.3.4 No Material Adverse Change. Since September 30, 1996
there will have been no material adverse change, or discovery of a condition or
occurrence of an event that has resulted or reasonably can be expected to
result in a material adverse change, in the business, properties, financial
condition, or results of operations of Dynamotion.
5.3.5 Other Agreements. Dynamotion will have caused each
of its employees located in California to sign a California ESI Confidentiality
Agreement, and each other employee of Dynamotion to sign a Standard ESI
Confidentiality Agreement, and will have delivered such executed agreements to
ESI; the Escrow Agreement and related stock powers will have been executed and
delivered by the parties thereto other than ESI or Merger Corp; the
Noncompetition Agreement will have been executed and delivered by each party
listed on
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Schedule 2.3; the Standstill Agreement will have been executed and delivered by
the parties thereto other than ESI or Merger Corp; an Affiliate Representation
Letter will have been executed and delivered by each party listed on Schedule
2.5; all Class B Warrants will have been exercised before the record date for
the Special Meeting; the Class B Additional Warrant Agreement will have been
terminated; and all Underwriters' Warrants will have been terminated.
5.3.6 Related Party and Other Agreements. All agreements
or arrangements described on Schedule 3.1.23 (Related Parties) and any other
agreements or arrangements listed on Schedule 5.3.6 will have been terminated
or amended to the reasonable satisfaction of ESI, if so requested by ESI.
5.3.7 Updated Financial and Other Information. ESI will
have received (a) the unaudited balance sheet of Dynamotion and the related
statements of operations, shareholders' equity, and cash flows for the fiscal
year ended December 31, 1996 (together, the "Updated Financial Statements"),
and (b) schedules of accounts and notes receivable (including an aging
analysis), liability accounts, inventories (organized by category), and backlog
(by customer and product), in each case as of immediately before the Closing
Date and accompanied by an officer's certificate as to accuracy and
completeness of such statement or schedule, and the Updated Financial
Statements will not indicate that there has been any material adverse change in
the financial condition or operating results of Dynamotion since September 30,
1996.
5.3.8 Environmental Report. ESI will have received a
Phase I environmental audit report with respect to the Leased Real Property,
prepared by an environmental audit firm selected by ESI, the results of which
audit are satisfactory to ESI in its sole discretion.
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5.3.9 Dynamotion Shareholder Approval, Etc. In accordance
with applicable provisions of the NYBCL, the Certificate of Incorporation and
Bylaws of Dynamotion, and any applicable state or federal securities laws, the
requisite percentages of the Voting Dynamotion Securities will have approved
the Conversion Proposal, this Agreement, the Plan of Merger, and the
transactions contemplated hereby and thereby, and amendments to Dynamotion's
Certificate of Incorporation will have been filed by the Department of State of
the State of New York effecting the Conversion Proposal on or before the day
immediately preceding the Closing Date. ESI and Merger Corp. will have
received a certificate dated the Closing Date and executed by an authorized
officer of Dynamotion stating that this Agreement and the transactions
contemplated by it have been duly and validly approved by the shareholders of
Dynamotion.
5.3.10 Dynamotion Dissenters. Not more than 20 percent of
the Voting Dynamotion Securities will have qualified as dissenting shares
pursuant to the NYBCL.
5.3.11 Conditions Relating to Z Warrants and Convertible
Debt. The Z Warrants will have been redeemed immediately following the
effectiveness of the conversion contemplated by the Conversion Proposal and
immediately before the Effective Time. There will be no default by Dynamotion
under the terms of the Convertible Debt, and the holders of the Convertible
Debt will not have become entitled to convert the Convertible Debt into shares
of Dynamotion Common Stock or such holders will have agreed in writing to waive
such right to convert until at least 10 business days after the Effective Time
or until this Agreement has been terminated, whichever occurs first.
5.3.12 Xxxxxx Xxxxxxxx LLP Analysis of In-Process Research
and Development. ESI will have received from Xxxxxx Xxxxxxxx LLP a written
opinion that the
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value of Dynamotion in-process research and development as of the Closing Date
is not less than the amount stated on Schedule 5.3.12.
5.3.13 Consent of Underwriters. The Underwriters will,
within five business days after the execution of this Agreement, have consented
in writing to the redemption of the Z Warrants in the manner described in this
Agreement.
5.3.14 Governmental Entity Consents. Dynamotion will have
obtained, without modification of the rights or obligations of Dynamotion under
any of the listed Permits, all necessary consents of Governmental Entities with
respect to the Permits listed on Schedule 3.1.21(b).
5.3.15 Dynamotion Revised Schedules. All schedules to this
Agreement relating to Dynamotion's representations and warranties will have
been revised as necessary as of the Closing Date, and such revised schedules
are satisfactory to ESI in its sole discretion.
ARTICLE VI
SURVIVAL AND INDEMNIFICATION
6.1 Survival.
6.1.1 Survival of Representations and Warranties. All
representations and warranties of any party contained in this Agreement or in
any agreement, document, or instrument delivered pursuant to or in connection
with this Agreement will survive the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, but will be
extinguished and be of no further force or effect 18 months after the Effective
Time, except that any claim for which a Claim Notice (as defined in Section
6.5.1) is delivered pursuant to Section 6.5.1 before the 18-month survival
period has elapsed will survive until the
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settlement or other final resolution of such claim. No Claim Notice will be
effective if delivered after the time period specified in this Section 6.1.1.
6.1.2 Survival of Article IV Covenants. All of the
covenants of any party contained in Article IV of this Agreement will be
extinguished and be of no further force or effect after the Effective Time,
except that Sections 4.1.4, 4.3.3, 4.3.4, 4.3.5, and 4.4 will survive the
Effective Time in accordance with their respective terms.
6.2 Indemnification. (a) From and after the Effective Time and
subject to the limitations of this Article VI, the Key Shareholders will,
severally and not jointly, and only to the extent of the Escrowed Property,
indemnify and hold harmless ESI and Merger Corp. and their respective
officers, directors, and shareholders (collectively, the "Indemnified Parties")
from, for, and against any losses, costs, expenses, damages, and liabilities,
including reasonable attorneys' fees (collectively, "Damages"), incurred by an
Indemnified Party by reason of or arising out of any inaccuracy in any
representation or warranty or the breach of any covenant of Dynamotion made in
this Agreement (after taking into account any revised schedule provided
pursuant to Section 5.3.15); provided, however, that for the purposes of this
Section 6.2, the determination of whether there has been a breach of any of
Dynamotion's representations and warranties contained in (i) Section 3.1.28
will be made without regard to any disclosures contained in Schedule 3.1.28(a)
(except as noted otherwise on such schedule) and (ii) Section 3.1.25 will be
made without regard to any disclosures contained in Schedule 3.1.25.2. (b)
From and after the Effective Time and subject to the limitations of this
Article VI, each Key Shareholder will, severally and not jointly, and only to
the extent of his, her, or its Escrowed Property, indemnify and hold harmless
each Indemnified Party from, for,
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and against any Damages incurred by such Indemnified Party by reason of or
arising out of any inaccuracy in any representation or warranty or the breach
of any covenant of such Key Shareholder made in this Agreement.
6.3 Escrow. On the Closing Date, ESI will, on behalf of each of
the Key Shareholders, deliver to the Escrow Agent an aggregate of $1,500,000
worth of the shares of ESI Common Stock to be received by the Key Shareholders
pursuant to Section 1.3 (such deposited shares, the "Escrowed Property"). The
shares to be delivered to the Escrow Agent on behalf of each Key Shareholder
will be withheld from the shares of ESI Common Stock otherwise to be received
by such Key Shareholder pursuant to Section 1.3 in the amounts set forth on
Schedule 6.3. The Escrowed Property will be deposited with the Escrow Agent
pursuant to the terms of the Escrow Agreement. The escrow and the Escrow
Agreement will terminate and the Escrowed Property will be distributed to the
Key Shareholders at the time and as provided for in the Escrow Agreement.
6.4 Threshold for Indemnity Claims. No indemnification payment
obligation will arise under this Article VI unless and until the aggregate
amount of Damages claimed by all Indemnified Parties under this Article VI
exceeds $275,000 (the "Claim Threshold"); provided, however, that once the
Claim Threshold is exceeded, all Damages of the Indemnified Parties, including
the first $275,000 (in the aggregate) of Damages claimed by the Indemnified
Partes, will be subject to the indemnity provisions of this Article VI.
6.5 Claim Procedure for Indemnification. The obligations and
liabilities of the Key Shareholders in connection with claims for
indemnification for Damages by an Indemnified Party will be subject to the
following terms and conditions:
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6.5.1 Notice. The Indemnified Party must give written
notice (a "Claim Notice") to the Key Shareholder Representatives and the Escrow
Agent of its claim for indemnification as promptly as practicable whenever the
Indemnified Party has determined that there are facts or circumstances that may
entitle the Indemnified Party to indemnification under this Article VI;
provided, however, that the failure to give a timely Claim Notice (so long as
such Claim Notice is within the time period specified in Section 6.1.1) will
not diminish the indemnification obligations hereunder except to the extent
that the delay in giving such Claim Notice materially adversely affects the
ability of the Key Shareholder Representatives to mitigate Damages with respect
to any claim. The Claim Notice must set forth in reasonable detail the basis
for the claim, the nature of the Damages and the amount thereof, to the extent
known.
6.5.2 Response to Third Party Claim. If the Claim Notice
states that a claim has been asserted by a third party against the Indemnified
Party (a "Third Party Claim"), ESI will undertake, conduct, and control,
through counsel of its choosing, the good faith settlement or defense of the
Third Party Claim and the Key Shareholder Representatives will provide such
assistance as is reasonably requested by ESI in connection with such settlement
or defense.
6.5.3 Diligent Conduct. If, within five days after receipt
by ESI from the Key Shareholder Representatives of written notice that ESI is
not diligently conducting the defense or attempted settlement of any Third
Party Claim in good faith, ESI does not provide reasonably sufficient evidence
to the Key Shareholder Representatives that ESI is diligently conducting such
defense or attempting such settlement in good faith, the Key Shareholder
Representatives will thereafter have the right to contest, settle or compromise
such Third Party Claim.
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ARTICLE VII
TERMINATION
7.1 Termination by Mutual Consent. This Agreement may be
terminated and the Merger may be abandoned at any time before the Effective
Time by the mutual consent of Dynamotion and ESI.
7.2 Termination Under Certain Other Conditions.
7.2.1 Automatic Termination. This Agreement will
automatically terminate without any action by ESI, Dynamotion, Merger Corp., or
the Key Shareholders if the Merger has not become effective on or before June
15, 1997, provided, however, that automatic termination of this Agreement
pursuant to this Section 7.2.1 will not limit the liability of any party whose
breach of this Agreement has been the cause of, or resulted in, the failure of
the Merger to occur on or before such date.
7.2.2 Termination by ESI or Dynamotion. This Agreement may
be terminated and the Merger may be abandoned at any time before the Effective
Time:
(a) by ESI or Dynamotion if any Governmental Entity of
competent jurisdiction in the United States or any state has issued an order,
judgment, or decree restraining, enjoining, or otherwise prohibiting the Merger
and such order, judgment, or decree has become final and nonappealable;
(b) by ESI or Dynamotion if the requisite approval of the
Merger by the shareholders of Dynamotion has not been obtained by May 31, 1997;
(c) by ESI if the Dynamotion Board of Directors has
withdrawn or modified in a manner adverse to ESI its approval of the Merger,
this Agreement or the transactions
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contemplated hereby or if Dynamotion or any officer, director, employee, agent,
or representative of Dynamotion takes any action that violates any provision of
Section 4.2.2; or
(d) by Dynamotion if the Dynamotion Board of Directors
determines in good faith, upon advice of legal counsel, that termination of
this Agreement is required for the directors of Dynamotion to fulfill their
fiduciary duties and obligations under New York law.
7.3 Effect of Termination and Abandonment. In the event of
termination of this Agreement and abandonment of the Merger pursuant to this
Article VII, this Agreement immediately will become void and of no effect,
except that Sections 4.1.4, 7.4, 8.1, 8.11, and 8.12 will survive the event of
termination.
7.4 Termination Fee. Dynamotion agrees to pay ESI (provided that
Dynamotion's termination of this Agreement has not resulted from the failure of
any of the conditions to the obligations of Dynamotion and the Key Shareholders
contained in Section 5.2) by wire transfer, the sum of $1,000,000 (the
"Termination Fee") in immediately available funds if Dynamotion terminates this
Agreement (other than pursuant to Section 7.2.2(a)) and within one year after
termination of this Agreement agrees to an Acquisition Transaction with any
person other than ESI or any of its affiliates and the Acquisition Transaction
results in a change in the beneficial owners of more than fifty percent (50%)
of the voting power of the capital stock of Dynamotion. Dynamotion will pay
ESI the Termination Fee promptly upon Dynamotion's execution of an agreement
relating to any such Acquisition Transaction.
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ARTICLE VIII
MISCELLANEOUS AND GENERAL
8.1 Payment of Expenses. Each party will be responsible for the
costs and expenses incurred by it in connection with this Agreement, the
Merger, and the other transactions contemplated by this Agreement, provided
that nothing in this Agreement will limit the right, if any, of a non-breaching
party to obtain damages, including attorneys' fees, incurred as a result of a
breach of this Agreement by another party.
8.2 Entire Agreement. This Agreement, including the schedules and
exhibits hereto, and the Confidentiality Agreement constitute the entire
agreement between the parties hereto and supersede all prior agreements and
understandings, oral and written, among the parties hereto with respect to its
subject matter.
8.3 Assignment. This Agreement is not assignable by any of the
parties hereto without the prior written consent of each of ESI and Dynamotion.
8.4 Binding Effect; No Third Party Benefit. This Agreement will
inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns, subject to the restrictions on assignment
contained in Section 8.3. Nothing express or implied in this Agreement is
intended or will be construed to confer upon or give to a person, firm, or
corporation other than the parties hereto any rights or remedies under or by
reason of this Agreement or any transaction contemplated hereby, except for the
provisions of Sections 4.3.5 and 4.4 concerning indemnification of current and
former officers and directors of Dynamotion under the Merger Corp. Certificate.
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8.5 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified, and supplemented at any time before or at
the Closing, whether before or after the vote of the shareholders of
Dynamotion, by written agreement executed and delivered by each of the Key
Shareholders and by the duly authorized officers of Dynamotion, ESI, and Merger
Corp.
8.6 Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law; provided, however, that any waiver by a party must be in
writing.
8.7 Counterparts. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts will
together constitute the same agreement.
8.8 Captions. The article, section and paragraph captions used in
this Agreement are for convenience of reference only, do not constitute a part
of this Agreement and will not be deemed to limit or otherwise affect any of
the provisions hereof.
8.9 Subsidiary. When a reference is made in this Agreement to a
subsidiary of a party, the term "subsidiary" means any corporation or other
organization, whether incorporated or unincorporated, of which at least a
majority of the securities or interests having by the terms thereof ordinary
voting power to elect a majority of the board of directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such party or by any one or more
of its subsidiaries, or by such party and one or more of its subsidiaries.
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8.10 Notices. All notices, requests, demands, waivers, and other
communications required or permitted to be given under this Agreement must be
in writing and will be deemed to have been duly given if delivered personally
or mailed, certified or registered mail with postage prepaid, return receipt
requested, or sent by telex, telegram, or facsimile (in each case with evidence
of confirmed transmission) as follows:
If to Dynamotion, to it at:
0000 X. Xxxxxxx Xxxxxx
Xxxxx Xxx, XX 00000
Attention: President and Chief
Executive Officer
Fax: (000) 000-0000
with copies to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxx Xxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxx
Fax: (000) 000-0000
If to ESI or Merger Corp., to it at:
00000 XX Xxxxxxx Xxxx Xxxxx
Xxxxxxxx, Xxxxxx 00000
Attention: President and Chief
Executive Officer
Fax: (000) 000-0000
with copies to:
Stoel Rives LLP
000 XX Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Fax: (000) 000-0000
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If to the Key Shareholders, to the "Key Shareholder Representatives,"
who are listed on Schedule 8.10, at the address specified for each Key
Shareholder Representative on Schedule 8.10. Each Key Shareholder hereby
appoints each of the Key Shareholder Representatives listed on Schedule 8.10 as
his, her, or its agent for the purpose of receiving notices and other
communications relating to this Agreement and the Escrow Agreement.
Any party may change the person or address for notices under this
Agreement by notifying all other parties in writing of such change. All
notices, requests, demands, waivers, and communications relating to this
Agreement will be deemed to have been received on the date of delivery or on
the third business day after mailing in accordance with this Section 8.10.
8.11 Choice of Law. This Agreement will be governed by and
construed in accordance with the laws of the state of Oregon, exclusive of
choice of law rules, except that the provisions of this Agreement relating to
the Merger will also be governed by the merger provisions of the NYBCL.
8.12 Attorneys' Fees. If suit or action is filed by any party to
enforce the provisions of this Agreement or otherwise with respect to the
subject matter of this Agreement, the prevailing party will be entitled to
recover reasonable attorneys' fees as fixed by final order of the trial court
and, if any appeal is taken from the decision of the trial court, reasonable
attorneys' fees as fixed by final order of the appellate court.
8.13 Separability. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction will, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
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provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, such provision will be
interpreted to be only so broad as is enforceable.
8.14 Reliance on Dynamotion and Key Shareholder Representations and
Warranties. Dynamotion and each Key Shareholder recognizes and agrees that,
notwithstanding any investigation by ESI, ESI is relying upon the
representations and warranties made by Dynamotion in this Agreement and upon
the representations and warranties made by the Key Shareholders in this
Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first hereinabove written.
KEY SHAREHOLDERS ELECTRO SCIENTIFIC INDUSTRIES, INC.
DYNAMOTION INVESTMENT L.L.C.
By: /s/ XXXXX X. XXXXXX
-----------------------------------
Name: Xxxxx X. Xxxxxx
/s/ XXXXX X. XXXXXXXXX Title: Senior Vice President and
----------------------------------- Chief Financial Officer
Name: Xxxxx X. Xxxxxxxxx
Title: Manager
DYNAMOTION/ATI CORP.
/s/ XXXXXXXX XXXXXXXXX By: /s/ XXX X. XXXXXX
----------------------------------- -----------------------------------
Xxxxxxxx Xxxxxxxxx Name: Xxx X. Xxxxxx
Title: President and Chief
Executive Officer
ROYAL MILES DYNAMOTION MERGER CORP.
By: /s/ XXXX XXXXX By: /s/ XXXXX X. XXXXXX
----------------------------------- -----------------------------------
Name: Xxxx Xxxx Name: Xxxxx X. Xxxxxx
Title: US Rep. for Royal Title: Chief Financial Officer
Miles Ltd.
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/s/ XXXXXX X. XXXXXX
------------------------------
Xxxxxx X. Xxxxxx
/s/ XXXXXXX XXXXXX
------------------------------
Xxxxxxx Xxxxxx
/s/ XXXXXX XXXXXXX
------------------------------
Xxxxxx Xxxxxxx
/s/ XXXXXXX X. XXXXXX, TRUSTEE
------------------------------
Xxxxxxx X. Xxxxxx, Trustee
/s/ XXX XXXXXX
------------------------------
Xxx Xxxxxx
/s/ XXXXX X. XXXXXX
------------------------------
Xxxxx X. Xxxxxx
/s/ XXXXXXX XXXX
------------------------------
Xxxxxxx Xxxx
/s/ XXXXX XXXXXXX
------------------------------
Xxxxx Xxxxxxx
/s/ XXXXXX XXXXX
------------------------------
Xxxxxx Xxxxx
/s/ XXXXXX XXXXXXX
------------------------------
Xxxxxx Xxxxxxx
/s/ XXXXXXX XXXX
------------------------------
Xxxxxxx Xxxx
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/s/ XXXXX X. XXXXXX
------------------------------
Xxxxx X. Xxxxxx
/s/ XXXXX XXXXXX
------------------------------
Xxxxx Xxxxxx
/s/ XXXXXXXX XXX
------------------------------
Xxxxxxxx Xxx
/s/ XXXX XXXXXX
------------------------------
Xxxx Xxxxxx
/s/ XXXXX X. XXXXX/XXXXXX
------------------------------
Xxxxx X. Xxxxx/Xxxxxx
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