EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MICROFIELD GROUP, INC.
AND
CTS ACQUISITION CO.
AND
XXXXXXXXXXX TECHNOLOGY SERVICES, INC.
AND
XXXXXXXXXXX GROUP, LLC
DATED AS OF SEPTEMBER 15, 2003
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TABLE OF CONTENTS
Article 1 Definitions........................................................................ 1
Article 2 The Merger......................................................................... 5
2.1 The Merger............................................................................ 5
2.2 Effective Time........................................................................ 5
2.3 Articles of Incorporation of Surviving Corporation.................................... 6
2.4 Bylaws of Surviving Corporation....................................................... 6
2.5 Directors and Officers of Surviving Corporation....................................... 6
2.6 Conversion of CTS Stock............................................................... 6
2.7 Indemnification Escrow................................................................ 7
2.8 Procedure for Payment................................................................. 7
2.9 Unregistered Shares................................................................... 7
2.10 Stock Certificate Legends............................................................. 7
2.11 Appointment of Representative......................................................... 8
2.12 Registration Rights................................................................... 8
2.13 Reserved.............................................................................. 8
Article 3 Representations and Warranties of CTS and CTS Shareholder.......................... 9
3.1 Organization.......................................................................... 9
3.2 Capitalization........................................................................ 9
3.3 Subsidiaries.......................................................................... 9
3.4 Authorization; Binding Agreement...................................................... 9
3.5 Governmental Approvals................................................................ 9
3.6 No Violations......................................................................... 10
3.7 CTS Financial Statements.............................................................. 10
3.8 Absence of Certain Changes or Events.................................................. 10
3.9 No Undisclosed Liabilities............................................................ 10
3.10 Compliance with Laws.................................................................. 11
3.11 Permits............................................................................... 11
3.12 Litigation............................................................................ 11
3.13 Contracts............................................................................. 11
3.14 Employee Benefit Plans................................................................ 11
3.15 Taxes and Tax Returns................................................................. 14
3.16 Intellectual Property................................................................. 15
3.17 Employee and Labor Matters............................................................ 16
3.18 Limitation on Business Conduct........................................................ 16
3.19 Title to Property..................................................................... 16
3.20 Owned and Leased Premises............................................................. 17
3.21 Environmental Matters................................................................. 17
3.22 Insurance............................................................................. 18
3.23 Product Liability and Recalls......................................................... 18
3.24 Customers............................................................................. 18
3.25 Interested Party Transactions......................................................... 19
3.26 Full Disclosure....................................................................... 19
Article 4 Representations and Warranties of Microfield and Merger Sub........................ 19
4.1 Organization and Good Standing........................................................ 19
1-TABLE OF CONTENTS
4.2 Capitalization........................................................................ 19
4.3 Subsidiaries.......................................................................... 19
4.4 Authorization; Binding Agreement...................................................... 19
4.5 Governmental Approvals................................................................ 20
4.6 No Violations......................................................................... 20
4.7 Litigation............................................................................ 20
4.8 SEC Reports and Financial Statements.................................................. 20
4.9 No Undisclosed Liabilities............................................................ 21
4.10 Taxes and Tax Returns................................................................. 21
4.11 Compliance with Laws.................................................................. 21
4.12 Permits............................................................................... 21
4.13 Contracts............................................................................. 22
4.14 Employee Benefit Plans................................................................ 22
4.15 Intellectual Property................................................................. 24
4.16 Employee and Labor Matters............................................................ 25
4.17 Title to Property..................................................................... 25
4.18 Owned and Leased Premises............................................................. 25
4.19 Environmental Matters................................................................. 25
4.20 Insurance............................................................................. 26
4.21 Full Disclosure....................................................................... 26
4.22 No Prior Activities................................................................... 26
Article 5 Additional Covenants of CTS........................................................ 27
5.1 Conduct of Business of CTS............................................................ 27
5.2 Notification of Certain Matters....................................................... 28
5.3 Access and Information................................................................ 29
5.4 Shareholder Approval.................................................................. 29
5.5 Reasonable Best Efforts............................................................... 29
5.6 Public Announcements.................................................................. 29
5.7 Compliance............................................................................ 29
5.8 CTS Shareholder Approval.............................................................. 29
Article 6 Additional Covenants of Microfield and Merger Sub.................................. 30
6.1 Conduct of Business of Microfield..................................................... 30
6.2 Notification of Certain Matters....................................................... 31
6.3 Access and Information................................................................ 32
6.4 Reasonable Best Efforts............................................................... 32
6.5 Public Announcements.................................................................. 32
6.6 Compliance............................................................................ 32
Article 7 Survival; Indemnification.......................................................... 32
7.1 Survival.............................................................................. 32
7.2 Indemnification by the CTS Shareholder................................................ 33
7.3 Indemnification by Microfield......................................................... 33
7.4 Limits on Indemnification............................................................. 33
7.5 Indemnification Procedure............................................................. 35
7.6 Payment with Microfield Common Stock.................................................. 36
Article 8 Conditions Precedent............................................................... 36
8.1 Merger Conditions..................................................................... 36
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8.2 Conditions Precedent to the Obligations of Microfield and Merger Sub.................. 37
8.3 Conditions Precedent to the Obligations of CTS........................................ 38
Article 9 Termination and Abandonment........................................................ 39
9.1 Termination........................................................................... 39
9.2 Effect of Termination and Abandonment................................................. 40
Article 10 Miscellaneous................................................................... 40
10.1 Confidentiality....................................................................... 40
10.2 Amendment and Modification............................................................ 41
10.3 Waiver of Compliance; Consents........................................................ 41
10.4 Survival.............................................................................. 41
10.5 Notices............................................................................... 42
10.6 Binding Effect; Assignment............................................................ 42
10.7 Fees and Expenses..................................................................... 42
10.8 Governing Law......................................................................... 43
10.9 Counterparts.......................................................................... 43
10.10 Interpretation..................................................................... 43
10.11 Entire Agreement................................................................... 43
10.12 Severability....................................................................... 43
10.13 Specific Performance............................................................... 43
10.14 Third Parties...................................................................... 43
10.15 Disclosure Schedules............................................................... 43
3-TABLE OF CONTENTS
LIST OF SCHEDULES
SCHEDULE: CONTAINS:
3.2 CTS capitalization
3.8 CTS material changes
3.9 CTS liabilities
3.11 CTS permits
3.13 CTS contracts
3.14(a) CTS employee benefit plans
3.14(c) CTS current and former employees with stock rights, options and restrictions
3.14(d) CTS employment agreements
3.14(e) CTS employee stock ownership plan
3.14(f) CTS employee stock ownership plan for non-U.S. employees
3.15 CTS tax claims or assessments
3.16(a) CTS intellectual property
3.17(a) CTS employees
3.19 CTS property and assets
3.21 CTS environmental matters
3.22 CTS insurance
3.23 CTS product liability and recalls
3.24 CTS 10 largest customers
3.25 CTS interested party transactions
4.7 Microfield litigation
4.12 Microfield permits
4.13 Microfield material contracts
4.14(a) Microfield employee benefit plans
4.14(c) Microfield current and former employees with stock rights, options and
restrictions
4.14(d) Microfield employment agreements
4.14(e) Microfield employee stock ownership plan
4.14(f) Microfield employee stock ownership plan for non-U.S. employees
4.15(a) Microfield intellectual property
4.16(a) Microfield employees
4.17 Microfield property and assets
4.19 Microfield environmental matters
4.20 Microfield insurance
1-LIST OF SCHEDULES
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made as of September 15, 2003 by
and among MICROFIELD GROUP, INC., an Oregon corporation, CTS ACQUISITION CO., an
Oregon corporation, XXXXXXXXXXX TECHNOLOGY SERVICES, INC., an Oregon
corporation, and XXXXXXXXXXX GROUP LLC, an Oregon limited liability company.
RECITALS
A. The respective boards of directors of Microfield, Merger Sub
and CTS have: (a) determined that the Merger of CTS with and into Merger Sub
pursuant and subject to all of the terms and conditions of this Agreement is
advisable, fair and in the best interests of Microfield, CTS and Merger Sub and
their respective shareholders; and (b) approved the Merger, this Agreement and
the transactions contemplated by this Agreement.
B. The board of directors of Microfield has authorized the
issuance of Microfield Common Stock pursuant to this Agreement.
C. Microfield, CTS and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger.
D. Simultaneously with the closing of the Merger described in
this Agreement, the VSI Merger shall close and become effective.
E. The parties intend that the structure of the Merger described
in this Agreement be a tax-free reorganization within the meaning of Section
368(a) of the Code.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements set forth herein and for other good and valuable consideration, the
sufficiency of which are acknowledged, the parties agree as follows:
ARTICLE 1 DEFINITIONS
When used in this Agreement, the following terms shall have the
meanings specified:
"AGREEMENT" means this Agreement and Plan of Merger, together with the
attached Exhibits and Disclosure Schedules, as the same may be amended from time
to time in accordance with the terms hereof.
"ARTICLES OF MERGER" means Articles of Merger in a form approved for
filing in accordance with the OBCA.
"CLOSING" means the conference to be held at 10:00 a.m., on the Closing
Date at the offices of Microfield, or such other time and place as the parties
may mutually agree to in writing.
1-AGREEMENT AND PLAN OF MERGER
"CLOSING DATE" means September 15, 2003, or such other date as the
parties may mutually agree in writing.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder, as the same may be in effect from time to
time.
"CTS" means Xxxxxxxxxxx Technology Services, Inc., an Oregon
corporation.
"CTS SHAREHOLDER" means the sole shareholder of CTS immediately prior
to the Effective Time, namely, Xxxxxxxxxxx Group LLC, an Oregon limited
liability company.
"CTS STOCK" means shares of common stock, without par value, of CTS.
"DISCLOSURE SCHEDULES" means the Disclosure Schedules attached to this
Agreement.
"EFFECTIVE TIME" means the date and time when the Merger becomes
effective pursuant to the OBCA.
"ENFORCEABILITY EXCEPTIONS" means the limits with respect to the
enforceability of any agreement imposed by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by principles of equity regarding the availability of
remedies.
"ESCROW AGENT" means the escrow agent appointed in the Indemnification
Escrow Agreement.
"ESCROWED SHARES" means the Microfield Common Stock placed in the
Indemnification Escrow pursuant to Section 2.7.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof or any entity, authority or body exercising
executive, legislative, judicial or regulatory functions of or pertaining to
government, including, without limitation, any governmental or regulatory
authority, agency, department, board, commission or instrumentality, any court,
tribunal or arbitrator and any self-regulatory organization.
"INDEMNIFICATION ESCROW" means the Escrow Account opened for the
purpose of holding the Microfield Common Stock held back pursuant to Section
2.7.
"KNOWLEDGE" with respect to a party, means the actual knowledge of the
existence or nonexistence of a fact or matter, after reasonable inquiry, by any
of the executive officers or directors of Microfield or CTS, as applicable.
"LAW" means any federal, state, local or other law, rule, regulation or
governmental requirement of any kind, and the rules, regulations and orders
promulgated thereunder by any regulatory agencies.
2-AGREEMENT AND PLAN OF MERGER
"LIEN" means (a) any mortgage, pledge, lien, covenant, lease, security
interest or encumbrance of any kind and (b) with respect to any asset, the
interest of a vendor or lessor under any conditional sale agreement, financing
lease or other title retention agreement relating to such asset.
"MAJOR SHAREHOLDERS" means the following persons: Xxxx X. Xxxxxxxxx,
TSI Telecommunications, Inc., Xxxxxxxxxxx Group LLC, Xxxxxx X. Jesenik, Xxxxxx
X. Xxxxxx, R. Xxxxxxx Xxxxxx, JMW-MICG Holdings, LLC, Xxxxxxx Xxxxxxxx and Xxxx
X. Xxxxxx.
"MATERIAL ADVERSE CHANGE" means any materially adverse change in the
financial condition, properties, business or results of operations of a party
that exceeds the sum of $50,000 or more, whether taken separately or together in
the aggregate with other similar events, other than changes arising out of
general economic conditions unrelated to the business in which the party is
engaged.
"MATERIAL ADVERSE EFFECT" means any event, condition or fact that is,
or reasonably may be expected to be, materially adverse to the financial
condition, properties, business, results of operations or prospects of a party
that exceeds the sum of $50,000 or more, whether taken separately or together in
the aggregate with other similar events, other than events, conditions or facts
arising out of general economic conditions unrelated to the business in which
the party is engaged.
"MATERIAL CONTRACTS" means any agreement or contract to which a party,
or by which its properties or assets, is bound, which could result in a Material
Adverse Change or have a Material Adverse Effect, including, but not limited,
to: (a) all loan agreements, indentures, mortgages, pledges, conditional sale or
title retention agreements, security agreements, guaranties, standby letters of
credit, equipment leases or lease purchase agreements, each in an amount equal
to or exceeding $50,000; (b) all contracts, agreements, commitments or other
understandings or arrangements, but excluding contracts, agreements, commitments
or other understandings or arrangements entered into in the ordinary course of
business and involving individual payments or receipts by the party of less than
$50,000 over the term of such contract, agreement, commitment or other
understanding or arrangement; and (c) all other agreements that are material to
the party and not excluded under the foregoing clauses.
"MERGER" means the merger of Merger Sub with and into CTS pursuant to
this Agreement and the OBCA.
"MERGER CONSIDERATION" means the aggregate number of shares of
Microfield Common Stock issuable to the CTS Shareholders pursuant to Section
2.6, subject to any rounding for fractional shares pursuant to Section 2.8(b).
"MERGER SUB" means CTS Acquisition Co., an Oregon corporation and a
wholly owned Subsidiary of Microfield.
"MICROFIELD" means Microfield Group, Inc., an Oregon corporation.
3-AGREEMENT AND PLAN OF MERGER
"MICROFIELD COMMON STOCK" means shares of common stock, no par value,
of Microfield.
"MICROFIELD STOCK VALUE" means the average bid price as reported on the
OCTBB or NASDAQ or other exchange upon which Microfield Common Stock is trading
for the thirty (30) days immediately prior to and including the last trading day
prior to the applicable date for which the value is determined.
"OBCA" means the Oregon Business Corporation Act, as the same shall be
in effect from time to time.
"PERMITS" means all permits, licenses, approvals, qualifications,
governmental authorizations, registrations and franchises that CTS has or holds,
all of which are listed and briefly described in the Disclosure Schedules.
"PERSON" means a natural person, corporation, trust, partnership,
limited liability company, governmental entity, agency or branch or department
thereof, or any other legal entity.
"REPRESENTATIVE" means Xxxxxx X. Jesenik, or his successor, who shall
act as representative of the CTS Shareholders under the Agreement.
"SUBSIDIARY" means any entity (a) at least a majority of the
outstanding capital stock or ownership interest of which shall at the time be
owned by Microfield or CTS, as applicable, directly or through one (1) or more
entities that are themselves Subsidiaries or (b) with respect to which
Microfield or CTS, as applicable, may elect a majority of the board of
directors.
"SURVIVING CORPORATION" means CTS, which shall survive the Merger of
Merger Sub with and into CTS.
"TSI" means TSI Telecommunication Services, Inc., a Delaware
corporation.
"XXXXXXXXX" means Xxxx X Xxxxxxxxx, individually.
"VELAGIO" means Velagio, Inc., an Oregon corporation.
"VELAGIO SHAREHOLDERS" means Xxxxxxxxx and TSI.
"VSI MERGER" means the merger whereby VSI Acquisition Co. shall merge
with and into Velagio and Velagio shall be the surviving corporation, effective
simultaneously with the Effective Time.
"VSI MERGER AGREEMENT" means the Agreement and Plan of Merger dated as
of the same date as this Agreement by and among Microfield, VSI Acquisition Co.,
Velagio, and the Velagio Shareholders in connection with the VSI Merger.
4-AGREEMENT AND PLAN OF MERGER
OTHER TERMS. The following terms shall have the meanings specified in
the following noted sections of this Agreement:
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TERM SECTION
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Balance Sheet 3.9
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Consent 3.5
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Conversion Ratio 2.6
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Damages 7.2
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Employee Plans 3.14(a)
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Environmental Claim 3.21(e)(i)
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Environmental Laws 3.21(e)(ii)
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ERISA 3.14(a)
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ERISA Affiliate 3.14(a)
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Indemnification Escrow Agreement 2.7
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Intellectual Property Rights 3.16(b)
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IRS 3.14(b)
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ISO 3.14(c)
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Litigation 3.12
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Material of Environmental Concern 3.21(e)(iii)
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Microfield Balance Sheet 4.9
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Microfield Indemnified Persons 7.2
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Microfield SEC Reports 4.8
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Preferred Shares 4.2
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Related Documents 7.1
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Rule 144 2.9
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Securities Act 2.9
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Tax 3.15(b)
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Tax Returns 3.15(b)
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Third Party Claims 7.5(a)(i)
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CTS Balance Sheet 3.9
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CTS Financial Statements 3.7
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CTS Indemnified Persons 7.3
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ARTICLE 2 THE MERGER
2.1 THE MERGER. At the Effective Time and upon and subject to the
terms and conditions of this Agreement, Merger Sub will be merged with and into
CTS. CTS shall be the Surviving Corporation in the Merger and shall continue to
be governed by the Laws of the State of Oregon, and the separate existence of
Merger Sub shall cease. The Merger shall be pursuant to the provisions of, and
shall be with the effects provided in, the OBCA.
2.2 EFFECTIVE TIME. Subject to the terms and conditions of this
Agreement, on the Closing Date, Merger Sub and CTS will cause the Articles of
Merger to be executed, delivered
5-AGREEMENT AND PLAN OF MERGER
and filed as provided in the OBCA. The Merger shall become effective at the time
of the filing of the Articles of Merger with the Oregon Secretary of State,
Corporation Division, or at such later time as Microfield and CTS may agree and
as may be set forth in the Articles of Merger.
2.3 ARTICLES OF INCORPORATION OF SURVIVING CORPORATION. The
Articles of Incorporation of Merger Sub in effect immediately prior to the
Effective Time shall be the Articles of Incorporation of the Surviving
Corporation until amended in accordance with the OBCA.
2.4 BYLAWS OF SURVIVING CORPORATION. The Bylaws of Merger Sub in
effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation until amended in accordance with the OBCA.
2.5 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. The board of
directors of the Surviving Corporation shall consist of one (1) director
position. The following director is hereby elected and shall serve as the sole
director of the Surviving Corporation to hold office as provided in the Bylaws:
Xxxx X. Xxxxxxxxx
The following officers shall be the officers of the Surviving
Corporation, to hold office as provided in the Bylaws:
CEO/President Xxxx X. Xxxxxxxxx
CFO/Treasurer Xxxxxx X. Xxxxxx
Senior Vice President -
Services and Development Xxxxxx Xxxxxxx
Vice President - Electrical Services A. Xxxx Xxxxxx
Secretary Xxxxxx X. Xxxxx
2.6 CONVERSION OF CTS STOCK. At the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub, CTS or Microfield,
the CTS Shareholder of record immediately prior to the Effective Time shall be
entitled to receive a total of 4,193,143 shares of Microfield Common Stock in
exchange for all of the CTS Stock outstanding. The CTS Shareholder will receive
the following shares of Microfield Common Stock:
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CTS STOCK TOTAL CONVERTED ESCROWED
CTS SHAREHOLDER OWNED SHARES SHARES
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XXXXXXXXXXX GROUP LLC 54,826,875 4,193,142 250,000
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The Escrowed Shares will be placed in the Indemnification Escrow as
provided for in Section 2.7.
6-AGREEMENT AND PLAN OF MERGER
2.7 INDEMNIFICATION ESCROW. At the Effective Time, the Velagio
Shareholders, the CTS Shareholder, Microfield and the Escrow Agent shall enter
into an Indemnification Escrow Agreement in the form attached as Exhibit A
("INDEMNIFICATION ESCROW AGREEMENT"). The Indemnification Escrow Agreement will
require that simultaneously with the Effective Time the Velagio Shareholders
will place 250,000 shares, and the CTS Shareholder will place 250,000 shares, of
Microfield Common Stock (for an aggregate of 500,000 shares of Microfield Common
Stock) into an escrow account for the purposes of satisfying claims arising
under this Agreement or the VSI Merger Agreement. The Indemnification Escrow
Agreement shall also provide the manner and method upon which claims will be
satisfied by the Microfield Common Stock placed in escrow.
2.8 PROCEDURE FOR PAYMENT.
(a) SURRENDER OF STOCK. From and after the Effective
Time, the CTS Shareholder of record immediately prior to the Effective Time,
upon surrender to Microfield or its agent designated for such purpose of any
letters of transmittal or other documents as may be reasonably requested by
Microfield or its agent, shall be entitled to receive one or more certificates
representing the number of shares of Microfield Common Stock into which such CTS
Stock shall have been converted pursuant to the provisions of Section 2.6;
provided, however, that a certificate representing the escrowed shares described
in Section 2.7 shall be delivered to the escrow agent and held pursuant to the
Indemnification Escrow Agreement.
(b) NO FRACTIONAL SHARES. No certificates or scrip
evidencing fractional shares of Microfield Common Stock shall be issued in the
Merger, and such fractional share interests will not entitle the owner thereof
to any rights as a shareholder of Microfield. Merger Consideration to be paid to
the CTS Shareholder will be rounded to the nearest whole share.
(c) NO FURTHER RIGHTS IN CTS STOCK. All shares of
Microfield Common Stock issued upon conversion of the CTS Stock in accordance
with the terms of this Agreement shall be deemed to have been issued (and paid)
in full satisfaction of all rights of the CTS Shareholder pertaining to the CTS
Stock. Following the Effective Time, the CTS Shareholders shall cease to have
any rights with respect to such CTS Stock except as otherwise provided in this
Agreement or by law.
2.9 UNREGISTERED SHARES. The CTS Shareholder has been informed by
Microfield that the Microfield Common Stock conveyed hereunder as Merger
Consideration has not been registered under the Securities Act of 1933 (the
"SECURITIES ACT") and that such Microfield Common Stock must be held for the
time required by Rule 144 promulgated under the Securities Act ("RULE 144"),
unless (i) the distribution for sale of the Microfield Common Stock has been
registered under the Securities Act, (ii) a sale of the Microfield Common Stock
is made in conformity with the provisions of Rule 144, or (iii) in the opinion
of counsel, which opinion is reasonably acceptable to Microfield, some other
exemption from registration is available with respect to any such sale, transfer
or other disposition of such Microfield Common Stock.
2.10 STOCK CERTIFICATE LEGENDS. The CTS Shareholder acknowledges
and understands that stock transfer instructions will be given to Microfield's
transfer agent with
7-AGREEMENT AND PLAN OF MERGER
respect to the Merger Consideration and that there will be placed on the
certificates for such shares, or any substitution therefor, the following
legend:
"The securities evidenced by this certificate have not been
registered under the Securities Act of 1933 (the "Act") or any
applicable state law, and no interest therein may be sold,
distributed, assigned, offered, pledged or otherwise
transferred unless (a) there is an effective registration
statement under such Act and applicable state securities laws
covering any such transaction involving these securities or
(b) the Company receives an opinion of legal counsel for the
holder of these securities (concurred in by legal counsel for
the Company) to the effect that such transaction is exempt
from registration or the Company otherwise satisfies itself
that such transaction is exempt from registration."
2.11 APPOINTMENT OF REPRESENTATIVE. The Representative is hereby
appointed as representative of the CTS Shareholder for purposes of this
Agreement. The CTS Shareholder's approval of this Agreement shall include
confirmation of the authority of the Representative.
2.12 REGISTRATION RIGHTS. Major Shareholders will receive the
following registration rights as set forth more specifically in the Registration
Rights Agreement attached hereto as Exhibit B:
(a) For a period of five (5) years following the Closing
Date, unlimited piggyback registration rights for all shares owned by the Major
Shareholders;
(b) If during the two (2) years following the Closing
Date, piggyback registration rights become available to the Major Shareholders,
but a Major Shareholder is unable to register fifty percent or more of the Major
Shareholder's Microfield Common Stock such shareholder elects to register at the
date the piggyback registration rights become available, in spite of the Major
Shareholder's election to register the shares through the piggyback rights
registration, then the Major Shareholder will have two (2) demand registration
rights as to those shares remaining unregistered contrary to the Major
Shareholder's election on the date the piggyback registration rights become
effective. Such Demand Registration Rights shall be available beginning two (2)
years after the Closing Date and ending five (5) years after the Closing Date.
Such demand registration rights shall apply only to stock not registered
contrary to the election of each Major Shareholder and may be exercised if the
registration is intended to result in aggregate gross proceeds of the offering,
net of underwriting expenses, of at least Five Hundred Thousand Dollars
($500,000.00).
2.13 RESERVED.
8-AGREEMENT AND PLAN OF MERGER
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF CTS AND CTS
SHAREHOLDER
CTS and the CTS Shareholder represent and warrant to Microfield and
Merger Sub that, except as set forth in the correspondingly numbered sections of
the Disclosure Schedules:
3.1 ORGANIZATION. CTS is a corporation duly organized and validly
existing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. CTS is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
character of the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
where the failure to be so duly qualified or licensed and in good standing would
not reasonably be expected to have a Material Adverse Effect. CTS has delivered
to Microfield accurate and complete copies of its Articles of Incorporation and
Bylaws, as currently in effect.
3.2 CAPITALIZATION. As of the Date of Closing, the CTS Stock and
the holders thereof are as set forth in Section 3.2 of the Disclosure Schedules.
As of the Closing Date, all issued and outstanding CTS Stock will be duly
authorized, validly issued, fully paid and non-assessable. Section 3.2 of the
Disclosure Schedules sets forth the name of the holder and the exercise price of
all options and warrants to purchase CTS Stock. Except as disclosed in Section
3.2 of the Disclosure Schedules, there are no outstanding rights, subscriptions,
warrants, puts, calls, unsatisfied preemptive rights, options or other
agreements of any kind relating to any of the outstanding or unissued CTS Stock
or any other security of CTS, and there is no authorized or outstanding security
of any kind convertible into or exchangeable for any CTS Stock or other
security. There are no obligations, contingent or otherwise, of CTS to
repurchase, redeem or otherwise acquire any CTS Stock or to provide funds to or
make any investment (in the form of a loan, capital contribution or otherwise)
in any other entity.
3.3 SUBSIDIARIES. CTS has no Subsidiaries.
3.4 AUTHORIZATION; BINDING AGREEMENT. CTS has all requisite
corporate power and authority to execute and deliver this Agreement and to
complete the transactions contemplated hereby. The execution and delivery of
this Agreement and the completion of the transactions contemplated hereby,
including, but not limited to, the Merger, have been duly and validly authorized
by CTS's board of directors, and no other corporate proceedings on the part of
CTS are necessary to authorize the execution and delivery of this Agreement or
to complete the transactions contemplated hereby (other than adoption of this
Agreement by the CTS Shareholders in accordance with the OBCA and the Articles
of Incorporation and Bylaws of CTS). This Agreement has been duly and validly
executed and delivered by CTS and constitutes the legal, valid and binding
agreement of CTS, enforceable against CTS in accordance with its terms, except
to the extent that enforceability thereof may be limited by the Enforceability
Exceptions.
3.5 GOVERNMENTAL APPROVALS. No consent, approval, waiver or
authorization of, notice to or declaration or filing with ("CONSENT") any
Governmental Authority, on the part of CTS is required in connection with the
execution or delivery by CTS of this Agreement or the
9-AGREEMENT AND PLAN OF MERGER
completion by CTS of the transactions contemplated hereby other than (a) the
filing of the Articles of Merger with the Secretary of State of Oregon,
Corporation Division, in accordance with the OBCA, and (b) those Consents that,
if they were not obtained or made, would not reasonably be expected to have a
Material Adverse Effect.
3.6 NO VIOLATIONS. The execution and delivery of this Agreement,
the completion of the transactions contemplated hereby and compliance by CTS
with any of the provisions hereof will not (a) conflict with or result in any
breach of any provision of the Articles of Incorporation or Bylaws of CTS, (b)
require any Consent under or result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of, any Material Contract, (c) result in the creation
or imposition of any Lien upon any of the assets of CTS or (d) subject to
obtaining the Consents from Governmental Authorities referred to in Section 3.5,
violate any applicable provision of any Law to which CTS or its assets or
properties are subject, except, in the case of each of clauses (b), (c) and (d)
above, for any deviations from the foregoing that would not reasonably be
expected to have a Material Adverse Effect.
3.7 CTS FINANCIAL STATEMENTS. CTS has delivered to Microfield the
financial statements for the years ending December 31, 2000, 2001 and 2002, and
for the six (6) months ended June 30, 2003 (the "CTS FINANCIAL STATEMENTS"). The
CTS Financial Statements have been prepared in accordance with generally
accepted accounting principles consistently applied, and they present fairly, in
all material respects, the financial position of CTS as at the dates thereof and
the results of its operations and cash flows for the periods then ended, subject
to any adjustments described therein, except that unaudited financial statements
do not contain footnotes.
3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 3.8 of the Disclosure Schedules, from the date of issuance of each of
the CTS Financial Statements through the date of this Agreement, there has not
been: (a) any event that has had or would reasonably be expected to have a
Material Adverse Effect; (b) any declaration, payment or setting aside for
payment of any dividend or other distribution or any redemption or other
acquisition of any stock or securities of CTS by CTS; (c) any material damage or
loss to any material asset or property, whether or not covered by insurance; (d)
any change by CTS in accounting principles or practices; (e) any material
revaluation by CTS of any of its assets, including writing down the value of
inventory or writing off notes or accounts receivable other than in the ordinary
course of business; (f) any sale of a material amount of property of CTS, except
in the ordinary course of business; (g) any payments to CTS employees or service
providers outside of CTS's regular course of business; or (h) any other action
or event, involving an amount exceeding $5,000 that would have required the
consent of Microfield pursuant to Section 5.1 had such action or event occurred
after the date of this Agreement.
3.9 NO UNDISCLOSED LIABILITIES. Except as set forth in Section 3.9
of the Disclosure Schedules, CTS has no liabilities (absolute, accrued,
contingent or other), except liabilities (a) adequately provided for in CTS
Financial Statements; or (b) incurred in the ordinary course of business on or
before the dates of the CTS Financial Statements and not required under GAAP
10-AGREEMENT AND PLAN OF MERGER
to be reflected on the Balance Sheet, (c) incurred since the issuing of the CTS
Financial Statements in the ordinary course of business consistent with past
practice, (d) incurred in connection with this Agreement or (e) that would not
reasonably be expected to have a Material Adverse Effect. Attached in Section
3.9 of the Disclosure Schedule is a list of all of the outstanding liabilities
of CTS greater than $50,000 as of the date of this Agreement. Except as
disclosed in section 3.9(b) of the Disclosure Schedules, CTS has no debt or
liabilities owed to any creditor, excluding current trade payables incurred in
the ordinary course of business.
3.10 COMPLIANCE WITH LAWS. The business of CTS has been operated in
compliance with all Laws applicable thereto, except for any non-compliance that
would not reasonably be expected to have a Material Adverse Effect.
3.11 PERMITS. Section 3.11 of the Disclosure Schedules contains a
complete and accurate list of each material Permit that is held by CTS or that
otherwise relates to the business of, or to any of the assets owned or used by,
CTS. Each Permit is valid and in full force and effect. Except as set forth in
Section 3.11 of the Disclosure Schedules, (a) CTS has all Permits required in
connection with the operation of its business, (b) CTS is not in violation of
any Permit and (c) no proceedings are pending or, to the Knowledge of CTS,
threatened, to revoke or limit any Permit, except, in the case of each of
clauses (a) and (b), where the absence or violation would not reasonably be
expected to have a Material Adverse Effect.
3.12 LITIGATION. There is no suit, action or proceeding
("LITIGATION") pending or, to the Knowledge of CTS, threatened against CTS, nor
is there any judgment, decree, injunction, rule or order of any Governmental
Authority outstanding against CTS.
3.13 CONTRACTS. Section 3.13 of the Disclosure Schedules sets
forth, as of the date hereof, a list of Material Contracts to which CTS is a
party or by which its properties or assets is bound that are outside the
ordinary course of the business of CTS. CTS is not a party to any agreements to
acquire in the future the capital stock or substantially all the assets of
another Person. Except as disclosed in Section 3.13 of the Disclosure Schedules,
to the Knowledge of CTS all the Material Contracts are valid and binding and are
in full force and effect and enforceable against CTS in accordance with their
respective terms, subject to the Enforceability Exceptions, and CTS is not in
violation or breach of or default under any Material Contract, except where the
failure to be in full force and effect or where such violation or breach would
not reasonably be expected to have a Material Adverse Effect. To the Knowledge
of CTS, no party is in default, violation or breach of any Material Contract
where such violation or breach would reasonably be expected to have a Material
Adverse Effect.
3.14 EMPLOYEE BENEFIT PLANS.
(a) Section 3.14(a) of the Disclosure Schedules lists all
employee pension benefit plans (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974 ("ERISA")), all employee welfare benefit
plans (as defined in Section 3(1) of ERISA) and all other bonus, option,
membership purchase, incentive, deferred compensation, supplemental retirement,
severance and other similar fringe or employee benefit plans, programs or
arrangements, and any employment, executive compensation or severance
agreements, written or
11-AGREEMENT AND PLAN OF MERGER
otherwise, as amended, modified or supplemented, for the benefit of, or relating
to, any former or current employee, officer or consultant who is an individual
or an individual doing business in a corporate form (or any of their
beneficiaries) of CTS or any other entity (whether or not incorporated) or which
is under common control (an "ERISA AFFILIATE") within the meaning of Section
414(b), (c), (m) or (o) of the Code or Section 4001(a)(14) or (b) of ERISA, or
any CTS Subsidiary, with respect to which CTS has or could have any current
(actual or contingent) material liability (together for purposes of this Section
3.14 and Section 4.14, "EMPLOYEE PLANS"). Prior to the date of this Agreement,
CTS has provided or made available to Microfield copies of (i) each such written
Employee Plan (or a written description of any Employee Plan which is not
written) and all related trust agreements, insurance and other contracts
(including policies), summary plan descriptions, summaries of material
modifications and any material communications to plan participants, (ii) the
three (3) most recent annual reports on Form 5500 series, with accompanying
schedules and attachments, filed with respect to each Employee Plan required to
make such a filing, and (iii) the most recent favorable determination letters
issued for each Employee Plan and related trust which is intended to qualify
under Section 401(a) of the Code (and, if an application for such determination
is pending, a copy of the application for such determination).
(b) (i) None of the Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any Person (other than in
accordance with Section 4980B of the Code or Part 6 of Subtitle B of Title I of
ERISA and none of the Employee Plans is subject to Title IV of ERISA or Section
412 of the Code); (ii) neither CTS nor any ERISA Affiliate has ever contributed
to a "MULTI-EMPLOYER PLAN" as such term is defined in Section 3(37) of ERISA;
(iii) to the Knowledge of CTS, no "PARTY IN INTEREST" or "DISQUALIFIED PERSON"
(as defined in Section 3(14) of ERISA and Section 4975 of the Code) has at any
time engaged in a transaction with respect to any Employee Plan that could
subject CTS or any ERISA Affiliate, directly or indirectly, to a tax, penalty or
other liability for prohibited transactions under ERISA or Section 4975 of the
Code, except for any such tax, penalty or liability that would not reasonably be
expected to result in a Material Adverse Effect; (iv) to the Knowledge of CTS,
no fiduciary of any Employee Plan has breached any of the responsibilities or
obligations imposed upon fiduciaries under Title I of ERISA, except where such
breach would not reasonably be expected to result in a Material Adverse Effect;
(v) all Employee Plans have been established and maintained substantially in
accordance with their terms and have operated in compliance with the
requirements prescribed by any and all statutes (including ERISA and the Code),
orders, or governmental rules and regulations currently in effect with respect
thereto (including all applicable requirements for notification to participants
or the Department of Labor, the Internal Revenue Service (the "IRS") or the
Secretary of the Treasury), except where failure to do so would not reasonably
be expected to result in a Material Adverse Effect; and CTS and each CTS
Subsidiary have performed all obligations required to be performed by them
under, are not in default under or in violation of any Employee Plan except
where failure to do so would not reasonably be expected to result in a Material
Adverse Effect, and have no Knowledge of any default or violation by any other
party to, any of the Employee Plans; (vi) each Employee Plan which is intended
to be qualified under Sections 401 and 501 of the Code is the subject of a
favorable determination letter from the IRS, and to the Knowledge of CTS nothing
has occurred that may reasonably be expected to impair such determination; (vii)
all contributions required to be made with respect to any Employee Plan pursuant
to the terms of the Employee Plan have
12-AGREEMENT AND PLAN OF MERGER
been made on or before their due dates, including due dates with respect to
employee deferrals; and (viii) there are no complaints, charges or claims
against CTS pending or to CTS's Knowledge threatened to be brought by or filed
with any Governmental Authority based on, arising out of, in connection with or
otherwise relating to the classification of any individual by CTS as an
independent contractor or "LEASED EMPLOYEE" (within the meaning of Section
414(n) of the Code) rather than as an employee.
(c) Section 3.14(c) of the Disclosure Schedules sets
forth a true and complete list of each current or former employee, officer or
director of CTS or any of its Subsidiaries who holds (i) any option to purchase
CTS Stock as of the date hereof, together with the number of shares of CTS Stock
subject to such option, the option price of such option (to the extent
determined as of the date hereof), whether such option is intended to qualify as
an incentive stock option within the meaning of Section 422(b) of the Code (an
"ISO"), and the expiration date of such option; (ii) any CTS Stock that is
restricted as a result of an agreement with or equity participation plan of CTS;
and (iii) any other right, directly or indirectly, to receive CTS Stock, except
as otherwise disclosed in Section 3.14 of the Disclosure Schedules, together
with the percentage of CTS Stock subject to such right. Section 3.14(c) of the
Disclosure Schedules also sets forth the total number of any such ISO's and any
such nonqualified options and other such rights.
(d) Unless otherwise disclosed in Section 3.14(a) of the
Disclosure Schedules, Section 3.14(d) of the Disclosure Schedules sets forth a
true and complete list of (i) all employment agreements with officers of CTS or
any of its Subsidiaries; (ii) all agreements with consultants who are
individuals obligating CTS or any of its Subsidiaries to make annual cash
payments in an amount exceeding $10,000; (iii) all agreements that individually
or in the aggregate are or could be material with respect to the services of
independent contractors or leased employees who are individuals or individuals
doing business in a corporate form whether or not they participate in any of the
Employee Plans; (iv) all officers of CTS or any of its Subsidiaries who have
executed a non-competition agreement with CTS or any of its Subsidiaries; (v)
all severance agreements, programs and policies of CTS or any of its
Subsidiaries with or relating to its employees, in each case with outstanding
commitments exceeding $25,000, excluding programs and policies required to be
maintained by Law; and (vi) all plans, programs, agreements and other
arrangements of CTS that contain change in control provisions.
(e) (i) Except as set forth in Section 3.14(e) of the
Disclosure Schedules, no Employee Plan is an employee stock ownership plan
(within the meaning of Section 4975(e)(7) of the Code) or otherwise invests in
CTS Stock; and (ii) the completion of the transactions contemplated by this
Agreement will not result in an increase in the amount of compensation or
benefits or accelerate the vesting or timing of payment of any benefits or
compensation payable in respect of any employee except as disclosed in Section
3.14(e) of the Disclosure Schedules or except where such increase or
acceleration would not reasonably be expected to result in a Material Adverse
Effect.
(f) Except as set forth in Section 3.14(f) of the
Disclosure Schedules, CTS maintains no Employee Plan covering non-U.S.
employees.
13-AGREEMENT AND PLAN OF MERGER
3.15 TAXES AND TAX RETURNS.
(a) CTS has timely filed, or caused to be timely filed,
all material Tax Returns required to be filed by it, and all such Tax Returns
are true, complete and correct in all material respects, and has timely paid,
collected or withheld, or caused to be paid, collected or withheld, all material
amounts of Taxes required to be paid, collected or withheld, other than such
Taxes for which adequate reserves in CTS Financial Statements have been
established and which are being contested in good faith and as identified in
Section 3.15 of the Disclosure Schedules. Except as set forth in Section 3.15 of
the Disclosure Schedules, there are no material claims or assessments pending
against CTS (or the CTS Shareholder with respect to CTS) for any alleged
deficiency in any Tax, and CTS has not been notified in writing of any proposed
Tax claims or assessments against CTS (or the CTS Shareholder with respect to
CTS) (other than in each case, claims or assessments for which adequate reserves
in the Financial Statements have been established and which are being contested
in good faith and as identified in Section 3.15 of the Disclosure Schedules or
claims or assessments which are immaterial in amount). Neither CTS nor the CTS
Shareholder with respect to CTS has executed any waivers or extensions of any
applicable statute of limitations to assess any material amount of Taxes. There
are no outstanding requests by CTS (or the CTS Shareholder with respect to CTS)
for any extension of time within which to file any material Tax Return or within
which to pay any material amounts of Taxes shown to be due on any Tax Return.
There are no Liens for material amounts of Taxes on the assets of CTS (or the
CTS Shareholder with respect to CTS) except for statutory liens for current
Taxes not yet due and payable. There are no outstanding powers of attorney
enabling any party to represent CTS (or the CTS Shareholder with respect to CTS)
or any of its Subsidiaries with respect to Tax matters.
(b) For purposes of this Agreement, the term "TAX" means
any federal, state, local, foreign or provincial income, gross receipts,
property, sales, use, license, excise, franchise, employment, payroll,
alternative or add-on minimum, ad valorem, transfer or excise tax, or any other
tax, custom, duty, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest or penalty imposed by any
Governmental Authority. The term "TAX RETURN" means a report, return or other
information (including any attached schedules or any amendments to such report,
return or other information) supplied to or filed with or required to be
supplied to or filed with a governmental entity with respect to any Tax,
including an information return, claim for refund, amended return or declaration
or estimated Tax.
(c) Except as set forth in Section 3.15 of the Disclosure
Schedules, (i) CTS has been a corporation for federal and state income tax
purposes at all times since its inception; (ii) CTS has not been included in a
combined, consolidated or unitary Tax Return and other than with respect to CTS,
CTS is not currently liable for Taxes of any other Person, or is currently under
any contractual obligation to indemnify any Person with respect to Taxes (except
for customary agreements to indemnify lenders or security holders in respect of
taxes other than income taxes), or is a party to any tax sharing agreement or
any other agreement providing for payments by CTS with respect to Taxes; (iii)
CTS is not a party to any joint venture, partnership or other arrangement or
contract that could be treated as a partnership for federal income tax
14-AGREEMENT AND PLAN OF MERGER
purposes; (iv) CTS has not entered into any sale leaseback or any leveraged
lease transaction that fails to satisfy the requirements of Revenue Procedure
75-21 (or similar provisions of foreign law); (v) CTS has not agreed nor is
required, as a result of a change in method of accounting or otherwise, to
include any adjustment under Section 481 of the Code (or any corresponding
provision of state, local or foreign law) in taxable income; (vi) CTS is not a
party to any agreement, contract, arrangement or plan that would result (taking
into account the transactions contemplated by this Agreement), separately or in
the aggregate, in the payment of any "EXCESS PARACHUTE PAYMENTS" within the
meaning of Section 280G of the Code; (vii) CTS is not liable with respect to any
indebtedness the interest of which is not deductible for applicable federal,
foreign, state or local income tax purposes; (viii) CTS is not a "CONSENTING
CORPORATION" under Section 341(f) of the Code or any corresponding provision of
state, local or foreign law; (ix) CTS has complied with all applicable laws,
rules, and regulations relating to the withholding and payment of Taxes except
where the amount of taxes involved is not material; and (x) none of the assets
owned by CTS is property that is required to be treated as owned by any other
Person pursuant to Section 168(g)(8) of the Internal Revenue Code of 1954, as
amended, as in effect immediately prior to the enactment of the Tax Reform Act
of 1986, or is "TAX-EXEMPT USE PROPERTY" within the meaning of Section 168(h) of
the Code.
3.16 INTELLECTUAL PROPERTY.
(a) Section 3.16(a) of the Disclosure Schedules sets
forth a list of (i) all patents and patent applications owned by CTS worldwide;
(ii) all trademark and service xxxx registrations and all trademark and service
xxxx applications, material common law trademarks, material trade dress and
material slogans, and all trade names owned by CTS worldwide; (iii) all
copyright registrations and copyright applications owned by CTS worldwide; and
(iv) all licenses in which CTS is (A) a licensor with respect to any of the
patents, trademarks, service marks, trade names or copyrights listed in Section
3.16 of the Disclosure Schedules or (B) a licensee of any other Person's
patents, trade names, trademarks, service marks or copyrights except for any
licenses of software programs that are commercially available "OFF THE SHELF."
(b) CTS owns, or is licensed or otherwise possesses legal
enforceable rights to use, all patents, trademarks, trade names, service marks,
trade dress, slogans, copyrights and any applications therefor, technology,
know-how, trade secrets, computer software programs or applications, domain
names and tangible or intangible proprietary information or materials that are
used in the respective businesses of CTS as currently conducted (the
"INTELLECTUAL PROPERTY RIGHTS"), except for any such failures to own, be
licensed or possess that would not reasonably be expected to have a Material
Adverse Effect.
(c) CTS has made all necessary filings and recordations
for the patents, patent applications, trademark and service xxxx registrations,
trademark and service xxxx applications, copyright registrations and copyright
applications set forth in Section 3.16(a) of the Disclosure Schedules, except
where the failure to make such filings or recordations would not reasonably be
expected to have a Material Adverse Effect. There are not currently pending, and
to the Knowledge of CTS there are no valid grounds for, any bona fide claims (i)
that the business of CTS infringes on any copyright, patent, trademark, service
xxxx or trade secret; (ii) against the use by CTS of any trademarks, trade
names, trade secrets, copyrights, patents, technology, know-
15-AGREEMENT AND PLAN OF MERGER
how or computer software programs and applications used in the business of CTS
as currently conducted or as proposed to be conducted; (iii) challenging the
exclusive ownership, validity or effectiveness of any of Intellectual Property
Rights; or (iv) challenging the license or legally enforceable right to use of
any third-party patents, trademarks, service marks and copyrights by CTS,
except, in the case of each of clauses (i), (ii), (iii) and (iv) above, for
matters that, if determined adversely to CTS, would not reasonably be expected
to have a Material Adverse Effect.
(d) Except as set forth in Section 3.16 of the Disclosure
Schedules, to the Knowledge of CTS, there is no material unauthorized use,
infringement or misappropriation of any of Intellectual Property Rights by any
third party, including any employee or former employee of CTS.
(e) Except as set forth in Section 3.16 of the Disclosure
Schedules, there are no valid royalty agreements, license agreements (except for
any license implied by the sale or products) or similar arrangements with
respect to the Intellectual Property.
3.17 EMPLOYEE AND LABOR MATTERS.
(a) Section 3.17(a) of the Disclosure Schedules sets
forth a list of all employees of CTS.
(b) Except as set forth in Section 3.17 of the Disclosure
Schedules, (i) there are no controversies pending or, to the Knowledge of CTS,
threatened, between CTS and any of its employees, which controversies would
reasonably be expected to have a Material Adverse Effect; (ii) CTS is not a
party to any collective bargaining agreement or other labor union contract
applicable to Persons employed by CTS, nor, as of the date of this Agreement,
does CTS know of any activities or proceedings of any labor union to organize
any such employees; and (iii) CTS has no Knowledge of any strikes, slowdowns,
work stoppages, lockouts, or threats thereof, by or with respect to any
employees of CTS that would reasonably be expected to have a Material Adverse
Effect.
3.18 LIMITATION ON BUSINESS CONDUCT. CTS is not a party to, nor has
any obligation under, any contract or agreement, written or oral, that contains
any covenants currently or prospectively limiting in any material respect the
freedom of CTS to engage in any line of business or to compete with any entity.
3.19 TITLE TO PROPERTY. Except as set forth in Section 3.19 of the
Disclosure Schedules, CTS owns the properties and assets that it purports to own
free and clear of all Liens, except for Liens that arise in the ordinary course
of business and do not materially impair CTS's ownership or use of such
properties or assets, Liens for taxes not yet due or delinquent or being
contested in good faith by appropriate proceedings for which reserves have been
established in accordance with GAAP and Liens securing obligations under CTS's
credit agreements, loan agreements and equipment leases. Except as set forth in
Schedule 3.19 of the Disclosure Schedules, with respect to the property and
assets it leases, CTS, and to the best of CTS's Knowledge, each of the other
parties thereto, is in material compliance with such leases, and
16-AGREEMENT AND PLAN OF MERGER
CTS holds a valid leasehold interest free of any Liens, except those referred to
above. The rights, properties and assets presently owned, leased or licensed by
CTS include all rights, properties and assets necessary to permit CTS to conduct
its business in all material respects in the same manner as its businesses have
been conducted prior to the date hereof.
3.20 OWNED AND LEASED PREMISES. Each of the buildings, structures
and premises owned or leased by CTS is in reasonably good repair and operating
condition.
3.21 ENVIRONMENTAL MATTERS. Except as set forth in Section 3.21 of
the Disclosure Schedules:
(a) CTS is in material compliance with the Environmental
Laws, which compliance includes the possession by CTS of all material Permits
and governmental authorizations required under applicable Environmental Laws,
and compliance in all material respects with the terms and conditions thereof,
except in each case where such non-compliance would not reasonably be expected
to have a Material Adverse Effect. CTS has not received any written
communication from a Governmental Authority that alleges that it is not in such
material compliance except where such non-compliance would not reasonably be
expected to have a Material Adverse Effect.
(b) There are no Environmental Claims, including claims
based on "ARRANGER LIABILITY," pending or, to the Knowledge of CTS, threatened
against CTS or to the Knowledge of CTS, pending or threatened against any Person
or entity whose liability for any Environmental Claim CTS has to the Knowledge
of CTS retained or assumed either contractually or by operation of law, except
for such Environmental Claims that would not reasonably be expected to have a
Material Adverse Effect.
(c) To the Knowledge of CTS, there are no past or present
actions, inactions, activities, circumstances, conditions, events or incidents,
including the release, emission, discharge, presence or disposal of any Material
of Environmental Concern, that would form the basis of any Environmental Claim
against CTS or against any Person whose liability for any Environmental Claim
CTS has retained or assumed either contractually or by operation of law, except
for such Environmental Claims that would not reasonably be expected to have a
Material Adverse Effect.
(d) CTS is in compliance in all material respects with
Environmental Laws as they relate to (i) any on-site or off-site locations where
to CTS's Knowledge, CTS has stored, disposed or arranged for the disposal of
Materials of Environmental Concern for itself (but not on behalf of others) or
(ii) any underground storage tanks located on property owned or leased by CTS of
which CTS has Knowledge.
(e) For purposes of this Agreement:
(i) "ENVIRONMENTAL CLAIM" means any written
claim, action, cause of action, investigation or written notice by any Person
alleging potential liability (including potential liability for investigatory
costs, cleanup costs, governmental response costs, natural
17-AGREEMENT AND PLAN OF MERGER
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (A) the presence, or release into the
environment, of any Material of Environmental Concern at any location, whether
or not owned or operated by CTS, or (B) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.
(ii) "ENVIRONMENTAL LAWS" means all Federal,
state, local and foreign laws or regulations relating to pollution or protection
of human health and the environment (including ambient air, surface water,
ground water, land surface or sub-surface strata), including laws and
regulations relating to emissions, discharges, releases or threatened releases
of Materials of Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern.
(iii) "MATERIAL OF ENVIRONMENTAL CONCERN" means
chemicals, pollutants, contaminants, hazardous materials, hazardous substances
and hazardous wastes, toxic substances, petroleum and petroleum products that
are regulated under the Environmental Laws.
3.22 INSURANCE. Section 3.22 of the Disclosure Schedules contains a
complete and accurate list of all fire, liability, worker's compensation and
other forms of insurance insuring CTS, and its respective officers and
directors, assets and operations. The insurance polices maintained by CTS are
with reputable insurance carriers and have no premium delinquencies.
3.23 PRODUCT LIABILITY AND RECALLS.
(a) Except as disclosed in Section 3.23 of the Disclosure
Schedules, to CTS's Knowledge, there is no claim, pending or overtly threatened,
against CTS for injury to Person or property of employees or any third parties
suffered as a result of the sale of any product or performance of any service by
CTS, including claims arising out of the defective or unsafe nature of its
products or services, that would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
(b) Except as disclosed in Section 3.23 of the Disclosure
Schedules, there is no pending or, to the Knowledge of CTS, overtly threatened
recall or investigation of any product sold by CTS, which recall or
investigation would reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect.
3.24 CUSTOMERS. Section 3.24 of the Disclosure Schedules sets forth
a list of CTS's ten (10) largest customers (detailed, in the case of government
agencies, by separate government agency) in terms of gross sales for the
twelve-month period ended June 30, 2003. Except as set forth in Section 3.24 of
the Disclosure Schedules, since June 30, 2003, there have not been any changes
in the business relationships of CTS with any of the customers named therein
that would constitute a Material Adverse Effect. Except as set forth in Section
3.24 of the Disclosure Schedules, no customer of CTS, on a combined basis,
accounted for more than five percent (5%) of the revenues of CTS for the twelve
month period ended June 30, 2003.
18-AGREEMENT AND PLAN OF MERGER
3.25 INTERESTED PARTY TRANSACTIONS. Except as set forth in Section
3.25 of the Disclosure Schedules, no event has occurred that would be required
to be reported, if CTS were a reporting company under Section 13 of the
Securities Exchange Act of 1934, pursuant to Item 404 of Regulation S-B
promulgated by the Securities and Exchange Commission (without regard to the
$60,000 threshold contained in Item 404).
3.26 FULL DISCLOSURE. No statement contained in any certificate or
schedule, including, without limitation, the Disclosure Schedules, furnished or
to be furnished by CTS to Microfield or Merger Sub in, or pursuant to the
provisions of, this Agreement contains or shall contain any untrue statement of
a material fact or omits or will omit to state any material fact necessary, in
the light of the circumstances under which it was made, in order to make the
statements herein or therein not misleading.
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF MICROFIELD AND
MERGER SUB
Microfield and Merger Sub jointly and severally represent and warrant
to CTS that, except as set forth in the correspondingly numbered sections of the
Disclosure Schedules:
4.1 ORGANIZATION AND GOOD STANDING. Each of Microfield and Merger
Sub is a corporation duly organized and validly existing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted.
4.2 CAPITALIZATION. The authorized capital stock of Microfield
consists of (a) 25,000,000 shares of Microfield Common Stock and (b) 10,000,000
shares of preferred stock (the "PREFERRED SHARES"). As of July 17, 2003, (i)
8,386,285 shares of Microfield Common Stock were issued and outstanding, (ii) no
shares of Preferred Shares were issued and outstanding, (iii) 261,188 shares of
Microfield Common Stock were reserved for future issuance pursuant to
outstanding options to purchase Microfield Common Stock, (iv) 650,000 shares of
Microfield Common Stock are available for issuance pursuant to the 1995 Stock
Option Agreement, as amended; and (v) 2,197,308 shares of Microfield Common
Stock were reserved for future issuance upon exercise of warrants to purchase
Microfield Common Stock. No other capital stock of Microfield is authorized or
issued. Microfield has agreed to issue shares of Microfield Common Stock
pursuant to the Common Stock Purchase Agreement. The shares of Microfield Common
Stock to be issued to the CTS Shareholder in the Merger will be duly authorized,
validly issued, fully paid and nonassessable.
4.3 SUBSIDIARIES. Innovative Safety Technologies, Inc., an Oregon
corporation, Merger Sub and VSI Acquisition Co. are wholly owned subsidiaries of
Microfield. Microfield has no other subsidiaries.
4.4 AUTHORIZATION; BINDING AGREEMENT. Microfield and Merger Sub
have all requisite corporate power and authority to execute and deliver this
Agreement and to complete the transactions contemplated hereby. The execution
and delivery of this Agreement and the completion of the transactions
contemplated hereby, including, but not limited to, the Merger, have been duly
and validly authorized by the respective boards of directors of Microfield and
19-AGREEMENT AND PLAN OF MERGER
Merger Sub, and no other corporate proceedings on the part of Microfield or
Merger Sub are necessary to authorize the execution and delivery of this
Agreement or to complete the transactions contemplated hereby (other than the
requisite approval by the sole shareholder of Merger Sub of this Agreement and
the Merger). This Agreement has been duly and validly executed and delivered by
each of Microfield and Merger Sub and constitutes the legal, valid and binding
agreement of Microfield and Merger Sub, enforceable against each of Microfield
and Merger Sub in accordance with its terms, subject to the Enforceability
Exceptions.
4.5 GOVERNMENTAL APPROVALS. No Consent from or with any
Governmental Authority on the part of Microfield or Merger Sub is required in
connection with the execution or delivery by Microfield and Merger Sub of this
Agreement or the completion by Microfield and Merger Sub of the transactions
contemplated hereby other than (a) the filing of the Articles of Merger with the
Secretary of State of Oregon in accordance with the OBCA, and (b) those Consents
that, if they were not obtained or made, would not reasonably be expected to
have a Material Adverse Effect.
4.6 NO VIOLATIONS. The execution and delivery of this Agreement,
the completion of the transactions contemplated hereby and compliance by
Microfield or Merger Sub with any of the provisions hereof will not (a) conflict
with or result in any breach of any provision of the Articles of Incorporation
and Bylaws of Microfield or other similar documents of any Subsidiary of
Microfield, or (b) require any Consent under or result in a violation or breach
of, or constitute (with or without notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of, any material note, bond,
mortgage, indenture, contract, lease, license, agreement or instrument to which
Microfield or any Subsidiary of Microfield is a party or by which any of them or
any of their respective assets or property is subject, except in any such case
for any such conflicts, violations, breaches, defaults or other occurrences that
would not prevent or delay completion of the Merger, or otherwise materially and
adversely affect the ability of Microfield or Merger Sub to perform their
respective obligations under this Agreement.
4.7 LITIGATION. Except as disclosed in Section 4.7 of the
Disclosure Schedules, there is no Litigation pending or, to the Knowledge of
Microfield, threatened against Microfield or any of its Subsidiaries which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect, nor is there any judgment, decree, injunction, rule or
order of any Governmental Authority outstanding against Microfield or any of its
Subsidiaries which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect.
4.8 SEC REPORTS AND FINANCIAL STATEMENTS. Microfield has furnished
CTS and the CTS Shareholder with complete copies of all registration statements,
reports and proxy statements, including amendments thereto, filed with the SEC
since December 31, 2000, and prior to the date of this Agreement (collectively,
the "MICROFIELD SEC REPORTS"). Each of the Microfield SEC Reports, as of the
date filed, complied in all material respects with the applicable requirements
of the Act, the Securities Exchange Act of 1934 and the rules and regulations
promulgated by the Securities and Exchange Commission thereunder.
20-AGREEMENT AND PLAN OF MERGER
4.9 NO UNDISCLOSED LIABILITIES. Except as disclosed in Section 4.9
of the Disclosure Schedules and in the Microfield SEC Reports, Microfield has no
liabilities (absolute, accrued, contingent or other), except liabilities (a)
adequately provided for in Microfield's unaudited balance sheet (including any
related notes thereto) as of June 29, 2003, (the "MICROFIELD BALANCE SHEET") (b)
incurred in the ordinary course of business on or before June 29, 2003, and not
required under GAAP to be reflected on the Microfield Balance Sheet, (c)
incurred since June 29, 2003, in the ordinary course of business consistent with
past practice, (d) incurred in connection with this Agreement or (e) that would
not reasonably be expected to have a Material Adverse Effect.
4.10 TAXES AND TAX RETURNS. Except as disclosed in Section 4.10 of
the Disclosure Schedules, Microfield has timely filed, or caused to be timely
filed, all Tax Returns required to be filed by it, and all such Tax Returns are
true, complete and correct in all material respects, and has timely paid,
collected or withheld, or caused to be paid, collected or withheld, all material
amounts of Taxes required to be paid, collected or withheld, other than such
Taxes for which adequate reserves in the financial statements contained in the
Microfield SEC Reports have been established and which are being contested in
good faith. There are no material claims or assessments pending against
Microfield for any alleged deficiency in any Tax, and neither Microfield nor any
of its officers, directors or employees has been notified of any proposed Tax
claims or assessments against Microfield. Microfield has not executed any
currently effective waivers or extensions of any applicable statute of
limitations to assess any material amount of Taxes. There are no outstanding
requests by Microfield for any extension of time within which to file any Tax
Return or within which to pay any material amounts of Taxes shown to be due on
any Tax Return. There are no Liens for material amounts of Taxes on the assets
of Microfield except for statutory liens for current Taxes not yet due and
payable. There are no outstanding powers of attorney enabling any party to
represent Microfield with respect to Tax matters.
4.11 COMPLIANCE WITH LAWS. The business of Microfield has been
operated in compliance with all Laws applicable thereto, except for any
non-compliance that would not reasonably be expected to have a Material Adverse
Effect.
4.12 PERMITS. Section 4.12 of the Disclosure Schedules contains a
complete and accurate list of each material Permit that is held by Microfield or
that otherwise relates to the business of, or to any of the assets owned or used
by, Microfield. Each Permit is valid and in full force and effect. Except as set
forth in Section 4.12 of the Disclosure Schedules, (a) Microfield has all
Permits required in connection with the operation of its business, (b)
Microfield is not in violation of any Permit and (c) no proceedings are pending
or, to the Knowledge of Microfield, threatened, to revoke or limit any Permit,
except, in the case of each of clauses (a) and (b), where the absence or
violation would not reasonably be expected to have a Material Adverse Effect.
21-AGREEMENT AND PLAN OF MERGER
4.13 CONTRACTS. Section 4.13 of the Disclosure Schedules sets
forth, as of the date hereof, a list of the Material Contracts to which
Microfield is a party or by which its properties or assets are bound that are
outside the ordinary course of business. Microfield is not a party to any
agreements to acquire in the future the capital stock or substantially all the
assets of another Person. Except as disclosed in Section 4.13 of the Disclosure
Schedules, to the Knowledge of Microfield all the Material Contracts are valid
and binding and are in full force and effect and enforceable against Microfield
in accordance with their respective terms, subject to the Enforceability
Exceptions, and Microfield is not in violation or breach of or default under any
Material Contract, except where the failure to be in full force and effect or
where such violation or breach would not reasonably be expected to have a
Material Adverse Effect. To the Knowledge of Microfield, no party is in default,
violation or breach of any Material Contract where such violation or breach
would reasonably be expected to have a Material Adverse Effect.
4.14 EMPLOYEE BENEFIT PLANS.
(a) Section 4.14(a) of the Disclosure Schedules lists
Microfield's Employee Plans and any ERISA Affiliate or Subsidiary. Prior to the
date of this Agreement, Microfield has provided or made available to CTS copies
of (i) each such written Employee Plan (or a written description of any such
Employee Plan which is not written) and all related trust agreements, insurance
and other contracts (including policies), summary plan descriptions, summaries
of material modifications and any material communications to plan participants,
(ii) the three (3) most recent annual reports on Form 5500 series, with
accompanying schedules and attachments, filed with respect to each such Employee
Plan required to make such a filing, and (iii) the most recent favorable
determination letters issued for each such Employee Plan and related trust which
is intended to qualify under Section 401(a) of the Code (and, if an application
for such determination is pending, a copy of the application for such
determination).
(b) (i) None of the Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any Person (other than in
accordance with Section 4980B of the Code or Part 6 of Subtitle B of Title I of
ERISA and none of the Employee Plans is subject to Title IV of ERISA or Section
412 of the Code); (ii) neither Microfield nor any ERISA Affiliate has ever
contributed to a "MULTI-EMPLOYER PLAN" as such term is defined in Section 3(37)
of ERISA; (iii) to the Knowledge of Microfield, no "PARTY IN INTEREST" or
"DISQUALIFIED PERSON" (as defined in Section 3(14) of ERISA and Section 4975 of
the Code) has at any time engaged in a transaction with respect to any Employee
Plan that could subject Microfield or any ERISA Affiliate, directly or
indirectly, to a tax, penalty or other liability for prohibited transactions
under ERISA or Section 4975 of the Code, except for any such tax, penalty or
liability that would not reasonably be
22-AGREEMENT AND PLAN OF MERGER
expected to result in a Material Adverse Effect; (iv) to the Knowledge of
Microfield, no fiduciary of any Employee Plan has breached any of the
responsibilities or obligations imposed upon fiduciaries under Title I of ERISA,
except where such breach would not reasonably be expected to result in a
Material Adverse Effect; (v) all Employee Plans have been established and
maintained substantially in accordance with their terms and have operated in
compliance with the requirements prescribed by any and all statutes (including
ERISA and the Code), orders, or governmental rules and regulations currently in
effect with respect thereto (including all applicable requirements for
notification to participants or the Department of Labor, the IRS or the
Secretary of the Treasury), except where failure to do so would not reasonably
be expected to result in a Material Adverse Effect; and Microfield and each
Microfield Subsidiary have performed all obligations required to be performed by
them under, are not in default under or in violation of any Employee Plan except
where failure to do so would not reasonably be expected to result in a Material
Adverse Effect, and have no Knowledge of any default or violation by any other
party to, any of the Employee Plans; (vi) each Employee Plan which is intended
to be qualified under Sections 401 and 501 of the Code is the subject of a
favorable determination letter from the IRS, and to the Knowledge of Microfield
nothing has occurred that may reasonably be expected to impair such
determination; (vii) all contributions required to be made with respect to any
Employee Plan pursuant to the terms of the Employee Plan have been made on or
before their due dates, including due dates with respect to employee deferrals;
and (viii) there are no complaints, charges or claims against Microfield pending
or to Microfield's Knowledge threatened to be brought by or filed with any
Governmental Authority based on, arising out of, in connection with or otherwise
relating to the classification of any individual by Microfield as an independent
contractor or "LEASED EMPLOYEE" (within the meaning of Section 414(n) of the
Code) rather than as an employee.
(c) Section 4.14(c) of the Disclosure Schedules sets
forth a true and complete list of each current or former employee, officer or
director of Microfield or any of its Subsidiaries who holds (i) any option to
purchase Microfield Stock as of the date hereof, together with the number of
shares of Microfield Stock subject to such option, the option price of such
option (to the extent determined as of the date hereof), whether such option is
intended to qualify as an ISO, and the expiration date of such option; (ii) any
Microfield Stock that is restricted as a result of an agreement with or equity
participation plan of Microfield; and (iii) any other right, directly or
indirectly, to receive Microfield Stock, except as otherwise disclosed in
Section 4.14 of the Disclosure Schedules, together with the percentage of
Microfield Stock subject to such right. Section 4.14(c) of the Disclosure
Schedules also sets forth the total number of any such ISO's and any such
nonqualified options and other such rights.
(d) Unless otherwise disclosed in Section 4.14(a) of the
Disclosure Schedules, Section 4.14(d) of the Disclosure Schedules sets forth a
true and complete list of (i) all employment agreements with officers of
Microfield or any of its Subsidiaries; (ii) all agreements with consultants who
are individuals obligating Microfield or any of its Subsidiaries to make annual
cash payments in an amount exceeding $10,000; (iii) all agreements that
individually or in the aggregate are or could be material with respect to the
services of independent contractors or leased employees who are individuals or
individuals doing business in a corporate form whether or not they participate
in any of the Employee Plans; (iv) all officers of Microfield or any of its
Subsidiaries who have executed a non-competition agreement with Microfield or
any of its Subsidiaries; (v) all severance agreements, programs and policies of
Microfield or any of its Subsidiaries with or relating to its employees, in each
case with outstanding commitments exceeding $25,000, excluding programs and
policies required to be maintained by Law; and (vi) all plans, programs,
agreements and other arrangements of Microfield that contain change in control
provisions.
(e) (i) Except as set forth in Section 4.14(e) of the
Disclosure Schedules, no Employee Plan is an employee stock ownership plan
(within the meaning of Section 4975(e)(7) of the Code) or otherwise invests in
Microfield Stock; and (ii) the completion of the transactions
23-AGREEMENT AND PLAN OF MERGER
contemplated by this Agreement will not result in an increase in the amount of
compensation or benefits or accelerate the vesting or timing of payment of any
benefits or compensation payable in respect of any employee except as disclosed
in Section 4.14(e) of the Disclosure Schedules or except where such increase or
acceleration would not reasonably be expected to result in a Material Adverse
Effect.
(f) Except as set forth in Section 4.14(f) of the
Disclosure Schedules, Microfield maintains no Employee Plan covering non-U.S.
employees.
4.15 INTELLECTUAL PROPERTY.
(a) Section 4.15(a) of the Disclosure Schedules sets
forth a list of (i) all patents and patent applications owned by Microfield
worldwide; (ii) all trademark and service xxxx registrations and all trademark
and service xxxx applications, material common law trademarks, material trade
dress and material slogans, and all trade names owned by Microfield worldwide;
(iii) all copyright registrations and copyright applications owned by Microfield
worldwide; and (iv) all licenses in which Microfield is (A) a licensor with
respect to any of the patents, trademarks, service marks, trade names or
copyrights listed in Section 4.15 of the Disclosure Schedules or (B) a licensee
of any other Person's patents, trade names, trademarks, service marks or
copyrights except for any licenses of software programs that are commercially
available "OFF THE SHELF."
(b) Microfield owns, or is licensed or otherwise
possesses legal enforceable rights to use, all Intellectual Property Rights,
except for any such failures to own, be licensed or possess that would not
reasonably be expected to have a Material Adverse Effect.
(c) Microfield has made all necessary filings and
recordations for the patents, patent applications, trademark and service xxxx
registrations, trademark and service xxxx applications, copyright registrations
and copyright applications set forth in Section 4.15(a) of the Disclosure
Schedules, except where the failure to make such filings or recordations would
not reasonably be expected to have a Material Adverse Effect. There are not
currently pending, and to the Knowledge of Microfield there are no valid grounds
for, any bona fide claims (i) that the business of Microfield infringes on any
copyright, patent, trademark, service xxxx or trade secret; (ii) against the use
by Microfield of any trademarks, trade names, trade secrets, copyrights,
patents, technology, know-how or computer software programs and applications
used in the business of Microfield as currently conducted or as proposed to be
conducted; (iii) challenging the exclusive ownership, validity or effectiveness
of any of Intellectual Property Rights; or (iv) challenging the license or
legally enforceable right to use of any third-party patents, trademarks, service
marks and copyrights by Microfield, except, in the case of each of clauses (i),
(ii), (iii) and (iv) above, for matters that, if determined adversely to
Microfield, would not reasonably be expected to have a Material Adverse Effect.
(d) Except as set forth in Section 4.15 of the Disclosure
Schedules, to the Knowledge of Microfield, there is no material unauthorized
use, infringement or misappropriation of any of Intellectual Property Rights by
any third party, including any employee or former employee of Microfield.
24-AGREEMENT AND PLAN OF MERGER
(e) Except as set forth in Section 4.15 of the Disclosure
Schedules, there are no valid royalty agreements, license agreements (except for
any license implied by the sale or products) or similar arrangements with
respect to the Intellectual Property.
4.16 EMPLOYEE AND LABOR MATTERS.
(a) Section 4.16(a) of the Disclosure Schedules sets
forth a list of all employees of Microfield.
(b) Except as set forth in Section 4.16 of the Disclosure
Schedules, (i) there are no controversies pending or, to the Knowledge of
Microfield, threatened, between Microfield and any of its employees, which
controversies would reasonably be expected to have a Material Adverse Effect;
(ii) Microfield is not a party to any collective bargaining agreement or other
labor union contract applicable to Persons employed by Microfield, nor, as of
the date of this Agreement, does Microfield know of any activities or
proceedings of any labor union to organize any such employees; and (iii)
Microfield has no Knowledge of any strikes, slowdowns, work stoppages, lockouts,
or threats thereof, by or with respect to any employees of Microfield that would
reasonably be expected to have a Material Adverse Effect.
4.17 TITLE TO PROPERTY. Except as set forth in Section 4.17 of the
Disclosure Schedules, Microfield owns the properties and assets that it purports
to own free and clear of all Liens, except for Liens that arise in the ordinary
course of business and do not materially impair Microfield's ownership or use of
such properties or assets, Liens for taxes not yet due or delinquent or being
contested in good faith by appropriate proceedings for which reserves have been
established in accordance with GAAP and Liens securing obligations under
Microfield's credit agreements, loan agreements and equipment leases. Except as
set forth in Schedule 4.17 of the Disclosure Schedules, with respect to the
property and assets it leases, Microfield, and to the best of Microfield's
Knowledge, each of the other parties thereto, is in material compliance with
such leases, and Microfield holds a valid leasehold interest free of any Liens,
except those referred to above. The rights, properties and assets presently
owned, leased or licensed by Microfield include all rights, properties and
assets necessary to permit Microfield to conduct its business in all material
respects in the same manner as its businesses have been conducted prior to the
date hereof.
4.18 OWNED AND LEASED PREMISES. Each of the buildings, structures
and premises owned or leased by Microfield is in reasonably good repair and
operating condition.
4.19 ENVIRONMENTAL MATTERS. Except as set forth in Section 4.19 of
the Disclosure Schedules:
(a) Microfield is in material compliance with the
Environmental Laws, which compliance includes the possession by Microfield of
all material Permits and governmental authorizations required under applicable
Environmental Laws, and compliance in all material respects with the terms and
conditions thereof, except in each case where such non-compliance would not
reasonably be expected to have a Material Adverse Effect. Microfield has not
received
25-AGREEMENT AND PLAN OF MERGER
any written communication from a Governmental Authority that alleges that is not
in such material compliance except where such non-compliance would not
reasonably be expected to have a Material Adverse Effect.
(b) There are no Environmental Claims, including claims
based on "ARRANGER LIABILITY," pending or, to the Knowledge of Microfield,
threatened against Microfield or to the Knowledge of Microfield, pending or
threatened against any Person or entity whose liability for any Environmental
Claim Microfield has to the Knowledge of Microfield retained or assumed either
contractually or by operation of law, except for such Environmental Claims that
would not reasonably be expected to have a Material Adverse Effect.
(c) To the Knowledge of Microfield, there are no past or
present actions, inactions, activities, circumstances, conditions, events or
incidents, including the release, emission, discharge, presence or disposal of
any Material of Environmental Concern, that would form the basis of any
Environmental Claim against Microfield or against any Person whose liability for
any Environmental Claim Microfield has retained or assumed either contractually
or by operation of law, except for such Environmental Claims that would not
reasonably be expected to have a Material Adverse Effect.
(d) Microfield is in compliance in all material respects
with Environmental Laws as they relate to (i) any on-site or off-site locations
where to Microfield's Knowledge, Microfield has stored, disposed or arranged for
the disposal of Materials of Environmental Concern for itself (but not on behalf
of others) or (ii) any underground storage tanks located on property owned or
leased by Microfield of which Microfield has Knowledge.
4.20 INSURANCE. Section 4.20 of the Disclosure Schedules contains a
complete and accurate list of all fire, liability, worker's compensation and
other forms of insurance insuring Microfield, and its respective officers and
directors, assets and operations. The insurance polices maintained by Microfield
are with reputable insurance carriers and have no premium delinquencies.
4.21 FULL DISCLOSURE. No statement contained in any certificate or
schedule, including, without limitation, the Disclosure Schedules, furnished or
to be furnished by Microfield to CTS in, or pursuant to the provisions of, this
Agreement contains or shall contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary, in the light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading.
4.22 NO PRIOR ACTIVITIES. Except for obligations or liabilities
incurred in connection with its incorporation or organization or the negotiation
and completion of this Agreement and the transactions contemplated hereby
(including any financing in connection therewith), Merger Sub has not incurred
any obligations or liabilities and has not engaged in any business or activities
of any type or kind whatsoever or entered into any agreements or arrangements
with any Person.
26-AGREEMENT AND PLAN OF MERGER
ARTICLE 5 ADDITIONAL COVENANTS OF CTS
CTS covenants and agrees as follows:
5.1 CONDUCT OF BUSINESS OF CTS.
(a) Unless Microfield shall otherwise consent in writing
(which consent, in the case of paragraphs (iv), (v), (ix), (xi), (xii), or
(xiii) below, shall not be unreasonably withheld) and except as expressly
contemplated by this Agreement or in the Disclosure Schedules, during the period
from the date of this Agreement to the Effective Time, (i) CTS shall conduct its
business in the ordinary course and consistent with past practice, and CTS shall
use its reasonable best efforts to preserve substantially intact its business
organization, to keep available the services of its present officers and
employees and to preserve the present commercial relationships of CTS with
Persons with whom CTS does significant business and (ii) without limiting the
generality of the foregoing, CTS will not:
(i) Amend or propose to amend its Articles of
Incorporation or Bylaws (or similar organizational documents);
(ii) Authorize for issuance, issue, grant, sell,
pledge, dispose of or propose to issue, grant, sell, pledge or dispose of any
equity interests in CTS, or any options, warrants, commitments, subscriptions or
rights of any kind to acquire or sell any equity interests in or other
securities of CTS, including, but not limited to, any securities convertible
into or exchangeable for equity interests in CTS;
(iii) Split, combine or reclassify any of its
Stock or declare, pay or set aside any dividend or other distribution (whether
in cash, equity interests or property or any combination thereof) in respect of
its Stock, or directly or indirectly redeem, purchase or otherwise acquire or
offer to acquire any of its equity interests or other securities;
(iv) Create or incur any indebtedness for
borrowed money in excess of $5,000 or issue any debt securities or make any
loans or advances, outside the ordinary course of business;
(v) Sell, pledge, dispose of or encumber any
assets of CTS, outside the ordinary course of business;
(vi) Authorize any capital expenditures or
purchases of fixed assets in excess of $5,000, outside the ordinary course of
business;
(vii) Assume, guarantee or endorse or otherwise as
an accommodation become responsible for, the obligations of any Person, or make
any loans or advances;
(viii) Voluntarily incur any material liability or
obligation (absolute, contingent or otherwise) in excess of $5,000, outside the
ordinary course of business.
27-AGREEMENT AND PLAN OF MERGER
(ix) Increase in any manner the compensation of
any of its officers or employees or enter into, establish, amend or terminate
any employment, consulting, retention, change in control, collective bargaining,
bonus or other incentive compensation, profit sharing, health or other welfare,
stock option or other equity, pension, retirement, vacation, severance, deferred
compensation or other compensation or benefit plan, policy, agreement, trust,
fund or arrangement with, for or in respect of, any shareholder, officer,
director, employee, consultant or affiliate other than, in any such case
referred to above, as may be required by Law or as required pursuant to the
terms of agreements in effect on the date of this Agreement;
(x) Alter through merger, liquidation,
reorganization, restructuring or in any other fashion the corporate structure or
ownership of CTS;
(xi) Except as may be required as a result of a
change in Law, change any of the accounting principles or practices used by it;
(xii) Make any tax election or settle or
compromise any income tax liability;
(xiii) Pay, discharge or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or other), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of liabilities
reflected or reserved against in, or contemplated by, the Financial Statements
(or the notes thereto) of CTS or incurred in the ordinary course of business
consistent with past practice;
(xiv) Take, or agree in writing or otherwise to
take, any of the foregoing actions or any action that would make any of the
representations or warranties of CTS contained in this Agreement untrue or
incorrect in any material respect at or prior to the Effective Time; or
(xv) Acquire (by merger, consolidation, or
acquisition of stock or assets) any corporation, partnership or other business
organization or division thereof.
(b) CTS shall comply with all Laws applicable to it or
any of its properties, assets or business and to maintain in full force and
effect all Permits necessary for such business, except in any such case for any
failure so to comply or maintain that would not reasonably be expected to result
in a Material Adverse Effect.
5.2 NOTIFICATION OF CERTAIN MATTERS. CTS shall give prompt notice
to Microfield if any of the following occur after the date of this Agreement:
(a) receipt of any notice or other communication in writing from any party
alleging that the Consent of such party is or may be required in connection with
the transactions contemplated by this Agreement; (b) receipt of any notice or
other communication from any Governmental Authority in connection with the
transactions contemplated by this Agreement; (c) the occurrence of an event that
would be reasonably likely (i) to have a Material Adverse Effect or (ii) to
cause any condition set forth in Section 8.1 or 8.2 to be unsatisfied; or (d)
the commencement or threat of any Litigation involving or affecting Velagio or
CTS, or any of their respective properties or assets, or, to
28-AGREEMENT AND PLAN OF MERGER
CTS's Knowledge, any employee, agent, director, officer or shareholder, in his
or her capacity as such, of CTS which, if pending on the date hereof, would have
been required to have been disclosed pursuant to this Agreement or which relates
to the completion of the Merger.
5.3 ACCESS AND INFORMATION. Between the date of this Agreement and
the Effective Time, and without intending by this Section 5.3 to limit any of
the other obligations of the parties under this Agreement, CTS will give, and
shall direct its accountants and legal counsel to give, Microfield and its
authorized representatives (including, without limitation, its financial
advisors, accountants and legal counsel), at reasonable times and without undue
disruption to or interference with the normal conduct of the business and
affairs of CTS, access as reasonably required in connection with the
transactions provided for in this Agreement to all offices and other facilities
and to all contracts, agreements, commitments, books and records of or
pertaining to CTS and will furnish Microfield with such financial and operating
data and other information with respect to the business and properties of CTS as
Microfield may from time to time reasonably request in connection with such
transactions.
5.4 SHAREHOLDER APPROVAL. As soon as practicable, CTS will take
all steps necessary to duly call, give notice of, convene and hold the Special
Meeting for the purpose of voting upon the Merger, this Agreement and the
transactions contemplated hereby, or provide unanimous written consent of the
Shareholder approving this Agreement and the transactions contemplated hereby.
5.5 REASONABLE BEST EFFORTS. Subject to the terms and conditions
herein provided, CTS agrees to use reasonable best efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable to complete and make effective as promptly as practicable
the transactions contemplated by this Agreement, including, but not limited to,
obtaining all Consents from Governmental Authorities and other parties required
for the completion of the Merger and the transactions contemplated thereby,
including without limitation all Consents required under any Material Contract.
Upon the terms and subject to the conditions hereof, CTS agrees to use
reasonable best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary to satisfy the other conditions of the
Closing set forth herein.
5.6 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect,
CTS shall not, and shall use reasonable best efforts to cause its affiliates not
to, issue or cause the publication of any press release or any other
announcement with respect to the Merger or the transactions contemplated hereby
without the consent of Microfield, except where such release or announcement is
required by applicable Law, in which case CTS, prior to making such
announcement, will consult with Microfield regarding the same.
5.7 COMPLIANCE. In completing the transactions contemplated
hereby, CTS shall comply with all applicable Laws.
5.8 CTS SHAREHOLDER APPROVAL. CTS and the CTS Shareholder covenant
and agree to vote in favor of or consent to this Merger Agreement and the
transaction contemplated herein.
29-AGREEMENT AND PLAN OF MERGER
ARTICLE 6 ADDITIONAL COVENANTS OF MICROFIELD AND MERGER SUB
Microfield and Merger Sub covenant and agree as follows:
6.1 CONDUCT OF BUSINESS OF MICROFIELD.
(a) Unless Microfield shall otherwise consent in writing
(which consent, in the case of paragraphs (ii), (iii), (iv), (v), (ix), (x),
(xii), or (xiii) below, shall not be unreasonably withheld) and except as
expressly contemplated by this Agreement or in the Disclosure Schedules, during
the period from the date of this Agreement to the Effective Time, (i) Microfield
shall conduct its business in the ordinary course and consistent with past
practice, and Microfield shall use its reasonable best efforts to preserve
substantially intact its business organization, to keep available the services
of its present officers and employees and to preserve the present commercial
relationships of Microfield with Persons with whom Microfield does significant
business and (ii) without limiting the generality of the foregoing, Microfield
will not:
(i) Amend or propose to amend its Articles of
Incorporation or Bylaws (or similar organizational documents);
(ii) Authorize for issuance, issue, grant, sell,
pledge, dispose of or propose to issue, grant, sell, pledge or dispose of any
equity interests in Microfield, or any options, warrants, commitments,
subscriptions or rights of any kind to acquire or sell any equity interests in
or other securities of Microfield, including, but not limited to, any securities
convertible into or exchangeable for equity interests in Microfield;
(iii) Split, combine or reclassify any of its
Stock or declare, pay or set aside any dividend or other distribution (whether
in cash, equity interests or property or any combination thereof) in respect of
its Stock, or directly or indirectly redeem, purchase or otherwise acquire or
offer to acquire any of its equity interests or other securities;
(iv) Create or incur any indebtedness for
borrowed money in excess of $5,000 or issue any debt securities or make any
loans or advances, outside the ordinary course of business;
(v) Sell, pledge, dispose of or encumber any
assets of Microfield, outside the ordinary course of business;
(vi) Authorize any capital expenditures or
purchases of fixed assets in excess of $5,000, outside the ordinary course of
business;
(vii) Assume, guarantee or endorse or otherwise as
an accommodation become responsible for, the obligations of any Person, or make
any loans or advances;
(viii) Voluntarily incur any material liability or
obligation (absolute, contingent or otherwise) in excess of $5,000, outside the
ordinary course of business;
30-AGREEMENT AND PLAN OF MERGER
(ix) Increase in any manner the compensation of
any of its officers or employees or enter into, establish, amend or terminate
any employment, consulting, retention, change in control, collective bargaining,
bonus or other incentive compensation, profit sharing, health or other welfare,
stock option or other equity, pension, retirement, vacation, severance, deferred
compensation or other compensation or benefit plan, policy, agreement, trust,
fund or arrangement with, for or in respect of, any shareholder, officer,
director, employee, consultant or affiliate other than, in any such case
referred to above, as may be required by Law or as required pursuant to the
terms of agreements in effect on the date of this Agreement;
(x) Alter through merger, liquidation,
reorganization, restructuring or in any other fashion the corporate structure or
ownership of Microfield;
(xi) Except as may be required as a result of a
change in Law, change any of the accounting principles or practices used by it;
(xii) Make any tax election or settle or
compromise any income tax liability;
(xiii) Pay, discharge or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or other), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of liabilities
reflected or reserved against in, or contemplated by, the Financial Statements
(or the notes thereto) of Microfield or incurred in the ordinary course of
business consistent with past practice;
(xiv) Take, or agree in writing or otherwise to
take, any of the foregoing actions or any action that would make any of the
representations or warranties of Microfield contained in this Agreement untrue
or incorrect in any material respect at or prior to the Effective Time; or
(xv) Acquire (by merger, consolidation, or
acquisition of stock or assets) any corporation, partnership or other business
organization or division thereof, other than the transaction contemplated in the
VSI Merger Agreement.
(b) Microfield shall comply with all Laws applicable to
it or any of its properties, assets or business and to maintain in full force
and effect all Permits necessary for such business, except in any such case for
any failure so to comply or maintain that would not reasonably be expected to
result in a Material Adverse Effect.
6.2 NOTIFICATION OF CERTAIN MATTERS. Microfield shall give prompt
notice to CTS if any of the following occur after the date of this Agreement:
(a) receipt of any notice or other communication in writing from any party
alleging that the Consent of such party is or may be required in connection with
the transactions contemplated by this Agreement; (b) receipt of any notice or
other communication from any Governmental Authority in connection with the
transactions contemplated by this Agreement; (c) the occurrence of an event that
would be reasonably likely (i) to have a Material Adverse Effect or (ii) to
cause any condition set forth in
31-AGREEMENT AND PLAN OF MERGER
Section 8.1 or 8.3 to be unsatisfied; or (d) the commencement or threat of any
Litigation involving or affecting Microfield, or any of its respective
properties or assets, or, to Microfield's Knowledge, any employee, agent,
director, or officer, in his or her capacity as such, of Microfield which, if
pending on the date hereof, would have been required to have been disclosed
pursuant to this Agreement or which relates to the completion of the Merger.
6.3 ACCESS AND INFORMATION. Between the date of this Agreement and
the Effective Time, and without intending by this Section 6.3 to limit any of
the other obligations of the parties under this Agreement, Microfield will give,
and shall direct its accountants and legal counsel to give, CTS and its
authorized representatives (including, without limitation, its financial
advisors, accountants and legal counsel), at reasonable times and without undue
disruption to or interference with the normal conduct of the business and
affairs of Microfield, access as reasonably required in connection with the
transactions provided for in this Agreement to all offices and other facilities
and to all contracts, agreements, commitments, books and records of or
pertaining to Microfield and will furnish CTS with such financial and operating
data and other information with respect to the business and properties of
Microfield as CTS may from time to time reasonably request in connection with
such transactions.
6.4 REASONABLE BEST EFFORTS. Subject to the terms and conditions
herein provided, Microfield and Merger Sub agree to use reasonable best efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to complete and make effective as promptly
as practicable the transactions contemplated by this Agreement, including, but
not limited to, obtaining all Consents from Governmental Authorities and other
third parties required for the completion of the Merger and the transactions
contemplated by this Agreement, including without limitation all Consents
required under any of Microfield's Material Contracts. Upon the terms and
subject to the conditions hereof, Microfield and Merger Sub agree to use
reasonable best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary to satisfy the other conditions of the
Closing set forth herein.
6.5 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect,
Microfield and Merger Sub shall not, and shall use reasonable best efforts to
cause their affiliates not to, issue or cause the publication of any press
release or any other announcement with respect to the Merger or the transactions
contemplated by this Agreement without the consent of the Surviving Corporation
(such consent not to be unreasonably withheld or delayed), except where such
release or announcement is required by applicable Law, in which case Microfield,
prior to making such announcement, will consult with CTS regarding the same.
6.6 COMPLIANCE. In completing the transactions contemplated by
this Agreement, Microfield and Merger Sub shall comply in, and cause their
Subsidiaries to comply or to be in compliance, in all material respects, with
all applicable Laws.
ARTICLE 7 SURVIVAL; INDEMNIFICATION
7.1 SURVIVAL. All representations, warranties, covenants and
agreements made in this Agreement or in any exhibit, including but not limited
to the representations and warranties
32-AGREEMENT AND PLAN OF MERGER
contained in the VSI Merger Agreement, schedule, certificate or agreement
delivered in accordance with this Agreement (collectively, the "RELATED
DOCUMENTS"), shall survive any investigation by or on behalf of any party, the
execution and delivery of this Agreement, the consummation of the transactions
contemplated hereby and any termination or expiration of this Agreement.
7.2 INDEMNIFICATION BY THE CTS SHAREHOLDER. Notwithstanding any
investigation by Microfield, from and after the Closing, the CTS Shareholder
shall indemnify, hold harmless and, to the extent provided in Section 7.5(a),
defend Microfield, its subsidiaries, shareholders, affiliates, officers,
directors, employees, agents, successors and assigns (collectively,
"MICROFIELD'S INDEMNIFIED PERSONS") from and against, and reimburse each of
Microfield's Indemnified Persons with respect to, any and all losses, damages,
liabilities, costs, and expenses, including interest from the Closing Date to
the time of payment, penalties and reasonable attorney fees (collectively,
"DAMAGES") incurred by any of Microfield's Indemnified Persons by reason of or
arising out of or in connection with (a) any breach or inaccuracy of any
representation or warranty of CTS or the CTS Shareholder made in this Agreement
or any Related Document or (b) any failure by CTS or the CTS Shareholder to
perform any covenant required to be performed by it pursuant to this Agreement
or any Related Document. This indemnification extends to any Damages suffered by
any of Microfield's Indemnified Persons, whether or not a claim is made against
any of Microfield's Indemnified Persons by any third party.
7.3 INDEMNIFICATION BY MICROFIELD. Notwithstanding any
investigation by CTS or the CTS Shareholder, from and after the Closing,
Microfield shall indemnify, hold harmless and, to the extent provided in Section
7.5(a), defend the CTS Shareholder (collectively, "CTS INDEMNIFIED PERSONS")
from and against, and reimburse each of CTS Indemnified Persons with respect to,
any and all Damages incurred by any of CTS Indemnified Persons by reason of or
arising out of or in connection with: (a) any breach or inaccuracy of any
representation or warranty of Microfield or Merger Sub made in this Agreement or
any Related Document; (b) any failure by Microfield or Merger Sub to perform any
covenant required to be performed by it pursuant to this Agreement or any
Related Document; or (c) any liability or obligation of CTS to any third party
expressly assumed by Microfield in accordance with the terms of this Agreement.
This indemnification extends to any Damages suffered by any of CTS Indemnified
Persons, whether or not a claim is made against any of CTS Indemnified Persons
by any third party.
7.4 LIMITS ON INDEMNIFICATION. Notwithstanding the foregoing, the
liability of the CTS Shareholder and Microfield under Sections 7.2 and 7.3 above
shall be subject to the following limitations:
(a) CTS SHAREHOLDER LIABILITY. The liability of the CTS
Shareholder pursuant to Section 7.2 is limited as follows:
(i) No claim for indemnity will be effective if
not made within one (1) year after the Closing Date, other than claims based
upon the assertion that the CTS Shareholder had actual knowledge that a
representation or warranty made by the CTS Shareholder was
33-AGREEMENT AND PLAN OF MERGER
materially false when made or was made with the intent to deceive, which claims
may be made at any time up to the applicable statute of limitations;
(ii) The maximum aggregate amount of the
liability of the CTS Shareholder is 250,000 shares of Microfield Common Stock.
The 250,000 shares of Microfield Common Stock will be held in escrow as provided
in Section 2.7 and the Indemnification Escrow Agreement; and
(iii) The CTS Shareholder shall not have any
indemnification obligation with respect to the first $500,000 of Damages
incurred by Microfield's Indemnified Persons, as a group and in the aggregate,
including all similar Damages incurred by Microfield's Indemnified Persons
pursuant to the VSI Merger Agreement, unless Damages of Microfield's Indemnified
Persons, as a group and in the aggregate, including all Damages arising pursuant
to the VSI Merger Agreement equal or exceed such amount, in which case the CTS
Shareholder's obligations under Section 7.2 shall include only the amount of
such Damages in excess of $500,000.
(b) MICROFIELD'S LIABILITY. Microfield's obligations
pursuant to Section 7.3 are limited as follows:
(i) No claim for indemnity will be effective if
not made within one (1) year after the Closing Date, other than claims based
upon the assertion that Microfield had actual knowledge that a representation or
warranty made by Microfield was materially false when made or was made with the
intent to deceive, which claims may be made at any time up to the applicable
statute of limitations;
(ii) The maximum aggregate amount of Microfield's
liability calculated under both this Agreement and the VSI Merger Agreement is
250,000 shares of Microfield Common Stock. In the event that the aggregate
claims of by CTS Indemnified Persons and Velagio's Indemnified Persons exceed
the threshold amount set forth in Section 7.4(b)(iii), below and exceed the
250,000 shares of Microfield Common Stock the 250,000 shares shall be divided
pro rata based on the CTS Indemnified Persons and Velagio's Indemnified Persons'
aggregate claims; and
(iii) Microfield shall not have any
indemnification obligation with respect to the first $500,000 of Damages
incurred by CTS Indemnified Persons and Velagio's Indemnified Persons (as
defined in the VSI Merger Agreement) as a group and in the aggregate, unless
Damages of Velagio's Indemnified Persons and CTS Indemnified Persons, as a group
and in the aggregate, equal or exceed such amount, in which case Microfield's
obligations under Section 7.3 shall include only the amount of Damages in excess
of $500,000.
34-AGREEMENT AND PLAN OF MERGER
7.5 INDEMNIFICATION PROCEDURE.
(a) THIRD PARTY CLAIMS.
(i) Each indemnified party will, with reasonable
promptness after obtaining knowledge thereof, provide the indemnifying party
with written notice of all third party actions, suits, proceedings, claims,
demands or assessments that may be subject to the indemnification provisions of
this Article 7 (collectively, "THIRD PARTY CLAIMS"), including, in reasonable
detail, the basis for the claim, the nature of Damages and a good faith estimate
of the amount of Damages.
(ii) The indemnifying party or, in the case where
the CTS Shareholder is the indemnifying party, the Representative, shall have 15
days after receipt of the claim notice to notify the indemnified party in
writing whether the indemnifying party agrees that the claim is subject to this
Article 7 and, if so, whether the indemnifying party elects to undertake,
conduct and control, through counsel of its choosing (subject to the consent of
the indemnified party, such consent not to be withheld unreasonably), and at its
sole risk and expense, the good faith settlement or defense of the Third Party
Claim.
(iii) If within 15 days after receipt of the claim
notice the indemnifying party or, in the case where the CTS Shareholder is the
indemnifying party, the Representative, notifies the indemnified party that the
indemnifying party elects to undertake the good faith settlement or defense of
the Third Party Claim, the indemnified party shall reasonably cooperate with the
indemnifying party in connection therewith including, without limitation, by
making available to the indemnifying party all relevant information material to
the defense of the Third Party Claim. The indemnified party shall be entitled to
participate in the settlement or defense of the Third Party Claim through
counsel chosen by the indemnified party, at its expense, and to approve any
proposed settlement that would impose any obligation or duty on the indemnified
party, which approval may, in the sole discretion of the indemnified party, be
withheld. So long as the indemnifying party is contesting the Third Party Claim
in good faith and with reasonable diligence, the indemnified party shall not pay
or settle the Third Party Claim. Notwithstanding the foregoing, the indemnified
party shall have the right to pay or settle any Third Party Claim at any time,
provided that in such event it waives any right to indemnification therefor by
the indemnifying party.
(iv) If the indemnifying party or, in the case
where the CTS Shareholder is the indemnifying party, the Representative, does
not provide notice that it elects to undertake the good faith settlement or
defense of the Third Party Claim, or if the indemnifying party or, in the case
where the CTS Shareholder is the indemnifying party, the Representative, fails
to contest the Third Party Claim or undertake or approve settlement, in good
faith and with reasonable diligence, the indemnified party shall thereafter have
the right to contest, settle or compromise the Third Party Claim at its
exclusive discretion, at the risk and expense of the indemnifying party and the
indemnifying party will thereby waive any claim, defense or argument that the
indemnified party's defense or settlement of such Third Party Claim is in any
respect inadequate or unreasonable.
35-AGREEMENT AND PLAN OF MERGER
(v) A party's failure to give timely notice will
not constitute a defense (in part or in whole) to any claim for indemnification
by such party, except if, and only to the extent that, such failure results in
any material prejudice to the indemnifying party.
(b) NON-THIRD PARTY CLAIMS.
(i) Each indemnified party will, with reasonable
promptness, deliver to the indemnifying party written notice of all claims for
indemnification under this Article 7 in the form set forth in the
Indemnification Escrow Agreement.
(ii) The indemnifying party or, in the case where
the CTS Shareholder is the indemnifying party, the Representative, shall have
thirty (30) days after receipt of the claim notice to notify the indemnified
party in writing whether the indemnifying party accepts liability for all or any
part of the Damages described in the claim notice. If the indemnifying party or,
in the case where the CTS Shareholder is the indemnifying party, the
Representative, does not so notify the indemnified party the indemnifying party
shall be deemed to accept liability for all the Damages described in the claim
notice.
(iii) A party's failure to give timely notice will
not constitute a defense (in part or in whole) to any claim for indemnification
by such party, except if, and only to the extent that, such failure results in
any material prejudice to the indemnifying party. If there is a contradiction
between the terms of this Section 7.5(b) and the terms of the Indemnification
Escrow Agreement, the terms of the Indemnification Escrow Agreement shall
control.
7.6 PAYMENT WITH MICROFIELD COMMON STOCK. Any Damages payable
hereunder shall be by delivery of the equivalent value of Microfield Common
Stock using the Microfield Stock Value calculated as of the last trading day
prior to the delivery of the certificates. In the case of payment by the CTS
Shareholder, such payment will be accomplished by delivery by the Escrow Agent
of certificates representing shares of Microfield Common Stock together with
duly executed stock powers to Mellon Investor Services, LLC, the transfer agent
for Microfield Common Stock, or its successor, with instructions to transfer and
deliver to Microfield a stock certificate evidencing the requisite number of
shares to be transferred to Microfield or instructing that the shares be
cancelled, as the case may be, with certificates representing the balance to be
returned to Escrow Agent. In the case of payment by Microfield, such payment
will be accomplished by the issuance and delivery of certificates representing
the requisite number of shares of Microfield Common Stock to the CTS
Shareholder.
ARTICLE 8 CONDITIONS PRECEDENT
8.1 MERGER CONDITIONS. The respective obligations of each party to
effect the Merger shall be subject to the fulfillment or waiver at or prior to
the Effective Time of the following conditions:
(a) VSI MERGER. All of the conditions precedent to the
VSI Merger of all parties shall have been satisfied or waived in writing by the
appropriate party or parties, such that the VSI Merger shall close and become
effective simultaneously with the Effective Time.
36-AGREEMENT AND PLAN OF MERGER
(b) CTS SHAREHOLDER APPROVAL. The Merger, this Agreement
and the transactions contemplated by this Agreement shall have been approved at
or prior to the Effective Time by the required vote or unanimous written consent
of the CTS Shareholder in accordance with the OBCA and the Articles and Bylaws
of CTS.
(c) NO INJUNCTION OR ACTION. No order, statute, rule,
regulation, executive order, stay, decree, judgment or injunction shall have
been enacted, entered, promulgated or enforced by any court or other
Governmental Authority that prohibits or prevents the completion of the Merger
which has not been vacated, dismissed or withdrawn prior to the Effective Time.
CTS and Microfield shall use all reasonable best efforts to have any of the
foregoing vacated, dismissed or withdrawn by the Effective Time.
(d) EXHIBITS AND SCHEDULES. The parties to this
Agreement, in their sole discretion, shall have approved and attached the
Exhibits and Schedules called for in this Agreement at the Closing.
8.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF MICROFIELD AND
MERGER SUB. The obligations of Microfield and Merger Sub to be performed on the
Closing Date shall be subject to the satisfaction prior to or at the Closing of
the following express conditions precedent:
(a) COMPLIANCE WITH AGREEMENT. CTS shall have performed
and complied: (i) in all respects with all of its obligations under Section 5.1;
and (ii) in all respects with all of its other obligations under this Agreement
that are to be performed or complied with by it prior to or on the Closing Date,
except where the failure to perform or comply, individually or in the aggregate,
would not or would not be reasonably likely to result in a Material Adverse
Effect.
(b) REPRESENTATIONS AND WARRANTIES OF CTS. The
representations and warranties made by CTS in this Agreement shall be true and
correct in all respects when made and as of the Closing Date with the same force
and effect as though made on the Closing Date, except where the effect of any
breaches of the representations and warranties of CTS made in this Agreement,
individually or in the aggregate, would not be reasonably likely to result in a
Material Adverse Effect.
(c) NO MATERIAL ADVERSE EFFECT. During the period from
the date of this Agreement to the Closing Date there shall not have occurred,
and be continuing on the Closing Date, any Material Adverse Effect.
(d) CLOSING CERTIFICATES. CTS shall have delivered to
Microfield (a) a certificate signed on behalf of CTS by the Chief Executive
Officer of CTS, dated on the Closing Date, to the effect that, to the best of
such person's Knowledge, the conditions set forth in Sections 8.2(a), (b) and
(c) have been satisfied; and (b) a secretary's certificate as to such CTS
corporate matters in connection with the Merger as Microfield may reasonably
request.
37-AGREEMENT AND PLAN OF MERGER
8.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF CTS. The
obligations of CTS to be performed on the Closing Date shall be subject to the
satisfaction prior to or at the Closing of the following express conditions
precedent:
(a) COMPLIANCE WITH AGREEMENT. Microfield and Merger Sub
shall have performed and complied in all respects with all of their obligations
under this Agreement which are to be performed or complied with by them prior to
or on the Closing Date, except where the failure to perform or comply,
individually or in the aggregate, would not or would not be reasonably likely to
result in a Microfield Material Adverse Effect.
(b) REPRESENTATIONS AND WARRANTIES OF MICROFIELD AND
MERGER SUB. The representations and warranties made by Microfield and Merger Sub
in this Agreement shall be true and correct in all respects when made and as of
the Closing Date with the same force and effect as though such representations
and warranties had been made on the Closing Date, except where the effect of any
breaches of the representations and warranties of Microfield and Merger Sub made
in this Agreement, individually or in the aggregate, would not or would not be
reasonably likely to result in a Material Adverse Effect.
(c) CLOSING CERTIFICATE. Microfield shall have delivered
to CTS (i) a certificate signed on behalf of Microfield by the Chief Executive
Officer of Microfield, dated the Closing Date, to the effect that, to the best
of such officers' knowledge, the conditions set forth in Sections 8.3(a) and (b)
of this Agreement have been satisfied; and (ii) secretary's certificates of
Microfield and Merger Sub as to such corporate matters in connection with the
Merger as CTS may reasonably request.
(d) APPOINTMENT OF CHIEF EXECUTIVE OFFICER AND PRESIDENT.
The board of directors of Microfield shall have appointed Xxxxxxxxx Chief
Executive Officer and President of Microfield, effective immediately after the
Effective Time.
(e) APPOINTMENT OF CHIEF OPERATING OFFICER. The board of
directors of Microfield shall have appointed Xxxxxx X. Xxxxxx Chief Operating
Officer of Microfield immediately after the Effective Time.
(f) BOARD OF DIRECTORS. Xxxxxxxxx and Xxxxxx X. Jesenik
shall have been duly elected to Microfield's board of directors, effective
immediately after the Effective Time.
(g) XXXXXXXXX EMPLOYMENT AGREEMENT. Xxxxxxxxx shall have
executed and delivered an employment agreement with Microfield in the form
attached as Exhibit C.
(h) XXXXXX EMPLOYMENT AGREEMENT. Xxxxxx X. Xxxxxx shall
have executed and delivered an employment agreement with Microfield in the form
attached as Exhibit D.
38-AGREEMENT AND PLAN OF MERGER
ARTICLE 9 TERMINATION AND ABANDONMENT
9.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the CTS
Shareholder described herein:
(a) By mutual written consent of Microfield and CTS;
(b) By either Microfield or CTS if (i) any Governmental
Authority shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the completion of
the transactions contemplated by this Agreement and such order, decree or ruling
or other action shall have become final and nonappealable, or (ii) the CTS
Shareholders does not approve the Merger;
(c) By Microfield if:
(i) CTS shall have breached or failed to perform
in any material respect any of its covenants or other agreements contained in
this Agreement, which breach or failure to perform is incapable of being cured
or has not been cured within 5 days after the giving of written notice thereof
to CTS;
(ii) Any representation or warranty of CTS shall
not have been true and correct when made (without for this purpose giving effect
to qualifications of materiality contained in such representation and warranty),
if such failure to be true and correct, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect;
(iii) Any representation or warranty of CTS shall
cease to be true and correct at any later date (without for this purpose giving
effect to qualifications of materiality contained in such representation and
warranty) as if made on such date (other than representations and warranties
made as of a specified date) other than as a result of a breach or failure to
perform by Microfield of any of its covenants or agreements under this Agreement
if such failure to be true and correct, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect; provided, however,
that such representation or warranty is incapable of being cured or has not been
cured within 5 days after the giving of written notice thereof to CTS;
(iv) Since the date of the issuance of the CTS
Financial Statements, CTS shall have suffered a Material Adverse Change, or any
representation or warranty contained in the VSI Merger Agreement shall cease to
be true and correct at any later date, as if made on such date.
(d) By CTS if:
(i) Microfield or Merger Sub shall have breached
or failed to perform in any material respect any of its representations,
warranties, covenants or other agreements contained in this Agreement, which
breach or failure to perform is incapable of being cured or has not been cured
within 5 days after the giving of written notice thereof to Microfield;
39-AGREEMENT AND PLAN OF MERGER
(ii) Any representation or warranty of Microfield
or Merger Sub shall not have been true and correct when made (without for this
purpose giving effect to qualifications of materiality contained in such
representation and warranty), if such failure to be true and correct,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect;
(iii) Any representation or warranty of Microfield
or Merger Sub shall cease to be true and correct at any later date (without for
this purpose giving effect to qualifications of materiality contained in such
representation and warranty) as if made on such date (other than representations
and warranties made as of a specified date) other than as a result of a breach
or failure to perform by CTS of any of its covenants or agreements under this
Agreement if such failure to be true and correct, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect;
provided, however, that such representation or warranty is incapable of being
cured or has not been cured within 5 days after the giving of written notice
thereof to Microfield or Merger Sub;
(iv) Since June 29, 2003, Microfield shall have
suffered a Material Adverse Change.
(e) By either Microfield or CTS if the Merger is not
completed on or before October 1, 2003, provided that the right to terminate
this Agreement pursuant to this Section 9.1(e) shall not be available to any
party where failure to perform any of its obligations under this Agreement
results in the failure of the Merger to be completed by such time.
The party desiring to terminate this Agreement pursuant to the
preceding paragraphs shall give written notice of such termination to the other
party in accordance with Section 10.5 hereof.
9.2 EFFECT OF TERMINATION AND ABANDONMENT. In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article 9, this Agreement (other than Sections 9.2, 10.1, 10.3, 10.5, 10.6,
10.7, 10.8, 10.10, 10.11, 10.12, 10.14 and 10.15) shall become void and of no
effect with no liability on the part of any party hereto (or of any of its
directors, officers, members, employees, agents, legal or financial advisors or
other representatives); provided, however, that no such termination shall
relieve any party hereto from any liability for any willful breach of this
Agreement prior to termination. If this Agreement is terminated as provided
herein, each party shall use all reasonable best efforts to redeliver all
documents, work papers and other material (including any copies thereof) of any
other party relating to the transactions contemplated hereby, whether obtained
before or after the execution hereof, to the party furnishing the same.
ARTICLE 10 MISCELLANEOUS
10.1 CONFIDENTIALITY.
(a) Unless (i) otherwise expressly provided in this
Agreement, (ii) required by applicable Law, (iii) necessary to secure any
required Consents as to which the other party has
40-AGREEMENT AND PLAN OF MERGER
been advised or (iv) consented to in writing by Microfield and CTS, all
information (whether oral or written) and documents furnished in connection
herewith together with analyses, compilations, studies or other documents
prepared by such party which contain or otherwise reflect such information shall
be kept strictly confidential by Microfield, CTS, Merger Sub and their
respective officers, directors, employees, agents, and the CTS Shareholder.
Prior to any disclosure permitted pursuant to the preceding sentence, the party
intending to make such disclosure shall consult with the other party regarding
the nature and extent of the disclosure. Nothing contained herein shall preclude
disclosures to the extent necessary to comply with obligations imposed by
applicable Law.
(b) In the event the transactions contemplated by this
Agreement are not completed, each party shall return to the other any documents
furnished by the other and all copies thereof that any of them may have made and
will hold in confidence any information obtained from the other party except to
the extent (i) such party is required to disclose such information by Law or
such disclosure is necessary or desirable in connection with the pursuit or
defense of a claim, (ii) such information was known by such party prior to such
disclosure (and provided that, except with respect to information referred to in
the following clause (iii), such party shall have advised the other party of
such knowledge upon or promptly after its receipt of such information) or was
thereafter developed or obtained by such party independent of such disclosure,
or (iii) such information is or becomes generally available to the public other
than by breach of this Section 10.1 (or, to such party's Knowledge, breach of a
confidentiality agreement with the other party). Prior to any disclosure of
information pursuant to the exception in clause (i) of the preceding sentence,
the party intending to disclose the same shall so notify the party which
provided the same in order that such party may seek a protective order or other
appropriate remedy should it choose to do so.
10.2 AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified or supplemented only by a written agreement among CTS, Microfield and
Merger Sub.
10.3 WAIVER OF COMPLIANCE; CONSENTS. Any failure of CTS on the one
hand, or Microfield and Merger Sub on the other hand, to comply with any
obligation, covenant, agreement or condition herein may be waived by Microfield
on the one hand, or CTS on the other hand, only by a written instrument signed
by the party granting such waiver, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
10.3.
10.4 SURVIVAL. The respective representations, warranties,
covenants and agreements of CTS and Microfield contained herein or in any
certificates or other documents delivered prior to or at the Closing shall
survive the execution and delivery of this Agreement, notwithstanding any
investigation made or information obtained by the other party, but shall
terminate at the Effective Time, except for those contained in Article 7 and
Sections 2.8, 2.9, 2.10, 10.4 and 10.8, which shall survive beyond the Effective
Time.
41-AGREEMENT AND PLAN OF MERGER
10.5 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given when delivered in
person, or on the next business day when sent by overnight courier or on the
second succeeding business day when sent by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) IF TO CTS, TO:
Xxxxxxxxxxx Technology Services, Inc.
Xxxxx 000
0000 XX Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxx X. Jesenik and Xxxxxx X. Xxxxx
Tel: (000) 000-0000
(b) IF TO MICROFIELD OR MERGER SUB, TO:
Microfield Group, Inc.
Xxxxx 000
0000 XX Xxxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx
Tel: (000) 000-0000
WITH A COPY TO:
Xxxx Xxxxxx Xxxxx Xxxxxxx & Tongue LLP
Suite 1500
000 XX 0xx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxxxx X. Xxxxxxx
Tel: (000) 000-0000
10.6 BINDING EFFECT; ASSIGNMENT. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto prior to the Effective Time without the
prior written consent of CTS, in the case of a proposed assignment by Microfield
or Merger Sub, or by Microfield, in the case of a proposed assignment by CTS.
10.7 FEES AND EXPENSES. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs or expenses.
42-AGREEMENT AND PLAN OF MERGER
10.8 GOVERNING LAW. This Agreement shall be deemed to be made in,
and in all respects shall be interpreted, construed and governed by and in
accordance with the laws of, the state of Oregon. Each party consents to
jurisdiction and venue in Multnomah County, Oregon.
10.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.10 INTERPRETATION. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
10.11 ENTIRE AGREEMENT. This Agreement and the documents or
instruments referred to herein including, but not limited to, the attached
Exhibits and Disclosure Schedules, which Exhibits and Disclosure Schedules are
incorporated herein by reference, embody the entire agreement and understanding
of the parties hereto in respect of the subject matter contained herein. There
are no restrictions, promises, representations, warranties, covenants, or
undertakings other than those expressly set forth or referred to herein. This
Agreement supersedes all prior agreements and understandings among the parties
with respect to such subject matter.
10.12 SEVERABILITY. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable in a jurisdiction, such provision shall
be modified or deleted, as to the jurisdiction involved, only to the extent
necessary to render the same valid, legal and enforceable, and the validity,
legality and enforceability of the remaining provisions hereof shall not in any
way be affected or impaired thereby nor shall the validity, legality or
enforceability of such provision be affected thereby in any other jurisdiction.
10.13 SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. Accordingly, the parties further agree that each party shall
be entitled to an injunction or restraining order to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other right or remedy to which such party may be entitled under
this Agreement, at law or in equity.
10.14 THIRD PARTIES. Nothing contained in this Agreement or in any
instrument or document executed by any party in connection with the transactions
contemplated hereby shall create any rights in, or be deemed to have been
executed for the benefit of, any Person that is not a party hereto or thereto or
a successor or permitted assign of such a party.
10.15 DISCLOSURE SCHEDULES. Each Microfield and CTS acknowledges
that the Disclosure Schedules (a) relate to certain matters concerning the
disclosures required and transactions contemplated by this Agreement, (b) are
qualified in their entirety by reference to specific provisions of this
Agreement, and (c) are not intended to constitute and shall not be construed as
indicating that any such matter is required to be disclosed, nor should such
43-AGREEMENT AND PLAN OF MERGER
disclosure be construed as an admission that such information is material with
respect to CTS or Microfield, as the case may be, except to the extent required
by this Agreement.
[SIGNATURES ON FOLLOWING PAGE]
44-AGREEMENT AND PLAN OF MERGER
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
MICROFIELD GROUP, INC.
an Oregon corporation
By: ____________________________
Xxxxxx X. Xxxxxx, President
XXXXXXXXXXX TECHNOLOGY
SERVICES, INC. CTS ACQUISITION CO.
an Oregon corporation an Oregon corporation
By: ____________________________ By: ____________________________
Xxxxxx X. Jesenik, Xxxxxx X. Xxxxxx, President
Chief Executive Officer
The undersigned CTS Shareholder agrees to be bound by the applicable
terms and conditions of this Agreement.
XXXXXXXXXXX GROUP, LLC
an Oregon limited liability company
By: JMW CAPITAL PARTNERS, INC.
Its Manager
By: ____________________________
Xxxxxx X. Jesenik,
Chief Executive Officer
45-AGREEMENT AND PLAN OF MERGER
EXHIBIT A
INDEMNIFICATION ESCROW AGREEMENT
[See attached]
1-EXHIBIT A
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
[See attached]
1-EXHIBIT B
EXHIBIT C
XXXXXXXXX EMPLOYMENT AGREEMENT
[See attached]
1-EXHIBIT C
EXHIBIT X
XXXXXX EMPLOYMENT AGREEMENT
[See attached]
1-EXHIBIT D
