Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
RPR ACQUISITION SUBSIDIARY, INC.,
XXXXX INDUSTRIES, INC.,
and
ZETEC, INC.
dated as of July 31, 2002
TABLE OF CONTENTS
Page
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1. DEFINITIONS ........................................................................ 1
2. MERGER ............................................................................. 9
(a) Inventory Count ......................................................... 9
(b) Merger .................................................................. 9
(c) Execution of Merger ..................................................... 10
(d) Effect of Merger ........................................................ 10
(e) Payment of Aggregate Consideration ...................................... 10
(f) Surrender of Certificates ............................................... 11
(g) The Closing ............................................................. 11
(h) Deliveries at the Closing ............................................... 11
(i) Satisfaction of Xxxxxx Note ............................................. 12
(j) Minimum Net Working Capital Adjustment .................................. 12
3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS AND THE COMPANY ................. 14
(a) Organization of the Company and its Subsidiary .......................... 14
(b) Authorization of Transaction ............................................ 14
(c) Noncontravention ........................................................ 14
(d) Title to Company Shares ................................................. 15
(e) Capitalization; Company Shares .......................................... 15
(f) Redemption .............................................................. 15
(g) Shareholder Debt ........................................................ 16
(h) Company Equity Securities ............................................... 16
(a) Financial Statements .................................................... 16
(b) Events Subsequent to December 31, 2001 .................................. 17
(c) Undisclosed Liabilities ................................................. 19
(d) Legal Compliance ........................................................ 19
(e) Tax Matters ............................................................. 19
(f) Real Property ........................................................... 21
(g) Intellectual Property ................................................... 21
(h) Software ................................................................ 24
(i) No Infringement ......................................................... 25
(j) Tangible Assets ......................................................... 26
(k) Inventory ............................................................... 26
(l) Contracts ............................................................... 26
(m) Notes and Accounts Receivable ........................................... 28
(n) Powers of Attorney ...................................................... 28
(o) Insurance ............................................................... 28
(p) Litigation .............................................................. 28
(q) Product Warranty ........................................................ 29
(r) Product Liability ....................................................... 29
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(s) Employees ............................................................... 29
(t) Employee Benefits ....................................................... 30
(u) Guaranties .............................................................. 32
(v) Environment, Health, and Safety ......................................... 33
(w) Certain Business Relationships with the Company and its Subsidiary ...... 33
(x) Brokers ................................................................. 33
(y) Disclosure .............................................................. 33
(z) Knowledge Group ......................................................... 34
4. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE BUYER ......................... 34
(a) Organization of the Parent and the Buyer ................................ 34
(b) Authorization of Transaction ............................................ 34
(c) Noncontravention ........................................................ 34
(d) Broker's Fees ........................................................... 35
(e) Disclosure .............................................................. 35
(f) Financial Capability .................................................... 35
(g) Reliance ................................................................ 35
5. CONDITIONS TO OBLIGATION TO CLOSE .................................................. 35
(a) Conditions to Obligation of Parent and Buyer ............................ 35
(b) Conditions to Obligation of the Company ................................. 37
6. PRE-CLOSING COVENANTS .............................................................. 38
(a) Access and Investigation ................................................ 38
(b) Operation of the Businesses of the Company and its Subsidiary ........... 39
(c) Negative Covenant ....................................................... 39
(d) No Merger or Solicitation ............................................... 41
(e) Accounting and Securities Matters ....................................... 41
(f) Pre-Closing Funding of Pension Plan ..................................... 42
7. POST-CLOSING COVENANTS ............................................................. 42
(a) General ................................................................. 42
(b) Litigation Support ...................................................... 42
(c) Transition .............................................................. 42
(d) Tax Matters ............................................................. 43
(e) Company Charter Provisions .............................................. 44
8. REMEDIES FOR BREACHES OF THIS AGREEMENT ............................................ 44
(a) Survival of Representations and Warranties .............................. 44
(b) Indemnification Provisions Relating to Section 3.A Representations
for Benefit of the Parent and the Surviving Corporation ................. 44
(c) Indemnification Provisions Relating to Section 3.B Representations
and Covenants for Benefit of the Parent and the Surviving Corporation ... 45
(d) Escrow .................................................................. 46
(e) Indemnification Provisions for Benefit of the Stockholders .............. 46
(f) Matters Involving Third Parties ......................................... 47
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(g) Determination of Adverse Consequences ................................... 48
(h) Post-Closing ............................................................ 48
9. TERMINATION ........................................................................ 48
(a) Termination Events ...................................................... 48
(b) Effect of Termination ................................................... 49
10. MISCELLANEOUS ...................................................................... 49
(a) Press Releases and Public Announcements ................................. 49
(b) No Third-Party Beneficiaries ............................................ 49
(c) Entire Agreement ........................................................ 49
(d) Succession and Assignment ............................................... 49
(e) Counterparts ............................................................ 49
(f) Headings ................................................................ 50
(g) Notices ................................................................. 50
(h) Governing Law ........................................................... 51
(i) Amendments and Waivers .................................................. 51
(j) Severability ............................................................ 51
(k) Expenses ................................................................ 51
(l) Construction ............................................................ 52
(m) Incorporation of Exhibits and Schedules ................................. 52
(n) Specific Performance .................................................... 52
(o) Submission to Jurisdiction .............................................. 52
(p) Arbitration ............................................................. 53
Table of Exhibits:
Exhibit A--Form of Escrow, Release, and Indemnification Agreement
Exhibit B--Required Consents
Exhibit C--Xxxxx Xxxxxx Consent, Termination, and Release Agreement
Exhibit D--Form of Noncompetition and Assignment of Inventions Agreement
Exhibit E--Form of Opinion of Xxxxxxx Xxxxxxxx X.X.
Exhibit F--Form of Opinion of Powell, Goldstein, Xxxxxx & Xxxxxx LLP
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is entered into on
_______, 2002, by and among RPR ACQUISITION SUBSIDIARY, INC., a Delaware
corporation (the "Buyer"), XXXXX INDUSTRIES, INC., a Delaware corporation and
parent of Buyer ("Parent"), and ZETEC, INC., a Washington corporation (the
"Company"). The Buyer, Parent, and the Company are referred to collectively
herein as the "Parties". As a condition to closing, the Stockholders shall
approve this Agreement pursuant to the provisions of the Escrow, Release, and
Indemnification Agreement.
The Company, through itself and its wholly-owned subsidiary, Zetec Foreign
Sales Corporation, is in the business of the design, manufacture, and assembly
of eddy current instruments, software, probes, and accessories, and providing
field, application, product support, and training services in eddy current
testing and technology.
This Agreement contemplates a transaction in which the Buyer shall merge
with the Company, with the Company being the surviving corporation, and in
connection therewith, the Stockholders will receive consideration in the form of
cash.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows:
1. DEFINITIONS.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, penalties, fines, costs, amounts paid in
settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and fees,
including court costs and reasonable attorneys' fees and expenses.
"Affiliated Group" means any affiliated group within the meaning of Code
Section 1504(a) (or any similar group defined under a similar provision of
state, local, or foreign law).
"Aggregate Consideration" has the meaning set forth in Section 2(d)(i)
below.
"Applicable Rate" means the corporate base rate of interest announced from
time to time by Bank One, NA.
"Business" means the business conducted by the Company and its Subsidiary
prior to and as of the Closing Date, which is the business of the design,
manufacture, and assembly of eddy current instruments, software, probes, and
accessories, and providing field, application, product support, and training
services in eddy current testing and technology.
"Buyer" has the meaning set forth in the preface above.
"Buyer's Advisors" has the meaning set forth in Section 6(a)(i) below.
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"Capital Expenditures Budget" has the meaning set forth in Section
3.B(b)(v) below.
"Certificates" has the meaning set forth in Section 2(f) below.
"Closing" has the meaning set forth in Section 2(g) below.
"Closing Date" has the meaning set forth in Section 2(g) below.
"Closing Date Balance Sheet" has the meaning set forth in Section
2(j)(iii) below.
"COBRA" has the meaning set forth in Section 3.B(t)(x) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preface above.
"Company Disclosure Schedule" has the meaning set forth in Section 3.A
below.
"Company Plans" has the meaning set forth in Section 3.B(t)(ii) below.
"Company Shares" means the shares of the common stock, par value $0.01 per
share, of the Company.
"Compensation Memo" has the meaning set forth in Section 3.B(b)(xv) below.
"Confidential Information" means: (a) confidential data and confidential
information relating to the business of any Party (the "Protected Party") which
is or has been disclosed to another Party (the "Recipient") or of which the
Recipient became aware as a consequence of or through its relationship with the
Protected Party and which has value to the Protected Party and is not generally
known to its competitors and which is designated by the Protected Party as
confidential or otherwise restricted; and (b) information of the Protected
Party, without regard to form, including, but not limited to, Intellectual
Property, technical or nontechnical data, algorithms, formulas, patents,
compilations, programs, devices, methods, techniques, drawings, processes,
financial data, financial plans, product or service plans or lists of customers
or suppliers which is not commonly known or available to the public and which
information (i) derives economic value from not being generally known to, and
not being readily ascertainable by proper means by, other Persons who can obtain
economic value from its disclosure or use, and (ii) is the subject of efforts
that are reasonable under the circumstances to maintain its secrecy.
Notwithstanding anything to the contrary contained herein, Confidential
Information shall not include any data or information that (v) has been
voluntarily disclosed to the public by the Protected Party, (w) has been
independently developed and disclosed to the public by others, (x) otherwise
enters the public domain through lawful means, (y) was already known by
Recipient prior to such disclosure (as evidenced by written documentation) or
was lawfully and rightfully disclosed to Recipient by another Person, or (z)
that is required to be disclosed by law or order without the availability of
applicable protective orders or treatment.
"Delaware Act" means the General Corporation Law of the State of Delaware,
as amended.
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"Xxxxxx Agreements" means each of (i) that certain Stock Redemption
Agreement by and among Xxxxx Xxxxxx, the Company, and the then-existing
stockholders of the Company and their respective spouses, dated as of January
29, 1997; (ii) that certain Promissory Note in the original principal amount of
thirty nine million two hundred sixty thousand and six hundred thirty five
dollars ($39,260,635.00), dated as of January 29, 1997, by the Company in favor
of Xxxxx Xxxxxx; (iii) that certain Guaranty Agreement by the then-existing
stockholders of the Company and their respective spouses, in favor of Xxxxx
Xxxxxx, dated as of January 29, 1997; (iv) that certain Pledge Agreement by the
Company and the then-existing stockholders of the Company and their respective
spouses, in favor of Xxxxx Xxxxxx, dated as of January 29, 1997; (v) that
certain Notice and Instructions to Pledgeholder, by and among the Company, the
then-existing stockholders of the Company and their respective spouses, Xxxxx
Xxxxxx, and Xxxxxx, Xxxxxxxx & Xxxxx, dated as of January 29, 1997; (vi) that
certain Release and Indemnification Agreement by the Company, the then-existing
stockholders of the Company and their respective Spouses, in favor of Xxxxx
Xxxxxx, dated as of January 29, 1997; and (vii) the Shareholder Agreement.
"Xxxxxx Note" means that certain Promissory Note in the original principal
amount of thirty nine million two hundred sixty thousand and six hundred thirty
five dollars ($39,260,635.00), dated as of January 29, 1997, by the Company in
favor of Xxxxx Xxxxxx, as secured pursuant to (i) that certain Guaranty
Agreement by the then-existing stockholders of the Company and their respective
spouses, in favor of Xxxxx Xxxxxx, dated as of January 29, 1997, and (ii) that
certain Pledge Agreement by the Company and the then-existing stockholders of
the Company and their respective spouses in favor of Xxxxx Xxxxxx, dated as of
January 29, 1997.
"Xxxxxx Payoff" has the meaning set forth in Section 2(i) below.
"Effective Date" means the date specified in the Articles of Merger as the
effective date of the consummation of the Merger, as set forth in Section 2.
"Employee Benefit Plan" means any (i) nonqualified deferred compensation
or retirement plan or arrangement, including any Employee Pension Benefit Plan
(as defined in ERISA Section 3(2)), (ii) qualified defined contribution
retirement plan or arrangement, including any Employee Pension Benefit Plan,
(iii) qualified defined benefit retirement plan or arrangement, including any
Employee Pension Benefit Plan (including any Multiemployer Plan), (iv) employee
welfare benefit plan, including any Employee Welfare Benefit Plan (as defined in
ERISA Section 3(1)), (v) fringe benefit plan or program, and (vi) each
employment, severance, salary continuation or other contract, incentive plan,
insurance plan arrangement, bonus plan and any equity plan or arrangement
without regard to whether such plan, arrangement, program or contract exists
under US or any similar non-US law, rule or regulation.
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other US and non-US laws
(including rules, regulations, state law rulings, codes, plans, permits,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local and foreign governments (and all agencies thereof)
concerning pollution or protection of the environment, natural resources, public
health and safety, or employee health and safety,
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including, but not limited to, laws relating to emissions, discharges, releases,
or threatened releases of Hazardous Substances in ambient air, surface water,
drinking water, wetlands, ground water, or lands or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
recycling, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Fund" shall have the meaning defined in the Escrow Agreement.
"Escrow Agent" means SunTrust Bank, N.A.
"Escrow Agreement" means the Escrow, Release, and Indemnification
Agreement dated the Closing Date, entered into among the Parent, the Buyer, the
Company, the Stockholders, the respective spouses of the Stockholders, and the
Escrow Agent with respect to the indemnification obligations of the Stockholders
and the Company under Section 8 of this Agreement, and pursuant to which the
Stockholders and their respective spouses will agree to be bound by the terms of
this Agreement, the form of which is set forth as Exhibit A.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended,
and any counterpart or similar non-US law.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Final Adjustment Schedule" has the meaning set forth in Section 2(j)(iii)
below.
"Financial Statements" has the meaning set forth in Section 3.B(a) below.
"Founders" shall mean each of Xxxxxx XxXxx, Xxxxxx Xxxxxx and Xxxxx Xxxx.
"GAAP" means United States generally accepted accounting principles as in
effect as of the date hereof.
"Hazardous Substance" means any substance regulated under or defined by
Environmental, Health, and Safety Laws, including, but not limited to, any
pollutant, contaminant, hazardous substance, hazardous constituent, hazardous
waste, special waste, solid waste, industrial waste, petroleum derived substance
or waste, or toxic substance.
"Indebtedness" means (i) all indebtedness for borrowed money or for the
deferred purchase price of property, including the current portion of such
indebtedness, and (ii) all obligations evidenced by notes, bonds, debentures or
similar instruments.
"Indemnified Party" has the meaning set forth in Section 8(f)(i) below.
"Indemnifying Party" has the meaning set forth in Section 8(f)(i) below.
"Intellectual Property" means, with respect to the Company and the
Business:
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(a) all inventions (whether patentable or unpatentable and whether
or not reduced to practice), all improvements thereto, and all US and non-US
patents, patent applications, and patent disclosures, together with all
reissuances, continuations, divisionals, continuations-in-part, revisions,
extensions, and reexaminations thereof;
(b) all US and non-US trademarks, service marks, trade dress, logos,
trade names and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith;
(c) all copyrightable works, all US and non-US copyrights, and all
applications, registrations, and renewals in connection therewith;
(d) all mask works and all applications, registrations, and renewals
in connection therewith;
(e) all trade secrets and confidential business information
(including without limitation ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals);
(f) all other proprietary rights;
(g) all Owned Software and all Licensed Software;
(h) all right, title, and interest in and to the name "Zetec";
(i) all right, title, and interest in and to the world wide web
internet domain name "xxx.xxxxx.xxx", and each other world wide web internet
domain name owned by the Company, and each other world wide web internet domain
name used in the Business; and
(j) with respect to each of the foregoing, all copies and tangible
embodiments thereof (in whatever form or medium).
"Inventory Count" has the meaning set forth in Section 2(a) below.
"Knowledge of the Company" means the actual knowledge as of the date of
this Agreement of the Stockholders listed in Section 3.B(z) of the Company
Disclosure Schedule, together with such knowledge as they would reasonably be
expected to have as a result of their positions with the Company.
"Leased Real Property" has the meaning set forth in Section 3.B(f)(ii)
below.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
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"Licensed Software" has the meaning set forth in Section 3.B(h)(i) below.
"Xxxxxx Compensation Agreement" means that certain Compensation Agreement
by and between the Company and Xxxxxx Xxxxxx dated as of January 29, 1997.
"Xxxxxx Agreement" means that certain Consulting Agreement between Zetec,
Inc. and Xxxxxxx X. Xxxxxx dated October 1, 1998.
"XxXxx Compensation Agreement" means that certain Compensation Agreement
by and between the Company and Xxxxxx XxXxx dated as of January 29, 1997.
"Merger" has the meaning set forth in Section 2(b) below.
"Merger Consideration" has the meaning set forth in Section 2(d)(i) below.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Net Working Capital" means the excess of total current assets, including
without limitation cash, accounts receivable, net inventories (calculated in a
first-in, first-out basis), prepaid expenses, and other current assets, less
total current liabilities (including without limitation accounts payable),
year-to-date accruals of the type included in the Company's 2001 audited
financial statements (including but not limited to Liability for claims under
the Company's self-insurance arrangements, accrued employee bonus payments,
accrued benefits and accrued profit sharing payments), accrued liabilities, and
deferred rent expense (but excluding liabilities to the extent reflected in
amounts payable under Section 2(e)(ii) of this Agreement), in each case
determined in accordance with GAAP. To the extent that the Xxxxxx Payoff exceeds
thirty million three hundred thousand dollars ($30,300,000.00), such excess
shall be a reduction in Net Working Capital, and to the extent that the Xxxxxx
Payoff is less than thirty million three hundred thousand dollars
($30,300,000.00), such amount shall be an increase in Net Working Capital. All
accounting entries will be made regardless of their amount and all detected
errors and omissions will be corrected regardless of their materiality.
"Noncompetition and Assignment of Inventions Agreement" shall mean those
Noncompetition and Assignment of Inventions Agreements, the form of which is
attached hereto as Exhibit D.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Owned Software" has the meaning set forth in Section 3.B(h)(i) below.
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Process Agent" has the meaning set forth in Section 10(o) below.
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"Product Warranty Claims" means claims of the customers of the Company and
its Subsidiary and/or users made at any time following Closing in the Ordinary
Course of Business with respect to products sold, manufactured, leased or
delivered by the Company and its Subsidiary on or prior to the Closing Date,
which (i) are based solely on the Company's written product warranties disclosed
to Buyer, or with respect to Probes, consistent with the Ordinary Course of
Business, and (ii) are only for repair or replacement remedies.
"Prohibited Transaction" has the meaning set forth in Section
3.B(t)(ix)(B) below.
"Purchase Price Adjustment" has the meaning set forth in Section 2(j)(i)
below.
"Redemptions" has the meaning set forth in Section 3.A(f) below.
"Related Person" means with respect to a particular individual: (a) each
other member of such individual's Family; (b) any Person that is directly or
indirectly controlled by such individual or one or more members of such
individual's Family; (c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and (d) any Person with respect to which such individual or one or more members
of such individual's Family serves as a director, manager, officer, partner,
executor, or trustee (or in a similar capacity). With respect to a specified
Person other than an individual: (A) any Person that directly or indirectly
controls, is directly or indirectly controlled by, or is directly or indirectly
under common control with such specified Person; (B) any Person that holds a
Material Interest in such specified Person; (C) each Person that serves as a
director, manager, officer, partner, executor, or trustee of such specified
Person (or in a similar capacity); (D) any Person in which such specified Person
holds a Material Interest; (E) any Person with respect to which such specified
Person serves as a general partner or a trustee (or in a similar capacity); and
(F) any Related Person of any individual described in clause (B) or (C).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse, (iii) any other
natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934,
as amended) of voting securities or other voting interests representing at least
10% of the outstanding voting power of a Person or equity securities or other
equity interests representing at least 10% of the outstanding equity securities
or equity interests in a Person.
"Requisite Shareholder Vote" has the meaning set forth in Section 3.A(b)
below.
"R&W Insurance Policy" means that certain Representations and Warranties
Insurance Policy by Gulf Underwriters Insurance Company in the form previously
approved by the Parties, to be issued at Closing in favor of the Parent, the
subsidiaries and affiliates of the Parent, the Company, the Surviving
Corporation, and each of their respective current and former officers and
directors.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's, and
similar liens incurred in the Ordinary Course of Business not yet due and
payable, (b) liens for Taxes not yet due and
7
payable, (c) purchase money liens and liens securing rental payments under
capital lease arrangements, and (d) other liens arising in the Ordinary Course
of Business and not incurred in connection with the borrowing of money.
"Severally" means each Stockholder is liable alone for his or her own
share of a claim, proportionate to that Stockholder's percentage ownership of
the Company Shares as reflected in Section 3.A(e) of the Company Disclosure
Schedule.
"Shareholder Agreement" means that certain Shareholder Agreement by and
among the Company and the then-existing stockholders of the Company and their
respective spouses, dated as of January 29, 1997, as amended.
"Software" has the meaning set forth in Section 3.B(h)(i) below.
"Stockholder Representatives" means the individuals (and their successors)
specified in the Escrow, Release, and Indemnification Agreement as the
Stockholder Representatives, who have been appointed by the Stockholders for the
purpose of acting on behalf of the Stockholders with respect to the transactions
contemplated by this Agreement, including without limitation acting as transfer
agent for the Company Shares, administering the Aggregate Consideration, as
adjusted, as set forth in Section 2 below, and making decisions with respect to
indemnity claims and amendments to this Agreement, the Escrow, Release, and
Indemnification Agreement, or any ancillary agreements.
"Stockholders" means each of Xxxxxxx Xxxxxxx, an individual resident of
the State of Washington; Xxxxxxx Xxxxxx, an individual resident of the State of
Washington; Xxxxx Xxx, an individual resident of the State of Washington; Xxx
Xxxx, an individual resident of the State of Washington; Xxxx Xxxxxxxxxx, an
individual resident of the State of Washington; Xxxxxxx Xxxxx, an individual
resident of the State of Washington; Xxxxxxx Xxxxx, an individual resident of
the State of Washington; Xxxxxx X. Xxxxxxxxx, an individual resident of the
State of Washington; Xxxxx Xxxxx, an individual resident of the State of
Washington; Xxxxxx Xxxxx, an individual resident of the State of Washington;
Xxxxx Xxxxxxxxxxxx, an individual resident of the State of Washington; Xxxxxx X.
Xxxxxx, an individual resident of the State of Washington; Xxxxxx Xxxxx XxXxx,
an individual resident of the State of Washington; Xxxxxx O'Dell, an individual
resident of the State of Washington; Xxxx X. Xxxxxx, an individual resident of
the State of Washington; Xxxxxxx Xxxxx, an individual resident of the State of
Washington; Xxxxxx Xxxxxxx, an individual resident of the State of Washington;
Xxxxxxx X. Xxx Xxxxx, an individual resident of the State of Washington; and
Xxxxxxx Xxxxxxx, an individual resident of the State of Washington.
"Subsidiary" means any corporation, limited partnership, limited liability
company, or other entity with respect to which a specified Person (or a
Subsidiary thereof) owns a majority of the common stock, units or other equity
interests or has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors, and means specifically, with respect to
the Company, Zetec Foreign Sales Corporation, a corporation organized under the
laws of Barbados.
"Surviving Corporation" has the meaning set forth in Section 2(b) below.
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"Takeover Proposal" means any written inquiry, proposal or offer from any
Person relating to (A) any direct or indirect acquisition or purchase of (i) the
assets of the Company or its Subsidiary outside of the Ordinary Course of
Business, or (ii) any securities of the Company or its Subsidiary, or (B) any
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company or its Subsidiary
(other than the transactions contemplated by this Agreement).
"Tax" means any federal, state, local, or foreign income, built-in gains
(within the meaning of Code Section 1374 or any comparable foreign, state or
local provisions), gross receipts, excess net passive income (within the meaning
of Code Section 1375 or any comparable foreign, state or local provisions),
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
retailer's occupation taxes and other taxes commonly understood to be sales or
use taxes, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8(f)(i) below.
"Undisclosed Liabilities" has the meaning set forth in Section 3.B(c)
below.
"Washington Act" means the Washington Business Corporation Act, as
amended.
2. MERGER.
(a) Inventory Count.
Not earlier than three (3) days prior to the Closing Date, the
Company, at its expense, shall conduct a physical inventory count of the
inventory of the Company and its Subsidiary (the "Inventory Count"), which
Inventory Count shall be completed prior to the Closing. The Parent and the
Buyer shall have the right to observe the Inventory Count.
(b) Merger.
At the Effective Date and subject to the terms and conditions of
this Agreement, Buyer shall be merged with and into the Company (the "Merger"),
in accordance with the relevant provisions of the Washington Act and the
Delaware Act, the separate corporate existence of the Buyer shall cease and the
Company shall continue as the surviving corporation (the "Surviving
Corporation"). The Merger shall otherwise have the effect set forth in the
Washington Act.
9
(c) Execution of Merger.
At the Closing, the Parties shall cause articles of merger to be
delivered to the Secretary of State of Washington and the Secretary of State of
Delaware executed in accordance with relevant provisions of the Washington Act
and the Delaware Act for filing thereby. Each such articles of merger shall
specify that the merger shall be effective as of the Effective Date, and that
the Articles of Incorporation of the Company shall be amended and restated in
its entirety to effect the replacement of the terms of the Articles of
Incorporation of the Company with those of the Certificate of Incorporation of
the Buyer, and such Amended and Restated Articles of Incorporation of the
Company shall be the Articles of Incorporation of the Surviving Corporation;
provided, however, that the name of the Surviving Corporation shall be Zetec,
Inc. The bylaws of the Buyer as in effect immediately prior to the Closing Date,
shall be the bylaws of the Surviving Corporation. As of Closing, the officers
and directors of the Surviving Corporation shall be as set forth on Section 2(c)
of the Company Disclosure Schedule, in each case, until their respective
successors are duly elected and qualified. Upon request of the Surviving
Corporation, the directors and officers of the Zetec Foreign Sales Corporation
will resign.
(d) Effect of Merger.
At the Closing, by virtue of the Merger and without any action on
the part of the holders thereof:
(i) all of the Company Shares shall be canceled and converted
into, and represent the right to receive in the manner provided in
Section 2(e) below, the aggregate of Twenty Five Million Eight
Hundred Ninety-Four Thousand Three Hundred Forty-Five Dollars
($25,894,345.00) (the "Aggregate Consideration, subject to
post-Closing adjustment as provided in Section 2(j) below (the net
amount referred to as the "Merger Consideration");
(ii) each share of capital stock of the Company that is held
in the treasury of the Company, if any, shall be cancelled and
retired and cease to exist and no consideration shall be issued in
exchange therefor; and
(iii) each issued and outstanding share of capital stock of
Buyer shall be converted into and become one fully paid and
non-assessable share of capital stock of the Surviving Corporation.
(e) Payment of Aggregate Consideration.
At the Closing Date, the Aggregate Consideration shall be paid and
allocated as follows:
(i) Five Million Eight Hundred Thousand Dollars
($5,800,000.00) shall be paid to the Escrow Agent, to be held and
disbursed as provided in Section 8 below and the Escrow Agreement;
10
(ii) Six Hundred Thousand Dollars ($600,000.00), which
represents the fees and expenses of the Stockholders' advisors, as
contemplated in Section 10(k) of this Agreement, shall be paid as
directed by the Stockholder Representatives;
(iii) the balance of the Aggregate Consideration shall be paid
to such accounts as may be designated in writing to the Buyer by the
Stockholder Representatives at least two business days prior to the
Closing Date, by wire transfer or other immediately available funds,
which amount shall be paid to the Stockholders pro rata based upon
the number of Company Shares held by each Stockholder as set forth
in Section 3.A(e) of the Company Disclosure Schedule.
(f) Surrender of Certificates.
Pursuant to the Escrow Agreement, the Stockholders shall appoint the
Stockholder Representatives as transfer agent for the purpose of surrendering
certificates representing the Company Shares for each Stockholder's portion of
the Aggregate Consideration, as set forth in Section 2(e) above. At the Closing,
each Stockholder shall deliver an executed assignment separate from certificate,
in a form reasonably satisfactory to the Parent, together with those original
certificates that immediately prior to the Closing represented the Company
Shares held by the Stockholders, or a duly executed affidavit of lost
certificate and indemnity for any Certificate which has been lost, stolen,
seized or destroyed (the "Certificates"), to Parent. Upon the surrender of
Certificates to Parent, the Stockholders shall be entitled to receive in
exchange therefor the Aggregate Consideration in accordance with Section
2(e)(iii) and the Certificates so surrendered shall be forthwith cancelled.
(g) The Closing.
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Xxxxxxx Xxxxxxxx X.X. at 10:00
a.m., on July 31, 2002, to be effective as of the commencement of business on
August 1, 2002, or such other date and time, or in such other manner, as the
Parties may agree (the "Closing Date").
(h) Deliveries at the Closing.
At the Closing, the Company and the Stockholders will deliver to the
Parent and the Buyer the various certificates, instruments, and documents
referred to in Section 5(a) below; (ii) the Parent and the Buyer will deliver to
the Company and the Stockholder Representatives the various certificates,
instruments, and documents referred to in Section 5(b) below; (iii) the Company
and the Stockholders will execute, acknowledge (if appropriate), and deliver to
the Parent and the Buyer such documents as the Parent, the Buyer and their
counsel may reasonably request; (iv) the Buyer will execute, acknowledge (if
appropriate), and deliver to the Company such documents as the Company and the
Stockholder Representatives and their counsel reasonably may request; and (v)
the Buyer will deliver to the Stockholders, and others specified in Section
2(e), the Aggregate Consideration.
11
(i) Satisfaction of Xxxxxx Note.
Prior to the Closing, the Company shall obtain from Xxxxx Xxxxxx a
payoff letter, indicating the amount of principal and accrued interest unpaid as
of the Closing Date in respect to the Xxxxxx Note, which payoff letter shall
indicate that upon wire transfer of such amount to an account designated by
Xxxxxx, the Xxxxxx Note shall be paid and satisfied fully and all obligations
under the Xxxxxx Agreements shall be terminated and satisfied (the "Xxxxxx
Payoff"). During the Closing: the Parties shall deliver the documents and
instruments described in Paragraph (b) above; the Parent shall make a capital
contribution to the Surviving Corporation in an amount equal to the Xxxxxx
Payoff; and the Surviving Corporation shall pay the amount of the Xxxxxx Payoff
to Xxxxx Xxxxxx.
(j) Minimum Net Working Capital Adjustment.
(i) The Aggregate Consideration shall be increased or reduced,
as the case may be, on a dollar-for-dollar basis to the extent that
the Net Working Capital of the Company as of the close of business
on the Closing Date is greater or less than Twelve Million Five
Hundred Thousand Dollars ($12,500,000.00). Any decrease or increase
in the Aggregate Consideration pursuant to this Section 2(j) shall
be referred to as a "Purchase Price Adjustment".
(ii) As part of the calculation of Net Working Capital, the
Company shall be credited with any funds received as a result of any
refund from the purchase or extension of any insurance policies that
are terminated on or after Closing. The Company will endeavor in
good faith to complete an inventory count and valuation as of June
30, 2002 and the Parent will reasonably cooperate in an effort to
agree with the Company prior to the Closing with respect to a
valuation methodology and range in accordance with GAAP that would
be applicable to the inventory count and valuation as of June 30,
2002, and to the inventory count and valuation that will occur as of
the Closing Date in connection with the Closing Date Balance Sheet
and the Final Adjustment Schedule. Failure to agree on a valuation
methodology and range prior to Closing shall in no event delay the
Closing or give rise to a claim of breach of this Agreement.
(iii) No later than forty five (45) days after the Closing
Date, the Parent shall deliver to the Stockholder Representatives
(i) a balance sheet and a statement of operations of the Company for
the period ended as of the close of business on the Closing Date,
prepared in accordance with GAAP (the "Closing Date Balance Sheet"),
and (ii) a separate statement calculating Net Working Capital of the
Company as of the close of business on the Closing Date, based on
the Closing Date Balance Sheet, showing any calculations with
respect to any necessary Purchase Price Adjustment, prepared in
accordance with GAAP (the "Final Adjustment Schedule"). The
Stockholder Representatives shall have the right to examine and make
copies of the work papers and such other documents that are
generated or reviewed by the Parent in connection with the
preparation of the Closing Date Balance Sheet and the Final
Adjustment Schedule.
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(iv) The Stockholder Representatives shall, within forty-five
(45) days following their receipt of the Closing Date Balance Sheet
and the Final Adjustment Schedule, accept or reject the Purchase
Price Adjustment submitted by the Parent. If the Stockholder
Representatives disagree with such calculation, they shall give
written notice to the Parent of such disagreement and any reason
therefor within such forty-five (45) day period. Should the
Stockholder Representatives fail to notify the Parent of a
disagreement within such forty-five (45) day period, the
Stockholders shall be deemed to agree with the Parent's calculation.
Any disagreement with respect to the determination of any Purchase
Price Adjustment shall be resolved in the manner set forth in
Section 10(p) below, except that the arbitrator shall be a certified
public accountant at Ernst & Young, selected by the manager of the
Seattle office of that firm. The arbitrator shall issue its report
as to the Net Working Capital as of the close of business on the
Closing Date, and the determination of the Purchase Price Adjustment
reflected in the Final Adjustment Schedule within sixty (60) days
after such dispute is referred to such arbitrator. The Stockholder
Representatives (on behalf of the Stockholders) on the one hand, and
the Parent on the other hand, shall bear all costs and expenses
incurred by it in connection with such arbitration, except that (1)
the costs and expenses of the Stockholder Representatives shall be
paid from the Escrow Fund, and (2) the fees and expenses of the
arbitrator hereunder shall be borne by the Stockholder
Representatives (on behalf of the Stockholders) and the Parent in
such proportion as such arbitrator shall determine based on the
relative merit of the position of the parties. This provision for
arbitration shall be specifically enforceable by the Parties and the
decision of such arbitrator in accordance with the provisions hereof
shall be final and binding with respect to the matters so arbitrated
and there shall be no right of appeal therefrom.
(v) If, based on the Final Adjustment Schedule as finally
determined pursuant to this Section 2(j), (i) the Net Working
Capital of the Company as of the close of business on the Closing
Date is less than Twelve Million Five Hundred Thousand Dollars
($12,500,000.00), the Stockholders Severally, coordinated by the
Stockholder Representatives, shall pay and deliver to the Parent an
amount equal to such deficit, or (ii) the Net Working Capital of the
Company as of the close of business on the Closing Date is greater
than Twelve Million Five Hundred Thousand Dollars ($12,500,000.00),
the Parent shall pay to the Stockholders, by and through the
Stockholder Representatives, an amount equal to such excess for
distribution to the Stockholders in accordance with the percentages
specified in Section 3.A(e) of the Company Disclosure Schedule,
after payment or reserves for payment of fees and expenses of
Stockholder Advisors. Final amounts due hereunder shall be paid no
later than five (5) business days following the Stockholder
Representatives' agreement with the Parent's calculation of the
Purchase Price Adjustment, or in the event of a disagreement,
following the resolution of such disagreement by written agreement
of the Parent and the Stockholder Representatives, or the
determination of the Arbitrator pursuant to Section 2(j)(iii) above.
13
3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS AND THE COMPANY.
A. Fundamental Representations of the Stockholders. The Stockholders
Severally represent and warrant to the Parent and the Buyer that the statements
contained in this Section 3.A (the "Section 3.A Representations") are true,
correct and complete as of the date hereof, and will be true, correct and
complete as of the Closing Date, except: as specified to the contrary in the
corresponding paragraph of the disclosure schedule prepared by the Company
accompanying this Agreement and initialed by the Stockholder Representatives and
the Buyer (the "Company Disclosure Schedule"). The Company Disclosure Schedule
will be arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this Section 3.A.
(a) Organization of the Company and its Subsidiary.
(i) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Washington and is duly qualified to conduct business in the
jurisdictions set forth on Section 3.A(a)(i) of the Company
Disclosure Schedule.
(ii) Zetec Foreign Sales Corporation is a Subsidiary of the
Company, and is a corporation duly organized, validly existing, and
in good standing under the laws of Barbados. The Company is the sole
record and beneficial owner of the capital stock of Zetec Foreign
Sales Corporation. Zetec Foreign Sales Corporation has nominal
assets, no liabilities and has not engaged in any business activity
since January of 2001.
(b) Authorization of Transaction.
The Board of Directors of the Company has approved this Agreement
and recommended its approval by the Stockholders. The Company has the full power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder, subject to obtaining the approval of the stockholders by
the affirmative vote of at least two-thirds (66 2/3%) of the issued and
outstanding shares of the Company's stock at a shareholders meeting to be held
prior to the Closing (the "Requisite Stockholder Vote"), and the satisfaction of
or waiver of each of the Conditions to Closing, including the execution of the
Escrow Agreement by each of the Stockholders prior to Closing. Each Stockholder
has the full legal capacity and authority to enter into and carry out the
transactions contemplated by this Agreement. This Agreement constitutes the
valid and legally binding obligation of the Company, enforceable in accordance
with its terms and conditions.
(c) Noncontravention.
(i) Neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will
violate any constitution, statute, law, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to
which the Company, its Subsidiary, or the Stockholders is subject or
any
14
provision of the articles of incorporation or the bylaws of the
Company or its Subsidiary.
(ii) No Stockholder or other Person has notified any member of
the Board of Directors of the Company of any intention to exercise
any of his or her right to dissent to the Merger or any of the other
transactions contemplated by this Agreement under the Washington
Act.
(iii) Neither the Company, its Subsidiary, nor the
Stockholders need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any governmental
agency in order for the Parties to consummate the transactions
contemplated by this Agreement or the merger to be effective, except
that the parties have mutually agreed that no filing under the Xxxx
Xxxxx Xxxxxx Antitrust Improvements Act of 1976, as amended (15 USC
ss.18a) is required in this transaction.
(d) Title to Company Shares.
The Stockholders have good title to the Company Shares. Upon the
payment of the Xxxxxx Note pursuant to Section 2(i) and the termination of the
Shareholder Agreement pursuant to the Escrow Agreement, both of which will occur
as a condition to Closing, the Stockholders will have the right to convey the
Company Shares to the Buyer. Upon the transfer of the Company Shares to the
Buyer, the Stockholders will have conveyed, good title and interest in and to
the Company Shares free and clear of all Security Interests.
(e) Capitalization; Company Shares.
Section 3.A(e) of the Company Disclosure Schedule sets forth the
number of authorized, issued, and outstanding equity securities of each of the
Company and its Subsidiary, and indicates the record legal owners of such
securities. The equity securities of each of the Company and its Subsidiary set
forth on Section 3.A(e) of the Company Disclosure Schedule constitute all of the
issued and outstanding capital stock of the Company and its Subsidiary, are
validly issued, fully paid and non-assessable and owned, legally and of record,
by the stockholders set forth on Section 3.A(e) of the Company Disclosure
Schedule, and none of such equity securities are subject to, nor have any been
issued in violation of, pre-emptive, rights of first offer, or similar rights,
whether arising under the articles of incorporation or bylaws of the Company, or
by contract.
(f) Redemption.
The Company has previously redeemed shares from certain of its
former shareholders listed on the Company Disclosure Schedule (the
"Redemptions"). Each of those Redemptions was valid and effective to fully
redeem the Company Shares previously held by the former shareholders, none of
whom currently hold any Company Shares.
15
(g) Shareholder Debt.
Except for the Xxxxxx Note, neither the Company nor its Subsidiary
is the maker or obligor in respect to any Indebtedness owed to any current or
former stockholder or other equity interest holder of the Company or its
Subsidiary. Except for amounts due under the Xxxxxx Note, none of the Company,
or any of the current officers or directors of the Company, have any Liabilities
or obligations to Xxxxx Xxxxxx relating to the business of the Company.
(h) Company Equity Securities.
All issuances, sales and repurchases by the Company of equity
interests in the Company and its Subsidiary have been effected in compliance
with all applicable laws, including, without limitation, applicable federal and
state securities laws. The Stock Ledgers and other corporate records of the
Company dated January 29, 1997 or later contain a complete and correct record of
all issuances and transfers of equity interests in the Company. No options,
warrants, conversion or other rights, agreements, commitments, arrangements or
understandings of any kind obligating the Company and its Subsidiary, contingent
or otherwise, to issue or sell any shares of its common stock or any securities
convertible into or exchangeable for any such shares or any other securities,
are outstanding, and no authorizations therefor have been given. The Company has
no Liability arising out of the issuance, sale, transfer or redemption of shares
of capital stock of the Company.
B. Representations of the Company. The Company hereby represents and
warrants that the statements contained in this Section 3.B (the "Section 3.B
Representations") are true, correct and complete as of the date hereof, and will
be true, correct, and complete as of the Closing Date, except (1) as specified
to the contrary in the corresponding paragraph of the Company Disclosure
Schedule, or (2) as specified in any Updated Disclosure provided in accordance
with Section 3.C below.
(a) Financial Statements.
Attached as Section 3.B(a) of the Company Disclosure Schedule are
audited consolidated balance sheets and related consolidated statements of
income and retained earnings, comprehensive income and cash flow of the Company
and its Subsidiary as of December 31, 2001, and unaudited interim consolidated
balance sheets and related consolidated statements of income and retained
earnings, comprehensive income and cash flow of the Company and its Subsidiary
through May 31, 2002 (the "Financial Statements").
(i) Each of the Financial Statements is true, correct,
complete and consistent with the books and records of the Company.
Each of the Financial Statements has been prepared in conformity
with GAAP and, to the extent in compliance with GAAP, on a
consistent basis throughout the periods covered thereby and presents
fairly the financial condition and results of operations and cash
flows of the Company and its Subsidiary at the dates and for the
periods specified, subject, in the case of unaudited financial
statements, to the absence of notes and the absence of normal
recurring year-end adjustments and procedures (none of which are
inconsistent with past practice). At closing, the Company will
16
have no Indebtedness, except: the Xxxxxx Note, and the obligations
reflected in Section 3.B(a)(i) of the Company Disclosure Schedule.
(ii) Neither the Company nor its Subsidiary have any debt,
liability or obligation of the type required by GAAP to be reflected
on the Financial Statements that is not reflected or reserved
against in the Financial Statements. Accounts payable reflected in
the Financial Statements have arisen from bona fide transactions.
All debts, liabilities and obligations of the Company and its
Subsidiary incurred after the date of the Financial Statements were
incurred in the Ordinary Course of Business, arose from bona fide
transactions, and are usual and normal in amount both individually
and in the aggregate. Neither the Company nor its Subsidiary are
directly or indirectly liable to or obligated to provide funds in
respect of or to guaranty or assume any obligation of any person
except to the extent reflected and fully reserved against in the
Financial Statements.
(b) Events Subsequent to December 31, 2001.
Since December 31, 2001, there has not been any material adverse
change in the business, financial condition, operations, or results of
operations of the Company. Without limiting the generality of the foregoing,
since that date, the Company:
(i) has not sold, leased, transferred, or assigned any of its
assets, tangible or intangible, except for sales of inventory in the
Ordinary Course of Business;
(ii) has not entered into any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and
licenses) either involving more than $500,000, or outside the
Ordinary Course of Business, or modified any such agreement,
contract, lease or license, the modification of which involves more
than $500,000 or is outside the Ordinary Course of Business;
(iii) has not and, to the Knowledge of the Company, no party
has accelerated, terminated or canceled any agreement, contract,
lease, or license (or series of related agreements, contracts,
leases, and licenses) involving more than $250,000 to which the
Company is a party or by which it is bound;
(iv) has not imposed or permitted any Security Interest upon
any of its assets, tangible or intangible;
(v) has not made any capital expenditure in excess of the
Company's "Capital Expenditures Budget", which is attached to the
Company Disclosure Schedule;
(vi) has not made any capital investment in, any loan to, or
any acquisition of the securities of, any other Person;
(vii) has not issued any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any Indebtedness;
17
(viii) has not delayed or postponed the payment of accounts
payable or other Liabilities outside of the Ordinary Course of
Business;
(ix) has not canceled, compromised, waived, or released any
right or claim (or series of related rights and claims) outside the
Ordinary Course of Business;
(x) has not granted any license or sublicense of any rights
under or with respect to any Intellectual Property outside the
Ordinary Course of Business;
(xi) has not changed or authorized any change in its articles
of incorporation, bylaws, or similar charter documents;
(xii) has not experienced any material damage, destruction, or
loss (whether or not covered by insurance) to its property;
(xiii) has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees;
(xiv) has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the
terms of any existing such contract or agreement;
(xv) has not granted any increase in the compensation of any
of its directors, officers, and employees, except as described in
that certain Memorandum from Xxxxxx Xxxxxxxxx to Xxxxxx X'Xxxxx
dated July 8, 2002 (the "Compensation Memo");
(xvi) has not adopted, amended, modified or terminated any
bonus, profit-sharing incentive, severance, or other plan, contract,
or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other
Employee Benefit Plan), except as described in the Compensation
Memo;
(xvii) has not made any other change in employment terms for
any of its directors, officers, and employees, except as described
in the Compensation Memo;
(xviii) has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
(xix) has not declared or paid any dividend or other
distribution, whether in cash or other property; and
(xx) has not entered into a commitment to do any of the
foregoing.
18
(c) Undisclosed Liabilities.
Neither the Company nor its Subsidiary have any Liability arising
from a fact or circumstance that is not the subject of a representation or
warranty contained in Section 3.B of this Agreement,, except for: (i)
Liabilities set forth on the face of the Financial Statements; (ii) Liabilities
which have arisen after the date of the Financial Statements in the Ordinary
Course of Business; and (iii) Liabilities set forth on Section 3.B(c) of the
Company Disclosure Schedule ("Undisclosed Liabilities").
(d) Legal Compliance.
The Company and its Subsidiary have complied with all applicable
laws (including rules, regulations, codes, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies or instrumentality thereof), the failure to comply
with which, individually or in the aggregate, will result in Adverse
Consequences in excess of Two Hundred Thousand Dollars ($200,000). To the
Knowledge of the Company, no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, audit or notice has been filed or commenced
against the Company and its Subsidiary alleging or relating to any failure so to
comply. The Company and its Subsidiary have duly filed all reports and returns
required to be filed by it with governmental authorities and obtained all
governmental permits and licenses and other governmental consents which are
required in connection with the businesses and operations of the Company and its
Subsidiary; all of such permits, licenses and consents are in full force and
effect, and no proceedings for the suspension or cancellation of any of them are
pending or threatened, except where any of the above would not have a material
adverse effect on the Company and its Subsidiary. The Company and its Subsidiary
is not and has not been threatened with being suspended or debarred from
contracting with any federal, state, or local government.
(e) Tax Matters.
(i) From its inception until April 1, 1988, the Company was a
C Corporation within the meaning of the Code for tax purposes. From
that date until January 29, 1997, the Company had in effect a valid
and binding election to be treated either as an "S Corporation" or a
"qualified subchapter S subsidiary", as the case may be, within the
meaning of Code Sections 1361 et seq. for federal income tax
purposes. From January 30, 1997, to the present, the Company has
been treated as a "C Corporation."
(ii) The Company and its Subsidiary have filed all Tax Returns
that they were required to file. All such Tax Returns were true,
correct and complete in all material respects. All Taxes owed by the
Company and its Subsidiary which are required to be paid prior to
Closing, except as otherwise set forth on Section 3B(e)(ii) of the
Company Disclosure Schedule and except for sales or use Taxes
reflected on the Closing Date Balance Sheet, have been paid. The
reserves set forth on the Financial Statements and on the Closing
Date Balance Sheet are adequate to satisfy in full any and all Tax
Liabilities arising in respect to those matters set forth on Section
3B(e)(ii) of the Company Disclosure Schedule. All
19
Taxes owing but not yet due as a result of operations of the Company
prior to Closing will be accrued on the Financial Statements of the
Company. There are no Security Interests on any of the assets of the
Company or its Subsidiary that arose in connection with any failure
(or alleged failure) to pay any Tax. Neither the Company nor its
Subsidiary have been a member of an Affiliated Group (other than a
group the common parent of which was the Company) that has filed a
"consolidated return" within the meaning of Code Section 1501, or
has filed a combined or consolidated return with any entity other
than its Subsidiary with any other taxing authority.
(iii) The Company and its Subsidiary withheld the Taxes as
required in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder, or other third party
and such withheld amounts have either been paid to the appropriate
governmental agency or set aside in appropriate accounts for such
purpose.
(iv) Neither the Company nor its Subsidiary are currently
under audit with respect to Taxes by any authority, and have not
received any notice or other indication that any authority is
considering assessing any additional Taxes for any period for which
Tax Returns have been filed. There is no dispute or claim concerning
any Tax Liability of the Company or its Subsidiary either to the
Company's Knowledge has been claimed or raised by any authority in
writing or based upon personal contact with any agent or
representative of such authority. The Company has previously
disclosed to the Parent true and accurate copies of all federal
income tax returns filed with respect to the Company and its
Subsidiary for taxable periods ended on or after December 31, 1997.
State tax returns filed by the Company for that period have also
been made available to the Parent, and the Company has disclosed to
the Parent the existence of disputes relating to state and local tax
issues.
(v) Neither the Company nor its Subsidiary have waived any
statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.
(vi) Neither the Company nor its Subsidiary have made any
payments, are obligated to make any payments, or is a party to any
agreement that could obligate any of them to make any payments that
will not be deductible under Code Section 280G. Neither the Company
nor its Subsidiary is a party to any Tax allocation or sharing
agreement. Neither the Company nor its Subsidiary (A) have been a
member of an Affiliated Group filing a consolidated federal income
Tax Return (other than a group the common parent of which was the
Company) or (B) have any Liability for the Taxes of any Person
(other than the Company) under Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee
or successor, by contract, or otherwise.
20
(f) Real Property.
(i) Neither the Company nor its Subsidiary own any real
property.
(ii) Section 3.B(f)(ii) of the Company Disclosure Schedule
lists all real property leased to the Company and its Subsidiary
(the "Leased Real Property"). The Company has delivered to the Buyer
true, correct and complete copies of the leases for the Leased Real
Property (as amended to date). With respect to each lease for Leased
Real Property:
(A) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(B) neither the Company nor its Subsidiary are, and to
the Knowledge of the Company and its Subsidiary, no party to
the lease or sublease is, in breach or default, and no event
has occurred which, with ;notice or lapse of time, would
constitute a breach or default on the part of the Company or
permit termination, modification or acceleration thereunder;
(C) neither the Company nor its Subsidiary have, and to
the Knowledge of the Company and its Subsidiary, no party to
the lease or sublease has, repudiated any provision thereof;
(D) the Company has not received any notice of disputes
or forbearance programs in effect as to the lease;
(E) neither the Company nor its Subsidiary have
assigned, transferred, conveyed, mortgaged, deeded in trust,
or encumbered any interest in the leasehold; or
(F) During the period the premises have been occupied by
the Company, all facilities leased thereunder have received
all approvals of governmental authorities (including licenses
and permits) required in connection with the operation thereof
and have been operated and maintained by the Company in all
material respects in accordance with applicable laws, rules,
and regulations.
(g) Intellectual Property.
(i) The Company owns, or has the right to use pursuant to
license, sublicense, agreement, or permission, all of the
Intellectual Property necessary or used in the operation of the
Business as presently conducted or as proposed to be conducted. No
present or former employee of the Company licenses to the Company
any Intellectual Property which is used in the Business. Each item
of Intellectual Property owned or used by the Company or its
Subsidiary immediately prior to the Closing hereunder will be owned
or available for use by the Surviving Corporation on identical terms
and conditions immediately
21
subsequent to the Closing hereunder. Except with respect to those
Liabilities arising under those licenses, sublicenses, agreements,
or permissions for Intellectual Property to which the Company or its
Subsidiary is a party and which Intellectual Property is owned by a
third party, as set forth on Section 3.B(g)(iv) of the Company
Disclosure Schedule, neither the Company nor its Subsidiary has any
Liability to any Person with respect to the Intellectual Property,
or with respect to the creation, development, design,
implementation, or adaptation of the Intellectual Property to the
Business. Neither the Company nor its Subsidiary have granted or
permitted any government agency or instrumentality, foreign or
domestic, to obtain unlimited or government purpose license rights
or any ownership interest in any technical data or invention
belonging to the Company or its Subsidiary.
(ii) To the Knowledge of the Company, neither the Company nor
its Subsidiary have interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and neither the
Company nor its Subsidiary have ever received within the past five
(5) years any charge, complaint, claim, demand, or notice alleging
any such interference, infringement, misappropriation, or violation
(including any claim that the Company or its Subsidiary must license
or refrain from using any Intellectual Property rights of any third
party) . To the Knowledge of the Company, no third party has
interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any Intellectual Property rights of the Company
or its Subsidiary.
(iii) Section 3.B(g)(iii) of the Company Disclosure Schedule
identifies each patent or registration which has been issued or
transferred to the Company or its Subsidiary with respect to any of
its Intellectual Property, identifies each pending patent
application for registration which the Company or its Subsidiary has
made with respect to any of its Intellectual Property, and
identifies each license, agreement, or other permission which the
Company or its Subsidiary has granted to any third party with
respect to any of its Intellectual Property. The Company and its
Subsidiary have made available to the Buyer true, correct and
complete copies of all such patent, trademark and copyright
registrations, applications, licenses, agreements, and permissions
(as amended to date) and has made available to the Buyer true,
correct and complete copies of all other written documentation
evidencing ownership and prosecution (if applicable) of each such
item. Section 3.B(g)(iii) of the Company Disclosure Schedule also
identifies each trade name or unregistered trademark used by the
Company and its Subsidiary in connection with the Business. With
respect to each item of Intellectual Property required to be
identified in Section 3.B(g)(iii) of the Company Disclosure
Schedule:
(A) the Company and its Subsidiary possess all right,
title, and interest in and to the item, free and clear of any
Security Interest or other restriction;
22
(B) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge; and
(C) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the
Knowledge of the Company, threatened, which challenges the
legality, validity, enforceability, use, or ownership of the
item.
(iv) Except for non-custom, off the shelf software, Section
3.B(g)(iv) of the Company Disclosure Schedule identifies each item
of Intellectual Property that any third party owns and that the
Company and its Subsidiary uses pursuant to license, sublicense,
agreement, or permission. The Company has delivered to the Buyer
true, correct and complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date). With respect to
each item of Intellectual Property required to be identified in
Section 3.B(g)(iv) of the Company Disclosure Schedule, to the
Knowledge of the Company:
(A) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and
in full force and effect;
(B) the license, sublicense, agreement, or permission
will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following the
consummation of the transactions contemplated hereby
(including the Merger referred to in Section 2 above);
(C) neither the Company, its Subsidiary, nor to the
Knowledge of the Company, any other party to the license,
sublicense, agreement, or permission, is in breach or default
thereunder;
(D) neither the Company nor its Subsidiary have, and to
the Knowledge of the Company, no other party to the license,
sublicense, agreement, or permission has, repudiated any
provision thereof;
(E) with respect to each sublicense, the representations
and warranties set forth in subsections (A) through (D) above
are true and correct with respect to the underlying license;
(F) the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;
(G) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand is pending or, to the
Knowledge of the Company, threatened, which challenges the
legality, validity, or enforceability of the underlying item
of Intellectual Property; and
23
(H) neither the Company nor its Subsidiary has granted
any sublicense or similar right with respect to the license,
sublicense, agreement, or permission.
(h) Software.
(i) The "Owned Software" shall mean all computer programs
(source code or object code) which were developed for or on behalf
of, or have been purchased by, the Company and its Subsidiary and
which are currently used internally by the Company and its
Subsidiary or which have been distributed by the Company and its
Subsidiary and all computer programs under development by the
Company and its Subsidiary but not currently distributed. Section
3.B(h)(i) of the Company Disclosure Schedule sets forth under the
caption "Licensed Software" a true, correct and complete list of all
computer programs (source code or object code) licensed to the
Company and its Subsidiary by another person which are currently
used internally by the Company and its Subsidiary or which have been
distributed by the Company and its Subsidiary, whether as integrated
or bundled with any Owned Software or as a separate stand-alone
product (specifically excluding any non-custom, off-the-shelf
computer program) (collectively, the "Licensed Software" and,
together with the Owned Software, the "Software").
(ii) The Company and its Subsidiary have good, marketable and
exclusive title to, and the valid and enforceable power and the
right to sell, license, lease, transfer, use, create derivative
works of, or otherwise exploit, all versions and releases of the
Owned Software and all copyrights thereof, free and clear of all
Security Interests. The Company and its Subsidiary are in actual
possession of the source code and object code for the Owned
Software, and the Company and its Subsidiary are in possession of
all other documentation, including without limitation all related
engineering specifications, program flow charts, installation and
user manuals, and know-how necessary for the effective use of the
Software as currently used in the Business. The Software constitutes
all of the computer programs necessary to conduct the Business as
now conducted, and includes all of the computer programs licensed or
offered for license to the Company's and its Subsidiary's customers
and potential customers or otherwise used in the development,
marketing, licensing, sale or support of the products and the
services presently offered by the Company and its Subsidiary. No
person other than the Company and its Subsidiary has any right or
interest of any kind or nature in or with respect to the Owned
Software or any portion thereof or any rights to sell, license,
lease, transfer, use or otherwise exploit the Owned Software or any
portion thereof. Except with respect to those Liabilities arising
under those licenses, sublicenses, agreements, or permissions for
Licensed Software to which the Company is a party, as set forth on
Section 3.B(h)(i) of the Company Disclosure Schedule, neither the
Company nor its Subsidiary has any Liability to any Person with
respect to the Software, or with respect to the creation,
development, design, implementation, or adaptation of the Software
to the Business.
24
(iii) Section 3.B(h)(iii) of the Company Disclosure Schedule
sets forth a true, correct and complete list, of (A) all persons
other than the Company and its Subsidiary that have been provided
with the source code or have a right to be provided with the source
code (including any such right that may arise after the occurrence
of any specified event or circumstance, either with or without the
giving of notice or passage of time or both) for any of the Owned
Software, and (B) all source code escrow agreements relating to any
of the Owned Software (setting forth as to any such escrow agreement
the source code subject thereto and the names of the escrow agent
and all other persons who are actual or potential beneficiaries of
such escrow agreement), and identifies with specificity all
agreements and arrangements pursuant to which the execution,
delivery and performance of this Agreement or the consummation of
the transactions contemplated hereby would entitle any third party
or parties to receive possession of the source code for any of the
Owned Software or any related technical documentation.
(iv) None of the sale, license, lease, transfer, use,
reproduction, distribution, modification or other exploitation by
the Company and its Subsidiary of any version or release of any
computer program included in the Owned Software obligates or will
obligate the Company or its Subsidiary to pay any royalty, fee, or
other compensation to any other person.
(v) Except as specified in Section 3.B(h)(v) of the Company
Disclosure Schedule, no agreement, license or other arrangement
pertaining to any of the Software (including, without limitation,
any development, distribution, marketing, use or maintenance
agreement, license or arrangement) to which the Company and its
Subsidiary is a party will become terminable by any party thereto as
a result of the execution, delivery or performance of this Agreement
or the consummation of the transactions contemplated hereby.
(i) No Infringement.
To the Knowledge of the Company, the existence, sale, license,
lease, transfer, use, reproduction, distribution, modification or other
exploitation by Company or its Subsidiary or any of its successors or assigns of
any Owned Software or Intellectual Property, as such Software or Intellectual
Property, as the case may be, is or was, or is currently contemplated to be
sold, licensed, leased, transferred, used or otherwise exploited by such persons
in connection with the Business, does not (A) infringe on any patent, trademark,
copyright or other right of any other person, (B) constitute a misuse or
misappropriation of any trade secret, know-how, process, proprietary information
or other right of any other person or a violation of any relevant agreement
governing the license of the Licensed Software to Company, or (C) entitle any
other person to any interest therein, or right to compensation from Company, its
Subsidiary, or any of its respective successors or assigns, by reason thereof.
Neither the Company nor its Subsidiary has not received any complaint,
assertion, threat or allegation or otherwise has notice of any lawsuit, claim,
demand, proceeding or investigation involving matters of the type contemplated
by the immediately preceding sentence or has Knowledge of any facts or
circumstances that
25
could reasonably be expected to give rise to any such lawsuit, claim, demand,
proceeding or investigation.
(j) Tangible Assets.
The Company and its Subsidiary own or lease all buildings,
machinery, equipment, and other tangible assets necessary for the conduct of the
Business as presently conducted. At Closing, the Company will have good title to
all of the assets of the Company free and clear of any Security Interest. The
assets are in sufficient operating condition to enable the Company to operate
its business.
(k) Inventory.
The inventory of the Company and its Subsidiary consists of raw
materials and supplies, manufactured and purchased parts, goods in process, and
finished goods, all of which is accurately reflected on the Financial Statements
in accordance with GAAP.
(l) Contracts.
Section 3.B(l) of the Company Disclosure Schedule lists the
following contracts and other agreements, written or oral, to which the Company
or any of its Subsidiary is a party:
(i) all customer orders accepted by the Company or its
Subsidiary which constitute commitments in excess of $500,000 and in
order backlog as of May 31, 2002;
(ii) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease
payments in excess of $100,000 per annum;
(iii) any agreement for the purchase or sale of raw materials,
commodities, supplies, products, or other personal property, or for
the furnishing or receipt of services, the performance of which
involves consideration, in excess of $500,000;
(iv) any agreement that constitutes a partnership or joint
venture;
(v) any agreement (or group of related agreements) under which
any of them have created, incurred, assumed, or guaranteed any
Indebtedness, under which any of them have imposed a Security
Interest on any of their assets, tangible or intangible;
(vi) any agreement limiting the Company's right to compete or
to enter into a line of business;
(vii) except the Xxxxxx Agreements, any agreement involving
the Stockholders to which the Company or its Subsidiary is a party;
26
(viii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of any of its current directors,
officers, and employees or those that remain in effect with respect
to any former directors, officers or employees;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis , which cannot be
terminated by the Company on thirty (30) days' notice or less
without penalty;
(x) any agreement under which any of them have advanced or
loaned any amount to any of their directors, officers, and
employees; and
(xi) any agreement which requires the consent or approval of
any governmental agency in connection with the transactions
contemplated by this Agreement.
The Company has made available to the Buyer a true, correct and
complete copy of each written agreement listed in Section 3.B(l) of
the Company Disclosure Schedule (as amended to date) and a written
summary setting forth the terms and conditions of each oral
agreement referred to in Section 3.B(l) of the Company Disclosure
Schedule. To the Company's Knowledge, the Customer Orders listed in
Section 3.B(l) were all priced at amounts consistent with past
practices and in excess of the cost to the Company of purchasing and
manufacturing such goods. To the Company's Knowledge, there is no
basis for the termination or cancellation of any of those orders.
With respect to each such agreement: (A) the agreement is legal,
valid, binding, enforceable, and in full force and effect, subject
to applicable bankruptcy, insolvency, fraudulent conveyance or
transfer, reorganization, arrangement, moratorium or other similar
laws from time to time affecting creditor's rights generally; (B) to
the Knowledge of the Company and its Subsidiary, the agreement will
continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation of the
transactions contemplated hereby, subject to applicable bankruptcy,
insolvency, fraudulent conveyance or transfer, reorganization,
arrangement, moratorium or other similar laws from time to time
affecting creditor's rights generally; (C) neither the Company nor
its Subsidiary are, and to the Knowledge of the Company and its
Subsidiary, no other party, is in material breach or default, and no
event has occurred which with notice or lapse of time would
constitute a material breach or default, or permit termination,
modification, or acceleration, under the agreements; (D) no party
has repudiated any provision of the agreement; (E) such agreement
does not prohibit or require consent in the event of a change of
control of the Company or its Subsidiary; and (F) to the Knowledge
of the Company and its Subsidiary, no claim or setoff has been
asserted under or against such agreement. Neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any of the contracts listed or required to
be listed in Section 3.B(l) of
27
the Company Disclosure Schedule (or result in the imposition of any
Security Interest upon any of its assets).
(m) Notes and Accounts Receivable.
The loans, notes and accounts receivable reflected in the Financial
Statements, and all such loans, notes and accounts receivable arising after the
applicable dates of the Financial Statements, arose and have arisen, from bona
fide transactions and are not subject to any setoffs or counterclaims, and the
bad debt reserves established in connection with such loans, notes, and accounts
receivable are reflected on the Financial Statements in conformity with GAAP,
and to the extent in compliance with GAAP, on a consistent basis throughout the
periods covered thereby.
(n) Powers of Attorney.
There are no outstanding powers of attorney executed on behalf of
the Company or its Subsidiary.
(o) Insurance.
The Company has provided to the Parent a summary of the Company's
current insurance coverages, which is attached to the Company Disclosure
Schedule. With respect to each such insurance policy: (A) all policy premiums
due to date have been paid in full, and to the Knowledge of the Company and its
Subsidiary, the policy is legal, valid, binding, enforceable, and in full force
and effect with respect to the periods for which it purports to provide coverage
subject to applicable bankruptcy, insolvency, fraudulent conveyance or transfer,
reorganization, arrangement or moratorium or other similar laws from time to
time affecting creditor's rights generally; (B) neither the Company nor its
Subsidiary or, to the Knowledge of the Company and its Subsidiary, any other
party to the policy, is in breach or default (including with respect to the
payment of premiums or the giving of notices), and, to the Knowledge of the
Company, no event has occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination, modification, or
acceleration, under the policy, other than provisions which may be triggered by
a change of control of the Company; and (C) no party to the policy has
repudiated any provision thereof. Section 3.B(o) of the Company Disclosure
Schedule describes any self-insurance arrangements affecting the Company and its
Subsidiary.
(p) Litigation.
Neither the Company nor its Subsidiary (i) are subject to any
outstanding injunction, judgment, order, decree, ruling, or charge and (ii) are
a party nor, to the Knowledge of the Company and its Subsidiary, have been
threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator.
28
(q) Product Warranty.
To the Knowledge of the Company, each product manufactured, sold,
leased, or delivered by the Company and its Subsidiary or service provided by
the Company and its Subsidiary has been in conformity with all applicable
contractual commitments and all express warranties. The Company does not have
any Liability (and there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
it giving rise to any Liability) for replacement or repair thereof or other
damages in connection therewith, except for Product Warranty Claims in the
Ordinary Course of Business. To the Knowledge of the Company, the Company does
not have any Liability for any material returns of products. No reserves for
product warranty claims are set forth on the Financial Statements. No product
manufactured, sold, leased, or delivered by the Company and its Subsidiary is
subject to any guaranty, warranty, or other indemnity beyond the applicable
standard terms and conditions of sale or lease. The Company has provided to the
Parent copies of the standard terms and conditions of sale or lease for the
Company and its Subsidiary (containing applicable guaranty, warranty, and
indemnity provisions).
(r) Product Liability.
There are no existing or, to the Knowledge of the Company and its
Subsidiary, threatened, claims against the Company and its Subsidiary arising
out of any injury to individuals or property as a result of the ownership,
possession, or use of any product manufactured, sold, leased, or delivered by
the Company and its Subsidiary which could result in Liability to the Company
and its Subsidiary. To the Company's Knowledge, no events have occurred which
would result in such claims.
(s) Employees.
The Company has provided to the Buyer a schedule entitled "Employee
Census" dated June 8, 2002, which accurately reflects: (A) the name, (B) the
current annual salary (or hourly wage), including any bonus or commitment to pay
any other amount or benefit in connection with a termination of employment, if
applicable, and (C) the specific identity of the employing entity, of all
present employees, consultants, and independent contractors employed by the
Company and its Subsidiary. To the Knowledge of the Company, no executive, key
employee, or group of employees has any immediate plans to terminate employment
with the Company or its Subsidiary. Neither the Company nor its Subsidiary are a
party to or bound by any collective bargaining agreement, nor has it experienced
any strikes, grievances, claims of unfair labor practice. The Company has no
Knowledge of any organizational effort presently being made or threatened by or
on behalf of any labor union with respect to its employees. There is no claim
outstanding or, to the Knowledge of the Company, threatened or claims respecting
employment of any past or present employee of the Company and its Subsidiary
including, without limitation, claims of personal injury (unless fully covered
by worker's compensation, liability or indemnity insurance) discrimination,
wage, hours or similar laws or regulations. There are no written employment or
similar agreements for a fixed term between any employee of the Company and its
Subsidiary and the Company and its Subsidiary; each employee of the Company and
its Subsidiary is an at-will employee.
29
(t) Employee Benefits.
(i) No other corporation, trade, business, or other entity,
would, together with the Company and its Subsidiary constitute a
single employer within the meaning of Code Section 414.
(ii) Section 3.B(t) of the Company Disclosure Schedule
contains a true and complete list of all of the Employee Benefit
Plans which are presently in effect for the benefit of current or
former employees, officers, directors or consultants of the Company
and its Subsidiary, together with any plans formerly in effect for
which the Company still has any Liability (the "Company Plans").
There are no Company Plans established or maintained outside of the
United States primarily for the benefit of persons substantially all
of whom are nonresident aliens.
(iii) Each Company Plan has been administered in all material
respects in accordance with its terms and is in compliance in all
material respects with the applicable provisions of law. All
reports, returns and similar documents required to be filed with any
governmental agency or distributed to any participant of each
Company Plan have been duly and timely filed or distributed in all
material respects.
(iv) No actions, suits or claims (other than routine claims
for benefits in the ordinary course) are pending or, to the
Knowledge of the Company and its Subsidiary, threatened, with
respect to any Company Plan, and, to the Knowledge of the Company,
no event or condition exists which would result in Liability to the
Company, except as reflected on the Financial Statements and except
for the Zetec, Inc. Pension Plan.
(v) The Company and its Subsidiary have made all contributions
or payments to or under each Company Plan required by law, or by the
terms of such Company Plan.
(vi) There is no lien outstanding upon any assets of the
Company or its Subsidiary pursuant to Code Section 412(n) in favor
of any Company Plan.
(vii) The Company does not have any past, present or future
obligation or liability to contribute to any multiemployer plan as
defined in ERISA Section 3(37).
(viii) Neither the Company nor its Subsidiary are obligated,
contingently or otherwise, under any agreement to pay any amount
which would be treated as a "parachute payment," as defined in Code
Section 280G(b) (determined without regard to Code Section
280G(b)(2)(A)(ii)).
(ix) With respect to each of the Company Plans:
30
(A) each of the Company Plans has been established,
maintained, funded and administered in all material respects
in accordance with its governing documents, and any applicable
provisions of ERISA, the Code, other applicable law, and all
regulations promulgated thereunder;
(B) none of the Company Plans nor any Fiduciary has
engaged in a "Prohibited Transaction" as defined in ERISA
Section 406 or Code Section 4975 (for which no individual or
class exemption exist under ERISA Section 408 or Code Section
4975, respectively);
(C) all filings and reports as to each of the Company
Plans required to have been made on or before the Closing Date
to the Internal Revenue Service, or to the United States
Department of Labor or to the Pension Benefit Guaranty
Corporation, have been or will be duly made by that date;
(D) each of the Company Plans which is intended to
qualify as a tax-qualified retirement plan under Code Section
401(a) has received a favorable determination letter(s) from
the Internal Revenue Service as to qualification of such
Company Plan for the period from its adoption through the
Closing Date; nothing has occurred, whether by action or
failure to act, which has resulted in or would cause the loss
of such qualification; and each trust thereunder is exempt
from tax pursuant to Code Section 501(a);
(E) each of the Company Plans which is required to
satisfy Code Sections 401(k)(3) or 401(m)(2) has been tested
for compliance with, and has satisfied the requirements of,
Code Sections 401(k)(3) and 401(m)(2) for each plan year
ending prior to the Closing Date;
(F) no event has occurred and no condition exists
relating to any of the Company Plans that would subject the
Company and its Subsidiary to any Tax or Liability under IRS
Sections 4971, 4972 or 4979, or to any Liability under ERISA
Sections 502 or 4071; and
(G) to the extent applicable, each of the Company Plans
has been funded in accordance with its governing documents,
ERISA and the Code or other applicable law, has not
experienced any accumulated funding deficiency (whether or not
waived) and has not exceeded its full funding limitation
(within the meaning of Code Section 412) at any time.
(x) With respect to the Company Plans which provide group
health benefits to employees of the Company and its Subsidiary and
are subject to the requirements of Code Section 4980B and Part 6,
Subtitle B of Title I of ERISA ("COBRA"), such group health plan has
been administered in every material respect in accordance with its
governing documents and COBRA and with the
31
group health plan requirements of Subtitle K, Chapter 100 of the
Code and ERISA Sections 701 et seq.
(xi) With respect to employee benefit matters generally:
(A) neither the Company, its Subsidiary, nor any person,
firm or corporation which is or has been under common control
of the Company and its Subsidiary within the meaning of
Section 4001(b) of ERISA, maintains or contributes to or has
ever maintained or contributed to any Employee Benefit Plan
subject to Title IV of ERISA;
(B) the consummation of the transactions contemplated
hereby will not accelerate or increase any Liability under any
of the Company Plans because of an acceleration or increase of
any of the rights or benefits to which Company Plan
participants or beneficiaries may be entitled thereunder;
(C) the Company does not have any obligation to any
retired or former employee or any current employee of the
Company and its Subsidiary upon retirement or termination of
employment under any Company Plans, other than such
obligations imposed by COBRA; and
(D) any of the Company Plans which is an "employee
welfare benefit plan," within the meaning of ERISA Section
3(1), may be terminated prospectively without Liability to the
Company, Parent, Buyer, or Surviving Corporation, including,
without limitation, Liability for unreported (e.g., run-off)
benefit claims, premium adjustments or termination charges of
any kind.
(xii) If any Employee Benefit Plan subject to Title IV of
ERISA were terminated by the Company or any Subsidiary, the fair
market value of the assets of such plan as of the plan termination
date would equal or exceed the plan's "benefit liabilities," as such
term is defined in Section 4001(a)(16) of ERISA, assuming such
funding status is determined using actuarial factors and applying
such other principles that are legally required to be given effect
in the context of the termination of a plan subject to Title IV of
ERISA.
(xiii) Notwithstanding any other provision of this Section
3.B(t), the Buyer and Parent are aware of the funding that would be
required to terminate the Zetec, Inc. Pension Plan, and the parties
have adjusted the Aggregate Consideration on an agreed amount to
affect that liability and the potential costs of terminating that
Plan.
(u) Guaranties.
Neither the Company nor its Subsidiary are a guarantor or otherwise
liable for any Liability or obligation (including Indebtedness) of any other
Person.
32
(v) Environment, Health, and Safety.
(i) The Company and its Subsidiary have complied with all
Environmental, Health, and Safety Laws, the failure to comply with
which could reasonably be expected to result in Adverse Consequences
in excess of Two Hundred Thousand Dollars ($200,000). To the
Knowledge of the Company, no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against the Company or its Subsidiary alleging
such failure.
(ii) The Company does not have any Liability for Adverse
Consequences in excess of $200,000 (and neither the Company nor its
Subsidiary have handled, used, stored, treated, recycled or disposed
of any Hazardous Substance, arranged for the disposal of any
Hazardous Substance, exposed any employee or other individual to any
Hazardous Substance or condition, or owned or operated any property
or facility in any manner that could form the legitimate basis for
any present or future action, suit, proceeding, hearing,
investigations, charge, complaint, claim or demand) for penalties,
investigations of or damage to any site, location, body of water
(surface or subsurface), or other natural resources, for any illness
of or personal injury to any employee or other individual, or for
any reason under any Environmental, Health, and Safety Laws.
(iii) To the Knowledge of the Company, all properties and
equipment used in the Business are and in the past have been free of
any amounts of asbestos, PCB's, methylene chloride,
trichlorethylene, 1,2-trans-dichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous Substances, the presence of
which could result in Adverse Consequences.
(w) Certain Business Relationships with the Company and its
Subsidiary.
No Related Person of the Company or its Subsidiary has or has had,
any interest in any property (whether real, personal, or mixed and whether
tangible or intangible) used in or pertaining to the Company, the Subsidiary, or
the Business. No Related Person of the Company or its Subsidiary owns or has
owned (of record or as a beneficial owner) an equity interest or any other
financial or profit interest in, a Person that has had business dealings or a
material financial interest in any transaction with the Company, its Subsidiary,
or the Business.
(x) Brokers.
Except for those fees and expenses of Windswept Capital LLC, which
fees and expenses will be paid by the Stockholders, neither the Company, its
Subsidiary, nor the Stockholders have incurred any Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(y) Disclosure.
The representations and warranties contained in this Section 3
(including the Company Disclosure Schedule and any Updated Disclosure) do not,
and as of the Closing Date
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will not, contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statement and information contained
in this Section 3 not misleading.
(z) Knowledge Group
Section 3.B(z) of the Company Disclosure Schedule contains the list
of Stockholders required in the definition of "Knowledge of the Company" as
contained in this Agreement.
C. Updated Disclosure. In the event that between the date of execution of
this Agreement and the Closing, the Stockholder Representatives first become
aware of events, facts or circumstances which would make any of the
representations and warranties of this Section 3 untrue, the Stockholder
Representatives may provide written notice of that event, fact or circumstance
to the Buyer and Parent, clearly labeled as "Updated Disclosure". Within five
(5) days of receipt of an Updated Disclosure, the Buyer and Parent may, in their
discretion, either (i) accept the Updated Disclosure, in which case, the event,
fact or circumstance so disclosed, shall be deemed to be added to the Company
Disclosure Schedule and shall not be deemed a breach of the representations and
warranties of this Section 3; or (ii) elect to terminate this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE BUYER.
Parent and Buyer, jointly and severally, represent and warrant to the
Stockholders that the statements contained in this Section 4 are true, correct
and complete as of the date hereof, and will be true, correct and complete as of
the Closing Date.
(a) Organization of the Parent and the Buyer.
Each of Parent and Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation and is duly qualified as a foreign corporation to do business in
every jurisdiction where such qualification is required.
(b) Authorization of Transaction.
Each of Parent and Buyer has full corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of Parent
and Buyer, enforceable in accordance with its terms and conditions. Parent and
Buyer need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agencies
in order for the Parties to consummate the transactions contemplated by this
Agreement.
(c) Noncontravention.
Neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby will violate any
constitution, state, regulation, rule,
34
injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Parent or Buyer is subject,
or any provision of its certificate of incorporation or bylaws.
(d) Broker's Fees.
Neither Parent nor Buyer has incurred any Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Stockholders could
become liable or obligated.
(e) Disclosure.
The representations and warranties contained in this Section 4 do
not, and as of the Closing Date will not, contain any untrue statements of a
material fact or omit to state any material fact necessary in order to make the
statements contained in this Section 4 not misleading.
(f) Financial Capability.
The Parent and Buyer will at Closing have the funds necessary to
complete the merger and make the payments described in Section 2.
(g) Reliance.
The Parent and the Buyer are not relying on any representations or
warranties made by or on behalf of the Company, the Subsidiary or any of the
Stockholders, except those expressly contained Section 3 of in this Agreement.
5. CONDITIONS TO OBLIGATION TO CLOSE.
(a) Conditions to Obligation of Parent and Buyer.
The obligation of Parent and Buyer to consummate the transactions to
be performed by it in connection with the Closing is subject to satisfaction of
the following conditions:
(i) the representations and warranties set forth in Section 3
above shall be true and correct in all material respects at and as
of the Closing Date;
(ii) the Company and the Stockholders shall have performed and
complied with all of its covenants hereunder in all material
respects through the Closing;
(iii) the Company shall have procured all of the third party
consents specified on Exhibit B hereto, and the consent, termination
and release agreement, shall have been executed by the Company and
Xxxxx Xxxxxx, in the form set forth on Exhibit C hereto;
35
(iv) the Company shall have provided notice of this
transaction to the United States Department of Defense and the
Department of Energy, and obtained any other governmental consents
for the Surviving Corporation to conduct the Business following the
Closing;
(v) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment,
order, decree, ruling, or charge would (A) prevent consummation of
any of the transactions contemplated by this Agreement, (B) cause
any of the transactions contemplated by this Agreement to be
rescinded following consummation, or (C) affect adversely the right
of the Buyer to own the assets of the Company and its Subsidiary or
to operate the Business (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(vi) the Company and the Stockholder Representatives shall
have delivered to the Parent and the Buyer a certificate, executed
by the Company and the Stockholder Representatives, to the effect
that the conditions specified above in Section 5(a)(i) to 5(a)(v)
have been satisfied in all respects;
(vii) each of the Stockholders shall have entered into a
Noncompetition and Assignment of Inventions Agreement, with a term
equal to two (2) years, in form and substance as set forth in
Exhibit D attached hereto, and the same shall be in full force and
effect;
(viii) each of the Stockholders, the respective spouses of the
Stockholders, the Parent, the Buyer, the Company, and the Escrow
Agent shall have entered into the Escrow Agreement;
(ix) the Company shall have delivered to the Parent and the
Buyer the payoff letter indicating the amount of the Xxxxxx Payoff;
(x) The R&W Insurance Policy shall have been issued and
delivered to the Parent and the Buyer, in the form attached to the
Company Disclosure Schedule;
(xi) The Shareholders Agreement shall have been terminated;
(xii) each of the Buyer and the Company shall have received
the consent and estoppel of Xxxxxx Enterprises, Inc., Xxxxx Xxxxxx
and Xxxxxx Xxxxx Xxxxxx, and Xxxxx Xxxxxx in form and substance
satisfactory to the Parent and the Buyer, with respect to the Leased
Real Property;
(xiii) the Parent and the Buyer shall have received from
Xxxxxxx Xxxxxxxx X.X., counsel to the Company, opinions with respect
to the Company and its Subsidiary and the transactions contemplated
hereby in form and substance as set forth in Exhibit E attached
hereto, addressed to the Parent and the Buyer, and dated as of the
Closing Date;
36
(xiv) the Company shall have satisfied all of its Liabilities
owed to the Founders, and to Xxxxxxx X. Xxxxxx pursuant to the
Xxxxxx Agreement;
(xv) the certificates of merger with respect to the Merger
shall have been filed in accordance with the Delaware Act and the
Washington Act;
(xvi) the Company shall have delivered to Parent and Buyer a
certificate of the Secretary of the Company as to the incumbency of
its officers, a copy of a certificate evidencing the incorporation
and good standing of the Company, a copy of the articles and bylaws
of the Company, and a copy of the resolutions adopted by the board
of directors and the stockholders of the Company with respect to the
transactions contemplated by this Agreement;
(xvii) all actions to be taken by the Company and its
Subsidiary in connection with consummation of the transactions
contemplated hereby and all certificates, opinions, instruments, and
other documents required to effect the transactions contemplated
hereby will be reasonably satisfactory in form and substance to the
Parent and the Buyer;
(xviii) The Parent shall have received the approval of its
Board of Directors to execute this Agreement.
(xix) The Board of Directors of the Company shall have adopted
resolutions that: (a) terminate the Zetec, Inc. Profit
Sharing/401(k) Plan, effective not earlier than the date all
conditions to Closing are satisfied or waived and not later than
immediately before Closing; and (b) freeze the Zetec, Inc. Pension
Plan, effective on the date specified in the notice delivered to
affected employees in accordance with and intended to satisfy the
requirements of Section 204(h) of the Employee Retirement Income
Security Act of 1974 and Section 4980F of the Internal Revenue Code,
said notice to be delivered to affected employees as soon as
practicable following the public announcement of the Merger.
Either the Parent or the Buyer may waive any condition specified in this Section
5(a) if it executes a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Company.
The obligation of the Company to consummate the transactions to be
performed by it in connection with the Closing is subject to satisfaction of the
following conditions:
(i) the representations and warranties set forth in Section 4
above shall be true and correct in all material respects at and as
of the Closing Date;
(ii) Parent and Buyer shall have performed and complied with
all of their covenants hereunder in all material respects through
the Closing;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or
37
foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(iv) the Parent and the Buyer shall have delivered to the
Company and the Stockholder Representatives a certificate to the
effect that the conditions specified above in Sections 5(b)(i) to
5(b)(iv) have been satisfied in all respects;
(v) the Stockholders shall have received from Powell,
Goldstein, Xxxxxx & Xxxxxx LLP, counsel to the Parent and the Buyer
an opinion in form and substance as set forth in Exhibit F attached
hereto, addressed to the Stockholders, and dated as of the Closing
Date;
(vi) each of the Parent and the Buyer shall have delivered to
the Company and the Stockholder Representatives a certificate of the
Secretary of each of the Parent and the Buyer as to the incumbency
of each of their officers, a copy of certificates evidencing the
incorporation and good standing of the Parent and the Buyer, a copy
of the articles and bylaws of the Parent and the Buyer, and a copy
of the resolutions adopted by the board of directors of the Parent
and the Buyer with respect to the transactions contemplated by this
Agreement; and
(vii) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Company.
Either the Company or the Stockholder Representatives may waive any condition
specified in this Section 5(b) if it or he executes a writing so stating at or
prior to the Closing.
6. PRE-CLOSING COVENANTS.
The Parties agree as follows with respect to the period prior to the
Closing:
(a) Access and Investigation.
Between the date hereof and the Closing Date, the Company and the
Stockholders will, and will cause their representatives to:
(i) afford the Parent, the Buyer, their attorneys,
accountants, and other representatives (collectively, "Buyer's
Advisors") reasonable access to the Company and its Subsidiary, and
their personnel, properties (including for purposes of environmental
testing), contracts, books and records, financial
38
statements, and other documents and data so as to not unreasonably
interfere with the conduct of the Business;
(ii) furnish the Buyer with copies of all such contracts,
books and records, and other existing documents and data as the
Buyer may reasonably request;
(iii) furnish the Buyer and Buyer's Advisors with such
additional financial, operating and other data and information as
the Buyer may reasonably request; and
(b) Operation of the Businesses of the Company and its Subsidiary.
Between the date hereof and the Closing Date, the Company, its
Subsidiary, and the Stockholders will, and the Company and its Subsidiary will
cause their representatives to:
(i) conduct the Business only in the Ordinary Course of
Business, or otherwise with the written consent of the Buyer, except
that the Board of directors shall take the action described in
Section 5(a)(xix) above;
(ii) use their best efforts to preserve intact the current
business organization of the Company and its Subsidiary, keep
available the services of the current officers, employees, and
agents of the Company and its Subsidiary, maintain the relations and
good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with the
Company and its Subsidiary, and maintain such amount of working
capital necessary for the Company and its Subsidiary to conduct the
Business in the Ordinary Course of Business; and
(iii) confer with the Buyer concerning operational matters of
a material nature and the status of business operations and
finances.
(c) Negative Covenant.
Except as otherwise expressly permitted by this Agreement, between
the date of this Agreement and the Closing Date, the Company, its Subsidiary,
and the Stockholders will not, without the prior consent of the Buyer, take any
affirmative action, or fail to take any reasonable action within their or its
control, which would cause or result in an inaccuracy or breach of any of the
representations, warranties or covenants of the Company and the Stockholders set
forth in this Agreement, including, without limitation, any action specified in
Section 3.B(b) of this Agreement. Without limiting the generality of the
foregoing, the Company agrees that it shall not, and shall cause its Subsidiary
not to, take any of the following actions without the prior written consent of
the Buyer or the Parent:
(i) amend the Articles of Incorporation or Bylaws of the
Company and its Subsidiary; make any change in its authorized,
issued or outstanding capital stock or any other equity security;
issue, sell, pledge, assign or otherwise encumber or dispose of, or
purchase, redeem or otherwise acquire, any of the
39
shares of capital stock or other equity securities of the Company or
its Subsidiary or enter into any agreement, call or commitment of
any character so to do; grant or issue any stock option or warrant
relating to, right to acquire, or security convertible into, shares
of capital stock or other equity security of the Company and its
Subsidiary; purchase, redeem, retire or otherwise acquire any shares
of, or any security convertible into, capital stock or other equity
security of the Company and its Subsidiary, or agree to do any of
the foregoing set forth in this Section 6(c)(i);
(ii) acquire, directly or indirectly, substantially all of the
assets of, or a controlling equity interest in, any corporation or
other entity, or enter into any commitment to do the same;
(iii) propose, declare, set aside or pay any dividend or other
distribution in respect of any of its capital stock (including,
without limitation, any stock dividend or distribution);
(iv) incur any Indebtedness;
(v) make any distribution outside of the Ordinary Course of
Business, except upon prior written notice to and written consent of
the Buyer;
(vi) enter into any agreement, commitment or similar
transaction with the Stockholders;
(vii) enter into any employment contract or collective
bargaining agreement, written or oral, or modify the terms of any
existing such contract or agreement;
(viii) grant any increase in the base compensation of any of
its directors, officers, and employees;
(ix) adopt, amend, modify, or terminate any bonus,
profit-sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other
Company Plan);
(x) knowingly breach, violate, or contravene any provisions of
any agreement or commitment to which the Company is a party,
including but not limited to the Xxxxxx Agreements;
(xi) make any other change in employment terms for any of its
directors, officers, and employees outside the Ordinary Course of
Business, except as listed on the Company Disclosure Schedule; and
(xii) make any capital expenditures in excess of $10,000
without the prior written consent of the Parent.
40
(d) No Merger or Solicitation.
(i) Neither the Company nor its Subsidiary shall, or authorize
or permit any of their officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative or agent retained by them, to, directly or
indirectly, solicit, initiate, or encourage (including by way of
furnishing nonpublic information), or take any other action to
facilitate, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any Takeover
Proposal, or agree to or endorse any Takeover Proposal, or
participate in any discussions or negotiations, or provide third
parties with any nonpublic information, relating to any such inquiry
or proposal. Without limiting the foregoing, it is understood that
any violation of the restrictions set forth in the preceding
sentence by the Stockholders, any director or executive officer of
the Company and its Subsidiary, or any investment banker, attorney
or other advisor or representative of the Company and its
Subsidiary, whether or not such Person is purporting to act on
behalf of the Company, its Subsidiary, or otherwise, shall be deemed
to be a breach of this Section 6(d) by the Company.
(ii) Neither the Board of Directors of the Company nor any
committee thereof shall (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to the Buyer, the approval
or recommendation by such Board of Directors or any such committee
of this Agreement or the transactions contemplated hereby, (ii)
approve or recommend, or propose to approve or recommend, any
Takeover Proposal, or (iii) enter into any agreement with respect to
any Takeover Proposal.
(iii) In addition to the obligation of the Company set forth
in paragraph (ii) above, the Company promptly shall advise the
Parent and the Buyer orally and in writing of any request for
information or of any Takeover Proposal, or any inquiry with respect
to or which could lead to any Takeover Proposal, the material terms
and conditions of such request, Takeover Proposal or inquiry and the
identity of the Person making any such request, Takeover Proposal or
inquiry.
(e) Accounting and Securities Matters.
The Company will, in good faith, endeavor to cause Xxxx Xxxxx LLP,
independent auditors for the Company and its Subsidiary, and each other firm
acting as independent auditors to the Company (a) to deliver to the Parent
financial statements audited and prepared in accordance with GAAP, (b) to
deliver an auditor's report and consents with respect to financial statements of
the Company, and other information required to be filed by the Parent pursuant
to the rules of the Securities and Exchange Commission, or pursuant to the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended, and (c) to cooperate with the Parent and its auditors to provide
"comfort" letters with respect to financial information about the Company
required to be included in the Parent's filings with the Securities and Exchange
Commission, provided that neither the Company nor its shareholders shall be
required to incur any expense in such effort.
41
(f) Pre-Closing Funding of Pension Plan.
Prior to the Closing Date, the Company shall pay and contribute to
the Zetec, Inc. Pension Plan an amount equal to Seven Hundred Forty Nine
Thousand Six Hundred Ninety One Dollars ($749,691.00) in cash.
7. POST-CLOSING COVENANTS.
The Parties agree as follows with respect to the period following the
Closing:
(a) General.
(i) In case at any time after the Closing any further action
is necessary to carry out the purposes of this Agreement, the
Stockholders and the Surviving Corporation will take such further
action (including the execution and delivery of such further
instruments and documents) as any other Party reasonably may
request, at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor
hereunder). The Stockholders acknowledge and agree that from and
after the Closing the Surviving Corporation will have the right to
possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort relating to the Company
and its Subsidiary in this Agreement; provided, however, that the
Stockholders shall have the right to obtain access to such
documents, books, records (including Tax records), agreements, and
financial data to the extent related to the period prior to the
Closing and make photocopies thereof for a proper purpose, such as
in connection with the preparation of their Tax Returns.
(b) Litigation Support.
In the event and for so long as any Party actively is contesting or
defending against any action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand in connection with (i) any transaction contemplated
under this Agreement or (ii) any fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction on or prior to the Closing Date involving the
Surviving Corporation or the Stockholders, each of the other Parties will
reasonably cooperate with the contesting or defending Party and his or its
counsel in the contest or defense, make available his or its personnel, and
provide such testimony and access to his or its books and records as shall be
necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending Party (unless the contesting or defending
Party is entitled to indemnification therefor under Section 8 below).
(c) Transition.
The Stockholders will use their best efforts not to take any action
that is designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of the Company, its
Subsidiary, or the Surviving Corporation from
42
maintaining the same business relationships with the Parent and the Surviving
Corporation after the Closing as it maintained with the Company and its
Subsidiary prior to the Closing.
(d) Tax Matters.
(i) Subject to the last sentence of this Section 7(d)(i), any
income Tax refunds that are received by the Surviving Corporation
during the one (1) year period following the Closing Date, and any
amounts credited against income Tax to which the Surviving
Corporation becomes entitled pursuant to written notice received by
the Surviving Corporation during the one (1) year period following
the Closing Date, that relate to income Tax periods or portions
thereof ending on or before the Closing Date shall be for the
account of the Stockholders, and the Surviving Corporation shall pay
over to the Stockholders any such refund or the amount of any such
credit within fifteen (15) days after receipt or entitlement
thereto. In addition, subject to the last sentence of this Section
7(d)(i), to the extent that a claim for refund or a proceeding
results, during the one (1) year period following the Closing Date,
in a payment or credit against income Tax by a taxing authority to
the Surviving Corporation of any amount accrued on the Closing Date
Balance Sheet, the Surviving Corporation shall pay such amount to
the Stockholders within fifteen (15) days after receipt or
entitlement thereto. The Stockholders, however, shall not be
entitled to any portion of any refund or credit received by the
Surviving Corporation, or to which the Surviving Corporation is
entitled to receive, unless and until the Surviving Corporation
shall have received, or be entitled to receive, such refunds and
credits which in the aggregate exceed Three Hundred Fifty Thousand
Dollars ($350,000), and then only to the extent such refunds and
credits exceed Three Hundred Fifty Thousand Dollars ($350,000).
(ii) The Surviving Corporation will be responsible for all
Taxes, subject to the right to make a claim against the Escrow Fund
for any breach of the representations and warranties contained in
Section 3.B(e) With respect to the transactions contemplated by this
Agreement, Parent, Surviving Corporation, and the Stockholders will
provide each other with such cooperation and information as either
of them may reasonably require of the other in connection with the
filing of any Tax Return, including Tax Returns relating to the
application of the successor employer rules for payroll Tax purposes
contained in Code Sections 3121(a)(1) and 3306(b)(1), the
determination of a liability for Taxes or a right to a refund for
Taxes, or the preparation for litigation or investigation of any
claim for Taxes or a right to a refund for Taxes, and the
cooperation and information shall include all relevant Tax Returns,
and other documents and records, or portions thereof relating to or
necessary in connection with the preparation of records, or portions
thereof relating to or necessary in connection with the preparation
of such Tax Returns or other determination of Tax Liability. Each
Party shall retain all Tax Returns, schedules, workpapers, and all
other related materials, records or documents until the expiration
of the statute of limitations for the taxable years to which such
Tax Returns and other related documents relate. After expiration of
the statute of limitations, a Party shall notify each other Party in
writing that it
43
desires to dispose of or destroy the Tax Returns and other documents
and shall provide such other Parties with the right for thirty (30)
days after the tendering of such notice to copy or take possession
of such Tax Returns and other related documents. Any information
obtained under this provision shall be kept confidential by the
Parties, except as may be necessary in connection with the filing of
such Tax Returns.
(e) Company Charter Provisions.
The Surviving Corporation will not take any action to modify or
terminate the rights of present or former officers or directors of the Company
to exculpation and indemnification under the terms of the Company's Articles of
Incorporation and Bylaws.
8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) Survival of Representations and Warranties.
All of the representations and warranties of the Stockholders
contained in Section 3.A of this Agreement and of the Parent and the Buyer
contained in Section 4 of this Agreement shall survive the Closing and continue
in full force and effect for a period of six (6) years following the Effective
Date. All of the representations and warranties of the Company contained in
Section 3.B and all covenants shall survive the Closing and continue in full
force and effect for a period of one (1) year following the Effective Date. No
action, claim, or proceeding may be brought by any Party hereto against any
other Party resulting from, arising out of, or caused by a breach of a
representation or warranty or covenant contained herein, after the time such
representation or warranty ceases to survive pursuant to the preceding sentence,
unless written notice of such claim setting forth with specificity the basis for
such claim is delivered to the applicable Party prior to the expiration of such
time.
(b) Indemnification Provisions Relating to Section 3.A
Representations for Benefit of the Parent and the Surviving Corporation.
(i) In the event that any of the Section 3.A Representations
of the Stockholders are untrue (or in the event any third party
alleges facts that, if true, would mean any of the Section 3.A
Representations are untrue), then, provided that either the Parent
or the Surviving Corporation makes a written claim for
indemnification setting forth the basis for such claim against the
Stockholders pursuant to Section 8(g) below within six (6) years
following the Effective Date, then the Stockholders shall, Severally
indemnify the Parent and the Surviving Corporation, subject to the
limitations set forth herein, from and against the entirety of any
Adverse Consequences the Parent or the Surviving Corporation may
suffer through and after the date of the claim for indemnification
(including any Adverse Consequences the Parent or the Surviving
Corporation may suffer after the end of any applicable survival
period) resulting from, arising out of, or caused by the breach (or
the alleged breach); provided, however, that:
44
(A) No Stockholder shall have any obligation to
indemnify the Parent or the Surviving Corporation from and
against any Adverse Consequences resulting from, arising out
of, or caused by the breach (or alleged breach) of any Section
3.A Representations which exceed the portion of the Merger
Consideration received by such Stockholder; and
(B) No Stockholder shall have any obligation to
indemnify the Parent or the Surviving Corporation from and
against any Adverse Consequences resulting from, arising out
of, or caused by the breach (or alleged breach) of any Section
3.A Representations until and unless and only to the extent
that: (1) the R&W Insurance Policy fails or refuses to provide
such indemnification to the Parent and the Surviving
Corporation; and (2) funds are not available from the Section
3.A Funds (as that term is defined in the Escrow Agreement) in
the Escrow Fund. Funds in the Escrow Fund in excess of the
Section 3.A Funds may only be used to pay a claim (in
accordance with Section 5(b) of the Escrow Agreement) arising
from a Section 3.A Representation if the Parent in its sole
discretion approves such use of the funds.
(ii) In the event that any claim, action suit or proceeding is
commenced against the Parent, the Company, the Buyer, or the
Surviving Corporation, or any of their current or former officers,
directors, or shareholders, based on or arising from the issuance,
sale, transfer, or redemption of any shares of capital stock of the
Company (including but not limited to the Redemptions), whether such
action, suit or proceeding arises at law or at equity, by contract,
by the terms of the governing documents of the Company, or
otherwise, that claim shall be deemed to constitute a breach of the
Section 3.A Representations for which the Stockholders are obligated
to provide indemnification in accordance with Section 8(a).
(c) Indemnification Provisions Relating to Section 3.B
Representations and Covenants for Benefit of the Parent and the Surviving
Corporation.
In the event that any of the Section 3.B Representations of the Company are
untrue (or in the event any third party alleges facts that, if true, would mean
any of the Section 3.B Representations are untrue), or any of the covenants for
the benefit of the Parent are breached, then, provided that either the Parent or
the Surviving Corporation makes a written claim for indemnification setting
forth the basis for such claim within one (1) year following the Effective Date,
then the Company and the Surviving Corporation shall be entitled, subject to the
limitations set forth herein, to indemnification from and against the entirety
of any Adverse Consequences the Parent or the Surviving Corporation may suffer
through and after the date of the claim for indemnification (including any
Adverse Consequences the Parent or the Surviving Corporation may suffer after
the end of any applicable survival period) resulting from, arising out of, or
caused by the breach (or the alleged breach); provided, however, that:
(i) The sole source of funds for such indemnification shall be
the funds in the Escrow Fund, which shall be released in accordance
with the terms of
45
the Escrow, Release and Indemnification Agreement. No claim may be
asserted directly against any Stockholder for any breach or alleged
breach of the Section 3.B Representations.
(ii) No claim may be made against the Escrow Funds with
respect to such breaches (or alleged breaches) contained in Section
3.B until the Parent or the Surviving Corporation has suffered
Adverse Consequences by reason thereof in excess of Three Hundred
Fifty Thousand Dollars ($350,000.00) and only to the extent that
such Adverse Consequences exceed that amount.
(d) Escrow.
In order to provide the Parent and the Surviving Corporation with a
nonexclusive source of funds for the indemnity obligations of the Stockholders
for the Section 3.A. Representations and an exclusive source of funds for
breaches of the Company's Section 3.B Representations and the covenants of the
Company and the Stockholders, the Parties and the Stockholders shall have
executed the Escrow Agreement prior to the Closing Date, which shall be funded
with Five Million Eight Hundred Thousand Dollars ($5,800,000.00) of the
Aggregate Consideration otherwise payable to the Stockholders, which will be
held pursuant to the Escrow Agreement for a period of one (1) year. Amounts held
under the Escrow Agreement shall be an exclusive source of indemnification with
respect to the Section 3.B Representations and the covenants of the Company and
the Stockholders (except for the covenants contained in the Minimum Net Working
Capital Adjustment set forth in Section 2(j) of this Agreement, and except for
any covenants that are contained in the Escrow Agreement or the Noncompetition
and Assignment of Inventions Agreements), and a nonexclusive source of
indemnification with respect to the Section 3.A Representations. Under no
circumstance shall the Parent or the Surviving Corporation be required to
satisfy amounts payable by the Stockholders pursuant to the Minimum Net Working
Capital Adjustment set forth in Section 2(j) of this Agreement from amounts held
pursuant to the Escrow Agreement.
(e) Indemnification Provisions for Benefit of the Stockholders.
In the event Parent or Buyer breaches (or in the event any third
party alleges facts that, if true, would mean Parent or Buyer has breached) any
of their representations, warranties, and covenants contained in this Agreement,
then, provided that the Stockholder Representatives make a written claim for
indemnification setting forth the basis for such claim against Parent or the
Surviving Corporation pursuant to Section 8(g) below within six (6) years
following the Effective Date, then Parent and the Surviving Corporation, jointly
and severally, agree to defend, indemnify and hold harmless the Stockholders
from and against the entirety of any Adverse Consequences (up to but not in
excess of the Merger Consideration) the Stockholders may suffer through and
after the date of the claim for indemnification (including any Adverse
Consequences the Stockholders may suffer after the end of any applicable
survival period) resulting from, arising out of, or caused by the breach (or the
alleged breach).
46
(f) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification against
any other Party (the "Indemnifying Party") under this Section 8,
then the Indemnified Party shall promptly notify each Indemnifying
Party thereof in writing; provided, however, that no delay on the
part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any obligation hereunder
unless (and then solely to the extent) the Indemnifying Party
thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its
choice satisfactory to the Indemnified Party so long as (A) the
Indemnifying Party notifies the Indemnified Party in writing within
fifteen (15) days after the Indemnified Party has given notice of
the Third Party Claim that the Indemnifying Party will indemnify the
Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the
Third Party Claim, (B) the Indemnifying Party provides the
Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder, (C) the Third
Party Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or an
adverse judgment with respect to, the Third Party Claim is not, in
the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice materially adverse to
the continuing business interest of the Indemnified Party, and (E)
the Indemnifying Party conducts the defense of the Third Party Claim
actively and diligently.
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 8(f)(ii)
above, (A) the Indemnified Party may retain separate co-counsel at
its sole cost and expense and participate in the defense of the
Third Party Claim, (B) the Indemnified Party will not consent to the
entry of any judgment or enter into any settlement with respect to
the Third Party Claim without the prior written consent of the
Indemnifying Party (which consent shall not be unreasonably
withheld).
(iv) In the event any of the conditions in 8(f)(ii) above is
or becomes unsatisfied, however, (A) the Indemnified Party may
defend against, and consent to the entry of any judgment or enter
into any settlement with respect to, the Third Party Claim in any
manner it may deem appropriate (and the Indemnified Party need not
consult with, or obtain any consent from, any Indemnifying Party in
connection therewith), (B) the Indemnifying Party will reimburse the
Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable
attorneys' fees and expenses), and (C) the Indemnifying Party will
remain responsible for any Adverse Consequences the
47
Indemnified Party may suffer resulting, arising out of, relating to,
in the nature of, or caused by the Third Party Claim to the fullest
extent provided in this Section 8.
(g) Determination of Adverse Consequences.
Adverse Consequences shall be determined net of insurance proceeds
actually received, and the Parties shall take into account the time cost of
money (using the Applicable Rate as the discount rate) in determining Adverse
Consequences for purposes of this Section 8. Available insurance coverage with
respect to policies purchased prior to the Closing Date shall be made available
by the Surviving Company as a source of funds to satisfy claims against the
Escrow and the Stockholder under Section 8. All indemnification payments under
this Section 8 shall be deemed adjustments to the Merger Consideration.
(h) Post-Closing.
Following the Closing, the remedy of the Stockholders, on the one
hand, and Parent and the Surviving Corporation on the other hand, with respect
to any breach or threatened breach of a representation, warranty or covenant
contained in this Agreement or with respect to any event, circumstance or
condition occurring on or before the Closing shall be limited to the enforcement
of the indemnification obligations set forth in Section 8; provided, however,
that nothing provided in this Section 8(g) shall limit the right of any Party to
seek any equitable remedy available to enforce his or its rights hereunder .
9. TERMINATION.
(a) Termination Events.
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(i) By either (i) Buyer and the Parent on the one hand, or
(ii) the Company on the other hand, if a material breach of any
provision of this Agreement has been willfully committed by the
other Party and such material breach has not been waived or cured
within fifteen (15) days of Notice to the other Party of such
material breach, and the terminating Party is not in breach of any
provision of this Agreement;
(ii) By either (i) Buyer and the Parent on the one hand, or
(ii) the Company on the other hand, if the Closing has not occurred
(other than through the failure of the Party seeking to terminate
this Agreement to comply fully with its obligations under this
Agreement) on or before August 31, 2002, or such later date as the
Parties may agree upon;
(iii) By the Parent or the Buyer, pursuant to the provisions
of Section 3.C of this Agreement; or
(iv) By mutual consent of the Parties.
48
(b) Effect of Termination.
If this Agreement is terminated pursuant to Section 9(a) above, all
further obligations of the Parties under this Agreement will terminate, except
the obligations in Section 10 (Miscellaneous); provided, however, that if this
Agreement is terminated by a Party as a result of the other Party's fraud, or
willful or intentional breach of its representations, warranties or obligations
hereunder, the terminating Party shall have the right to pursue all remedies
available to it at law or in equity.
10. MISCELLANEOUS.
(a) Press Releases and Public Announcements.
Neither the Company, its Subsidiary, nor the Stockholders shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the Parent.
Parent, upon prior notice to the Company, may make any public disclosure it
believes in good faith is required or permitted by applicable law or any listing
or trading agreement concerning its publicly-traded securities.
(b) No Third-Party Beneficiaries.
This Agreement shall not confer any rights or remedies upon any
Person other than the Parties and their respective successors and permitted
assigns.
(c) Entire Agreement.
This Agreement (including the documents and instruments to be
delivered at closing pursuant to Section 5(a) and Section 5(b) of this
Agreement) constitutes the entire agreement between the Parties and supersedes
any prior understandings, agreements, or representations by or between the
Parties, written or oral, to the extent they related in any way to the subject
matter hereof.
(d) Succession and Assignment.
This Agreement shall be binding upon and inure to the benefit of the
Parties named herein and their respective successors and permitted assigns. No
Party may assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of each other Party;
provided, however, that either the Parent or the Buyer may (i) assign any or all
of its rights and interests hereunder to one or more of its affiliates and (ii)
designate one or more of its affiliates to perform its obligations hereunder (in
any or all of which cases the assigning Party nonetheless shall remain
responsible for the performance of all of its obligations hereunder).
(e) Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together will constitute one
and the same instrument.
49
(f) Headings.
The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
(g) Notices.
All notices, requests, demands, claims, and other communications
hereunder will be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given if (and then two business
days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Buyer or the Surviving Corporation:
C. Xxxxxx X'Xxxxx Copy to:
RPR Acquisition Subsidiary, Inc. Xxxxxx X. XxXxxxx
c/x Xxxxx Industries, Inc. Powell, Goldstein, Xxxxxx & Xxxxxx LLP
000 Xxx Xxxxxx Xxxx 191 Peachtree Street, NE, 16th Floor
Xxxxxx, Georgia 30622 Xxxxxxx, XX 00000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
If to the Stockholders: Copy to:
Xxxxxx X. Xxxxxxxxx Xxxxx X. Xxxxxx
24619 S.E. Second Place Xxxxxxx Xxxxxxxx X.X.
Xxxxxxxxx, XX 00000 0000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000-0000
Facsimile: (000) 000-0000
Xxxxxx Xxxx
00000 X.X. 00xx Xxxxxx
Xxxxxxxxx, XX 00000
Xxxxxx Xxxxxxx
00000 X.X. 00xx Xxxxxx
Xxxxxxxxx, XX 00000
If to the Parent:
C. Xxxxxx X'Xxxxx Copy to:
Xxxxx Industries, Inc. Xxxxxxx X. Xxxxx, Esq.
000 Xxx Xxxxxx Xxxx Xxxxx Industries, Inc.
Xxxxxx, Xxxxxxx 00000 000 Xxx Xxxxxx Xxxx
Facsimile: (000) 000-0000 Xxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
50
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
(h) Governing Law.
This Agreement shall be governed by and construed in accordance with
the domestic laws of the State of Washington without giving effect to any choice
or conflict of law provision or rule (whether of the State of Washington or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Washington.
(i) Amendments and Waivers.
No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by each of the Parties. No waiver
by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
(j) Severability.
Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction.
(k) Expenses.
Parent and Buyer will bear their own costs and expenses (including
but not limited to financial, advisory, accounting, legal, and environmental
fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby. The Stockholders shall bear the costs and
expenses (including but not limited to financial, advisory, accounting, legal,
and environmental fees and expenses) of the Company and its Subsidiary, incurred
in connection with this Agreement and the transactions contemplated hereby which
are approved by the Company's Board of Directors. The satisfaction and payment
by the Company prior to Closing of such costs and expenses, and the payments
from the Aggregate Consideration contemplated by Section 2(e)(ii) of this
Agreement, shall constitute compliance by the Stockholders with this Section
10(k). If any Stockholder incurs any additional cost or expenses, that
Stockholder shall be responsible for discharging the obligation.
51
(l) Construction.
Any reference to any federal, state, local, or foreign statute or
law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" shall
mean including without limitation. Items set forth in the Company Disclosure
Schedule shall be deemed an exception only to the representations and warranties
for which they are identified and any other representations or warranties to
which the Company Disclosure Schedule with respect to representations and
warranties contain an appropriate cross-reference.
(m) Incorporation of Exhibits and Schedules.
The Exhibits and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
(n) Specific Performance.
Each of the Parties acknowledges and agrees that the other Party
would be damaged irreparably in the event any of the provisions of this
Agreement are not performed in accordance with their specific terms or otherwise
are breached. Accordingly, each of the Parties agrees that the other Party shall
be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having, in accordance with the terms of this
Agreement, jurisdiction over the Parties and the matter, in addition to any
other remedy to which it may be entitled, at law or in equity.
(o) Submission to Jurisdiction.
Each of the Parties submits to the jurisdiction of any state or
federal court sitting in Seattle, Washington in any action or proceeding arising
out of or relating to this Agreement and agrees that all claims in respect of
the action or proceeding may be heard and determined in any such court. Each
Party also agrees not to bring any action or proceeding arising out of or
relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Parent and Buyer appoint The Xxxxxxxx-Xxxx
Corporation System, Inc. as their agent to receive on its behalf service of
copies of the summons and complaint and any other process that might be served
in the action or proceeding. The Stockholders appoint the Stockholder
Representatives designated in the Escrow Agreement as his, her, or its agent to
receive on his, her, or its behalf service of copies of the summons and
complaint and any other process that might be served in the action or proceeding
(the Xxxxxxxx-Xxxx Corporation System, Inc. and the Stockholder Representatives
are referred to together in this Section 10(o) as the "Process Agent"). Any
Party (or the Stockholder Representatives in the case of the Stockholders) may
make service on any other Party by sending or delivering a copy of the process
(i) to the Party to be served at the address and in the manner provided for the
giving of notices in Section 10(g) above or (ii) to the Party to be served in
care of the Process Agent at the address and in the manner provided for the
giving of notices in Section 10(g) above. Each Party agrees that a final
judgment in any action
52
or proceeding so brought shall be conclusive and may be enforced by suit on the
judgment or in any other manner provided by law or in equity.
(p) Arbitration.
Except as otherwise set forth in this Agreement, all disputes
arising out of or under this Agreement shall be settled by arbitration in a
location in Seattle, Washington mutually acceptable to the Parties before a
single arbitrator pursuant to the Commercial Arbitration Rules of the American
Arbitration Association. Arbitration may be commenced at any time by any of the
Parties by giving written notice to each other than such dispute has been
referred to arbitration under this Section 10(p). The arbitrator shall be
selected by the joint agreement of the Parties, but if they do not so agree
within twenty (20) days after the date of receipt of the notice referred to
above, the selection shall be made pursuant to the rules from the panels of
arbitrators maintained by the American Arbitration Association. Any award
rendered by the arbitrator shall be conclusive and binding upon the Parties
hereto; provided, however, that any such award shall be accompanied by a written
opinion of the arbitrator giving the reason for the award. This provision for
arbitration shall be specifically enforceable by the Parties and the decision of
the arbitrator in accordance herewith shall be final and binding and there shall
be no right of appeal therefrom. The arbitrator shall assess, as part of his
award to the prevailing Party, all or such part as the arbitrator deems proper
of the arbitration expenses of the prevailing Party (including reasonable
attorneys' fees) and of the arbitrator against the Party that is unsuccessful in
such claim, defense or objection.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
53
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the
date first above written.
BUYER:
RPR Acquisition Subsidiary, Inc.
By: ____________________________________
Name: __________________________________
Title: _________________________________
PARENT:
Xxxxx Industries, Inc.
By: ____________________________________
Name: __________________________________
Title: _________________________________
COMPANY:
Zetec, Inc.
By: ____________________________________
Name: __________________________________
Title: _________________________________
STOCKHOLDER JOINDER:
Pursuant to the provisions of the Escrow Agreement, each of the
Stockholders and their respective spouses have agreed to be bound to this
Agreement as if they were Parties hereto.
54
