AGREEMENT AND PLAN OF MERGER
By and Among
PTI ACQUISITION CORP.,
a subsidiary of
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC.,
PACIFIC TECHNOLOGIES, INC.,
XXXXX X. XXXXXX,
XXXXX X. XXXXX,
XXXXXX X. XXXXXX,
XXXX X. XXX,
and
XXXXX X. XXXXXX
DATED: September 30, 1996
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TABLE OF CONTENTS
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ARTICLE I............................................................... 1
DEFINITIONS.................................................... 1
ARTICLE II.............................................................. 6
THE MERGER AND PURCHASE OF SHARES.............................. 6
Section 2.1. The Merger...................................... 6
Section 2.2. Conversion of Shares............................ 7
ARTICLE III............................................................. 9
REPRESENTATIONS AND WARRANTIES OF SURVIVING CORPORATION........ 9
Section 3.1. Capitalization.................................. 9
Section 3.2. Corporate Existence............................. 9
Section 3.3. Authority Relative to this Agreement
and Transaction Documents....................... 9
Section 3.4. Absence of Subsidiary Liabilities............... 10
Section 3.5. No Litigation................................... 10
Section 3.6. No Brokers, Finders, etc........................ 10
Section 3.7. Acquisition for Investment...................... 10
Section 3.8. Filings with the SEC............................ 10
Section 3.9. Financial Statements............................ 10
Section 3.10. Full Disclosure................................. 11
ARTICLE IV.............................................................. 11
REPRESENTATIONS AND WARRANTIES................................. 11
Section 4.1. Capitalization.................................. 11
Section 4.2. Title to Shares, etc............................ 11
Section 4.3. Corporate Existence............................. 12
Section 4.4. Authority Relative to this Agreement and
Transaction Documents........................... 12
Section 4.5. No Litigation................................... 12
Section 4.6. Title to Assets and Real Property............... 13
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Section 4.7. Compliance with Laws; Permits and Licenses....... 14
Section 4.8. Intellectual Property............................ 14
Section 4.9. Litigation....................................... 15
Section 4.10. Contracts........................................ 15
(a) Material Contracts............................... 15
(b) Government Contracts............................. 16
(i) Government Contracts Compliance......... 16
(ii) Investigation and Claims......................... 17
(iii) No Debarment or Suspension....................... 19
(iv) Test and Inspection Results...................... 19
Section 4.11. Foreign Government Contracts..................... 19
Section 4.12. Labor Union Contracts............................ 19
Section 4.13. Employees, Labor Matters, etc.................... 20
Section 4.14. ERISA............................................ 21
Section 4.15. Brokers' or Finders' Fees, etc................... 22
Section 4.16. Financial Information; Undisclosed Liabilities... 23
Section 4.17. Taxes............................................ 23
Section 4.18. Absence of Changes............................... 25
Section 4.19. Accounts Receivable.............................. 27
Section 4.20. Insurance........................................ 27
Section 4.21. Sufficiency of Assets and Real Property.......... 27
Section 4.22. Foreign Assets................................... 28
Section 4.23. Propriety of Past Payments....................... 28
Section 4.24. Affiliate Transactions........................... 28
Section 4.25. Suppliers and Customer........................... 28
Section 4.26. Environmental Conditions and
Governmental Authorizations...................... 29
Section 4.27. Leases of Personal Property...................... 29
Section 4.28. Books and Records................................ 30
Section 4.29. Accounts......................................... 30
Section 4.30. Products Liability............................... 30
Section 4.31. Interest in Competitors.......................... 31
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Section 4.32. Inventories....................................... 31
Section 4.33. Private Offering.................................. 31
Section 4.34. Subsidiaries...................................... 31
Section 4.35. Full Disclosure................................... 32
Section 4.36. Purchase for investment........................... 32
ARTICLE V................................................................ 32
COVENANTS....................................................... 32
Section 5.1. Covenants of Surviving Corporation................ 32
Section 5.2. Covenants of the Company and the
Company's Shareholders............................ 33
Section 5.3. Net Worth Statement; Adjustment to Purchase Price. 36
ARTICLE VI............................................................... 37
CONDITIONS PRECEDENT TO EXECUTION OF THIS AGREEMENT............. 37
Section 6.1. Conditions Precedent to Obligations of
Surviving Corporation............................. 37
Section 6.2. Conditions Precedent to Obligations of
the Company....................................... 39
ARTICLE VII.............................................................. 41
ADDITIONAL AGREEMENTS.................................................... 41
Section 7.1. Further Assurances................................ 41
Section 7.2. Covenants of Certain of the
Company's Shareholders............................ 41
Section 7.3. Remedies.......................................... 42
Section 7.4. Public Disclosure................................. 43
Section 7.5. Limitations on Transfers and Dispositions......... 43
ARTICLE VIII............................................................. 44
INDEMNIFICATION................................................. 44
Section 8.1. Survival of Representations and Warranties........ 44
Section 8.2. Indemnification by the Parties.................... 44
Section 8.3. General Indemnification Provisions................ 44
Section 8.4. Limitations on Indemnification.................... 45
Section 8.5. Shareholders' Representatives..................... 45
ARTICLE IX............................................................... 46
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TERMINATION.............................................................. 46
Section 9.1. Termination of Agreement......................... 46
Section 9.2. Procedure and Effect of Termination.............. 47
ARTICLE X................................................................ 47
CERTAIN REGISTRATION RIGHTS..................................... 47
10.1. Certain Definitions..................................... 47
10.2. Restrictions On Transfer................................ 49
10.3. Registration Of Securities.............................. 49
10.4. Expenses Of Registration................................ 50
10.5. Registration Procedures................................. 50
10.6. Indemnification......................................... 51
10.7. Information By Holder................................... 53
10.8. Rule 144 Reporting...................................... 53
10.9. Allocation Of Registration Opportunities................ 53
ARTICLE XI............................................................... 54
MISCELLANEOUS................................................... 54
Section 11.1. Taxes........................................... 54
Section 11.2. Expenses........................................ 54
Section 11.3. Consents........................................ 54
Section 11.4. Assignment...................................... 54
Section 11.5. Entire Agreement................................ 54
Section 11.6. Amendment....................................... 55
Section 11.7. Waiver.......................................... 55
Section 11.8. Headings........................................ 55
Section 11.9. Notices......................................... 55
Section 11.10. Law Governing Jurisdiction...................... 57
Section 11.11. Counterparts.................................... 57
Section 11.12. Severability.................................... 57
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made as of this 30th day of September,
1996 (the "Agreement") by and among PTI ACQUISITION CORP., a Delaware
corporation ("Subsidiary" or the "Surviving Corporation") and a wholly owned
subsidiary of DIAGNOSTIC/RETRIEVAL SYSTEMS, INC., a Delaware corporation
("Parent" or "DRS"), PACIFIC TECHNOLOGIES, INC., a California corporation
("Merging Corporation" or the "Company"), Xxxxx X. Xxxxxx, an individual,
("Xxxxxx"), Xxxxx X. Xxxxx, an individual ("Xxxxx"), Xxxxxx X. Xxxxxx, an
individual ("Xxxxxx"), Xxxx X. Xxx, an individual ("Ito"), and Xxxxx X. Xxxxxx,
an individual ("Xxxxxx") (collectively, Xxxxxx, Ito and Xxxxxx shall be referred
to as the "Minority Shareholders") (collectively, Xxxxxx, Xxxxx and the Minority
Shareholders shall be referred to as the "Company's Shareholders").
WHEREAS, the parties hereto desire to adopt a plan of reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended;
WHEREAS, the parties hereto deem it advisable that the Company be merged
into Subsidiary pursuant to this Agreement and in accordance with the applicable
statutes of the States of Delaware and California;
WHEREAS, the Company's Shareholders are the owners of 3,455 issued and
outstanding shares (singularly, a "Share" and collectively the "Shares") of
common stock, no par value, of the Company (the "Common Stock"), which Shares
represent 100% of the issued and outstanding Common Stock of the Company;
WHEREAS, at or prior to the Effective Date (as hereinafter defined),
Subsidiary will acquire from the Company's Shareholders all of the Shares
necessary to complete the merger provided for herein; and
WHEREAS, the principal office of Subsidiary in the State of Delaware is
located at 0000 Xxxxxx Xxxxxx, Xxxx xx Xxxxxxxxxx, Xxxxxx of New Castle, and the
name of its resident agent at that address is The Corporation Trust Company.
NOW, THEREFORE, the parties agree as follows:
ARTICLE
DEFINITIONS
Certain Defined Terms. As used in this Agreement, the following terms shall
have the following meanings:
"Accountant" means Xxxx Xxxxx, the certified public accountant of the
Company.
"Affiliate" means, when used with reference to a specified Person, (i) any
Person that directly or indirectly through one or more intermediaries controls
or is controlled by or is under common control with the specified Person or (ii)
any Person that is an executive officer or director of, partner in, or trustee
of, or serves in a similar capacity with respect to, the specified Person or of
which the specified Person is an officer, partner or trustee, or with respect to
which the specified Person serves in a similar capacity and, (iii) when used
with reference to a natural Person, any Person that is related to the specified
Person by blood or marriage in the first degree of consanguinity; provided,
however, that no natural Person shall be deemed to be controlled by any other
Person.
"Applicable Law" shall have the meaning specified in Section 4.7(a).
"Assets" means all of the assets of the Company, real, personal, tangible,
intangible and otherwise, all as more particularly set forth on Schedule 4.6.
"Surviving Corporation's Accountants" shall mean KPMG Peat Marwick LLP.
"Certificate of Merger" shall have the meaning set forth in Section 6.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Pacific Technologies, Inc. together with Subsidiaries
thereof, if any, and any partnership Affiliates.
"Contracts" means all contracts, subcontracts, agreements, options,
guarantees, orders, commitments, undertakings and arrangements, whether written
or oral.
"Effective Date" shall have the meaning specified in Section 2.1(a).
"Environmental Damages" means all claims, judgments, damages, losses,
penalties, fines, liabilities (including strict liability), costs and expenses,
including costs and expenses of defense of any claim and of any settlement of
claims, including, without limitation, reasonable attorneys' fees and
consultants' fees, which are incurred at any time as a result of the existence
of Hazardous Material upon, about or beneath the Premises or migrating or
threatening to migrate to or from the Premises, or arising in any manner
whatsoever out of any violation of Environmental Requirements pertaining to the
Premises and the activities thereon or to the past, present or future operations
of the Company, including without limitation:
(i) damages for personal injury, or injury to property or natural
resources, including but not limited to claims brought by or on behalf of
employees of the Company, occurring upon or off of the Premises, whether
foreseeable or unforeseeable, including, without limitation, lost profits,
consequential damages, interest and penalties;
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(ii) diminution in the value of the Premises and damages for the loss
of or restriction on the use of or adverse impact on the marketing of
rentable or usable space or of any amenity of the real property containing
the Premises;
(iii) fees incurred for the services of attorneys, consultants,
contractors, experts, laboratories and all other costs and liabilities
(including liabilities to indemnify any Person for costs) incurred in
connection with the investigation or remediation of such Hazardous
Materials or violation of Environmental Requirements including, but not
limited to, the preparation of any feasibility studies or reports or the
performance of any cleanup, remedial, removal, containment, restoration or
monitoring work required by any Governmental Authority, or reasonably
necessary to make full economic use of the Premises or any other property
or otherwise expended in connection with such conditions; and
(iv) damages and claims resulting from the off-site disposal of
Hazardous Materials which are derived from the use, generation, storage,
treatment, transportation or disposal of Hazardous Materials by the
Company.
"Environmental Requirements" means all Applicable Law relating to the
protection of human health or the environment, including, without limitation:
(i) all requirements pertaining to reporting, licensing, permitting,
investigation or remediation of emissions, discharges, releases or
threatened releases of Hazardous Materials into the air, surface water,
groundwater or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials; and
(ii) all requirements pertaining to the protection of the health and
safety of employees or the public.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended (P.L. 93-406).
"GAAP" means generally accepted accounting principles in the United States
of America in effect from time to time, applied consistently throughout the
periods involved.
"Governmental Approval" means an authorization, consent, approval, permit,
license or exemption of, registration or filing with, or report or notice to,
any Governmental Authority, including, without limitation, federal environmental
authorities and environmental authorities of the states in which the Company
conducts business.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
including, without limitation, any
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government authority, agency, department, board, commission or instrumentality
of the United States, any State of the United States or any political
subdivision thereof and any tribunal or arbitrator(s) of competent jurisdiction.
"Hazardous Materials" means any chemical substance:
(i) the presence of which requires investigation, removal or
remediation under any Applicable Law; or
(ii) which is or becomes defined as a "hazardous waste" or "hazardous
substance" under any Applicable Law, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. Section 9601 et seq.) or the Resource Conservation and Recovery Act
(42 U.S.C. Section 6901 et seq.); or
(iii) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic, or otherwise hazardous and is or
becomes regulated by any Governmental Authority or Applicable Law; or
(iv) the presence of which causes or threatens to cause a nuisance
upon the Premises or to adjacent properties or poses or threatens to pose a
hazard to the Premises or to the health or safety of any Person on or about
the Premises; or
(v) without limitation which contains gasoline, diesel fuel or other
petroleum hydrocarbons; or
(vi) without limitation which contains PCBs or asbestos.
"IRS" means the United States Internal Revenue Service.
"Intellectual Property Rights" means any and all copyrights, trademarks,
trademark applications, service marks, service xxxx applications, licensing
agreements and similar Contracts, technology, trade secrets, trade names,
division names and other information, property or rights used in or relating to
the business or operations of the Company, as more specifically set forth in
Schedule 4.8 hereof.
"Inventories" means all inventories relating to the business of the Company
including, without limitation, all finished goods, work in progress, raw
materials, stores, all production, shipping and packaging supplies and all spare
parts.
"knowledge": In any representation or warranty, words denoting "to the
knowledge of the Company and the Shareholders" mean that none of the Company,
Xxxxxx, Mason, Miller, Ito and/or Xxxxxx has knowledge which would contradict
the relevant representation or warranty.
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"Liens" has the meaning specified in Section 4.6.
"Material Adverse Effect" means an effect which, directly or indirectly,
subjects the Company to any liability, damage, deficiency, loss, cost or expense
of $25,000 or more or which otherwise has or will have a material adverse effect
on the operations, results of operations, prospects or condition (financial or
other) of the business of the Company.
"Material Contract" shall have the meaning specified in Section 4.10.
"Minority Shareholders" shall have the meaning specified in the first
paragraph of this Agreement.
"Net Worth Statement" shall have the meaning specified in Section 5.3.
"Notice" shall have the meaning specified in Section 11.9.
"Permitted Liens" shall have the meaning specified in Section 4.6.
"Person" means any individual, firm, partnership, corporation, trust,
estate, limited liability company, limited liability partnership, or other
entity.
"Personal Property Leases" shall have the meaning specified in Section
4.27.
"Plan(s)" shall have the meaning specified in Section 4.14.
"Premises" means those locations owned or leased by the Company or
otherwise used thereby for the business operations of the Company.
"Return" shall mean all reports, estimates, declarations, information
statements and returns due under all foreign, federal, state or local laws or
regulations, as appropriate, relating to Taxes.
"Securities Act" shall mean the Securities Act of 1933, as amended (15
U.S.C. Section 77a et seq.).
"Security Interest" shall have the meaning specified in Section 4.34.
"Subsidiary" of any Person means any corporation or other entity of which
more than 50% of the outstanding capital stock or other equity having ordinary
voting power to elect a majority of the Board of Directors or other managers of
such corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting power upon the
occurrence of any contingency) or other entity is at the time directly or
indirectly owned by such Person, by such Person and one or more of such Person's
other Subsidiaries or by one or more of such Person's other Subsidiaries.
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"Taxes" means all federal, state and local taxes, assessments and
governmental charges, of any nature, kind or description (including, without
limitation, all income taxes, franchise taxes, withholding taxes, estimated
taxes, unemployment insurance, social security taxes, payroll taxes, sales and
use taxes, excise taxes, occupancy taxes, real and personal property taxes,
stamp taxes, transfer taxes, workers' compensation and withholding taxes) and
all interest, additions to tax and penalties with respect thereto, whether such
interest, additions or penalties arise before or after the Effective Date.
"Transaction Documents" shall mean the collective reference to this
Agreement and all other agreements and documents to be delivered pursuant hereto
or thereto on or before the Effective Date, in each case with such changes as
may be agreed among the parties.
ARTICLE
THE MERGER AND PURCHASE OF SHARES
SECTION 2.1. The Merger.
Filing of Certificate of Merger. Upon the execution and delivery of this
Agreement and the Transaction Documents in the manner set forth in Article VI,
the fully executed Certificates of Merger shall be filed by the Subsidiary with
the Secretaries of State of the States of Delaware and California. All of the
parties to this Agreement agree and covenant to do whatever acts are necessary
to ensure that these Certificates of Merger are filed by such Secretaries of
State. The date of the later filing of such Certificates of Merger shall be the
"Effective Date" referred to in this Agreement.
Transfer of Properties and Liabilities. Upon the Effective Date, the
separate existence of the Company shall cease; all of the outstanding Shares of
Common Stock of the Company shall be exchanged for and converted into the right
to receive shares of common stock, $.01 par value, of DRS ("DRS Stock") or cash
as hereinafter provided; and upon the filing of the Certificate of Merger with
the Secretaries of State for the States of Delaware and California, the
Surviving Corporation shall possess all the rights, privileges, immunities,
powers, and purposes, and all the property, real and personal, causes of action,
and every other asset of the Company, and shall assume and be liable for all the
liabilities, obligations and penalties of Company, in accordance with the
Delaware General Corporation Law without further act or deed. Notwithstanding
the foregoing, but consistent with the Delaware General Corporation Law, all
corporate acts, plans, policies, approvals and authorizations of the Company,
its Board of Directors, officers and agents, which were valid and effective
immediately prior to the Effective Date shall be taken for all purposes as the
acts, plans, policies, approvals and authorizations of the Surviving
Corporation, consistent, however, with the terms and conditions of this
Agreement, including without limitation Article VIII hereof and Section 11.2
hereof.
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(c) Surviving Corporation. Following the merger, the existence and identity
of the Surviving Corporation shall continue unaffected and unimpaired by the
merger, with all the rights, privileges, franchises, immunities, and powers
previously held by the Subsidiary before the Effective Date as well as those
previously held by the Company immediately prior to the Effective Date, and
subject to all the duties and liabilities, of a corporation organized under the
laws of the State of Delaware. The Certificate of Incorporation and Bylaws of
Subsidiary, as in effect immediately prior to the Effective Date, shall continue
in full force and effect, and, except as provided in Section 2.1(b), shall not
be changed in any manner by the merger. The directors and the officers of
Subsidiary immediately prior to the Effective Date shall continue as the
directors and officers of the Surviving Corporation. The authorized capital
stock of the Subsidiary shall remain unchanged.
(d) Name. The name of the Surviving Corporation shall be changed as of the
Effective Date to Pacific Technologies, Inc.
SECTION 2.2 Conversion of Shares.
(a) Conversion. Each Share of Common Stock issued and outstanding
immediately prior to the Effective Date (exclusive of Shares, if any, held in
the treasury of the Company, which treasury Shares shall be canceled upon the
Effective Date) shall, without any action on the part of the Company,
Subsidiary, or any holder of such Shares, be converted by the merger into the
right to receive DRS Stock or cash as follows:
Cash to be
Received in
The Company's Shares of Company's Cash to be Shares of DRS Lieu of Frac-
Shareholder Common Stock Received Stock to be Received tional Shares
------------- ------------------ ---------- -------------------- -------------
(Pre-Merger) (Post-Merger)
Xxxxxx 2,025 $ -0- 26,752 $10.01
Xxxxx 1,000 $ -0- 13,211 $ 9.20
Xxxxxx 250 $ -0- 3,303 $ 8.05
Ito 100 $15,192.42 -0- $ -0-
Xxxxxx 80 $12,153.94 -0- $ -0-
The aggregate rights delineated above of the holders of Common Stock to receive
DRS Stock or cash shall be referred to herein as the "Merger Consideration."
(b) Shares of Subsidiary. None of the issued shares of Subsidiary shall be
converted as a result of the merger, but all of such shares shall remain issued
shares of capital stock of the Surviving Corporation.
(c) Exchange of Certificates; Delivery of Cash. As promptly as practicable
after the Effective Date, each holder of an outstanding certificate or
certificates that prior thereto represented Shares of the Company's Common Stock
shall surrender the same to the Subsidiary,
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as exchange agent for all such holders (the "Exchange Agent"), and such holders
shall be entitled upon such surrender to receive in exchange therefor either
certificates representing the number of whole shares of DRS Stock into which the
shares theretofore converted and/or cash, as provided above in Section 2.2(a).
Adoption of this Agreement by the Company's Shareholders shall constitute
ratification of the appointment of the Subsidiary as Exchange Agent. Following
the Effective Date and until so surrendered, each outstanding certificate that,
prior to the Effective Date, represented Shares of Common Stock, shall be deemed
for all corporate purposes to evidence either ownership of the number of whole
shares of DRS Stock into which the Shares of Common Stock represented thereby
prior to such Effective Date shall have been converted or a right to receive the
cash amount set forth in Section 2.2(a) above or both, as specified in Section
2.2(a). No interest shall be payable with respect to the payment of any
dividends or with respect to a cash payment. The holder of a fractional share
interest, as such, shall only be entitled to receive a cash distribution as
provided in Sections 2.2(a) and 2.2(d) and shall not be entitled to any
dividends, or to any distribution in the event of a liquidation, or to any
voting or other privileges of a shareholder of in respect of such fractional
share interest.
(d) Fractional Shares. Fractional shares of DRS Stock will not be issued.
The Exchange Agent will hold for the account of each holder of a certificate or
certificates formerly representing Shares of the Company's Common Stock who
would otherwise be entitled to receive a fractional interest in a share of DRS
Stock, and upon surrender of such certificate or certificates shall deliver to
such holder (together with certificates representing the number of whole shares
of DRS Stock to which he may entitled as provided in Section 2.2(a)), a cash
distribution in lieu of such fractional share in the amount set forth in Section
2.2(a) above. No interest shall be payable with respect to payment of such cash
distribution. Any payment with respect to fractional shares is merely intended
to provide a mechanical rounding of, and is not separately bargained-for,
consideration.
(e)Dissenters' Rights. Any Company Shareholder who shall have delivered a
written demand for appraisal of his/her Shares, as provided in Sections 1300 et
seq., of the California General Corporation Law (each a "Dissenting
Shareholder"), shall not be entitled to DRS Stock or cash pursuant to this
Agreement, unless and until the holder thereof shall have failed to perfect or
shall have effectively withdrawn or lost such holder's right to dissent from the
merger under the California General Corporation Law, and shall be entitled to
receive only the payment provided by Sections 1300, et seq., of the California
General Corporation Law with respect to such Shares. If any Dissenting
Shareholder shall fail to perfect or shall have effectively withdrawn or lost
the right to dissent, the Shares held by such Dissenting Shareholder shall
thereupon be deemed to have been converted into and to have become exchangeable
for, on the Effective Date, the right to receive DRS Stock or cash pursuant to
the Agreement. The Company shall give DRS (a) prompt notice of any written
demands for appraisal of any Shares, attempted withdrawals of such demands, and
any other instruments served pursuant to applicable law received by the Company
relating to the Dissenting Shareholder's rights of appraisal, and (b) the
opportunity to direct all negotiations and proceedings with respect to demand
for appraisal under the California General Corporation Law. The Company shall
not, except with the prior written consent of DRS,
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voluntarily make any payment with respect to any demands for appraisals of
Shares, offer to settle or settle any such demands or approve any withdrawal of
any such demand.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SURVIVING CORPORATION
Representations and Warranties of Surviving Corporation. Surviving
Corporation represents and warrants to the Company and to the Company's
Shareholders as follows:
SECTION 3.1. Capitalization. The authorized stock of the Surviving
Corporation consists of 1,000 shares of common stock, par value .01, of which,
on or before the Effective Date, 100 shares will be issued and outstanding. Such
shares, all to be held by DRS, will constitute all the issued and outstanding
shares of capital stock of the Surviving Corporation and all have been validly
authorized and issued, fully paid and nonassessable, and not issued in violation
of any preemptive rights or of any federal or state securities law.
SECTION 3.2. Corporate Existence. Surviving Corporation is, or on the
Effective Date will be, a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has or will have all
requisite corporate power and authority to own its properties and assets and
conduct its business as it is now being, or on the Effective Date will be,
conducted. Surviving Corporation, is or on the Effective Date will be, duly
qualified as a foreign corporation in each jurisdiction where the nature of its
activities makes such qualification necessary.
SECTIO 3.3. Authority Relative to this Agreement and Transaction Documents.
The execution, delivery and performance by the Surviving Corporation of this
Agreement and each Transaction Document to which it is, or on the Effective Date
will be, a party and the consummation of the transactions contemplated hereby
and thereby have been duly authorized and approved by all requisite corporate
action, and no other corporate action on the part of the Surviving Corporation
is necessary for the execution, delivery and performance by the Surviving
Corporation of this Agreement or any Transaction Document to which it is, or on
the Effective Date will be, a party and the consummation by the Surviving
Corporation of the transactions contemplated hereby and thereby. Neither the
execution nor the delivery by the Surviving Corporation of this Agreement or any
Transaction Document to which it is, or on the Effective Date will be, a party,
nor the consummation by the Surviving Corporation of the transactions
contemplated hereby or thereby, nor compliance with nor fulfillment by the
Surviving Corporation of the terms and provisions hereof or thereof, will (i)
conflict with or result in a breach of the terms, conditions or provisions of or
constitute a default under (A) its Certificate of Incorporation or Bylaws or (B)
any lease, Contract, instrument, mortgage, deed of trust, deed evidencing or
securing indebtedness for borrowed money, financing lease, any law, rule,
regulation, judgment, order, award, decree or other restriction of any kind to
which the Surviving Corporation is, or on the Effective Date will be, a party or
by which it is bound, or (ii) require the Surviving
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Corporation to obtain the consent, approval, authorization or other order or
action of, or filing with, any court, governmental authority or regulatory body.
SECTION 3.4. Absence of Subsidiary Liabilities. Prior to the Effective
Date, Subsidiary will have engaged only in the transactions contemplated by this
Agreement, will have no material liabilities, and will have incurred no
obligations except in connection with its performance of the transactions
provided for in this Agreement.
SECTION 3.5. No Litigation. There is no action, lawsuit, claim,
counterclaim, proceeding, or investigation (or group of related actions,
lawsuits, claims, proceedings or investigations) pending or, to the knowledge of
Surviving Corporation, threatened against or affecting Surviving Corporation
that seeks to restrain or enjoin the consummation of the transactions
contemplated by this Agreement or any Transaction Document.
SECTION 3.6. No Brokers, Finders, etc. All negotiations relating to this
Agreement and the transactions contemplated hereby have been carried on without
the participation of any Person acting on behalf of the Surviving Corporation or
any Affiliate thereof in such manner as to give rise to any valid claim against
the Company's Shareholders or the Company for any brokerage or finder's
commission, fee or similar compensation.
SECTION 3.7. Acquisition for Investment. The Surviving Corporation is
acquiring the Shares solely for investment, with no present intention to resell
the Shares. The Surviving Corporation hereby acknowledges that the Shares have
not been registered pursuant to the Securities Act, and may not be transferred
in the absence of such registration or an exemption therefrom.
SECTION 3.8. Filings with the SEC. DRS has made all filings with the SEC
that it has been required to make within the past year under the Securities Act
of 1933, as amended, and the Securities Exchange Act of 1934, as amended
(collectively, the "Public Reports"). None of the Public Reports, as of their
respective dates, contained any untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading. DRS
has delivered to the Company's Shareholders a correct and complete copy of each
Public Report as amended to date.
SECTION 3.9. Financial Statements. DRS has filed Quarterly Reports on Form
10-Q for the fiscal quarters ended June 30, 1995, September 30, 1995 and
December 31, 1995, and an Annual Report on Form 10-K for the fiscal year ended
March 31, 1996. The financial statements included in or incorporated by
reference into these Public Reports have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby and present
fairly the financial condition of DRS and its Subsidiaries as of the indicated
dates; provided, however, that the interim statements are subject to normal year
end adjustments.
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SECTION 3.10. Full Disclosure. No representation or warranty herein by the
Surviving Corporation or any Affiliate thereof, nor any statement or certificate
furnished to the Company and/or the Company's Shareholders pursuant hereto or in
connection with the transactions contemplated hereby, contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements contained herein or therein, in light of the circumstances
in which they were made and, together with the Schedules attached hereto, not
misleading. The Schedules attached hereto completely and correctly present the
information required by this Agreement to be set forth therein, do not contain
any untrue statement of a material fact and do not omit to state any facts
necessary to make the statements contained therein, together with the
representations and warranties herein by the Surviving Corporation or any
Affiliate thereof, not misleading.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND CERTAIN OF THE COMPANY'S SHAREHOLDERS
Representations and Warranties of the Company and certain of the Company's
Shareholders. The Company and each of Xxxxxx, Xxxxx and Xxxxxx jointly and
severally represent and warrant to the Surviving Corporation that:
SECTION 4.1. Capitalization. The authorized stock of the Company consists
of 100,000 shares of Common Stock, of which, as of the date hereof, 3,455 Shares
are issued and outstanding. The Shares listed in Section 2.2(a) above constitute
all the issued and outstanding shares of capital stock of the Company and have
been validly authorized and issued, are fully paid and nonassessable, have not
been issued in violation of any preemptive rights or of any federal or state
securities law and no personal liability attaches to the ownership thereof.
There is no security, option, warrant, right, call, subscription, agreement,
commitment or understanding of any nature whatsoever, fixed or contingent, that
directly or indirectly (i) calls for the issuance, sale, pledge or other
disposition of any shares of capital stock of the Company or any securities
convertible into, or other rights to acquire, any shares of capital stock of the
Company, or (ii) obligates the Company to grant, offer or enter into any of the
foregoing, or (iii) relates to the voting or control of such capital stock,
securities or rights, except as set forth on Schedule 4.1 hereto. The Company
has not agreed to register any securities under the Securities Act.
SECTION 4.2. Title to Shares, etc. Each of the Company's Shareholders
owns, beneficially and of record, their respective Shares as set forth in
Section 2.2(a) above, free and clear of any Lien or rights of others with
respect thereto, and upon the delivery of any payment for such Shares in the
manner provided in Article II of this Agreement, the Surviving Corporation will
acquire good and marketable title thereto, free and clear of any Lien other than
any Lien created by Surviving Corporation.
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SECTION 4.3. Corporate Existence. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, and has all requisite corporate power and authority to own its
properties and assets and conduct its business as it is now being conducted. The
Company is duly qualified as a foreign corporation in each jurisdiction where
the nature of its activities makes such qualification necessary.
SECTION 4.4. Authority Relative to this Agreement and Transaction
Documents. Each of the Company's Shareholders has the legal capacity to execute
and deliver this Agreement and/or the Transaction Documents to which each of
them is, or on the Effective Date will be, a party or by which each of them is
or will be bound, to perform their respective obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance by the Company of this Agreement and
each Transaction Document to which it is, or on the Effective Date will be, a
party and the consummation of the transactions contemplated hereby and thereby
have been duly authorized and approved by all requisite corporate action, and no
other corporate action is necessary for the execution, delivery and performance
by the Company of this Agreement or any Transaction Document to which it is, or
on the Effective Date will be, a party, no other corporate action is necessary
for the consummation by the Company of the transactions contemplated hereby and
thereby. Neither the execution nor the delivery by the Company and/or the
Company's Shareholders of this Agreement, and/or any Transaction Document to
which any is, or on the Effective Date will be, a party or parties, nor the
consummation by the Company and/or any of the Company's Shareholders of the
transactions contemplated hereby or thereby, nor compliance with nor fulfillment
by the Company and/or any of the Company's Shareholders of the terms and
provisions hereof or thereof, will (i) conflict with or result in a breach of
the terms, conditions or provisions of or constitute a default under (A) in
respect of the Company, Certificate of Incorporation or Bylaws or (B) any lease,
Contract, instrument, mortgage, deed of trust, deed evidencing or securing
indebtedness for borrowed money, financing lease, any law, rule, regulation,
judgment, order, award, decree or other restriction of any kind to which the
Company or any of the Company's Shareholders is, or on the Effective Date will
be, a party or by which any is or will be bound, or (ii) require the Company or
any of the Company's Shareholders to obtain the consent, approval, authorization
or other order or action of, or filing with, any court, governmental authority
or regulatory body. This Agreement has been duly executed and delivered by the
Company and the Company's Shareholders and, together with each other Transaction
Document and other agreement and instrument required to be delivered, is or will
be, as the case may be, a legal, valid and binding obligation of each,
enforceable against each in accordance with its respective terms.
SECTION 4.5. No Litigation. There is no action, lawsuit, claim,
counterclaim, proceeding, or investigation (or group of related actions,
lawsuits, claims, proceedings or investigations) pending or, to the knowledge of
the Company and the Company's Shareholders, threatened against or affecting the
Company or any of the Company's Shareholders that seeks to restrain or enjoin
the consummation of the transactions contemplated by this Agreement or any
Transaction Document.
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SECTION 4.6. Title to Assets and Real Property. (a) Schedule 4.6 lists all
of the machinery, equipment, Intellectual Property Rights, furniture, fixtures,
personalty, and other items constituting the Assets. The Company has good and
marketable title to all of the Assets, which are free and clear of all liens
(including environmental liens), mortgages, deeds of trust, trust deeds, deeds
to secure debt, pledges, encumbrances, defects, security interests,
restrictions, conditional and installment sale agreements, options, easements
and other legal or equitable encumbrances and claims or charges of any kind
(collectively, "Liens"), except as disclosed in Schedule 4.6 (collectively,
"Permitted Liens").
(b) Set forth on Schedule 4.6 is a list of all interests in real property
owned by or leased to the Company (including all interests in real property used
in the business of the Company) and of all options or other contracts to acquire
any such interest (collectively, the "Real Property"), specifying the location
of each such Real Property and any improvements thereon ("Improvements"), and,
as to all Real Property not owned by the Company, a legal description (if
available), address and approximate size and boundaries of each leased or
subleased premises, the present use to which each of the leased or subleased
premises is being put, the name and address of the landlord and, if appropriate,
the sublandlord with respect to each lease, a listing of any amendments,
modifications, extensions or renewals which comprise a part of each lease, the
expiration date of each lease, any renewal or extension right under each lease
and the current base fixed annual rent due under each lease. The Company has
good and marketable title to all Real Property and Improvements and to all other
properties reflected on the Company Balance Sheet or acquired by any of them
after the date thereof, and each such property is held free and clear of (i) all
leases, licenses and other rights to occupy or use such property and (ii) all
Security Interests, rights of way, easements, restrictions, exceptions,
variances, reservations, covenants or other title defects or limitations of any
kind, except (with respect to all such properties) those set forth on Schedule
4.6 or disclosed on the Company Balance Sheet or the notes thereto, none of
which has an adverse effect on such property or its present or contemplated use
in the business of such Company. No financing statement under the Uniform
Commercial Code with respect to any of the foregoing properties has been filed
in any jurisdiction, and the Company has not signed any such financing statement
or any security agreement authorizing any secured party thereunder to file any
such financing statement, except as set forth on Schedule 4.6 hereto. The
present and contemplated use of the Real Property, Improvements and tangible
property conforms in all respects with all applicable building, fire, zoning,
environmental and other land use, laws, ordinances, rules and regulations,
Applicable Law and all necessary occupancy and other certificates and Permits
for the occupancy and lawful use thereof have been issued and are presently in
full force and effect. All notices of violations of Applicable Law issued by any
state, county, municipal or local department having jurisdiction against or
affecting any of the Real Property, Improvements or tangible property have been
complied with in all respects. No use of the Real Property, Improvements or
tangible property is dependent upon the continuance of a nonconforming use or a
special permit or license. The Company is not obligated to pay any fee or
commission to any broker, finder, consultant or other intermediary as a result
of the purchase or leasing of any of the Real Property.
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SECTION 4.7. Compliance with Laws; Permits and Licenses. (a) Except as
disclosed in Schedule 4.7(a), the Company is in substantial compliance with all
applicable statutes, orders, rules and regulations promulgated by Governmental
Authorities (collectively, "Applicable Law") relating to the operation or
conduct of the business of the Company, or the use of the properties of the
Company, including, without limitation, any applicable statute, order, rule or
regulation relating to (i) wages, hours, hiring, non-discrimination, promotion,
retirement, benefits, pensions and working conditions, (ii) health and safety,
(iii) zoning and building codes or municipal ordinances, violation of which
would interfere with the ability of the Company to operate, (iv) the production,
storage, processing, advertising, sale, transportation, distribution, disposal,
use and warranty of products of the business of the Company, (v) obligations of
the Company to disabled persons, or (vi) trade and antitrust regulations, and
the Company has not received any notice of alleged violation of any such
statute, order, rule or regulation. Except as disclosed in Schedule 4.7(a), to
the knowledge of the Company and the Company's Shareholders, the Company is not
in default under or in violation of, any applicable franchise, permit or
license, its Certificate of Incorporation or other charter document, Bylaws, any
promissory note, indenture or any evidence of indebtedness or security therefor,
lease, Contract or any other instrument to which it is a party or by which any
of its properties or assets is or may be bound.
(b) Schedule 4.7(b) lists all governmental licenses, permits, product
registrations, authorizations, approvals and indicia of authority and any
pending applications therefor. Except as disclosed in Schedule 4.7(b), such
licenses, permits, product registration, authorizations, approvals and indicia
of authority are (i) all the governmental licenses, permits, product
registrations, authorizations, approvals and indicia of authority necessary to
conduct the business of the Company, and (ii) valid and in full force and
effect, assuming the related consents referenced in Section 5.2(f) have been
obtained prior to the execution of this Agreement.
SECTION 4.8. Intellectual Property. (a) Schedule 4.8(a) sets forth a true
and complete list of all Intellectual Property Rights of the Company. The
Intellectual Property Rights constitute all such property forming a part of the
business of the Company and, except as disclosed in Schedule 4.8(a), do not
conflict with or infringe on the rights of others.
(b) Except as disclosed in Schedule 4.8(b) (i) all the Intellectual
Property Rights are owned by or are licensed to the Company under licenses or
written agreements; (ii) no claims have been made and are pending or are
currently threatened against the Company alleging that any services provided or
products manufactured or sold by the Company, or any Intellectual Property
Rights are being provided, manufactured, sold or used in violation of any
patents or trademarks, or any other rights of any Person (nor is there a basis
in fact which could result in such a claim); (iii) the Company has not granted
any license to any Person with respect to any Intellectual Property Rights; (iv)
no other Person is infringing on any Intellectual Property Rights; (v) all
Intellectual Property Rights of the Company are legal, valid and binding, in
full force and effect and are freely assignable to the Surviving Corporation, if
as and when required; (vi) the Company has duly made punctual payments of all
royalties or fees required to be made by it under or in connection with any
Intellectual Property Right; and (vii) no event has occurred which (with the
passing of time and/or the giving of notice) would result in or permit the
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termination of any Intellectual Property Right or the acceleration of any
obligation thereunder without the consent of the Company.
(c) Except as disclosed in Schedule 4.8(c), following the transactions
contemplated hereby, the Surviving Corporation shall own or possess adequate and
enforceable licenses or other rights to use, without payment of any fee other
than as disclosed in Schedule 4.8(c), all of the Intellectual Property Rights.
SECTION 4.9. Litigation. Except as disclosed in Schedule 4.9, there is no
action, lawsuit, claim, counterclaim, proceeding, or investigation (or group of
related actions, lawsuits, claims, proceedings or investigations) pending or, to
the knowledge of the Company and the Company's Shareholders, threatened against
or affecting the Company in any court, or before any federal, state, provincial,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind, and
neither the Company nor the Company's Shareholders know of any reasonable basis
for any such action, lawsuit, claim, proceeding, or investigation (or group of
related actions, lawsuits, claims, proceedings or investigations). The Company
is not in default, and no condition exists that with notice or the lapse of time
or both would constitute a default, with respect to any judgment, order, writ,
injunction or decree of any court or before any federal, state, provincial,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting or relating to the business of
the Company. No condemnation proceeding has been commenced or, to the knowledge
of the Company and the Company's Shareholders, is threatened to be commenced
against any of the Assets or Real Property.
SECTION 4.10. Contracts.
(a) Material Contracts. Schedule 4.10(a) contains a complete and correct
list as of the date hereof of all agreements, contracts and commitments of the
following types, written or oral, to which the Company is a party or by which
the Company or its properties are bound as of the date hereof: (a) mortgages,
indentures, security agreements, letters of credit, loan agreements and other
agreements, guaranties and instruments relating to the borrowing of money or
extension of credit; (b) employment, consulting, severance or agency agreements;
(c) collective bargaining agreements; (d) bonus, profit-sharing, compensation,
stock option, pension, retirement, deferred compensation or other plans, trusts
or funds for the benefit of employees, officers, agents and directors (whether
or not legally binding); (e) sales agency, manufacturer's representative or
distributorship agreements; (f) agreements, orders or commitments for the
purchase of raw materials, supplies or finished products exceeding $10,000; (g)
agreements, orders or commitments for the sale of its products exceeding
$10,000; (h) licenses of patent, copyright, tradenames, trademark, transfer of
technology or know how and other intellectual property rights; (i) agreements or
commitments for capital expenditures in excess of $10,000 for any single project
(it being warranted that all undisclosed agreements or commitments for capital
projects do not exceed $15,000 in the aggregate for all projects); (j) brokerage
or finder's agreements; (k) joint venture, partnership and development
agreements; and (1) other agreements, contracts and commitments which in any
case involve payments or receipts of more than $10,000. The
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Company has delivered to the Surviving Corporation complete and correct copies
of all such written agreements, contracts and commitments, together with all
amendments thereto, and accurate descriptions of all oral agreements listed in
Schedule 4.10(a). No reason exists that would not allow each such oral agreement
to become a written agreement, executed by the parties thereto and enforceable
against any party to such agreement who fails to execute such agreement. Each
such oral agreement is in compliance with the Statute of Frauds of the
jurisdiction governing such oral agreement. All such agreements, contracts and
commitments governed by this Section 4.10(a) are in full force and effect, are
enforceable by the Company against the other parties thereto in accordance with
their terms, and, except as disclosed in Schedule 4.10(a), to the knowledge of
the Company and the Company's Shareholders, there does not exist thereunder any
violation or any default or event or condition or course of dealing which, after
notice or lapse of time or both, would constitute a default thereunder on the
part of the Company, or any other party thereto or would provide a basis for any
creditor of the Company, or any party to such agreements, contracts or
commitments, to challenge the extent, validity or priority of the interest of
any other party to such agreements, contracts or commitments; to the knowledge
of the Company and the Company's Shareholders, consummation of the transactions
contemplated under this Agreement and the Transaction Documents shall not give
rise to any violation or any default or event or condition which, after notice
or lapse of time or both, would constitute a default thereunder on the part of
the Company, or any other party thereto or would provide a basis for any
creditor of the Company, or any party to such agreements, contracts or
commitments to challenge the extent, validity or priority of the interest of any
other party to such agreements, contracts or commitments. No agreement, contract
or commitment to which the Company is a party, or by which it or any of its
properties is bound, adversely affects or in the future may adversely affect the
business of the Company. No agreement, contract or commitment to which the
Company is a party, or by which it or any of its properties is bound, is in
conflict, whether by way of violation of any term or condition or by way of
default, with any other agreement, contract or commitment to which the Company
is a party, or by which it or any of its properties is bound. All agreements,
contracts or commitments with Affiliates of the Company, to which the Company is
a party or by which it or any of its properties is bound reflect terms no less
favorable to the Company than could be obtained from unaffiliated third parties.
The Company has no outstanding powers of attorney, except routine powers of
attorney relating to representation before governmental agencies or given in
connection with qualification to conduct business in another jurisdiction.
(b) Government Contracts.
(i) Government Contracts Compliance. The Company is not, and the
consummation of this Agreement, the Transaction Documents or the transactions
contemplated hereby and thereby will not result, in any violation, breach or
default of any term or provision of (i) any contract, subcontract or agreement
between the United States Government and the Company and (ii) any bid, proposal
or quote submitted to the United States Government by the Company. The Company
is not, and the consummation of this Agreement, the Transaction Documents or the
transactions contemplated hereby and thereby will not result, in any violation,
breach or default of any provision of any federal order, statute, rule or
regulation governing any contract, subcontract, bid, proposal, quote,
arrangement or transaction of any kind between the
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United States Government and the Company. The representations in the two
immediately preceding sentences are made after consideration of, but are not
limited to, the following laws, regulations, standards, and agreements, to the
extent, if any, they are applicable to or incorporated into contracts,
subcontracts, agreements:
(A) The Truth in Negotiations Act of 1962, as amended;
(B) The Service Contract Act of 1965, as amended;
(C) The Contract Dispute Act of 1978, as amended;
(D) The Federal Acquisition Regulations and any applicable agency
supplements thereto, as well as applicable predecessor procurement
regulations;
(E) The Cost Accounting Standards;
(F) Agreement with the Contract Audit Agency;
(G) Relevant rules and arrangements governing the allowance of costs
charged to overhead and general and administrative cost pools allocable to
government contracts;
(H) The Defense Industrial Security Manual DOD 5220.22-M, the Defense
Industrial Security Regulation DOD 5220.22-R and related security
regulations;
(I) The Procurement Integrity Provisions of the OFPP Act Amendments of
1988, P.L. 100-679, as amended and implemented.
(ii) Investigation and Claims. Schedule 4.10(b) sets forth descriptions of
all audit reports, final decisions, claims, consent orders in effect,
outstanding notices and reports concerning audits, investigations or claims,
ongoing government investigations or prosecutions, or internal investigations
conducted or initiated by or in respect of the Company and identifies any
corrective action, restitution or disciplinary action initiated or taken by or
in respect of the Company relating in any sense to the subjects listed below in
paragraphs (A) through and including (G). Except as disclosed in Schedule
4.10(b), the Company has never engaged in nor has been charged with, received a
claim related to, or been under investigation or conducted or initiated any
internal investigation or, to the knowledge of the Company and the Company's
Shareholders, has reason to conduct, initiate or report any internal
investigation or made a voluntary disclosure, with regard to any of the
following:
(A) Defective Pricing within the meaning of P.L. 87-653, as amended;
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(B) Failure to correct accounting, inventory, material requirements
planning, or purchasing system deficiencies;
(C) Mischarging of direct and/or indirect costs in connection with
U.S. Governmental contracts or subcontracts;
(D) Delivery to the U.S. Government or to a U.S. Government prime
contractor or subcontractor of material, components, items or services that
do or did not meet specifications or standards therefor, or delivery to the
U.S. Government or a U.S. Government prime contractor or subcontractor of
foreign-made material, components or items where domestic-made material,
components or items were required;
(E) Improper payments or any payments or activities for obtaining
non-public source selection information;
(F) Unallowable costs, including unallowable direct or indirect costs;
(G) Violations of any of the following statutes, as amended, or the
regulations promulgated thereunder:
(I) False Statements Act (18 U.S.C. 1001),
(II) False Claims Act (18 U.S.C. 287),
(III) False Claims Act (31 U.S.C. 3729),
(IV) Briberies, Gratuities and Conflicts of Interest (18 U.S.C.
201),
(V) Anti-Kickback Act (41 X.X.X. 00, 00),
(XX) Anti-Kickback Enforcement Act of 1986 (P.L. 99-634),
(VII) Arms Export Control Act (22 U.S.C. 277, et seq.),
(VIII) Foreign Corrupt Practices Act (15 U.S.C. 78m, 78dd-1,
78ff),
(IX) Export Administration Act (P.L. 99-64),
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(X) War and National Defense Act (18 U.S.C. 793),
(XI) Racketeer Influenced Corrupt Organizations Act (18 U.S.C.
1901-68),
(XII) Conspiracy to Defraud the Government (18 U.S.C. 371),
(XIII) Program Fraud Civil Remedies Act (P.L. 99-509),
(XIV) "Revolving Door" Legislation (18 U.S.C. 207, 281(a)(11)
and 10 U.S.C. 2397), and
(XV) Defense Production Act (50 U.S.C. App. 2061).
(iii) No Debarment or Suspension. The Company is not nor has ever been
informed that it is or will be subject to any proceeding which could result in
or otherwise contemplates debarment or suspension.
(iv) Test and Inspection Results. All test and inspection results the
Company has provided to any government agency pursuant to any government
contract or any subcontract or as a part of the delivery to the government of
any article designed, engineered or manufactured by the Company were true,
complete and correct. Except as set forth in Schedule 4.10(b), the Company has
provided all test and inspection results to government agencies as required by
law or pursuant to government contract or subcontracts, or may have been
required as part of the delivery of any article designed, engineered or
manufactured by the Company.
SECTION 4.11. Foreign Government Contracts. To the extent that the Company
is party to a prime contract or subcontract with a government other than the
U.S. Government (a "Foreign Government Contract"), then: (a) if the Foreign
Government Contract incorporates by reference, or is otherwise subject to, any
or all of the regulations cited in Section 4.10(b) above (or their foreign
equivalents), the representations made in Section 4.10(b) above shall be deemed
applicable to such Foreign Government Contract, and (b) if the Foreign
Government Contract incorporates by reference or is otherwise subject to other
applicable laws ("Foreign Laws") the representations made hereinabove regarding
compliance, investigations and claims, debarment or suspension and test and
inspection results shall be deemed made in respect of the appropriate Foreign
Laws.
SECTION 4.12. Labor Union Contracts. The Company is not a party to any
collective bargaining or other labor union Contract applicable to persons
employed by the Company. There are no unfair labor practice complaints nor are
there any current union representation
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questions involving persons employed in the business of the Company. Except as
disclosed on Schedule 4.12, the Company does not know of any current activities
or proceedings of any labor union (or representatives thereof) to organize any
unorganized employees of the Company and of any strikes, slowdowns, work
stoppages, lockouts or threats thereof, by or with respect to any employees of
the Company. During the 24-month period preceding the date hereof, there have
not been any formally filed grievances involving employees of the Company.
SECTION 4.13. Employees, Labor Matters, etc.
(a) Schedule 4.13(a) contains a complete and correct list of the names of
all directors and officers of the Company. There is no payment that has not been
paid for more than 30 days past the date on which such payment became due that
is owed by the Company to any of its directors, officers, employees, trustees,
agents, brokers, representatives or other personnel, current and former, or any
beneficiaries, dependents or survivors of the foregoing (including, without
limitation, expense reimbursement and severance payments), in accordance with
the terms of their respective employment arrangements or under their employment,
severance or agency agreements, if any.
(b) Except as set forth in Schedule 4.13(b), there has never been any (i)
unfair labor practice complaint against the Company before the National Labor
Relations Board; (ii) labor strike, dispute, or work stoppage actually pending
or, to the best of the Company's knowledge after reasonable inquiry, threatened
against or affecting the Company; (iii) representation petition respecting the
employees of the Company filed with the National Labor Relations Board; or (iv)
arbitration proceeding arising out of or under collective bargaining agreements
pending against the Company.
(c) Certain Benefit and Compensation Arrangements:
(i) Set forth on Schedule 4.13(c) hereto is a true and complete list
of each employee of the Company whose aggregate compensation for the fiscal
year ended December 31, 1995 exceeded $50,000 or who is employed as an
officer of the Company , as well as any and all agreements, arrangements,
commitments or understandings of any kind, whether written or oral,
applicable to each (as well as to current and former directors and
consultants and former officers of the Company) pursuant to which payments
of any kind are required to be made following the date hereof (including,
without limitation, any employment, deferred compensation, consulting,
severance, termination or supplemental pension payments) (the "Compensation
Commitments"). True and complete copies of all of the written Compensation
Commitments have been provided to Surviving Corporation together with,
where prepared by or for the Company, any valuation, actuarial or
accountant's opinion or other financial reports with respect to each
Compensation Commitment for the last three years. An accurate and complete
written summary has been provided to Surviving Corporation with respect to
any Compensation Commitment which is unwritten.
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(ii) Each Compensation Commitment:
(A) since its inception, has been operated in all material
respects in accordance with its terms;
(B) is not currently under investigation, audit or review by the
IRS or any other federal or state agency and no such action is
contemplated or under consideration;
(C) has no liability for any federal, state, local or foreign
Taxes;
(D) has no claims subject to dispute or litigation; and
(E) has met all applicable requirements, if any, of the Code;
SECTION 4.14. ERISA. Schedule 4.14 lists (i) all employee benefit plans (as
defined in Section 3(3) of ERISA) and all bonus, stock option, stock purchase,
restricted stock, incentive, deferred compensation, retiree medical, disability
or life insurance, supplemental retirement, or severance benefit plans, programs
or arrangements, and all employment, termination, or severance contracts to
which the Company is a party, with respect to which the Company has any
obligation, or that are maintained, contributed to or sponsored by the Company
for the benefit of any current or former employee, officer or director, (ii)
each employee benefit plan for which the Company could incur liability under
Section 4069 of ERISA in the event such plan has been or were to be terminated
and (iii) any plan in respect of which the Company could incur liability under
Section 4212(c) of ERISA (collectively, the "Plans").
(a) Each Plan that is intended to qualify under Section 401(a) of the Code
or similar provision of foreign law is so qualified. The Company has performed
all obligations required to be performed by it by the terms of the Plans and
Applicable Law, rules and regulations. The Company has complied in all material
respects with all Applicable Law, rules and regulations relating to each Plan.
(b) The Company has not and has no knowledge that any other "party in
interest" (as defined in Section 3(14) of ERISA) to any Plan has engaged in any
transaction with respect to any Plan in connection with which the Company or any
other party in interest could be subjected to either a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the
Code.
(c) No Plan which is a "defined benefit plan" (as defined in Section 3(35)
of ERISA) or any trust created under any such Plan has been terminated since
September 2, 1974. No material liability to the Pension Benefit Guaranty
Corporation (the "PBGC"), other than annual premium payments, has been or is
expected by the Company to be
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incurred by the Company with respect to any Plan. There has been no reportable
event (within the meaning of Section 4043 of ERISA), which at the time of such
event required notification within 30 days to the PBGC. There has been no other
reportable event with respect to any Plan which could result in a liability to
the Company as a result thereof. There has been no event or condition which
presents a risk of termination of any such Plan by the PBGC.
(d) Full payment has been made of all amounts which the Company is required
under the terms of each Plan to have paid as contributions to such Plan as of
the last day of the most recent fiscal year of such Plan ended prior to the date
hereof or, if later, the most recent date as of which such amount is required to
be paid under such Plan (and, with respect to any Plan that is subject to
Section 412(m) of the Code, all payments required to be made have been paid on
or before each required installment due date (as defined in Section 412(m) of
the Code) preceding the date hereof), and, with respect to any Plan, no
accumulated funding deficiency (as defined in section 302 of ERISA and Section
412 of the Code), whether or not waived, exists. There has been no failure to
make any payment due prior to the date hereof that is or could become a
liability of the Company under Section 412(c) of the Code.
(e) The present value as of December 31, 1994 of all accrued benefits under
all Plans subject to Section 412 of the Code did not, as of such date, exceed
the current value of the assets of such Plans allocable to such accrued
benefits. The terms "present value," "current value" and "accrued benefit" have
the meanings specified in Section 3 of ERISA.
(f) No Plan is a "multiemployer plan" (as defined in Sections 3(37) and
4001(3) of ERISA) and the Company has not withdrawn or partially withdrawn from
any multiemployer plan under circumstances giving rise to a withdrawal liability
under ERISA.
(g) Neither the Company nor any corporation, trade or business under common
control with the Company (within the meaning of Sections 414(b), (c), (m) or (o)
of the Code) has engaged in any transaction since January 1, 1986 described in
Section 4069(a) of ERISA.
(h) No Plan provides for the payment of any welfare benefit (as described
in Section 3(1) of ERISA) to any former or retired employee of the Company or
any of its Affiliates, except as may be required by Section 4980B of the Code or
Section 601 of ERISA.
(i) No Plan provides for the payment of severance benefits upon termination
of employment.
SECTION 4.15. Brokers' or Finders' Fees, etc. All negotiations relating to
this Agreement and the transactions contemplated hereby have been carried on
without the participation of any Person acting on behalf of the Company or any
of the Company's Shareholders (other than the Company or employees thereof) in
such manner as to give rise to any valid claim against the Surviving Corporation
or the Company for any brokerage or finder's commission, fee or similar
compensation.
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SECTION 4.16. Financial Information; Undisclosed Liabilities.
(a) Attached hereto as Schedule 4.16 is a copy of the balance sheet of the
Company (the "Company Balance Sheet") as of June 30, 1996 (the "Balance Sheet
Date"). Except as disclosed in Schedule 4.16, the Company Balance Sheet,
together with the books and records of the business of the Company, present
fairly in accordance with GAAP the financial condition of the business of the
Company as of the Balance Sheet Date.
(b) The books of account of the Company reflect all items of income and
expense and all assets and liabilities of the business of each.
(c) The Company has delivered to Surviving Corporation a copy of its
balance sheets, together with the notes thereto, as of August 31, 1993, 1994 and
1995 and the related statement of operations and retained earnings and of cash
flows for the year then ended. Such financial statements, together with the
notes thereto, (i) are in accordance with the books and records of the Company,
(ii) present fairly the financial condition of the Company as of the date
thereof, (iii) present fairly the result of operations of the Company for the
periods covered by such statements, (iv) have been prepared in accordance with
GAAP by the Accountants and (v) include all adjustments that are necessary for a
fair presentation of the financial condition of the Company and the results of
the Company's business operations for the periods covered by such statements.
(d) There are no material liabilities of the Company of any kind
whatsoever, whether or not accrued or fixed, absolute or contingent, determined
or determinable, known or unknown, other than liabilities (i) reflected on and
adequately provided for in the Company's Balance Sheet attached hereto as
Schedule 4.16, or (ii) incurred since the Balance Sheet Date in the ordinary
course of the operation of the Company's business and not as a result of any
violation of law or regulation, or (iii) disclosed in Schedule 4.16.
SECTION 4.17. Taxes.
(a) Except as disclosed in Schedule 4.17(a), the Company, for any period
during all or part of which the tax liability of any other corporation was
determined on a combined or consolidated basis with the Company, any such other
corporation, have filed timely all federal, state, local and foreign tax
returns, reports and declarations required to be filed (or have obtained or
timely applied for an extension with respect to such filing) correctly
reflecting the Taxes and all other information required to be reported thereon
and have paid, or made adequate provision for the payment of, all Taxes which
are due pursuant to such returns or pursuant to any assessment received by the
Company or any such other corporation. Copies of all tax returns for the fiscal
years ended since December 31, 1991 have been furnished to the Surviving
Corporation or its representatives and such copies are accurate and complete as
of the date hereof. The Company has also furnished to the Surviving Corporation
correct and complete copies of all notices and correspondence sent or received
since December 31, 1991, by the
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Company to or from any federal, state, local or foreign tax authorities. The
Company has adequately reserved for the payment of all Taxes with respect to
periods ended on, prior to or through the Effective Date for which tax returns
have not yet been filed. In the ordinary course, the Company makes adequate
provision on its books for the payment of all Taxes (including for the current
fiscal period) owed by the Company. Except to the extent reserves therefor are
reflected on the Company Balance Sheet, the Company is not liable, nor will
become liable, for any Taxes for any period ending on, or prior to, the date of
the Company Balance Sheet. Except as disclosed in Schedule 4.17(a), the Taxes
payable set forth in the Company Balance Sheet are adequate to cover all
liabilities for Taxes of the Company with respect to all assets held and
activities conducted by the Company on or prior to the Effective Date, other
than liabilities for Taxes incurred in the ordinary course of business
subsequent to the date of the Company Balance Sheet and permitted by this
Agreement. No tax liens have been filed and neither the Internal Revenue Service
nor any other taxing authority is now asserting or, to the best knowledge of the
Company after reasonable inquiry, threatening to assert against the Company any
deficiency or claim for additional Taxes. Except as provided in Schedule
4.17(a), no Return of the Company is currently under audit by the Internal
Revenue Service or by the taxing authorities of any other jurisdiction. The
Company has not granted any waiver of any statute of limitations with respect
to, or any extension of a period for the assessment of any federal, state or
local Tax. Without limiting the foregoing, the Company has no knowledge of any
actual claim for any additional Tax to be imposed upon the Company for the
periods ending on or prior to the Effective Date in excess of the accruals of
the Company set forth in the Company Balance Sheet with respect to Taxes. The
federal, state and local tax Returns of the Company have been examined by the
appropriate taxing authority, or the statutes of limitations with respect to the
relevant income or franchise tax liability have expired, for all tax periods
through and including the tax period listed with respect to each such
jurisdiction set forth in Schedule 4.17(a).
(b) No consent or agreement under Section 341(f) of the Code is in effect
with respect to the Company.
(c) Except as provided in Schedule 4.17(c), the Company has not (i) agreed
to and is not required to make any adjustment under Section 481(a) of the Code
or Revenue Procedure 87-32 (or any successor thereto), by reason of a change in
method of accounting or otherwise; (ii) ever been included in a combined or
consolidated income tax return; (iii) ever owned stock representing 50% or more
of the voting power or value of another corporation; (iv) entered into any
agreement or arrangement that could result, separately or in the aggregate, in
the payment of any "excess parachute payments" within the meaning of Section
280G of the Code; (v) consummated any transaction with another corporation that
is owned, directly or indirectly, by the Company on other than an arms-length
basis within the meaning of Section 482 of the Code and the regulations
thereunder; or (vi) entered into any tax sharing agreements or similar
arrangements.
(d) Prior to the current year, the Company's taxable year for federal and
state income and franchise tax purposes has always been a taxable year beginning
September 1 and ending August 31.
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SECTION 4.18. Absence of Changes. Since December 31, 1995 except as
specified in Schedule 4.18 or presented on the Company Balance Sheet, the
Company has not:
(a) undergone any material adverse change in its condition (financial
or other), properties, assets, liabilities, business, operations or
prospects, other than changes in the ordinary course of business;
(b) declared, set aside, made or paid any dividend or other
distribution in respect of its capital stock or otherwise purchased or
redeemed, directly or indirectly, any shares of its capital stock;
(c) issued or sold any shares of its capital stock of any class or any
options, warrants or conversion or other rights to purchase any such shares
or any securities convertible into or exchangeable for such shares;
(d) incurred any indebtedness for borrowed money, issued or sold any
debt securities or prepaid any debt outstanding as of December 31, 1995;
(e) mortgaged, pledged or subjected to any Lien any of its properties
or assets, tangible or intangible;
(f) except in the normal course of business, acquired or disposed of
any assets or properties, or entered into any agreement or other
arrangement for such acquisition or disposition;
(g) forgiven or canceled any debts or claims, or waived any rights;
(h) entered into any agreement, commitment or other transaction other
than agreements involving an expenditure up to $10,000 or, whether singly
or in the aggregate, or entered into any agreement which, pursuant to its
terms, is not cancelable without penalty on less than 30 days' notice;
(i) paid any bonus to any officer, director or employee or granted to
any officer, director or employee any other increase in compensation in any
form, or granted any increase in the compensation or benefits of employees
or entered into any employment or severance agreement or arrangement with
any of officer, director or employee;
(j) adopted or amended in any respect, any employment, collective
bargaining, bonus, profit-sharing, compensation, stock option, pension,
retirement, deferred compensation or other plan, agreement, trust, fund or
arrangement for the benefit of employees (whether or not legally binding);
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(k) suffered any damage, destruction or loss (whether or not covered
by insurance) to any property or assets;
(l) suffered any strike or other employment related problem;
(m) suffered any loss of employees or customers;
(n) amended its certificate of incorporation or bylaws (or comparable
documents);
(o) changed in any respect its accounting practices, policies or
principles;
(p) incurred any liability or obligation (whether absolute, accrued,
contingent or otherwise and whether direct or as guarantor or otherwise)
with respect to the obligations of others;
(q) granted any rights or licenses under any of its trademarks,
tradenames or patents or entered into any licensing or distributorship
agreements;
(r) made any changes in policies or practices relating to selling
practices, returns, discounts or other terms of sale or accounting
therefor;
(s) failed to discharge or satisfy any Lien or pay or satisfy any
obligation or liability (whether absolute, accrued, contingent or
otherwise);
(t) defaulted on any obligation;
(u) written down the value of any inventory or written off as
uncollectible any accounts receivable or any portion thereof not reflected
in the Company Balance Sheet;
(v) laid off any employees or made any changes in policies of
employment;
(w) discontinued the sale of any products or product lines or
programs; or
(x) entered into any agreement or made any commitment (whether or not
legally binding) to do any of the foregoing.
SECTION 4.19. Accounts Receivable. All accounts receivable reflected on the
Company Balance Sheet or arising since the date thereof (subject to the reserve
for bad debts reflected on such Company Balance Sheet) are good and have been
collected or are collectible, without resort to litigation or extraordinary
collection activity, within 60 days of the Effective
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Date, and are subject to no defenses, set-offs or counterclaims other than
normal cash discounts accrued in the ordinary course of business of the Company.
Set forth on Schedule 4.19 hereto is a list of all accounts receivable of the
Company as of June 30, 1996 showing separately those receivables which as of
such date have been outstanding (i) 1 to 29 days, (ii) 30 to 59 days, (iii) 60
to 89 days, (iv) 90 to 119 days and (v) more than 119 days.
SECTION 4.20. Insurance. The operations and assets of the Company are
covered by valid and currently effective insurance policies issued in favor of
the Company. Schedule 4.20 contains a brief description (including the name of
the insurer, the type of coverage provided, the amount of the annual premium for
the current policy period, the amount of remaining coverage and deductibles and
the coverage period) of all policies and contracts of insurance held by the
Company and/or the employees currently or previously employed in the business
thereof. All premiums due thereon have been paid and, to the knowledge of the
Company and the Company's Shareholders, the Company and its Affiliates have
complied in all material respects with the provisions of such policies. To the
knowledge of the Company or each of the Company's Shareholders, such policies
(i) are sufficient for compliance with all requirements of law and are
substantially consistent with all (A) Contracts to which the Company is a party
and (B) leases, mortgages, deeds of trust and deeds to secure debt to which the
Company is a party, (ii) are reasonable in scope and amount, in light of the
risks attendant to the businesses and activities in which the Company is or has
been engaged and (iii) are comparable to coverage customarily maintained by
companies in similar lines of business and in similar localities. There is no
material default with respect to any provision contained in any such policy and
there has not been any failure to give any notice or present any claim under any
such policy in a timely fashion or in the manner or detail required by the
policy. Except as disclosed in Schedule 4.20, no notice of cancellation or
non-renewal with respect to, or disallowance of any claim under, any such policy
has been received; neither has the Company been refused insurance with respect
to its assets or operations, nor has its coverage been previously canceled or
materially limited, by any insurer to which it has applied for such insurance or
with which it has held insurance.
SECTION 4.21. Sufficiency of Assets and Real Property.
(a) The properties owned by or leased to the Company are adequate for the
conduct of the business of the Company. Except as disclosed in Schedule 4.21(a),
all of the Assets are suitable for the uses in which they are currently
employed, are in good operating condition and are free from any defects, except
such minor defects as do not interfere with the continued use of such properties
and equipment in the conduct of the normal operations of the business of the
Company, and the Assets include supplies of spare parts for the equipment and
machinery included in the Assets in amounts consistent with past practices.
(b) None of the Assets or Real Property is used by the Company or any of
its Affiliates in connection with any business or enterprise other than the
business of the Company.
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SECTION 4.22. Foreign Assets. The Assets do not include any interest in any
real property or tangible or intangible personal property or other assets
located outside the continental limits of the United States of America.
SECTION 4.23. Propriety of Past Payments. No funds or assets of the Company
have been used for illegal purposes; no unrecorded funds or assets of the
Company have been established for any purpose; no accumulation or use of the
Company's corporate funds or assets has been made without being properly
accounted for in the respective books and records of the Company; all payments
by or on behalf of the Company have been duly and properly recorded and
accounted for in their respective books and records; no false or artificial
entry has been made in the books and records of the Company for any reason; no
payment has been made by or on behalf of the Company with the understanding that
any part of such payment is to be used for any purpose other than that described
in the documents supporting such payment; and the Company has not made, directly
or indirectly, any illegal contributions to any political party or candidate,
either domestic or foreign. The Company has complied with the Foreign Corrupt
Practices Act of 1977, as amended, and the rules and regulations thereunder
("FCPA") and, in each case, has not made any payment to or on behalf of any
person with respect to which a deduction could be disallowed under Section
162(c) of the Code. Neither the IRS nor any other federal, state, local or
foreign government agency or entity has initiated or threatened any
investigation of any payment made by the Company of, or alleged to be of, the
type described in this Section 4.23 nor is there a basis in fact for such
investigation.
SECTION 4.24. Affiliate Transactions. Schedule 4.24 contains a complete and
correct list of all agreements or arrangements (whether or not written) between
the Company and any shareholder, officer, director or employee (or immediate
family member thereof) of the Company currently in effect or to be performed in
the future. Other than such agreements or arrangements, if any, or as further
disclosed on Schedule 4.24, there has been no transaction between the Company
and any shareholder, officer, director or employee (or immediate family member
of any thereof) of the Company in effect within the five-year period immediately
preceding the date hereof which involved payments to, or from, or for the
benefit of, any such shareholder, officer, director or employee (or immediate
family member of any thereof). Except as set forth in Schedule 4.24, no
shareholder, officer, director or employee (or immediate family member of any
thereof) of the Company owns directly or indirectly, on an individual or joint
basis, greater than a 5% interest in, or serves as an officer, director or
employee of, any customer, competitor or supplier of the Company or any person
or entity which has a contract or arrangement with the Company.
SECTION 4.25. Suppliers and Customer. (a) Except as disclosed on Schedule
4.25(a), none of the suppliers of inventory, equipment or services of the
Company will cease to sell such equipment or services thereto as a result of the
transactions contemplated by this Agreement.
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(b) Except as disclosed on Schedule 4.25(b), no single customer of the
Company (other than ITEC and Lockheed Xxxxxx) accounted for in excess of 10% of
the combined gross revenues of the Company for the twelve month period ending
June 30, 1996.
SECTION 4.26. Environmental Conditions and Governmental Authorizations.
Except as specified in Schedule 4.26:
(a) All real property owned, leased, occupied or used by the Company
is free from contamination from any Hazardous Materials. The Company has
not caused or suffered, nor, to the best knowledge of the Company and the
Company's Shareholders after reasonable inquiry, has any other party
previously involved in operations at any such property caused or suffered,
any Environmental Damages.
(b) Neither the Company nor any prior owner or occupant of real
property owned, leased, occupied or used by the Company has received notice
of any alleged violation of Environmental Requirements, or notice of any
alleged liability for Environmental Damages, and there exists no writ,
injunction, decree, order or judgment outstanding, nor any claim, suit,
proceeding, citation, fine, penalty, directive, summons or investigation,
pending or threatened, relating to the ownership, use, maintenance or
operation of the Premises by any Person, or to alleged violation of
Environmental Requirements, or to the suspected presence of Hazardous
Material thereon, nor, to the knowledge of the Company and the Company's
Shareholders after reasonable inquiry, does there exist any basis for such
claim, suit, proceeding, citation, fine, penalty, directive, summons or
investigation being instituted or filed.
(c) There is not constructed, placed, deposited, stored, disposed of
or located on any real property owned, leased, occupied or used by the
Company any polychlorinated biphenyls ("PCBs") or transformers, capacitors,
ballasts, or other equipment which contains dielectric fluid containing
PCBs, or any asbestos.
(d) Neither the Company nor any of the Company's Shareholders has any
knowledge of any alleged liability for Environmental Damages of any alleged
violation of Environmental Requirements asserted against any of the owners
or occupants of any related property located in the vicinity of any of any
real property owned, leased, occupied or used by the Company.
(e) The Company has in its possession all permits required to operate
in compliance with all Applicable Law, and the Company is presently in full
and complete compliance with each of such permits.
SECTION 4.27. Leases of Personal Property (a) Schedule 4.27(a) correctly
describes each lease under which the Company is the lessee of any personal
property (collectively, the "Personal Property Leases"). The property described
in all of the Personal Property Leases is presently and exclusively used in the
business of the Company. The Company has all right, title and interest of the
lessee under the terms of all of the Personal Property Leases to which it is a
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party. Other than any related consents listed in Schedule 4.27(a), no consent is
necessary for the assignment of any Personal Property Lease for the consummation
of this Agreement or any Transaction Document or the transactions contemplated
hereby or thereby.
(b) No event has occurred which (with the passage any of time or the giving
of notice) would materially impair any right of the Company to exercise and
obtain the benefits of any options contained in any Personal Property Lease.
There is no substantial default or basis for acceleration or termination, nor
has any event occurred which (with the passage of time or the giving of notice)
would constitute such a default or result in or permit the acceleration of any
Personal Property Lease.
SECTION 4.28. Books and Records. The Company has previously furnished to
Surviving Corporation true and correct copies of the Certificate of
Incorporation (or other charter document), the Bylaws of the Company as in
effect on the date hereof and the minute books and stock books of the Company,
which are correct and complete as of the date hereof in all respects, and will
be correct and complete as of the Effective Date.
SECTION 4.29. Accounts. Schedule 4.29 correctly identifies each bank
account maintained by or on behalf or for the benefit of the Company and the
name of each Person with any power or authority to act with respect thereto.
SECTION 4.30. Products Liability.
(a) Except as disclosed in Schedule 4.30(a) hereto, (i) there is no notice,
demand, claim, action, suit, inquiry, hearing, proceeding, notice of violation
or investigation of a civil, criminal or administrative nature before any court
or governmental or other regulatory or administrative agency, commission or
authority against or involving any product, service, substance or material
(collectively, a "Product"), or class of claims or lawsuits involving the same
or similar Product manufactured, produced, distributed or sold by or on behalf
of the Company which is pending, or, to the knowledge of the Company and the
Company's Shareholders, threatened, resulting from an alleged defect in design,
implementation, manufacture, materials or workmanship of any Product
manufactured, produced, distributed or sold by or on behalf of the Company, or
any alleged failure to warn, or from any-breach of implied warranties or
representations, (ii) there has not been any Occurrence (as defined in Section
4.30(b)), and (iii) there has not been, nor is there under consideration or
investigation by the Company, any Product recall, rework, retrofit or post-sale
warning conducted by or on behalf of the Company concerning any products
manufactured, produced, distributed or sold by or on behalf of the Company or
any product recall conducted by or on behalf of any entity as a result of any
alleged defect in any Product supplied by the Company.
(b) For purposes of this Section 4.30, the term "Occurrence" shall mean any
accident, happening or event which takes place at any time before the Effective
Date which is caused or allegedly caused by any alleged hazard or alleged defect
in manufacture, design, materials or workmanship, including, without limitation,
any alleged failure to warn or any
-30-
breach of express or implied warranties or representations with respect to, or
any such accident, happening or event otherwise involving a Product (including
any parts or components) manufactured, produced, distributed or sold by or on
behalf of the Company which is likely to result in a claim or loss.
SECTION 4.31. Interest in Competitors. Except as disclosed on Schedule
4.31, neither the Company's Shareholders, nor the Company, nor any of its
officers, directors, shareholders or employees, has any interest, either by way
of contract or by way of investment or otherwise, directly or indirectly, in any
person that provides any services or designs, produces or sells any product or
product lines or engages in any activity similar to or competitive with any
activity currently proposed to be conducted by the Company.
SECTION 4.32. Inventories. The values at which inventories are carried on
the Company Balance Sheet reflect the normal inventory valuation policies of the
Company, and such values (including the calculation of any LIFO reserve) are in
conformity with GAAP consistently applied. All inventories reflected on the
Company Balance Sheet or arising since the date thereof are currently marketable
and can be anticipated to be sold at normal xxxx-ups within days after the date
hereof in the ordinary course of business (subject to the reserve for obsolete,
off-grade or slow-moving items that is set forth on such Company Balance Sheet),
except for spare parts inventory which inventory is good and usable.
SECTION 4.33. Private Offering. Neither the Company, nor the Company's
Shareholders nor anyone acting on their behalf, has sold or has offered any of
the Shares for sale to, or solicited offers to buy from, or otherwise approached
or negotiated with respect thereto with, any prospective purchaser, other than
DRS and/or Surviving Corporation. Neither the Company, nor the Company's
Shareholders nor anyone acting on their behalf shall offer any of the Shares for
issue or sale to, or solicit any offer to acquire any of the same from, anyone
so as to bring the offer and sale of such Shares within the provisions of
Section 5 of the Securities Act.
SECTION 4.34. Subsidiaries. Set forth on Schedule 4.34 is a true and
complete list of any and all Subsidiaries of the Company and partnerships and
joint ventures in which the Company participates, stating, with respect to each,
its jurisdiction of organization or incorporation, capitalization, equity
ownership and jurisdictions in which it is qualified to do business. Each is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to own,
lease and operate the properties and assets used in its business and to carry on
its business as now being conducted, and is duly qualified to do business and in
good standing as a foreign entity in each jurisdiction where each qualification
is required. All of the outstanding shares of capital stock of the Subsidiaries
have been validly authorized and issued, are fully paid and non-assessable, have
not been issued in violation of any preemptive rights or of any federal or state
securities law, and are owned by the Company of record and beneficially free and
clear of any security interest, pledge, lien, charge, claim, option, equity,
right, restriction on transfer or encumbrance of any nature whatsoever
("Security Interest"). Except as set forth on Schedule 4.34 hereto, the Company
does not own, directly or indirectly, any ownership, equity, profits or voting
interest in any corporation, partnership, joint
-31-
venture or other person, nor has any right, agreement or commitment to purchase
any such interest. The Company has previously delivered to Surviving Corporation
complete and correct copies of the charter and by-laws (including comparable
governing instruments with different names) of each of the Subsidiaries, as
amended and presently in effect.
SECTION 4.35. Full Disclosure. No representation or warranty herein by the
Company, the Company's Shareholders or any Affiliate thereof, nor any statement
or certificate furnished to DRS and/or Surviving Corporation pursuant hereto or
in connection with the transactions contemplated hereby, contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements contained herein or therein, in light of the circumstances
in which they were made and, together with the Schedules attached hereto, not
misleading. The Schedules attached hereto completely and correctly present the
information required by this Agreement to be set forth therein, do not contain
any untrue statement of a material fact and do not omit to state any facts
necessary to make the statements contained therein, together with the
representations and warranties herein by the Company, the Company's Shareholders
or any Affiliates thereof, not misleading.
SECTION 4.36. Purchase for investment. The Company's Shareholders are
purchasing the DRS Shares solely for investment, with no present intention to
sell the DRS Shares. The Company's Shareholders hereby acknowledge that the DRS
Shares have not been registered pursuant to the Securities Act of 1933, as
amended, and may not be transferred in the absence of such registration or an
exemption therefrom under such Act.
ARTICLE V.
COVENANTS
SECTION 5.1. Covenants of Surviving Corporation. Surviving Corporation
covenants with the Company that:
(a) Compliance with Laws. Surviving Corporation is and will continue
to be in all material respects in compliance with all laws applicable to
it;
(b) Maintain Accuracy of Representations. Surviving Corporation will
not take or omit to take any action which would result in the inaccuracy on
the Effective Date of any of their representations and warranties
(including any and all Schedules thereto) contained in Article III. It is
expressly understood by the Company that a change in control of Surviving
Corporation, whether by merger, acquisition, share exchange, sale or pledge
of stock or otherwise, shall not by such change of control alone constitute
a breach of any representation or warranty or otherwise breach this
Agreement.
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SECTION 5.2. Covenants of the Company and the Company's Shareholders. The
Company and the Company's Shareholders covenant with DRS and Surviving
Corporation that:
(a) Compliance with Laws. The Company is and will continue to be in
all material respects in compliance with all laws applicable to it;
(b) Maintain Accuracy of Representations. The Company and/or the
Company's Shareholders will not take or omit to take (or cause to be taken
or omitted) any action which would result in the inaccuracy on the
Effective Date of any of the representations and warranties (including any
and all Schedules thereto) contained in Article IV;
(c) No Shop. Until the earlier of the termination of this Agreement in
accordance with its terms or the Effective Date, neither the Company nor
the Company's Shareholders, or any of them, shall directly or indirectly,
through any Affiliate, agent or otherwise, solicit, initiate or encourage
the submission of any proposal or offer from any Person relating to any
acquisition or purchase of all or (other than in the ordinary course of
business) any portion of the assets or stock of the Company or any business
combination with the Company or participate in any negotiations regarding,
or furnish to any other Person any information with respect to, or
otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other Person to do or
seek any of the foregoing. The Company immediately shall cease and cause to
be terminated any existing discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing. The Company
shall notify Surviving Corporation promptly of any such proposal or offer,
or any inquiry or contract with any Person with respect thereto, is made
and shall, in any such notice to Surviving Corporation, indicate in
reasonable detail the identity of the Person making such proposal, offer,
inquiry or contact;
(d) Access to Information; Confidentiality.
(i) From the date hereof to the Effective Date, upon reasonable notice
to and with the prior consent of Xxxxxx at his sole discretion, the Company
shall and shall cause any Affiliates, employees, auditors and agents of the
Company to, afford the officers, employees and agents of DRS and Surviving
Corporation access during or outside of regular business hours to the
officers, employees, agents, properties, offices, plants and other
facilities, books and records of the Company, and shall make available to
DRS and Surviving Corporation all financial, operating and other data and
information as DRS and Surviving Corporation, through their officers,
employees or agents, may reasonably request;
(ii) All information obtained by DRS and Surviving Corporation
pursuant to this Section 5.2 shall be kept confidential pursuant to that
certain confidentiality agreement entered into by the Company and the
Surviving Corporation and dated May 7, 1996; and;
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(iii) No investigation or knowledge of any matter or condition by DRS,
the Surviving Corporation or the employees, agents or representatives of
either shall affect any representation or warranty or any condition to
their obligations or any right to terminate this Agreement;
(e) Conduct of Business. Between the date hereof and the Effective
Date, without the consent of Surviving Corporation and except as
contemplated by the Transaction Documents, the Company shall:
(i) conduct its business only in the usual, regular and ordinary
course of business consistent with past practice;
(ii) refrain from declaring any dividend or making any other
distribution to the shareholders of the Company; and
(iii) except either in the usual, regular and ordinary course of
business and consistent with past practice or as necessary to comply
with the provisions of this Agreement, refrain from:
(A) making any purchases, sales, transfers, or leases of any
Assets or Real Property or mortgaging, pledging or otherwise
creating a security interest in, or any encumbrance of, any of
the Assets or Real Property (other than Permitted Liens);
(B) entering into any Contract, license, or lease in
relation to the business of the Company or taking any other
action which would, if entered into or taken on the date hereof,
be required to be disclosed on a Schedule to this Agreement;
(C) making any change in the compensation or benefits
payable or to become payable to any employee or making any new
bonus payment or arrangement or benefit to or with any such
employee;
(D) making any changes in the customary methods of operation
of the business of the Company, including marketing, selling and
pricing practices and policy; and
(E) taking any other action which would have a negative
impact on the business of the Company or on the prospects of the
business of the Company;
(iv) use all reasonable efforts to preserve its business
organization intact, to keep its insurance policies intact, to keep
available the services of its present employees and officers, and to
preserve the relationships with and the goodwill of all suppliers,
customers, sales representatives and others having business relations
with the Company;
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(v) maintain the Premises and all of the other properties used in
the operation of its business in customary repair, order and
condition, reasonable wear and tear excepted, and perform all of its
obligations under any leases;
(vi) maintain its books, accounts and records in connection with
its business in the usual manner on a basis consistent with past
practices;
(vii) refrain from amending, modifying in any material respect or
consenting to the termination of any Contract or the Company's
material rights with respect thereto;
(viii) except in the ordinary course of business, refrain from
increasing the total number of employees employed in connection with
its business; and
(ix) refrain from agreeing, whether in writing or otherwise, to
do any of the foregoing;
(f) Third Party Consents; Further Actions.
(i) The Company shall use its best efforts to obtain at the earliest
practicable date after the date hereof, and, in any event, prior to the
Effective Date, all necessary consents to the transactions contemplated by this
Agreement or any Transaction Document from parties to Contracts and Governmental
Authorities;
(ii) The Company shall use its best efforts to obtain, and to assist
Surviving Corporation in obtaining, all waivers, licenses, authorizations,
qualifications, orders, permits, consents and approvals required to be obtained
by it or them and to effect, and to assist Surviving Corporation in effecting,
all registrations, filings and notices with or to third parties or governmental
or public bodies or authorities required to be made which are necessary or
desirable in connection with the transactions contemplated by this Agreement or
any Transaction Documents;
(iii) The Company and the Company's Shareholders who are signatories to the
Agreement shall have obtained by power of attorney or otherwise the consent of
all of the Company's Shareholders to enter into this Agreement and to consummate
the transactions contemplated hereby and hereunder. Further, any and all
shareholder agreements, voting trusts, proxies and/or plans which may have the
effect of impairing or prohibiting the transactions contemplated hereby (or
which may be otherwise inconsistent with such transactions) shall have been
canceled or rendered null and void;
(g) Renewal of Permits. The Company shall take such steps as are customary
in the industry to file any necessary applications for the renewals of all
licenses and permits referred to in Section 4.26 including, without limitation,
Environmental Permits, if any such license or permit is required to be obtained
prior to the Execution of this Agreement;
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(h) Powers of Attorney. Upon the Execution of this Agreement, the Company
shall revoke all powers of attorney relating to the its business and operations;
(i) Notification of Certain Matters. The Company shall give prompt notice
to Surviving Corporation of (i) the occurrence, or non-occurrence, of any event
the occurrence, or non-occurrence, of which would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate and (ii) any failure of the Company to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice;
(j) Disclosure Schedules. Concurrently with the date hereof, the Company
has delivered to Surviving Corporation complete Schedules to this Agreement and
the Transaction Documents which are to be provided by the Company together with
any supporting documentation which Surviving Corporation may reasonably request
and, within seven business days after receipt of such Schedules and supporting
documentation either (i) Surviving Corporation will accept such Schedules in
which case they shall become a part of this Agreement and the appropriate
Transaction Documents, (ii) the parties hereto will agree upon mutually
acceptable revisions to such Schedules in which case such revised Schedules
shall become a part of this Agreement and the appropriate Transaction Documents
or (iii) Surviving Corporation will terminate this Agreement pursuant to Article
IX hereof.
SECTION 5.3. Net Worth Statement; Adjustment to Purchase Price. Prior to
execution of this Agreement, the Company and its Accountant have prepared (and
Surviving Corporation has reviewed) the Company Balance Sheet as at June 30,
1996 in accordance with GAAP (except as otherwise stated herein), and, based on
the Company Balance Sheet, have prepared a statement of net worth (the "Net
Worth Statement") which reflects agreed-upon adjustments to the net worth of the
Company as reported on the Company Balance Sheet. The Net Worth Statement
constitutes the basis upon which the Merger Consideration has been determined.
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ARTICLE VI.
CONDITIONS PRECEDENT TO EXECUTION OF THIS AGREEMENT
SECTION 6.1. Conditions Precedent to Obligations of Surviving Corporation.
The obligation of Surviving Corporation to perform its obligations hereunder and
under the Transaction Documents is subject to the satisfaction or waiver of the
conditions precedent that:
(a) Documents. Surviving Corporation shall have received on or before
the Effective Date of this Agreement the following, in form and substance
satisfactory to Surviving Corporation, all of which shall be held in escrow
with Xxxxxxx Xxxxxxx, a Professional Corporation, pursuant to the Escrow
Agreement (as defined below) until the Effective Date:
(i) Two (2) executed Certificates of Merger, in the form attached
hereto as Exhibit A ("Certificate of Merger");
(ii) A fully executed Joint Unanimous Written Consent of the
Board of Directors and the Shareholders of Pacific Technologies, Inc.,
in the form attached hereto as Exhibit B;
(iii) A signed opinion of counsel to the Company and the
Company's Shareholders, in the form attached hereto as Exhibit C;
(iv) A Certificate of the Company, signed on behalf of the
Company by the President or a Vice President and the Secretary or any
Assistant Secretary, certifying fulfillment of the conditions
specified in subsections (c) and (d) below;
(v) A Tax Clearance Certificate from the California Franchise Tax
Board;
(vi) Resignations of all directors and officers of the Company
which resignations shall have been requested by the Surviving
Corporation effective as of the Effective Date;
(vii) The statement of each of the Company's Shareholders, as
contemplated under Section 1.1445-2(b)(2)(i) of the Treasury
Regulations, to the effect that such Shareholder is not a foreign
person within the meaning of the Code and applicable Treasury
Regulations;
(viii) A certificate from the Landlord stating that the Company's
lease, described in Schedule 4.6, is in full force and effect;
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(ix) the Accountant's letter with respect to the Company Balance
Sheet including an opinion with respect to the Financial Statements
(against which letter the Accountant shall not be indemnified by the
Company);
(x) Executed Escrow Agreement by and among the Company, the
Company's Shareholders, the Subsidiary and Xxxxxxx Xxxxxxx, a
Professional Corporation, as Escrow Agent (the "Escrow Agreement");
and
(xi) all opinions, certificates and other instruments and
documents required to be delivered by the Company and the Company's
Shareholders upon execution of this Agreement or otherwise required in
connection herewith;
(b) Satisfactory Completion of Due Diligence. The Surviving
Corporation shall have completed its due diligence inquiry in accordance
with the provisions of Section 5.2(d). The Surviving Corporation shall have
been satisfied that The Company's Shareholders and the Company have
complied with all covenants and conditions set forth in Section 5.2 and
Section 6.1, and that all representations and warranties contained in
Article IV remain true and accurate. In the event that any of the
provisions contained in this Section 6.1 have not been satisfied in the
opinion of the Surviving Corporation, Surviving Corporation shall be
relieved of all obligations under this Agreement, including the obligation
to consummate the transactions contemplated hereunder.
(c) Representations and Warranties. The representations and warranties
of the Company and the Company's Shareholders contained in this Agreement,
as modified by any Schedules delivered by the Company pursuant to Section
5.2(j) hereof, shall be true and correct in all respects on the date hereof
and as of the Effective Date with the same effect as though such
representations and warranties had been made or given again at and as of
the Effective Date, except for any representation and warranty expressly
stated to have been made or given as of a specified date, which, at the
Effective Date, shall be true and correct in all respects as of the date
expressly stated.
(d) Performance. The Company and the Company's Shareholders shall have
performed and complied in all respects with all of their respective
agreements, covenants and conditions required by this Agreement and each
Transaction Document to be performed or complied with by them prior to or
at the Effective Date.
(e) No Material Adverse Effect. Since the date of the Company Balance
Sheet there shall not have occurred an event or condition which has
resulted or which reasonably may be expected to result in a Material
Adverse Effect.
(f) Net Worth. The Surviving Corporation shall have received from the
Company a Net Worth Statement, in a form satisfactory to Surviving
Corporation evidencing that the net worth as of June 30, 1996 is not less
than $524,898.00.
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(g) Consents, etc. All notices to, and declarations, filings and
registrations with, and consents, approvals and waivers from governmental
and regulatory agencies required to consummate the transactions
contemplated hereby and all consents, approvals and waivers from third
parties required to have been obtained in connection with the transactions
contemplated by this Agreement and the Transaction Documents shall have
been obtained prior to Execution of this Agreement.
(h) No Proceeding or Litigation.
(i) No preliminary or permanent injunction or other order shall have
been issued by any court of competent jurisdiction, whether federal, state
or foreign, or by any governmental or regulatory body, whether federal,
state or foreign, nor shall any statute, rule, regulation or executive
order promulgated or enacted by any governmental authority, whether
federal, state or foreign, be in existence or effect, which prevents the
consummation of the transactions contemplated by this Agreement or any
Transaction Document.
(ii) No suit, action, claim, proceeding or investigation before any
court, arbitrator or administrative, governmental or regulatory body or
authority, whether federal, state or foreign, shall have been commenced and
be pending against either Surviving Corporation, the Company or any of
their respective Affiliates, associates, officers or directors seeking to
prevent the consummation of the transactions contemplated by this Agreement
or any Transaction Document or asserting that such transactions would be
illegal.
(i) Licenses; Permits. All operating licenses and permits necessary for the
operation of the businesses of the Company as conducted on the Effective Date
(including, without limitation, Environmental Permits) shall have been obtained.
(j) Other. Surviving Corporation shall have received such further
assurances and documents as it may reasonably request.
SECTION 6.2. Conditions Precedent to Obligations of the Company. The
obligations of the Company to perform its other obligations hereunder and under
the Transaction Documents are subject to satisfaction or waiver of the
conditions precedent that:
(a) Documents. The Company shall have received on or before the
Effective Date the following, in form and substance satisfactory to the
Company, all of which shall be held in escrow pursuant to the Escrow
Agreement until the Effective Date:
(i) Two (2) executed Certificates of Merger;
(ii) A fully executed Joint Unanimous Written Consent of the
Board of Directors and the Sole Shareholder of PTI Acquisition, Inc.,
in the form attached hereto as Exhibit D;
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(iii) A signed opinion by counsel to the Subsidiary, in the form
attached hereto as Exhibit E;
(iv Acceptance by the Company's Shareholders of offers of
employment made to them by the Surviving Corporation;
(v) A Certificate of Surviving Corporation, signed on behalf of
Surviving Corporation by the President or a Vice President and the
Secretary or any Assistant Secretary of Surviving Corporation
certifying as to the fulfillment of the conditions specified in
subsections (b) and (c) below;
(vi) Executed Escrow Agreement; and
(vii) all opinions, certificates and other instruments and
documents required to be delivered by the Subsidiary upon execution of
this Agreement or otherwise required in connection herewith;
(b) Representations and Warranties. The representations and warranties
of Surviving Corporation contained in this Agreement shall be true and
correct in all respects on the date hereof and as of the Effective Date
with the same effect as though such representations and warranties had been
made or given again at and as of the Effective Date, except for any
representation or warranty expressly stated to have been made or given as
of a specified date, which, at the Effective Date, shall be true and
correct in all respects as of the date expressly stated.
(c) Performance. Surviving Corporation shall have performed and
complied in all respects with all of its agreements, covenants and
conditions required by this Agreement and each Transaction Document to be
performed or complied with by it prior to or on the Effective Date.
(d) Consents, etc. All notices to, and declarations, filings and
registrations with, and consents, approvals and waivers from, governmental
and regulatory agencies required to consummate the transactions
contemplated hereby and all consents, approvals and waivers from third
parties required to have been obtained in connection with the transactions
contemplated by this Agreement and the Transaction Document shall have been
obtained prior to the Effective Date;
(e) No Proceeding or Litigation.
(i) No preliminary or permanent injunction or other order shall have
been issued by any court of competent jurisdiction, whether federal, state
or foreign, or by any governmental or regulatory body, whether federal,
state or foreign, nor shall any statute, rule, regulation or executive
order promulgated or enacted by any governmental authority, whether
federal, state or foreign, be in existence or effect, which prevents the
consummation of the transactions contemplated by this Agreement or any
Transaction Document.
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(ii) No suit, action, claim, proceeding or investigation before any
court, arbitrator or administrative, governmental or regulatory body or
authority, whether federal, state or foreign, shall have been commenced and
be pending against either Surviving Corporation or the Company or any of
their respective Affiliates, associates, officers or directors seeking to
prevent the consummation of the transactions contemplated by this Agreement
or any Transaction Document or asserting that such transactions would be
illegal.
ARTICLE VII.
ADDITIONAL AGREEMENTS
SECTION 7.1. Further Assurances. Following the execution of this Agreement
and continuing after the Effective Date, each of the Company's Shareholders and
the Company shall, from time to time, execute and deliver such additional
instruments, documents, conveyances and assurances as requested by the Surviving
Corporation to confirm, assure and further the rights, purposes, effects and
obligations set forth herein.
SECTION 7.2. Covenants of Certain of the Company's Shareholders.
By signing this Agreement, Xxxxxx and Xxxxx each agree that neither such
Shareholder nor any of his or her Affiliates will own, manage, operate, join or
control, or participate in the ownership, management, operation or control of,
or assist in any manner with, or be connected with or have any interest in, as a
stockholder, agent, consultant, partner, director, officer, employee or
otherwise: (i) any business which develops, manufactures and markets and/or
sells within the United States any product or service developed, manufactured,
marketed and/or sold by the Company (or contemplated to be developed,
manufactured, marketed and/or sold by the Company in the reasonably foreseeable
future); or (ii) any entity which otherwise competes directly or indirectly with
the business of the Company, except that either of them may make passive
investments in a competitive enterprise the shares of which are publicly traded
if such investment constitutes less than one half of one percent of the equity
of such enterprise. This above-described covenant shall be effective for the
period beginning on the Effective Date under this Agreement and ending on the
second anniversary of the Effective Date; provided, however, that if the
employment of Xxxxxx and/or Xxxxx is terminated by the Surviving Corporation
without cause prior to such second anniversary, then such Shareholder(s)
terminated without cause shall be relieved of the above-described covenant on
the relevant termination date; and, provided further, that if Xxxxxx and/or
Xxxxx voluntarily terminate employment with the Surviving Corporation or if the
employment of Xxxxxx and/or Xxxxx is terminated by the Surviving Corporation
with cause, then the terms of the above-described covenant shall restrict the
terminated Shareholder(s) for one year following the termination date or until
the second anniversary of the Effective Date, whichever date occurs later. By
signing this Agreement, each of the Company's Shareholders agrees that each
shall not, directly or indirectly, in any capacity whatsoever:
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(a) hire or solicit for employment, directly or indirectly, any
personnel of the Company in any capacity whatsoever (which shall be deemed
to include, without limitation, any existing or prospective employee of the
Company or any person who has been such an employee of the Company within
one hundred fifty (150) days prior to the Effective Date);
(b) attempt directly or indirectly to induce any such Company
personnel to leave the employ of, or discontinue such person's business
association with, the Company;
(c) solicit, directly or indirectly, any client or account or bona
fide prospective client or account of the Company; or
(d) interfere with the business relationships, contractual or
otherwise, between the Company and any of its customers, suppliers or
employees.
SECTION 7.3. Remedies.
(a) Reasonableness of Restraints. Each of the Company's Shareholders hereby
acknowledges that: (i) he is fully familiar with the restrictions, restraints
and limitations imposed upon him in Section 7.2 hereof (collectively, the
"Restraints"); (ii) the Surviving Corporation would not undertake the
transactions contemplated hereunder without the imposition of the Restraints and
each agreement of the Company's Shareholders herein to abide by such Restraints;
(iii) the imposition upon each such Shareholder of the Restraints is necessary
for the reasonable, adequate protection of the business of the Company; and (iv)
each and every Restraint is reasonable with respect to its subject matter,
geographic area and length of time.
(b) Injunctive Relief. Each of the Company's Shareholders acknowledges that
monetary damages alone will not adequately compensate the Company and/or the
Surviving Corporation in the event of a breach or a threatened breach by him of
the Restraints and therefore each of the Company's Shareholders hereby agrees
that in addition to all remedies available to the Surviving Corporations and/or
Company at law or in equity, the Surviving Corporation and/or Company shall be
entitled to interim restraints and permanent injunctive relief for the
enforcement thereof, and to an accounting and payment over of all receipts
realized by such of the Company's Shareholders as a result of such breach.
(c) Extension of Period of Restraints. In the event that any of the
Company's Shareholders shall be in material violation of any Restraints, then
the time limitation therefor shall be extended for a period of time equal to the
period of time during which such breach or breaches occurred. In the event the
Surviving Corporation and/or the Company shall be required to seek relief in any
court or other tribunal, then the Restraints shall be extended for a period of
time equal to the pendency of such proceedings, including appeals, and excluding
any periods during which the court or other tribunal has ordered the Company's
Shareholders to honor the Restraints and such Company's Shareholders have
complied with such order.
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(d) Court Ordered Reduction of Restraints. In the event that any of the
restrictions, limitations or restraints contained in this Agreement are deemed
to be unreasonable or unenforceable by any court of competent jurisdiction, then
each party hereto agrees to submit to such reduction of said restrictions,
limitations or restraints as the court shall deem reasonable.
SECTION 7.4. Public Disclosure.
No party to this Agreement shall make an announcement of this Agreement or
the transactions contemplated hereby to the public or any third party (including
employees of the Company), other than with the express consent of the Surviving
Corporation, on the one hand, and the Company and the Company's Shareholders, on
the other hand, or as may be required by applicable laws or regulations.
SECTION 7.5. Limitations on Transfers and Dispositions.
(a) Each Company Shareholder covenants that following the Effective Date
such Company Shareholder will not transfer the shares of DRS Stock, if any, to
be received hereunder in violation of the Securities Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or the rules of the SEC
promulgated thereunder, including Rule 144 under the Securities Act, and unless
and until (i) there is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement or (ii) (A) such Company
Shareholder shall have notified DRS of the proposed disposition and shall have
furnished DRS with a detailed statement of the circumstances surrounding the
proposed disposition and (B) if reasonably requested by DRS, such Company
Shareholder shall have furnished DRS with an opinion of counsel, reasonably
satisfactory to DRS and its counsel, that such disposition will not require
registration of such shares under the Securities Act.
(b) Each Company Shareholder severally agrees that he/she has no plan or
present intention to sell, transfer or otherwise dispose of a number of shares
of DRS Stock to be received in the merger that would reduce the number of shares
of DRS Stock owned by such Company Shareholder to a number of shares having, in
the aggregate, a value as of the Effective Date of less than fifty (50) percent
of the value of all of the Company Shares held by such Company Shareholder as of
the Effective Date. For purposes of the agreement set forth in this Section (b),
Dissenting Shareholder Shares, Company Shares exchanged for cash in lieu of
fractional shares of DRS Stock and Company Shares sold, exchanged or otherwise
disposed of prior to and in anticipation of the merger will be treated as
Company Shares held by such Company Shareholder as of the Effective Date.
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ARTICLE VIII.
INDEMNIFICATION
SECTION 8.1. Survival of Representations and Warranties. The
representations and warranties of the Company and the Company's Shareholders
shall survive the Execution of this Agreement and the Effective Date for a
period of three years from the Effective Date, provided however, that
Representations and Warranties in Section 4.17 shall survive 90 days following
expiration of claims pursuant to the statute of limitations in respect of such
matters; and provided further that there shall be no temporal limitation of
indemnification in respect of Representations and Warranties set forth in
Sections 4.1 and 4.2.
SECTION 8.2. Indemnification by the Parties. Except as otherwise limited by
this Article VIII, each of the Surviving Corporation and its corporate
Affiliates, officers, directors, employees, agents, successors and assigns (each
an "Indemnified Party") shall be indemnified and held harmless by the Company's
Shareholders (each an "Indemnifying Party"), on the one hand, and each of the
Company's Shareholders, on the other hand (an "Indemnified Party"), shall be
indemnified and held harmless by the Surviving Corporation (an "Indemnifying
Party"), for any and all liabilities, losses, damages, claims, costs and
expenses, interest, awards, judgments and penalties (including, without
limitation, reasonable legal costs and expenses and environmental engineering
consultants' fees) actually suffered or incurred by the Indemnified Party
(hereinafter singularly, a "Loss" or, collectively, "Losses"), actually arising
out of or resulting from:
(a) the breach of any representation or warranty by the Indemnifying
Party contained herein; or
(b) the breach of any covenant or agreement by the Indemnifying Party
contained herein.
SECTION 8.3. General Indemnification Provisions. An Indemnified Party shall
promptly give the Indemnifying Party written notice of any matter which an
Indemnified Party has determined has given or could give rise to a right of
indemnification under this Agreement, stating the amount of the Loss, if known,
and method of computation thereof, all with reasonable particularity and
containing a reference to the provisions of this Agreement in respect of which
such right of indemnification is claimed or arises. The obligations and
liabilities of an Indemnifying Party under this Article with respect to Losses
arising from claims of any third party that are subject to the indemnification
provided for in this Article ("Third Party Claims") shall be governed by and
contingent upon the following additional terms and conditions: if an Indemnified
Party shall receive notice of any Third Party Claim, the Indemnified Party shall
promptly give the Indemnifying Party written notice of such Third Party Claim
and shall permit the Indemnifying Party, at its option, to participate in the
defense of such Third Party Claim by counsel of its own choice and at its
expense. If, however, the Indemnifying Party acknowledges in writing its
obligation to indemnify the Indemnified Party hereunder against any Losses that
may result from such
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Third Party Claims (subject to the limitations set forth herein), then the
Indemnifying Party shall be entitled, at its option, to assume and control the
defense of such Third Party Claim at its expense and through counsel of its
choice if it gives prompt notice of intention to do so to the Indemnified Party.
In the event the Indemnifying Party exercises its right to undertake the defense
against any such Third Party Claim as provided above, the Indemnified Party
shall cooperate with the Indemnifying Party in such defense and make available
to the Indemnifying Party, at the Indemnifying Party's expense, all witnesses,
pertinent records, materials and information in its possession or under its
control relating thereto as is reasonably required by the Indemnifying Party.
Similarly, in the event the Indemnified Party is, directly or indirectly,
conducting the defense against any such Third Party Claim, the Indemnifying
Party shall cooperate with the Indemnified Party in such defense and make
available to it all such witnesses, records, materials and information in its
possession or under its control relating thereto as is reasonably required by
the Indemnified Party. No such Third Party Claim, except the settlement thereof
which involves the payment of money only and for which the Indemnified Party is
totally indemnified by the Indemnifying Party, may be settled by the
Indemnifying Party without the written consent of the Indemnified Party (which
consent shall not be unreasonably withheld). Similarly, no Third Party Claim
which is being defended in good faith by the Indemnifying Party shall be settled
by the Indemnified Party without the written consent of the Indemnifying Party
(which consent shall not be unreasonably withheld).
SECTION 8.4. Limitations on Indemnification.
(a) Participation in indemnification. Notwithstanding anything in this
Agreement to the contrary, Xxxxxx and Xxxxx shall be jointly and severally
liable for the totality of indemnification obligations incurred under this
Agreement; Xxxxxx, on the other hand, shall be severally liable for the pro rata
share of such liability attributable to him on the basis of his percentage of
Share ownership immediately prior to the Effective Date; and Ito and Xxxxxx
shall not be liable for Losses as indemnitors hereunder.
(b) Upper Limit to Indemnification. Regardless of the totality of
indemnification obligations incurred under this Agreement, Xxxxxx, Xxxxx and/or
Xxxxxx shall not be required to indemnify Surviving Corporation and/or its
Affiliates in an aggregate amount greater than $524,898.00.
(c) Insubstantial matters. In an effort to avoid disputes over numerous
small items, Surviving Corporation and the Company's Shareholders agree that the
Company and the Company's Shareholders shall not be liable for Losses hereunder
until the total of all such Losses equals or exceeds $15,000 (the "Basket");
provided, however, that once such Losses exceed the Basket, the Company and the
Company's Shareholders shall be liable for all Losses including the first
$15,000 of such Losses in the Basket.
SECTION 8.5. Shareholders' Representatives. In connection with the
procedures set forth in Section 8.3 (General Indemnification Provisions only),
the Minority Shareholders confirm and agree that they will be represented by
Xxxxxx and Xxxxx jointly as
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Minority Shareholders' representatives (the "Shareholders' Representatives")
appointed and acting pursuant hereto and empowered by each Minority Shareholder
to give and receive notices and communications; to compromise, defend,
participate in the defense of, release and prosecute claims; to admit liability;
to consent to the entry of any judgment; to negotiate, agree to and enter into
any settlement; to demand arbitration and comply with awards of arbitrators and
courts; and to take any and all actions necessary or appropriate in the judgment
of the Shareholders' Representatives for the accomplishment of any of the
foregoing. A decision by both of the Shareholders' Representatives shall
constitute a decision of all of the Company's Shareholders, and shall be final,
binding and conclusive on all of them, and Buyer may rely on any act, decision,
notice, consent or instruction of both of the Shareholders' Representatives as
being the act, decision, notice, consent or instruction of each and all of the
Company's Shareholders; provided, however, that if, for any reason, Xxxxxx and
Xxxxx cannot or have not acted in concert, then the Company's Shareholders
empower Xxxxxx to act on their behalf and Buyer may rely on such act of Xxxxxx.
ARTICLE IX.
TERMINATION
SECTION 9.1. Termination of Agreement. This Agreement may be terminated and
the merger contemplated in Article II may be abandoned at any time prior to the
Effective Date:
(a) By mutual written consent of the parties hereto; or
(b) By the Subsidiary if the Effective Date shall not have occurred on
or before October 15, 1996 unless a delay in the Effective Date occurs
solely by reason of a delay in obtaining the required tax clearance
certificate from the Franchise Tax Board of the State of California, in
which case the Agreement shall continue until such Tax Clearance is
obtained (subject to clauses (c) and (d) below); or
(c) By the Subsidiary if the board of directors of the Subsidiary at
any time determines in its business judgment that this Agreement is no
longer in the best interests of the Subsidiary or its shareholders by
reason of a material adverse change in the business or prospects of the
Company or by reason of a delay in the Effective Date beyond December 1,
1996 for any reason whatsoever; or
(d) By the Subsidiary if, at any time in the course of the
Subsidiary's legal, accounting, financial, operational or environmental due
diligence investigation as to the business of the Company and the
liabilities thereof (whether disclosed, undisclosed, direct, indirect,
absolute, contingent, secured, unsecured, accrued or otherwise, whether
known or unknown) including, without limitation, the Subsidiary's
continuing review of the Schedules delivered by the Company and any other
materials delivered to Subsidiary, whether prior or subsequent to the date
hereof, it shall have become aware of any facts or circumstances that
-46-
adversely affect the basis upon which Subsidiary determined to enter into
the transactions contemplated hereby; or
(e) By any party hereto if a court of competent jurisdiction (whether
federal, state or foreign) or any governmental body or agency (whether
federal, state or foreign) shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement or any Transaction Document,
and such order, decree, ruling or other action shall have become final and
nonappealable.
SECTION 9.2. Procedure and Effect of Termination. In the event of
termination of this Agreement and abandonment of the merger pursuant to Section
9.1, written notice thereof shall forthwith be given to the other party or
parties specifying the provision hereof pursuant to which such termination is
made and this Agreement shall forthwith become void and there shall be no
liability on the part of the parties hereto (or their respective officers,
directors or affiliates), except nothing herein shall relieve either party from
liability for any willful breach hereof and except that the provisions of the
Confidentiality Agreement entered into by the Company and DRS on May 7, 1996 and
the provisions of Section 11.2 dealing with payment of expenses shall survive
such termination. The parties shall consult with each other before any public
announcement of the termination, or of discussions regarding the termination, of
this Agreement is made.
ARTICLE X.
CERTAIN REGISTRATION RIGHTS
10.1. Certain Definitions. As used in this Section, the following terms
shall have the meanings set forth below:
(a) Commission shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
(b) Exchange Act shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to
time.
(c) Holder shall mean each person who holds, pursuant to this
Agreement, Registrable Securities acquired in the merger.
(d) Other Shares shall mean shares of DRS Stock with registration
rights other than the Registrable Securities.
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(e) Other Stockholders shall mean persons other than Holders who, by
virtue of agreements with DRS, are entitled to include their securities in
certain registrations hereunder.
(f) Registrable Securities shall mean: (i) Merger Consideration in the
form of stock; and (ii) any shares issued as a dividend or other
distribution with respect to or in exchange for or in replacement of said
Merger Consideration; provided, however, that Registrable Securities shall
not include any such shares which have previously been registered or which
have been sold to the public, or which have been sold in a private
transaction.
(g) The terms Register, Registered and Registration shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
(h) Registration Expenses shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, printing expenses, escrow fees, fees and disbursements of
counsel for DRS, and expenses of any regular or special audits and/or "cold
comfort" letters incident to or required by any such registration, but
shall not include Selling Expenses.
(i) Restricted Securities shall mean any Registrable Securities
required to bear the legend set forth in Section 10.2(b) hereof.
(j) Rule 144 shall mean Rule 144 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or
any similar successor rule that may be promulgated by the Commission.
(k) Rule 145 shall mean Rule 145 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or
any similar successor rule that may be promulgated by the Commission.
(i) Securities Act shall mean the Securities Act of 1933, as amended,
or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
(m) Selling Expenses shall mean all underwriting discounts, selling
commissions, stock transfer taxes and federal and state registration,
qualification and filing fees applicable to the sale of Registrable
Securities and fees and disbursements of counsel for any Holder.
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10.2. Restrictions On Transfer.
(a) Each Holder agrees not to make any disposition of all or any portion of
the Registrable Securities unless and until the transferee has agreed in writing
for the benefit of DRS to be bound by this Section 10.2, provided and to the
extent such Section is then applicable and:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or
(ii) Such Holder shall have: (A) notified DRS of the proposed
disposition and shall have furnished DRS with a detailed statement of the
circumstances surrounding the proposed disposition; and (B) if reasonably
requested by DRS, furnished DRS with an opinion of counsel, reasonably
satisfactory to the DRS, that such disposition will not require
registration of such shares under the Securities Act.
(b) Each certificate representing Registrable Securities shall (unless
otherwise permitted by the provisions of this Agreement) be stamped or otherwise
imprinted with a legend substantially similar to the following (in addition to
any legend required under applicable state securities laws):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER SUCH ACT OR UNLESS DRS HAS RECEIVED AN OPINION OF
COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO DRS AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED.
10.3. Registration Of Securities.
(a) For so long as the Holders' ability to transfer Registrable Securities
is restricted by the holding period imposed on such Holders by Rule 144, if DRS
shall determine to register any of its securities either for its own account or
the account of Other Stockholders exercising their respective demand
registration rights, other than a registration relating solely to employee
benefit plans, or a registration relating solely to a Rule 145 transaction, or a
registration on any registration form that does not contemplate secondary sales,
DRS will:
(i) Promptly give to each Holder written notice thereof; and
(ii) Use its reasonable best efforts to include in such registration
(and any related qualification under blue sky laws or other compliance),
and in any underwriting
-49-
involved therein, all the Registrable Securities specified in a written
request or requests, made by any Holder and received by DRS within twenty
(20) days after the written notice from DRS described in Section 10.3(a)(i)
is mailed or delivered by DRS. Such written request may specify all or a
part of a Holder's Registrable Securities.
(b) Underwriting. If the registration of which DRS gives notice is for a
registered public offering involving an underwriting, DRS shall so advise the
Holders as a part of the written notice given pursuant to Section 10.3(a)(i). In
such event, the right of any Holder to registration pursuant to this Section
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with DRS and the Other Stockholders
distributing their securities through such underwriting) enter into an
underwriting agreement approved by DRS and with the representative of the
underwriter or underwriters selected by DRS.
(c) Procedures. Notwithstanding any other provision of this Section, if the
representative of the underwriters advises DRS in writing that market factors
require a limitation on the number of shares to be underwritten, the
representative may (subject to the limitations set forth below) exclude all
Registrable Securities from, or limit the number of Registrable Securities to be
included in, the registration and underwriting, DRS shall so advise all holders
of securities requesting registration, and the number of shares of securities
that are entitled to be included in the registration and underwriting shall be
allocated first to DRS and thereafter as set forth in Section 10.9. If any
Holder does not agree to the terms of any such underwriting, he shall be
excluded therefrom by written notice from DRS or the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration. If shares are so
withdrawn from the registration and if the number of shares of Registrable
Securities to be included in such registration was previously reduced as a
result of market factors, DRS shall then offer to all persons who have retained
the right to include securities in the registration the right to include
additional securities in the registration in an aggregate amount equal to the
number of shares so withdrawn, with such shares to be allocated among the
persons requested additional inclusion in accordance with Section 10.9 hereof.
10.3. Expenses Of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 10.3 hereof shall be borne by DRS; all Selling Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 10.3 hereof shall be borne by the Holder(s) of Registrable Shares
participating in such registration, qualification or compliance.
10.5 Registration Procedures. In the case of each registration effected by
DRS pursuant to this Agreement, DRS will keep each Holder advised in writing as
to the initiation of each registration and as to the completion thereof. At its
expense, DRS will use its reasonable best efforts to:
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(a) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition
of securities covered by such registration statement;
(b) Furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as a
Holder from time to time may reasonably request;
(c) Cause all such Registrable Securities registered pursuant
hereunder to be listed on the American Stock Exchange or on each securities
exchange on which similar securities issued by DRS are then listed; and
(d) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP
number for all such Registrable Securities, in each case not later than the
effective date of such registration.
10.6. Indemnification.
(a) DRS will indemnify each Holder, each of their legal counsel, and
accountants and each person controlling such Holder within the meaning of
Section 15 of the Securities Act, with respect to which registration,
qualification, or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls within the meaning of
Section 15 of the Securities Act any underwriter, against all claims, losses,
damages, and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other document or based on
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and will reimburse each such Holder, each such underwriter, and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability, or action, provided that DRS will not be liable in any such
case to the extent that any such claim, loss, damage, liability, or expense
arises out of or is based on any untrue statement or omission (or alleged untrue
statement or omission) based upon information furnished to DRS by such Holder or
underwriter. The obligations of DRS hereunder shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of DRS (which consent shall not been
unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by him are included in
the securities as to which such registration, qualification, or compliance is
being effected, indemnify DRS, each of its directors, officers, partners, legal
counsel, and accountants and each underwriter, if any, of DRS' securities
covered by such a registration statement, each person who controls DRS or such
underwriter within the meaning of Section 15 of the Securities Act, each other
such Holder and Other Stockholder, and each of their officers, directors, and
partners, and
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each person controlling such Holder or Other Stockholder, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering
circular, or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse DRS and such Holders,
Other Stockholders, directors, officers, partners, legal counsel, and
accountants, persons, underwriters, or control person for any legal and any
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability, or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular, or other document in reliance upon and in
conformity with information furnished to DRS by such Holder. The obligations of
such Holder hereunder shall not apply to amounts paid in settlement of any such
claims, losses, damages, or liabilities (or actions in respect thereof) if such
settlement is effected without the consent of such Holder (which consent shall
not be unreasonably withheld).
(c) Each party entitled to indemnification under this Section 10.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of such a claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement, to the extent such
failure is not prejudicial. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section is held by a court
of competent jurisdiction to be unavailable to an Indemnified Party with respect
to any loss, liability, claim, damage, or expense referred to therein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such loss, liability, claim, damage, or expense in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party on the
one hand and the Indemnified Party on the other in connection with the
statements or omissions that resulted in such loss, liability, claim, damage, or
expense as well as any other relevant equitable considerations. The relative
fault of the Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact
-52-
or the omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with an underwritten public offering are in conflict with the
foregoing provisions, the provisions in the underwriting agreement shall
control.
10.7. Information By Holder. Each Holder of Registrable Securities shall
furnish to DRS such information regarding such Holder and the distribution
proposed by such Holder as DRS may reasonably request in writing and/or as shall
be reasonably required in connection with any registration, qualification, or
compliance referred to in this Agreement.
10.8. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission that may permit the sale of the
Restricted Securities to the public with registration, DRS agrees to use its
reasonable best efforts to:
(a) Make and keep public information regarding DRS available as those
terms are understood and defined in Rule 144 under the Securities Act;
(b) File with the Commission in a timely manner all reports and other
documents required of DRS under the Securities Act;
(c) So long as a Holder owns any Restricted Securities, furnish to the
Holder forthwith upon written request a written statement by DRS as to its
compliance with the reporting requirements of Rule 144, a copy of the most
recent annual or quarterly report of DRS, and such other reports and
documents so filed as a Holder may reasonably request in availing itself of
any rule or regulation of the Commission allowing a Holder to sell any such
securities without registration.
10.9. Allocation Of Registration Opportunities. In any circumstance in
which all of the Registrable Securities and Other Shares requested to be
included in a registration on behalf of the Holders or Other Stockholders cannot
be so included as a result of limitations of the aggregate number of shares of
Registrable Securities and Other Shares that may be so included, the number of
Registrable Securities and Other Shares that may be so included shall be
allocated among the Holders and Other Stockholders requesting inclusion of
shares pro rata on the basis of the number of shares of Registrable Securities
and Other Shares held by such Holders and Other Stockholders; provided, however,
that such allocation shall not operate to reduce the aggregate number of
Registrable Securities and Other Shares to be included in such registration, if
any Holder or Other Stockholder does not request inclusion of the maximum number
of shares of Registrable Securities and Other Shares allocated to him pursuant
to the above-described procedure, the remaining portion of his allocation shall
be reallocated among those requesting Holders and Other Stockholders whose
allocations did not satisfy their requests pro rata on the basis of
-53-
the number of shares of Registrable Securities and Other Shares held by such
Holders and Other Stockholders, and this procedure shall be repeated until all
of the shares of Registrable Securities and Other Shares which may be included
in the registration on behalf of the Holders and Other Stockholders have been so
allocated.
ARTICLE XI.
MISCELLANEOUS
SECTION 11.1. Taxes. Each party shall pay any and all stamp and other taxes
payable or determined to be payable by it in connection with the execution and
delivery of this Agreement and the other documents to be delivered by it
hereunder, and agrees to save the other party harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes.
SECTION 11.2. Expenses. Whether or not the transactions contemplated in
this Agreement are consummated, the Subsidiary shall pay its own expenses
incident to this Agreement and the Transaction Documents and in preparing to
consummate the transactions provided for herein and therein. If the transactions
contemplated by this Agreement are not consummated, the Company and the
Company's Shareholders shall pay their aggregate expenses incident to this
Agreement and the Transaction Documents and in preparing to consummate the
transactions provided for herein and therein. If the transactions contemplated
by this Agreement are consummated, unless otherwise agreed, the Company's
Shareholders shall pay both the Company's and the Company's Shareholders
expenses incident to this Agreement and the Transaction Documents and in
preparing to consummate the transactions provided for herein and therein.
SECTION 11.3. Consents. Whenever this Agreement requires or permits
consents by or on behalf of any party hereto, such consent shall be given in
writing in a manner consistent with the requirements specified in Section 11.9.
SECTION 11.4. Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of, and be enforceable by, the
parties hereto and their respective successors and permitted assigns, but
neither this Agreement nor any of the rights, interests or obligations herein
shall be assigned by either party without the prior written consent of the other
party; provided, however, that Surviving Corporation can assign its obligations
hereunder to a corporate Affiliate thereof.
SECTION 11.5. Entire Agreement. This Agreement, the other documents
referred to herein or delivered pursuant hereto which form a part hereof and
other writings of even date herewith, together with the Transaction Documents
and other writings referred to therein or delivered pursuant thereto, contain
the entire understanding of the parties with respect to the subject matter
hereof. This Agreement supersedes all prior agreements with respect to the
-54-
subject matter hereof, including that Nonbinding Letter of Intent dated March
25, 1996, but not including that Confidentiality Agreement dated May 7, 1996.
SECTION 11.6. Amendment. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 11.7. Waiver. Except as otherwise provided in this Agreement, any
failure of any of the parties to comply with any obligation, covenant, agreement
or condition herein may be waived by the party entitled to the benefit thereof
only by a written instrument signed by the party granting such waiver, but the
failure to insist upon strict compliance with such obligation, representation,
warranty, covenant, agreement or condition shall not operate as a waiver of or
estoppel with respect to said compliance and such failure shall not operate as a
waiver of or estoppel with respect to any subsequent or other failure.
SECTION 11.8. Headings. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 11.9. Notices. All notices, claims, certificates, requests, demands
and other communications hereunder will be in writing and will be deemed to have
been duly given when personally delivered, telexed, sent by facsimile
transmission (with telephone confirmation) or on the date of receipt or refusal
indicated on the return receipt if mailed (registered or certified mail, postage
prepaid, return receipt requested) as follows:
(a) If to Surviving Corporation:
PTI ACQUISITION CORP.
c/o Xx. Xxxx Xxxxxx
000 Xxxxxxxxxxxx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxx, 00000
with a copy to:
Xxxxxxx Xxxxxxx
A Professional Corporation
0 Xxxxxx Xxxx Xxxx
Xxxxxxxx, XX 00000-0000
Attn.: Xxxx Xxxxxxxx Xxxx, Esq.
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(b) If to the Company:
Pacific Technologies, Inc.
0000 Xxxxxx Xxx Xxx Xxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
Attn.: Xx. Xxxxx X. Xxxxxx
with a copy to:
Sparber, Ferguson, Xxxxxx & Xxxx
A Professional Law Corporation
Imperial Bank Tower
000 "X" Xxxxxx, Xxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000-0000
Attn.: Xxxxxxx X. Xxxxxxx, Esq.
(c) If to any of the Company's Shareholders, to the
address(es) so set forth below:
To Xxxxxx:
Xx. Xxxxx X. Xxxxxx
0000 Xxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
To Xxxxx:
Xx. Xxxxx X. Xxxxx
0000 Xxxxxxxxx Xxxxx
Xx Xxxx, Xxxxxxxxxx 00000
To Xxxxxx:
Xx. Xxxxxx X. Xxxxxx
0000 Xxxxx Xx.
Xxxxx Xxxxx, Xxxxxxxxxx 00000
To Ito:
Xx. Xxxx X. Xxx
0000 Xxxxxxxx Xxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
To Xxxxxx:
Xx. Xxxxx X. Xxxxxx
00000 Xxxxxxxx Xxxxxx, #00
Xxx Xxxxx, Xxxxxxxxxx 00000
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each with a copy to Sparber, Ferguson, Xxxxxx &
Xxxx at the address set forth in (b) above
or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above.
SECTION 11.10. Law Governing Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE,
REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES
OF CONFLICTS OF LAWS THEREOF. SURVIVING CORPORATION AND THE COMPANY HEREBY
CONSENT TO AND GRANT ANY COURT OF THE STATE OF CALIFORNIA JURISDICTION OVER THE
PERSON OF SUCH PARTIES AND OVER THE SUBJECT MATTER OF ANY SUCH DISPUTE AND AGREE
THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION WITH ANY SUCH ACTION OR
PROCEEDING IN SUCH MANNER AS MAY BE PERMITTED BY LAW SHALL BE VALID AND
SUFFICIENT SERVICE THEREOF.
SECTION 11.11. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which when
taken together shall constitute one and the same agreement.
SECTION 11.12. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic substance
of the transactions contemplated hereby is not affected in any manner adverse to
any party hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their respective duly authorized signatories as of the date first
above written.
ATTEST: PACIFIC TECHNOLOGIES, INC.
By: /s/ XXXXXX X. XXXXXX By: /s/ XXXXX X. XXXXXX
---------------------------- -------------------------------
Xxxxxx X. Xxxxxx Xxxxx X. Xxxxxx
Title: Secretary Its: President
ATTEST: PTI ACQUISITION CORP.
By: /s/ XXXXXXXX X. XxXXXX By: /s/ XXXX X. XXXXXX, XX.
---------------------------- -------------------------------
Xxxxxxxx X. XxXxxx Xxxx X. Xxxxxx, Xx.
Title: Secretary Its: President
WITNESS:
-- /s/ XXXXX X. XXXXXX
-------------------------------- -----------------------------------
Xxxxx X. Xxxxxx
-- /s/ XXXXX X. XXXXX
-------------------------------- -----------------------------------
Xxxxx X. Xxxxx
-- /s/ XXXXXX X. XXXXXX
-------------------------------- -----------------------------------
Xxxxxx X. Xxxxxx
-- /s/ XXXX X. XXX
-------------------------------- -----------------------------------
Xxxx X. Xxx
-- /s/ XXXXX X. XXXXXX
-------------------------------- -----------------------------------
Xxxxx X. Xxxxxx
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