Exhibit 2.01
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of April
10, 2002, among (i) Kinetics Holdings Corporation, a Delaware corporation,
("KHC"), (ii) Kinetics Acquisition Corporation, an Oregon corporation and direct
wholly owned subsidiary of KHC ("Merger Sub"), (iii) Kinetics Fluid Systems,
Inc., a California corporation and indirect wholly owned subsidiary of KHC
("Fluid Systems"), (iv) Poly Concepts, Inc., an Oregon corporation (the
"Company"), and (iv) all of the Company's shareholders ("Company Shareholders").
Capitalized terms not defined elsewhere in this Agreement are defined in Section
7.5.
BACKGROUND
A. Company is in the business of designing, manufacturing, and
repairing high purity products and chemical process equipment from a variety of
plastics. In particular, the Company is a leader in the construction of plastic
products for cleanroom applications.
B. KHC, through its affiliates, is the world's leading provider of
critical infrastructure for the semiconductor industry.
C. The Company Shareholders and the Boards of Directors of KHC, Fluid
Systems, Merger Sub and the Company have determined that a business combination
between Merger Sub and the Company is in the best interests of their respective
companies and stockholders and presents an opportunity to achieve long-term
strategic and financial benefits. Accordingly, the Company Shareholders and the
Boards of Directors of KHC, Merger Sub and the Company have approved the merger
of the Company with and into Merger Sub (the "Merger"), under the terms and
conditions set forth in this Agreement.
D. The Boards of Directors of KHC and Merger Sub have determined that,
immediately following the Merger, Merger Sub should be merged with and into
Fluid Systems (the "Second Step Merger"), after which all business currently
conducted by the Company will be conducted as a division of Fluid Systems. The
Company and Company Shareholders have been advised of the Second Step Merger and
deem it to be in their mutual best interest for Merger Sub to consummate the
Second Step Merger with Fluid Systems.
E. KHC, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
F. For Federal income tax purposes, the Parties intend the Merger
(including the Second Step Merger) to qualify as a reorganization within the
meaning of Section 368(a) (1)(A) of the Code, and for this Agreement to
constitute a plan of reorganization.
Therefore, the Parties agree as follows:
ARTICLE I
The Merger
Section 1.1 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Oregon Business
Corporation Act, the Company shall be merged with and into Merger Sub at the
Effective Time. Following the Effective Time, Merger Sub shall be the Surviving
Corporation and shall succeed to and assume all the rights and obligations of
the Company in accordance with the Oregon Business Corporation Act.
Section 1.2 Closing. The closing of the Merger (the "Closing") will
take place on a date to be specified by the Parties (the "Closing Date"), which
shall occur no later than ten (10) days after the satisfaction or waiver of all
conditions set forth in Article V. The Closing will be held at the offices of
Xxxxx Xxxxxx Xxxxxxxx, LLP, Suite 2300, 0000 XX Xxxxx Xxxxxx, Xxxxxxxx, Xxxxxx
or at such other location as may be agreed upon by the Parties. If the
conditions to Closing set forth in Article V have not been satisfied or waived
by June 30, 2002, then this Agreement shall lapse and be of no further force or
effect other than the Confidentiality Agreement which shall survive the lapse of
this Agreement.
Section 1.3 Effective Time. Subject to the provisions of this
Agreement, promptly on the Closing Date, the Parties shall file Articles of
Merger, executed in accordance with the relevant provisions of the Oregon
Business Corporation Act. The Merger shall become effective on the date and at
the time the Articles of Merger are filed with the Oregon Secretary of State, or
at such later time as Merger Sub and the Company shall agree and specify in the
Articles of Merger.
Section 1.4 Effects of the Merger. The Merger shall have the effects
set forth in Oregon Revised Statutes Section 60.497.
Section 1.5 Articles of Incorporation and Bylaws. The Articles of
Incorporation and Bylaws of the Merger Sub, as in effect immediately prior to
the Effective Time, shall be the Articles of Incorporation and Bylaws of the
Surviving Corporation until thereafter changed or amended in accordance with
applicable law.
Section 1.6 Board of Directors of the Surviving Corporation. The
directors of Merger Sub immediately prior to the Effective Time shall be the
directors of the Surviving Corporation, until the earlier of their resignation
or removal or until their successors are elected and qualified.
ARTICLE II
Merger Consideration and Effect of the Merger on the
Capital Stock of the Constituent Corporations
Section 2.1 Effect on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of any shareholder of
the Company or Merger Sub:
2.1.1 Conversion of Company Stock/Merger Consideration. The
issued and outstanding shares of Company Stock shall be converted into the right
to receive the following
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consideration: (i) nine million dollars ($9,000,000), plus or minus the Working
Capital Adjustment, in immediately available funds (the "Cash Consideration");
(ii) two million eight hundred forty-eight thousand, one hundred and one
(2,848,101) shares of Series A Preferred (the "Closing Shares"); and (iii) the
contingent right to receive six hundred thirty-two thousand nine hundred eleven
(632,911) shares of Series A Preferred (the "Escrow Shares") under the terms and
conditions of the Escrow Agreement.
2.1.2 Payment of Merger Consideration. KHC shall pay
$9,000,000 of the Cash Consideration at Closing. KHC shall pay the remainder of
the Cash Consideration, if any, within thirty (30) days following the
preparation and certification of the Opening Balance Sheet, as described in
Sections 4.1.8 and 4.2.6 of this Agreement. KHC shall pay all Cash Consideration
via wire transfer to the Company Shareholders, according to the Company
Shareholders' pro rata ownership of Company Stock, in accordance with wire
transfer instructions that shall be provided by Company Shareholders to KHC
prior to the Closing Date. At Closing, KHC shall deliver the Closing Shares to
Company Shareholders, according to the Company Shareholders' pro rata ownership
of Company Stock. At Closing, KHC shall deliver the Escrow Shares to the escrow
agent under the Escrow Agreement, to be distributed to the Company Shareholders,
if at all, in accordance with the Escrow Agreement.
2.1.3 Cancellation of Company Stock. At Closing, the Company
Shareholders shall deliver their certificates for Company Stock endorsed for
cancellation. At the Effective Time, all shares of Company Stock shall
automatically be cancelled and retired and shall cease to exist, and the Company
Shareholders shall cease to have any rights with respect to the Company Stock.
2.1.4 Second Step Merger. Immediately after the Effective
Time, KHC shall contribute all of the stock of the Surviving Corporation to its
wholly owned subsidiary Kinetics Group, Inc. Thereafter, in accordance with the
Oregon Business Corporation Act and the California Corporations Code, the
Surviving Corporation shall be merged with and into Fluid Systems. Following
this Second Step Merger, Fluid Systems shall survive and shall succeed to and
assume all the rights and obligations of the Surviving Corporation in accordance
with the California Corporations Code and shall thereafter be the Surviving
Corporation under this Agreement.
2.1.5 Capital Stock of Merger Sub. Following the Second Step
Merger, each issued and outstanding share of capital stock of Merger Sub shall
automatically be cancelled and retired and shall cease to exist. At such time,
all shares of capital stock of Fluid Systems shall continue to be held by its
direct parent, Kinetics Group, Inc., a Delaware corporation that is a direct,
wholly owned subsidiary of KHC.
2.1.6 Options and Warrants. At the Effective Time, all stock
option plans of the Company and all outstanding options, warrants and other
instruments convertible into capital stock of the Company, if any, shall
terminate and be of no further force or effect.
2.1.7 Anti-Dilution Provisions. If KHC changes the number of
shares of Series A Preferred issued and outstanding (from those represented in
Section 3.2.2.1) prior to the Effective Time as a result of a Recapitalization
Event and the effective date of the
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Recapitalization Event is prior to the Effective Time, the number of Shares
issued shall be proportionately adjusted to reflect the Recapitalization Event.
Section 2.2 Working Capital Adjustment. If, at Closing, the Net Working
Capital is more than $3,750,000, then the Cash Consideration shall be increased
by the difference between the Net Working Capital and $3,750,000, up to a
maximum increase of $100,000. If, at Closing, the Net Working Capital is less
than $3,750,000, then the Cash Consideration shall be decreased by the
difference between $3,750,000 and the Net Working Capital. If the calculations
described in this Section result in a decrease in the Cash Consideration, then
Company Shareholders shall pay the amount of the Working Capital Adjustment to
KHC within thirty (30) days after the preparation and certification of the
Opening Balance Sheet, as described in Sections 4.1.8 and 4.2.6 of this
Agreement.
ARTICLE III
Representations and Warranties
Section 3.1 Representations and Warranties of the Company. Except as
set forth on the disclosure schedules to be delivered by the Company to KHC
within five business days after the date of this Agreement, which shall be
incorporated into this Agreement and labeled according to the particular
subsection of this Agreement requiring such disclosure or to which exception is
being taken, the Company and the Company Shareholders represent and warrant to
KHC and Merger Sub that the following statements are true and correct as of the
date of this Agreement:
3.1.1 Organization, Standing and Corporate Power. The Company
is a corporation duly organized and validly existing under the laws of the state
of Oregon, and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. The
Company is duly qualified or licensed to do business and is in good standing in
each jurisdiction in which the nature of its business or the ownership, leasing
or operation of its properties makes such qualification or licensing necessary
except where the failure to so qualify will not have a material adverse effect
on its business or operation. The Company has delivered to KHC prior to the
execution of this Agreement complete and correct copies of its Articles of
Incorporation and Bylaws, as currently in effect.
3.1.2 Subsidiaries. The Company does not (i) have any
Subsidiaries, (ii) own or control any other Person (other than control of
employees of the Company), (iii) have any other direct or indirect equity
investment in any other Person (other than investment of the Company's Net
Working Capital in financial products and investments) or (iv) have any right to
acquire any Subsidiary or ownership interest in any other Person.
3.1.3 Capital Structure. The authorized capital stock of the
Company consists of 500 shares of Company Stock, of which 420 shares are issued
and outstanding. All outstanding shares of Company Stock are duly authorized,
validly issued, fully paid, non-assessable and are subject to preemptive rights.
The execution and delivery of this Agreement by the Company Shareholders
constitutes a full and complete waiver of such preemptive rights. Each offer and
sale of Company Stock has been in compliance with federal or state securities
laws. There are (i)
PAGE 4 - AGREEMENT AND PLAN OF MERGER
no other shares of capital stock, or other securities of the Company issued,
(ii) no rights to receive shares of capital stock; (iii) no stock appreciation
rights or other similar rights; and (iv) no securities of the Company
convertible into or exchangeable or exercisable for shares of capital stock. The
Company is not obligated to repurchase, redeem or otherwise acquire any Company
Stock or to issue, deliver or sell any securities. The Company is not a party to
any voting agreement with respect to the voting of the Company Stock. Schedule
3.1.3 sets forth the name and the address of each Company Shareholder and the
number of Company Stock shares held by each.
3.1.4 Authority; Noncontravention.
3.1.4.1 The Company has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement by
the Company and the consummation by the Company of the transactions contemplated
by this Agreement have been duly authorized by all necessary corporate action on
the part of the Company. This Agreement has been duly executed and delivered by
the Company and, assuming the due authorization, execution and delivery by each
of the other Parties, constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
such enforcement may be limited by bankruptcy and insolvency laws or by
equitable principles.
3.1.4.2 The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated by this
Agreement and compliance with the provisions of this Agreement will not conflict
with, result in any violation of or default (with or without notice or lapse of
time, or both) under, give rise to a right of termination, cancellation or
acceleration under, result in any loss of a benefit under, or result in the
creation of any Lien upon any of the properties or assets of the Company under:
(i) the Articles of Incorporation or Bylaws of the Company; (ii) any material
loan or credit agreement (except those being paid in full at Closing), note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, license or similar authorization applicable to the
Company or its properties or assets; or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulation of any Governmental Entity
applicable to the Company or its properties or assets.
3.1.4.3 Except as set forth in Schedule 3.1.4.3 and
consents from transferred employees as provided in Section 4.2.5, no consent,
approval, order or authorization of, action by or in respect of, or
registration, declaration or filing with any Governmental Entity is required by
or with respect to the Company in connection with the execution and delivery of
this Agreement by the Company or the consummation by the Company of the
transactions contemplated by this Agreement, except for the filing of the
Articles of Merger with the Oregon Secretary of State to reflect the Merger, and
the filing of Articles of Merger with the Oregon Secretary of State and the
California Secretary of State to reflect the Second Step Merger.
3.1.5 Undisclosed Liabilities. The financial statements of the
Company as of and for each of the three years ended December 31, 1999, December
31, 2000, and December 31, 2001, have been delivered to KHC and (i) comply as to
form, as of their respective dates, in all material respects with applicable
accounting requirements of the Financial Accounting Standards Board; (ii) have
been prepared in accordance with GAAP (except, in the case of
PAGE 5 - AGREEMENT AND PLAN OF MERGER
unaudited statements, as to the absence of footnotes and except for normal and
non-material year end adjustments and other non-material adjustments permitted
by GAAP); and (iii) fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of Company and
cash flows for the periods then ended. Except as set forth in such financial
statements, there are no material liabilities or obligations of the Company, of
any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise that are disclosable under GAAP or under any
applicable FASB standards, and there is no existing condition, situation or set
of circumstances that could reasonably be expected to result in such liability
or obligation other than usual and customary warranty claims that arise in the
ordinary course of business.
3.1.6 Absence of Certain Changes or Events. Except for (i)
liabilities incurred in connection with this Agreement, including any income or
other tax liabilities of the Company arising from or relating to the
transactions described in Articles I and II, (ii) liabilities disclosed in the
December 31, 2001, financial statements of the Company and (iii) liabilities
disclosed in the Company Balance Sheet, since the date of the Company Balance
Sheet, the Company has conducted its business only in the ordinary course
consistent with past practice, and there has not been:
3.1.6.1 To the Knowledge of the Company, any material
adverse change in the operations, financial condition, assets, liabilities,
commercial relationships or business or prospects of the Company or its
business;
3.1.6.2 any capital commitments by the Company for
additions to property, plant or equipment of the Company in excess of $50,000;
3.1.6.3 any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to any of the Company's capital stock (except to the extent reflected by
a reduction of the Net Working Capital);
3.1.6.4 any Recapitalization Event with regard to any
of the Company's capital stock, or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for shares of the Company's capital stock;
3.1.6.5 except as otherwise permitted in this
Agreement, any increase in compensation, bonus or other benefits; any granting
of severance or termination pay; or any amendments of any employment, deferred
compensation, consulting, severance, termination or indemnification agreement
with any current or former director, executive officer or employee;
3.1.6.6 any material damage, destruction or loss of
Company assets;
3.1.6.7 any material changes in the manner in which
the Company extends discounts or credits to its customers or otherwise deals
with its customers;
3.1.6.8 any material charitable contributions or any
material commitments for charitable contributions;
PAGE 6 - AGREEMENT AND PLAN OF MERGER
3.1.6.9 any redemption or repurchase of any shares of
the Company Stock;
3.1.6.10 any material partial or total write-offs as
uncollectible of any accounts receivable or notes receivable of the Company;
3.1.6.11 any change in accounting methods, principles
or practices by the Company materially affecting its reported financial
condition or results of operation;
3.1.6.12 any material cancellation or termination of
any insurance policy maintained by or for the benefit of the Company; or
3.1.6.13 any tax election that individually or in the
aggregate is reasonably likely to have a material adverse effect on the tax
liability or tax attributes of the Company or any settlement or compromise of
any material tax liability.
3.1.7 Litigation. There is no suit, action or proceeding
pending or to the Knowledge of the Company threatened against or affecting the
Company, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against the Company.
3.1.8 Compliance with Applicable Laws. The Company and its
employees hold all permits, licenses, variances, exemptions, orders,
registrations, consents, franchises and approvals of all Governmental Entities,
which are necessary for the operation of the business of the Company and the
absence of which, individually or in the aggregate, is reasonably likely to have
a material adverse effect on the Company. The Company is in compliance with the
terms of all such permits, and neither the Merger nor the Second Step Merger
will cause the revocation or cancellation of any such permit. The Company is in
compliance with all material applicable statutes, laws, ordinances, rules and
regulations. There is not pending or, to the Knowledge of the Company,
threatened any action, demand, requirement or investigation by any Governmental
Entity or any other Person, in each case with respect to the Company or any of
its properties.
3.1.9 Contracts. Each Material Contract is valid, binding and
in full force and effect, except as such enforcement may be limited by
bankruptcy and insolvency laws or by equitable principles, and has been made
available to KHC. The Company is not in violation of or in default under (nor
does there exist any condition which upon the passage of time or the giving of
notice or both would cause such a violation of or default under) any Material
Contract. Schedule 3.1.9 contains a complete list of all Material Contracts
through March 31, 2002. The Company is not a party to or bound by any
non-competition agreement or any other similar agreement or obligation, which
purports to limit in any material respect the manner in which, or the localities
in which, any portion of the business of the Company, is or may be conducted. To
the Knowledge of the Company, no party to any Material Contract is in breach and
no event or condition of default has occurred, with respect to any Material
Contract.
3.1.10 Absence of Changes in Benefit Plans. Schedule 3.1.10
lists all severance agreements and all written employment agreements to which
the Company is a party. The Company is not a party to any other employment
agreements other than at-will agreements that arise by operation of law. Since
the date of the Company Balance Sheet, the Company has not
PAGE 7 - AGREEMENT AND PLAN OF MERGER
adopted or amended, in any material respect, any Company Benefit Plan. The
Company has never maintained any Company Benefit Plan which has been subject to
Title IV of ERISA (including, but not limited to, any defined benefit pension
plan, or Multiemployer plan within the meaning of Section 3(37) of ERISA nor has
the Company ever maintained a Company Benefit Plan that is a self-insured health
plan or a nonqualified retirement plan. Schedule 3.1.10 lists all Company
Benefit Plans.
3.1.10.1 All Company Benefit Plans intended to be
qualified under Section 401(a) of the Code have been approved in the manner
required by applicable laws and to the Knowledge of the Company no event has
occurred since the date of approval, and there exists no condition or set of
circumstances, in connection with which the Company could reasonably be subject
to any liability under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), the Code or any other applicable law.
3.1.10.2 Each Company Benefit Plan has been
administered, in all material respects, in accordance with its terms. The
Company and all the Company Benefit Plans are in compliance, in all material
respects, with the applicable provisions of ERISA, the Code and all other
applicable laws and the terms of all applicable collective bargaining
agreements. There are no pending or, to the Knowledge of the Company, threatened
lawsuits, claims, grievances, investigations or audits of any Company Benefit
Plan.
3.1.10.3 No employee of the Company who continues to
be employed by the Surviving Division will be entitled to any additional
benefits or any acceleration of the time of payment or vesting of any benefits
under any Company Benefit Plan as a result of the transactions contemplated by
this Agreement.
3.1.10.4 No Company Benefit Plan provides, or has
ever provided, medical, health, life insurance or other welfare-type benefits
for current or future retired or terminated employees, except for limited
continuation medical benefit coverage required under Code Section 4980B or
applicable state law.
3.1.11 Taxes.
3.1.11.1 The Company has filed all Returns required
to be filed by it, or requests for extensions to file have been granted and have
not expired. All such Returns are complete and correct in all material respects.
The Company has paid or caused to be paid all Taxes shown as due on such Returns
or on subsequent assessments with respect thereto, and no other Taxes are
payable by the Company with respect to items or periods covered by such Returns
(whether or not shown on or reportable on such Returns) or with respect to any
period prior to the date of this Agreement, except for Taxes for which an
adequate reserve has been established. The Company has withheld and paid over
all Taxes required to have been withheld and paid over, and complied with all
information reporting and backup withholding requirements, including maintenance
of required records with respect thereto, in connection with amounts paid or
owing to any employee, creditor, independent contractor, or other third party.
There are no Liens on any of the assets of the Company with respect to Taxes,
other than Liens for Taxes not yet due and payable or for Taxes that the Company
is contesting in good faith through appropriate proceedings and for which
appropriate reserves have been established. The
PAGE 8 - AGREEMENT AND PLAN OF MERGER
most recent financial statements reflect an adequate reserve for all Taxes
payable by the Company (under the shared presumption that no Company Taxes will
arise from the transactions described in Articles I and II hereof).
3.1.11.2 The Returns of the Company have never been
audited by a Governmental Entity, nor is any such audit in process, pending or
to the Knowledge of the Company threatened. No deficiencies for any Taxes have
been proposed, asserted or assessed against the Company. No waiver or extension
of any statute of limitations is in effect with respect to Taxes or Returns of
the Company.
3.1.11.3 The Company is not (nor has it ever been) a
party to any tax sharing agreement and the Company has not assumed the liability
of any other person under contract.
3.1.11.4 The Company has not, in contemplation of the
Merger, distributed or allowed the Company Shareholders to retain any assets of
the Company that would otherwise be transferred pursuant to the terms of this
Agreement. The Company is, by virtue of the Merger, transferring by operation of
law all of its assets to Merger Sub. Neither the Company nor the Company
Shareholders have taken or agreed to take any action or know of any fact,
agreement, plan or other circumstance that is reasonably likely to prevent the
Merger and Second Step Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
3.1.11.5 The Company has not constituted either a
"distributing corporation" or a "controlled corporation" in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (x) in the
two years prior to the date of this Agreement; or (y) in a distribution which
could otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
Merger.
3.1.11.6 The Company is not nor has it ever been a
"United States real property holding company" within the meaning of Section
897(c)(2) of the Code at any time during the five year period ending at the
Effective Time.
3.1.12 Brokers. No broker, investment banker, financial
advisor or other Person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company.
3.1.13 Intellectual Property.
3.1.13.1 The Company owns, or has a valid license or
other right to use all Intellectual Property Rights. To the Knowledge of the
Company, the Company has not interfered with, infringed upon, misappropriated or
otherwise come into conflict with any intellectual property rights or other
proprietary information of any other Person. The Company has not received any
written charge, complaint, claim, demand or notice alleging any such
interference, infringement, misappropriation or other conflict (including, but
not limited to, any claim that the Company must license or refrain from using
any Intellectual Property Rights or proprietary information of any other Person)
which has not been settled or otherwise fully
PAGE 9 - AGREEMENT AND PLAN OF MERGER
resolved. To the Company's Knowledge, no other Person has interfered with,
infringed upon, misappropriated or otherwise come into conflict with any
Intellectual Property Rights.
3.1.13.2 Set forth in Schedule 3.1.13 is a list of
all contracts, agreements, obligations, commitments, arrangements,
understandings and instruments that limit or restrict the Company's use of the
Intellectual Property Rights. Fluid System's use of the Intellectual Property
Rights following the Second Step Merger will not interfere with, infringe upon,
misappropriate or otherwise come into conflict with the intellectual property
rights of any other Person.
3.1.14 Personal and Real Property. The Company leases all of
the real property and owns all personal property used in the operation of the
Company's business, free and clear of all Liens, except as set forth in Schedule
3.1.14. Each lease listed in Schedule 3.1.14 is in full force and effect, and
the Company is not in material default under any of such lease, nor has any
event occurred which, with the giving of notice or the lapse of time, or both,
would constitute a default under any such lease by the Company. The Company has
furnished to KHC a true and complete copy of all such leases.
3.1.15 Labor and Employment Matters. The Company is in
compliance with all Federal, state and local requirements regarding employment.
The Company is not a party to any collective bargaining or other labor union
contract applicable to Persons employed by the Company and no collective
bargaining agreement is being negotiated by the Company. There is no labor
dispute, strike or work stoppage against the Company pending or, to the
Knowledge of the Company, threatened. To the Knowledge of the Company, none of
the Company or any of its representatives or employees has committed any unfair
labor practice in connection with the operation of the business of the Company,
and to the Knowledge of the Company there is no charge or complaint against the
Company by the National Labor Relations Board or any comparable Governmental
Entity. Subject to the provisions of Section 3.1.10 and the matters set forth on
Schedule 3.1.10, there are no contracts or agreements of the Company which
provide for or guaranty any employee of the Company a specific term of
employment.
3.1.16 Environmental Laws. The Company has not, within or
outside the ordinary course of its business, generated, manufactured, refined,
transported, treated, stored, handled, or disposed of any Hazardous Waste other
than in accordance with applicable Environmental Laws. The Company has not
received a citation, directive, letter, notice of violation, or other
communication from any Person or Governmental Entity alleging or concerning the
presence of any Hazardous Waste on any property owned or leased by the Company
or alleging or concerning the Company's actual or potential liability under any
applicable Environmental Laws. The Company has obtained all permits and licenses
of Governmental Entities and has caused all notifications to be made as required
by applicable Environmental Laws. No action has been commenced or, to the
Knowledge of the Company, threatened regarding the Company's compliance with or
liability under any applicable Environmental Laws. The Company has provided true
and complete copies of all environmental reports and studies conducted by the
Company with respect to any real property owned or leased by the Company. To the
Knowledge of the Company, there are no other environmental reports or studies
with respect to any such properties.
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3.1.17 Foreign Corrupt Practices Act. The Company has not
taken any action that is or could be deemed to be a violation of the Foreign
Corrupt Practices Act of the United States of America (15 U.S.C. Section 78dd)
and any successor legislation or statute thereto. Neither the Company, nor, to
the Knowledge of the Company, any of its officers, directors, employees,
managers, shareholders, members, agents or representatives has offered, given,
paid, authorized the payment of, or promised, directly or indirectly, any money,
gift, promise or other thing of value to a foreign official (or to any other
Person while knowing it will be offered, given or promised to a foreign
official) for the purpose of influencing any act or decision of any such Person
acting in his or her official capacity or inducing the Person to do or omit to
do any action in violation of his or her lawful duty, inducing such Person to
use his or her influence with any government to affect or influence any act or
decision of such government or instrumentality, in order to assist the Company
to obtain or retain business for or with, or in directing business to, any
Person.
3.1.18 Insurance. All insurance policies and bonds and
self-insurance arrangements currently in force relating to the Company have been
made available to KHC. The Company has attached to Schedule 3.1.18 the insurance
certificates or letters of coverage evidencing its insurance coverage. All such
insurance policies are in full force and effect and all premiums with respect
thereto covering all periods up to the date of this Agreement have been paid. No
notice of cancellation or termination has been received with respect to any such
policy. The insurance policies covering the Company are sufficient for
compliance with all requirements of law and all agreements to which the Company
is a party or by which the Company is bound.
3.1.19 Accounts Receivable. The accounts and notes receivable
reflected on the Company Balance Sheet arose from bona fide transactions in the
ordinary course of business. The materials or services giving rise to such
receivables have been provided to the account or note obligor, and, to the
Knowledge of the Company, such receivables constitute valid and enforceable
claims except as such enforcement may be limited by bankruptcy and insolvency
laws or by equitable principles. Such receivables are, to the Knowledge of the
Company, collectible at their full face amount less the reserve for
uncollectibility as set forth on the Company Balance Sheet. To the Knowledge of
the Company, there are no material disputes regarding the collectibility of any
such receivables.
3.1.20 Projections. The Company's revenue projections
("Projections"), which are set forth in Schedule 3.1.20 and dated no earlier
than seven days prior to the date of this Agreement, were prepared in good faith
by the Company.
3.1.21 Corporate Documents, Books and Records. The minute
books of the Company contain complete and accurate records of all meetings and
consents in lieu of meetings of the Board (and its committees) and stockholders
of the Company since incorporation. The books and records of the Company
accurately reflect the transactions to which the Company is a party or by which
its properties are subject or bound, and such books and records have been
properly kept and maintained in all material respects.
PAGE 11 - AGREEMENT AND PLAN OF MERGER
3.1.22 Accounts. Schedule 3.1.22 contains a complete list of
all of the bank accounts, safe deposit boxes, brokerage accounts and other
institutional accounts of the Company with a list of signatories thereto.
3.1.23 Investment Representations. The Company Shareholders
understand that KHC will issue the Shares to the Company Shareholders in
reliance upon each Company Shareholder's representation that he or she is
acquiring the Shares for investment, for his or her own account, not as a
nominee or agent, and not with a view to the resale or distribution. Each
Company Shareholder acknowledges that he or she can bear the economic risk of
his or her investment and has such knowledge and experience in financial or
business matters to be capable of evaluating the merits and risks of the
investment in the Shares. Each Company Shareholder understands that the Shares
are characterized as "restricted securities" under the Securities Act because
they are being acquired from KHC in a transaction not involving a public
offering and may be resold without registration under the Securities Act only in
certain limited circumstances. The Company Shareholders understand that no
public market exists for the Shares and that there is no assurance that a public
market will ever exist for the Shares.
3.1.24 Disclosure. The Company and the Company Shareholders
have exercised due diligence in determining whether to enter into this Agreement
and the transactions contemplated by this Agreement. The Company Shareholders
have been afforded an opportunity to ask questions of, and receive answers from,
the management of KHC. The Company Shareholders have been provided with certain
requested documents and other information responsive to their inquiries about
KHC and Merger Sub, and after a thorough review of such documents and
information as have been provided, each Company Shareholder has determined that
the Shares are an appropriate investment in light of his or her individual
financial circumstances and investment goals. Each Company Shareholder has also
determined that the Merger and Second Step Merger are in the best interests of
the Company.
3.1.25 Legends. The Company Shareholders understand that the
certificates evidencing the Shares will bear the following legends:
3.1.25.1 "THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD,
PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF PROVIDES
EVIDENCE REASONABLY SATISFACTORY TO THE ISSUER (WHICH, IN THE DISCRETION OF THE
ISSUER, MAY INCLUDE AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER)
THAT SUCH OFFER, SALE, PLEDGE, TRANSFER OR OTHER DISPOSITION WILL NOT VIOLATE
APPLICABLE FEDERAL OR STATE SECURITIES LAWS."
3.1.25.2 "THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE AMENDED AND RESTATED SHAREHOLDERS AGREEMENT OF
THE ISSUER DATED AS OF DECEMBER 14, 2001, AS THE SAME MAY BE AMENDED FROM TIME
TO TIME, PURSUANT TO THE TERMS OF WHICH THE TRANSFER OF SUCH SECURITIES IS
RESTRICTED. SUCH AGREEMENT ALSO PROVIDES FOR VARIOUS OTHER LIMITATIONS AND
OBLIGATIONS, AND ALL OF
PAGE 12 - AGREEMENT AND PLAN OF MERGER
THE TERMS THEREOF ARE INCORPORATED BY REFERENCE HEREIN. A COPY OF SUCH AGREEMENT
WILL BE FURNISHED WITHOUT CHARGE BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN
REQUEST. A STATEMENT CONCERNING THE RIGHTS, PREFERENCES, PRIVILEGES AND
RESTRICTIONS OF THE ISSUER'S PREFERRED AND COMMON STOCK MAY BE OBTAINED WITHOUT
CHARGE AT THE OFFICES OF THE ISSUER."
3.1.26 Residency. For purposes of application of federal and
state securities law, the Company Shareholders are residents of the State of
Oregon.
3.1.27 Reorganization Representations and Warranties.
3.1.27.1 Dissenter Payments. The Company will pay its
own dissenting shareholders, if any, the value of such shareholders' stock out
of its own funds to the extent available. The Company acknowledges that no funds
will be supplied for that purpose, directly or indirectly, by Merger Sub, Fluid
Systems or KHC, nor will Merger Sub, Fluid Systems or KHC directly or indirectly
reimburse the Company for any payments to dissenters.
3.1.27.2 Intercorporate Indebtedness. There is no
intercorporate indebtedness existing between the Company and KHC or any of its
Affiliates that was issued, acquired or will be settled at a discount. The
Company acknowledges that KHC will not assume any liabilities of the Company or
any Company Shareholder in connection with the Merger.
3.1.27.3 No KHC Ownership. Neither KHC not its
Affiliates own, nor have they owned during the past five years, directly or
indirectly, any shares of stock of the Company or rights to acquire such stock.
3.1.27.4 Fairness of Transaction. The fair market
value of the assets of the Company transferred to Merger Sub will equal or
exceed the sum of the liabilities assumed by Merger Sub, plus the amount of
liabilities, if any, to which the transferred assets are subject.
3.1.27.5 Arm's Length Negotiation. The Merger is
being undertaken for substantial business purposes and not for the purpose of
tax avoidance, and the terms of the Merger are the product of arm's-length
negotiations.
3.1.27.6 Intent to Reorganize. Prior to, at and with
respect only to the Company Shareholders, after the Effective Time of the
Merger, the Company and Company Shareholders shall, for all applicable tax
purposes, report the Merger in a manner consistent with their intention and take
(or, as applicable, refrain from taking) all other actions reasonably necessary
to ensure that the Merger qualifies as a reorganization under Section 368 of the
Code.
3.1.28 Accuracy and Completeness of Representations and
Warranties. No representation or warranty by the Company or Company Shareholders
contained in this Agreement, nor any statement or certificate furnished by the
Company or the Company Shareholders to KHC, Merger Sub or their representatives,
contains any untrue statement of a material fact, or omits to state any material
fact required to make the representation, warranty, statement or certificate not
misleading.
PAGE 13 - AGREEMENT AND PLAN OF MERGER
3.1.29 Disclaimer of other Representations and Warranties.
Except as expressly set forth above, neither the Company nor the Company
Shareholders make any representation or warranty, express or implied, at law or
in equity, in respect of Company, or any of its assets, liabilities or
operations, including, without limitation, with respect to: (i) merchantability
or fitness for any particular purpose; (ii) any and all present and future
market conditions that may affect the Company, including industry changes,
changes in customer demand, changes in the demand for products into which the
products marketed by the Company are incorporated, changes in strategic
alliances that may impact sales and any other such market conditions; (iii)
activities of the present or future competitors of Company to emulate, reverse
engineer or otherwise capitalize upon the products marketed by Company (with KHC
and Merger Sub acknowledging that the products marketed by the Company are not
protected by patents, licenses or other Intellectual Property Rights) or (iv)
whether the Merger and Second Step Merger will qualify as a reorganization
pursuant to Section 368(a)(1)(A) of the Code. The Company Shareholders shall
have no liability to the Company, KHC or Merger Sub for any corporate income tax
arising from or in relation to the transactions described in Article I and
Article II and more specifically, the failure of the transaction to qualify as
reorganization under Section 368(a) of the Code.
Section 3.2 Representations and Warranties of KHC, Merger Sub and Fluid
Systems. Except as set forth on the disclosure schedules delivered by KHC to the
Company within five business days after the date of this Agreement, which shall
be incorporated into this Agreement and labeled according to the particular
subsection of this Agreement requiring such disclosure or to which exception is
being taken, KHC, Merger Sub and Fluid Systems represent and warrant to the
Company and Company Shareholders that the following statements are true and
correct as of the date of this Agreement:
3.2.1 Organization, Standing and Corporate Power. Each of KHC,
Merger Sub and Fluid Systems is a corporation duly organized and validly
existing under the laws of the jurisdiction in which it is incorporated, and has
all requisite corporate power and authority to carry on its business as now
being conducted. Each of KHC, Merger Sub and Fluid Systems is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, except where the
failure to so qualify will not have a material adverse effect on its business or
operation. KHC has made available to the Company prior to the execution of this
Agreement complete and correct copies of the Articles of Incorporation (or
Certificate of Incorporation) and Bylaws of Merger Sub, Fluid Systems and KHC,
in each case as amended to date.
3.2.2 Capital Structure.
3.2.2.1 The authorized capital stock of KHC consists
of 250,000,000 shares of $0.01 par value common stock (the "KHC Common Stock"),
of which 93,664,508 are issued and outstanding; and 50,000,000 shares of $0.01
par value preferred stock, of which 25,350,000 are designated as Series A
Preferred, of which 19,706,698 are issued and outstanding. All outstanding
shares of KHC Common and Series A Preferred have been, and all shares of Series
A Preferred to be issued in exchange for Company Stock in accordance with this
Agreement will be, when so issued, duly authorized, validly issued, fully paid,
non-assessable
PAGE 14 - AGREEMENT AND PLAN OF MERGER
and free of preemptive rights. Assuming the truth and accuracy of the
representations and warranties made to KHC by its investors, each offer and sale
of KHC securities has been made in compliance with federal and state securities
laws.
3.2.2.2 54,875,573 shares of KHC Common Stock are
reserved for issuance under outstanding warrants, options and convertible
securities. Except for such warrants, options and convertible securities, there
are (i) no other shares of capital stock, or other securities of KHC issued or
reserved for issuance, (ii) no rights to receive shares of capital stock; (iii)
no stock appreciation rights or other similar rights; and (iv) no securities of
KHC convertible into or exchangeable or exercisable for shares of capital stock.
KHC has not issued any options to purchase KHC Common Stock that are exercisable
at a price lower than $3.00 per share.
3.2.2.3 The authorized capital stock of Merger Sub
consists of 1,000 shares of common stock, of which 1,000 shares are issued and
outstanding. KHC owns all such shares.
3.2.2.4 The authorized capital stock of Fluid Systems
consists of 1,000,000 shares of common stock, of which 100,000 shares are issued
and outstanding. Kinetics Group, Inc., a Delaware corporation and direct wholly
owned subsidiary of KHC, owns all such shares.
3.2.3 Securities Exemption. Based on the truth and accuracy of
the representations and warranties of the Company Shareholders, the issuance of
the Shares qualifies for an exemption from the registration requirements under
the Securities Act and applicable state securities laws.
3.2.4 Authority; Noncontravention.
3.2.4.1 Each of KHC, Merger Sub and Fluid Systems has
all requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by KHC, Merger Sub and Fluid Systems and the
consummation by KHC, Merger Sub and Fluid Systems of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of KHC, Merger Sub and Fluid Systems, including
without limitation, all requisite votes and approvals by those holders of the
Series A Preferred and KHC Common Stock (and any other equity securities)
entitled to vote on or approve the issuance of the Series A Preferred (including
the Shares), all of whom have waived any applicable preemptive rights. This
Agreement has been duly executed and delivered by KHC, Merger Sub and Fluid
Systems, and assuming the due authorization, execution and delivery by the
Company and each of the other Parties, constitutes a legal, valid and binding
obligation of KHC, Merger Sub and Fluid Systems, enforceable against each of
them in accordance with its terms, except as such enforcement may be limited by
bankruptcy and insolvency laws or by equitable principles.
3.2.4.2 The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated by this
Agreement and compliance with the provisions of this Agreement will not conflict
with, result in any violation of or default (with or without notice or lapse of
time, or both) under, give rise to a right of termination, cancellation or
PAGE 15 - AGREEMENT AND PLAN OF MERGER
acceleration under, result in any loss of a benefit under, or result in the
creation of any Lien upon any of the properties or assets of KHC, Merger Sub or
Fluid Systems under: (i) the Articles of Incorporation or Bylaws of KHC, Merger
Sub or Fluid Systems; (ii) any shareholder agreement, investors' right
agreement, subscription agreement, or the terms of any warrant or option to
acquire equity securities of KHC, Merger Sub or Fluid Systems; (iii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license or similar authorization
applicable to KHC, Merger Sub or Fluid Systems or their properties or assets; or
(iii) any judgment, order, decree, statute, law, ordinance, rule or regulation
of any Governmental Entity applicable to KHC, Merger Sub or Fluid Systems or
their properties or assets.
3.2.4.3 No consent, approval, order or authorization
of, action by or in respect of, or registration, declaration or filing with any
Governmental Entity is required by or with respect to the Company in connection
with the execution and delivery of this Agreement by the Company or the
consummation by the Company of the Merger, the Second Step Merger or the other
transactions contemplated by this Agreement, except for (a) the filing of the
Articles of Merger with the Oregon Secretary of State to reflect the Merger, (b)
the filing of appropriate tax clearance documents with the Secretary of State of
California, (c) the filing of Articles of Merger with the Oregon Secretary of
State and California Secretary of State to reflect the Second Step Merger, and
(d) applicable securities exemption filings.
3.2.5 Undisclosed Liabilities. The KHC Financial Statements
have been delivered to the Company Shareholders and (i) comply as to form, as of
their respective dates, in all material respects with applicable accounting
requirements of the Financial Accounting Standards Board; (ii) have been
prepared in accordance with GAAP (except, in the case of unaudited statements,
as to the absence of footnotes and except for normal and non-material year end
adjustments and other non-material adjustments permitted by GAAP); and (iii)
fairly present in all material respects the financial position of KHC and its
consolidated affiliates as of the dates thereof and the results of KHC and its
consolidated affiliates and cash flows for the periods then ended. To the
Knowledge of KHC, neither KHC nor its consolidated affiliates has committed any
unfair labor practice in connection with the operation of the business of KHC
and its consolidated affiliates, and to the Knowledge of the KHC, there is no
charge or complaint against KHC and its consolidated affiliates by the National
Labor Relations Board or any comparable Governmental Entity.
3.2.6 Litigation. Except as disclosed in Schedule 3.2.6, there
is no material suit, action or proceeding pending or, to the Knowledge of KHC,
threatened against or affecting KHC or its Affiliates, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against KHC or its Affiliates that has not been
fulfilled. The reports of KHC's counsel in Schedule 3.2.6 represents KHC's good
faith appraisal of each matter disclosed.
3.2.7 Interim Operations of Merger Sub. Merger Sub was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement, has engaged in no other business activities, has incurred no
obligations or liabilities directly or indirectly, and has conducted its
operations only as contemplated by this Agreement.
PAGE 16 - AGREEMENT AND PLAN OF MERGER
3.2.8 Intent to Continue Company Operations. KHC, Merger Sub
and Fluid Systems are entering into this Agreement with the purpose and
intention of acquiring, by operation of law, all assets of the Company via the
Merger. Following the Second Step Merger, Fluid Systems intends to hold such
assets for the purpose of continuing the entire business enterprise of the
Company as a division of Fluid Systems. Fluid Systems has no present intention
or plan to distribute or otherwise transfer any such assets.
3.2.9 Absence of Certain Changes or Events. Except for
liabilities incurred in connection with this Agreement, and liabilities
disclosed in the KHC Financial Statements, since the date of the KHC Financial
Statements, KHC and its affiliates have conducted their business only in the
ordinary course consistent with past practice, and there has not been:
3.2.9.1 any material adverse change in the
operations, financial condition, assets, liabilities, commercial relationships
or business or prospects of the Company or its business;
3.2.9.2 any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to any of KHC's capital stock;
3.2.9.3 any Recapitalization Event with regard to any
of KHC's capital stock, or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for shares of
KHC's capital stock;
3.2.9.4 any increase in compensation, bonus or other
benefits; any granting of severance or termination pay; or any amendments of any
employment, deferred compensation, consulting, severance, termination or
indemnification agreement with any current or former director or executive
officer;
3.2.9.5 any material damage, destruction or loss of
the assets of KHC or its Affiliates;
3.2.9.6 any material changes in the manner in which
KHC or its Affiliates extends discounts or credits to their customers or
otherwise deals with their customers;
3.2.9.7 any redemption or repurchase of any shares of
KHC securities;
3.2.9.8 any material partial or total write-offs as
uncollectible any accounts receivable or notes receivable of KHC or its
Affiliates;
3.2.9.9 any change in accounting methods, principles
or practices by KHC materially affecting its reported financial condition or
results of operations;
3.2.9.10 any material cancellation or termination of
any insurance policy maintained by or for the benefit of KHC or its Affiliates;
or
3.2.9.11 any tax election that individually or in the
aggregate is reasonably likely to have a material adverse effect on the tax
liability or tax attributes of KHC or its Affiliate or any settlement or
compromise of any material tax liability.
PAGE 17 - AGREEMENT AND PLAN OF MERGER
3.2.10 Absence of Changes in Benefit Plans. Schedule 3.2.10
lists all severance agreements and all written employment agreements to which
KHC or any Affiliate is a party. Neither KHC nor any Affiliate is a party to any
other employment agreements other than at-will agreements that arise by
operation of law. Since the date of the KHC Financial Statements, neither KHC
nor any Affiliate has adopted or amended, in any material respect, any KHC
Benefit Plan. Schedule 3.2.10 lists all KHC Benefit Plans.
3.2.10.1 All KHC Benefit Plans intended to be
qualified under Section 401(a) of the Code have been approved in the manner
required by applicable laws and to the Knowledge of the Company no event has
occurred since the date of approval, and there exists no condition or set of
circumstances, in connection with which the Company could be subject to any
liability under the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the Code or any other applicable law.
3.2.10.2 Each KHC Benefit Plan has been administered,
in all material respects, in accordance with its terms. KHC and its Affiliates
and all KHC Benefit Plans are in compliance, in all material respects, with the
applicable provisions of ERISA, the Code and all other applicable laws and the
terms of all applicable collective bargaining agreements. There are no pending
or, to the Knowledge of KHC, threatened lawsuits, claims, grievances,
investigations or audits of any KHC Benefit Plan.
3.2.10.3 Neither KHC nor any Affiliate has any
liability under any KHC Benefit Plan that provides, or has ever provided,
medical, health, life insurance or other welfare-type benefits for current or
future retired or terminated employees (other than limited continuation medical
benefit coverage required under Code Section 4980B or applicable state law),
except as disclosed in the KHC Financial Statements.
3.2.11 Taxes. KHC and its Affiliates have filed all Returns
required to be filed by them, or extensions to file have been granted and have
not expired. All such Returns are complete and correct in all material respects.
KHC and its Affiliates have paid or cause to be paid all Taxes shown as due on
such Returns or on subsequent assessments with respect thereto, and no other
Taxes are payable by KHC or any Affiliate with respect to items or periods
covered by such Returns (whether or not shown on or reportable on such Returns)
or with respect to any period prior to the date of this Agreement, except for
Taxes for which an adequate reserve has been established. KHC and its Affiliates
have withheld and paid over all Taxes required to have been withheld and paid
over, and complied with all information reporting and backup withholding
requirements, including maintenance of required records with respect thereto, in
connection with amounts paid or owing to any employee, creditor, independent
contractor, or other third party. There are no material Liens on any of the
assets of KHC or any Affiliate with respect to Taxes, other than Liens for Taxes
not yet due and payable or for Taxes that KHC or an Affiliate is contesting in
good faith through appropriate proceedings and for which appropriate reserves
have been established. The KHC Financial Statements reflect an adequate reserve
for all Taxes payable by KHC and its Affiliates (under the shared presumption
that no Company income taxes will arise from the transactions described in
Articles I and II hereof).
3.2.11.1 Except as disclosed in Schedule 3.2.11, the
Returns of KHC and its Affiliates have never been audited by a Governmental
Entity, nor is any such audit in
PAGE 18 - AGREEMENT AND PLAN OF MERGER
process, pending or to the Knowledge of the Company threatened. No deficiencies
for any Taxes have been proposed, asserted or assessed against KHC or any
Affiliate. No waiver or extension of any statute of limitations is in effect
with respect to Taxes or Returns of KHC or any Affiliate.
3.2.11.2 Neither KHC nor any Affiliate is (or ever
has been) a party to any tax sharing agreement and neither KHC nor any Affiliate
has assumed the tax liability of any other person under contract.
3.2.12 Intellectual Property. KHC or its Affiliates own, or
have a valid license or other rights to use all Intellectual Property Rights
material to their businesses. To the Knowledge of KHC, neither KHC nor any
Affiliate has interfered with, infringed upon, misappropriated or otherwise come
into conflict with any intellectual property rights or other proprietary
information of any other Person. Neither KHC nor any Affiliate has received any
written charge, complaint, claim, demand or notice alleging any such
interference, infringement, misappropriation or other conflict (including, but
not limited to, any claim that KHC or any Affiliate must license or refrain from
using any Intellectual Property Rights or proprietary information of any other
Person) which has not been settled or otherwise fully resolved. To KHC's
Knowledge, no other Person has interfered with, infringed upon, misappropriated
or otherwise come into conflict with any Intellectual Property Rights.
3.2.13 Leases. Each material lease is listed in Schedule
3.1.13 and is in full force and effect, and neither KHC nor any Affiliate is in
default under any of such lease, nor has nay event occurred which, with the
giving of notice or the lapse of time, would constitute a default under any such
lease by KHC or any Affiliate.
3.2.14 Labor and Employment Matters. KHC and all Affiliates
are in compliance with all Federal, state and local requirements regarding
employment. Schedule 3.2.14 lists all collective bargaining or other labor union
contracts applicable to Persons employed by KHC and its Affiliates and no
additional collective bargaining agreements are being negotiated by KHC or any
Affiliate. There is no labor dispute, boycott, strike or work stoppage against
KHC pending or, to the Knowledge of KHC, threatened. To the Knowledge of KHC,
none of KHC, any Affiliate or any of their representatives or employees has
committed any unfair labor practice in connection with the operation of the
business of KHC or any Affiliate, and to the Knowledge of KHC there is no charge
or complaint against KHC or any Affiliate by the National Labor Relations Board
or any comparable Governmental Entity.
3.2.15 Corporate Documents, Books and Records. The minute
books of KHC contain complete and accurate records of all meetings and consents
in lieu of meetings of the Board (and its committees) and stockholders of KHC
since incorporation. The books and records of KHC accurately reflect the
transactions to which KHC is a party or by which its properties are subject or
bound, books and records have been property kept and maintained in all material
respects, and complete and accurate copies thereof have been previously
delivered to Company Shareholders.
3.2.16 Disclosure. KHC has exercised due diligence in
determining whether to enter into this Agreement and the transactions
contemplated by this Agreement. KHC has been
PAGE 19 - AGREEMENT AND PLAN OF MERGER
afforded an opportunity to ask questions of, and receive answers from, the
management of the Company and Company Shareholders. KHC has been provided with
certain requested documents and other information responsive to their inquiries
about the Company, and after a thorough review of such documents and information
as have been provided, KHC has determined that the Merger and Second Step Merger
are in the best interests of KHC, Merger Sub and Fluid Systems.
3.2.17 Loans and Debt Financing. The attached Schedule 3.2.17
lists all of the outstanding KHC Debt together with all sums owed and the
further credit available thereunder. There is not an uncured default under any
of the KHC Debt and KHC is not currently in violation any covenant applicable to
KHC Debt. No Affiliate of KHC has granted security in any assets in connection
with debt financing, other than (a) purchase money security interests in
connection with ordinary course payables or (b) security interests granted in
support of debt obtained by KHC or Kinetics Group, Inc.
3.2.18 Indemnification. Except as provided in Articles (or
Certificate)or Incorporation or Bylaws of KHC, Merger Sub or Fluid Systems, and
in this Agreement, neither KHC nor any Affiliate is by contract or otherwise,
liable to guarantee, insure, indemnify or hold harmless any Person other than
KHC or an Affiliate.
3.2.19 Contracts Material to the Business of KHC and its
Affiliates. Except as disclosed in Section 3.2.6 ("Litigation"), there are no
breaches or defaults by any party to a contract material to the business of KHC
or any Affiliate or any breaches or defaults under multiple contracts which,
taken in the aggregate, would be material to the business of KHC or any
Affiliate.
3.2.20 Reorganization Representations and Warranties.
3.2.20.1 Following the Merger, Merger Sub will hold
at least 90% of the fair market value of its net assets and at least 70% of the
fair market value of its gross assets and at least 90% of the fair market value
of Company's net assets and at least 70% of the fair market value of Company's
gross assets held immediately prior to the Merger. Following the Second Step
Merger and any loan described in Section 3.2.20.17, Fluid Systems will hold at
least 90% of the fair market value of Merger Sub's (and Company's) net assets
and at least 70% of the fair market value of Merger Sub's (and Company's) gross
assets held immediately prior to the Second Step Merger. For purposes of this
representation and assuming the truth and accuracy of the Company's
representations contained in this Agreement, amounts paid by Company or Merger
Sub to dissenters, amounts used by Company or Merger Sub to pay expenses
incurred in connection with the Merger, and all redemptions and distributions,
if any, (except for regular, normal dividends) made by Company or Merger Sub,
and Company or Merger Sub assets disposed of by Company or Merger Sub prior to
the Merger and in contemplation thereof (including without limitation any asset
disposed of, other than in the ordinary course of business, during the period
ending on the Effective Time of the Merger and beginning with the commencement
of negotiations (whether formal or informal) between Company and KHC or any of
its Affiliates regarding the Merger) will be included as assets of Company or
Merger Sub, respectively, immediately prior to the Merger.
PAGE 20 - AGREEMENT AND PLAN OF MERGER
3.2.20.2 KHC has no plan or intention to reacquire,
directly or indirectly, any of its stock issued in the Merger to make any
extraordinary distribution with respect to such stock. Neither KHC nor any
person related to KHC within the meaning of Treasury Regulations Section
1.368-1(e)(3) will, in connection with the Merger, directly or indirectly,
purchase, redeem or otherwise acquire (including by derivative transactions such
as an equity swap that would have the economic effect of an acquisition) any of
the Series A Preferred issued in the Merger.
3.2.20.3 KHC will be in Control of Merger Sub
immediately prior to the Effective Time. For purposes of this Certificate,
"Control" shall mean ownership of stock possessing at least 80% of the total
combined voting power of all classes of stock entitled to vote and at least 80%
of the total number of shares of all other classes of stock of the corporation.
3.2.20.4 KHC has no plan or intention to cause or
permit Merger Sub to issue additional shares of stock (or rights to acquire
shares of Sub stock) or take any other action that would result in KHC losing
Control of Sub, except for the transactions necessary to effect the Second Step
Merger.
3.2.20.5 KHC has no plan or intention to (i)
liquidate (or permit the liquidation of) Company; (ii) merge Merger Sub or Fluid
Systems with or into another corporation other entity other than as described in
the Second Step Merger; (iii) permit or cause Merger Sub or Fluid Systems to
distribute substantially all of its assets; (iv) permit or cause Merger Sub to
sell, exchange, transfer or otherwise dispose of any of its assets or any of the
assets acquired from Company, other than in the ordinary course of business; (v)
otherwise terminate the separate existence of Fluid Systems; (vi) permit or
cause Fluid Systems to distribute substantially all of its assets; or (vii)
enter into a contract to do any of the foregoing.
3.2.20.6 Following the Merger, KHC will cues
Surviving Corporation to continue the historic lines of business of Company or
to use a significant portion of Company's business assets in a business.
3.2.20.7 Expenses incurred by KHC and Merger Sub in
connection with the Merger will be paid by KHC and/or Merger Sub.
3.2.20.8 There is no intercorporate indebtedness
existing between Company and KHC or any of its Affiliates, that was issued,
acquired, or will be settled at a discount. KHC will assume no liabilities of
the Company or any Company Shareholder in connection with the Merger.
3.2.20.9 Merger Sub was formed solely for the purpose
of effecting the Merger and has conducted no business or other activities except
in connection with the Merger.
3.2.20.10 KHC does not own, nor has it owned during
the past five years, directly or indirectly, any shares of stock of Company or
rights to acquire such stock.
3.2.20.11 The fair market value of the Series A
Preferred and other consideration received by each Company Shareholder will be
approximately equal to the fair market value of the Company stock surrendered in
the Merger.
PAGE 21 - AGREEMENT AND PLAN OF MERGER
3.2.20.12 No stock of the Merger Sub will be issued
in the transaction.
3.2.20.13 The Merger will be consummated in
accordance with the Agreement. The Agreement (including the documents and
instruments referred to therein) constitutes the entire agreement of KHC, Fluid
Systems and Merger Sub with respect to the Merger.
3.2.20.14 The Merger is being undertaken for
substantial business purposes and not for the purpose of tax avoidance, and the
terms of the Merger are the product of arm's length negotiations.
3.2.20.15 None of the compensation received or to be
received by any shareholder-employees of Company will be separate consideration
for, or allocable to, any of their shares of Company Stock; none of the shares
of Series A Preferred to be received by any shareholder-employees of Company
will be separate consideration for, or allocable to, any employment agreement;
and the compensation paid to any shareholder-employees of Company will be for
services actually rendered and will be commensurate with amount paid to third
parties bargaining at arm's length for similar services.
3.2.20.16 Prior to, at and after the Effective Time
of the Merger, KHC, Fluid Systems and Merger Sub shall, for all applicable tax
purposes, report the Merger in a manner consistent with their intention and take
(or, as applicable, refrain from taking) all other actions reasonably necessary
to ensure that the Merger qualifies as a reorganization under Section 368 of the
Code.
3.2.20.17 Any loan by Fluid Systems to KHC or any of
its Affiliates following the Second Step Merger shall be bona fide and
undertaken for substantial business purposes and not for the purposes of tax
avoidance, and the terms thereof shall be commensurate with arm's length, third
party bargaining.
3.2.20.18 Neither KHC nor any of its Affiliates is a
regulated investment company, a real estate investment trust, or a corporation
50% or more of the value of whose assets are stock and securities and 80% or
more of the value of whose total assets are assets held for investment. For
purposes of this representation, in making the 50% and 80% determinations under
the preceding sentence, (i) stock and securities in any subsidiary corporation
shall be disregarded and the parent corporation shall be deemed to own its
ratable share of the subsidiary's assets, and (ii) a corporation shall be
considered a subsidiary if the parent owns 50% or more of the combined voting
power of all classes of stock entitled to vote or 50% or more of the total value
of shares of all classes of stock outstanding. For this purpose "total assets"
shall not include cash and cash items (including receivables and government
securities).
3.2.20.19 Based on the representations and warranties
of the Company and Company Shareholders, Merger Sub believes the fair market
value of the assets of Company transferred to Merger Sub will equal or exceed
the sum of the liabilities assumed by Merger Sub, plus the amount of
liabilities, if any, to which the transferred assets are subject.
PAGE 22 - AGREEMENT AND PLAN OF MERGER
3.2.20.20 KHC shall not knowingly supply funds to
Company, directly or indirectly, for the purpose of paying Company's dissenting
shareholders nor will KHC knowingly, directly or indirectly, reimburse Company
for any payments to dissenters.
3.2.21 Environmental Representations.
3.2.21.1 To the Knowledge of KHC, Fluid Systems and
the Merger Sub, KHC, Fluid Systems and the Merger Sub have not, within or
outside the ordinary course of their businesses, generated, manufactured,
refined, transported, treated, stored, handled, or disposed of any Hazardous
Waste other than in accordance with applicable Environmental Laws. Neither KHC,
Fluid Systems nor the Merger Sub have received a citation, directive, letter,
notice of violation, or other communication from any Person or Governmental
Entity alleging or concerning the presence of any Hazardous Waste on any
property owned, leased, previously owned, previously leased or used as a
Hazardous Waste disposal site by KHC, Fluid Systems or the Merger Sub or
alleging or concerning KHC's, Fluid Systems' or the Merger Sub's actual or
potential liability under any applicable Environmental Laws, excepting only the
matters specifically identified in the following paragraph of this Agreement,
paragraph 3.2.10. To the Knowledge of KHC, Fluid Systems and the Merger Sub,
KHC, Fluid Systems and the Merger Sub has obtained all permits and licenses of
Governmental Entities required by applicable Environmental Laws and has caused
all notifications to be made as required by applicable Environmental Laws. KHC,
Fluid Systems and Merger Sub have provided true and complete copies of all
environmental reports and studies conducted by KHC or its Affiliates with
respect to any real property owned, leased, previously leased or used as a
Hazardous Waste disposal site by KHC or its Affiliates. To the Knowledge of KHC,
Fluid Systems or the Merger Sub, there are no other environmental reports or
studies with respect to any real property owned, leased, previously owned,
previously leased or used as a Hazardous Waste disposal site by KHC or its
Affiliates.
3.2.21.2 To the Knowledge of KHC, Fluid Systems and
the Merger Sub, the only properties owned, leased, previously owned, previously
leased or used as a Hazardous Waste disposal site by KHC or its Affiliates from
which arise actual or potential liability under Environmental Laws are those
four properties identified in Schedule 3.2.21 of the Agreement (the "Disclosed
Sites"). To the Knowledge of KHC, Fluid Systems and their Merger Sub, none of
these Disclosed Sites are being considered for inclusion on, nor are on, nor are
adjacent to a site that is on the National Priorities List (Superfund/CERCLA).
To the knowledge of KHC, Fluid Systems and the Merger Sub, none of these
Disclosed Sites are currently the subject of litigation or contested
administrative proceedings that relate to contamination of soil or groundwater
on the properties. To the Knowledge of KHC, Fluid Systems and the Merger Sub,
neither KHC, Fluid Systems, the Merger Sub nor X.X. Xxxxxxx have been named as a
PRP (Potentially Responsible Party) by any Governmental Entity nor by any other
party.
3.2.22 Accuracy and Completeness of Representations
and Warranties. No representation or warranty by the KHC, Merger Sub or Fluid
Systems contained in this Agreement, nor any statement or certificate furnished
by KHC, Merger Sub, Fluid Systems or their representatives, contains any untrue
statement of a material fact, or omits to state any material fact required to
make the representation, warranty, statement or certificate not misleading.
PAGE 23 - AGREEMENT AND PLAN OF MERGER
3.2.23 Disclaimer of other Representations and Warranties.
Except as expressly set forth above, neither KHC, Merger Sub nor Fluid Systems
make any representation or warranty, express or implied, at law or in equity, in
respect of KHC, Merger Sub, Fluid Systems or any of their assets, liabilities or
operations, including, without limitation, with respect to: (i) any and all
present and future market conditions that may affect KHC or its affiliates,
including industry changes, changes in customer demand, changes in the demand
for products or services manufactured, marketed or distributed by KHC or its
affiliates, changes in strategic alliances that may impact sales and any other
such market conditions; (ii) activities of the present or future competitors of
KHC and its affiliates to emulate, reverse engineer or otherwise capitalize upon
the products manufactured, marketed or distributed by KHC or its affiliates; or
(iii) whether the Merger and Second Step Merger will qualify as a reorganization
pursuant to Section 368(a)(1)(A) of the Code. Neither KHC, Merger Sub nor Fluid
Systems shall have any liability to the Company Shareholders for any of personal
income tax applicable to the Company Shareholders as a result of the
transactions described in Article I and Article II and more specifically, the
failure of the transaction to qualify as reorganization under Section 368(a) of
the Code.
ARTICLE IV
Covenants
Section 4.1 Company's Covenants.
4.1.1 Conduct of Business by the Company. Except as expressly
contemplated by this Agreement or as consented to in writing by KHC, until the
Effective Time, the Company shall carry on its business in the ordinary course
consistent with past practice and in material compliance with all applicable
laws and regulations. The Company shall also use commercially reasonable efforts
to preserve intact its current business organization, keep available the
services of its current officers and employees and preserve its relationships
with customers, suppliers, licensors, licensees, distributors and others having
business dealings with it. Without limiting the generality of the foregoing, the
Company shall not:
4.1.1.1 (i) declare, set aside or pay any dividends
on, or make any other distributions in respect of the Company Stock, except that
the Company may make normal distributions or disbursements in the ordinary
course of business and payments or distributions to Company Shareholders,
including bonuses in their capacities as employees, that do not deplete the Net
Working Capital below $3,650,000; (ii) split, combine or reclassify the Company
Stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of Company Stock; or (iii) purchase,
redeem or otherwise acquire any Company Stock;
4.1.1.2 issue, deliver, sell, grant, pledge or
otherwise encumber or subject to any Lien any Company Stock;
4.1.1.3 amend or otherwise modify the Company's
Articles of Incorporation or Bylaws;
PAGE 24 - AGREEMENT AND PLAN OF MERGER
4.1.1.4 acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any Person;
4.1.1.5 except in the ordinary course of business,
sell, lease, license, mortgage or otherwise encumber or subject to any Lien or
otherwise dispose of any of its properties or assets;
4.1.1.6 incur any indebtedness for borrowed money or
guarantee any indebtedness of another Person, or enter into any arrangement
having the economic effect of either of the foregoing, except for short-term
borrowings incurred in the ordinary course of business (or to refund existing or
maturing indebtedness); or make any loans, advances or capital contributions to,
or investments in, any other Person;
4.1.1.7 other than payments that do not deplete the
Working Capital below $3,650,000 and do not violate Section 4.1.1.1, pay, loan
or advance (other than payment of compensation, directors' fees or reimbursement
of expenses in the ordinary course of business) any amount to, or sell, transfer
or lease any properties or assets (real, personal or mixed, tangible or
intangible) to or enter into any Material Contract with any of its officers or
directors or any "affiliate" or "associate" of its officers and directors (as
such terms are defined in Rule 405 promulgated under the Securities Act);
4.1.1.8 make or agree to make any new capital
expenditure, except for expenditures of less than $50,000 or as otherwise
permitted in Schedule 3.1.6;
4.1.1.9 make any tax election that is reasonably
likely to have a material adverse effect on the tax liability or tax attributes
of the Company, or settle or compromise any material tax liability;
4.1.1.10 pay, discharge, settle or satisfy any
claims, liabilities, obligations or litigation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than (a) the payment of the long
term liabilities of the Company set forth on the attached Schedule 4.1.1.10 or
(b) the payment, discharge, settlement or satisfaction, in the ordinary course
of business or in accordance with their terms, of liabilities recognized or
disclosed in the Company Balance Sheet or liabilities that arise in the ordinary
course of business after the date of the Company Balance Sheet;
4.1.1.11 adopt or amend any Company Benefit Plan, pay
any special bonus or special remuneration to any director or employee if such
special bonus or remuneration will deplete the Net Working Capital below
$3,650,000, or increase the salaries or wage rates or fringe benefits (including
rights to severance or indemnification) of its directors, officers, employees or
consultants other than in the ordinary course of business;
4.1.1.12 make any significant change in the
accounting methods or systems of internal accounting controls, except as may be
appropriate to conform to changes in statutory accounting rules or GAAP;
PAGE 25 - AGREEMENT AND PLAN OF MERGER
4.1.1.13 knowingly take any action or fail to take
any action that would cause the representations and warranties set forth in
Section 3.1 to no longer be true and correct; or
4.1.1.14 authorize, commit or agree to take, any of
the foregoing actions.
4.1.2 Unencumbered Assets. The Company shall undertake to
ensure that at Closing, the Company's assets will be free and clear of all
Liens, other than those encumbrances that secure current liabilities that are
encompassed in Net Working Capital.
4.1.3 Advise of Changes. The Company and Company Shareholders
shall promptly notify KHC, Merger Sub and Fluid Systems to the extent they have
Knowledge of (i) any representation or warranty made by Company and the Company
Shareholders in this Agreement becoming untrue or inaccurate in any material
respect; or (ii) the failure of the Company or the Company Shareholders to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement; and (iii)
any change or event having, or which is reasonably likely to have, a material
adverse effect on such Party or on the truth of their respective representations
and warranties or the ability of the conditions set forth in Article V to be
satisfied.
4.1.4 No Solicitation by the Company. Until the Effective
Time, neither the Company nor the Company Shareholders will, nor will they
authorize or permit any of the Company's officers, directors, employees,
investment bankers, attorneys or other advisors or representatives to, directly
or indirectly:
4.1.4.1 take any action to initiate, solicit,
facilitate, encourage or induce the making, submission or announcement of any
Acquisition Proposal;
4.1.4.2 participate in any discussions or
negotiations regarding, furnish to any Person any nonpublic information with
respect to, or take any other action to facilitate any inquiries or the making
of any proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal;
4.1.4.3 engage in discussions or negotiations with
any Person with respect to any Acquisition Proposal; or
4.1.4.4 approve, endorse or recommend any Acquisition
Proposal.
4.1.5 Access to Information; Confidentiality. Subject to (i)
the Confidentiality Agreement, and (ii) documents and communications protected
by the attorney client privilege, the Company and Company Shareholders shall
afford KHC and its officers, employees, accountants, counsel, financial advisors
and other representatives reasonable access during normal business hours to the
Company's properties, books, contracts, commitments, personnel and records, and
shall furnish promptly to KHC all other information concerning its business,
properties and personnel that KHC may reasonably request. Neither Company nor
Company Shareholders shall be required to provide access to or disclose
information where such access or disclosure would contravene any existing
agreement, law, rule, regulation, order or decree. The Company shall use
commercially reasonable efforts to obtain from third parties any consents or
PAGE 26 - AGREEMENT AND PLAN OF MERGER
waivers of confidentiality restrictions with respect to any such information. No
review pursuant to this Section shall alter the consequences of any inaccurate
representation or warranty given by either Party to the other Party. The Company
will hold, and will cause its officers, employees, accountants, counsel,
financial advisors and other representatives and affiliates to hold, any
nonpublic information in accordance with the terms of the Confidentiality
Agreement.
4.1.6 Commercially Reasonable Efforts. Upon the terms and
subject to the conditions set forth in this Agreement, the Company and Company
Shareholders shall use commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other Parties in doing, all things necessary, proper or advisable to
promptly consummate and make effective the Merger and Second Step Merger.
Without limitation, the Company shall use commercially reasonable efforts to
accomplish the following: (i) the taking of all acts necessary to cause the
conditions to Closing to be satisfied; (ii) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from Governmental
Entities and the making of all necessary registrations and filings (including
filings with Governmental Entities, if any) and the taking of all steps as may
be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by any Governmental Entity; (iii) the obtaining of all necessary
consents, approvals or waivers from third parties; (iv) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby; and (v) the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry out
the purposes of, this Agreement.
4.1.7 Tax Treatment. The Company and Company Shareholders
shall use commercially reasonable efforts to cause the Merger to qualify as a
reorganization under the provisions of Section 368 of the Code.
4.1.8 Creation of Opening Balance Sheet. The Company
Shareholders will fully cooperate with KHC and Fluid Systems to create and
certify as accurate the Opening Balance Sheet within thirty days after Closing.
If the Company Shareholders, KHC and Fluid Systems are unable to mutually create
and certify as accurate the Opening Balance Sheet within such time, KHC and
Fluid Systems will unconditionally delegate to KHC's certified public
accountants the task of creating and certifying the Opening Balance Sheet. If
the Company Shareholders wish to challenge or dispute the accuracy of the
Opening Balance Sheet, they may engage, at their own expense, an independent
accountant to review the Opening Balance Sheet prepared by KHC's certified
public accountant. If, following such review, Company Shareholders wish to
continue such challenge, then KHC's accountant and the accountant chosen by
Company Shareholders shall engage a third independent accountant to review,
modify as necessary, and issue a definitive Opening Balance Sheet, which KHC,
Fluid Systems and the Company Shareholders will accept as final.
4.1.9 Covenant Not to Compete. Company Shareholders
acknowledge that Company has developed relationships with customers, suppliers,
contractors, consultants and referral sources of the Restricted Business, and
that Company Shareholders' engagement in the Restricted Business with such
Persons could diminish the value to KHC, Merger Sub and Fluid Systems of the
benefits of the Merger and Second Step Merger. Therefore, as further
consideration for the Shares and Cash Consideration, and to protect the value of
Fluid Systems,
PAGE 27 - AGREEMENT AND PLAN OF MERGER
each Company Shareholder covenants that he or she shall not, for a period of two
years from the Closing Date (in the case of Xxxxxxx Xxxxx and Xxxxxxx Xxxx) and
for a period of three years from the Closing Date (in the case of Xxxx Xxxxx),
directly or indirectly:
4.1.9.1 render services to or engage or become
interested in, as manager, employee, officer, consultant, owner or partner, or
through stock ownership (other than securities that are listed for trading on a
national securities exchange), either alone or in association with others, any
Person (other than the Surviving Division) that engages in the Restricted
Business in the United States; or
4.1.9.2 induce or attempt to induce any customer,
supplier, contractor, consultant, referral source or other Person having
business relations with Fluid Systems to breach a contract or terminate its
relationship with Fluid Systems or take any other action intended to damage the
relationship between Fluid Systems and any such Person.
Each Company Shareholder acknowledges that the length of time and geographic
restrictions set forth in this Section are both reasonable and necessary for the
protection of Fluid Systems. If a court of competent jurisdiction determines
that these restrictions are not enforceable, then these restrictions shall be
interpreted to extend only over the maximum period of time, geographic area or
range of activities as to which it may be enforceable, and the Parties shall
promptly amend this Agreement to the extent required to render it enforceable.
Without limiting the remedies available to KHC and Fluid Systems, each Company
Shareholders acknowledges that a breach of any of the covenants contained in
this Section will result in material irreparable injury for which there is no
adequate remedy at law, that it will not be possible to measure damages for such
injuries precisely and that, in the event of such a breach or threat thereof,
KHC or Fluid Systems shall be entitled to a temporary restraining order and/or
preliminary or permanent injunction restraining Company Shareholders from
engaging in activities prohibited by this Section or such other relief as may be
required to specifically enforce any of the covenants of this Section.
4.1.10 Transfer of Employees. From and after the date of this
Agreement, the Company and Company Shareholders shall permit KHC and Fluid
Systems to contact Company employees to discuss the Merger, the Second Step
Merger and relevant post-Closing characteristics of Fluid Systems. The Company
and Company Shareholders shall also cooperate with, and assist KHC, Merger Sub
and Fluid Systems in obtaining, any required consents and approvals from the
affected employees in connection with the Merger and Second Step Merger.
Section 4.2 KHC, Merger Sub and Fluid Systems Covenants.
4.2.1 Advise of Changes. KHC, Merger Sub and Fluid Systems
shall promptly notify the Company to the extent it has Knowledge of (i) any
representation or warranty made by KHC, Merger Sub or Fluid Systems in this
Agreement becoming untrue or inaccurate in any material respect; or (ii) the
failure of KHC, Merger Sub or Fluid Systems to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement; or (iii) any change or event having, or
which is reasonably likely to have a material adverse effect on such Party or on
the truth of its representations and warranties or the ability of the conditions
set forth in Article V to be satisfied.
PAGE 28 - AGREEMENT AND PLAN OF MERGER
4.2.2 Access to Information; Confidentiality. Subject to (i)
the Confidentiality Agreement and (ii) documents and communications protected by
the attorney client privilege, KHC, Merger Sub and Fluid Systems shall afford
the Company and Company Shareholders reasonable access during normal business
hours during the period prior to the Effective Time to all of their properties,
books, contracts, commitments, personnel and records. During such period, KHC,
Merger Sub and Fluid Systems shall furnish promptly to Company and Company
Shareholders all other information concerning their business, properties and
personnel that Company and Company Shareholders may reasonably request. Neither
KHC, Merger Sub nor Fluid Systems shall be required to provide access to or
disclose information where such access or disclosure would contravene any
existing agreement, law, rule, regulation, order or decree. KHC, Merger Sub and
Fluid Systems shall use commercially reasonable efforts to obtain from third
parties any consents or waivers of confidentiality restrictions with respect to
any such information. No review pursuant to this Section shall alter the
consequences of any inaccurate representation or warranty given by either Party
to the other Party. KHC, Merger Sub and Fluid Systems will hold, and will cause
their officers, employees, accountants, counsel, financial advisors and other
representatives and affiliates to hold, any nonpublic information in accordance
with the terms of the Confidentiality Agreement.
4.2.3 Commercially Reasonable Efforts. Upon the terms and
subject to the conditions set forth in this Agreement, KHC, Merger Sub and Fluid
Systems shall use commercially reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, and to assist and cooperate with
the other Parties in doing, all things necessary, proper or advisable to
promptly consummate and make effective the Merger and Second Step Merger.
Without limitation, KHC, Merger Sub and Fluid Systems shall use commercially
reasonable efforts to accomplish the following: (i) the taking of all acts
necessary to cause the conditions to Closing to be satisfied; (ii) the obtaining
of all necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and filings
(including filings with Governmental Entities, if any) and the taking of all
steps as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by any Governmental Entity; (iii) the obtaining of all
necessary consents, approvals or waivers from third parties; (iv) the defending
of any lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby; and (v) the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry out
the purposes of, this Agreement.
4.2.4 Tax Treatment. KHC, Merger Sub and Fluid Systems shall
use commercially reasonable efforts to cause the Merger to qualify as a
reorganization under the provisions of Section 368 of the Code. It is the
present intent of KHC, Merger Sub and Fluid Systems to continue at least one
significant historic business line of the Company, or to use at least a
significant portion of the Company's historic business assets in a business, in
each case within the meaning of Reg. Section 1.368-1(d).
4.2.5 Transfer of Employees. KHC shall be permitted to contact
Company employees who will be transferred to Merger Sub upon Closing. KHC and
Merger Sub shall be solely and exclusively responsible for obtaining any
required consents and approvals from the affected employees in connection with
such transfers. KHC shall, from time to time, give
PAGE 29 - AGREEMENT AND PLAN OF MERGER
Company prior notification of its intent to conduct such discussions with such
employees, and Company shall reasonably promptly schedule such discussions. For
a period of ninety days following Closing, Fluid Systems shall not terminate the
employment of a sufficient number of employees of the Company's former employees
to cause a "plant closing" or "mass layoff" as those terms are defined in the
Workers Adjustment and Retraining Notification Act, 29 USC Section 2101-2109
("WARN Act"). KHC and Fluid Systems agree to indemnify and defend Company
Shareholders against, and agree to hold Company Shareholders harmless from any
and all claims, losses, damages and expenses (including reasonable attorneys'
fees) and other liabilities and obligations incurred or suffered as a result of
any claim by any transferred employee that arises under federal, state or local
Statute (including Title VII of the Civil Rights Act of 1964, the Civil Rights
Act of 1991, the Age Discrimination in Employment Act of 1990, the Equal Pay
Act, the Americans with Disabilities Act of 1990, the WARN Act, ERISA and all
other statues regulating the terms and conditions of employment), regulation or
ordinance, under the common law or in equity (including any claims for wrongful
discharge or otherwise), or under any policy, agreement, understanding or
promise, written or oral, formal or informal, between Company and the
transferred employees, to the extent (but only to the extent) that such claims
are caused by events or omissions that occurred (or, in the case of omissions,
failed to occur) on or after the Closing, including the transfer or decision not
to transfer the employees at Closing to Fluid Systems.
4.2.6 Creation of Opening Balance Sheet. KHC and Fluid Systems
will fully cooperate with the Company Shareholders to create and certify as
accurate the Opening Balance Sheet within thirty days after Closing. If KHC, the
Company Shareholders and Fluid Systems are unable to mutually create and certify
as accurate the Opening Balance Sheet within such time, KHC and Fluid Systems
will unconditionally delegate to KHC's certified public accountants the task of
creating and certifying the Opening Balance Sheet. KHC and the Surviving
Division will accept as final the Opening Balance Sheet that is created and
certified by such accountants. If the Company Shareholders challenge or dispute
the Opening Balance Sheet in accordance with Section 4.1.8, then KHC's
accountant and the accountant chosen by the Company Shareholders shall engage a
third independent accountant to review, modify as necessary, and issue a
definitive Opening Balance Sheet, which KHC, Fluid Systems and the Company
Shareholders will accept as final.
4.2.7 Equal Treatment of Company Shareholders. Except as the
Company Shareholders may otherwise agree, the Company Shareholders shall enjoy
or be deemed to have been granted, pari passu, all rights, privileges and
preferences exercised or exercisable by other holders of Series A Preferred with
respect to any sale, transfer, dividend, distribution, conversion, exchange,
liquidation, registration, disposition after a registration for an initial
public offering involving or affecting the Series A Preferred.
ARTICLE V
Conditions Precedent
Section 5.1 Conditions to Obligations of KHC and Merger Sub. The
obligation of KHC, Merger Sub and Fluid Systems to effect the Merger and Second
Step Merger is subject to satisfaction or waiver of the following conditions:
PAGE 30 - AGREEMENT AND PLAN OF MERGER
5.1.1 Governmental Approvals. All consents, approvals or
orders of authorization of, or actions by any Governmental Entities necessary to
complete the transactions contemplated by this Agreement shall have been
obtained, and all necessary registrations, declarations or filings with any
Governmental Entities shall have been made.
5.1.2 Required Third-Party Consents. All consents, approvals
or waivers from third parties necessary to complete the Merger and Second Step
Merger shall have been obtained.
5.1.3 Permits. KHC shall have verified to its reasonable
satisfaction that all required or appropriate permits, licenses, franchises,
authorizations, and approvals to conduct the Company's business as currently
conducted by the Company have been obtained.
5.1.4 Escrow Agreement. At or prior to Closing, the Company
Shareholders and an escrow agent satisfactory to KHC shall have entered into the
Escrow Agreement, in the form attached to this Agreement as Exhibit A.
5.1.5 Employment Agreements. At or prior to Closing, each
Company Shareholder shall have entered into an employment agreement with Fluid
Systems in the form attached to this Agreement as Exhibit B.
5.1.6 Shareholder Agreement. At or prior to Closing, each
Company Shareholder shall have executed a joinder to the KHC Shareholder
Agreement, in the form attached to this Agreement as Exhibit C.
5.1.7 Net Working Capital. The Net Working Capital shall be no
less than $3,650,000, of which at least $2,500,000 shall be cash or cash
equivalents.
5.1.8 Representations and Warranties. The representations and
warranties of the Company and Company Shareholders shall be true and correct in
all material respects as of the Closing Date, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as of
such date).
5.1.9 Performance of Obligations of the Company. The Company
and Company Shareholders shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or prior to
the Closing Date.
5.1.10 Closing Certificate. The Company and Company
Shareholders shall have delivered to KHC a certificate signed by the appropriate
officers of the Company and each of the Company Shareholders verifying: (i) that
the authorizing resolutions of the Board of Directors and Shareholders were duly
adopted, have not been amended and are in full effect as of the Closing Date;
(ii) the accuracy of the Company and Company Shareholders' representations; and
(iii) performance of the Company and Company Shareholders' covenants.
5.1.11 Legal Opinion. KHC shall have received from Xxxxxxx
Xxxxx & Xxxxx LLP, counsel to the Company, dated as of the Closing Date, an
opinion, substantially in the form of the attached Exhibit D.
PAGE 31 - AGREEMENT AND PLAN OF MERGER
5.1.12 No Material Adverse Changes. No change in operations,
financial conditions, assets, liabilities, commercial relationships or business
or prospects of the Company or its business that has had or may reasonably be
expected to have a material adverse effect on the Company's business shall have
occurred since the date of the Company Balance Sheet.
Section 5.2 Conditions to Obligations of the Company and Company
Shareholders. The obligation of the Company and Company Shareholders to effect
the Merger is subject to satisfaction or waiver of the following conditions:
5.2.1 Governmental Approvals. All consents, approvals or
orders of authorization of, or actions by any Governmental Entities necessary to
complete the transactions contemplated by this Agreement shall have been
obtained, and all necessary registrations, declarations or filings with any
Governmental Entities shall have been made.
5.2.2 Required Third-Party Consents. All consents, approvals
or waivers from third parties necessary to complete the Merger and Second Step
Merger shall have been obtained, which consents are limited to consent of (a)
2001 Investors; (b) Senior Warrantholders; (c) senior lenders holding a majority
of KHC's outstanding indebtedness under its senior credit agreement (involving
13 senior lenders) and (d) senior subordinated noteholders holding a majority of
KHC's outstanding indebtedness under a security purchase agreement (involving 4
institutional noteholders).
5.2.3 Escrow Agreement. At or prior to Closing, KHC shall have
entered into the Escrow Agreement, in the form attached to this Agreement as
Exhibit A.
5.2.4 Employment Agreements. At or prior to Closing, Fluid
Systems shall have entered into an employment agreement with each Company
Shareholder in the form attached to this Agreement as Exhibit B.
5.2.5 Representations and Warranties. The representations and
warranties of KHC, Merger Sub and Fluid Systems shall be true and correct in all
material respects, as of the Closing Date, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as of
such date).
5.2.6 KHC stock issuance. KHC shall not have issued any equity
securities with rights, preferences or privileges equal to or greater than the
rights, preferences or privileges of the Series A Preferred.
5.2.7 Performance of Obligations of KHC, Merger Sub and Fluid
Systems. KHC, Merger Sub and Fluid Systems shall have performed in all material
respects all obligations required to be performed by them under this Agreement
at or prior to the Closing Date.
5.2.8 Closing Certificate. The Company shall have received a
certificate signed by the appropriate officers of KHC, Merger Sub and Fluid
Systems verifying: (i) that the authorizing resolutions of the Board of
Directors and Shareholders of Merger Sub were duly adopted, have not been
amended and are in full effect as of the Closing Date; (ii) the accuracy of KHC
and Merger Sub's representations; and (iii) performance of KHC and Merger Sub's
covenants.
PAGE 32 - AGREEMENT AND PLAN OF MERGER
5.2.9 Legal Opinion. The Company shall have received from
Xxxxx Xxxxxx Xxxxxxxx, LLP, counsel to KHC, Merger Sub and Fluid Systems, dated
as of the Closing Date, an opinion, substantially in the form of the attached
Exhibit E.
5.2.10 No Material Adverse Changes. No change in operations,
financial condition, assets, liabilities, commercial relationships or business
or prospects of KHC or its Subsidiaries that has had a material adverse effect
on the KHC business shall have occurred since the date of this Agreement.
Section 5.3 Termination. This Agreement may be terminated at any time
prior to the Effective Time in the following ways:
5.3.1 by written consent of KHC, the Company and the Company
Shareholders.
5.3.2 by KHC or by the Company Shareholders and the Company:
5.3.2.1 if the Merger has not been consummated by
June 30, 2002; provided, however, that the right to terminate this Agreement
pursuant to this Section 5.3.2.1 shall not be available to any Party whose
failure to perform any of its obligations under this Agreement results in the
failure of the Merger to be consummated by such time;
5.3.2.2 if (i) there shall be any law or regulation
that makes consummation of the Merger illegal or otherwise prohibited or (ii)
any judgment, injunction, order or decree of any court or other Governmental
Entity having competent jurisdiction enjoining Merger Sub and the Company from
consummating the Merger is entered and such judgment, injunction or order shall
have become final and non-appealable; or
5.3.3 by KHC:
5.3.3.1 if, within five days after delivering notice
of dissatisfaction to the Company Shareholders, the Company Shareholders have
not revised the schedules delivered by the Company and Company Shareholders
under Section 3.1 of this Agreement in a manner acceptable to KHC;
5.3.3.2 if the Company or Company Shareholders have
misrepresented, breached or failed to perform in any material respect any of its
representations, warranties, covenants or other agreements contained in this
Agreement.
5.3.4 by the Company or Company Shareholders:
5.3.4.1 if, within five days after delivering notice
of dissatisfaction to KHC, KHC has not revised the schedules delivered by KHC
under Section 3.2 of this Agreement in a manner acceptable to the Company and
Company Shareholders;
5.3.4.2 if KHC, Merger Sub or Fluid Systems has
breached or failed to perform in any material respect any of its
representations, warranties, covenants or other agreements contained in this
Agreement; or
PAGE 33 - AGREEMENT AND PLAN OF MERGER
5.3.4.3 if KHC, Merger Sub and Fluid Systems have
failed to obtain the approvals and consents referenced in Section 5.2.2 within
ten days after execution of this Agreement.
Section 5.4 Effect of Termination. No termination of this Agreement
shall relieve any Party from any liability arising from the breach by any Party
of any of its representations, warranties, covenants or agreements set forth in
this Agreement. In the event of termination of this Agreement, the
Confidentiality Agreement shall remain in full force and effect.
Section 5.5 Amendment. This Agreement may be amended by the Parties
only by an instrument in writing signed on behalf of each of the Parties.
Section 5.6 Extension; Waiver. At any time prior to the Effective Time,
and subject to the requirements of Section 5.5, a Party may (i) extend the time
for the performance of any of the obligations or other acts of the other
Parties; (ii) waive any inaccuracies in the representations and warranties of
the other Parties contained in this Agreement or in any document delivered
pursuant to this Agreement; or (iii) waive compliance by the other Party with
any of the agreements or conditions contained in this Agreement. The failure of
any Party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
Section 5.7 Notice and Opportunity to Cure. Prior to any Party
exercising its right to terminate this Agreement as provided in Sections 5.3.2,
5.3.3. or 5.3.4(a), the Party claiming the right to terminate shall first
provide the other Parties with (i) written notice of the intent to terminate,
which notice shall specify the basis for claimed right of termination and the
steps that much be taken to correct the deficiency, and (ii) a ten (10) Business
Day period in which to cure the claimed deficiency prior to the termination
becoming effective. In order to effect a termination under Section 5.3.4(b), the
Company shall provide written notice of termination, which shall be effective
immediately.
ARTICLE VI
Indemnification
Section 6.1 Indemnification by the Company and the Company
Shareholders.
6.1.1 Subject to the limitations set forth below in this
Article VI and VII, the Company and the Company Shareholders each covenant and
agree to, jointly and severally, indemnify, defend and hold harmless KHC, Merger
Sub, Fluid Systems and their respective successors, assigns and affiliates and
the directors, officers, agents and employees of any of them (collectively, the
"KHC Indemnified Parties") from and against any and all losses imposed on,
incurred or suffered by or asserted against any KHC Indemnified Parties, to the
extent resulting from or arising out of (i) any breach of any representation or
warranty of the Company contained in this Agreement (ii) any breach of any
covenant of the Company contained in this Agreement, or (iii) any and all
actions, suits, proceedings, audits, judgments, costs and legal and other
expenses incident to any of the foregoing or to the enforcement of this Article
VI.
PAGE 34 - AGREEMENT AND PLAN OF MERGER
6.1.2 Indemnification Procedure.
6.1.2.1 Promptly after receipt by a KHC Indemnified
Party of notice by a third party of any complaint or the commencement of any
audit (tax or otherwise), investigation, action or proceeding with respect to
which such KHC Indemnified Party may be entitled to receive indemnification from
the Company and Company Shareholders, such KHC Indemnified Party will notify the
Company Shareholders, promptly following the Indemnified Party's receipt of such
complaint or of notice of the commencement of such audit, investigation, action
or proceeding; provided, however, that the failure to so notify the Company
Shareholders will relieve the Company and the Company Shareholders from
liability under this Agreement with respect to such claim only if, and only to
the extent that, such failure to notify the Company Shareholders results in the
forfeiture by the Company and the Company Shareholders of rights and defenses
otherwise available to the Company with respect to such claim or materially
prejudices the Company or the Company Shareholders with respect to the defense
of such claims. The Company Shareholders on behalf of themselves and the Company
and the Company Shareholders will have the right, upon written notice delivered
to the KHC Indemnified Party within ten (10) days thereafter, to assume the
defense of such audit, investigation, action or proceeding, including the
employment of counsel reasonably satisfactory to the KHC Indemnified Party and
the payment of the fees and disbursements of such counsel. In the event,
however, that the Company Shareholders on behalf of themselves and the Company
decline or fail to assume the defense of the audit, investigation, action or
proceeding on the terms provided above, within such ten (10)-day period, then
such KHC Indemnified Party may employ counsel to represent or defend it in any
such audit, investigation, action or proceeding and the Company will pay the
reasonable fees and disbursements of such counsel as incurred. In any audit,
investigation, action or proceeding with respect to which indemnification is
being sought under this Agreement, the KHC Indemnified Party or the Company
Shareholders on behalf of themselves and the Company, whichever is not assuming
the defense of such action, will have the right to participate in such matter
and to retain its own counsel at such Party's own expense. The Party defending
an action will at all times use reasonable efforts to keep the other Parties
reasonably apprised of the status of the defense and cooperate in good faith
with the other Parties in such defense.
6.1.2.2 No KHC Indemnified Party may settle or
compromise any claim or consent to the entry of any judgment with respect to
which indemnification is being sought under this Agreement without the prior
written consent of the Company Shareholders, unless (i) the Company Shareholders
fail to assume and maintain the defense of such claim pursuant to Section
6.1.2.1 above or (ii) such settlement, compromise or consent includes an
unconditional release of the Company and Company Shareholders from all liability
arising out of such claim.
6.1.3 Liability Limits. Notwithstanding anything to the
contrary set forth in this Agreement, the KHC Indemnified Parties shall not make
a claim against the Company or the Company Shareholders for indemnification
under this Article VI or for a breach of any representation, warranty or
covenant under this Agreement, unless and until the aggregate costs and damages
incurred by all KHC Indemnified Parties exceed one hundred fifty thousand
dollars ($150,000) (the "Floor"), in which event the KHC Indemnified Parties may
claim indemnification for any costs and damages in excess of the Floor. However,
the Floor shall not apply to any losses arising out of any of the
PAGE 35 - AGREEMENT AND PLAN OF MERGER
following: (a) any claim asserted against the KHC Indemnified Parties by or on
behalf of Xxxxxx Xxxxxx; (b) any fraud by the Company Shareholders; (c) any
Company tax obligation other than the obligation to pay state sales taxes; or
(d) any failure to retain, as of Closing, Net Working Capital in an amount less
than $3,650,000 (the "Excepted Claims"). With respect to the Excepted Claims,
the KHC Indemnified Parties may assert a claim against the Company or Company
Shareholders and seek indemnification without regard to the Floor. In no event
will the Company and Company Shareholders be required to indemnify KHC
Indemnified Parties under this Article VI or be liable to any KHC Indemnified
Party for breach of any representation, warranty or covenant under this
Agreement, for costs and damages in excess of Seven Million Dollars
($7,000,000). The Parties acknowledge and agree that the foregoing
indemnification provisions in this Article 6, shall be the exclusive remedy of
the KHC Indemnified Parties against the Company and Company Shareholders for
contractual indemnity or breach of this Agreement. The KHC Indemnified Parties
further acknowledge that this agreement establishing an exclusive contractual
remedy was a material inducement to Company Shareholders in entering into this
Agreement.
6.1.4 Determination of Adverse Consequences. When calculating
the losses imposed on, incurred or suffered by or asserted against any KHC
Indemnified Parties, the Parties shall make appropriate adjustments for any tax
benefits or insurance coverage (and take into account the time value of money)
in determining liability and damages under this Section 6. All indemnification
payments under this Section 6 shall be deemed adjustments to the Cash
Consideration.
6.1.5 No Presumption of Materiality.The Parties acknowledge
and agree that no single representation or warranty of KHC, Merger Sub or Fluid
Systems contained in this Agreement, nor the information contained in any such
representation or warranty, are necessarily material to the investment decision
of the Company Shareholders, nor would such representation, warranty or
information necessarily be material to an investment decision by a reasonable
KHC investor. The Parties further acknowledge and agree that (i) the information
provided to Company Shareholders by KHC, and (ii) the information that the
Company Shareholders requested and received from KHC during the negotiation and
drafting of this Agreement, if true, accurate, complete and not misleading
(either by affirmative statement or omission), constitutes all of the
information that a reasonable investor would review when making an investment
decision in the Series A Preferred. Moreover, any untruth of a representation or
warranty by KHC, Merger Sub or Fluid Systems shall not provide the Company
Shareholders with any legal claim or remedy against KHC, Merger Sub or Fluid
Systems, unless the untruth constitutes an untrue statement of a fact that would
be material to a reasonable investor, or constitutes a failure to state a
material fact necessary in order to make the statements made, in the light of
the circumstances in which they were made, not misleading to a reasonable
investor.
ARTICLE VII
General Provisions
Section 7.1 Survival of Representations and Warranties. The
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive for three years after the Effective
Time.
PAGE 36 - AGREEMENT AND PLAN OF MERGER
Section 7.2 Fees and Expenses. All fees and expenses incurred in
connection with the Merger, this Agreement and the transactions contemplated
hereby shall be paid by the Party incurring such fees or expenses, whether or
not the Merger is consummated.
Section 7.3 Public Announcements. Merger Sub and the Company will
consult with each other and obtain the other Party's written consent before
issuing, and provide each other the opportunity to review, comment upon and
concur with, any press release or other public statements with respect to the
transactions contemplated by this Agreement, including the Merger, and shall not
issue any such press release or make any such public statement prior to such
consultation, except as either Party may determine is required by applicable
law, court process or by obligations pursuant to any listing agreement with any
national securities exchange or national trading system.
Section 7.4 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the Parties at the following
addresses (or at such other address for a Party as shall be specified by like
notice):
if to KHC, Merger Sub or Fluid Systems, to
Kinetics Group
0000 Xxxxxxx Xxxxxxx Xxxx.
Xxxxx Xxxxx, XX 00000
Attention: Xxxx Xxxxxxx
(000) 000-0000 phone
(000) 000-0000 fax
With a copy to:
Xxxxx Xxxxxx Xxxxxxxx LLP
2300 Xxxxx Fargo Tower
0000 XX Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
Attn: Xxxxxxx Xxxxxx, Esquire
(000) 000-0000 phone
(000) 000-0000
And
if to the Company, to
Poly Concepts, Inc.
00000 XX Xxxxxxxx Xxxxxxxx Xxxx
Xxxxxxxx, Xx 00000
Attention: Xxxx Xxxxx, President and CEO
(000) 000-0000
(000) 000-0000
PAGE 37 - AGREEMENT AND PLAN OF MERGER
With a copy to:
Xxxxxxx Xxxxx & Xxxxx LLP
000 XX Xxxxxxxx Xx. #0000
Xxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
(000) 000-0000 phone
(000) 000-0000 fax
And
if to the Company Shareholders, to
Xxxx Xxxxx
0000 XX Xxxxxxx Xxxx
Xxxxxxxx, XX 00000
(000) 000-0000
Xxxxxxx Xxxxx
0000 XX Xxxxxxx Xxxx
Xxxxxxxx, XX 00000
(000) 000-0000
Xxxxxxx Xxxx
00000 XX Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Phone (000) 000-0000
With a copy to:
Xxxxxxx Xxxxx & Xxxxx LLP
000 XX Xxxxxxxx Xx. #0000
Xxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
(000) 000-0000 phone
(000) 000-0000 fax
Section 7.5 Definitions. For purposes of this Agreement:
7.5.1 "Acquisition Proposal" means any offer or proposal for,
or any indication of interest in (i) a merger, consolidation, share exchange,
business combination, reorganization, recapitalization or other similar
transaction involving the Company or (ii) the acquisition, directly or
indirectly, of any securities or assets of the Company, other than the
transactions contemplated by this Agreement.
7.5.2 "Affiliate" means any direct or indirect subsidiary,
joint venturer or partner of KHC whose financial condition or performance are
reflected in the consolidated financial statements of KHC.
PAGE 38 - AGREEMENT AND PLAN OF MERGER
7.5.3 "Agreement" means this Agreement and Plan of Merger.
7.5.4 "Articles of Merger" means the document to be completed
and filed with the Oregon Secretary of State, in accordance with the relevant
provisions of the Oregon Business Corporation Act, to evidence and make
effective the Merger.
7.5.5 "Business Day" means any day other than Saturday, Sunday
or any other day on which banks are legally permitted to be closed in Portland,
Oregon.
7.5.6 "Cash Consideration" shall have the meaning specified in
Section 2.1.1.
7.5.7 "Closing" shall have the meaning specified in Section
1.2.
7.5.8 "Closing Date" shall have the meaning specified in
Section 1.2.
7.5.9 "Code" means the Internal Revenue Code of 1986, as
amended.
7.5.10 "Company" means Poly Concepts, Inc., an Oregon
corporation.
7.5.11 "Company Balance Sheet" means the December 31, 2001,
balance sheet of the Company.
7.5.12 "Company Benefit Plan" means any collective bargaining
or material employment agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical, welfare benefit or other plan, arrangement or
understanding providing benefits to any current or former employee, officer or
director of the Company
7.5.13 "Company Shareholders" means those individuals listed
on the attached Schedule 3.1.3, who are the only persons holding stock in the
Company.
7.5.14 "Company Stock" means the no par value common stock of
the Company, which is the only authorized and outstanding capital stock of the
Company.
7.5.15 "Confidentiality Agreement" means the confidentiality
agreement among Kinetics Fluid Systems, Inc., the Company and the Company
Shareholders dated September 5, 2001.
7.5.16 "Effective Time" shall mean the time the Merger becomes
effective, as described in Section 1.3.
7.5.17 "Environmental Law" means any applicable federal,
state, or local law, regulation, rule, permit, or governmental requirement or
any agreement with any governmental authority or other third party, relating
specifically to natural resources, the environment, waste management, regulated
substances or materials, and pollution .
7.5.18 "ERISA" means the Employee Retirement Income Security
Act of 1974.
PAGE 39 - AGREEMENT AND PLAN OF MERGER
7.5.19 "Escrow Agreement" means the agreement among KHC, the
Surviving Corporation, Company Shareholders and an escrow agent selected by the
Parties, in the form of the attached Exhibit A.
7.5.20 "Escrow Shares" shall have the meaning specified in
section 2.1.1.
7.5.21 "Fluid Systems" means Kinetics Fluid Systems, a
California corporation.
7.5.22 "GAAP" means United States generally accepted
accounting principles.
7.5.23 "Governmental Entity" means a court, administrative,
regulatory or other governmental agency, commission, authority or
instrumentality, foreign or domestic, or any non-governmental self-regulatory
agency, commission or authority, foreign or domestic.
7.5.24 "Hazardous Waste" shall have that meaning given to that
term by Environmental Laws applicable on the date of execution of this
Agreement.
7.5.25 "Intellectual Property Rights" means all patents,
patent rights, trademarks, trade secrets, trade names, service marks, copyrights
and other proprietary intellectual property rights and computer programs that
are material to the conduct of the business of the Company, KHC or any Affiliate
of KHC, as the context requires.
7.5.26 "KHC" means Kinetics Holdings Corporation, a Delaware
corporation.
7.5.27 "KHC Benefit Plan" means any collective bargaining or
material employment agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical, welfare benefit or other plan, arrangement or
understanding providing benefits to any current or former employee, officer or
director of KHC or its Affiliates.
7.5.28 "KHC Debt" means all loans, whether secured or
unsecured, whether evidenced by a promissory note, bond or other instrument,
whether or not convertible to equity securities, including, without limitation,
lines of credit (regardless of whether there is an outstanding balance under
such line of credit) which KHC or Kinetics Group, Inc. is obligated to repay or,
in the case of unused lines of credit, would become obligated to repay if drawn
upon.
7.5.29 "KHC Financial Statements" means the financial
statements of KHC and its Affiliates for the periods ended as of and for each of
the two years ended September 30, 2000, and September 30, 2001, and for the
interim period ending December 31, 2001.
7.5.30 "KHC Indemnified Parties" means those Persons entitled
to the benefits of the indemnities from Company and Company Shareholders
described in Section 6.1.1.
7.5.31 The words "to the Knowledge of the Company" or "to the
Company's Knowledge" and words of similar import shall mean the knowledge, after
due inquiry, of any one of the Company Shareholders. The words "to the Knowledge
of KHC, Fluid Systems and Merger Sub" or "to KHC's, Fluid Systems' and Merger
Sub's Knowledge" and words of similar
PAGE 40 - AGREEMENT AND PLAN OF MERGER
import shall mean the knowledge, after due inquiry, of any one of the officers
of KHC, Fluid Systems or Merger Sub.
7.5.32 "Lien" means any mortgage, lien, pledge, security
interest, encumbrance or other interest, consensual or otherwise, in property
securing a monetary obligation owed to, or a claim by, a Person other than the
owner of the property, whether such interest is based on the common law, statute
or contract, and any other option, charge, restriction, equity or claim against
any property of any nature whatsoever. Liens shall not include inchoate liens
relating to real or personal property taxes that are not yet due or payable or
mechanics or materialman liens that arise in the ordinary course of business and
which provide the claimant with the right to a assert or file a lien if payment
is not made when due provided that the Company has not failed to make such
payment when due.
7.5.33 "Material Contract" means any loan, credit agreement,
bond, note, mortgage, indenture, lease, contract, agreement, obligation,
commitment, arrangement, understanding or instrument to which the Company is a
party or by which its assets or properties are bound, involving actual or
potential obligations or commitments that are material or that limits the
freedom of the Company to compete with any Person or in any business.
7.5.34 "Merger" shall have the meaning specified in the
Background section of this Agreement.
7.5.35 "Merger Sub" means Kinetics Acquisition Corporation, an
Oregon corporation and a wholly owned Subsidiary of KHC.
7.5.36 "Net Working Capital" means short-term assets less
short-term liabilities of the Company according to GAAP.
7.5.37 "Opening Balance Sheet" means the balance sheet of the
Surviving Division, as measured immediately after the Second Step Merger.
7.5.38 "Parties" means all Persons who are signatories to this
Agreement.
7.5.39 "Person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity.
7.5.40 "Recapitalization Event" means a stock split, stock
dividend, recapitalization, subdivision, reclassification, combination, exchange
of shares or similar transaction.
7.5.41 "Restricted Business" means the design, manufacture,
and repair of plastic high purity products and plastic chemical process
equipment.
7.5.42 "Returns" means all reports, estimates, declarations of
estimated tax, information statements and returns required to be filed in
connection with, any Taxes, including information returns or reports with
respect to backup withholding and other payments to third parties.
PAGE 41 - AGREEMENT AND PLAN OF MERGER
7.5.43 "Second Step Merger" shall have the meaning specified
in the Background section of this Agreement.
7.5.44 "Securities Act" means the federal Securities Act of
1933, as amended.
7.5.45 "Shares" means both the Closing Shares and Escrow
Shares.
7.5.46 "Series A Preferred" shall mean the Series A Preferred
Stock of KHC.
7.5.47 A "Subsidiary" of any Person means another Person, an
amount of the voting securities, other voting ownership, membership or
partnership interests of which is sufficient to elect at least a majority of its
Board of Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly or
indirectly by such first Person.
7.5.48 "Surviving Corporation" means Merger Sub after the
Effective Time, and Fluid Systems after the Second Step Merger.
7.5.49 "Surviving Division" means the division of Fluid
Systems that will operate the business of the Company following the Second Step
Merger, and the books and records of which will be separately maintained during
the Measurement Period (as defined in the Escrow Agreement).
7.5.50 "Working Capital Adjustment" means the increase or
decrease in Cash Consideration resulting from the difference between $3,750,000
and the amount of the Company's Net Working Capital, as more thoroughly
described in Section 2.2.
7.5.51 "Taxes" shall mean all (i) taxes, however denominated,
including any interest, penalties or other additions to tax that may become
payable in respect thereof, imposed by any federal, territorial, state, local or
foreign government or any agency or political subdivision of any such
government, which taxes shall include, without limitation, all income or profits
taxes (including but not limited to federal and state income taxes), real
property gains taxes, payroll and employee withholding taxes, unemployment
insurance taxes, social security taxes, sales and use taxes, ad valorem taxes,
excise taxes, franchise taxes, gross receipts taxes, business license taxes,
occupation taxes, real and personal property taxes, stamp taxes, environmental
taxes, transfer taxes, workers' compensation, Pension Benefit Guaranty
Corporation premiums, and other taxes or similar governmental charges (ii)
liability for the payment of any amounts of the type described in (i) as a
result of being a member of an affiliated, consolidated, combined or unitary
group; and (iii) liability for the payment of any amounts as a result of being
party to any tax sharing agreement or as a result of any express or implied
obligation to indemnify any other Person with respect to the payment of any
amounts of the type described in clause (i) or (ii).
Section 7.6 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the Parties and delivered to the other Parties.
PAGE 42 - AGREEMENT AND PLAN OF MERGER
Section 7.7 Entire Agreement; No Third-Party Beneficiaries. This
Agreement (including the documents and instruments referred to herein)
constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, among the Parties with respect to the
subject matter of this Agreement and are not intended to confer upon any Person
other than the Parties any rights or remedies.
Section 7.8 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Oregon, regardless of the
laws that might otherwise govern under applicable principles of conflict of
laws.
Section 7.9 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by either of the Parties without the
prior written consent of the other Party; provided however, that any Company
Shareholder may upon death or disability assign any rights to payment hereunder
to his or her heirs and/or legal representatives. Any assignment in violation of
the preceding sentence shall be void. Subject to the preceding two sentences,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by, the Parties and their respective successors and assigns.
Section 7.10 Enforcement. The Parties agree that irreparable damage
would occur and that the Parties would not have any adequate remedy at law in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in the
State of Oregon or in an Oregon state court, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
Parties (i) consents to submit itself to the personal jurisdiction of any
Federal court located in the State of Oregon or any Oregon state court in the
event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement; (ii) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court; and (iii) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any court
other than a Federal court sitting in the State of Oregon or an Oregon state
court.
Section 7.11 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. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
Parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the Parties as closely as possible and to the fullest
extent permitted by applicable law.
Section 7.12 Construction. This Agreement has been negotiated by the
Company, KHC, Fluid Systems, Company Shareholders and Merger Sub and their
respective counsel and shall be interpreted fairly in accordance with its terms
and without any strict construction in favor of or against any Party.
[REMAINDER OF THIS PAGE INTENTIONALLY BLANK - SIGNATURES APPEAR ON FOLLOWING
PAGE]
PAGE 43 - AGREEMENT AND PLAN OF MERGER
KHC, Fluid Systems, Merger Sub, Company Shareholders and Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
KINETICS FLUID SYSTEMS, INC. POLY CONCEPTS, INC.
By: /s/ Xxxx Xxxxxxx By: /s/ Xxxx Xxxxx
________________________________ _______________________________
Name: ________________________________ Name: _______________________________
Its: ________________________________ Its: _______________________________
KINETICS ACQUISITION CORPORATION COMPANY SHAREHOLDERS
By: /s/ Xxxx Xxxxxxx /s/ Xxxx Xxxxx
________________________________ ____________________________________
Name: ________________________________ Xxxx Xxxxx
Its: ________________________________
/s/ Xxxxxxx Xxxxx
_____________________________________
Xxxxxxx Xxxxx
/s/ Xxxxxxx Xxxx
_____________________________________
Xxxxxxx Xxxx
KINETICS HOLDINGS CORPORATION
By: /s/ Xxxx Xxxxxxx
__________________________
Name:________________________
Its:___________________________
PAGE 44 - AGREEMENT AND PLAN OF MERGER
EXHIBIT LIST
EXHIBIT A - Escrow Agreement
EXHIBIT B - Employment Agreement
EXHIBIT C - Shareholder Agreement
EXHIBIT D - Legal Opinion of Xxxxxxx Xxxxx & Xxxxx LLP
EXHIBIT E - Legal Opinion of Xxxxx Xxxxxx Xxxxxxxx LLP
PAGE 45 - AGREEMENT AND PLAN OF MERGER
EXHIBIT A
Escrow Agreement
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Escrow Agreement") is made and entered into as
of _____________ , 2002 ("Effective Time"), by and among (i) KINETICS HOLDING
CORPORATION, a California corporation ("KHC"), (ii) the Shareholders (the
"Holders") of POLY CONCEPTS, INC., an Oregon corporation (the "Company"), (iii)
Xxxxxxx Xxxxx, as the representative of the Holders (the "Holders'
Representative"), and (iv) X.X. Xxxxxx Trust Company, National Association, as
escrow agent of the Escrow Shares (the "Escrow Agent").
RECITALS
A. On April 10, 2002, an Agreement and Plan of Merger ("Merger
Agreement") was made and entered into among (i) KHC, (ii) Kinetics Fluid
Systems, Inc., a California corporation ("Fluid Systems"), (iii) Kinetics
Acquisition Corporation, an Oregon corporation and a wholly-owned subsidiary of
KHC ("Merger Sub"), (iv) Company, and (v) the Holders.
B. Pursuant to Section 2.1.1 and 2.1.2 of the Merger Agreement, Holders
are to receive the Escrow Shares (which shares represent shares of the Series A
Preferred of KHC) if the Surviving Division achieves certain financial
performance goals as set forth in this Escrow Agreement.
NOW, THEREFORE, for and in consideration of the foregoing and the
mutual covenants and agreements contained in the Merger Agreement and in this
Escrow Agreement, the parties agree as follows:
AGREEMENT
1. DEFINITIONS
Capitalized terms used and not otherwise defined herein shall have the
meanings set forth in the Merger Agreement.
2. ESCROW AGENT
KHC and the Holders hereby designate and appoint the Escrow Agent to
serve in accordance with the terms, conditions and provisions of this Agreement.
The Escrow Agent hereby agrees to act as escrow agent in accordance with the
terms, conditions and provisions of this Agreement.
3. ESTABLISHMENT OF ESCROW ACCOUNT
(a) Deposit of Shares.
PAGE 1 -ESCROW AGREEMENT
Upon Closing, KHC shall immediately issue the Escrow Shares ("Initial
Escrow Shares") according to the percentages set forth on Exhibit 3.1, and shall
promptly deposit with Escrow Agent duly authorized share certificates registered
in the respective names of the Holders as set forth in Exhibit 3.1 hereto. In
the event any additional KHC capital shares result from any share dividend,
reclassification, stock split, subdivision or combination of shares,
recapitalization, merger or other events made with respect to any KHC Series A
Preferred held in escrow under this Escrow Agreement ("Additional Shares"), KHC
shall deliver certificates representing the Additional Shares to the Escrow
Agent, which shall also be held in escrow (and, as required under this Escrow
Agreement, shall be released from escrow). Unless otherwise indicated, as used
in this Escrow Agreement, the term "Escrow Shares" includes the Initial Escrow
Shares and any Additional Shares. In the event of a reduction in the capital
shares due to a reverse stock split the number of Escrow Shares shall be
adjusted accordingly. The Escrow Agent agrees to accept delivery of the Escrow
Shares and to hold such Escrow Shares in escrow in accordance with this Escrow
Agreement and to release the Escrow Shares out of escrow as provided in this
Escrow Agreement.
(b) Dividends; Voting and Rights of Ownership.
Any cash dividends, dividends payable in property or other
distributions of any kind (except for Additional Shares) made in respect of the
Escrow Shares shall also be held in escrow ("Escrow Funds") (and, as required
under this Escrow Agreement, shall be released from escrow), and for the
purposes of this Escrow Agreement, shall constitute part of the "Escrow Shares."
Each Holder shall have the right to vote the Escrow Shares held in escrow for
the account of such Holder so long as such Escrow Shares are held in escrow.
While the Escrow Shares remain in the Escrow Agent's possession pursuant to this
Escrow Agreement, the Holders shall retain and shall be able to exercise all
other incidents of ownership of the Escrow Shares that are not inconsistent with
the terms and conditions hereof.
(c) No Encumbrance.
None of the Escrow Shares or any beneficial interest therein may be
pledged, sold, assigned or transferred, including by operation of law or by a
Holder, or may be taken or reached by any legal or equitable process in
satisfaction of any debt or other liability of a Holder, prior to the delivery
of the Escrow Shares by the Escrow Agent or KHC to such Holder pursuant to this
Escrow Agreement.
(d) Power to Transfer Escrow Shares.
The Escrow Agent is hereby granted the power to effect any transfer of
the Escrow Shares provided for in this Escrow Agreement.
4. RELEASE FROM ESCROW
(a) Financial Goals.
The Escrow Shares are to be released by the Escrow Agent to Holders
when and if the Company, as a division of Fluid Systems after Closing
("Surviving Division"), meets or exceeds the financial goals as detailed on
Exhibit 4.1 hereto (hereinafter, the "Financial Goals")
PAGE 2 -ESCROW AGREEMENT
measured for performance for the time period commencing May 1, 2002, and ending
April 30, 2003 (the "Measurement Period"). If the Surviving Division meets the
Financial Goals during the Measurement Period (as measured at the end of the
Measurement Period), then the Escrow Agent shall release the Escrow Shares to
Holders. If the Surviving Division does not meet the Financial Goals by the end
of the Measurement Period, then the Escrow Agent shall release the Escrow Shares
to KHC. At all times during the Measurement Period, Fluid Systems shall keep
separate statements and records for the Surviving Division to facilitate the
clear and convenient measurement of the Financial Goals.
(b) Access to Financial Information.
At all times during the Measurement Period, Fluid Systems shall grant
to Holders' Representative, in Sherwood Oregon, access to all information that
is relevant to the calculation of the Financial Goals, including but not limited
to financial statements, purchase orders, invoices, shipping reports, and
shipment analysis reports. Holders' Representative shall provide reasonable
advance notice to Fluid Systems prior to review of such information, and shall
conduct the review at times and in a manner that is not disruptive of the
business of Fluid Systems.
(c) Determination of Achievement of Financial Goals.
Within thirty (30) days following the end of the Measurement Period,
KHC shall determine whether the Financial Goals have been met. If KHC fails to
instruct the Escrow Agent to return the Escrow Shares to KHC within this thirty
(30) day period, the Escrow Agent shall automatically and without further
instructions release the Escrow Shares to the respective Holders. If KHC
determines that the Financial Goals have not been met, KHC shall within such 30
day period instruct the Escrow Agent to return the Escrow Shares to KHC, with a
copy of such instruction to Holders' Representative. KHC shall also provide the
Holders' Representative all financial reports, records, and other documentation
upon which it relied in making its determination. If Holders' Representative
disagrees with KHC's determination, the Holders' Representative may within sixty
(60) days following its receipt of KHC's instruction state in writing to KHC and
the Escrow Agent that it believes the Financial Goals have been met ("Contest
Notice") and provide documentation to KHC supporting its conclusion. If the
Holders' Representative has not delivered a Contest Notice within this sixty
(60) day period, the Escrow Agent shall within ten (10) days of this period
automatically and without further instructions promptly release the Escrow
Shares to KHC.
(d) Contested Release.
If the Holders' Representative gives a Contest Notice to KHC and the
Escrow Agent contesting KHC's determination within the period provided above,
then such matter shall be deemed to be in dispute and is hereinafter referred to
as an "Arbitrable Claim." If a timely Contest Notice is received by the Escrow
Agent and KHC, then the Escrow Agent shall hold the Escrow Shares until Escrow
Agent receives either: (i) a settlement agreement executed by KHC and the
Holders setting forth a resolution of the dispute ("Settlement Agreement") or,
(ii) a copy of the final award or decision of the arbitrator and setting forth
the required distribution ("Distribution Award"). Upon receipt of either of the
above, the Escrow Agent shall, within ten
PAGE 3 -ESCROW AGREEMENT
(10) Business Days of receipt of the Settlement Agreement or the Distribution
Award, as applicable, release the Escrow Shares as specified in the Settlement
Agreement or the Distribution Award, as applicable. If the Escrow Agent
institutes an action for interpleader as a result of a dispute between the
parties, the parties hereby agree to jointly seek to stay such interpleader
action pending the resolution of any arbitration commenced by the parties or, if
the parties are unable to agree, pursuant to this Section (d).
(e) Arbitration.
(i) CPR Rules.
Any Arbitrable Claim, and any dispute between the Holders and KHC under
this Escrow Agreement, shall be submitted to final and binding arbitration in
Portland, Oregon, which arbitration shall, except as herein specifically stated,
be conducted in accordance with the CPR Non-Administered Arbitration Rules (the
"CPR Rules") then in effect; provided, however, that the parties agree first to
try in good faith to resolve any Arbitrable Claim by mediation under the CPR
Mediation Procedure for Business Disputes, before resorting to arbitration;
provided, further, that, in the event of an arbitration, the arbitration
provisions of this Escrow Agreement shall govern over any conflicting rules
which may now or hereafter be contained in the CPR Rules.
(ii) Binding Effect.
The final decision of the arbitrator shall be a reasoned opinion based
on applicable law and furnished in writing to the Escrow Agent, the Holders'
Representative, the Holders and KHC and will constitute a conclusive
determination of the issue in question, binding upon the Holders, the Holders'
Representative, and KHC. The arbitrator shall have the authority to grant any
equitable and legal remedies that would be available in any judicial proceeding
instituted to resolve an Arbitrable Claim. Any judgment upon the award rendered
by the arbitrator may be entered in any court having jurisdiction over the
subject matter thereof.
(iii) Compensation of Arbitrator.
Any such arbitration shall be conducted before a single arbitrator, who
will be compensated for his or her services, as provided below in Section (v),
at a rate to be determined by the parties or pursuant to the CPR Rules, but
based upon reasonable hourly or daily consulting rates for the arbitrator in the
event KHC and the Holders' Representative are not able to agree upon his or her
rate of compensation.
(iv) Selection of Arbitrator.
The parties shall select the arbitrator by mutual agreement promptly
following initiation of arbitration in accordance with the CPR Rules; provided,
however, if the parties are unable to reach such agreement within twenty (20)
days of initiation, the CPR shall have the authority to select an arbitrator
from a list of arbitrators who are partners in a nationally or regionally
recognized firm of independent certified public accountants from the management
advisory services department (or comparable department or group) of such firm or
who are partners in a major law firm; provided, however, that such accounting
firm or law firm cannot be a firm that
PAGE 4 -ESCROW AGREEMENT
has within the last three years rendered, or is then rendering, services to any
party hereto or, in the case of a law firm, appeared, or is then appearing, as
counsel of record in opposition to any party hereto. Any arbitrator selected to
serve shall be qualified by training and experience for the matters for which
such arbitrator is designated to serve.
(v) Payment of Costs.
The prevailing party in any arbitration shall be entitled to an award
of attorneys' fees and costs, and all costs of arbitration, including those
provided for above, will be paid by the losing party, subject in each case to a
determination by the arbitrator as to which party is the prevailing party and
the amount of such fees and costs to be allocated to such party. Each Holder in
the proportions set forth on Exhibit 3.1 will reimburse any amounts payable to
KHC by or on account of the Holders under this subsection; provided, however,
that all Holders shall be jointly and severally liable for amounts payable to
KHC under this subsection.
(vi) Terms of Arbitration.
The arbitrator chosen in accordance with these provisions shall not
have the power to alter, amend or otherwise affect the terms of these
arbitration provisions or the provisions of this Escrow Agreement, the Merger
Agreement or any other documents that are executed in connection therewith.
(vii) Exclusive Remedy.
Arbitration or mediation under this Section (vii) shall be the sole and
exclusive remedy of the parties for any Arbitrable Claim arising out of this
Escrow Agreement.
5. RESPONSIBILITIES OF ESCROW AGENT
(a) Responsibilities of the Escrow Agent.
The acceptance by the Escrow Agent of its duties under this Agreement
is subject to the following terms and conditions, which the parties to this
Agreement hereby agree shall govern and control with respect to such Escrow
Agent's rights, duties, liabilities and immunities:
(i) The Escrow agent shall act hereunder as depository only,
and it shall not be responsible or liable in any manner whatsoever for the
sufficiency of the share certificates and Escrow Funds deposited with it. The
duties and responsibilities of the Escrow Agent hereunder shall be determined
solely by the express provisions of this Agreement, and no further duties or
responsibilities shall be implied. Except for the defined terms in the Merger
Agreement, the Escrow Agent shall not have any liability under, nor duty to
inquire into the terms and provisions of any agreements or instructions, other
than outlined in this Agreement.
(ii) The Escrow Agent shall be protected in acting upon any
written notice, request, waiver, consent, receipt or other paper or document
furnished to it, not only as to its due execution and the validity and
effectiveness of its provisions but also as to the truth and acceptability of
any information therein contained, which it in good faith believes to be genuine
and what it purports to be.
PAGE 5 -ESCROW AGREEMENT
(iii) The Escrow Agent shall not be liable for any error of
judgment, or for any act done or step taken or omitted by it, or for any mistake
of fact or law or for anything which it may do or refrain from doing in
connection herewith, except for fraud, gross negligence, willful misconduct or
for any action taken or omitted in bad faith that a court of competent
jurisdiction determines was the primary cause of a loss to KHC or the Holders.
The Escrow Agent shall not incur any liability for following the instructions
herein contained or expressly provided for, or written instructions given by
both parties hereto. KHC and the Holders, jointly and severally, covenant and
agree to indemnify and hold the Escrow Agent and its directors, officers, agents
and employees (collectively, the "Indemnitees") harmless from and against any
and all liabilities, losses, damages, fines, suits, actions, demands, penalties,
costs and expenses, including out-of-pocket, incidental expenses, legal fees and
expenses, the allocated costs and expenses of in-house counsel and legal staff
and the costs and expenses of defending or preparing to defend against any claim
("Damages") that may be imposed on, incurred by, or asserted against, the
Indemnitees or any of them for following any instruction or direction upon which
the Escrow Agent is authorized to rely pursuant to the terms of this Agreement.
In addition to and not in limitation of the immediately preceding sentence, KHC
and the Holders, jointly and severally, also covenant and agree to indemnify and
hold the Indemnitees and each of them harmless from and against any Damages that
may be imposed on, incurred by, or asserted against the Indemnitees or any of
them in connection with or arising out of the Escrow Agent's performance under
this Agreement, provided the Escrow Agent has not acted with fraud, gross
negligence or bad faith or engaged in willful misconduct. The provisions of this
Section 5 shall survive the termination of this Agreement and the resignation or
removal of the Escrow Agent for any reason. Anything in this Agreement to the
contrary notwithstanding, in no event shall the Escrow Agent be liable for
special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Escrow Agent has been
advised of such loss or damage and regardless of the form of action.
(iv) In the administration of this Agreement and the Escrow
Shares hereunder, the Escrow Agent may consult with counsel for accountants to
be selected and retained by it. The Escrow Agent shall not be liable for
anything done, suffered or omitted in good faith by it in accordance with the
advice or opinion of any such counsel or accountant.
(v) The Escrow Agent shall have no duties except those which
are expressly set forth herein, and it shall not be bound by any notice of a
claim, or demand with respect thereto, or any waiver, modification, amendment,
termination or rescission of this Agreement, unless in writing received by it.
(vi) The Escrow Agent may resign at any time by giving written
notice thereof to KHC and the Holders' Representative, but such resignation
shall not become effective until a successor Escrow Agent mutually agreed to by
KHC and the Holders' Representative shall have been appointed and shall have
accepted such appointment in writing. If an instrument of acceptance by a
successor Escrow Agent shall not have been delivered to the Escrow Agent within
thirty (30) days after the giving of such notice of resignation, the resigning
Escrow Agent may, at the joint and several expense of KHC and the Holders,
petition any court of competent jurisdiction for the appointment of a successor
Escrow Agent. The Escrow Agent shall have the right to withhold an amount from
the Escrow Fund equal to the amount due and owing to the Escrow Agent, plus any
costs and expenses the Escrow Agent shall reasonably believe may be
PAGE 6 -ESCROW AGREEMENT
incurred by the Escrow Agent in connection with the appointment of a successor
Escrow Agent. Any corporation or association into which the Escrow Agent in its
individual capacity may have merged or converted or with which it may be
consolidated, or any corporation or association resulting from any merger,
conversion or consolidation to which the Escrow Agent in its individual capacity
shall be a party, or any corporation or association to which all or
substantially all of the corporate trust business of the Escrow Agent in its
individual capacity may be sold or otherwise transferred, shall be the Escrow
Agent under this Agreement without further act.
6. FEE
The Escrow Agent will be paid by KHC as billed for services hereunder
in accordance with the fee schedule attached hereto as Exhibit 6. If the Escrow
Agent is made a party to litigation with respect to the property held hereunder,
or brings an action in interpleader, or the Escrow Agent is required to render
any service not provided for in this Escrow Agreement and fee schedule, or there
is any assignment of the interests under this Escrow Agreement or any
modification hereof, the Escrow Agent shall be entitled to reasonable
compensation from KHC for such extraordinary services and reimbursement for all
fees, costs, liability, and expenses, including attorneys' fees.
7. HOLDERS' REPRESENTATIVE
For purposes of this Escrow Agreement, the Holders have, by the
execution of this Escrow Agreement, consented to the appointment of the Holders'
Representative as representative of the Holders and as the attorney-in-fact for
and on behalf of each Holder, and, subject to the express limitations set forth
below, the taking by the Holders' Representative of any and all actions and the
making of any decisions required or permitted to be taken by Holders'
Representative under this Escrow Agreement, including but not limited to the
exercise of the power to: (i) authorize delivery to KHC of the Escrow Shares, or
any portion thereof, (ii) agree to, negotiate, enter into settlements and
compromises of, and demand arbitration and comply with orders of courts and
awards of arbitrators with respect to disputes under this Escrow Agreement, and
(iii) take all actions necessary in the judgment of the Holders' Representative
for the accomplishment of the foregoing and all of the other terms, conditions,
and limitations of this Escrow Agreement. The Holders' Representative shall have
unlimited authority and power to act on behalf of each Holder with respect to
this Escrow Agreement (including without limitation the amendment of the terms
hereof) and the disposition, settlement, or other handling of all claims,
rights, or obligations arising under this Escrow Agreement so long as all
Holders are treated in the same manner. The Holders shall be bound by all
actions taken by the Holders' Representative in connection with this Escrow
Agreement, and KHC and the Escrow Agent shall be entitled to rely on any action
or decision of the Holders' Representative. In performing Holders'
Representative's functions hereunder, the Holders' Representative shall not be
liable to the Holders in the absence of gross negligence or willful misconduct.
The Holders' Representative shall not be entitled to receive any compensation
from KHC or out of the Escrow Shares in connection with this Escrow Agreement.
The Holders will pay any out-of-pocket costs and expenses reasonably incurred by
the Holders' Representative in connection with actions taken pursuant to the
terms of this Escrow Agreement to the Holders' Representative in proportion to
their percentage interests in the Escrow Shares.
PAGE 7 -ESCROW AGREEMENT
8. TERMINATION
This Escrow Agreement and the escrow created hereby shall terminate
following the Escrow Agent's delivery of all Escrow Shares to the Holders or KHC
in accordance with the terms of this Agreement.
9. MISCELLANEOUS PROVISIONS
(a) Attorneys' Fees
In the event of any action to enforce any provision of this Escrow
Agreement, or on account of any default under or breach of this Escrow
Agreement, the prevailing party in such action shall be entitled to recover, in
addition to all other relief, from the other party all attorneys' fees incurred
by the prevailing party in connection with such action (including, but not
limited to, any appeal thereof).
(b) Entire Agreement
This Escrow Agreement constitutes the final and entire agreement among
the parties with respect to the subject matter hereof and supersedes all prior
arrangements or understandings.
(c) Notices
All notices and other communications under this Agreement shall be in
writing and shall be deemed given (i) when delivered by hand, (ii) when
transmitted by telecopier (with confirmation), provided that a copy is sent at
about the same time by registered mail, return receipt requested, (iii) one
business day after mailed, if sent by Express Mail, FedEx, or other nationally
recognized express delivery service, or (iv) three days after mailed, if sent by
registered or certified mail, return receipt requested, to the addressee at the
following addresses or telecopier numbers (or to such other address or
telecopier number as a party may specify by notice given to the other party
pursuant to this provision):
If to the Holders or Holder's Representative: Xxxxxxx Xxxxx
0000 XX Xxxxxxx Xxxx
Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
With copies to: Xx. Xxxxxxx X. Xxxx
00000 XX Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000 phone
Xx. Xxxx Xxxxx 0000
XX Xxxxxxx Xxxx
Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
PAGE 8 -ESCROW AGREEMENT
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxxx Xxxxx & Xxxxx LLP
Suite 1400
000 XX Xxxxxxxx Xxxxxx
Xxxxxxxx XX 00000-0000
Telephone: 000 000-0000
Facsimile: 000 000-0000
If to KHC: Mr. Xxxx Xxxxxxx
Kinetics Group
0000 Xxxxxxx Xxxxxxx Xxxxxxxxx
Xxxxx Xxxxx, XX 00000
Telephone: 000 000-0000
Facsimile: 000 000-0000
With a copy to: Xxxxxxx X. Xxxxxx, Esq.
Xxxxx Xxxxxx Xxxxxxxx
2300 First Interstate Tower
0000 XX Xxxxx Xxxxxx
Xxxxxxxx XX 00000
Telephone: 000 000-0000 (Main)
503 778-5422 (Direct
Dial)
Facsimile: 000 000-0000
If to the Escrow Agent, to: Mr. Xxxxxxx Xxxxxx
X.X. Xxxxxx Trust Company, N.A.
One Oxford Centre, Suite 1100
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Telephone: ____________________
Facsimile: 000 000-0000
or to such other person as shall be designated in writing by any such party.
(d) Parties in Interest
This Agreement shall be binding upon and insure to the benefit of KHC,
the Holders, and the Escrow Agent and their respective successors and permitted
assigns.
(e) Execution by Escrow Agent
The execution of this Agreement by the Escrow Agent shall evidence its
acceptance and agreement of the terms hereto.
PAGE 9 -ESCROW AGREEMENT
(f) Changes
The terms of this Escrow Agreement may not be modified or amended, or
any provisions hereof waived, temporarily or permanently, except pursuant to the
written agreement of the parties.
(g) Amendment and Termination
This Agreement may be amended or terminated by and upon written notice
to the Escrow Agent at any time given jointly by KHC and the Holders'
Representative, but the duties or responsibilities of the Escrow Agent may not
be amended or modified without its consent.
(h) Severability
If any term or provision of this Escrow Agreement or the application
thereof as to any person or circumstance shall to any extent be invalid or
unenforceable, the remaining terms and provisions of this Escrow Agreement or
the application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable shall not be affected
thereby and each term and provision of this Escrow Agreement shall be valid and
enforceable to the fullest extent permitted by law.
(i) Counterparts
This Escrow Agreement may be executed in two or more partially or fully
executed counterparts, each of which shall be deemed an original and shall bind
the signatory, but all of which together shall constitute but one and the same
instrument. The execution and delivery of an Escrow Agreement - Signature Page
in the form annexed to this Escrow Agreement by any party hereto who shall have
been furnished the final form of this Escrow Agreement shall constitute the
execution and delivery of this Escrow Agreement by such party.
(j) Headings
The headings of the various sections of this Escrow Agreement have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Escrow Agreement.
(k) Governing Law
This Escrow Agreement shall be construed and controlled by the laws of
the State of Oregon without regard to the principles of conflicts of laws. The
parties consent to the exclusive jurisdiction and venue in the state and federal
courts in Multnomah County, Oregon.
(l) Binding Effect
This Escrow Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, affiliates, successors and
assigns.
(the remainder of this page has been intentionally left blank)
PAGE 10 -ESCROW AGREEMENT
ESCROW AGREEMENT -- SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have duly executed this Escrow
Agreement as of the day and year first above written.
HOLDERS' REPRESENTATIVE KINETICS HOLDING CORPORATION
By: ________________________________ By: _______________________________
Name: ________________________________ Name: _______________________________
Its: ________________________________ Its: _______________________________
HOLDERS X.X. XXXXXX TRUST COMPANY
______________________________________ By: _______________________________
Xxxxxxx X. Xxxx Name: _______________________________
Its: _______________________________
______________________________________
Xxxxxxx X. Xxxxx
______________________________________
Xxxx Xxxxx
PAGE 11 -ESCROW AGREEMENT
EXHIBIT 3.1
INITIAL ESCROW SHARES
HOLDER INITIAL ESCROW SHARES % OF TOTAL
Xxxx Xxxxx 420,074 300/452
Xxxxxxx Xxxxx 22,404 16/452
Xxxxxxx Xxxx 190,433 136/452
TOTAL 632,911 100%
PAGE 1 - EXHIBIT 3.1 TO ESCROW AGREEMENT
EXHIBIT 4.1
FINANCIAL GOALS
The Holders' receipt of the Escrowed Shares shall be subject to
Surviving Corporation's achievement of a minimum aggregate Gross Profit (i.e.,
GROSS PROFIT: the difference between net sales and the cost of goods sold) from
Designated Business between the first day of the calendar month following the
execution of this Agreement and the first anniversary of such date (the
"Measurement Period"), of $5,000,000.
For purposes of this measurement, Gross Profit is calculated on the
gross revenues accrued from Designated Business during the Measurement Period
under generally accepted accounting principles, applied on a basis consistent
with the accounting practices applied to generate the Company's reviewed
financial statements for the year ending December 31, 2001.
For purposes of this measurement, "Designated Business" means sales of
products and services of the type sold or under development by the Company prior
to the Measurement Period, but shall not include existing products and services
of KHC or its affiliates that are listed on the attached schedule and currently
sold to the following specific customers: Intel Corporation, Novellus, and their
contractors and/or subcontractors (the "Identified Customers").
In order to assure meaningful measurement of Gross Profit, for purposes
of such measurement, the Surviving Corporation shall continue to receive sole
benefit of and be solely responsible for the Designated Business during the
Measurement Period.
PAGE 1 - EXHIBIT 4.1 TO ESCROW AGREEMENT
EXHIBIT 6
ESCROW AGENT FEE SCHEDULE
PAGE 1 - EXHIBIT 6 TO ESCROW AGREEMENT
11 -EMPLOYMENT AGREEMENT FOR XXXXXXX XXXXX
EXHIBIT B
Employment Agreement
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into this
_____ day of __________, 2002, by and between Kinetics Fluid Systems, Inc., a
California corporation ("Employer") and Xxxxxxx Xxxxx ("Employee").
RECITALS
A. Employer is a California corporation, and is a designer and
manufacturer of high purity products and chemical process equipment. Employer is
engaged in that business as a consequence of a corporate merger between Poly
Concepts, Inc. ("PCI") and Kinetics Acquisition Corporation, both Oregon
corporations, which in turn merged with Employer ("Merger").
B. Employee was formerly employed by PCI and Employer desires to retain
Employee by reason of Employee's experience, training and ability to
perform services for and behalf of the Employer. Employee desires to accept
such employment upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in reliance upon the foregoing Recitals, and the mutual
covenants hereinafter set forth, the parties agree as follows:
AGREEMENT
1. EMPLOYMENT. Employer hereby agrees to employ Employee and Employee
hereby agrees to serve Employer as an "at-will" employee. Employee's employment
with Employer will commence upon the closing of the Merger ("Closing"). While in
the employ of Employer, Employee shall devote Employee's full business time,
skill, energy and attention to the business of Employer, and shall perform
Employee's duties in a diligent, trustworthy, businesslike and efficient manner,
all for the purpose of advancing the business of Employer. Employer shall be
entitled to all the benefits, profits, and other issues arising from, or
incident to, all work, services, and advice of Employee.
2. TERM. This Agreement shall have no fixed term but shall be "at-will"
employment that may be terminated by Employer or Employee at any time and for
any reason.
3. DUTIES. Employee shall have the corporate title of Business
Integration Director, and Employee's general job description is set forth on
Exhibit A, attached hereto and by reference incorporated herein ("Scope of
Services"). Employee shall perform duties and responsibilities required of such
Employee within the Scope of Services, and shall perform in a faithful and
competent manner such additional duties as may be reasonably assigned from time
Page 1 - EMPLOYMENT AGREEMENT FOR XXXXXXX XXXXX
to time by the General Manager of the Poly Concepts division. Employee shall
report to the General Manager of the Poly Concepts division.
4. COMPENSATION. As Employee's entire compensation for all services
rendered to Employer under this Agreement, in whatever capacity rendered, the
Employee shall have and receive the following:
4.1 BASE COMPENSATION. Regular annual compensation ("Base
Compensation") at the rate of one hundred five thousand dollars ($105,000) based
on a forty (40) hour work week schedule, payable in accordance with the standard
pay periods of Employer as may be in effect from time to time. If Employee
chooses to work a reduced schedule of thirty (30) hours, the Base Compensation
will be reduced proportionately to the reduction in hours. At such time as the
regular annual compensation of the other executive employees of Employer is
evaluated or adjusted, Employer agrees to evaluate, and if appropriate, adjust
the Base Compensation of Employee based on the determination of the Board of
Directors of Employer. The Base Compensation shall be subject to withholding for
federal, state and local payroll and all other taxes or withholdings applicable
to Employee.
4.2 INCENTIVE COMPENSATION. In addition to the Base
Compensation, Employee shall be entitled to a retention bonus and an incentive
bonus (collectively "Incentive Compensation") as detailed on Exhibit B, attached
hereto and by reference incorporated herein.
4.3 BENEFITS. Employee shall be entitled to participate in the
insurance, vacation, sick leave and other fringe benefits made available
generally to employees of Employer, as such benefits may be determined from time
to time by Employer's Board of Directors; provided, however that during the
first year after Closing Employee's benefits will be governed by Employer's
standard policy subject to any required adjustments to benefits as set forth in
the integration plan approved by both parties.
4.4 SEVERANCE BENEFIT. In addition to Base Compensation and
Incentive Compensation, in the event of a Constructive Discharge under Section
8.4 or a termination by Employer without Cause under Section 8.7. Employee is
only entitled to severance benefits ("Severance Benefits") equal to monthly
salary times the number of full months remaining between such termination and
the second anniversary of Closing. In the event of a Constructive Discharge due
to a reduction in salary, Severance Benefits will be determined based on the
Base Compensation prior to the reduction. Following the second anniversary of
Closing, Employee is entitled to Severance Benefits in accordance with
Employer's standard severance. If this Agreement is terminated as a result of
death under Section 8.1, illness or disability under Section 8.2, by Employer
for Cause under Section 8.3 or by Employee without Cause under Section 8.6, then
Employee shall be entitled to no Severance Benefit.
4.4 BUSINESS EXPENSES. Employer agrees to reimburse Employee
for reasonable and necessary business expenses incurred by Employee in
furthering the business interests of Employer, all in accordance with Employer's
standard policies and practices.
Page 2 - EMPLOYMENT AGREEMENT FOR XXXXXXX XXXXX
5. AUTHORITY. Employee shall promptly deposit all funds derived by
Employer and received by Employee in appropriately denoted bank accounts of
Employer.
6. BOND. Employee agrees to provide to Employer such information as
Employer may reasonably require to apply for a fiduciary bond in such amount as
deemed appropriate by Employer. The cost of such bond shall be borne solely and
only by Employer. Employer's ability to obtain such bond shall not be deemed a
condition of employment.
7. PROTECTION OF BUSINESS INTERESTS.
7.1 EMPLOYER OWNERSHIP OF CONFIDENTIAL DATA. Other than as
required to perform Employee's duties in accordance with this Agreement and for
the purposes of furthering the business of Employer, Employee shall not use or
otherwise appropriate for Employee's own benefit or for the benefit of others,
any knowledge or information with respect to Employer and its affiliates'
business that is not generally known by persons not employed by or affiliated
with Employer, including all trade secrets, customers lists, development,
strategy, financial, pricing, marketing or technical information (hereinafter
referred to as the "Confidential Data"). Employee agrees to return all
Confidential Data and other property of Employer immediately upon termination of
employment, including all handbooks, training materials, reports, policy
statements, research, programs, customer and prospect lists, mailing lists and
other documents obtained by Employee as a result of her employment with Employer
or PCI.
7.2 CONFIDENTIALITY. Because the work for which Employee is
employed, and upon which Employee will be engaged, will include knowledge and
information of a confidential nature to, and the secret property of Employer
and/or its affiliates, Employee will receive all Confidential Data in confidence
and will not, except as required in the conduct of Employer's business, or
authorized in writing by Employer, publish, disclose or use or authorize, or
make it possible for anyone else to publish, disclose or make use of any such
Confidential Data, unless and until such information and knowledge shall have
ceased to be secret or confidential as evidenced by general public knowledge.
This prohibition as to publication and disclosure shall not restrict Employee in
the exercise of Employee's technical skill, provided that the exercise of such
skill does not involve the disclosure to others, or use by Employee, of
Confidential Data.
7.3 COVENANT NOT TO COMPETE. Employee further covenants and
agrees that at no time while in the employ of Employer, or for two (2) years
immediately following the termination of Employee's employment for Cause
pursuant to Section 8.3 or by Employee without Cause under Section 8.6, will
Employee for himself or on behalf of any other person, persons, firm,
partnership, corporation, limited liability company or other company, (i) engage
in a business similar to Employer's business within the United States, (ii)
directly or indirectly solicit or attempt to solicit the business or patronage
of any person, firm, corporation, limited liability company or partnership
within said area for the purpose of selling products or services similar to
those distributed or provided by Employer, (iii) induce or attempt to induce any
employee of Employer or any of its affiliates to terminate such employee's
association with Employer or any of its affiliates, (iv) make any oral or
written statements or communications which, directly or indirectly, disparage,
criticize, degrade, demean, insult or otherwise cast in an unfavorable light
Employer, its reputation, its business strategies, or the reputation of any of
its
Page 3 - EMPLOYMENT AGREEMENT FOR XXXXXXX XXXXX
affiliates, employees, shareholders, directors or officers, or (v) perform such
other incidental business and services as are now engaged in by Employer. For
the purpose of this Agreement, engaging in "a business similar to Employer's
business" means selling products or services that have the same end-use by the
customer.
7.4 COMPLIANCE WITH EMPLOYER POLICIES. Employee acknowledges
that in the course of performing Employee's duties for Employer, Employee will
have access to Confidential Data, the ownership and confidential status of which
are highly important to Employer, and Employee agrees in addition to the
specific covenants contained herein, to comply with all of Employer's policies
and procedures for the protection of such information. Employee also
acknowledges that all such information is and shall continue to be the exclusive
property of Employer, whether or not prepared in whole or in part by Employee
and whether or not disclosed to or entrusted to Employee in connection with
employment by Employer. Finally, Employee agrees to exercise a high degree of
care in safeguarding such information against loss, theft or other inadvertent
disclosure and agrees generally to take all steps reasonably necessary or
requested by Employer to ensure the maintenance of confidentiality.
7.5 ACKNOWLEDGEMENT OF REASONABLENESS. The employment and
post-employment covenants contained in this Agreement are considered by the
parties to be fair, reasonable and integral for the protection of Employer. The
parties mutually agree that if a violation of any of these covenants occurs,
such violation or any threatened violation will cause irreparable injury to
Employer and the remedy at law for any such violation or threatened violation
will be inadequate. The parties acknowledge that these covenants will survive,
and remain in effect and enforceable after, termination of this Agreement.
8. TERMINATION.
8.1 DEATH. This Agreement shall automatically terminate upon
the death of Employee. Employer shall be obligated to pay to Employee's legal
representative all Base Compensation and Incentive Compensation earned by or
accrued for the benefit of Employee through the date of death.
8.2 ILLNESS OR DISABILITY. If Employee is ill or disabled,
necessitating Employee's absence from the work place for a consecutive period in
excess of one hundred eighty (180) days, then, Employer shall have the absolute
right to terminate this Agreement. Employer shall be obligated to pay to
Employee or Employee's legal representative all Base Compensation and Incentive
Compensation earned by or accrued for the benefit of Employee through the date
of termination, all in accordance with Employer's standard policies relating to
sick leave and absences.
8.3 TERMINATION BY EMPLOYER FOR CAUSE. Employer may terminate
this Agreement for "Cause" if Employee (i) continually (by act or omission)
fails to perform Employee's job duties in accordance with the terms of this
Agreement and in accordance with the reasonable direction of the Board of
Directors of Employer, (ii) is convicted of, pleads guilty to, or confesses to a
felony or any crime involving any act of dishonesty, fraud, misappropriation,
embezzlement or moral turpitude, or (iii) engages in any fraudulent, disloyal
Page 4 - EMPLOYMENT AGREEMENT FOR XXXXXXX XXXXX
or unprofessional conduct which results in material injury to Employer or its
affiliates, monetarily or otherwise. Prior to terminating this Agreement and
Employee's employment as a result of subsection (i) above or as a result of
disloyal or unprofessional conduct, Employer shall give Employee written notice
detailing the specific acts, actions, failures, or events upon which the
termination will be based, and Employee shall have thirty (30) days after such
written notice to cease such actions or otherwise correct any such failure or
breach. During this thirty (30) day cure period, Employee shall have a right to
discuss the circumstances of the warning notice in a meeting with the Chief
Executive Officer, Vice President of Human Resources, and at Employer's option
either a director, General Counsel or the Chief Financial Officer. If Employee
does not cease such action or otherwise correct such failure or breach within
such thirty day time period, or having twice received such written notice and
ceased such actions or corrected such failure or breach, Employee at any time
thereafter again so acts, fails or breaches, Employer may terminate this
Agreement immediately. Employer shall be obligated to pay to Employee following
a termination for Cause, all Base Compensation and Incentive Compensation earned
by or accrued for the benefit of Employee through the date of termination.
8.4 CONSTRUCTIVE DISCHARGE. Employee may terminate this
Agreement pursuant to a "Constructive Discharge," which shall result if Employer
does any of the following: (i) continually (by act or omission) fails to perform
its obligations under this Agreement, (ii) reduces Employee's Base Compensation
to an amount less than the Base Compensation in effect on the date of this
Agreement, other than a proportionate reduction applicable to all employees of
Employer, (iii) materially changes the Scope of Services, (iv) requires Employee
to spend more than 30 nights in a year outside of the Portland area or (v)
requires Employee to relocate Employee's residence to perform her duties under
this Agreement. Prior to terminating this Agreement and Employee's employment as
a result of any of the foregoing, Employee shall provide Employer a written
notice detailing the specific acts, actions, failures or events upon which the
termination is based within ninety (90) days after any such event. Employer
shall thereafter have thirty (30) days to remedy the matter prior to the
termination by Employee, and if so remedied such termination right shall no
longer be available with respect to the matter so remedied. If Employee's
employment is terminated by Employee as a result of a Constructive Discharge,
then Employee shall be entitled to all Base Compensation and Incentive
Compensation earned by or accrued for the benefit of Employee through the date
of termination, together with the Severance Benefit.
8.5 MUTUAL AGREEMENT. The parties may mutually agree to
terminate this Agreement at any time.
8.6 TERMINATION BY EMPLOYEE WITHOUT CAUSE. Employee may
terminate her employment at any time and for any reason, and if such termination
is not as the result of a Constructive Discharge as provided in Section 8.4.
Employee agrees to provide at least two (2) weeks' notice prior to the date of a
termination for other than Constructive Discharge. In the event of a termination
by Employee other than for Constructive Discharge, Employee shall be entitled to
all Base Compensation and Incentive Compensation earned by or accrued for the
benefit of Employee through the date of termination, but shall not be entitled
to any Severance Benefit.
Page 5 - EMPLOYMENT AGREEMENT FOR XXXXXXX XXXXX
8.7 TERMINATION BY EMPLOYER WITHOUT CAUSE. Employer may
terminate Employee's employment at any time and for any reason, and if such
termination is not as a result of death pursuant to Section 8.1, illness or
disability pursuant to Section 8.2 or a termination for Cause pursuant to
Section 8.3, then such termination shall be deemed to be a termination without
Cause. Employer agrees to provide Employee with at least two (2) weeks' notice
prior to the date of termination without Cause. In the event of a termination of
Employee's employment by Employer without Cause, then Employer shall pay to
Employee all Base Compensation and Incentive Compensation earned by or accrued
for the benefit of Employee through the date of termination, together with the
Severance Benefit.
8.8 SCOPE OF SERVICES DURING NOTICE PERIOD. Employer and
Employee acknowledge that once notice of termination without Cause is given
pursuant to Section 8.6 or 8.7, that it can be awkward or counterproductive to
have the Employee at the workplace during the two- (2-) week period between the
date of the notice of termination and the effective date of the termination.
Employer may, at its discretion, waive the requirement that Employee provide
services during this two- (2-) week period and simply maintain Employee on the
payroll during that two- (2-) week period even though no services are being
provided.
9. INJUNCTIVE RELIEF. Employee acknowledges that the services to be
rendered under the provisions of this Agreement are of a special, unique and
extraordinary character and that it would be difficult or impossible to replace
such services. Accordingly, Employee agrees that any breach or threatened breach
by Employee of Section 7 of this Agreement shall entitle Employer, in addition
to any other legal remedies available to it, to apply to any court of competent
jurisdiction to enjoin such breach or threatened breach. The parties understand
and intend that each restriction agreed to by Employee shall be construed as
separable and divisible from every other restriction, that the enforceability of
any one restriction shall not limit the enforceability, in whole or in part, of
any other restriction, and that one or more of all of such restrictions may be
enforced in whole or in part as the circumstances warrant. If any restriction in
this Agreement is more restrictive than permitted by the laws of the
jurisdiction in which Employer seeks enforcement thereof, such restriction shall
be limited to the extent permitted by law.
10. REPRESENTATIONS OF EMPLOYEE. Employee hereby represents, warrants
and agrees that the execution of this Agreement and the performance of the terms
and conditions hereof do not and shall not violate any other employment contract
or commitment, express or implied, of Employee.
11. NOTICES. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given when personally delivered, sent by facsimile or
email, with receipt confirmed, or sent by certified mail, return receipt
requested, postage prepaid, as follows:
Page 6 - EMPLOYMENT AGREEMENT FOR XXXXXXX XXXXX
11.1 If to Employer: Kinetics Fluid Systems, Inc.
0000 Xxxxxx Xxxxx Xxxxx
Xxxxxxxx, XX 00000
Attention Xxxx Xxxxxxx
(000) 000-0000 phone
(000) 000-0000 fax
11.2 If to Employee: Xxxxxxx Xxxxx
0000 XX Xxxxxxx Xxxx
Xxxxxxxx, XX 00000
(000) 000-0000
Either party may change the address to which such communications are to be
directed by giving written notice to the other party in the manner provided in
this Section. Any notice given by mail shall be deemed given on the third (3rd)
business day following such mailing.
12. GENERAL PROVISIONS.
12.1 ENTIRE AGREEMENT. This Agreement contains all the terms
and conditions agreed upon by the parties herein with reference to the subject
matter hereof. No officers or employees of Employer have any authority to make
any representation or promise not contained in this Agreement, and each of the
parties hereto agrees that it, he or she has not executed this Agreement in
reliance upon any such representations or promises.
12.2 ASSIGNMENT. This Agreement contemplates the rendition of
personal services by Employee and neither Employee's benefits nor obligations
shall be assignable by Employee without the prior consent of Employer. This
Agreement may not be assigned by Employer except to an affiliate, provided,
however, that if Employer shall merge or effect a consolidation or share
exchange with or into, or sell or otherwise transfer substantially all its
assets to, another business entity, Employer may assign its rights to that
business entity without the consent of Employee provided that it causes the
business entity to assume Employer's obligations under this Agreement. Subject
to the preceding sentence, this Agreement shall inure to the benefit of and be
binding upon the parties and their respective heirs, successors and assigns.
12.3 THIRD PARTY RIGHTS. Nothing in this Agreement, express or
implied, is intended to confer on any person other than the parties and their
respective successors and assigns any rights or remedies under or by reason of
this Agreement.
12.4 CAPTIONS. All section headings are inserted for
convenience only and shall not be used in any way to modify, limit, construe or
otherwise affect this Agreement.
12.5 COUNTERPART. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument. This Agreement shall be
effective as of the date first above written, despite the fact that various
dates of execution by the parties hereto may differ therefrom.
Page 7 - EMPLOYMENT AGREEMENT FOR XXXXXXX XXXXX
12.6 WAIVER. No action taken pursuant to this Agreement,
including, without limitation, any investigation by or on behalf of either
party, shall be deemed to constitute a waiver by the party taking such action of
the complete compliance with representations, warranties, covenants or
agreements contained herein. No waiver, modification or change shall be binding
unless in writing and signed by the party making the waiver. A waiver by either
party hereto of a breach of any provision of this Agreement shall not operate or
be construed as a waiver of any subsequent breach.
12.7 APPLICABLE LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Oregon applicable to
contracts made and performed in that state.
12.8 PARTIAL INVALIDITY. If any term(s) or provisions of this
Agreement or the application thereof to any person or circumstances shall to any
extent be invalid or unenforceable, the remainder of this Agreement or the
application of such term(s) or provision(s) to persons or circumstances other
than those as to which it is held invalid or unenforceable shall not be affected
thereby. Each and every term of this Agreement shall be valid and enforced to
the full extent possible permitted by law.
12.9 INTERPRETATION. This Agreement is to be deemed to have
been prepared jointly by the parties hereto, and if any inconsistencies or
ambiguities exist herein, they shall not be interpreted or construed against
either party as the drafter.
12.10 GENDER. Whenever in this Agreement the context requires,
references to the masculine shall be deemed to include the feminine and neuter,
and reference to the singular shall be deemed to include the plural.
12.11 FURTHER ASSURANCES. Each party hereto agrees to execute
any and all documents and writings that may be necessary or expedient and to do
other acts as will further the purposes hereof.
12.12 DISPUTES AND GOVERNING LAW. Employer and Employee agree
that any dispute arising in connection with, or relating to, this Agreement or
the termination of this Agreement, to the maximum extent allowed by applicable
law, shall be subject to resolution through informal methods and, failing such
efforts, through binding arbitration. Either party may notify the other party of
the existence of a dispute by written notice to the address indicated above in
Section 11. The parties shall thereafter attempt in good faith to resolve their
differences within thirty (30) days after the receipt of such notice. If the
dispute cannot be resolved within such thirty-day period, either party may file
a written demand for arbitration with the other party. The arbitration shall
proceed in accordance with the terms of the Federal Arbitration Act and the
rules and procedures of the American Arbitration Association. A single
arbitrator shall be appointed through the American Arbitration Association's
procedures to resolve the dispute. Notwithstanding the foregoing, either party
hereto shall be entitled to seek an injunction, temporary restraining order or
other temporary relief pending final resolution through the procedures otherwise
provided in this Section 12.12. The parties agree that in the event
Page 8 - EMPLOYMENT AGREEMENT FOR XXXXXXX XXXXX
arbitration is necessary, the laws of the State of Oregon and any applicable
federal law shall apply. The place of the arbitration shall be in Portland,
Oregon. The award of the arbitrator shall be binding and conclusive upon the
parties. Either party shall have the right to have the award made the judgment
of a court of competent jurisdiction in the State of Oregon. The prevailing
party in any arbitration, or any court proceeding brought to enforce an
arbitration award, shall be entitled to reasonable attorney's fees and other
cost and expenses, as determined by the court or arbitrator, incurred in the
proceeding and in any subsequent appeals, in addition to any other relief to
which the prevailing party is entitled.
12.13 NO JOINT VENTURE. Nothing herein contained shall be
construed to create a joint venture or partnership nor to create the
relationship of principal and agent or of an association between Employer and
Employee other than Employer and Employee.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first here and above written.
EMPLOYER: KINETICS FLUID EMPLOYEE:
SYSTEMS, INC.
_________________________________
Xxxxxxx Xxxxx
By: ________________________________
Name:___________________________
Title:__________________________
Page 9 - EMPLOYMENT AGREEMENT FOR XXXXXXX XXXXX
EXHIBIT A
SCOPE OF SERVICES
BUSINESS INTEGRATION DIRECTOR
POSITION OBJECTIVE: - To successfully integrate Poly Concepts
business unit with Kinetics Fluid Systems
organization especially in terms of structure,
processes, resource Deployment and key areas of
leverages.
KEY ROLES AND - Work with KFS Supply Chain organization to
RESPONSIBILITIES: converge Poly Concepts supply base with KFS
supply base. Convergence includes (but not
limited to) possible consolidation of
suppliers, participation in commodity teams,
possible assumption of "polymer" commodity
team, supply chain tools and systems, etc.
- Work with KFS Operations to integrate Poly
Concepts in key Operational initiatives such as
inventory reduction program, supplier
consignment program, quality roadmap, quotation
process, transfer pricing agreements, SOP, etc.
- Successfully integrate Poly Concepts Sales,
Service, Marketing and Marcom functions with
KFS.
- Perform the role of "Product Marketing" for
Polymer Outsource Manufacturing. Develop
processes, resources and tools to make Poly
Concepts become the center of excellence for
polymer design, engineering, quotation and
product strategy.
- Responsible for Poly Concepts sales forecast
and capacity planning.
- Act as the business process leader for Poly
Concepts system integration and migration
(example, Agile, Oracle, etc).
- May be asked to lead other projects as
required.
Page 10 - EMPLOYMENT AGREEMENT FOR XXXXXXX XXXXX
EXHIBIT B
DESCRIPTION OF INCENTIVE COMPENSATION
In addition to the Base Compensation, Employee will be entitled in the first
year following the date of this Agreement to the following Incentive
Compensation: a retention bonus and incentive bonus.
Retention Bonus. The retention bonus will be in the amount of $179,400, payable
in four equal payments beginning on the ninetieth (90th) day after the date of
this Agreement, and at the end of each of the next three ninety (90) day
periods; provided that no retention bonus will be accrued or paid subsequent to
the termination of Employee's employment (a) by Employer for Cause pursuant to
Section 8.3 or (b) by Employee other than as a result of Constructive Discharge
pursuant to Section 8.6. The retention bonus will be paid if the employment is
terminated due to Employee's death or disability.
Incentive Bonus. The first year incentive bonus eligibility shall not exceed
$35,398 to be paid following the first quarter-end after the one year
anniversary of Closing, subject to Employee's achievement of the First Year
Performance Target set forth below. After the first year, Employee will be
eligible for annual incentive bonuses determined by Employer's standard
incentive bonus formula, which shall not exceed twenty percent (20%) of her Base
Compensation and which shall be subject to Employee's achievement of performance
targets set for that year by the Employer.
FIRST YEAR PERFORMANCE TARGET
For the first year following Closing, Employee's incentive bonus shall be deemed
earned in full upon (i) Employee's maintenance of uninterrupted employment with
Employer for one year following Closing, (ii) the generation by the Surviving
Division (as defined in the Merger Agreement) of at least $__,000,000 in gross
sales during such period, and (iii) the generation by the Surviving Division of
gross sales during such period that are at least $__,000,000 higher than the
projected sales in the grounded sales forecast that is attached to this
Agreement.
Page 11 - EMPLOYMENT AGREEMENT FOR XXXXXXX XXXXX
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into this
_____ day of __________, 2002, by and between Kinetics Fluid Systems, Inc., a
California corporation ("Employer") and Xxxxxxx Xxxx ("Employee").
RECITALS
A. Employer is a California corporation, and is a designer and
manufacturer of high purity products and chemical process equipment. Employer is
engaged in that business as a consequence of a corporate merger between Poly
Concepts, Inc. ("PCI") and Kinetics Acquisition Corporation, both Oregon
corporations, which in turn merged with Employer ("Merger").
B. Employee was formerly employed by PCI and Employer desires to retain
Employee by reason of Employee's experience, training and ability to
perform services for and behalf of the Employer. Employee desires to accept
such employment upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in reliance upon the foregoing Recitals, and the mutual
covenants hereinafter set forth, the parties agree as follows:
AGREEMENT
1. EMPLOYMENT. Employer hereby agrees to employ Employee and Employee
hereby agrees to serve Employer as an "at-will" employee. Employee's employment
with Employer will commence upon the closing of the Merger ("Closing"). While in
the employ of Employer, Employee shall devote Employee's full business time,
skill, energy and attention to the business of Employer, and shall perform
Employee's duties in a diligent, trustworthy, businesslike and efficient manner,
all for the purpose of advancing the business of Employer. Employer shall be
entitled to all the benefits, profits, and other issues arising from, or
incident to, all work, services, and advice of Employee.
2. TERM. This Agreement shall have no fixed term but shall be "at-will"
employment that may be terminated by Employer or Employee at any time and for
any reason.
3. DUTIES. Employee shall have the corporate title of Controller for
the Poly Concepts division, and Employee's general job description is set forth
on Exhibit A, attached hereto and by reference incorporated herein ("Scope of
Services"). Employee shall perform duties and responsibilities required of such
Employee within the Scope of Services, and shall perform in a faithful and
competent manner such additional duties as may be reasonably assigned from time
to time by the Senior Vice President of Finance and Administration. Employee
shall report to the Senior Vice President of Finance and Administration.
Page 1 - EMPLOYMENT AGREEMENT FOR XXX XXXX
4. COMPENSATION. As Employee's entire compensation for all services
rendered to Employer under this Agreement, in whatever capacity rendered, the
Employee shall have and receive the following:
4.1 BASE COMPENSATION. Regular annual compensation ("Base
Compensation") at the rate of one hundred twenty thousand dollars ($120,000),
payable in accordance with the standard pay periods of Employer as may be in
effect from time to time. At such time as the regular annual compensation of the
other executive employees of Employer is evaluated or adjusted, Employer agrees
to evaluate, and if appropriate, adjust the Base Compensation of Employee based
on the determination of the Board of Directors of Employer. The Base
Compensation shall be subject to withholding for federal, state and local
payroll and all other taxes or withholdings applicable to Employee.
4.2 INCENTIVE COMPENSATION. In addition to the Base
Compensation, Employee shall be entitled to an incentive bonus, a retention
bonus and signing bonus (collectively "Incentive Compensation") as detailed on
Exhibit B, attached hereto and by reference incorporated herein.
4.3 BENEFITS. Employee shall be entitled to participate in the
insurance, vacation, sick leave and other fringe benefits made available
generally to employees of Employer, as such benefits may be determined from time
to time by Employer's Board of Directors; provided, however that during the
first year after Closing Employee's benefits will be governed by Employer's
standard policy subject to any required adjustments to benefits as set forth in
the integration plan approved by both parties.
4.4 SEVERANCE BENEFIT. In addition to Base Compensation and
Incentive Compensation, in the event of a Constructive Discharge under Section
8.4 or a termination by Employer without Cause under Section 8.7. Employee is
entitled to severance benefits ("Severance Benefits") equal to the greater of
(i) $12,500 or (ii) his monthly salary times the number of full months remaining
between such termination and the second anniversary of Closing. In the event of
a Constructive Discharge due to a reduction in salary, Severance Benefits will
be determined based on the Base Compensation prior to the reduction. Following
the second anniversary of Closing, Employee is only entitled to Severance
Benefits in accordance with Employer's standard severance policy. If this
Agreement is terminated as a result of death under Section 8.1, illness or
disability under Section 8.2, by Employer for Cause under Section 8.3 or by
Employee without Cause under Section 8.6, then Employee shall be entitled to no
Severance Benefit.
4.4 BUSINESS EXPENSES. Employer agrees to reimburse Employee
for reasonable and necessary business expenses incurred by Employee in
furthering the business interests of Employer, all in accordance with Employer's
standard policies and practices.
5. AUTHORITY. Employee shall promptly deposit all funds derived by
Employer and received by Employee in appropriately denoted bank accounts of
Employer.
Page 2 - EMPLOYMENT AGREEMENT FOR XXX XXXX
6. BOND. Employee agrees to provide to Employer such information as
Employer may reasonably require to apply for a fiduciary bond in such amount as
deemed appropriate by Employer. The cost of such bond shall be borne solely and
only by Employer. Employer's ability to obtain such bond shall not be deemed a
condition of employment.
7. PROTECTION OF BUSINESS INTERESTS.
7.1 EMPLOYER OWNERSHIP OF CONFIDENTIAL DATA. Other than as
required to perform Employee's duties in accordance with this Agreement and for
the purposes of furthering the business of Employer, Employee shall not use or
otherwise appropriate for Employee's own benefit or for the benefit of others,
any knowledge or information with respect to Employer and its affiliates'
business that is not generally known by persons not employed by or affiliated
with Employer, including all trade secrets, customers lists, development,
strategy, financial, pricing, marketing or technical information (hereinafter
referred to as the "Confidential Data"). Employee agrees to return all
Confidential Data and other property of Employer immediately upon termination of
employment, including all handbooks, training materials, reports, policy
statements, research, programs, customer and prospect lists, mailing lists and
other documents obtained by Employee as a result of his employment with Employer
or PCI.
7.2 CONFIDENTIALITY. Because the work for which Employee is
employed, and upon which Employee will be engaged, will include knowledge and
information of a confidential nature to, and the secret property of Employer
and/or its affiliates, Employee will receive all Confidential Data in confidence
and will not, except as required in the conduct of Employer's business, or
authorized in writing by Employer, publish, disclose or use or authorize, or
make it possible for anyone else to publish, disclose or make use of any such
Confidential Data, unless and until such information and knowledge shall have
ceased to be secret or confidential as evidenced by general public knowledge.
This prohibition as to publication and disclosure shall not restrict Employee in
the exercise of Employee's technical skill, provided that the exercise of such
skill does not involve the disclosure to others, or use by Employee, of
Confidential Data.
7.3 COVENANT NOT TO COMPETE. Employee further covenants and
agrees that at no time while in the employ of Employer, or for two (2) years
immediately following the termination of Employee's employment for Cause
pursuant to Section 8.3 or by Employee without Cause under Section 8.6, will
Employee for himself or on behalf of any other person, persons, firm,
partnership, corporation, limited liability company or other company, (i) engage
in a business similar to Employer's business within the United States, (ii)
directly or indirectly solicit or attempt to solicit the business or patronage
of any person, firm, corporation, limited liability company or partnership
within said area for the purpose of selling products or services similar to
those distributed or provided by Employer, (iii) induce or attempt to induce any
employee of Employer or any of its affiliates to terminate such employee's
association with Employer or any of its affiliates, (iv) make any oral or
written statements or communications which, directly or indirectly, disparage,
criticize, degrade, demean, insult or otherwise cast in an unfavorable light
Employer, its reputation, its business strategies, or the reputation of any of
its affiliates, employees, shareholders, directors or officers, or (v) perform
such other incidental business and services as are now engaged in by Employer.
For the purpose of this Agreement,
Page 3 - EMPLOYMENT AGREEMENT FOR XXX XXXX
engaging in "a business similar to Employer's business" means selling products
or services that have the same end-use by the customer.
7.4 COMPLIANCE WITH EMPLOYER POLICIES. Employee acknowledges
that in the course of performing Employee's duties for Employer, Employee will
have access to Confidential Data, the ownership and confidential status of which
are highly important to Employer, and Employee agrees in addition to the
specific covenants contained herein, to comply with all of Employer's policies
and procedures for the protection of such information. Employee also
acknowledges that all such information is and shall continue to be the exclusive
property of Employer, whether or not prepared in whole or in part by Employee
and whether or not disclosed to or entrusted to Employee in connection with
employment by Employer. Finally, Employee agrees to exercise a high degree of
care in safeguarding such information against loss, theft or other inadvertent
disclosure and agrees generally to take all steps reasonably necessary or
requested by Employer to ensure the maintenance of confidentiality.
7.5 ACKNOWLEDGEMENT OF REASONABLENESS. The employment and
post-employment covenants contained in this Agreement are considered by the
parties to be fair, reasonable and integral for the protection of Employer. The
parties mutually agree that if a violation of any of these covenants occurs,
such violation or any threatened violation will cause irreparable injury to
Employer and the remedy at law for any such violation or threatened violation
will be inadequate. The parties acknowledge that these covenants will survive,
and remain in effect and enforceable after, termination of this Agreement.
8. TERMINATION.
8.1 DEATH. This Agreement shall automatically terminate upon
the death of Employee. Employer shall be obligated to pay to Employee's legal
representative all Base Compensation and Incentive Compensation earned by or
accrued for the benefit of Employee through the date of death.
8.2 ILLNESS OR DISABILITY. If Employee is ill or disabled,
necessitating Employee's absence from the work place for a consecutive period in
excess of one hundred eighty (180) days, then, Employer shall have the absolute
right to terminate this Agreement. Employer shall be obligated to pay to
Employee or Employee's legal representative all Base Compensation and Incentive
Compensation earned by or accrued for the benefit of Employee through the date
of termination, all in accordance with Employer's standard policies relating to
sick leave and absences.
8.3 TERMINATION BY EMPLOYER FOR CAUSE. Employer may terminate
this Agreement for "Cause" if Employee (i) continually (by act or omission)
fails to perform Employee's job duties in accordance with the terms of this
Agreement and in accordance with the reasonable direction of the Board of
Directors of Employer, (ii) is convicted of, pleads guilty to, or confesses to a
felony or any crime involving any act of dishonesty, fraud, misappropriation,
embezzlement or moral turpitude, or (iii) engages in any fraudulent, disloyal or
unprofessional conduct which results in material injury to Employer or its
affiliates, monetarily or otherwise. Prior to terminating this Agreement and
Employee's employment as a
Page 4 - EMPLOYMENT AGREEMENT FOR XXX XXXX
result of subsection (i) above or as a result of disloyal or unprofessional
conduct, Employer shall give Employee written notice detailing the specific
acts, actions, failures, or events upon which the termination will be based, and
Employee shall have thirty (30) days after such written notice to cease such
actions or otherwise correct any such failure or breach. During this thirty (30)
day cure period, Employee shall have a right to discuss the circumstances of the
warning notice in a meeting with the Chief Executive Officer, Vice President of
Human Resources, and at Employer's option either a director, General Counsel or
the Chief Financial Officer. If Employee does not cease such action or otherwise
correct such failure or breach within such thirty day time period, or having
twice received such written notice and ceased such actions or corrected such
failure or breach, Employee at any time thereafter again so acts, fails or
breaches, Employer may terminate this Agreement immediately. Employer shall be
obligated to pay to Employee following a termination for Cause, all Base
Compensation and Incentive Compensation earned by or accrued for the benefit of
Employee through the date of termination.
8.4 CONSTRUCTIVE DISCHARGE. Employee may terminate this
Agreement pursuant to a "Constructive Discharge," which shall result if Employer
does any of the following: (i) continually (by act or omission) fails to perform
its obligations under this Agreement, (ii) reduces Employee's Base Compensation
to an amount less than the Base Compensation in effect on the date of this
Agreement, other than a proportionate reduction applicable to all employees of
Employer, (iii) materially changes the Scope of Services, (iv) requires Employee
to spend more than 30 nights in a year outside of the Portland area or (v)
requires Employee to relocate Employee's residence to perform his duties under
this Agreement. Prior to terminating this Agreement and Employee's employment as
a result of any of the foregoing, Employee shall provide Employer a written
notice detailing the specific acts, actions, failures or events upon which the
termination is based within ninety (90) days after any such event. Employer
shall thereafter have thirty (30) days to remedy the matter prior to the
termination by Employee, and if so remedied such termination right shall no
longer be available with respect to the matter so remedied. If Employee's
employment is terminated by Employee as a result of a Constructive Discharge,
then Employee shall be entitled to all Base Compensation and Incentive
Compensation earned by or accrued for the benefit of Employee through the date
of termination, together with the Severance Benefit.
8.5 MUTUAL AGREEMENT. The parties may mutually agree to
terminate this Agreement at any time.
8.6 TERMINATION BY EMPLOYEE WITHOUT CAUSE. Employee may
terminate his employment at any time and for any reason, and if such termination
is not as the result of a Constructive Discharge as provided in Section 8.4.
Employee agrees to provide at least two (2) weeks' notice prior to the date of a
termination for other than Constructive Discharge. In the event of a termination
by Employee other than for Constructive Discharge, Employee shall be entitled to
all Base Compensation and Incentive Compensation earned by or accrued for the
benefit of Employee through the date of termination, but shall not be entitled
to any Severance Benefit.
Page 5 - EMPLOYMENT AGREEMENT FOR XXX XXXX
8.7 TERMINATION BY EMPLOYER WITHOUT CAUSE. Employer may
terminate Employee's employment at any time and for any reason, and if such
termination is not as a result of death pursuant to Section 8.1, illness or
disability pursuant to Section 8.2 or a termination for Cause pursuant to
Section 8.3, then such termination shall be deemed to be a termination without
Cause. Employer agrees to provide Employee with at least two (2) weeks' notice
prior to the date of termination without Cause. In the event of a termination of
Employee's employment by Employer without Cause, then Employer shall pay to
Employee all Base Compensation and Incentive Compensation earned by or accrued
for the benefit of Employee through the date of termination, together with the
Severance Benefit.
8.8 SCOPE OF SERVICES DURING NOTICE PERIOD. Employer and
Employee acknowledge that once notice of termination without Cause is given
pursuant to Section 8.6 or 8.7, that it can be awkward or counterproductive to
have the Employee at the workplace during the two- (2-) week period between the
date of the notice of termination and the effective date of the termination.
Employer may, at its discretion, waive the requirement that Employee provide
services during this two- (2-) week period and simply maintain Employee on the
payroll during that two- (2-) week period even though no services are being
provided.
9. INJUNCTIVE RELIEF. Employee acknowledges that the services to be
rendered under the provisions of this Agreement are of a special, unique and
extraordinary character and that it would be difficult or impossible to replace
such services. Accordingly, Employee agrees that any breach or threatened breach
by Employee of Section 7 of this Agreement shall entitle Employer, in addition
to any other legal remedies available to it, to apply to any court of competent
jurisdiction to enjoin such breach or threatened breach. The parties understand
and intend that each restriction agreed to by Employee shall be construed as
separable and divisible from every other restriction, that the enforceability of
any one restriction shall not limit the enforceability, in whole or in part, of
any other restriction, and that one or more of all of such restrictions may be
enforced in whole or in part as the circumstances warrant. If any restriction in
this Agreement is more restrictive than permitted by the laws of the
jurisdiction in which Employer seeks enforcement thereof, such restriction shall
be limited to the extent permitted by law.
10. REPRESENTATIONS OF EMPLOYEE. Employee hereby represents, warrants
and agrees that the execution of this Agreement and the performance of the terms
and conditions hereof do not and shall not violate any other employment contract
or commitment, express or implied, of Employee.
11. NOTICES. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given when personally delivered, sent by facsimile or
email, with receipt confirmed, or sent by certified mail, return receipt
requested, postage prepaid, as follows:
Page 6 - EMPLOYMENT AGREEMENT FOR XXX XXXX
11.1 If to Employer: Kinetics Fluid Systems, Inc.
0000 Xxxxxx Xxxxx Xxxxx
Xxxxxxxx, XX 00000
Attention Xxxx Xxxxxxx
(000) 000-0000 phone
(000) 000-0000 fax
11.2 If to Employee: Xxxxxxx Xxxx
00000 XX Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
(000) 000-0000 phone
Either party may change the address to which such communications are to be
directed by giving written notice to the other party in the manner provided in
this Section. Any notice given by mail shall be deemed given on the third (3rd)
business day following such mailing.
12. GENERAL PROVISIONS.
12.1 ENTIRE AGREEMENT. This Agreement contains all the terms
and conditions agreed upon by the parties herein with reference to the subject
matter hereof. No officers or employees of Employer have any authority to make
any representation or promise not contained in this Agreement, and each of the
parties hereto agrees that it, he or she has not executed this Agreement in
reliance upon any such representations or promises.
12.2 ASSIGNMENT. This Agreement contemplates the rendition of
personal services by Employee and neither Employee's benefits nor obligations
shall be assignable by Employee without the prior consent of Employer. This
Agreement may not be assigned by Employer except to an affiliate, provided,
however, that if Employer shall merge or effect a consolidation or share
exchange with or into, or sell or otherwise transfer substantially all its
assets to, another business entity, Employer may assign its rights to that
business entity without the consent of Employee provided that it causes the
business entity to assume Employer's obligations under this Agreement. Subject
to the preceding sentence, this Agreement shall inure to the benefit of and be
binding upon the parties and their respective heirs, successors and assigns.
12.3 THIRD PARTY RIGHTS. Nothing in this Agreement, express or
implied, is intended to confer on any person other than the parties and their
respective successors and assigns any rights or remedies under or by reason of
this Agreement.
12.4 CAPTIONS. All section headings are inserted for
convenience only and shall not be used in any way to modify, limit, construe or
otherwise affect this Agreement.
12.5 COUNTERPART. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument. This Agreement shall be
effective as of the date first above written, despite the fact that various
dates of execution by the parties hereto may differ therefrom.
Page 7 - EMPLOYMENT AGREEMENT FOR XXX XXXX
12.6 WAIVER. No action taken pursuant to this Agreement,
including, without limitation, any investigation by or on behalf of either
party, shall be deemed to constitute a waiver by the party taking such action of
the complete compliance with representations, warranties, covenants or
agreements contained herein. No waiver, modification or change shall be binding
unless in writing and signed by the party making the waiver. A waiver by either
party hereto of a breach of any provision of this Agreement shall not operate or
be construed as a waiver of any subsequent breach.
12.7 APPLICABLE LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Oregon applicable to
contracts made and performed in that state.
12.8 PARTIAL INVALIDITY. If any term(s) or provisions of this
Agreement or the application thereof to any person or circumstances shall to any
extent be invalid or unenforceable, the remainder of this Agreement or the
application of such term(s) or provision(s) to persons or circumstances other
than those as to which it is held invalid or unenforceable shall not be affected
thereby. Each and every term of this Agreement shall be valid and enforced to
the full extent possible permitted by law.
12.9 INTERPRETATION. This Agreement is to be deemed to have
been prepared jointly by the parties hereto, and if any inconsistencies or
ambiguities exist herein, they shall not be interpreted or construed against
either party as the drafter.
12.10 GENDER. Whenever in this Agreement the context requires,
references to the masculine shall be deemed to include the feminine and neuter,
and reference to the singular shall be deemed to include the plural.
12.11 FURTHER ASSURANCES. Each party hereto agrees to execute
any and all documents and writings that may be necessary or expedient and to do
other acts as will further the purposes hereof.
12.12 DISPUTES AND GOVERNING LAW. Employer and Employee agree
that any dispute arising in connection with, or relating to, this Agreement or
the termination of this Agreement, to the maximum extent allowed by applicable
law, shall be subject to resolution through informal methods and, failing such
efforts, through binding arbitration. Either party may notify the other party of
the existence of a dispute by written notice to the address indicated above in
Section 11. The parties shall thereafter attempt in good faith to resolve their
differences within thirty (30) days after the receipt of such notice. If the
dispute cannot be resolved within such thirty-day period, either party may file
a written demand for arbitration with the other party. The arbitration shall
proceed in accordance with the terms of the Federal Arbitration Act and the
rules and procedures of the American Arbitration Association. A single
arbitrator shall be appointed through the American Arbitration Association's
procedures to resolve the dispute. Notwithstanding the foregoing, either party
hereto shall be entitled to seek an injunction, temporary restraining order or
other temporary relief pending final resolution through the procedures otherwise
provided in this Section 12.12. The parties agree that in the event
Page 8 - EMPLOYMENT AGREEMENT FOR XXX XXXX
arbitration is necessary, the laws of the State of Oregon and any applicable
federal law shall apply. The place of the arbitration shall be in Portland,
Oregon. The award of the arbitrator shall be binding and conclusive upon the
parties. Either party shall have the right to have the award made the judgment
of a court of competent jurisdiction in the State of Oregon. The prevailing
party in any arbitration, or any court proceeding brought to enforce an
arbitration award, shall be entitled to reasonable attorney's fees and other
cost and expenses, as determined by the court or arbitrator, incurred in the
proceeding and in any subsequent appeals, in addition to any other relief to
which the prevailing party is entitled.
12.13 NO JOINT VENTURE. Nothing herein contained shall be
construed to create a joint venture or partnership nor to create the
relationship of principal and agent or of an association between Employer and
Employee other than Employer and Employee.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first here and above written.
EMPLOYER: KINETICS FLUID EMPLOYEE:
SYSTEMS, INC.
_________________________________
Xxxxxxx Xxxx
By:___________________________________
Name: _____________________________
Title: ____________________________
Page 9 - EMPLOYMENT AGREEMENT FOR XXX XXXX
EXHIBIT A
SCOPE OF SERVICES
FINANCE AND ACCOUNTING JOB FAMILY
JOB CODE FA0800
GRADE 11
POSITION PROFILE: Under the general guidance of general
management and within the general accounting
INCLUDES TYPICAL WORK policies of the corporation, manage the
ASSIGNMENTS & PROJECTS accounting processes of the Poly Concepts
business unit. This includes planning,
budgeting and financial record keeping and
reporting.
BUSINESS IMPACT: May impact overall company performance.
INCLUDES DECISION
MAKING
KNOWLEDGE, SKILLS, & ABILITIES Requires demonstrated leadership and
REQUIRED: financial skills.
INCLUDES TECHNICAL SKILLS AND
EXPERIENCE
FLSA STATUS E
EEO JOB CATEGORY Officials and Managers
Page 10 - EMPLOYMENT AGREEMENT FOR XXX XXXX
EXHIBIT B
DESCRIPTION OF INCENTIVE COMPENSATION
In addition to the Base Compensation, Employee will be entitled to receive a
signing bonus of $30,000 due upon execution of this Agreement and payable within
thirty (30) days of signing. In addition, in the first year following the date
of this Agreement, Employee is entitled to the following Incentive Compensation:
a retention bonus and incentive bonus.
Retention Bonus. The retention bonus will be in the amount of $319,800 payable
in four equal payments, beginning on the ninetieth (90th) day after the date of
this Agreement, and at the end of each of the next three ninety (90) day
periods; provided that no retention bonus will be accrued or paid subsequent to
the termination of Employee's employment (a) by Employer for Cause pursuant to
Section 8.3 or (b) by Employee other than as a result of Constructive Discharge
pursuant to Section 8.6. The retention bonus will be paid if the employment is
terminated due to Employee's death or disability.
Incentive Bonus. The first year incentive bonus shall not exceed $300,885 to be
paid following the first quarter-end after the one year anniversary of Closing,
subject to Employee's achievement of the First Year Performance Target set forth
below. After the first year, Employee will be eligible for annual incentive
bonuses determined by Employer's standard incentive bonus formula, which shall
not exceed twenty percent (20%) of his Base Compensation and which shall be
subject to Employee's achievement of performance targets set for that year by
the Employer.
FIRST YEAR PERFORMANCE TARGET
For the first year following Closing, Employee's incentive bonus shall be deemed
earned in full upon (i) Employee's maintenance of uninterrupted employment with
Employer for one year following Closing, (ii) the generation by the Surviving
Division (as defined in the Merger Agreement) of at least $__,000,000 in gross
sales during such period, and (iii) the generation by the Surviving Division of
gross sales during such period that are at least $__,000,000 higher than the
projected sales in the grounded sales forecast that is attached to this
Agreement.
Page 11 - EMPLOYMENT AGREEMENT FOR XXX XXXX
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into this
_____ day of __________, 2002, by and between Kinetics Fluid Systems, Inc., a
California corporation ("Employer") and Xxxx Xxxxx ("Employee").
RECITALS
A. Employer is a California corporation, and is a designer and
manufacturer of high purity products and chemical process equipment. Employer is
engaged in that business as a consequence of a corporate merger between Poly
Concepts, Inc. ("PCI") and Kinetics Acquisition Corporation, both Oregon
corporations, which in turn merged with Employer ("Merger").
B. Employee was formerly employed by PCI and Employer desires to retain
Employee by reason of Employee's experience, training and ability to
perform services for and behalf of the Employer. Employee desires to accept
such employment upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in reliance upon the foregoing Recitals, and the mutual
covenants hereinafter set forth, the parties agree as follows:
AGREEMENT
1. EMPLOYMENT. Employer hereby agrees to employ Employee and Employee
hereby agrees to serve Employer as an "at-will" employee. Employee's employment
with Employer will commence upon the closing of the Merger ("Closing"). While in
the employ of Employer, Employee shall devote Employee's full business time,
skill, energy and attention to the business of Employer, and shall perform
Employee's duties in a diligent, trustworthy, businesslike and efficient manner,
all for the purpose of advancing the business of Employer. Employer shall be
entitled to all the benefits, profits, and other issues arising from, or
incident to, all work, services, and advice of Employee.
2. TERM. This Agreement shall have no fixed term but shall be "at-will"
employment that may be terminated by Employer or Employee at any time and for
any reason.
3. DUTIES. Employee shall have the corporate title of Vice President,
General Manager of the Employer's northwest division, and Employee's general job
description is set forth on Exhibit A, attached hereto and by reference
incorporated herein ("Scope of Services"). Employee shall perform duties and
responsibilities required of such Employee within the Scope of Services, and
shall perform in a faithful and competent manner such additional duties as may
be reasonably assigned from time to time by the Vice President of Operations.
Employee shall report to the Vice President of Operations.
Page 1 - EMPLOYMENT AGREEMENT FOR XXXX XXXXX
4. COMPENSATION. As Employee's entire compensation for all services
rendered to Employer under this Agreement, in whatever capacity rendered, the
Employee shall have and receive the following:
4.1 BASE COMPENSATION. Regular annual compensation ("Base
Compensation") at the rate of one hundred fifty thousand dollars ($150,000),
payable in accordance with the standard pay periods of Employer as may be in
effect from time to time. At such time as the regular annual compensation of the
other executive employees of Employer is evaluated or adjusted, Employer agrees
to evaluate, and if appropriate, adjust the Base Compensation of Employee based
on the determination of the Board of Directors of Employer. The Base
Compensation shall be subject to withholding for federal, state and local
payroll and all other taxes or withholdings applicable to Employee.
4.2 INCENTIVE COMPENSATION. In addition to the Base
Compensation, Employee shall be entitled to a retention bonus and an incentive
bonus (collectively "Incentive Compensation") as detailed on Exhibit B, attached
hereto and by reference incorporated herein.
4.3 BENEFITS. Employee shall be entitled to participate in the
insurance, vacation, sick leave and other fringe benefits made available
generally to employees of Employer, as such benefits may be determined from time
to time by Employer's Board of Directors; provided, however that during the
first year after Closing Employee's benefits will be governed by Employer's
standard policy subject to any required adjustments to benefits as set forth in
the integration plan approved by both parties.
4.4 SEVERANCE BENEFIT. In addition to Base Compensation and
Incentive Compensation, in the event of a Constructive Discharge under Section
8.4 or a termination by Employer without Cause under Section 8.7. Employee is
entitled to severance benefits ("Severance Benefits") equal to monthly salary
times the number of full months remaining between such termination and the third
anniversary of Closing. In the event of a Constructive Discharge due to a
reduction in salary, severance benefits will be determined based on the Base
Compensation before the reduction. Following the third anniversary of Closing,
Employee is only entitled to Severance Benefits in accordance with Employer's
standard severance policy. If this Agreement is terminated as a result of death
under Section 8.1, illness or disability under Section 8.2, by Employer for
Cause under Section 8.3 or by Employee without Cause under Section 8.6, then
Employee shall be entitled to no Severance Benefit.
4.4 BUSINESS EXPENSES. Employer agrees to reimburse Employee
for reasonable and necessary business expenses incurred by Employee in
furthering the business interests of Employer, all in accordance with Employer's
standard policies and practices. Employee shall be entitled to a reasonable car
allowance, and a reasonable technology allowance (for cellular telephones,
laptop computers, and the like).
5. AUTHORITY. Employee shall promptly deposit all funds derived by
Employer and received by Employee in appropriately denoted bank accounts of
Employer.
Page 2 - EMPLOYMENT AGREEMENT FOR XXXX XXXXX
6. BOND. Employee agrees to provide to Employer such information as
Employer may reasonably require to apply for a fiduciary bond in such amount as
deemed appropriate by Employer. The cost of such bond shall be borne solely and
only by Employer. Employer's ability to obtain such bond shall not be deemed a
condition of employment.
7. PROTECTION OF BUSINESS INTERESTS.
7.1 EMPLOYER OWNERSHIP OF CONFIDENTIAL DATA. Other than as
required to perform Employee's duties in accordance with this Agreement and for
the purposes of furthering the business of Employer, Employee shall not use or
otherwise appropriate for Employee's own benefit or for the benefit of others,
any knowledge or information with respect to Employer and its affiliates'
business that is not generally known by persons not employed by or affiliated
with Employer, including all trade secrets, customers lists, development,
strategy, financial, pricing, marketing or technical information (hereinafter
referred to as the "Confidential Data"). Employee agrees to return all
Confidential Data and other property of Employer immediately upon termination of
employment, including all handbooks, training materials, reports, policy
statements, research, programs, customer and prospect lists, mailing lists and
other documents obtained by Employee as a result of his employment with Employer
or PCI.
7.2 CONFIDENTIALITY. Because the work for which Employee is
employed, and upon which Employee will be engaged, will include knowledge and
information of a confidential nature to, and the secret property of Employer
and/or its affiliates, Employee will receive all Confidential Data in confidence
and will not, except as required in the conduct of Employer's business, or
authorized in writing by Employer, publish, disclose or use or authorize, or
make it possible for anyone else to publish, disclose or make use of any such
Confidential Data, unless and until such information and knowledge shall have
ceased to be secret or confidential as evidenced by general public knowledge.
This prohibition as to publication and disclosure shall not restrict Employee in
the exercise of Employee's technical skill, provided that the exercise of such
skill does not involve the disclosure to others, or use by Employee, of
Confidential Data.
7.3 COVENANT NOT TO COMPETE. Employee further covenants and
agrees that at no time while in the employ of Employer, or for two (2) years
immediately following the termination of Employee's employment for Cause
pursuant to Section 8.3 or by Employee without Cause under Section 8.6, will
Employee for himself or on behalf of any other person, persons, firm,
partnership, corporation, limited liability company or other company, (i) engage
in a business similar to Employer's business within the United States, (ii)
directly or indirectly solicit or attempt to solicit the business or patronage
of any person, firm, corporation, limited liability company or partnership
within said area for the purpose of selling products or services similar to
those distributed or provided by Employer, (iii) induce or attempt to induce any
employee of Employer or any of its affiliates to terminate such employee's
association with Employer or any of its affiliates, (iv) make any oral or
written statements or communications which, directly or indirectly, disparage,
criticize, degrade, demean, insult or otherwise cast in an unfavorable light
Employer, its reputation, its business strategies, or the reputation of any of
its affiliates, employees, shareholders, directors or officers, or (v) perform
such other incidental business and services as are now engaged in by Employer.
For the purpose of this Agreement,
Page 3 - EMPLOYMENT AGREEMENT FOR XXXX XXXXX
engaging in "a business similar to Employer's business" means selling products
or services that have the same end-use by the customer.
7.4 COMPLIANCE WITH EMPLOYER POLICIES. Employee acknowledges
that in the course of performing Employee's duties for Employer, Employee will
have access to Confidential Data, the ownership and confidential status of which
are highly important to Employer, and Employee agrees in addition to the
specific covenants contained herein, to comply with all of Employer's policies
and procedures for the protection of such information. Employee also
acknowledges that all such information is and shall continue to be the exclusive
property of Employer, whether or not prepared in whole or in part by Employee
and whether or not disclosed to or entrusted to Employee in connection with
employment by Employer. Finally, Employee agrees to exercise a high degree of
care in safeguarding such information against loss, theft or other inadvertent
disclosure and agrees generally to take all steps reasonably necessary or
requested by Employer to ensure the maintenance of confidentiality.
7.5 ACKNOWLEDGEMENT OF REASONABLENESS. The employment and
post-employment covenants contained in this Agreement are considered by the
parties to be fair, reasonable and integral for the protection of Employer. The
parties mutually agree that if a violation of any of these covenants occurs,
such violation or any threatened violation will cause irreparable injury to
Employer and the remedy at law for any such violation or threatened violation
will be inadequate. The parties acknowledge that these covenants will survive,
and remain in effect and enforceable after, termination of this Agreement.
8. TERMINATION.
8.1 DEATH. This Agreement shall automatically terminate upon
the death of Employee. Employer shall be obligated to pay to Employee's legal
representative all Base Compensation and Incentive Compensation earned by or
accrued for the benefit of Employee through the date of death.
8.2 ILLNESS OR DISABILITY. If Employee is ill or disabled,
necessitating Employee's absence from the work place for a consecutive period in
excess of one hundred eighty (180) days, then, Employer shall have the absolute
right to terminate this Agreement. Employer shall be obligated to pay to
Employee or Employee's legal representative all Base Compensation and Incentive
Compensation earned by or accrued for the benefit of Employee through the date
of termination, all in accordance with Employer's standard policies relating to
sick leave and absences.
8.3 TERMINATION BY EMPLOYER FOR CAUSE. Employer may terminate
this Agreement for "Cause" if Employee (i) continually (by act or omission)
fails to perform Employee's job duties in accordance with the terms of this
Agreement and in accordance with the reasonable direction of the Board of
Directors of Employer, (ii) is convicted of, pleads guilty to, or confesses to a
felony or any crime involving any act of dishonesty, fraud, misappropriation,
embezzlement or moral turpitude, or (iii) engages in any fraudulent, disloyal or
unprofessional conduct which results in material injury to Employer or its
affiliates, monetarily or otherwise. Prior to terminating this Agreement and
Employee's employment as a
Page 4 - EMPLOYMENT AGREEMENT FOR XXXX XXXXX
result of subsection (i) above or as a result of disloyal or unprofessional
conduct, Employer shall give Employee written notice detailing the specific
acts, actions, failures, or events upon which the termination will be based, and
Employee shall have thirty (30) days after such written notice to cease such
actions or otherwise correct any such failure or breach. During this thirty (30)
day cure period, Employee shall have a right to discuss the circumstances of the
warning notice in a meeting with the Chief Executive Officer, Vice President of
Human Resources, and at Employer's option either a director, General Counsel or
the Chief Financial Officer. If Employee does not cease such action or otherwise
correct such failure or breach within such thirty day time period, or having
twice received such written notice and ceased such actions or corrected such
failure or breach, Employee at any time thereafter again so acts, fails or
breaches, Employer may terminate this Agreement immediately. Employer shall be
obligated to pay to Employee following a termination for Cause, all Base
Compensation and Incentive Compensation earned by or accrued for the benefit of
Employee through the date of termination.
8.4 CONSTRUCTIVE DISCHARGE. Employee may terminate this
Agreement pursuant to a "Constructive Discharge," which shall result if Employer
does any of the following: (i) continually (by act or omission) fails to perform
its obligations under this Agreement, (ii) reduces Employee's Base Compensation
to an amount less than the Base Compensation in effect on the date of this
Agreement, other than a proportionate reduction applicable to all employees of
Employer, (iii) materially changes the Scope of Services, or (iv) requires
Employee to relocate Employee's residence to perform his duties under this
Agreement. Prior to terminating this Agreement and Employee's employment as a
result of any of the foregoing, Employee shall provide Employer a written notice
detailing the specific acts, actions, failures or events upon which the
termination is based within ninety (90) days after any such event. Employer
shall thereafter have thirty (30) days to remedy the matter prior to the
termination by Employee, and if so remedied such termination right shall no
longer be available with respect to the matter so remedied. If Employee's
employment is terminated by Employee as a result of a Constructive Discharge,
then Employee shall be entitled to all Base Compensation and Incentive
Compensation earned by or accrued for the benefit of Employee through the date
of termination, together with the Severance Benefit.
8.5 MUTUAL AGREEMENT. The parties may mutually agree to
terminate this Agreement at any time.
8.6 TERMINATION BY EMPLOYEE WITHOUT CAUSE. Employee may
terminate his employment at any time and for any reason, and if such termination
is not as the result of a Constructive Discharge as provided in Section 8.4.
Employee agrees to provide at least two (2) weeks' notice prior to the date of a
termination for other than Constructive Discharge. In the event of a termination
by Employee other than for Constructive Discharge, Employee shall be entitled to
all Base Compensation and Incentive Compensation earned by or accrued for the
benefit of Employee through the date of termination, but shall not be entitled
to any Severance Benefit.
Page 5 - EMPLOYMENT AGREEMENT FOR XXXX XXXXX
8.7 TERMINATION BY EMPLOYER WITHOUT CAUSE. Employer may
terminate Employee's employment at any time and for any reason, and if such
termination is not as a result of death pursuant to Section 8.1, illness or
disability pursuant to Section 8.2 or a termination for Cause pursuant to
Section 8.3, then such termination shall be deemed to be a termination without
Cause. Employer agrees to provide Employee with at least two (2) weeks' notice
prior to the date of termination without Cause. In the event of a termination of
Employee's employment by Employer without Cause, then Employer shall pay to
Employee all Base Compensation and Incentive Compensation earned by or accrued
for the benefit of Employee through the date of termination, together with the
Severance Benefit.
8.8 SCOPE OF SERVICES DURING NOTICE PERIOD. Employer and
Employee acknowledge that once notice of termination without Cause is given
pursuant to Section 8.6 or 8.7, that it can be awkward or counterproductive to
have the Employee at the workplace during the two- (2-) week period between the
date of the notice of termination and the effective date of the termination.
Employer may, at its discretion, waive the requirement that Employee provide
services during this two- (2-) week period and simply maintain Employee on the
payroll during that two- (2-) week period even though no services are being
provided.
9. INJUNCTIVE RELIEF. Employee acknowledges that the services to be
rendered under the provisions of this Agreement are of a special, unique and
extraordinary character and that it would be difficult or impossible to replace
such services. Accordingly, Employee agrees that any breach or threatened breach
by Employee of Section 7 of this Agreement shall entitle Employer, in addition
to any other legal remedies available to it, to apply to any court of competent
jurisdiction to enjoin such breach or threatened breach. The parties understand
and intend that each restriction agreed to by Employee shall be construed as
separable and divisible from every other restriction, that the enforceability of
any one restriction shall not limit the enforceability, in whole or in part, of
any other restriction, and that one or more of all of such restrictions may be
enforced in whole or in part as the circumstances warrant. If any restriction in
this Agreement is more restrictive than permitted by the laws of the
jurisdiction in which Employer seeks enforcement thereof, such restriction shall
be limited to the extent permitted by law.
10. REPRESENTATIONS OF EMPLOYEE. Employee hereby represents, warrants
and agrees that the execution of this Agreement and the performance of the terms
and conditions hereof do not and shall not violate any other employment contract
or commitment, express or implied, of Employee.
11. NOTICES. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given when personally delivered, sent by facsimile or
email, with receipt confirmed, or sent by certified mail, return receipt
requested, postage prepaid, as follows:
Page 6 - EMPLOYMENT AGREEMENT FOR XXXX XXXXX
11.1 If to Employer: Kinetics Fluid Systems, Inc.
0000 Xxxxxx Xxxxx Xxxxx
Xxxxxxxx, XX 00000
Attention Xxxx Xxxxxxx
(000) 000-0000 phone
(000) 000-0000 fax
11.2 If to Employee: Xxxx Xxxxx
0000 XX Xxxxxxx Xxxx
Xxxxxxxx, XX 00000
(000) 000-0000 phone
Either party may change the address to which such communications are to be
directed by giving written notice to the other party in the manner provided in
this Section. Any notice given by mail shall be deemed given on the third (3rd)
business day following such mailing.
12. GENERAL PROVISIONS.
12.1 ENTIRE AGREEMENT. This Agreement contains all the terms
and conditions agreed upon by the parties herein with reference to the subject
matter hereof. No officers or employees of Employer have any authority to make
any representation or promise not contained in this Agreement, and each of the
parties hereto agrees that it, he or she has not executed this Agreement in
reliance upon any such representations or promises.
12.2 ASSIGNMENT. This Agreement contemplates the rendition of
personal services by Employee and neither Employee's benefits nor obligations
shall be assignable by Employee without the prior consent of Employer. This
Agreement may not be assigned by Employer except to an affiliate, provided,
however, that if Employer shall merge or effect a consolidation or share
exchange with or into, or sell or otherwise transfer substantially all its
assets to, another business entity, Employer may assign its rights to that
business entity without the consent of Employee provided that it causes the
business entity to assume Employer's obligations under this Agreement. Subject
to the preceding sentence, this Agreement shall inure to the benefit of and be
binding upon the parties and their respective heirs, successors and assigns.
12.3 THIRD PARTY RIGHTS. Nothing in this Agreement, express or
implied, is intended to confer on any person other than the parties and their
respective successors and assigns any rights or remedies under or by reason of
this Agreement.
12.4 CAPTIONS. All section headings are inserted for
convenience only and shall not be used in any way to modify, limit, construe or
otherwise affect this Agreement.
12.5 COUNTERPART. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument. This Agreement shall be
effective as of the date first above written, despite the fact that various
dates of execution by the parties hereto may differ therefrom.
Page 7 - EMPLOYMENT AGREEMENT FOR XXXX XXXXX
12.6 WAIVER. No action taken pursuant to this Agreement,
including, without limitation, any investigation by or on behalf of either
party, shall be deemed to constitute a waiver by the party taking such action of
the complete compliance with representations, warranties, covenants or
agreements contained herein. No waiver, modification or change shall be binding
unless in writing and signed by the party making the waiver. A waiver by either
party hereto of a breach of any provision of this Agreement shall not operate or
be construed as a waiver of any subsequent breach.
12.7 APPLICABLE LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Oregon applicable to
contracts made and performed in that state.
12.8 PARTIAL INVALIDITY. If any term(s) or provisions of this
Agreement or the application thereof to any person or circumstances shall to any
extent be invalid or unenforceable, the remainder of this Agreement or the
application of such term(s) or provision(s) to persons or circumstances other
than those as to which it is held invalid or unenforceable shall not be affected
thereby. Each and every term of this Agreement shall be valid and enforced to
the full extent possible permitted by law.
12.9 INTERPRETATION. This Agreement is to be deemed to have
been prepared jointly by the parties hereto, and if any inconsistencies or
ambiguities exist herein, they shall not be interpreted or construed against
either party as the drafter.
12.10 GENDER. Whenever in this Agreement the context requires,
references to the masculine shall be deemed to include the feminine and neuter,
and reference to the singular shall be deemed to include the plural.
12.11 FURTHER ASSURANCES. Each party hereto agrees to execute
any and all documents and writings that may be necessary or expedient and to do
other acts as will further the purposes hereof.
12.12 DISPUTES AND GOVERNING LAW. Employer and Employee agree
that any dispute arising in connection with, or relating to, this Agreement or
the termination of this Agreement, to the maximum extent allowed by applicable
law, shall be subject to resolution through informal methods and, failing such
efforts, through binding arbitration. Either party may notify the other party of
the existence of a dispute by written notice to the address indicated above in
Section 11. The parties shall thereafter attempt in good faith to resolve their
differences within thirty (30) days after the receipt of such notice. If the
dispute cannot be resolved within such thirty-day period, either party may file
a written demand for arbitration with the other party. The arbitration shall
proceed in accordance with the terms of the Federal Arbitration Act and the
rules and procedures of the American Arbitration Association. A single
arbitrator shall be appointed through the American Arbitration Association's
procedures to resolve the dispute. Notwithstanding the foregoing, either party
hereto shall be entitled to seek an injunction, temporary restraining order or
other temporary relief pending final resolution through the procedures otherwise
provided in this Section 12.12. The parties agree that in the event
Page 8 - EMPLOYMENT AGREEMENT FOR XXXX XXXXX
arbitration is necessary, the laws of the State of Oregon and any applicable
federal law shall apply. The place of the arbitration shall be in Portland,
Oregon. The award of the arbitrator shall be binding and conclusive upon the
parties. Either party shall have the right to have the award made the judgment
of a court of competent jurisdiction in the State of Oregon. The prevailing
party in any arbitration, or any court proceeding brought to enforce an
arbitration award, shall be entitled to reasonable attorney's fees and other
cost and expenses, as determined by the court or arbitrator, incurred in the
proceeding and in any subsequent appeals, in addition to any other relief to
which the prevailing party is entitled.
12.13 NO JOINT VENTURE. Nothing herein contained shall be
construed to create a joint venture or partnership nor to create the
relationship of principal and agent or of an association between Employer and
Employee other than Employer and Employee.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first here and above written.
EMPLOYER: KINETICS FLUID EMPLOYEE:
SYSTEMS, INC.
_________________________________
Xxxx Xxxxx
By:___________________________________
Name: _____________________________
Title: ____________________________
Page 9 - EMPLOYMENT AGREEMENT FOR XXXX XXXXX
EXHIBIT A
SCOPE OF SERVICES
PLANT OPERATIONS DIRECTOR
JOB CODE PO0600
GRADE 12
POSITION PROFILE: Develops and implements policies and
procedures to ensure and safe and
INCLUDES TYPICAL WORK efficient plant operations.
ASSIGNMENTS & PROJECTS
BUSINESS IMPACT: Has direct impact on company
performance.
INCLUDES DECISION MAKING
KNOWLEDGE, SKILLS, & ABILITIES REQUIRED: M.B.A. or other advanced degree
preferred.
INCLUDES TECHNICAL SKILLS AND EXPERIENCE Ability to operationalize strategic
goals and objectives into department
policies and procedures.
FLSA STATUS E
EEO JOB CATEGORY Officials and Managers
Page 10 - EMPLOYMENT AGREEMENT FOR XXXX XXXXX
EXHIBIT B
DESCRIPTION OF INCENTIVE COMPENSATION
In addition to the Base Compensation, Employee will be entitled in the first
year following the date of this Agreement to the following Incentive
Compensation: a retention bonus and incentive bonus.
Retention Bonus. The retention bonus will be in the amount of [$280,800 LESS NPV
OF 50% OF ANNUITY OBLIGATIONS TO XXXXXXX XXXXX, WITH REDUCTION NOT TO EXCEED
$213,000] payable in four equal payments, beginning on the ninetieth (90th) day
after the date of this Agreement, and at the end of each of the next three
ninety (90) day periods; provided that no retention bonus will be accrued or
paid subsequent to the termination of Employee's employment (a) by Employer for
Cause pursuant to Section 8.3 or (b) by Employee other than as a result of
Constructive Discharge pursuant to Section 8.6. The retention bonus will be paid
if the employment is terminated due to Employee's death or disability.
Incentive Bonus. The first year incentive bonus eligibility shall not exceed
$663,717 to be paid following the first quarter-end after the one year
anniversary of Closing, subject to Employee's achievement of the First Year
Performance Target set forth below. After the first year, Employee will be
eligible for annual incentive bonuses determined by Employer's standard
incentive bonus formula, which shall not exceed twenty percent (20%) of his Base
Compensation and which shall be subject to Employee's achievement of performance
targets set for that year by the Employer.
FIRST YEAR PERFORMANCE TARGET
For the first year following Closing, Employee's incentive bonus shall be deemed
earned in full upon (i) Employee's maintenance of uninterrupted employment with
Employer for one year following Closing, (ii) the generation by the Surviving
Division (as defined in the Merger Agreement) of at least $__,000,000 in gross
sales during such period, and (iii) the generation by the Surviving Division of
gross sales during such period that are at least $__,000,000 higher than the
projected sales in the grounded sales forecast that is attached to this
Agreement.
Page 11 - EMPLOYMENT AGREEMENT FOR XXXX XXXXX
EXHIBIT C
Shareholder Agreement
AMENDMENT
TO
AMENDED AND RESTATED SHAREHOLDERS AGREEMENT
This Amendment to the Amended and Restated Shareholders Agreement (this
"AMENDMENT") is entered into as of April ___, 2002, by and among Kinetics
Holdings Corporation, a Delaware corporation (the "COMPANY") and the persons and
entities set forth on the signature pages hereto. This Amendment is intended to
amend that Amended and Restated Shareholders Agreement (the "SHAREHOLDERS
AGREEMENT"), dated as of December 14, 2001, by and among the Company and the
stockholder signatory thereto listed on Schedule A attached thereto (the
"STOCKHOLDERS"). Capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Shareholders Agreement.
RECITALS
A. In connection with a Merger Agreement (the "MERGER AGREEMENT") by and between
the Company, Kinetics Acquisition Corporation, an Oregon corporation and Poly
Concepts, Inc., an Oregon corporation (the "TARGET"), certain stockholders of
Target will receive 2,848,101 shares of Series A Preferred Stock of the Company
("SERIES A STOCK") at the closing of such merger and may receive 632,911
additional shares of Series A Stock on achieving certain performance milestones
(the "MERGER SHARES").
B. In order to consummate the transaction contemplated by the Merger Agreement,
the Company and certain Stockholders wish to amend the Shareholders Agreement to
provide for the inclusion of the Merger Shares as Registrable Securities
thereunder and Xxxx Xxxxx, Xxxxxxx Xxxxx and Xxxxxxx Xxxx (the "NEW
STOCKHOLDERS") as Stockholders holding the same rights, preferences and
privileges as the "2001 Investors" thereunder. The New Stockholders are willing
to be bound by the provisions of the Shareholders Agreement under these terms.
C. Section 6.13 of the Shareholders Agreement provides that such agreement may
be amended by the written consent of the Company and the holders of at least
two-thirds (66 2/3%) of the Common Stock Equivalents then outstanding.
D. Section 6.13 of the Shareholders Agreement also requires the consent of each
existing 2001 Investor and each Senior Warrantholder in order to grant the New
Stockholders status as 2001 Investors.
E. The Stockholders who are signatories to this Amendment hold at least
two-thirds (66 2/3%) of the Common Stock Equivalents then outstanding and
constitute all of the existing 2001 Investors and Senior Warrantholders.
1
NOW, THEREFORE, in consideration of the foregoing recitals and for
other consideration, the adequacy and sufficiency of which is hereby
acknowledged, the Company and the Stockholders hereby agree as follows:
1. Subject to the New Stockholders' agreement to be bound by all
provisions of the Shareholders Agreement applicable to them, Schedule V to the
Shareholders Agreement is amended to add the New Stockholders as Stockholders,
and the New Stockholders will enjoy status as, and the rights as, 2001 Investors
under the Shareholders Agreement.
2. Except as expressly modified hereby, the Shareholders Agreement is
in all respects ratified and confirmed, and all of the terms, provisions and
conditions thereof shall be and remain in full force and effect.
3. Except as otherwise provided in this Agreement, this Agreement, and
the rights and obligations of the parties hereunder, will be binding upon and
inure to the benefit of their respective successors, assigns, heirs, executors,
administrators and legal representatives.
4. If any provision of this Agreement shall be determined to be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired hereby.
5. The parties agree to execute such further documents and instruments
and to take such further actions as may be reasonably necessary to carry out the
purposes and intent of this Agreement.
6. This Agreement shall be governed by and construed in accordance with
the laws of the State of California, without giving effect to that body of laws
pertaining to conflict of laws.
7. This Agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be deemed an original and all of
which together shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
2
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.
KINETICS HOLDINGS CORPORATION
By:____________________________________
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT TO AMENDED AND RESTATED SHAREHOLDERS AGREEMENT]
3
[Add necessary signature pages]
4
EXHIBIT D
Legal Opinion of Xxxxxxx Xxxxx & Xxxxx LLP
DRAFT
April ___, 2002
Kinetics Holdings Corporation, Kinetics Fluids Systems, Inc.
and Project Pinot Noir, Inc.
0000 Xxxxxxx Xxxxxxx Xxxx.
Xxxxx Xxxxx, XX 00000
Ladies and Gentlemen:
We have acted as special counsel to Poly Concepts, Inc., (the "Company"), an
Oregon corporation, and its shareholders, in connection with the transaction
contemplated by the Agreement and Plan of Merger dated April 10, 2002, among
Kinetics Holdings Corporation, Kinetics Fluid Systems, Inc. ("Fluid Systems"),
Kinetics Acquisition Corporation ("KAC"), the Company and each of the Company's
shareholders (the "Agreement") and in connection with various ancillary
documents, including separate employment agreements between Fluid Systems and
the Company's shareholders (the "Employment Agreements") (together with the
Agreement and ancillary documents, the "Transaction Document"). This opinion
letter is provided to you at the request of the Company and its shareholders
pursuant to Section 5.1.11 of the Agreement. Except as otherwise indicated
herein, capitalized terms used in this opinion letter are defined as set forth
in the Agreement.
We have examined and relied upon the following documents in preparation of this
legal opinion: (1) articles and by-laws for the Company, (2) certificates of
existence from the relevant state authority in the jurisdiction of incorporation
for each entity certifying the entity's existence, (3) the documents produced in
the course of due diligence by the Company to Fluid Systems and (4) the
Transaction Documents. We have assumed the genuineness of all signatures, the
authenticity of documents, certificates and records submitted to us as
originals, the conformity to the originals of all documents, certificates and
records submitted to us as certified or reproduction copies, the legal capacity
of all natural persons executing documents, certificates and records, and the
completeness and accuracy as of the date of this opinion letter of the
information contained in such documents, certificates and records.
This opinion letter is subject to all assumptions, qualifications and
limitations that are described in the Legal Opinion Accord of the ABA Section of
Business Law (1991) at Section 4 ("Reliance by Opinion Giver on Assumptions"),
Section 14 ("Other Common Qualifications") and Section 19 ("Specific Legal
Issues").
Page 1 - LEGAL OPINION OF XXXXXXX XXXXX & XXXXX
Kinetics Fluid Systems, Inc.
April __, 2004
Page 2
The law covered by the opinions expressed in this letter is limited to the State
of Oregon. We express no opinion with respect to the laws, regulations or
ordinances of any county, municipality or other local governmental agency.
As used in this opinion letter, the expression "to our knowledge" or expressions
of like import means the conscious awareness of facts or other information by
Xxxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxxx and Xxxxx X. Xxxxxxx, who have
represented the Company and its shareholders in negotiation and preparation of
the Transaction Documents. It does not include information that might be
revealed if there were to be undertaken a canvass of all lawyers in all of our
offices or a review of all of our files. Except as otherwise set forth in this
letter, we have not reviewed any agreements, orders, writs, judgments or decrees
or made any inquiry of the Company and its shareholders.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly incorporated and validly existing
under the laws of the state of Oregon and has the corporate power and corporate
authority to own and operate its properties and assets and, to our knowledge, to
engage in the business that it now carries on.
2. The Company does not have any subsidiaries or affiliates (as that
term is defined under the Securities Act of 1933) other than the Company's
shareholders.
3. The Company has the corporate power and authority to enter into and
perform its obligations under the Transaction Documents. The execution, delivery
and performance of its obligations under the Transaction Documents have been
duly authorized by all necessary corporate action on the part of the Company and
each Transaction Document has been duly executed and delivered by the Company.
4. Execution and delivery by the Company and performance of its
agreements in the Transaction Documents do not, except as identified in the
Transaction Documents, (i) violate the Company's articles of incorporation or
by-laws, (ii) to our knowledge, breach or result in a default under any existing
material obligation of the Company under any indenture, mortgage, contract or
other agreement to which the Company is a party, or (iii) to our knowledge,
breach or otherwise violate any existing material obligation of the Company
under any court or administrative order, writ, judgment or decree that names the
Company and is specifically directed to it or its property.
This opinion letter is delivered as of its date and without any undertaking to
advise you of any changes of law or fact that occur after the date of this
opinion letter even though the changes may affect a legal analysis or conclusion
or an information confirmation in this opinion letter.
Page 2 - LEGAL OPINION OF XXXXXXX XXXXX & XXXXX
Kinetics Fluid Systems, Inc.
April __, 2004
Page 3
This opinion letter may be relied upon by you only in connection with the
transaction described in the initial paragraph of this opinion letter and may
not be used or relied upon by you for any other purpose or by any other person
for any purpose whatsoever without, in each instance, our prior written consent.
Very truly yours,
Page 3 - LEGAL OPINION OF XXXXXXX XXXXX & XXXXX
EXHIBIT E
Legal Opinion of Xxxxx Xxxxxx Xxxxxxxx LLP
DRAFT
April ___, 2002
Poly Concepts, Inc.
Xxxx Xxxxx, Xxxxxxx Xxxxx, and Xxxxxxx Xxxx
00000 XX Xxxxxxxx Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Ladies and Gentlemen:
We have acted as special counsel to Kinetics Holdings Corporation and its
subsidiaries, including Kinetics Fluid Systems, Inc. and Kinetics Acquisition
Corporation (collectively, the "Kinetics Companies"), in connection with the
transaction contemplated by the Agreement and Plan of Merger dated April 10,
2002, among the Kinetics Companies, Poly Concepts, Inc. and each of you
individually as shareholders of Poly Concepts Inc. (the "Agreement") and in
connection with various ancillary documents, including separate employment
agreements between Kinetics Fluid Systems, Inc. and each of you (the "Employment
Agreements") (together with the Agreement and ancillary documents, the
"Transaction Document"). This opinion letter is provided to you at the request
of the Kinetics Companies pursuant to Section 5.2.9 of the Agreement. Except as
otherwise indicated in this letter, capitalized terms used in this opinion
letter are defined as set forth in the Agreement.
We have examined and relied upon the following documents in preparation of this
legal opinion: (1) articles and by-laws for each of the Kinetics Companies, (2)
certificates from the relevant state authority in the jurisdiction of
incorporation for each entity certifying the entity's current existence, (3) the
documents produced in the course of due diligence by the Kinetics Companies to
Poly Concepts, Inc. and Company Shareholders and (4) the Transaction Documents.
We have assumed the genuineness of all signatures, the authenticity of
documents, certificates and records submitted to us as originals, the conformity
to the originals of all documents, certificates and records submitted to us as
certified or reproduction copies, the legal capacity of all natural persons
executing documents, certificates and records, and the completeness and accuracy
as of the date of this opinion letter of the information contained in such
documents, certificates and records.
Page 1 - LEGAL OPINION OF XXXXX XXXXXX XXXXXXXX
Poly Concept, Inc.
April __, 2004
Page 2
This opinion letter is subject to all assumptions, qualifications and
limitations that are described in the Legal Opinion Accord of the ABA Section of
Business Law (1991) at Section 4 ("Reliance by Opinion Giver on Assumptions"),
Section 14 ("Other Common Qualifications") and Section 19 ("Specific Legal
Issues").
The law covered by the opinions expressed in this letter is limited to the State
of Oregon and additionally to Delaware corporate law with respect to Kinetics
Holdings Corporation and California corporate law with respect to Kinetics Fluid
Systems, Inc. We express no opinion with respect to the laws, regulations or
ordinances of any county, municipality or other local governmental agency.
As used in this opinion letter, the expression "to our knowledge" or expressions
of like import means the conscious awareness of facts or other information by
Xxxxxxx X. Xxxxxx or Xxxxxxx X. Xxxxxx, who have represented the Kinetics
Companies in negotiation and preparation of the Transaction Documents. It does
not include information that might be revealed if there were to be undertaken a
canvass of all lawyers in all of our offices or a review of all of our files.
Except as otherwise set forth in this letter, we have not reviewed any
agreements, orders, writs, judgments or decrees or made any inquiry of the
Kinetics Companies.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Kinetics Companies are corporations duly incorporated and
validly existing under the laws of their respective states of incorporation.
Each has the corporate power and corporate authority to own and operate its
properties and assets and, to our knowledge, to engage in the business that it
now carries on.
2. The Kinetics Companies have the corporate power and authority to
enter into and perform their respective obligations under the Transaction
Documents. The execution, delivery and performance of the obligations under the
Transaction Documents have been duly authorized by all necessary corporate
action on the part of each of the Kinetics Companies and each Transaction
Document has been duly executed and delivered by each of the Kinetics Companies
that is a party to the particular Transaction Document.
3. Execution and delivery by the Kinetics Companies and performance of
their respective agreements in the Transaction Documents do not (i) violate the
Kinetics Companies' respective articles of incorporation or by-laws, (ii) to our
knowledge, breach or result in a default under any existing material obligation
of the Kinetics Companies under any indenture, mortgage, contract or other
agreement to which any of the Kinetics Companies is a party, or (iii) to our
knowledge, breach or otherwise violate any existing material obligation of any
of the Kinetics Companies under any court or administrative order, writ,
judgment or decree that names a Kinetics Company and is specifically directed to
it or its property.
Page 2 - LEGAL OPINION OF XXXXX XXXXXX XXXXXXXX
Poly Concept, Inc.
April __, 2004
Page 3
This opinion letter is delivered as of its date and without any undertaking to
advise you of any changes of law or fact that occur after the date of this
opinion letter even though the changes may affect a legal analysis or conclusion
or an information confirmation in this opinion letter.
This opinion letter may be relied upon by you only in connection with the
transaction described in the initial paragraph of this opinion letter and may
not be used or relied upon by you for any other purpose or by any other person
for any purpose whatsoever without, in each instance, our prior written consent.
Very truly yours,
Page 3 - LEGAL OPINION OF XXXXX XXXXXX XXXXXXXX
