CONFORMED COPY
SHARE PURCHASE AGREEMENT
between
ELECTRONIC FAB TECHNOLOGY CORP.
and
THE SHAREHOLDERS OF
CURRENT ELECTRONICS (WASHINGTON), INC.
January 15, 1997
TABLE OF CONTENTS
Page
RECITAL. . . . . . . . . . . . . . . . . . . . . . . .1
AGREEMENT. . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE I PURCHASE AND SALE. . . . . . . . . . . . . .1
1.1 Purchase and Sale of Stock. . . . . . .1
1.2 Purchase Price. . . . . . . . . . . . .1
1.3 The Closing . . . . . . . . . . . . . .2
ARTICLE II REPRESENTATIONS AND WARRANTIES CONCERNING THE
SHAREHOLDERS . . . . . . . . . . .3
2.1 Due Authorization. . . . . . . . . . . . . .4
2.3 Brokers' and Finders' Fees . . . . . . . . .4
ARTICLE III REPRESENTATIONS AND WARRANTIES CONCERNING THE
COMPANY. . . . . . . . . . . . . .5
3.1 Organization and Standing. . . . . . . . . .5
3.2 Capitalization . . . . . . . . . . . . . . .5
3.3 Subsidiaries . . . . . . . . . . . . . . . .5
3.4 No Conflicts . . . . . . . . . . . . . . . .5
3.5 Financial Statements . . . . . . . . . . . .6
3.6 Absence of Certain Changes . . . . . . . . .6
3.7 Liabilities. . . . . . . . . . . . . . . . .8
3.8 Litigation . . . . . . . . . . . . . . . . .8
3.9 Restrictions on Business Activities. . . . .8
3.10 Governmental Authorization. . . . . . .8
3.11 Contracts and Commitments . . . . . . .9
3.12 Title to Property . . . . . . . . . . .9
3.13 Intellectual Property . . . . . . . . 10
3.14 Environmental Matters . . . . . . . . 11
3.15 Taxes . . . . . . . . . . . . . . . . 12
3.16 Employee Benefit Plans. . . . . . . . 14
3.17 Employee Matters. . . . . . . . . . . 16
3.18 Interested Party Transactions . . . . 16
3.19 Insurance . . . . . . . . . . . . . . 16
3.20 Compliance With Laws. . . . . . . . . 17
3.21 Major Customers . . . . . . . . . . . 17
3.22 Suppliers . . . . . . . . . . . . . . 17
3.23 Inventory . . . . . . . . . . . . . . 17
3.24 Product Warranty and Product Liability18
Page
3.25 Minutes Books . . . . . . . . . . . . 18
3.26 Brokers' and Finders' Fees. . . . . . 18
3.28 Disclosure. . . . . . . . . . . . . . 19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT19
4.1 Organization . . . . . . . . . . . . . . . 19
4.2 Due Authorization. . . . . . . . . . . . . 19
ARTICLE V CONDUCT PENDING THE CLOSING. . . . . . . . 20
5.1 Conduct of Business of the Company . . . . 20
5.2 No Solicitation; Acquisition Proposals . . 22
5.3 Notice of Breach . . . . . . . . . . . . . 22
ARTICLE VI OTHER COVENANTS . . . . . . . . . . . 22
6.1 Access to Information. . . . . . . . . . . 22
6.2 Confidentiality. . . . . . . . . . . . . . 23
6.3 Publicity. . . . . . . . . . . . . . . . . 23
6.4 Filings; Cooperation . . . . . . . . . . . 23
6.5 Employment Matters . . . . . . . . . . . . 23
6.6 Further Assurances . . . . . . . . . . . . 23
ARTICLE VI CONDITIONS PRECEDENT. . . . . . . . . 24
7.1 Conditions to Obligations of Each Party. . 24
7.2 Additional Conditions to Obligations of Shareholders24
7.3 Additional Conditions to the Obligations of Parent25
ARTICLE VIII TAX MATTERS . . . . . . . . . . . . . 26
8.1 Section 338(h)(10) Election. . . . . . . . 26
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER . . 27
9.1 Termination. . . . . . . . . . . . . . . . 27
9.2 Effect of Termination. . . . . . . . . . . 27
9.3 Amendment; Waiver. . . . . . . . . . . . . 27
ARTICLE X GENERAL PROVISIONS . . . . . . . . . . . . 28
10.1 Survival of Representations and Warranties28
10.2 Notices . . . . . . . . . . . . . . . 28
10.3 Interpretation. . . . . . . . . . . . 29
10.4 Counterparts. . . . . . . . . . . . . 30
10.5 Entire Agreement; Nonassignability; Parties in
Interest. . . . . . . . . . . . . . . 30
10.6 Severability. . . . . . . . . . . . . 30
10.7 Remedies Cumulative; No Waiver. . . . 30
10.8 Governing Law . . . . . . . . . . . . 30
Page
10.9 Rules of Construction . . . . . . . . 30
10.10 Expenses. . . . . . . . . . . . . . 30
INDEX OF DEFINED TERMS
Page
1994 Audit Fees . . . . . . . . . . . . . . . . .2
AA. . . . . . . . . . . . . . . . . . . . . . . .3
Adjusted Debt Amount. . . . . . . . . . . . . . .1
Adjusted Purchase Price . . . . . . . . . . . . .2
Adverse Consequence . . . . . . . . . . . . . . 26
Agreement . . . . . . . . . . . . . . . . . . . .1
Annual Financial Statements . . . . . . . . . . .6
CERCLA. . . . . . . . . . . . . . . . . . . . . 12
Closing . . . . . . . . . . . . . . . . . . . . .2
Closing Date. . . . . . . . . . . . . . . . . . .2
COBRA . . . . . . . . . . . . . . . . . . . . . 15
Code. . . . . . . . . . . . . . . . . . . . . . 12
Combined Equity . . . . . . . . . . . . . . . . .1
Company . . . . . . . . . . . . . . . . . . . . .1
Company Authorizations. . . . . . . . . . . . . .9
Confidential Information. . . . . . . . . . . . 11
Debt. . . . . . . . . . . . . . . . . . . . . . .1
Disclosure Schedule . . . . . . . . . . . . . . .5
Employee Plans. . . . . . . . . . . . . . . . . 14
Environmental Law . . . . . . . . . . . . . . . 11
Equity. . . . . . . . . . . . . . . . . . . . . .1
ERISA . . . . . . . . . . . . . . . . . . . . . 14
ERISA Affiliate . . . . . . . . . . . . . . . . 14
Exchange Act. . . . . . . . . . . . . . . . . . 16
environment . . . . . . . . . . . . . . . . . . 11
Governmental Entity . . . . . . . . . . . . . . .4
Indemnification Agreement . . . . . . . . . . . 26
Intellectual Property . . . . . . . . . . . . . 10
Interim Financial Statements. . . . . . . . . . .6
Inventory . . . . . . . . . . . . . . . . . . . 17
include . . . . . . . . . . . . . . . . . . . . 29
includes. . . . . . . . . . . . . . . . . . . . 29
including . . . . . . . . . . . . . . . . . . . 29
knowledge . . . . . . . . . . . . . . . . . . . 29
Lien. . . . . . . . . . . . . . . . . . . . . . .4
Material Adverse Effect . . . . . . . . . . . . 29
Materials of Environmental Concern. . . . . . . 12
Merger Agreement. . . . . . . . . . . . . . . . 26
made available. . . . . . . . . . . . . . . . . 29
material. . . . . . . . . . . . . . . . . . . . 29
Page
multiemployer plan. . . . . . . . . . . . . . . 15
prohibited transaction. . . . . . . . . . . . . 15
Parent. . . . . . . . . . . . . . . . . . . . . .1
Parent Shareholders Meeting . . . . . . . . . . 18
Proprietary Information . . . . . . . . . . . . 23
Proxy Statement . . . . . . . . . . . . . . . . 18
release . . . . . . . . . . . . . . . . . . . . 11
reportable event. . . . . . . . . . . . . . . . 15
Section 338(h)(10) Election . . . . . . . . . . 26
Securities Act. . . . . . . . . . . . . . . . . .4
Shareholder . . . . . . . . . . . . . . . . . . .1
Shareholders. . . . . . . . . . . . . . . . . . .1
Stock . . . . . . . . . . . . . . . . . . . . . .1
Target. . . . . . . . . . . . . . . . . . . . . .1
Tax . . . . . . . . . . . . . . . . . . . . . . 13
Tax authority . . . . . . . . . . . . . . . . . 13
Tax Return. . . . . . . . . . . . . . . . . . . 13
Taxable . . . . . . . . . . . . . . . . . . . . 13
Taxes . . . . . . . . . . . . . . . . . . . . . 13
Third Party Intellectual Property Rights. . . . 10
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this "Agreement") dated as of
January 15, 1997, is among ELECTRONIC FAB TECHNOLOGY CORP., a
Colorado corporation ("Parent"), and the undersigned SHAREHOLDERS
(individually a "Shareholder" and together, the "Shareholders") of
CURRENT ELECTRONICS (WASHINGTON), INC., a Washington corporation
(the "Company").
RECITAL
The Shareholders own all of the issued and outstanding
shares of Common Stock, $.01 par value, of the Company ("Stock").
Parent desires to purchase from the Shareholders, and the
Shareholders desire to sell to Parent, and Parent desires to
purchase from Shareholders, all Stock subject to the terms and
conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and of
the representations, warranties, covenants and agreements
contained herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 Purchase and Sale of Stock. Upon the terms and
subject to the conditions of this Agreement, the Shareholders will
sell to Parent, and Parent will purchase from the Shareholders all
shares of Stock.
1.2 Purchase Price. As payment for the purchase price of
Company Stock, Parent will pay to the Shareholders the aggregate
amount of $1,530,000, which amount will be (a) increased by the
amount by which the interest bearing indebtedness for money
borrowed of the Company ("Debt") outstanding as of the Closing
Date (as defined in Section 1.3) is less than the Adjusted Debt
Amount (as defined in this Section 1.2), (b) reduced by the amount
by which Debt as of the Closing Date exceeds the Adjusted Debt
Amount, and (c) if the total combined shareholders' equity of the
Company and Current Electronics, Inc., an Oregon corporation
("Target"), as of the Closing Date ("Combined Equity"), is less
than $4.0 million, reduced or increased, as the case may be, by
the amount by which the total shareholders' equity of the Company
as of the Closing Date ("Equity") is less or more than $285,000.
For purposes of the foregoing calculation, (x) "Adjusted Debt
Amount" shall be zero, increased by the amount of any additional
Debt outstanding as of the Closing Date that has been authorized
by Parent under Section 1.5, (y) Equity and Combined Equity shall
be determined without deduction for (i) the amount of any bonuses
(not to exceed $180,000) paid to Target's leadership team pursuant
to Section 6.1(b)(vi) of the Merger Agreement, (ii) the fees and
expenses of the accountants of conducting the audit of the 1994
fiscal year of Target and the Company requested by Parent (the
"1994 Audit Fees"), (iii) any writedown or writeoff of leasehold
improvements of Target's Newberg, Oregon facility or any reserves
relating to any move from such facility of Target's operations
that is contemplated by Parent, or (iv) such other reserves,
writedowns or adjustments as may be approved in writing by Parent,
and (z) Equity and Combined Equity shall be reduced (regardless of
when paid or accrued) by (i) the amount of any legal and
accounting fees and expenses incurred by the Company or Target, as
the case may be, with their present counsel and accountants that
relate to the transactions contemplated by this Agreement and the
Merger Agreement and any other similar expenses that relate to the
representation of the interests of the present shareholders of the
Company or Target with respect to such transactions (other than
the 1994 Audit Fees) and (ii) the amount of any fees and expenses
incurred to Pacific Crest Securities, Inc. as contemplated by the
letter agreement identified in Section 3.26 of this Agreement.
Any Debt owed by the Company to Target, and any Debt owed by
Target to the Company, shall be ignored in determining the
Adjusted Debt Amount and the amount of Debt outstanding. The
amount of Debt outstanding, the Adjusted Debt Amount and the
amount of Equity as of the Closing Date shall be determined as
provided in Section 1.4. The purchase price as so adjusted is
referred to herein as the "Adjusted Purchase Price." For the
avoidance of doubt, the term Debt shall not include the then
outstanding balances of two accounts payable owed by the Company
to Allied Signal in the approximate amounts of $676,000 and
$180,000 as of December 31, 1996.
1.3 The Closing.
(a) Subject to the terms and conditions of this
Agreement, the closing of the purchase by Parent of the Stock in
exchange for payment of the Adjusted Purchase Price (the
"Closing") shall take place (i) at the offices of Holme Xxxxxxx &
Xxxx LLP, 0000 Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000,
at 10:00 a.m., local time, within three business days following
the day on which the conditions set forth in Article VIII shall be
fulfilled or waived in accordance herewith or (ii) at such other
time, date or place as the parties hereto agree. The date on
which the Closing occurs is hereinafter referred to as the
"Closing Date."
(b) At the Closing, (i) each Shareholder shall
deliver to Parent the certificates representing shares of Stock to
be sold by such Shareholder in negotiable form, duly endorsed in
blank, or with separate notarized stock transfer powers attached
thereto and signed in blank, and the various certificates and
documents described in Section 7.3, and (ii) Parent in exchange
therefor shall wire transfer to such Shareholder an amount equal
to the Adjusted Purchase Price multiplied by the number of shares
of Stock owned by such Shareholder over the total number of shares
of Stock and shall deliver the various certificates and documents
described in Section 7.2.
1.4 Determinations as of Closing Date; Subsequent
Adjustments.
(a) The Company shall prepare and submit to Parent,
not later than five days prior to the Closing Date, a written
estimate of the Adjusted Purchase Price as of the Closing Date.
The estimate shall be based upon the books and records of the
Company and shall be accompanied by (i) a statement setting forth
in reasonable detail the calculation of the estimate and (ii) a
certificate signed by the Company confirming that the estimate was
calculated in accordance with this Article I. The Company shall
also deliver to Parent such other information as may be reasonably
requested by Parent to verify the estimate of the Adjusted
Purchase Price provided. The amount paid at the Closing as the
Adjusted Purchase Price under Section 1.3 shall be equal to the
estimate provided by the Company, absent reasonable objection by
Parent, in which event the amount paid at the Closing shall be
equal to such reasonable amount as may be specified by Parent.
(b) Within 30 days after the Closing Date, Parent
shall deliver to the Shareholders a statement calculating the
Adjusted Purchase Price as of the Closing Date in accordance with
this Article I. Such calculation shall be made in accordance with
generally accepted accounting principles consistently applied,
except as otherwise specified herein. Parent's statement and
report shall be final and binding on the parties unless the
Shareholders deliver a notice to Parent disputing any matter
including in such statement and stating the Shareholders' position
with respect to the disputed matter. If the Shareholders deliver
such notice and the parties are unable to resolve all disputed
matters within 30 additional days, Parent or the Shareholders may
elect to submit the disputed matter to Xxxxxx Xxxxxxxx & Co.,
independent certified public accountants ("AA"), for
determination. The determination of all disputed matters pursuant
to the preceding sentence shall be final and binding on the
parties and the fees and expenses of AA shall be borne by Parent
and the Shareholders in proportion to the amount by which the
determination of all matters varies from the positions of Parent
and the Shareholders on all matters.
(c) Promptly following the determination of matters
by AA, Parent shall pay to the Shareholders or the Shareholders
shall pay to Parent, as appropriate, the amount, if any,
determined to have been overpaid or underpaid at the Closing.
1.5 Increase in Adjusted Debt Amount. The Shareholders
may request that Parent consent to an increase in the Adjusted
Debt Amount to permit borrowings by the Company to fund actual or
expected increased sales volumes and related working capital and
capital equipment requirements. Such request may be made by
giving written notice to Parent, accompanied by appropriate
information supporting such request. Parent shall respond to any
such request promptly, and shall not unreasonably withhold its
consent where such borrowings would be necessary to fund working
capital and capital equipment requirements prudently required in
connection with increases in product sales by the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
CONCERNING THE SHAREHOLDERS
Each of the Shareholders represents and
warrants to Parent
with respect to such Shareholder as follows:
2.1 Due Authorization. The Shareholder has the full power
and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby and has taken all
actions necessary to secure all approvals required in connection
therewith. This Agreement has been duly executed and delivered by
the Shareholder and constitutes the valid and binding obligation
of the Shareholder enforceable against the Shareholder in
accordance with its terms. The execution and delivery of this
Agreement do not, and the consummation of the transactions
contemplated hereby will not, (a) violate or conflict with any
permit, order, license, decree, judgment, statute, law, ordinance,
rule or regulation applicable to the Shareholder or (b) result in
any breach or violation of, or constitute a default (with or
without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of, or result
in the creation of any mortgage, pledge, lien, encumbrance,
charge, or other security interest (a "Lien") on any of the
properties or assets of the Shareholder pursuant to, or require
the consent of any party to any mortgage, indenture, lease,
contract or other agreement or instrument, bond, note, concession
or franchise applicable to the Shareholder or any of its
properties or assets, except, in the case of this clause (b) only,
where such conflict, violation, default, termination, cancellation
or acceleration would not have and could not reasonably be
expected to prevent the consummation of the transactions
contemplated hereby. No consent, approval, order or authorization
of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental
authority or instrumentality ("Governmental Entity") is required
by or with respect to the Shareholder in connection with the
execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby.
2.2 Stock. The Shareholder has good and marketable title
to the number of shares of Stock set forth next to the
Shareholder's name on Schedule 2.2 of the Disclosure Schedule (as
defined in Article III), free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act of
1933, as amended (the "Securities Act") and state securities
laws); Taxes (as defined in Section 3.15); any Lien; and any
option, warrant, put, call, purchase right, equity, claim, demand,
or other commitment or agreement of any nature. The Shareholder
is not a party to any option, warrant, put, call, purchase right
or other commitment or agreement that could require the
Shareholder to sell, transfer or otherwise convey any Stock, other
than pursuant to this Agreement. Except as set forth in Schedule
2.2 of the Disclosure Schedule, the Shareholder is a competent
adult and is the record and the beneficial owner of the Stock so
listed in the Shareholder's name, with the sole right to vote,
dispose of, and receive dividends or distributions with respect to
such Stock.
2.3 Brokers' and Finders' Fees. The Shareholder has not
incurred, or will not incur, directly or indirectly, any liability
for brokerage or finders' fees or agents' commissions or
investment bankers' fees or any similar charges in connection with
this Agreement or any transaction contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY
Except as disclosed in a document of even date herewith and
delivered by Shareholders to Parent prior to the execution and
delivery of this Agreement and referring to the representations
and warranties in this Agreement (the "Disclosure Schedule"), the
Shareholders represent and warrant to Parent as follows:
3.1 Organization and Standing. The Company is a
corporation duly organized and validly existing and in good
standing under the laws of the State of Washington, has the full
corporate power to own its properties and to carry on its business
as now being conducted and as proposed to be conducted and is duly
qualified to do business and is in good standing in each
jurisdiction in which the failure to be so qualified and in good
standing would have a Material Adverse Effect (as defined in
Section 10.3) on the Company. The Company has delivered to Parent
a true and correct copy of it Articles of Incorporation and
Bylaws, each as amended to date. The Company is not in violation
of any of the provisions of its Articles of Incorporation or
Bylaws or equivalent organizational documents.
3.2 Capitalization. The authorized capital stock of the
Company consists of 2,000,000 shares of Stock and 1,000,000 shares
of Preferred Stock, $.01 par value, of which there are issued and
outstanding 300 shares of Stock and no shares of Preferred Stock.
There are no other outstanding shares of capital stock or other
securities of the Company and no outstanding subscriptions,
options, warrants, puts, calls, rights, exchangeable or
convertible securities or other commitments or agreements of any
nature relating to the capital stock or other securities of the
Company, or otherwise obligating the Company to issue, transfer,
sell, purchase, redeem or otherwise acquire such stock or
securities. All outstanding shares of Stock are duly authorized,
validly issued, fully paid and non-assessable and are free and
clear of any Lien and are not subject to preemptive rights or
rights of first refusal created by statute, the Articles of
Incorporation or Bylaws of the Company or any agreement to which
the Company or any Shareholder is a party or by which it is bound.
3.3 Subsidiaries. The Company does not directly or
indirectly own any equity or similar interest in, or any interest
convertible or exchangeable or exercisable for, any equity or
similar interest in, any corporation, partnership, joint venture
or other business association or entity.
3.4 No Conflicts. The execution and delivery of this
Agreement do not, and the consummation of the transactions
contemplated hereby will not, (a) conflict with or violate any
provision of the Articles of Incorporation or Bylaws of the
Company, (b) violate or conflict with any permit, order, license,
decree, judgment, statute, law, ordinance, rule or regulation
applicable to the Company or the properties or assets of the
Company, or (c) result in any breach or violation of, or
constitute a default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation
or acceleration of, or result in the creation of any Lien on any
of the properties or assets of the Company pursuant to, or require
the consent of any party to any mortgage, indenture, lease,
contract or other agreement or instrument, bond, note, concession
or franchise applicable to the Company or any of its properties or
assets, except, in the case of this clause (c) only, where such
conflict, violation, default, termination, cancellation or
acceleration would not have and could not reasonably be expected
to have a Material Adverse Effect on the Company. No consent,
approval, order or authorization 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 or the consummation of the transactions
contemplated hereby.
3.5 Financial Statements. The Company has heretofore
delivered to Parent true and complete copies of an audited balance
sheet, and the related statements of operations and stockholders'
equity and of cash flows at September 30, 1996 on a combined basis
with Target with separate disclosure of the balance sheet and
income and retained earnings of the Company (the "Annual Financial
Statements"), with an opinion of the Company's independent public
accountants. The Company also has heretofore delivered to Parent
true copies of the unaudited balance sheet of the Company at
November 30, 1996, and the related unaudited statements of income
for the two months then ended (the "Interim Financial
Statements"). The Annual Financial Statements and the Interim
Financial Statements were prepared in accordance with generally
accepted accounting principles applied on a basis consistent
throughout the periods indicated and consistent with each other
(except as indicated in the notes thereto and, in the case of the
Interim Financial Statements, that no notes are included) and
fairly present the financial condition and operating results of
the Company (combined with Target to the extent applicable) at the
dates and during the periods indicated therein, subject, in the
case of the Interim Financial Statements, to normal, recurring
year-end audit adjustments.
3.6 Absence of Certain Changes. Except as specifically
permitted by this Agreement or as set forth in Schedule 3.6 of the
Disclosure Schedule, since September 30, 1996, the Company has
conducted its business in the ordinary course consistent with past
practice and there has not occurred:
(a) any change, event or condition (whether covered
by insurance) that has resulted in, or might reasonably be
expected to result in, a Material Adverse Effect on the Company;
(b) any sale, lease or other transfer or disposition
of any property or asset of the Company, except for the sale of
inventory in the ordinary course of business;
(c) any change in accounting methods, practices or
policies (including any change in depreciation or amortization
policies or rates) by the Company or any revaluation by the
Company of any of its assets, except as described in the notes to
the Annual Financial Statements;
(d) any declaration, setting aside, or payment of
any dividend or other distribution to the Company's shareholders
(other than declaration or payment of dividends or other
distributions to the Shareholders in the amount of $300,000 on
December 13, 1996 and immediately prior to the Closing, the
estimated amount of federal and state income tax to be imposed on
the Shareholders on income earned by the Company from January 1,
1996 through the Closing, assuming such shareholders are subject
to the maximum effective combined Oregon and federal income tax
rates then in effect), or any direct or indirect redemption,
retirement, purchase or other acquisition by the Company of any of
its capital stock or other securities or options, warrants or
other rights to acquire capital stock;
(e) any entering into, amendment or termination of,
or default under, by the Company of any contract to which the
Company is a party or by which it or any of them is bound other
than in the ordinary course of business and as provided to Parent;
(f) any damage, destruction or loss (whether or not
covered by insurance) to the properties and assets of the Company;
(g) any commitment or transaction (including any
capital expenditure, capital financing or sale of assets) by the
Company for any amount that requires or could require payments in
excess of $50,000 with respect to any individual contract or a
series of related contracts;
(h) any Lien on any asset allowed to exist by the
Company;
(i) any cancellation of any debt or waiver or
release of any right or claim by the Company;
(j) any payment, discharge or satisfaction of any
claim, liability or obligation by the Company, other than as
reflected or reserved against in the Annual Financial Statements
or the Interim Financial Statements or in the ordinary course of
business consistent with past practice;
(k) to the Shareholders' knowledge, any labor
dispute, litigation or governmental investigation affecting the
business or financial condition of the Company;
(l) any issuance or sale of capital stock or other
securities, exchangeable or convertible securities, options,
warrants, puts, calls or other rights to acquire capital stock or
other securities of the Company;
(m) any indebtedness for borrowed money incurred,
assumed or guaranteed by the Company;
(n) any loan or advance (other than advances to
employees in the ordinary course of business for travel and
entertainment in accordance with past practice) to any person;
(o) any increase in any salary, wage, benefit or
other remuneration payable or to become payable to any current or
former officer, director, employee or agent of the Company or any
bonus or severance payment or arrangement made to, for or with any
officer, director, employee or agent of the Company or any
supplemental retirement plan or other program or special
remuneration for any officer, director, employee or agent of the
Company, except for normal salary or wage increases relating to
periodic performance reviews and annual bonuses consistent with
past practices of the Company where such increases or bonuses are
not given to Shareholders or their relations or members of the
leadership team of the Company or Target.
(p) any grant of credit to any customer on terms or
in amounts more favorable than those which have been extended to
such customer in the past, any other change in the terms of any
credit heretofore extended or any other change in the policies or
practices of the Company with respect to the granting of credit;
(q) any delay in the payment of any trade or other
payables other than in the ordinary course of business consistent
with past practice; or
(r) any agreement, whether in writing or otherwise,
by the Company to do any of the foregoing.
3.7 Liabilities. Except as set forth in the Annual
Financial Statements, the Interim Financial Statements,
Schedule 3.7 of the Disclosure Schedule or any other Schedule of
the Disclosure Schedule and except for liabilities or obligations
arising in the ordinary course and consistent with past practice
and those incurred in connection herewith, neither the Company has
any liability or obligation of any nature, whether due or to
become due, fixed or contingent.
3.8 Litigation. There is no private or governmental
action, suit, proceeding, claim, arbitration or investigation
pending before any agency, court or tribunal, foreign or domestic,
or, to the knowledge of any Shareholder, threatened against the
Company or any of its assets and properties or any of its officers
or directors (in their capacities as such) that, individually or
in the aggregate, could reasonably be expected to have a Material
Adverse Effect on the Company. There is no judgment, decree or
order against the Company or any Shareholder, or, to the knowledge
of any Shareholder, any of the Company's directors or officers (in
their capacities as such), that could prevent consummation of the
transactions contemplated by this Agreement, or that could
reasonably be expected to have a Material Adverse Effect on the
Company.
3.9 Restrictions on Business Activities. There is no
material agreement, judgment, injunction, order or decree binding
upon the Company which has or reasonably could be expected to have
the effect of prohibiting or materially impairing any current or
proposed business practice of the Company, any acquisition of
property by the Company or the conduct of business by the Company
as currently conducted or as proposed to be conducted by the
Company.
3.10 Governmental Authorization. The Company has obtained
each federal, state, county, local or foreign governmental
consent, license, permit, grant, or other authorization that are
necessary for the Company to own or lease, operate and use its
assets and properties and to carry on its business as currently
conducted or as proposed to be conducted (collectively, the
"Company Authorizations"), the Company has performed and fulfilled
its obligations under the Company Authorizations, and all the
Company Authorizations are in full force and effect, except where
the failure to obtain or have any of such Company Authorizations
could not reasonably be expected to have a Material Adverse Effect
on the Company.
3.11 Contracts and Commitments. Except as set forth in
Schedule 3.11 of the Disclosure Schedule, neither the Company is a
party to any oral or written (a)(i) obligation for borrowed money,
(ii) obligation evidenced by bonds, debentures, notes or other
similar instruments, (iii) obligation to pay the deferred purchase
price of property or services (other than trade accounts arising
in the ordinary course of business), (iv) obligation under capital
leases, (v) debt of others secured by a Lien on its property,
(vi) guaranty of liabilities or obligations of others,
(vii) agreement under which the Company is obligated to make or
expects to receive payments in excess of $10,000 or
(viii) agreement granting any person a Lien on any of its
properties or assets (except purchase money security interests
created in the ordinary course of business consistent with past
practice); (b)(i) employment agreement or collective bargaining
agreement or (ii) agreements that limits the right of the Company
or any of its employees to compete in any line of business; or
(c) agreement which, after giving effect to the transactions
contemplated hereby, purports to restrict or bind Parent or any of
its subsidiaries, other than the Company and Target, in any
respect. True and complete copies of all agreements described in
Schedule 3.11 of the Disclosure Schedule or any other section
thereto have been delivered to Parent. The Company has fulfilled,
or taken all actions necessary to enable it to fulfill when due,
its obligations under each of such agreements. All parties
thereto have complied in all material respects with the provisions
thereof and no party is in breach or violation of, or in default
(with or without notice or lapse of time, or both) under such
agreements. With respect to such agreements, the Company has not
received any notice of termination, cancellation or acceleration
or any notice of breach, violation or default thereof.
3.12 Title to Property. Except as set forth in
Schedule 3.12 of the Disclosure Schedule, the Company has good and
marketable title to all of their respective properties and assets,
or in the case of leased properties and assets, valid leasehold
interests in such properties, free and clear of any Lien. The
plants, property and equipment of the Company that are used in the
operations of their business are in good operating condition and
repair. All plants, property and equipment have been well
maintained and conform (to the Shareholders' actual knowledge as
to leased real property) with all applicable ordinances,
regulations and zoning and other laws and do not encroach on the
property of others. There is no pending or, to the knowledge of
the Shareholders, threatened change in any such ordinance,
regulation or zoning or other law, and there is no pending or, to
the knowledge of the Shareholders, threatened condemnation of any
such building, machinery or equipment. The properties and assets
of the Company include all rights, properties, interests in
properties and assets necessary to permit the Company to conduct
its business as currently conducted or as proposed to be
conducted. Schedule 3.12 of the Disclosure Schedule identifies
each parcel of real property owned or leased by the Company.
3.13 Intellectual Property.
(a) The Company owns, or is licensed or otherwise
possess legally enforceable rights to use, all patents,
trademarks, trade names, service marks, copyrights, and any
applications therefor, maskworks, net lists, schematics,
technology, know-how, trade secrets, inventory, ideas, algorithms,
processes, computer software programs or applications (in both
source code and object code form), and tangible or intangible
proprietary information or material ("Intellectual Property") that
are used or proposed to be used in the business of the Company as
currently conducted or as proposed to be conducted, except to the
extent that the failure to have such rights have not and could not
reasonably be expected to have a Material Adverse Effect on the
Company.
(b) Schedule 3.13 of the Disclosure Schedule lists
(i) all patents and patent applications and all registered and
unregistered trademarks, trade names and service marks, registered
and unregistered copyrights, and maskworks, which the Company
considers to be material to its business and included in the
Intellectual Property, including the jurisdictions in which each
such Intellectual Property right has been issued or registered or
in which any application for such issuance and registration has
been filed, (ii) all material licenses, sublicenses and other
agreements as to which the Company is a party and pursuant to
which any person is authorized to use any Intellectual Property,
and (iii) all material licenses, sublicenses and other agreements
as to which the Company is a party and pursuant to which the
Company is authorized to use any third party patents, trademarks
or copyrights, including software ("Third Party Intellectual
Property Rights"), in each case which are incorporated in, are, or
form a part of any product or service of the Company.
(c) To the knowledge of the Company, there is no
unauthorized use, disclosure, infringement or misappropriation of
any Intellectual Property rights of the Company, any trade secret
material to the Company, or any Third Party Intellectual Property
Right, by any third party, including any employee or former
employee of the Company. The Company has not entered into any
agreement to indemnify any other person against any charge of
infringement of any Intellectual Property, other than
indemnification provisions contained in purchase orders arising in
the ordinary course of business.
(d) The Company is not, and will not as a result of
the execution and delivery of this Agreement or the performance of
the Company's obligations under this Agreement be, in breach of
any license, sublicense or other agreement relating to the
Intellectual Property or Third Party Intellectual Property Rights,
the breach of which could have a Material Adverse Effect on the
Company.
(e) All patents, registered trademarks, service
marks and copyrights held by the Company are valid and subsisting.
The Company (i) has not been sued in any suit, action or
proceeding which involves a claim of infringement of any patents,
trademarks, service marks, copyrights or violation of any trade
secret or other proprietary right of any third party or (ii) has
not brought any action, suit or proceeding for infringement of
Intellectual Property or breach of any license or agreement
involving Intellectual Property against any third party. The
manufacture, marketing, licensing or sale of the products and
services of the Company do not infringe any patent, trademark,
service xxxx, copyright, trade secret or other proprietary right
of any third party.
(f) The Company has secured valid written
assignments from all consultants and employees who contributed to
the creation or development of Intellectual Property of the rights
to such contributions that the Company does not already own by
operation of law.
(g) The Company has taken all reasonable and
appropriate steps to protect and preserve the confidentiality of
all Intellectual Property not otherwise protected by patents, or
patent applications or copyright ("Confidential Information").
All use, disclosure or appropriation of Confidential Information
owned by the Company by or to a third party has been pursuant to
the terms of a written agreement with such third party. All use,
disclosure or appropriation of Confidential Information not owned
by the Company has been pursuant to the terms of a written
agreement with the owner of such Confidential Information, or is
otherwise lawful.
3.14 Environmental Matters.
(a) The Company has complied with, and is in
compliance with, all Environmental Laws (as defined in this
Section 3.14(a)) applicable to its business, properties and
assets. The Company has, and the Company has provided to Parent
true and complete copies of, all permits, approvals,
registrations, licenses and other authorizations required by any
Governmental Entity pursuant to any Environmental Law applicable
to its business, properties and assets, the absence of which would
have a Material Adverse Effect on the Company. There is no
pending or, to the knowledge of the Shareholders, threatened civil
or criminal litigation, written notice of violation, formal
administrative proceeding, or investigation, inquiry or
information request by any Governmental Entity, relating to any
Environmental Law to which the Company is a party or, to the
knowledge of the Shareholders, threatened to be made a party. For
purposes of this Agreement, "Environmental Law" means any federal,
state or local law, statute, rule or regulation or the common law
relating to the environment or occupational health and safety,
including any statute, regulation or order pertaining to
(i) treatment, storage, disposal, generation and transportation of
industrial, toxic or hazardous substances or solid or hazardous
waste; (ii) air, water and noise pollution; (iii) groundwater and
solid contamination; (iv) the release or threatened release into
the environment of industrial, toxic or hazardous substances, or
solid or hazardous waste, including without limitation emissions,
discharges, injections, spills, escapes or dumping of pollutants,
contaminants or chemicals; (v) the protection of wild life, marine
sanctuaries and wetlands, including without limitation all
endangered and threatened species; (vi) storage tanks, vessels and
containers; (vii) underground and other storage tanks or vessels,
abandoned, disposed or discarded barrels, containers and other
closed receptacles; (viii) health and safety of employees and
other persons; and (ix) manufacture, processing, use,
distribution, treatment, storage, disposal, transportation or
handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or oil or petroleum products or
solid or hazardous waste. As used herein, the terms "release" and
"environment" have the meanings set forth in the federal
Comprehensive Environmental Compensation, Liability and Response
Act of 1980 ("CERCLA").
(b) There have been no releases of any Materials of
Environmental Concern (as defined in this Section 3.14(b)) into
the environment at any parcel of real property or any facility
presently or formerly owned by the Company or by the Company at
any parcel of real property or any facility presently or formerly
leased, operated or controlled by the Company. With respect to any
such releases of Materials of Environmental Concern, the Company
has given all required notices to government authorities, copies
of which have been provided to Parent. The Shareholders are not
aware of any releases of Materials of Environmental Concern at
parcels of real property or facilities other than those presently
or formerly owned, leased, operated or controlled by the Company
that could reasonably be expected to have an impact on the real
property or facilities owned, leased, operated or controlled by
the Company. For purposes of this Agreement, "Materials of
Environmental Concern" means any chemicals, pollutants or
contaminants, hazardous substances (as such term is defined under
CERCLA), solid wastes and hazardous wastes (as such terms are
defined under the Federal Resources Conservation and Recovery
Act), toxic materials, oil or petroleum and petroleum products.
(c) Set forth in Schedule 3.14 of the Disclosure
Schedule is a list of all environmental reports, investigations
and audits in the possession of the Company with respect to the
operations of, or real property leased by the Company (whether
conducted by or on behalf of the Company or a third party and
whether done at the initiative of the Company or directed by a
Governmental Entity or other third party). True and complete
copies of each such report, or the results of each such
investigation or audit, have been provided to Parent.
(d) The Shareholders are not aware of any material
environmental liability arising out of the utilization by the
Company of any solid and hazardous waste transporter or treatment,
storage and disposal facility.
3.15 Taxes. The Company is, and has been for all taxable
periods since its formation, treated as an S Corporation as
defined in Section 1361(a)(1) of the Internal Revenue Code of
1986, as amended (the "Code"). The Company, and any consolidated,
combined, unitary or aggregate group for Tax (as defined in this
Section 3.15) purposes of which the Company is or has been a
member have timely filed all Tax Returns (as defined in this
Section 3.15) required to be filed by it taking into account
extensions of due dates, have paid all Taxes shown thereon to be
due and has provided adequate accruals in accordance with
generally accepted accounting principles in its financial
statements for any Taxes that have not been paid, whether shown as
being due on any Tax returns. The Company has withheld and paid
over all Taxes required to have been withheld and paid over
(including any estimated taxes), and has 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. The Company does
not have any liability under Treasury Regulation 1.1502-6 or any
analogous state, local or foreign law by reason of having been a
member of any consolidated, combined or unitary group. The
Company does not do business in or derive income from any state,
local, territorial or foreign taxing jurisdiction other than those
for which Returns have been furnished to Parent. Except as
disclosed in Schedule 3.15 of the Disclosure Schedule, (a) no
material claim for Taxes has become a Lien against the property of
the Company or is being asserted against the Company other than
Liens for Taxes not yet due and payable, (b) no audit of any Tax
Return of the Company is being conducted by a Tax authority,
(c) no Tax authority is now asserting, or to the knowledge of the
Shareholders, threatening to assert against the Company any
deficiency or claim for additional Taxes, and there are no
requests for information from a Tax authority currently
outstanding that could affect the Taxes of the Company, (d) no
extension of the statute of limitations on the assessment of any
Taxes has been granted by the Company and is currently in effect,
and (e) the Company has not entered into any compensatory
agreements with respect to the performance of services which
payment thereunder would result in a nondeductible expense
pursuant to Sections 162(m) or 280G of the Code, (f) no action has
been taken that would have the effect of deferring any liability
for Taxes for the Company from any period prior to the Effective
Date to any period after the Effective Date, (g) the Company has
never been included in an affiliated group of corporations, within
the meaning of Section 1504 of the Code, (h) the Company is not
(nor has it ever been) a party to any Tax sharing agreement, (i)
no consent under Section 341(f) of the Code has been filed with
respect to the Company, (j) the Company has not disposed of any
property that has been accounted for under the installment method,
(k) the Company is not a party to any interest rate swap, currency
swap or similar transaction, (l) the Company is not a United
States real property holding corporation within the meaning of
Section 897(c)(2) of the Code, (m) the Company is not subject to
any joint venture, partnership or other arrangement or contract
that is treated as a partnership for federal income tax purposes,
(n) the Company has not made any of the foregoing elections and is
not required to apply any of the foregoing rules under any
comparable state or local income tax provisions, and (o) the
transactions contemplated herein are not subject to the tax
withholding provisions of Section 3406 of the Code, or of
Subchapter A of Chapter 3 of the Code, or of any other provision
of law. The Company will not be required to include any material
adjustment in Taxable income for any Tax period (or portion
thereof) ending after the Closing Date attributable to adjustments
made prior to the Closing Date pursuant to Section 481 or 263A of
the Code or any comparable provision of any state or foreign Tax
law. Schedule 3.15 of the Disclosure Schedule contains accurate
and complete information with respect to: (w) all material tax
elections in effect with respect to the Company, (x) the current
tax basis of the assets of the Company, (y) the current and
accumulated earnings and profits of the Company, and (z) the tax
credit carry overs of the Company. As used herein, "Tax" (and,
with correlative meaning, "Taxes" and "Taxable") means (i) any net
income, alternative or add-on minimum tax, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, excise, severance,
stamp, business and occupations, occupation, premium, property,
environmental or windfall profit tax, custom, duty, or other tax,
governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or any penalty, addition to
tax or additional amount imposed by any Governmental Entity (a
"Tax authority") responsible for the imposition of any such tax
(domestic or foreign), (ii) any liability for the payment of any
amounts of the type described in clause (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group
for any Taxable period and (iii) any liability for the payment of
any amounts of the type described in clause (i) or (ii) as a
result of any express or implied obligation to indemnify any other
person. As used herein, "Tax Return" shall mean any return,
statement, report or form (including, without limitation,)
estimated Tax returns and reports, withholding Tax returns and
reports and information reports and returns required to be filed
with respect to Taxes. The Company is in full compliance with all
terms and conditions of any Tax exemptions or other Tax-sharing
agreement or order of a foreign government and the consummation of
the transaction contemplated hereby will not have any adverse
effect on the continued validity and effectiveness of such Tax
exemptions or other Tax-sharing agreement or order.
3.16 Employee Benefit Plans.
(a) Schedule 3.16 of the Disclosure Schedule lists,
with respect to the Company and any trade or business (whether or
not incorporated) which is treated as a single employer with the
Company (an "ERISA Affiliate") within the meaning of
Section 414(b), (c), (m) or (o) of the Code, (i) all material
employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")),
(ii) each loan to a non-officer employee in excess of $10,000,
loans to officers and directors and any stock option, stock
purchase, phantom stock, stock appreciation right, supplemental
retirement, severance, sabbatical, medical, dental, vision care,
disability, employee relocation, cafeteria benefit (Code
Section 125) or dependent care (Code Section 129), life insurance
or accident insurance plans, programs or arrangements, (iii) all
bonus, pension, profit sharing, savings, deferred compensation or
incentive plans, programs or arrangements, (iv) other fringe or
employee benefit plans, programs or arrangements that apply to
senior management and that do not generally apply to all
employees, and (v) any current or former employment or executive
compensation or severance agreements, written or otherwise, as to
which unsatisfied obligations of greater than $10,000 remain for
the benefit of, or relating to, any present or former employee,
consultant or director (collectively, the "Employee Plans").
(b) The Company has furnished to Parent a copy of
each of the Employee Plans and related plan documents (including
trust documents, insurance policies or contracts, employee
booklets, summary plan descriptions and other authorizing
documents, and, to the extent still in its possession, any
material employee communications relating thereto) and has, with
respect to each Employee Plan which is subject to ERISA reporting
requirements, provided copies of the Form 5500, including all
schedules attached thereto and actuarial reports, if any, filed
for the last three Plan years. Any Employee Plan intended to be
qualified under Sections 401(a) or 501(c)(9) of the Code has
either obtained from the Internal Revenue Service a favorable
determination letter as to its qualified status under the Tax
Reform Act of 1986 and subsequent legislation, or has applied to
the Internal Revenue Service for such a determination letter prior
to the expiration of the requisite period under applicable
Treasury Regulations or Internal Revenue Service pronouncements in
which to apply for such determination letter and to make any
amendments necessary to obtain a favorable determination. The
Company has also furnished Parent with the most recent Internal
Revenue Service determination letter issued with respect to each
such Employee Plan (and nothing has occurred since the issuance of
each such letter which could reasonably be expected to cause the
loss of the tax-qualified status of any Employee Plan subject to
Code Section 401(a)), and all prohibited transaction exemptions
(or requests for such exemptions), private letter rulings,
opinions, information letters or compliance statements issued with
respect to any plan described in Section 3.16(a) by the Internal
Revenue Service, the Department of Labor or the Pension Benefit
Guaranty Corporation.
(c) (i) None of the Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any
person; (ii) there has been no "prohibited transaction," as such
term is defined in Section 406 of ERISA and Section 4975 of the
Code, with respect to any Employee Plan, which could reasonably be
expected to have, in the aggregate, a Material Adverse Effect;
(iii) each Employee Plan has been administered in accordance with
its terms and in compliance with the requirements prescribed by
any and all statutes, rules and regulations (including ERISA and
the Code), except as would not have a Material Adverse Effect on
the Company, and the Company or ERISA Affiliate have performed all
obligations required to be performed by them under, are not in any
respect in default under or violation of, and have no knowledge of
any default or violation by any other party to, any of the
Employee Plans, which default or violation could reasonably be
expected to have a Material Adverse Effect on the Company;
(iv) neither the Company nor any ERISA Affiliate is subject to any
liability or penalty under Sections 4976 through 4980 of the Code
or Title I of ERISA with respect to any of the Employee Plans
which have a Material Adverse Effect on any such parties; (v) all
material contributions required to be made by the Company or any
ERISA Affiliate to any Employee Plan have been made on or before
their due dates and a reasonable amount has been accrued for
contributions to each Employee Plan for the current plan years;
(vi) with respect to each Employee Plan, no "reportable event"
within the meaning of Section 4043 of ERISA (excluding any such
event for which the 30-day notice requirement has been waived
under the regulations to Section 4043 of ERISA) nor any event
described in Section 4062, 4063 or 4041 of ERISA has occurred; and
(vii) no Employee Plan is covered by, and neither the Company nor
any ERISA Affiliate has incurred or expects to incur any liability
under Title IV of ERISA or Section 412 of the Code. With respect
to each Employee Plan subject to ERISA as either an employee
pension plan within the meaning of Section 3(2) of ERISA or an
employee welfare benefit plan within the meaning of Section 3(1)
of ERISA, the Company has prepared in good faith and timely filed
all requisite governmental reports (which were true and correct as
of the date filed) and has properly and timely filed and
distributed or posted all notices and reports to employees
required to be filed, distributed or posted with respect to each
such Employee Plan except where the failure to timely file,
distribute or post such documents would not, in the aggregate,
have a Material Adverse Effect on the Company. No suit,
administrative proceeding, action or other litigation has been
brought, or to the knowledge of the Shareholders, is threatened,
against or with respect to any such Employee Plan, including any
audit or inquiry by the Internal Revenue Service or United States
Department of Labor. Neither the Company nor any ERISA Affiliate
is a party to, or has made any contribution to or otherwise
incurred any obligation under, any "multiemployer plan" as defined
in Section 3(37) of ERISA.
(d) With respect to each Employee Plan, the Company
has complied with (i) the applicable health care continuation and
notice provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") and the proposed regulations
thereunder and (ii) the applicable requirements of the Family and
Medical Leave Act of 1993 and the regulations thereunder, except
to the extent that such failure to comply would not, in the
aggregate, have a Material Adverse Effect on the Company.
(e) The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will not
(i) entitle any current or former employee or other service
provider or any director of the Company or any ERISA Affiliate to
severance benefits or any other payment (including unemployment
compensation, golden parachute, bonus or otherwise), (ii) increase
any benefits otherwise payable or (iii) accelerate the time of
payment or vesting, or increase the amount of compensation due any
such employee, service provider or director.
(f) There has been no amendment to, written
interpretation or announcement (whether or not written) by the
Company or ERISA Affiliate relating to, or change in participation
or coverage under, any Employee Plan which would materially
increase the expense of maintaining such Plan above the level of
expense incurred with respect to that Plan for the most recent
fiscal year included in the Annual Financial Statements.
3.17 Employee Matters. Schedule 3.17 of the Disclosure
Schedule lists all employees of the Company and the remuneration
and benefits to which such employees are entitled. Schedule 3.17
also lists all employment contracts and collective bargaining
agreements, and all pension, bonus, profit sharing, or other
agreements or arrangements providing for employee remuneration or
benefits to which the Company is a party or by which it is bound;
all of these contracts and arrangements are in full force and
effect, and neither the Company nor any other party is in default
under them. There have been no claims of defaults and, to the
knowledge of the Shareholders, there are no facts or conditions
which if continued, or on notice, will result in a default under
these contracts or arrangements. There is no pending or, to the
knowledge of the Shareholders, threatened labor dispute, strike,
or work stoppage that would have a Material Adverse Effect on the
Company. The Company is in compliance in all respects with all
current applicable laws and regulations respecting employment,
discrimination in employment, terms and conditions of employment,
wages, hours and occupational safety and health and employment
practices, and are not engaged in any unfair labor practice.
There are no pending claims against the Company under any workers
compensation plan or policy or for long term disability. The
Company does not have any obligations under COBRA with respect to
any former employees or qualifying beneficiaries thereunder.
3.18 Interested Party Transactions. Except as disclosed in
Schedule 3.18 of the Disclosure Schedule, the Company is not
indebted to any shareholder, director, officer, employee or agent
of the Company (except for amounts due as normal salaries and
bonuses and in reimbursement of ordinary expenses), and no such
person is indebted to the Company, and there have been no other
transactions of the type required to be disclosed pursuant to
Items 402 and 404 of Regulation S-K under the Securities Act and
the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
3.19 Insurance. The Company has policies of insurance and
bonds of the type and in amounts customarily carried by persons
conducting businesses or owning assets similar to those of the
Company. Schedule 3.19 of the Disclosure Schedule sets forth a
true and complete listing of all such policies, including in each
case applicable coverage limits, deductibles and policy expiration
dates. There is no material claim pending under any of such
policies or bond as to which the Company has received a denial,
or, to the knowledge of the Shareholders, which coverage has been
questioned, denied or disputed by the underwriters of such
policies or bonds. All premiums due and payable under all such
policies and bonds have been paid and the Company is otherwise in
compliance in all material respects with the terms of such
policies and bonds. The Shareholders have no knowledge of any
threatened termination of, or material premium increase with
respect to, any of such policies. Each policy or bond is legal,
valid, binding, enforceable and in full force and effect and will
continue to be legal, valid, binding, enforceable and in full
force and effect following the consummation of the transactions
contemplated hereby.
3.20 Compliance With Laws. The Company has complied with,
is not in violation of, and has not received any notices of
violation with respect to, any federal, state, local or foreign
statute, law or regulation with respect to the conduct of its
business, or the ownership or operation of its business, except
for such violations or failures to comply as could not be
reasonably expected to have a Material Adverse Effect on the
Company.
3.21 Major Customers. Schedule 3.21 of the Disclosure
Schedule contains a list of the customers of the Company for each
of the two most recent fiscal years, which individually accounted
for more than five percent of the total dollar amount of net
sales, showing the total dollar amount of net sales to each such
customer during each such year. The Shareholders have no
knowledge or information of any facts indicating, nor any other
reason to believe, that any of the customers listed in such
Schedule 3.21 will not continue to be customers of the Company
after the Closing at substantially the same level of purchases.
3.22 Suppliers. As of the date hereof, no supplier of the
Company has indicated to the Company that it will stop, or
decrease the rate of, supplying materials, products or service to
the Company. The Company has not knowingly breached, so as to
provide a benefit to the Company that was not intended by the
parties, any agreement with, or engaged in any fraudulent conduct
with respect to, any customer or supplier of the Company.
3.23 Inventory. All inventories of raw materials, work-in
process and finished goods (including all such in transit) of the
Company, together with related packaging materials (collectively,
"Inventory"), reflected in the Annual and Interim Financial
Statements consist of a quality and quantity usable and saleable
in the ordinary course of business, have commercial values at
least equal to the value shown on such balance sheet or are
subject to purchase obligations by customers or suppliers at such
value and is valued in accordance with generally accepted
accounting principles at the lower of cost (on a first in first
out basis) or market. All Inventory purchased since the date of
such balance sheet consists of a quality and quantity usable and
saleable in the ordinary course of business. Except as set forth
in Schedule 3.23 of the Disclosure Schedule, all Inventory is
located on premises owned or leased by the Company. All work-in
process contained in Inventory constitutes items in process of
production pursuant to contracts or open orders taken in the
ordinary course of business, from regular customers of the Company
with no recent history of credit problems with respect to the
Company; neither the Company nor any such customer is in material
breach of the terms of any obligation to the other, and, based on
the knowledge of the Shareholders, valid grounds exist for any
counterclaim or set-off of amounts billable to such customers upon
the completion of orders to which work-in-process relates. All
work-in process is of a quality ordinarily produced in accordance
with the requirements of the orders to which such work-in-process
is identified, and will require no rework with respect to work
performed prior to Closing.
3.24 Product Warranty and Product Liability. Schedule 3.24
of the Disclosure Schedule contains a true and complete copy of
the Company's standard warranty or warranties for its
manufacturing services. There has been no variation from such
warranties, except as set forth in Schedule 3.24 of the Disclosure
Schedule. Except as stated therein, there are no warranties,
commitments or obligations with respect to the Company's
performance of services. Schedule 3.24 of the Disclosure Schedule
contains a description of all product liability claims and similar
claims, actions, litigation and other proceedings relating to
services rendered, which are presently pending or, to the
knowledge of the Shareholders, threatened, or which have been
asserted or commenced against the Company within the last five
years, in which a party thereto either requests injunctive relief
(whether temporary or permanent) or alleges damages (whether or
not covered by insurance). There are no defects in the Company's
manufacturing services which would adversely affect performance of
products the Company manufactures or create an unusual risk of
injury to persons or property. The Company's manufacturing
services have been designed or performed so as to meet and comply
with all governmental standards and specifications currently in
effect, and have received all governmental approvals necessary to
allow their performance.
3.25 Minutes Books. The minute books of the Company made
available to Parent contain true and complete summaries of all
meetings of directors and shareholders or actions by written
consent since the time of incorporation of the Company, and
reflect all transactions referred to in such minutes accurately in
all material respects.
3.26 Brokers' and Finders' Fees. Except for the letter
agreement, dated August 23, 1996, between Target and Pacific Crest
Securities, Inc., neither the Company nor any Shareholder has
incurred, or will incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or investment
bankers' fees or any similar charges in connection with this
Agreement or any transaction contemplated hereby.
3.27 Proxy Statement. The information supplied by the
Company for inclusion in the proxy statement to be sent to the
shareholders of Parent in connection with the meeting of Parent's
shareholders (the "Parent Shareholders Meeting") to consider the
Merger (such proxy statement as amended or supplemented is
referred to herein as the "Proxy Statement") shall not, on the
date the Proxy Statement is first mailed, at the time of the
Parent Shareholders Meeting and at the Closing Date, contain any
statement which, at such time, is false or misleading with respect
to any material fact, or omit to state any material fact necessary
in order to make the statements made therein, in light of the
circumstances under which they are made, not false or misleading;
or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the
solicitation of proxies for the Parent Shareholders Meeting which
has become false or misleading.
3.28 Disclosure. None of the representations or warranties
made by Shareholders herein or in the Disclosure Schedule, or in
any certificate furnished by Shareholders pursuant to this
Agreement, when all such documents are read together in their
entirety, contain or will contain at the Closing Date any untrue
statement of a material fact, or omit or will omit at the Closing
Date to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the
circumstances under which made, not misleading. The Company and
Shareholders have delivered or made available true and complete
copies of each document that has been requested by Parent or its
counsel in connection with their legal and accounting review of
the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Shareholders as
follows:
4.1 Organization. Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Colorado.
4.2 Due Authorization. Parent has the full corporate
power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Parent and constitutes the valid and
binding obligation of Parent enforceable against Parent in
accordance with its terms. The execution and delivery of this
Agreement do not, and the consummation of the transactions
contemplated hereby will not, (a) violate or conflict with any
permit, order, license, decree, judgment, statute, law, ordinance,
rule or regulation applicable to Parent or (b) result in any
breach or violation of, or constitute a default (with or without
notice or lapse of time, or both) under, or give rise to a right
of termination, cancellation or acceleration of, or result in the
creation of any Lien on any of the properties or assets of Parent
pursuant to, or require the consent of any party to any mortgage,
indenture, lease, contract or other agreement or instrument, bond,
note, concession or franchise applicable to Parent or any of its
properties or assets, except, in the case of this clause (b) only,
where such conflict, violation, default, termination, cancellation
or acceleration would not have and could not reasonably be
expected to prevent the consummation of the transactions
contemplated hereby. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Parent in connection with
the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.
4.3 Brokers' and Finders' Fees. Parent has not incurred,
and will not incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or investment
bankers' fees or any similar charges in connection with this
Agreement or any transaction contemplated hereby.
4.4 Investment. Parent is not acquiring the Stock with a
view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act.
ARTICLE V
CONDUCT PENDING THE CLOSING
5.1 Conduct of Business of the Company. Prior to the
Closing, except as expressly contemplated by this Agreement or as
agreed in writing by Parent:
(a) Affirmative Covenants. The Shareholders will
cause each of the Company to:
(i) carry on its business in the usual,
regular and ordinary course in substantially the same manner as
heretofore conducted and use its best efforts to preserve intact
its present business organizations, keep available the services of
its present officers and key employees and preserve its
relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it, to the end
that its goodwill and ongoing businesses shall be unimpaired at
the Closing;
(ii) maintain insurance coverages and its
books, accounts and records in the usual manner consistent with
past practice;
(iii) comply in all material respects with all
laws and regulations of any Governmental Entity applicable to it;
(iv) maintain and keep its plants, property and
equipment in good repair, working order and condition, ordinary
wear and tear excepted;
(v) perform in all material respects its
obligations under all contracts and commitments to which it is a
party or by which it is bound;
(vi) notify Parent of any event or occurrence
not in the ordinary course of its business, and of any event which
could have a Material Adverse Effect on the Company; or
(vii) pay, consistent with past practice, all
accounts payable that arise in the ordinary course of its business
except to the extent that the amount owing is being duly contested
by the Company and such contest does not have a Material Adverse
Effect on the Company and adequate reserves therefor are reflected
on the Annual Financial Statements or the Interim Financial
Statements.
(b) Negative Covenants. The Shareholders will cause
each of the Company not to do any of the things enumerated in
Section 3.6. In addition, but without limiting the generality of
the foregoing, the Shareholders will cause each of the Company not
to:
(i) cause or permit any amendments to its
Articles of Incorporation or Bylaws or equivalent charter
documents;
(ii) accelerate, amend or change the period of
exercisability or vesting of options or other rights granted under
its employee stock plans or director stock plans or authorize cash
payments in exchange for any options or other rights granted under
any of such plans;
(iii) transfer to any person or entity any
rights to its Intellectual Property;
(iv) enter into or amend any agreements
pursuant to which any other party is granted exclusive marketing
or other exclusive rights of any type or scope with respect to any
of its products or technology;
(v) enter into any operating lease providing
for payments in excess of an aggregate of $10,000;
(vi) adopt or amend any employee benefit or
stock purchase or option plan, or hire any new director level or
officer level employee (other than in the ordinary course of
business), pay any special bonus or special remuneration to any
employee or director, or increase the salaries or wage rates of
its employees, except for normal salary or wage increases relating
to periodic performance reviews and annual bonuses consistent with
past practices of the Company where such increases or bonuses are
not given to Shareholders or their relations or members of the
leadership team of the Company or Target.
(vii) commence a lawsuit other than (A) for the
routine collection of bills or (B) in such cases where it in good
faith determines that failure to commence suit would result in the
material impairment of a valuable aspect of its business, provided
that it consults with Parent prior to the filing of such a suit;
(viii) 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 corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to
acquire any assets, other than in the ordinary course of business
consistent with past practice;
(ix) other than in the ordinary course of
business, make or change any material election in respect of
Taxes, adopt or change any accounting method in respect of Taxes,
file any material Tax Return or any amendment to a material Tax
Return, enter into any closing agreement, settle any claim or
assessment in respect of Taxes, or consent to any extension or
waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(x) revalue any of its assets, including
without limitation writing down the value of inventory or writing
off notes or accounts receivable other than in the ordinary course
of business;
(xi) take, or agree in writing or otherwise to
take, any other action that would make any of its representations
or warranties contained in this Agreement untrue; or
(xii) agree, whether in writing or otherwise, to
do any of the foregoing.
5.2 No Solicitation; Acquisition Proposals. The
Shareholders will (and the Shareholders will cause each of the
Company to) not, directly or indirectly, through any officer,
director, employee, representative, agent, financial advisor or
otherwise, solicit, initiate or encourage inquiries or submission
of proposals or offers from any person relating to any sale of all
or any portion of the assets, business, properties of (other than
immaterial or insubstantial assets or inventory in the ordinary
course of business), or any equity interest in, the Company or any
business combination with the Company whether by merger, purchase
of assets, tender offer or otherwise or participate in any
negotiation regarding, or furnishing to any other person any
information with respect to, or otherwise cooperate in any way
with, or assist in, facilitate or encourage, any effort or attempt
by any other person to do or seek to do any of the foregoing.
None of the Shareholders will vote their Stock in favor of any
transaction of the nature described in this Section 5.2. The
Shareholders will notify Parent immediately if any inquiries or
proposals are received by, any information is requested from, or
any negotiations or discussions are sought to be initiated or
continued with the Company or any Shareholder, in each case in
connection with any of the foregoing. The Shareholders shall use
their best efforts to cause all confidential materials previously
furnished to any third parties in connection with any of the
foregoing to be promptly returned to the Company and shall cease,
or cause the Company to cease, any negotiations conducted in
connection therewith or otherwise conducted with any such parties.
5.3 Notice of Breach. Each party hereto shall promptly
give written notice to the others upon becoming aware of the
occurrence or, to its knowledge, impending or threatened
occurrence, of any event that could cause or constitute a breach
of any of its representations, warranties or covenants hereunder.
ARTICLE VI
OTHER COVENANTS
6.1 Access to Information. The Shareholders will afford,
and will cause the Company to afford, Parent and its accountants,
counsel and other representatives full access during normal
business hours (and at such other times as the parties hereto
agree) during the period prior to the Closing to (a) all of the
Company's properties, books, contracts, commitments and records,
and (b) all other information concerning the business, properties
and personnel of the Company as Parent may reasonably request.
The Shareholders will provide, and will cause each of the Company
to provide, to Parent and its accountants, counsel and other
representatives copies of internal financial statements promptly
upon request. Parent shall cooperate with the Shareholders with
their due diligence review of Parent to the extent necessary to
confirm the accuracy of Parent's representations and warranties.
Subject to compliance with applicable law, from the date hereof
until the Closing, each of Parent and the Company shall confer on
a regular and frequent basis with one or more representatives of
the other party to report operational matters of materiality and
the general status of ongoing operations. No information or
knowledge obtained in any investigation pursuant to this
Section 6.1 shall affect or be deemed to modify any representation
or warranty contained herein or the conditions to the obligations
of the parties hereto to consummate the transactions contemplated
hereby.
6.2 Confidentiality. The parties hereto will treat as
confidential and hold in confidence all information concerning the
businesses and affairs of the Company and the business and affairs
of Parent that is not already generally available to the public
and is not otherwise known to the party to whom it was disclosed
on a non-confidential basis ("Proprietary Information") and
refrain from using any Confidential Information except in
furtherance of this Agreement or as required by law. For
avoidance of doubt, the letter agreement between Parent and
Pacific Crest Securities Inc., dated October 2, 1996, relating to
the disclosure of the Company's confidential information and
Section 11 of letter agreement, dated December 18, 1996, among
Current Electronics, Inc., the Company and Parent shall cease to
have any further force or effect.
6.3 Publicity. The Shareholders will not, and will cause
each of the Company not to, issue, or cause or permit to be
issued, any press release or otherwise make any public statement
regarding the terms of this Agreement or the transactions
contemplated hereby without Parent's prior written consent.
Parent shall consult with the Company before issuing any press
release or otherwise making any public statement regarding the
terms of this Agreement or the transactions contemplated hereby,
except as required by law or its other legal obligations.
6.4 Filings; Cooperation. The parties hereto shall make,
and cause their affiliates to make, all necessary filings with
respect to the transactions contemplated hereby including those
required under the Securities Act and the Exchange Act and the
rules and regulations thereunder, and under applicable Blue Sky or
similar securities laws, and shall use all reasonable efforts to
obtain required approvals and clearances with respect thereto to
(a) comply as promptly as practicable with all governmental
requirements applicable to the transaction and (b) obtain promptly
all necessary permits, orders and other consents of Governmental
Entities and consents of third parties necessary for the
consummation of the transactions contemplated hereby.
6.5 Employment Matters. The Shareholders shall cause the
employment arrangements of each person that is related to a
Shareholder to be terminated, such terminations to be effective at
the Closing and be without liability to the Company in any
respect.
6.6 Further Assurances.
(a) Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable
efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including using
all reasonable efforts to obtain all necessary waivers, consents
and approvals, to effect all necessary registrations and filings
(including, but not limited to, filings with all applicable
Governmental Entities) and to lift any injunction or other legal
bar to the transactions contemplated hereby (and, in such case, to
proceed with the such transactions as expeditiously as possible).
(b) In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes
of this Agreement, the proper officers and/or directors of Parent
and the Shareholders shall take all such necessary action.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Obligations of Each Party. The
respective obligations of each party hereto to consummate and
effect this Agreement and the transactions contemplated hereby
shall be subject to the satisfaction at or prior to the Closing
Date of each of the following conditions, any of which may be
waived, in writing, by agreement of Parent and Shareholders
holding a majority in interest of the Stock:
(a) This Agreement and the transactions contemplated
hereby shall have been approved and adopted by the requisite vote
of the shareholders of Parent.
(b) No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the transactions
contemplated hereby, nor any proceeding brought by an
administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of
the foregoing, shall be pending; nor shall there be any action
taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to such transactions, which makes
the consummation of such transactions illegal.
(c) The parties hereto shall have timely obtained
from each Governmental Entity all approvals, waivers and consents,
if any, necessary for consummation of or in connection with the
Merger and the several transactions contemplated hereby, including
such approvals, waivers and consents as may be required under the
federal securities and state Blue Sky laws.
7.2 Additional Conditions to Obligations of Shareholders.
The obligations of the Shareholders to consummate and effect this
Agreement and the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Closing of each of
the following conditions, any of which may be waived, in writing,
by Shareholders holding a majority in interest of the Stock:
(a) Parent shall have performed and complied in all
material respects with all covenants, obligations and conditions
of this Agreement required to be performed and complied with by
them on or prior to the Closing and the representations and
warranties of Parent in this Agreement shall be true and correct
in all material respects (or in all respects in the case of any
representation or warranty that is qualified by its terms by a
reference to Material Adverse Effect or otherwise the concept of
materiality) when made and on and as of the Closing Date as though
such representations and warranties were made on and as of such
date.
(b) The Shareholders shall have received a
certificate executed on behalf of Parent by its Chief Financial
Officer certifying that the conditions specified in Section 7.2(a)
have been fulfilled.
(c) The Shareholders shall have received a legal
opinion of Holme Xxxxxxx & Xxxx LLP, counsel to Parent,
substantially in the form attached to the Merger Agreement as
Exhibit 8.2(c).
7.3 Additional Conditions to the Obligations of Parent.
The obligations of Parent to consummate and effect this Agreement
and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Closing of each of the following
conditions, any of which may be waived, in writing, by Parent:
(a) The Shareholders shall have performed and
complied in all material respects with all covenants, obligations
and conditions of this Agreement required to be performed and
complied with by them on or prior to the Closing Date and the
representations and warranties of the Shareholders in this
Agreement shall be true and correct in all material respects (or
in all respects in the case of any representation or warranty that
is qualified by its terms by a reference to Material Adverse
Effect or otherwise by the concept of materiality) when made and
on and as of the Closing Date as though such representations and
warranties were made on and as of such time.
(b) Parent shall have received a certificate, dated
as of the Closing Date, from each Shareholder certifying that the
conditions specified in Section 7.3(a) have been fulfilled.
(c) Parent shall have received a legal opinion from
Hershner, Hunter, Xxxxxxx, Xxxxx & Xxxxx, LLP, legal counsel to
the Shareholders, substantially in form attached to the Merger
Agreement as Exhibit 8.3(c).
(d) Parent shall have been furnished with evidence
satisfactory to it of the consent or approval of those persons
whose consent or approval shall be required in connection with the
transactions contemplated hereby under any material contract of
the Company or otherwise.
(e) There shall not have occurred any Material
Adverse Effect on the Company.
(f) Parent shall have received letters of
resignation, effective as of the Closing Date, executed and
tendered by each of the then incumbent directors of the Company.
(g) All of the transactions contemplated by the
Agreement and Plan of Merger, dated as of January 15, 1997, among
Parent, Current Merger Corp. and Target (the "Merger Agreement")
shall have been completed, including the execution and delivery by
each Shareholder of an agreement with respect to indemnification
of Parent and Merger Sub with respect to breaches of terms and
conditions of this Agreement (the "Indemnification Agreement"),
which Indemnification Agreement shall be substantially in the form
attached to the Merger Agreement as Exhibit 8.3(g).
(h) The transactions hereunder shall qualify for a
Section 338(h)(10) Election (as hereinafter defined) under the
applicable provisions of the Code and the Treasury Regulations and
under the state income tax laws of the states in which the Company
is required to file tax returns.
ARTICLE VIII
TAX MATTERS
8.1 Section 338(h)(10) Election. Each Shareholder will,
if so directed by Parent, join with Parent in making an election
under Section 338(h)(10) of the Code (and any corresponding
elections under state, local or foreign tax law) (collectively, a
"Section 338(h)(10) Election") with respect to the purchase and
sale of the Stock pursuant to this Agreement. The Shareholders
will pay any Tax, including any liability of the Company for Tax
resulting from the application to it of Treasury Regulation
1.338(h)(10)-1(f)(5), attributable to the making of the Section
338(h)(10) Election and will indemnify Parent and the Company
against any action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, injunction, judgment, order,
decree, ruling, damage, dues, penalty, fines, costs, amounts paid
in settlement, liabilities, obligations, Taxes, Liens, losses,
expenses and fees, including court costs and attorneys' fees and
expenses (an "Adverse Consequence") arising out of any failure to
pay such Taxes. The Shareholders shall also pay any
state, local, or foreign Taxes (and indemnify Parent
and the Company against any loss or damage arising out
of any failure to pay such Taxes) attributable to an
election under state, local or foreign law similar to
the election available under Section 338(g) of the Code
(or which results from the making of an election under
Section 338(g) of the Code) with respect to the
purchase and sale of the stock of the Company and any
such election shall be included within the term
"Section 338(h)(10) Election" for purposes of this
Agreement. Parent shall be responsible for, and control, the
preparation and filing of forms and documents with respect to the
Section 338(h)(10) Election. The Shareholders shall timely
execute and deliver to Parents such documents and forms as Parent
may request with respect to the Section 338(h)(10) Election. The
Shareholders agree not to take any action to change the election
or the contents of any forms filed with any taxing authority
without Parent's prior written consent.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. At any time prior to the Closing Date,
whether before or after approval of the matters presented in
connection with this Agreement by the shareholders of Parent, this
Agreement may be terminated:
(a) by mutual consent of Parent and the Shareholders
holding a majority in interest of the Stock;
(b) by either Parent or all Shareholders, if,
without fault of the terminating party, the Closing shall not have
occurred on or before April 30, 1997, or such later date as may be
agreed upon in writing by the parties hereto;
(c) by Parent, (i) if any of the conditions
specified in Section 7.3 have not been satisfied or waived at such
time as such condition is no longer capable of satisfaction or
(ii) if any of the Shareholders shall have breached its respective
representations, warranties or other obligations under Articles
II, III, V and VI in any material respect and such breach
continues for a period of 10 days after Shareholders holding a
majority in interest of the Stock receive notice of the breach
from Parent;
(d) by Shareholders holding a majority in interest
of the Stock, if (i) any of the conditions specified in Section
7.2 have not been satisfied or waived at such time as such
condition is no longer capable of satisfaction or (ii) if Parent
shall have breached its respective representations, warranties or
other obligations under Articles IV and VI in any material respect
and such breach continues for a period of 10 days after Parent
receives notice of the breach from the Shareholders.
9.2 Effect of Termination. In the event of termination of
this Agreement as provided in Section 9.1, this Agreement shall
forthwith become void and there shall be no liability or
obligation on the part of the parties hereto, except to the extent
that such termination results from the breach by a party hereto of
any of its representations, warranties or covenants set forth in
this Agreement; provided that, the provisions of this Section 9.2
and Section 6.2(Confidentiality) and Article X (General
Provisions) shall remain in full force and effect and survive any
termination of this Agreement.
9.3 Amendment; Waiver. The parties hereto may cause this
Agreement to be amended at any time by execution of an instrument
in writing signed by Parent and Shareholders holding a majority in
interest of the Stock. Any agreement on the part of a party
hereto to any such waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
10.1 Survival of Representations and Warranties. The
representations and warranties of the Shareholders in Sections 3.1
- 3.14 and 3.16 - 3.28 shall survive the Closing and continue in
full force and effect for one year after the Closing Date. All
the other representations and warranties of the Shareholders,
including those in Article II and Sections 3.15, shall survive the
Closing and continue in full force and effect forever after the
Closing Date (subject to any applicable statute of limitations).
The representations and warranties of Parent shall not survive the
Closing.
10.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if
delivered personally or by commercial delivery service, or mailed
by registered or certified mail, return receipt requested, or sent
via facsimile, with confirmation of receipt, to the parties at the
following address or at such other address for a party as shall be
specified by notice hereunder:
(a) if to Parent, to:
Electronic Fab Technology Corp.
0000 Xxxx 0xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Holme Xxxxxxx & Xxxx LLP
0000 Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile No.: (000) 000 0000
(b) if to the Shareholders, to:
Xxxxxxxx Xxxxxxxx
0000 X.X. Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
and
Xxxxxx Xxxxxxxx
00000 X.X. 00xx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
and
Xxxxx Xxxxxxxx
00000 X.X. Xxxxxx Xxxxx Xx.
Xxxx Xxxxxx, Xxxxxx 00000
Facsimile No.: (000) 000-0000
with a copy to:
Hershner, Hunter, Xxxxxxx,
Xxxxx & Xxxxx, LLP
000 Xxxx 00xx Xxxxxx
Xxxxxx, Xxxxxx 00000
Attention: Xxxxxx Xxxxx, Esq.
Facsimile No.: (000) 000-0000
10.3 Interpretation. When a reference is made in this
Agreement to Exhibits, Articles or Sections, such reference shall
be to an Exhibit, Article or Section to this Agreement unless
otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The phrase "made
available" in this Agreement shall mean that the information
referred to has been made available if requested by the party
hereto to whom such information is to be made available. The
table of contents and Article and Section headings contained in
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
In this Agreement, any reference to any event, change, condition
or effect being "material" with respect to any entity or group of
entities means any material event, change, condition or effect
related to the condition (financial or otherwise), properties,
assets (including intangible assets), liabilities, business,
operations or results of operations of such entity or group of
entities. In this Agreement, any reference to a "Material Adverse
Effect" with respect to any entity or group of entities means any
event, change or effect that is materially adverse to the
condition (financial or otherwise), properties, assets,
liabilities, business, operations or results of operations of such
entity and its subsidiaries, taken as a whole. In this Agreement,
any reference to a party's "knowledge" means such party's actual
knowledge after due and diligent inquiry of officers, directors
and other employees of such party reasonably believed to have
knowledge of such matters. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms.
10.4 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 hereto and
delivered to the other parties hereto, it being understood that
all parties hereto need not sign the same counterpart.
10.5 Entire Agreement; Nonassignability; Parties in
Interest. This Agreement and the documents and instruments and
other agreements specifically referred to herein or delivered
pursuant hereto, including the Exhibits and the Disclosure
Schedule (a) constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, among
the parties hereto with respect to the subject matter hereof; (b)
are not intended to confer upon any other person any rights or
remedies hereunder; and (c) shall not be assigned by operation of
law or otherwise except as otherwise specifically provided.
10.6 Severability. In the event that any provision of this
Agreement, or the application thereof, becomes or is declared by a
court of competent jurisdiction to be illegal, void or
unenforceable, the remainder of this Agreement will continue in
full force and effect and the application of such provision to
other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The
parties hereto further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business
and other purposes of such void or unenforceable provision.
10.7 Remedies Cumulative; No Waiver. Except as otherwise
provided herein, any and all remedies herein expressly conferred
upon a party will be deemed cumulative with and not exclusive of
any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not
preclude the exercise of any other remedy. No failure or delay on
the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver
of, or acquiescence in, any breach of any representation, warranty
or agreement herein, nor shall any single or partial exercise of
any such right preclude other or further exercise thereof or of
any other right.
10.8 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Colorado
(without regard to the principles of conflicts of law thereof).
10.9 Rules of Construction. The parties hereto agree that
they have been represented by counsel during the negotiation,
preparation and execution of this Agreement and, therefore, waive
the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such
agreement or document.
10.10 Expenses. Whether or not the transactions
contemplated hereby are consummated, all costs and expenses
incurred in connection with this Agreement and the
transactions
contemplated hereby (including, without limitation,
the fees and expenses of its advisers, accountants and legal
counsel) shall be paid by the party incurring such expense.
11.11 Attorneys Fees. In the event of any proceeding to
enforce this Agreement, the prevailing party shall be entitled to
receive from the losing party all reasonable costs and expenses,
including the reasonable fees of attorneys, accountants and other
experts, incurred by the prevailing party in investigating and
prosecuting (or defending) such action at trial or upon any
appeal.
IN WITNESS WHEREOF, the parties hereto have caused this
Share Purchase Agreement to be executed and delivered by their
respective officers thereunto duly authorized, all as of the date
first written above.
Parent:
ELECTRONIC FAB TECHNOLOGY CORP.
By:
Shareholders:
Xxxxxxxx Xxxxxxxx
Xxxxxxxx Xxxxxxxx
Xxxxxx Xxxxxxxx
Xxxxxx Xxxxxxxx
Xxxxx Xxxxxxxx
Xxxxx Xxxxxxxx
The undersigned persons join in this Agreement to the extent
of any community property interest held by them and consent hereto
with respect to such interest.
Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx
Xxxx Xxxxxxxx
Xxxx Xxxxxxxx
