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EXHIBIT 10.29
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
WHITE ELECTRONIC DESIGNS CORPORATION,
PV ACQUISITION CORP.,
PANELVIEW, INC.,
PANELVIEW PARTNERS L.P.,
XXXXXX XXXXXX,
XXXXXXX XXXXXX,
XXXXXXXX X. XXXXX,
XXXX XXXXXXX,
XXXXXXX X. XXXXXX,
AND
XXXXXX X. XXXXXX
DATED AS OF
JANUARY 29, 2001
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is made
effective as of January 29, 2001, by and among White Electronic Designs
Corporation, an Indiana corporation ("Acquiror"), PV Acquisition Corp., an
Oregon corporation ("Merger Sub"), which is a wholly-owned subsidiary of
Acquiror, Panelview, Inc., an Oregon corporation (the "Company"), Panelview
Partners, L.P., a California limited partnership ("PVP"), Xxxxxx Xxxxxx, Xxxxxxx
Xxxxxx, Xxxxxxxx X. Xxxxx, Xxxx Xxxxxxx, Xxxxxxx X. Xxxxxx, and Xxxxxx X. Xxxxxx
(PVP, Xxxxxx Xxxxxx, Xxxxxxx Xxxxxx, Xxxxxxxx Xxxxx, Xxxx Xxxxxxx, Xxxxxxx X.
Xxxxxx, and Xxxxxx X. Xxxxxx are referred to herein each individually as a
"Shareholder" and collectively as the "Shareholders") and for the purposes of
Article 8 of this Agreement, the directors of the Company, including without
limitation, Xxxxx Xxxxxx, Xxxxxx Xxxx and Xxxx Xxxxxxx. Xxxxxx Xxxxxx, Xxxxxxx
Xxxxxx, Xxxx Xxxxxxx, Xxxxxxx X. Xxxxxx, and Xxxxxx X. Xxxxxx, are considered
the "Former Graymor Shareholders."
RECITALS:
A. Acquiror wishes to acquire all of the outstanding capital stock of the
Company from the Shareholders.
B. The parties intend the transaction contemplated herein to constitute a
reorganization within the meaning of both section 368(a)(1)(A) and section
368(a)(2)(E) of the Code.
C. Acquiror has caused the formation of the Merger Sub for the purpose of
accomplishing a reverse triangular merger with the Company.
D. The parties have determined that it is in their respective best
interests to merge the Merger Sub with and into the Company (the "Merger") and
to undertake such other actions described herein, all on the terms and subject
to the conditions set forth in this Agreement.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, representations,
and warranties herein contained, and on the terms and subject to the conditions
herein set forth, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
The terms defined in this Article 1, whenever used in this Agreement
(including in the Schedules), shall have the respective meanings indicated below
for all purposes of this Agreement. All references herein to a Section, Article
or Schedule are to a Section, Article or Schedule of or to this Agreement,
unless otherwise indicated.
Accounting Arbitrator: as defined in Section 2.6(d).
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Acquiror: as defined in the preamble of this Agreement.
Acquiror Indemnitees: as defined in Section 9.1.
Acquiror Common Stock: as defined in Section 2.5.
Actions: as defined in Section 3.14.
Affiliate: of a Person means a Person that directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first Person. "Control" (including the terms
"controlled by" and "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of a Person, whether through the ownership of voting securities, by
contract or credit arrangement, as trustee or executor, or otherwise.
Agreement: this Agreement, including the Schedules and Exhibits hereto.
Applicable Law: all applicable provisions of all (i) constitutions,
treaties, statutes, laws (including the common law), rules, regulations,
ordinances, codes or orders of any Governmental Authority, (ii) Governmental
Approvals and (iii) orders, decisions, injunctions, judgments, awards, and
decrees of or agreements with any Governmental Authority, in each case as in
effect during the applicable time until the Closing.
Articles of Merger: as defined in Section 2.3.
Balance Sheet: as defined in Section 3.5.
Balance Sheet Date: as defined in Section 3.5.
Business: as defined in Section 8.1(c).
Business Day: shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in Phoenix, Arizona are authorized or required to
close.
Business Territory: as defined in Section 8.1.
CERCLA: the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. 9601 et seq.
Closing: as defined in Section 2.8.
Code: the Internal Revenue Code of 1986, as amended.
Commission: means the Securities and Exchange Commission.
Company: as defined in the preamble of this Agreement.
Company Certificates: as defined in Section 2.9.
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Company Common Stock: as defined in Section 2.5.
Company Real Estate: as defined in Section 3.9.
Compete: as defined in Section 8.1(a).
Consent: any consent, approval, authorization, waiver, permit, grant,
franchise, concession, license, exemption, or order of, registration,
certificate, declaration, or filing with, or report or notice to, any Person,
including but not limited to any Government Authority.
Contract: any agreement, contract, note, bond, mortgage, indenture,
loan, evidence of indebtedness, lease, sublease, permit, purchase order, letter
of credit, franchise agreement, covenant not to compete, employment agreement,
license, instrument, obligation or commitment to which Graymor or the Company is
a party or is bound to which its assets or properties are subject, whether
written or oral.
Customer Non-Solicitation Period: as defined in Section 8.3.
Dispute Notice: as defined in Section 2.6(b).
Earnout Exchange Price: as defined in Section 2.6(a).
Earnout Payment: as defined in Section 2.6(a).
Earnout Payment Date: as defined in Section 2.6(a).
Earnout Period: as defined in Section 2.6(a).
Earnout Targets: as defined in Section 2.6(a).
Effective Time: as defined in Section 2.3.
Employee Non-Solicitation Period: as defined in Section 8.2.
Employee Benefit Plans: as defined in Section 3.18.
Environmental Laws: shall mean all federal, state, local or foreign
laws, statutes, ordinances, regulations, rules, judgments, orders, notice
requirements, court decisions, agency guidelines or principles of laws,
restrictions or licenses, which (i) regulate or relate to the protection or
clean-up of the environment, the use, treatment, storage, transportation,
handling or disposal of hazardous, toxic or otherwise dangerous substances,
wastes or materials (whether gas, liquid or solid), the preservation or
protection of waterways, groundwater, drinking water, air, wildlife, plants or
other natural resources or the health and safety of persons or property,
including without limitation protection of the health and safety of employees or
(ii) impose liability with respect to any of the foregoing, including without
limitation the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et
seq.), Resource Conservation & Recovery Act (42 U.S.C. Section 6901 et seq.)
("RCRA"), Safe Drinking Water Act (21 U.S.C. Section 349, 42 U.S.C.
Section 201, 300f), Toxic Substances Control Act (15 U.S.C. Section 2601 et
seq.), Clean Air Act (42 U.S.C. Section 7401
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et seq.), the Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. Section 9601 et seq.) ("CERCLA"), or any other similar federal,
state or local law of similar effect, each as amended.
ERISA: the Employee Retirement Income Security Act of 1974, as amended.
Exchange Agent: as defined in Section 2.9.
Facilities: all the buildings, offices, maintenance and storage
facilities, shops, plants, warehouses, improvements and other structures,
together with all related fixtures, located at or on the real property and
having the following addresses: 00000 XX Xxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxx,
Xxxxxx 00000; 0000 XX Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxx 00000; and 0000 XX 000xx
Xxxxxxx, Xxxxxxxxx, Xxxxxx 00000.
Financial Statements: as defined in Section 3.5.
Former Graymor Shareholders: as defined in the preamble to this
Agreement.
GAAP: generally accepted accounting principles as in effect in the
United States of America from time to time applied on a consistent basis as of
the date of any application thereof.
Governmental Approval: any Consent of, with, or from any Governmental
Authority.
Governmental Authority: any nation or government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory, or administrative functions of or pertaining to
government, including, without limitation, any government authority, agency,
department, board, commission, or instrumentality of the United States or any
other country, any State of the United States or any other country, or any
political subdivision thereof, and any tribunal or arbitrator(s) of competent
jurisdiction.
Graymor: Graymor Coatings Inc., an Oregon corporation and a wholly
owned subsidiary of the Company.
Holdback: as defined in Section 2.7.
Indemnified Party: as defined in Section 9.4.
Indemnifying Party: as defined in Section 9.4.
Inventory: All of Graymor's and the Company's inventory held for resale
and all of the Company's new repair or replacement parts, supplies and packaging
items and similar items, in each case wherever the same may be located.
IRS: the Internal Revenue Service.
Key Employees: as defined in Section 3.15.
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knowledge: means, in connection with representations and warranties of
the Shareholders that are limited to their knowledge, the knowledge of each of
the Shareholders after reasonable investigation.
Losses: as defined in Section 9.1.
Material Adverse Effect: with regard to the Company, any event,
occurrence, fact, condition, change, or effect that individually or in the
aggregate with similar events, occurrences, facts, conditions, changes, or
effects will or can reasonably be expected to result in a cost, expense, charge,
liability, loss of revenue, or diminution in value equal to or greater than
$10,000.
Merger: as defined in the Recitals.
Merger Sub: as defined in the preamble of this Agreement.
Newly Issued Shares: as defined in Section 2.5
Non-Competition Period: as defined in Section 8.1.
Oregon Law: as defined in Section 2.1.
Permits: all licenses, permits, franchises, approvals, notifications,
authorizations, consents or orders of, or filings with, any governmental agency
or authority, whether foreign, federal, state or local, or any other person,
necessary for the present or Company's presently anticipated conduct of, or
relating to the operation of, the Company, its business or assets.
Person: any natural person, firm, partnership, association,
corporation, company, limited liability company, limited partnership, trust,
business trust, Governmental Authority, or other entity.
Plan of Merger: as defined in Section 2.3.
PVP: as defined in the preamble of this Agreement.
Purchase Price: as defined in Section 2.5(a).
Registration Expenses: as defined in Section 7.1(e).
Schedules: each of the schedules and exhibits attached to and made a
part of this Agreement.
Securities Act: means the Securities Act of 1933, as amended.
Shareholders: as defined in the preamble of this Agreement.
Shareholder Certificates: as defined in Section 2.9.
Shareholder Indemnitees: as defined in Section 9.2.
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Selling Expenses: as defined in Section 7.1(e).
Subsidiary: each corporation or other Person in which the Company owns
or controls, directly or indirectly, capital stock or other equity interests
representing at least 40% of the outstanding voting stock or other equity
interests or conferring the power to name a majority of the members of the board
of directors or other governing body or otherwise direct the management or
policies thereof.
Surviving Corporation: as defined in Section 2.1.
Tax or Taxes: any federal, state, provincial, local, foreign, or other
income, alternative, minimum, accumulated earnings, personal holding company,
franchise, capital stock, net worth, capital, profits, windfall profits, gross
receipts, value added, privilege, sales, use, goods and services, excise,
customs duties, transfer, conveyance, mortgage, registration, stamp,
documentary, recording, premium, severance, environmental (including taxes under
Section 59A of the Code), real property, personal property, transfer, ad
valorem, intangibles, rent, occupancy, license, occupational, employment,
unemployment insurance, social security, disability, workers' compensation,
payroll, health care, registration, withholding, estimated, or other tax, duty,
or other governmental charge or assessment or deficiencies thereof (including
all interest and penalties thereon and additions thereto, whether disputed or
not).
Tax Return: any return, report, declaration, form, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
Transaction Expenses: as defined in Section 10.3.
ARTICLE 2
THE MERGER; CLOSING
In connection with the terms and conditions of this Agreement, Acquiror,
Merger Sub, Shareholders and the Company agree as follows:
2.1 THE MERGER. At the Effective Time (as defined in Section 2.3), in
accordance with this Agreement and the Oregon Business Corporations Act ("Oregon
Law"), Merger Sub shall be merged with and into Company, the separate existence
of Merger Sub (except as such existence may be continued by operation of law)
shall cease, and Company shall continue as the surviving corporation under the
corporate name it possesses immediately prior to the Effective Time. The
Company, in its capacity as the corporation surviving the Merger, sometimes is
referred to herein as the "Surviving Corporation."
2.2 EFFECT OF THE MERGER. The Surviving Corporation shall possess all the
rights, privileges, immunities and franchises, of a public as well as of a
private nature, of each of Merger Sub and Company (collectively the "Constituent
Corporations"); all property, real, personal and mixed, and all accounts payable
arising in the ordinary course of business and accrued expenses due on whatever
account, and all debts, liabilities and duties due to each of the Constituent
Corporations shall be taken and deemed to be transferred to and vested in the
Surviving Corporation without further act or deed; and the Surviving Corporation
shall be
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responsible and liable for all liabilities and obligations of each of the
Constituent Corporations, in each case in accordance with Oregon Law.
2.3 CONSUMMATION OF THE MERGER. As soon as is practicable after the
satisfaction or waiver of the conditions set forth in Article 6, and in no event
later than five business days after such satisfaction or waiver, the parties
hereto will cause a plan of merger ("Plan of Merger") in the form attached
hereto as Exhibit A, and articles of merger ("Articles of Merger") to be
delivered to the Corporations Division of the Oregon Secretary of State in
accordance with Oregon Law. The Merger shall be effective at such time as such
Plan of Merger and Articles of Merger are duly filed. The date and time when the
Merger shall become effective is referred to as the "Effective Time."
2.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS. The
Articles of Incorporation and Bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the Articles of Incorporation of the
Surviving Corporation immediately after the Effective Time and shall thereafter
continue to be its Articles of Incorporation and Bylaws until amended as
provided therein and under Oregon Law. The directors of the Merger Sub holding
office immediately prior to the Effective Time shall be the directors of the
Surviving Corporation immediately after the Effective Time. The officers of
Merger Sub holding office immediately prior to the Effective Time shall be the
officers (holding the same offices as they held with Merger Sub) of the
Surviving Corporation immediately after the Effective Time.
2.5 PURCHASE PRICE AND CONVERSION OF THE COMPANY COMMON STOCK. At the
Effective Time, by virtue of the Merger and without any action on the part of
Acquiror, Merger Sub, Shareholders or the Company:
(a) The shares of common stock, no par value per share, of the Company
(the "Company Common Stock") issued and outstanding immediately prior to the
Effective Time shall automatically be canceled and extinguished and converted
into and become a right to receive, in the aggregate 905,000 shares (the "Newly
Issued Shares") of common stock, $0.10 par value per share, of Acquiror common
stock (the "Acquiror Common Stock") (the "Purchase Price"). The Newly Issued
Shares will be issued as follows:
(i) 814,500 shares of Acquiror Common Stock will be issued to the
Shareholders at the Closing;
(ii) 90,500 shares of Acquiror Common Stock will be issued to the
Shareholders one (1) year after the Closing pursuant to Section 2.7.
In addition, in consideration for the Acquiror Common Stock, all options and
warrants to acquire Company Common Stock and any employment agreements or other
commitments to issue Company Common Stock shall be canceled and extinguished as
of the Effective Time.
(b) Each share of common stock, $0.01 par value per share, of Merger
Sub issued and outstanding immediately prior to the Effective Time shall
automatically be converted into and become one validly issued, fully paid and
nonassessable share of common stock, $0.10 par value per share, of the Surviving
Corporation.
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2.6 EARNOUT PAYMENT.
(a) Subject to the achievement of the "Earnout Targets" set forth on
Schedule 2.6, Acquiror shall pay Shareholders an earnout amount of One Million
Dollars ($1,000,000) in Acquiror Stock (the "Earnout Payment") as follows:
(i) Shareholders shall earn up to $1,000,000 in Acquiror Stock if
the Earnout Targets (as defined below) for the Earnout Period (as defined below)
are met or exceeded.
(ii) The Earnout Payment for the Earnout Period shall be comprised
of two factors: (x) achievement of revenue targets, and (y) achievement of
operating contribution targets all as set forth on Schedule 2.6 (collectively
the "Earnout Targets"). Shareholders shall become eligible to receive the
Earnout Payment upon achievement of greater than 80% of the respective Earnout
Targets. If greater than 80% but less than 100% of any of the Earnout Targets is
achieved, Shareholders shall be entitled to receive a pro-rata portion of the
maximum Earnout Payment as provided in Schedule 2.6.
(iii) The number (rounded to the nearest whole share) of shares of
Acquiror Stock to be issued to the Shareholders for the Earnout Payment will
equal $1,000,000 divided by the Earnout Exchange Price. The Earnout Payment
shall be due, if at all, on or before ninety (90) days after the end of the
applicable period (the "Earnout Payment Date"). As used herein, "Earnout
Exchange Price" means the ten (10) day average closing price of the Acquiror's
Stock as reported on the NASDAQ National Market two (2) days before the Earnout
Payment is made.
(iv) For Earnout Payment calculation purposes, the "Earnout Period"
shall be the fifty two week period commencing on the Effective Date.
(b) If Shareholders dispute the amount of the Earnout Payment,
Shareholders shall notify Acquiror in writing (the "Dispute Notice") within
thirty (30) days after receipt of any Earnout Payment or after the applicable
Earnout Payment Date. Upon delivery of a Dispute Notice, Acquiror and/or its
accountants shall meet and consult with Shareholders and/or its accountants to
discuss matters relating to the calculation. Shareholders have the right to
conduct an audit or review of the financial statements relating to the Earnout
Targets. Shareholders shall pay for the expense of any such audit or review,
unless such audit or review results in a five percent (5%) or higher Earnout
Payment than originally received prior to the Shareholder audit in which case
Acquiror shall pay for such expense. For purposes of conducting its audit or
review of such financial statements, Acquiror and its accountants shall provide
Shareholders with all supporting work papers and other materials as Shareholders
or their representatives shall reasonably request.
(c) If Acquiror and Shareholders are unable to resolve any dispute
regarding the calculation of the Earnout Payment for the Earnout Period within
thirty (30) days after Acquiror's receipt of the Dispute Notice, the Accounting
Arbitrator (as defined in Section 2.6(d)) shall settle such dispute as soon as
practicable. The parties shall give the Accounting Arbitrator access to all
documents, facilities and personnel within their respective control reasonably
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necessary to perform its function as arbitrator. The parties agree that the
Accounting Arbitrator shall decide only matters involving differences as to
accounting practices and principles and other matters relating to the Earnout
Payment which may be due Shareholders pursuant to this Agreement, and not to any
non-accounting matters involving the construction or interpretation of this
Agreement, which non-accounting matters shall be arbitrated in accordance with
Section 10.14 of this Agreement. The Accounting Arbitrator's determination with
respect to any dispute by Shareholders hereunder shall be final and binding on
all parties, and judgment on the arbitration award may be enforced in any court
having jurisdiction over the subject matter of the controversy. Each party shall
bear their own costs associated with such arbitration.
(d) For the purposes of this Section 2.6, "Accounting Arbitrator" shall
mean a nationally recognized accounting firm jointly selected by Acquiror and
Shareholders, not currently engaged by Acquiror, the Company or the Shareholders
or any Affiliate of the foregoing.
2.7 HOLDBACK. At Closing, Acquiror will withhold issuance of 90,500 of the
Newly Issued Shares (the "Holdback"), as security to cover potential losses or
other claims for which Acquiror is entitled to indemnification or recovery
hereunder. Subject to any claims made against Shareholders and resolved in favor
of Acquiror, the Holdback, will be released to Shareholders on the first
anniversary of the Closing.
2.8 CLOSING. The closing (the "Closing") of the transactions contemplated
by this Agreement shall occur as soon as each of the conditions to closing
contained in Article 6 are fulfilled or waived, which is expected to occur on
January 29, 2001, at the offices of Xxxxx & Xxxxxx L.L.P., Xxx Xxxxxxx Xxxxxx,
Xxxxxxx, Xxxxxxx 00000, or at such other place and at such other time as the
parties may mutually agree upon.
2.9 SURRENDER OF CERTIFICATES. The Shareholders will deliver to Acquiror at
the Closing each outstanding certificate or certificates representing
collectively all of the issued and outstanding shares of the Company Common
Stock (the "Company Certificates"). At the Closing, Acquiror will (i) cause
American Stock Transfer & Trust Company, the exchange agent appointed by
Acquiror (the "Exchange Agent"), to issue certificates in the name of each
Shareholder (the "Shareholder Certificates") for the Newly Issued Shares
issuable to the Shareholders upon conversion of the Company Common Stock as
provided in Section 2.5 above or (ii) issue a letter to the Exchange Agent
irrevocably instructing the Exchange Agent to issue the Shareholder Certificates
within five (5) Business Days after the Closing. Upon the issuance of the
Shareholder Certificates, the Company Certificates will be canceled.
2.10 TAKING OF NECESSARY ACTION; FURTHER ACTION. Acquiror and Merger Sub,
on the one hand, and the Company and Shareholders, on the other hand, shall use
all reasonable efforts to take all such actions (including without limitation
actions to cause the satisfaction of the conditions of the other to effect the
Merger) as may be necessary or appropriate in order to effectuate the Merger as
promptly as possible. If, at any time after the Effective Time, any further
action is necessary or desirable to carry out the purposes of this Agreement and
to vest the Surviving Corporation with full possession of all the rights,
privileges, immunities and franchises of the Constituent Corporations, the
officers and directors of the Surviving
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Corporation are fully authorized in the name of the Constituent Corporations or
otherwise to take, and shall take, all such actions.
2.11 RIGHT TO OFFSET. Acquiror may set off against the total Holdback any
Losses (as defined in Section 9.1 and subject to the $50,000 limitation provided
therein) for which any of the Shareholders may be responsible pursuant to this
Agreement. Acquiror shall give written notice to the Shareholders, of any Losses
or any other damages hereunder, which notice shall set forth (i) the amount of
the Losses, and (ii) the basis for such claim. Acquiror shall not be limited to
the Holdback with respect to claims against Shareholders in the event any Losses
exceed the amount of the Holdback. Shareholders agree that any indemnity claims
will first be offset against the Holdback, and then against the Earnout Payment,
in that order. The amount of any set off made against the Holdback shall be made
by dividing the amount of any Losses by $9.00 and subtracting the result from
the number of Shares of Company Common Stock held back at that time. The amount
of any set off made against the Earnout Payment shall be made by dividing the
amount of the Losses by the Earnout Exchange Price and subtracting the result
from the amount of shares of Company Common Stock payable to the Shareholders as
determined by Section 2.6. Schedule 2.11 sets forth examples of the Operation of
this Section.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
The Shareholders, as individuals, jointly and severally represent and
warrant to Acquiror that as of the date hereof and again at the Effective Time:
3.1 ORGANIZATION OF THE COMPANY. Each of the Company and Graymor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Oregon. Copies of the articles of incorporation and bylaws of
the Company and Graymor, and all amendments thereto, heretofore delivered to
Acquiror are accurate and complete as of the date hereof and are currently in
effect without further amendment thereto, except as set forth therein. Each of
the Company and Graymor is duly qualified or licensed to do business in the
State of Oregon which is the only jurisdiction in which ownership of property,
the employment of personnel or the conduct of its business requires such
qualification except where the failure to be so qualified would not have a
Material Adverse Effect. The Company has no Subsidiaries other than Graymor.
3.2 AUTHORIZATION. Each of the Shareholders and the Company has full power
and authority (corporate, fiduciary or other) to enter into this Agreement, and
to carry out the transactions contemplated hereby and thereby, and the board of
directors, trustees, or any governing body or person of the Company and each of
the Shareholders have taken all action required by law, its charter or other
governing documents, as the case may be, or otherwise, to be taken by it to
authorize the execution, delivery and performance of this Agreement, as the case
may be, and the consummation of the transactions contemplated hereby and
thereby. This Agreement is, and when executed will be, the legal, valid and
binding obligations of each of the Shareholders and the Company or other parties
thereto (other than Acquiror), enforceable against each of them in accordance
with their respective terms.
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3.3 NO VIOLATION; CONSENTS. None of the execution, delivery and performance
of this Agreement nor the consummation of the transactions contemplated hereby
and thereby will (i) violate any provision of the articles of incorporation or
bylaws of the Company or Graymor or any governing documents of any Shareholders,
(ii) violate, result in a breach of, conflict with, or constitute a default (or
an event which, with the giving of notice or lapse of time or both, would
constitute a default) or require any consent under, or give to others any right
of termination, amendment, acceleration, suspension, revocation or cancellation
with respect to, any Contract to which any Shareholders, Graymor, or the Company
is a party or by which any of the shares of Company Common Stock or any of the
assets or properties of Graymor, the Company, or any Shareholders are bound or
affected, (iii) result in the creation or imposition of any Encumbrance upon any
of the shares of Company Common Stock or any property or assets of Graymor, the
Company, or any Shareholder under any Contract to which Graymor, the Company, or
any Shareholders is a party or by which Graymor, the Company, or any Shareholder
is bound or affected, or to which the property of Graymor, the Company, or any
Shareholder is subject, or (iv) violate, conflict with or result in the breach
of any Applicable Law or any judgment, decree, order, regulation or rule of any
court or Governmental Authority to which any Shareholders, Graymor, the Company,
or any of their properties or assets are subject. Except as set forth on
Schedule 3.3, no Governmental Approval or other Consent is required in
connection with the execution, delivery and performance by Graymor, each of the
Shareholders, and the Company of this Agreement, as the case may be, or the
consummation by each of Graymor, the Shareholders, and the Company of the
transactions contemplated by each of them herein and therein.
3.4 CAPITALIZATION.
(a) The authorized capital stock of the Company consists solely of
25,000,000 shares of common stock, no par value per share, of which 4,240,273
shares are issued and outstanding immediately prior to the Closing. The Company
has no warrants or options exercisable into Company Common Stock outstanding as
of the Closing. The authorized capital stock of Graymor consists solely of
10,000 shares of common stock of which 9,500 shares are issued and outstanding
immediately prior to the Closing. Graymor has no warrants or options exercisable
into common stock of Graymor.
(b) All the outstanding shares of Company Common Stock are and will be
owned by the Shareholders as of the Closing. All the outstanding shares of
common stock of Graymor are and will be owned by the Company as of the Closing.
(c) Schedule 3.4 sets forth the capitalization of the Company,
including the name and address of each Shareholder and the certificate numbers
of the certificates representing the shares of Company Common Stock held by each
Shareholder, as of the Closing.
(d) The shares of Company Common Stock and Graymor common stock are
free and clear of all Encumbrances (other than a legend indicating only that the
Shares have not been registered under the Securities Act or any state securities
act).
(e) Except as set forth on Schedule 3.4, there are no outstanding
options, warrants, rights (including conversion or preemptive rights) or
agreements for the purchase or acquisition from the Company or Graymor of any
shares of its capital stock. Neither Graymor,
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the Company, nor any of Shareholders are a party or subject to any agreement or
understanding, and to the Shareholder's knowledge, there is no agreement or
understanding between any persons or entities, that affects or related to the
voting or giving of written consents with respect to any security or by a
director of the Company.
3.5 FINANCIAL STATEMENTS. The Company has provided Acquiror with an
unaudited balance sheet (the "Balance Sheet") dated as of September 30, 2000
(the "Balance Sheet Date"), and statements of cash flows for each of the years
ended June 30, 2000 and 1999 (together, the "Financial Statements" which are
attached hereto as Schedule 3.5). The Financial Statements (a) are true, correct
and complete, (b) are in accordance with the underlying books and records of the
Company, (c) except as set forth in Schedule 3.5, have been prepared in
accordance with GAAP consistently applied throughout the periods covered
thereby, and (d) fairly and accurately present the assets, liabilities
(including all reserves) and financial position of the Company as of the
respective dates thereof and the results of operations and changes in cash flows
for the periods then ended. At the respective dates of the Financial Statements,
there were no liabilities of the Company which, in accordance with GAAP, should
have been shown or reflected in the Financial Statements or the notes thereto,
which are not shown or reflected in the Financial Statements or the notes
thereto. The Company has provided Acquiror with unaudited balance sheets and
income statements dated as of December 31, 1998, 1999, and 2000 of Graymor
(together, the "Graymor Financial Statements") which are attached hereto as
Schedule 3.5). The Graymor Financial Statements (a) are true, correct, and
complete, (b) are in accordance with the underlying books and records of
Graymor, (c) except as set forth in Schedule 3.5, have been prepared in
accordance with GAAP consistently applied throughout the periods covered
thereby, and (d) fairly and accurately present the assets, liabilities
(including all reserves), and financial position of Graymor as of the respective
dates thereof and the results of operations for the periods then ended. At their
respective dates, there were no liabilities of Graymor which, in accordance with
GAAP, should have been shown or reflected in the Graymor Financial Statements or
the notes thereto, which are not shown or reflected in the Graymor Financial
Statements or the notes thereto.
3.6 NO CHANGE IN THE ASSETS. Except as set forth on Schedule 3.6, since the
Balance Sheet Date, there has not been a Material Adverse Change in the business
or assets of the Company or Graymor. Without limiting the foregoing, since the
Balance Sheet Date there has not been:
(a) any changes in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Balance Sheet, or
from Graymor, except changes in the ordinary course of business that would not
constitute, in the aggregate, a Material Adverse Change;
(b) any waiver by Graymor or the Company of a material right or of a
material debt owed to it;
(c) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results or business of Graymor or the Company (as such
business is presently conducted);
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(d) any satisfaction or discharge of any claim or Encumbrance or
payment of any obligation of Graymor or the Company, except (i) in the ordinary
course of business and (ii) that is not material to the assets, properties,
financial condition, operating results or business Graymor or of the Company (as
such business is presently conducted);
(e) any material change or amendment to a material Contract or
arrangement by which Graymor or the Company or any of its assets or properties
is bound or subject;
(f) any material change in any compensation arrangement or agreement
with any employee;
(g) any sale, assignment or transfer of any Intellectual Property;
(h) any resignation or termination of employment of any Key Employee or
officer of the Company; and to the Shareholders' knowledge there is no impending
resignation or termination of employment of any Key Employee or officer;
(i) any loss of, material change in relationship with, or order
cancellation by any major customer of Graymor or the Company;
(j) any mortgage, pledge, transfer of a security interest in, or lien,
created by Graymor or the Company, with respect to any of its material
properties or assets, except liens for taxes not yet due or payable;
(k) any loans or guarantees made by Graymor or the Company to or for
the benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of business;
(l) any declaration, setting aside or payment or other distribution in
respect of any of Graymor's or the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any such stock by the
Company;
(m) to the Shareholders' knowledge, any other event or condition of any
character that might be reasonably expected to materially and adversely affect
the assets, properties, financial condition, operating results, business or
prospects of Graymor or the Company; or
(n) any agreement or commitment by Graymor or the Company to do any of
the things described in this Section 3.6.
3.7 NO LIABILITIES. Except as set forth on Schedule 3.7, the Company and
Graymor have no liabilities or obligations (absolute, accrued, contingent or
otherwise) except (i) liabilities which are reflected on the Financial
Statements, the Graymor Financial Statements, or which are not required under
GAAP to be reflected on the Financial Statements, (ii) liabilities incurred in
the ordinary course of business and consistent with past practice since the
Balance Sheet Date not to exceed $10,000, and (iii) liabilities arising under
Contracts to which Graymor or the Company is a party (excluding specifically any
claim for breach of contract); and (iv) liabilities disclosed in any schedule
hereto including Schedule 3.7.
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3.8 ASSETS; ABSENCE OF ENCUMBRANCES. Except as set forth on Schedule 3.8,
the assets reflected on the Financial Statements and the Graymor Financial
Statements constitute all assets necessary for the conduct in the ordinary
course of business of Graymor's and the Company's business as presently
conducted and as presently anticipated to be conducted. All of the assets of or
used by the Company are owned by the Company free and clear of all Encumbrances,
other than Encumbrances as set forth on Schedule 3.8.
3.9 TITLE TO ASSETS.
(a) Except as set forth on Schedules 3.8 and 3.9, each of Graymor and
the Company owns good and marketable title to its properties and assets
reflected on the Balance Sheet or Graymor Financial Statements or acquired since
the date thereof, free and clear of all Encumbrances, except for liens for
current taxes not yet due and payable and assets disposed of since the Balance
Sheet Date in the ordinary course of business.
(b) (i) The Company does not own any real estate; (ii) Graymor does not
own any real estate; (iii) the properties subject to the real property leases
set forth on Schedule 3.9 constitute all of the real estate used or occupied by
Graymor or the Company in connection with the Facilities (the "Company Real
Estate") and (ii) the Company Real Estate has access, sufficient for the conduct
of Graymor and the Company's business, to public roads and to all utilities,
including electricity, sanitary and storm sewer, potable water, natural gas and
other utilities, used in the operations of Graymor and the Company.
(c) The real property leases described on Schedule 3.9 are in full
force and effect, and Graymor and the Company have a valid and existing
leasehold interests under each such lease for the term set forth therein. The
Company has delivered to Acquiror complete and accurate copies of each of the
leases and none of such leases has been modified in any respect, except to the
extent that such modifications are disclosed by the copies delivered to
Acquiror. Neither Graymor nor the Company is in default, and no circumstances
exist that could result in such default, under any of such leases, nor, to the
knowledge of the Shareholders, is any other party to any of such leases in
default.
(d) All of the buildings, machinery, equipment and other tangible
assets necessary for the conduct of Graymor's or the Company's business are in
good condition and repair, ordinary wear and tear excepted, and are usable in
the ordinary course of business. Graymor and the Company own, or lease under
valid leases, all buildings, machinery, equipment and other tangible assets
necessary for the conduct of its business. The Company has delivered to Acquiror
complete and accurate copies of all equipment leases. None of such equipment
leases has been modified in any respect, except to the extent that such
modifications are disclosed by the copies delivered to Acquiror. Neither Graymor
nor the Company is in default, and no circumstances exist that could result in
such default, under any of such equipment leases, nor, to the knowledge of the
Company, is any other party to any of such equipment leases in default. Schedule
3.9 sets forth a list of all equipment of Graymor and the Company subject to
leases.
(e) Neither Graymor nor the Company is in violation of any applicable
zoning ordinance or other law, regulation or requirement relating to the
operation of any properties used in the operation of its business, and has not
received any notice of any such violation, or of the
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existence of any condemnation proceeding with respect to any properties owned or
leased by Graymor or the Company.
3.10 ACCOUNTS RECEIVABLES. Except as set forth on Schedule 3.10, the
accounts receivable reflected on the Balance Sheet and Graymor Financial
Statements, and all accounts receivable arising since the date thereof represent
bona fide claims of Graymor and the Company against debtors for sales, services
performed, or other charges arising on or before the date hereof, and all the
goods delivered and services performed which gave rise to said accounts were
delivered or performed in accordance with the applicable orders, Contracts, or
customer requirements. All of such accounts receivable are collectible in the
ordinary course of business, except as set forth in Schedule 3.10. Except as set
forth on Schedule 3.10, Graymor and the Company own all such accounts
receivable, free and clear of all Encumbrances.
3.11 INVENTORY. Schedule 3.11 sets forth a complete and accurate list of
all Inventory as of December 31, 2000. Except as set forth on Schedule 3.11, all
the Inventory is located at the Facilities. Except as set forth in Schedule
3.11, there has been no material decrease in the book value or fair value of the
Inventory since December 31, 2000. The value of the Inventory as of December 31,
2000 has been determined at lower of cost or market in accordance with GAAP,
consistently applied throughout the periods covered by the Financial Statements,
with adequate provisions or adjustments for excess or slow-moving Inventory, and
obsolescence and shrinkage.
3.12 CONTRACTS AND COMMITMENTS.
(a) Schedule 3.12 sets forth a complete and accurate list of all
Contracts of the following categories:
(i) Contracts not made in the ordinary course of Graymor's or the
Company's conduct of the business;
(ii) Employment contracts, handbooks on policies; bonus plans,
programs or agreements; and severance plans, programs or agreements;
(iii) Supply, purchase, distribution, franchise, license, sales or
commission contracts related to Graymor or the Company;
(iv) Contracts involving expenditures or liabilities, actual or
potential, in excess of $10,000 or otherwise material to Graymor or the Company,
and not cancelable (without liability) by the Company within 30 calendar days;
(v) Contracts or commitments relating to commission arrangements
with others;
(vi) Promissory notes, loans, agreements, evidences of indebtedness,
letters of credit, guarantees, or other instruments relating to an obligation to
pay money, whether Graymor or the Company shall be the borrower, lender or
guarantor thereunder or whereby any assets are pledged (excluding credit
provided by the Company in the ordinary course of business to its customers);
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(vii) Leases of personal property not cancelable (without liability)
within 30 calendar days; and
(viii) Contracts containing covenants limiting the freedom of the
Company or any officer, director or Shareholder of the Company to engage in any
line of business or compete with any person.
Shareholders and Company have delivered to Acquiror true, correct and
complete copies of all of the Contracts listed on Schedule 3.12, including all
amendments and supplements thereto.
(b) All of the Contracts are valid and in full force and effect. The
Company has duly performed all of its obligations under the Contracts to the
extent those obligations to perform have accrued, and no violation of, or
default or breach under any Contracts by the Company or, to the knowledge of the
Shareholders, any other party has occurred and to the knowledge of the
Shareholders, any other party has repudiated any provisions thereof. All of the
Contracts will be enforceable by the Company after the Closing to the same
extent as if the transactions contemplated by this Agreement had not been
consummated.
3.13 BOOKS AND RECORDS. Each of Graymor and the Company has made and kept
(and given Acquiror access to) books and records and accounts, which, in
reasonable detail, accurately and fairly reflect the activities of the Company.
The minute books of Graymor and the Company previously delivered to Acquiror
accurately and adequately reflect all action previously taken by the
Shareholders, board of directors and committees of the board of directors of
Graymor and the Company. The stock book records of Graymor and the Company
previously delivered to Acquiror are true, correct and complete, and accurately
reflect all transactions effected in Graymor and the Company's stock through and
including the date hereof.
3.14 LITIGATION. Except as set forth on Schedule 3.14, there is no action,
order, writ, injunction, judgment or decree outstanding or any claim, suit,
litigation, proceeding, labor dispute, arbitral action, governmental audit or
investigation (collectively, "Actions") pending, or to the best of Shareholders'
knowledge, threatened or anticipated (a) against, related to or affecting
Graymor or the Company or its assets or (b) seeking to delay, limit or enjoin
the transactions contemplated by this Agreement. Neither Graymor nor the Company
is in default with respect to or subject to any judgment, order, writ,
injunction or decree of any court or Governmental Agency, and there are no
unsatisfied judgments against Graymor or the Company.
3.15 LABOR MATTERS. Neither Graymor or the Company is a party to any labor
agreement with respect to its employees with any labor organization, union,
group or association and there are no employee unions (nor any other similar
labor or employee organizations) under local statutes, custom or practice of
which Graymor's or the Company's employees are members. Neither Graymor nor the
Company has experienced any attempt by organized labor or its representatives to
make Graymor or the Company conform to demands of organized labor relating to
its employees or to enter into a binding agreement with organized labor that
would cover the employees of Graymor or the Company. The employment of all
persons presently employed or retained by the Company is terminable at will by
Graymor or the Company. Schedule 3.15 (i) contains a list of all employees of
the Company and their wage rates or salaries
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as of the date of this Agreement, and (ii) sets forth the dates of employment
for such employees. In addition, Schedule 3.15 sets forth those employees (the
"Key Employees") which are critical and indispensable to the ongoing operation
of Graymor and the Company.
3.16 COMPLIANCE WITH LAW; PERMITS. Graymor and the Company, the conduct of
their business and the operation of their Facilities have not violated and are
in compliance with all Applicable Law and any judgment, decision, decree or
order of any court or governmental agency, department or authority. Graymor and
the Company and the conduct of their business and the operation of the
Facilities are in conformity with all energy, public utility, zoning, building
and health codes, regulations and ordinances, the Americans with Disabilities
Act, ERISA, OSHA and Environmental Laws and all other foreign, federal, state,
and local governmental and regulatory requirements. Neither Graymor nor the
Company has received any notice to the effect that, or otherwise been advised
that, it is not in compliance with any such statutes, regulations, rules,
judgments, decrees, orders, ordinances or other laws, and Graymor and the
Company have no reason to anticipate that any existing circumstances are likely
to result in violations of any of the foregoing. Graymor and the Company have
all Permits required to conduct its business. All Permits are valid and in full
force and effect and all material Permits are listed on Schedule 3.16. All of
the Permits will remain in full force and effect after the Closing to the same
extent as if the transaction contemplated by this Agreement had not been
consummated.
3.17 TAX MATTERS.
(a) Except as set forth in Schedule 3.17, the Company and Graymor have
filed all Tax Returns that the Company and Graymor were required to file prior
to the date hereof. All such Tax Returns were correct and complete and were
prepared and filed in accordance with Applicable Law. Except as set forth in
Schedule 3.17, all Taxes owed by or with respect to the Company or Graymor
(whether or not shown on any Tax Return) with respect to Tax Returns the due
date of which preceded the Closing have been or will be paid. Except as set
forth in Schedule 3.17, all other Taxes due and payable by the Company or
Graymor with respect to periods ending on or before the date of the Closing or
in respect of transactions entered into or any state of facts existing on or
before the Closing (whether or not a Tax Return is due on such date) have been
or will be paid on or before the date of the Closing or have been or will be
accrued and a corresponding amount of cash segregated in the accounts of the
Company on or before the date of the Closing. For purposes of the preceding
sentence, in determining the amount of Taxes due and payable by the Company or
Graymor with respect to periods ending on or as of the date of the Closing or in
respect of transactions entered into or any state of facts existing on or before
the date of the Closing, the date of the Closing shall be deemed to be the last
day of any applicable tax period. Except as set forth in Schedule 3.17, all Tax
Returns of the Company or Graymor the due date of which (determined without
extensions) is on or after the date hereof but on or before the date of the
Closing will be correct and complete and filed in accordance with applicable
law.
(b) Schedule 3.17 lists (i) all countries, states, cities, or other
jurisdictions in which the Company or Graymor is currently subject to an
obligation to file Tax Returns or to collect sales or use Taxes, (ii) all
elections for income Taxes made by the Company or Graymor that are currently in
force or to which the Company or Graymor is bound, and (iii) (x) all
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countries, states, cities, or other jurisdictions in which the Company or
Graymor is a beneficiary of any real or personal property Tax exemptions or
concessions, reduced rates, or Tax credits, (y) the annual benefit of each such
item, and (z) the terms governing expiration or phase-out of each such item.
(c) Except as set forth in Schedule 3.17, with respect to each
taxable period for the Company or Graymor ending on or before the Closing (or as
of such other date as set forth below), (i) either such taxable period has been
audited by the relevant taxing authority or the time for assessing or collecting
Taxes with respect to each such taxable period has closed and each taxable
period is not subject to review by a relevant taxing authority; (ii) no
deficiency or proposed adjustment that has not been settled or otherwise
resolved for any amount of Taxes has been asserted or assessed by any taxing
authority against the Company or Graymor; (iii) neither the Company nor Graymor
has consented to extend the time in which any Taxes may be assessed or collected
by any taxing authority; (iv) neither the Company nor Graymor has requested or
been granted an extension of the time for filing any Tax Return; (v) there is no
action, suit, taxing authority proceeding, or audit or claim for refund now in
progress, pending, or threatened against or with respect to the Company or
Graymor regarding Taxes; (vi) neither the Company nor Graymor has made an
election or filed a consent under Section 341(f) of the Code (or any
corresponding provision of state, local or foreign law) or agreed to have
Section 341(f)(2) of the Code (or any corresponding provision of state, local or
foreign law) apply to any disposition of subsection (f) assets (as defined in
Section 341(f)(4) of the Code) owned by the Company or Graymor; (vii) there are
no liens, pledges, charges, claims, security interests, or other Encumbrances on
the assets of the Company or Graymor relating or attributable to Taxes (other
than liens for sales and payroll Taxes not yet due and payable) and the Company,
Graymor, and the Shareholders have no knowledge of any reasonable basis for the
assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any lien, pledge, charge, claim, security interest,
or other Encumbrance on the assets of the Company or the Subsidiary; (viii)
neither the Company nor Graymor will be required (A) as a result of a change in
method of accounting for a taxable period ending on or prior to the Closing, to
include any adjustment under Section 481 of the Code (or any corresponding
provision of state, local, or foreign law) in taxable income for any taxable
period (or portion thereof) beginning after the Closing or (B) as a result of
any "closing agreement," as described in Section 7121 of the Code (or any
corresponding provision of state, local, or foreign law) to include any item of
income or exclude any item of deduction from any taxable period (or portion
thereof) beginning after the Closing; (ix) neither the Company nor Graymor has
been a member of an affiliated group (as defined in Section 1504 of the Code) or
filed or been included in a combined, consolidated, or unitary income Tax
Return; (x) neither the Company nor Graymor is a party to or bound by any tax
allocation or tax sharing agreement and has no current or potential contractual
or other obligation to indemnify any other person with respect to any Tax or pay
the Taxes of any other person under Treasury Regulations Section 1.1502-6 (or
any similar provisions of state, local, or foreign law) as a transferee or
successor, by contract or otherwise; (xi) no claim has ever been made by a
taxing authority in a jurisdiction where the Company or Graymor does not file
Tax Returns that the Company or Graymor is or may be subject to Taxes assessed
by such jurisdiction; (xii) neither the Company nor Graymor has a permanent
establishment in any foreign country, as defined in the relevant tax treaty
between the United States of America and such foreign country; (xiii) neither
the Company nor Graymor has been a "U.S. real property holding corporation"
(within the meaning of Code Section 897(c)(2)) during the applicable
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period specified in Code Section 897(c)(1)(A)(ii); (xiv) the Company and Graymor
have disclosed on each Tax Return filed by the Company and Graymor all positions
taken thereon that could give rise to a substantial understatement of penalty of
federal income Taxes within the meaning of Code Section 6662; (xv) neither the
Company nor Graymor was acquired in a qualified stock purchase under Code
Section 338(d)(3) and no elections under Code Section 338(g), protective
carryover basis elections, or offset prohibition elections are applicable to the
Company or Graymor; (xvi) the Company and Graymor have made no payments, are not
obligated to make any payments, and are not parties to any agreement that under
any circumstances could obligate either to make any payments, that will not be
deductible under Code Sections 280G or 162; (xvii) no sales or use tax will be
payable by the Company or Graymor as a result of the transactions contemplated
by this Agreement, and there will be no non-recurring intangible tax,
documentary stamp tax, or other excise tax (or comparable tax imposed by an
governmental entity) as a result of the transactions contemplated by this
Agreement; (xviii) Acquiror will not be required to deduct and withhold any
amount with respect to Taxes upon consummation of the transactions contemplated
by this Agreement; (xix) none of the Company's or Graymor's assets is property
required to be treated as being owned by any other person under the "safe harbor
lease" provisions of former Section 168(f)(8) of the Internal Revenue Code of
1954, as amended, or (B) has been financed with or directly or indirectly
secures any bond or debt the interest of which is tax-exempt under Section
103(a) of the Code; (xx) the Company and Graymor have withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to an employee, independent contractor, Shareholder, or other third party;
(xxi) no income under any arrangement or understanding to which the Company or
Graymor is a party will be attributed to the Company or Graymor which is not
represented by income to which the Company or Graymor is legally entitled;
(xxii) neither the Company nor Graymor owns an interest in any "controlled
foreign corporation" (within the meaning of Code Section 957), "passive foreign
investment company" (within the meaning of Code Section 1297) or other entity
the income of which is required to be included in the income of the Company or
Graymor whether or not distributed.; and (xxiii) neither the Company nor Graymor
has been either a "distributing company" or a "controlled corporation" (within
the meaning of Code Section 355(a)(1)(A) in a distribution of stock qualifying
in whole or in part for tax-free treatment under Code Section 355.
(c) Set forth in Schedule 3.17 is a list reflecting the following
information with respect to the Company and Graymor as of the date hereof as
well as on an estimated pro forma basis as of the date of the Closing: (i) the
basis of the Company and Graymor in their assets, (ii) the amount of any net
operating loss, net capital loss, unused investment or other tax credit, unused
foreign tax or tax credit, or excess charitable contribution allocable to the
Company or Graymor assets, and (iii) with respect to the preceding clause (ii)
any limitations on use of any of such attributes including any limitations
arising by reason of the transactions contemplated by this Agreement.
(d) Except as otherwise set forth in Schedule 3.17 the Company and
Graymor has furnished Acquiror with copies of all income and sales Tax Returns
filed by or with respect to the Company and Graymor relating to the period
encompassing the three taxable years of the Company and Graymor preceding the
date hereof.
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(e) Any reference to the term "the Company" in this Section 3.17 shall
refer to the Company and any predecessor entity of the Company. Further, any
reference to any action of "the Company" in this Section 3.17 shall encompass
any action or actions taken by or at the direction of the Company whether or not
such actions taken by or at the direction of the Company were properly
authorized. Any reference to the term "Graymor" in this Section 3.17 shall refer
to Graymor and any predecessor entity of Graymor. Further, any reference to any
action of "Graymor" in this Section 3.17 shall encompass any action or actions
taken by or at the direction of Graymor whether or not such actions taken by or
at the direction of Graymor were properly authorized.
3.18 EMPLOYEE BENEFITS.
(a) Employee Benefit Plans. Neither Graymor nor the Company has
maintained or contributed to, and has no liability with respect to, (a) any
multi-employer plan, as defined in Section 3(37) of the Employee Retirement
Income Security Act of 1974 ("ERISA"), or (b) any employee pension benefit plan,
as defined in Section 3(2) of ERISA, subject to Section 412 of the Internal
Revenue Code of 1986, as amended (the "Code"). Schedule 3.18 contains a list
setting forth each employee benefit plan or arrangement of Graymor or the
Company including, but not limited to, employee welfare benefit plans, deferred
compensation plans, stock option plans, bonus plans, stock purchase plans,
hospitalization, disability and other insurance plans, severance or termination
pay plans and policies, whether or not described in Section 3(3) of ERISA, in
which employees, their spouses or dependents, of Graymor or the Company
participate ("Employee Benefit Plans") (true and accurate copies of which,
together with the most recent annual reports on Form 5500 and summary plan
descriptions with respect thereto, if applicable, were furnished to Acquiror).
With respect to each Employee Benefit Plan (i) each has been administered in
compliance with its terms and with all applicable laws, including, but not
limited to, ERISA and the Code; (ii) no actions, suits, claims (other than
benefit claims in the ordinary course of business) or disputes are pending, or,
to the knowledge of the Company, threatened; (iii) no audits, inquiries,
reviews, proceedings, claims, or demands are pending with any governmental or
regulatory agency; (iv) there are no facts which could give rise to any
liability in the event of any investigation, claim, action, suit, audit, review,
or other proceeding; (v) all material reports, returns, and similar documents
required to be filed with any governmental agency or distributed to any plan
participant have been duly or timely filed or distributed; (vi) to the knowledge
of the Company, no "prohibited transaction" has occurred within the meaning of
the applicable provisions of ERISA or the Code; and (vii) all contributions to
all Employee Benefit Plans (including contributions that consist of employee
deferrals) required of the Company have been completely and timely made, all
such contributions haven been and are deductible for income tax purposes, and no
such contributions or deductions have been challenged or disallowed by any
governmental entity or other tribunal, except as set forth in Schedule 3.18.
(b) Welfare Plans. (i) Except as provided in Section 4980B of the Code,
neither Graymor nor the Company is obligated under any employee welfare benefit
plan as described in Section (3)(1) of ERISA ("Welfare Plan") to provide medical
or death benefits with respect to any employee or former employee of Graymor or
the Company or its predecessors after termination of employment; (ii) Graymor
and the Company have complied with the notice and continuation coverage
requirements of Section 4980B of the Code and the regulations
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thereunder with respect to each Welfare Plan that is, or was during any taxable
year for which the statute of limitations on the assessment of federal income
taxes remains, open, by consent or otherwise, a group health plan within the
meaning of Section 5000(b)(1) of the Code; and (iii) there are no reserves,
assets, surplus or prepaid premiums under any Welfare Plan that is an Employee
Benefit Plan. The consummation of the transactions contemplated by this
Agreement will not entitle any individual to severance pay, and will not
accelerate the time of payment or vesting, or increase the amount of
compensation, due to any individual.
(c) Other Liabilities. (i) None of the Employee Benefit Plans obligates
Graymor or the Company to pay separation, severance, termination or similar
benefits solely as a result of any transaction contemplated by this Agreement or
solely as a result of a "change of control" (as such term is defined in Section
280G of the Code); (ii) all required or discretionary (in accordance with
historical practices) payments, premiums, contributions, reimbursements or
accruals for all periods ending prior to or as of the Closing shall have been
made or properly accrued on the books and records of Graymor or the Company as
of the Closing; and (iii) none of the Employee Benefit Plans has any unfunded
liabilities that are not reflected on the Balance Sheet or the books and records
of Graymor or the Company.
3.19 ENVIRONMENTAL. Except as indicated on Schedule 3.19, neither Graymor
nor the Company is in material violation of any law or legal requirement
relating to the environment. No material expenditures are or will be required in
order to comply with any such law or legal requirement. No Hazardous Materials
(as defined below) are used or have been used, stored, or disposed of by Graymor
or the Company or, to the Shareholders' knowledge, by any other person on any
property owned, leased or used by Graymor or the Company. "Hazardous Material"
shall include: (a) any petroleum, waste oil, crude oil, asbestos, urea
formaldehyde or polychlorinated biphenyl; (b) any waste, gas or other substance
or material that is explosive or radioactive; (c) any "hazardous substance," or
"toxic chemical" as designated, listed or defined (whether expressly or by
reference) in any statute, regulation or other legal requirement (including
CERCLA and any other so-called "superfund" or "superlien" law and the respective
regulations promulgated thereunder); (d) any other substance or material
(regardless of physical form) or form of energy that is subject to any legal
requirement which regulates or establishes standards of conduct in connection
with, or which otherwise relates to, the protection of human health, plant life,
animal life, natural resources, property or the enjoyment of life or property
from the presence in the environment of any solid, liquid, gas, odor, noise or
form of energy; and (e) any compound, mixture, solution, product or other
substance or material that contains any substance or material referred to in
clause "(a)," "(b)," "(c)" or "(d)" above.
3.20 INSURANCE.
(a) Schedule 3.20 describes all policies of insurance (including the
insurer, type of insurance and period of coverage) to which Graymor or the
Company is a party or under which Graymor or the Company or any employee,
officer or director of Graymor or the Company (in his or her capacity as such)
is or has been insured at any time within the five years preceding the date of
this Agreement; and any self-insurance arrangement by or affecting Graymor or
the Company, including any reserves established thereunder. All such policies,
together with such self-insurance, (i) provide adequate insurance coverage for
Graymor and the Company, its business, assets and operations for all risks
normally insured against by a person or
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entity carrying on the same business or businesses as Graymor or the Company,
(ii) are sufficient for compliance with all legal requirements and Contracts to
which Graymor or the Company is a party or by which it is bound, and (iii) will
continue in full force and effect following the Closing.
(b) Schedule 3.20 sets forth, by year, for the current policy year and
each of the five preceding policy years, a summary of the loss experience under
each policy, and summary of the loss experience for all claims that were
self-insured, including the number and aggregate cost of such claims.
(c) Neither Graymor nor the Company has received (i) any refusal of
coverage or any notice that a defense will be afforded with reservation of
rights, or (ii) any notice of cancellation or any other indication that any
insurance policy is no longer in full force or effect or will not be renewed or
that the issuer of any policy is not willing or able to perform its obligations
thereunder.
(d) Graymor and the Company have paid all premiums due, and has
otherwise performed all of its respective obligations, under each insurance
policy described above.
3.21 AFFILIATE TRANSACTIONS. Except as set forth on Schedule 3.21, no
employee, officer, or director of Graymor, the Company, nor any Shareholder or
member of his or her immediate family is indebted to the Company, nor is Graymor
or the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the knowledge of the Shareholders, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which Graymor or the Company is affiliated or with which the Company has a
business relationship, or any firm or corporation that compete or deals with
Graymor or the Company, except that employees, officers, or directors of Graymor
or the Company and members of their immediate families may owns up to one
percent (1%) of the stock of each publicly traded company that may compete with
Graymor or the Company. No member of the immediate family of any officer or
director of Graymor or the Company, nor any Shareholder is directly or
indirectly interested in any material Contract with Graymor or the Company.
3.22 NO BROKERS. None of the Shareholders, Graymor, the Company, or any of
the Company's officers, directors, employees or Affiliates has employed or made
any agreement with any broker, finder or similar agent or any person or firm
which will result in an obligation on the part of the Acquiror or, except as set
forth in Schedule 3.22, the Company or Graymor, to pay any finder's fee,
brokerage fees or commission or similar payment in connection with the
transactions contemplated hereby.
3.23 DISCLOSURE. Neither this Agreement nor any of the schedules or
Exhibits hereto contains or shall contain when delivered at Closing any untrue
statement of a material fact or shall omit to state a material fact necessary to
make the statements contained herein or therein, in light of the circumstances
in which they were made, not misleading, and there is no fact which has not been
disclosed in writing to Acquiror which Materially Adversely Affects or could
reasonably be anticipated to Materially Adversely Affect the Company Common
Stock being transferred, or the assets, business, financial condition or results
of operations, customer, employee or supplier relations, or prospects of Graymor
or the Company.
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3.24 CUSTOMERS. Schedule 3.24 sets forth (a) the names and addresses of all
customers of Graymor or the Company that ordered products, goods, or services
from the Company with an aggregate value for each such customer of $50,000 or
more during the twelve month periods ended December 31, 2000, and December 31,
1999 and (b) the amount for which each such customer was invoiced during such
periods. Except as set forth on Schedule 3.24, neither Graymor nor the Company
has received notice and the Shareholders have no reason to believe that any
significant customer of Graymor or the Company (i) has ceased, or will cease, to
use the products, goods, or services of Graymor or the Company, (ii) has
substantially reduced, or will substantially reduce, the use of products, goods,
or services of Graymor or the Company or (iii) has sought, or is seeking, to
reduce the price it will pay for products, goods, or services of Graymor or the
Company. To the Shareholders' knowledge, no customer of Graymor or the Company
described in clause (a) of this section has otherwise threatened to take any
action described in the preceding sentence as a result of the consummation of
the transactions contemplated by this Agreement.
3.25 SUPPLIERS. Schedule 3.25 sets forth (a) the names and addresses of all
suppliers from which Graymor and the Company ordered inventories and other
products, goods, and services with an aggregate purchase price for each such
supplier of $25,000 or more during the twelve month periods ended December 31,
2000 and December 31, 1999 and (b) the amount for which each such supplier
invoiced Graymor or the Company during such periods. Except as set forth on
Schedule 3.25, neither Graymor nor the Company has received any notice from any
such supplier indicating that there is or will be a material change in the price
of such items or services, and the Shareholders have no reason to believe that
there will be any such material change in the price of such items or services
subject to general and customary price increases, or that any such supplier
(other than Acquiror) will not sell such items to Graymor or the Company at any
time after the Closing on terms and conditions similar to those used in its
current sales to Graymor or the Company, subject to general and customary price
increases. To the Shareholders' knowledge, no supplier to Graymor or the Company
described in clause (a) of the first sentence of this section has otherwise
threatened to take any action described in the preceding sentence as a result of
the consummation of the transactions contemplated by this Agreement.
3.26 PRODUCT WARRANTIES. Except as set forth in Schedule 3.26 and for
warranties (implied or otherwise) under Applicable Law, (a) there are no
warranties made by Graymor or the Company, express or implied, written or oral,
with respect to the products of Graymor or the Company, (b) there are no pending
or, to the Shareholders' knowledge, threatened claims with respect to any such
warranty, and (c) as of the Closing and thereafter, to the Shareholders'
knowledge, Graymor and the Company, will have no, liability with respect to any
such warranty, whether known or unknown, absolute, accrued, contingent, or
otherwise and whether due or to become due, other than customary returns in the
ordinary course of business that are fully reserved against in the most recent
Financial Statements.
3.27 PATENTS AND TRADEMARKS. Each of Graymor and the Company have
sufficient ownership or rights to all patents, trademarks, service marks, trade
names, copyrights, trade secrets, information, proprietary rights and processes
necessary for its business as now conducted (the "Intellectual Property")
without any conflict with or infringement of the rights of others. There are no
outstanding options, licenses, or agreements of any kind relating to the
foregoing,
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nor is the Company bound by or a party to any options, licenses or agreements of
any kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, proprietary rights and
processes of any other person or entity. Neither Graymor nor the Company has
received any communications alleging that Graymor or the Company has violated
or, by conducting its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity. Neither Graymor nor the
Company is aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with their duties to Graymor or the Company or that
would conflict with Graymor's or the Company's business as now conducted.
Neither the execution nor delivery of this Agreement, nor the carrying on of
Graymor's or the Company's business by the employees of Graymor or the Company,
nor the conduct of Graymor's or the Company's business as now conducted, will,
to the Shareholders' knowledge, conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated.
Neither Graymor nor the Company believes it is or will be necessary to utilize
any inventions of any of its employees made prior to or outside the scope of
their employment by Graymor or the Company. Graymor and the Company have taken
all commercially reasonable action necessary to protect its Intellectual
Property. Schedule 3.27 sets forth all Intellectual Property of Graymor and the
Company.
3.28 BACKLOG. All of the backlog of unfilled orders, as of December 31,
2000, for products or services sold by Graymor and the Company represent bona
fide transactions incurred in the ordinary course of business and are set forth
in Schedule 3.28 hereto.
3.29 REPRESENTATIONS REGARDING THE ACQUIROR STOCK. With regard to the
Acquiror Stock that will be issued to the Shareholders, each Shareholder
represents and warrants that:
(a) such Shareholder is acquiring such Acquiror Stock for such
Shareholder's own account, for investment and not with a view to distribution
thereof, and that such Acquiror Stock will not be sold or distributed in
violation of the Securities Act or applicable state law or the rules and
regulations under either. Each Shareholder understands that such Acquiror Stock
has not been registered under the Securities Act or applicable state securities
laws by reason of the reliance by Acquiror on an exemption from the registration
requirements of the Securities Act, and applicable state securities laws, and
that such securities must be held indefinitely unless a subsequent disposition
thereof is registered under the Securities Act and applicable state laws or is
exempt from registration. The financial condition of each Shareholder is such
that each Shareholder is able to bear all risks of holding such Acquiror Stock
for an indefinite period of time. Each Shareholder has been afforded an
opportunity to ask questions of and receive answers from Acquiror and from
persons authorized to act on its behalf concerning the terms and conditions of
the acquisition of such Acquiror Stock, and the opportunity to obtain additional
information to verify the accuracy of information otherwise furnished by
Acquiror hereunder. Each Shareholder has investigated the acquisition of such
Acquiror Stock to the extent that each Shareholder deems necessary or desirable,
and Acquiror has provided each Shareholder with the assistance in connection
therewith that each Shareholder requested. Each Shareholder has such knowledge
and experience in financial and business matters that each Shareholder is
capable of
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evaluating the merits and risks of the acquisition of the Acquiror Stock and of
making an informed investment decision with respect thereto. Additionally,
except as set forth on Schedule 3.29, each Shareholder is an "accredited
investor" within the meaning of Rule 501 of Regulation D promulgated by the
Commission.
(b) Each Shareholder acknowledges and agrees that the certificates for
the Acquiror Stock received by each Shareholder will be endorsed with the
following legend:
"The securities evidenced hereby have not been registered under the
Securities Act of 1933 or applicable state securities laws and may not
be sold, transferred, assigned, offered, pledged, or otherwise
distributed for value unless there is an effective registration
statement under such Act and such laws covering such securities or
White Electronic Designs Corporation receives an opinion of counsel
reasonably acceptable to White Electronic Designs Corporation stating
that such sale, transfer, assignment, offer, pledge, or other
distribution for value is exempt from the registration and prospectus
delivery requirements of such Act and such laws."
(c) Each Shareholder and Acquiror acknowledge and agree that the legend
endorsed on the certificates for the Acquiror Stock will be removed, and
Acquiror will issue a certificate or instrument without such legend at the
request of the holder of such security, (a) if such security is being disposed
of pursuant to registration under the Securities Act and any applicable state
acts, or (b) if such holder provides Acquiror with an opinion of counsel
reasonably satisfactory to Acquiror to the effect that a sale, transfer,
assignment, pledge, or distribution for value of such security may be made
without registration and that such legend is not required to satisfy the
applicable exemption from registration.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to the Shareholders and the Company that
as of the date hereof, and again at the Effective Time:
4.1 CORPORATE STATUS; AUTHORIZATION, ETC. Acquiror is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Indiana with full corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder, and to consummate the
transactions contemplated hereby. The execution and delivery by Acquiror of this
Agreement, and the consummation of the transactions contemplated hereby, have
been duly authorized by all requisite corporate action of Acquiror. Acquiror has
duly executed and delivered this Agreement. This Agreement is a valid and
legally binding obligation of Acquiror enforceable against Acquiror in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
fraudulent transfer and conveyance, receivership, moratorium, and similar laws
affecting creditors' rights generally, and to the availability of equitable
remedies (whether asserted at law or in equity).
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4.2 NO CONFLICTS, ETC. The execution, delivery, and performance by Acquiror
of this Agreement and the consummation of the transactions contemplated hereby,
do not and will not conflict with or result in a violation of or under (i) the
articles of incorporation or bylaws of Acquiror or (ii) any Applicable Law
applicable to Acquiror or any of its properties or assets except, in the case of
clause (ii), for violations and defaults that, individually and in the
aggregate, have not and will not materially impair the ability of Acquiror to
perform its obligations under this Agreement.
4.3 LITIGATION. There is no action, claim, suit, or proceeding pending, or
to the knowledge of Acquiror, overtly threatened, by or against or affecting
Acquiror in connection with or relating to the transactions contemplated by this
Agreement or of any action taken or to be taken in connection herewith or the
consummation of the transactions contemplated hereby.
4.4 BROKERS, FINDERS, ETC. All negotiations relating to this Agreement and
the transactions contemplated hereby have been carried on without the
participation of any Person acting on behalf of Acquiror in such manner as to
give rise to any valid claim against the Shareholders for any brokerage or
finder's commission, fee, or similar compensation.
4.5 TAX MATTERS. Acquiror makes no representations or warranties as to any
circumstances relating to (i) the transactions included in this Agreement or
(ii) the Company or the Shareholders or any actions taken or agreed to be taken
by any of them, that may prevent the transactions contemplated hereby from
qualifying as a reorganization within the meaning of Section 368 of the Code.
4.6 ACQUIROR REPORTS. Acquiror has previously furnished to the Shareholders
or made available to the Shareholders copies of all reports required to be filed
by the Acquiror pursuant to the Exchange Act of 1934, as amended, since January
1, 2000. Additionally, Acquiror has filed with the Securities and Exchange
Commission ("SEC") all such reports in a timely fashion and as of their
respective filing dates, all such reports complied in all material respects with
the rules and regulations promulgated by the SEC in connection therewith.
4.7 ACQUIROR COMMON STOCK. The Newly Issued Shares will be, upon issuance
to the Shareholders pursuant to this Agreement, validly issued, fully paid, and
non-assessable and free and clear of Encumbrances and be free and clear of any
transfer restrictions, except for restrictions on transfer under applicable
securities laws, including Rule 144 promulgated under the Securities Act and as
set forth in Sections 3.29 and 7.3.
ARTICLE 5
CONDUCT OF BUSINESS PENDING THE MERGER
5.1 CONDUCT OF BUSINESS. The Company and the Shareholders covenant and
agree that prior to the Closing, except as expressly permitted or required by
this Agreement or as otherwise consented to by Acquiror in writing, the Company
will, and the Shareholders will cause the Company to:
(a) carry on its business in, and only in, the ordinary course, in
substantially the same manner as heretofore conducted, and use commercially
reasonable efforts to preserve intact its present business organization,
maintain its properties in good operating condition and
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repair (normal wear and tear excepted), keep available the services of its
present officers and employees, and preserve its relationship with customers,
suppliers, and others having business dealings with it, with the goal and intent
that its goodwill and ongoing business will be in all material respects
unimpaired following the Closing;
(b) pay accounts payable and other obligations of the Company in the
ordinary course of business consistent with prior practice;
(c) perform in all material respects all of its obligations under all
Contracts and other agreements and instruments and comply in all material
respects with all Applicable Laws applicable to it;
(d) other than sales and purchases of inventories in the ordinary
course, not enter into or assume any material agreement, contract, or
instrument, or enter into or permit any material amendment, supplement, waiver,
or other modification in respect thereof;
(e) not grant (or commit to grant) any increase in the compensation
(including incentive or bonus compensation) of any employee or institute, adopt,
or amend (or commit to institute, adopt, or amend) any compensation or benefit
plan, policy, program, or arrangement or collective bargaining agreement
applicable to any such employee other than in the ordinary course of business
consistent with past practice;
(f) continue all policies of insurance in full force and effect;
(g) not make any change or modification in the Company's accounting
practices, policies, or procedures;
(h) not file any Tax Returns without the consent of the Acquiror;
(i) not make any distributions to the Shareholders with respect to the
stock of the Company; and
(j) not take any action or knowingly omit to take any action, which
action or omission would result in a breach of any of the representations and
warranties set forth in Section 3.1.
ARTICLE 6
CONDITIONS PRECEDENT
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
obligations of the parties to consummate the transactions contemplated hereby
will be subject to the fulfillment on or prior to the Closing of the following
conditions:
(a) there shall not be pending by or before any court or other
governmental body an order or injunction restraining or prohibiting the
transactions contemplated hereby.
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6.2 CONDITIONS TO OBLIGATIONS OF ACQUIROR AND THE MERGER SUB. The
obligations of Acquiror and Merger Sub to consummate the transactions
contemplated hereby will be subject to the fulfillment at or prior to the
Closing of the following conditions:
(a) the representations and warranties of the Shareholders contained in
this Agreement (i) will be true and correct in all respects at and as of the
date hereof, and (ii) will be repeated and will be true and correct in all
respects on and as of the Closing with the same effect as though made on and as
of the Closing;
(b) the Company and the Shareholders will have duly performed and
complied, in all material respects, with all covenants and agreements and
conditions required by this Agreement to be performed or complied with by the
Company and the Shareholders prior to or as of the Closing;
(c) the Company will have furnished a certificate in which the Company
and the Shareholders shall certify that they have no reason to believe that the
conditions set forth in Sections 6.2(a) and (b) have not been fulfilled;
(d) the Company and the Shareholders will have obtained and will have
delivered to Acquiror copies of (i) all Governmental Approvals required to be
obtained by the Company and the Shareholders in connection with the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby and (ii) all Consents (including, without limitation, all
Consents required under any Contract), necessary to be obtained in order to
consummate the transactions contemplated thereby;
(e) no event, occurrence, fact, condition, change, development, or
effect shall have occurred, exist, or come to exist since the Balance Sheet
Date, that, individually or in the aggregate, has constituted or resulted in or,
in the reasonable good faith discretion of Acquiror, could reasonably be
expected to constitute or result in, a Material Adverse Effect;
(f) the Company shall have furnished to the Acquiror (i) a copy of the
text of the resolutions by the which the Board of Directors of the Company and
the Shareholders have approved this Agreement (including, without limitation,
the Plan of Merger attached hereto) and the Merger; (ii) certified copies of the
Company's articles of incorporation and a copy of its bylaws; and (iii) a
certificate executed on behalf of the Company by its corporate secretary
certifying to Acquiror that such resolutions are true, correct and complete,
were duly adopted and have not been amended or rescinded, and that prior to the
Closing, the articles of incorporation and bylaws have not been amended or
rescinded;
(g) the Company will have taken all action necessary to terminate its
any Employee Benefit Plans, except its health, group, life, dental, cafeteria,
and long term disability plans, pursuant to the provisions of such plans prior
to Closing;
(h) the Company will have terminated all employment agreements, prior
to Closing, including without limitation, the Employment Agreement with Xxxxxx
Xxxxxx and the Consulting Agreement with Xxxxxxx Xxxxxx;
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(i) the Company will have terminated all warrants and options
exercisable to acquire shares of Company Common Stock; and
(j) the Company and the Shareholders will deliver to Acquiror:
(i) certificates representing the Company Common Stock duly endorsed
(or accompanied by duly executed stock powers), for transfer; and
(ii) written resignations of the Company's directors and officers,
dated as of the Closing.
6.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY AND SHAREHOLDERS. The
obligations of Company and the Shareholders to consummate the transactions
contemplated hereby will be subject to the fulfillment at or prior to the
Closing of the following conditions:
(a) the representations and warranties of Acquiror contained in this
Agreement (i) will be true and correct in all material respects at and as of the
date hereof and (ii) will be repeated and will be true and correct in all
material respects on and as of the Closing with the same effect as though made
at and as of such time;
(b) Acquiror will have duly performed and complied in all material
respects with all agreements and conditions required by this Agreement to be
performed or complied with by Acquiror prior to or on the Closing.
(c) the Company will have furnished a certificate in which the Company
and the Shareholders shall certify that they have no reason to believe that the
conditions set forth in Sections 6.3(a) and (b) have not been fulfilled;
(d) the Company shall have furnished to Shareholders (i) a copy of the
text of the resolutions by which the corporate action on the part of the Company
and Merger Sub necessary to approve this Agreement, the Merger, and the issuance
of the Newly Issued Shares were taken and (ii) certificates executed on behalf
of the Company certifying, in each case, that such copy is a true, correct and
complete copy of such resolutions and that such resolutions were duly adopted
and have not been amended or rescinded; and
(e) the Acquiror will deliver to the Shareholders certificates
representing the Newly Issued Shares or the letter to the Exchange Agent
required by Section 2.9 hereof.
ARTICLE 7
REGISTRATION RIGHTS
7.1 REGISTRATION PROCEDURES AND EXPENSES. Acquiror will use commercially
reasonable efforts to effect the registration under the Securities Act for sale
by the Shareholders of the Acquiror Stock issued to the Shareholders at the
Closing and pursuant to Section 2.5 and 2.6 of this Agreement, by performing the
following:
(a) Acquiror shall, as soon as practicable following the Closing,
prepare and file with the Commission a registration statement with respect to
the resale of such Acquiror
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Stock covering the sale of the Acquiror Stock by the Shareholders on the NASDAQ
National Market, and shall use commercially reasonable efforts to cause such
registration statement to become and remain effective for lesser of a period of
one (1) year or until Shareholders are free to resell such Acquiror Stock
without restriction or limitation pursuant to Rule 144 of the Securities Act.
(b) Acquiror will use commercially reasonable efforts to register or
qualify such Acquiror Stock for sale in such states as the Shareholders shall
reasonably designate and to keep such registration or qualification in effect
for so long as the registration statement filed under the Securities Act remains
in effect.
(c) Acquiror will prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to update and keep such registration
statement effective and to comply with the provisions of the Securities Act with
respect to the sale of all securities covered by such registration statement.
Notwithstanding anything else to the contrary contained herein, neither Acquiror
nor any of its Affiliates will be required to disclose any confidential
information concerning pending acquisitions not otherwise required to be
disclosed.
Acquiror will notify the Shareholders upon discovery that the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, in the light of the circumstances under which they were made, and at
the request of the Shareholders promptly prepare and furnish to each of them a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that such prospectus will not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made; provided that, after such
notification and until such supplement or amendment has been so delivered, the
Shareholders will not deliver or otherwise use the original prospectus.
(d) Acquiror will cause to be furnished to the Shareholders three
conformed copies of such registration statement and of each amendment and
supplement thereto (in each case including all exhibits) and such number of
copies of the preliminary and final prospectuses and any other prospectus filed
under Rule 424 of the Securities Act as the Shareholders may reasonably request
in order to facilitate the sale of such Acquiror Stock. The Shareholders will
comply with all prospectus delivery requirements under the Securities Act. It
will be a condition to Acquiror's obligations to effect registration of such
Acquiror Stock that the Shareholders provide Acquiror with all material facts
including, without limitation, furnishing such certificates, questionnaires, and
legal opinions as may be required by Acquiror concerning the Acquiror Stock to
be registered which are reasonably required for Acquiror to complete and file
the registration statement or in the prospectus or are otherwise required in
connection with the offering.
(e) All expenses incurred by Acquiror or its Affiliates in complying
with this Section 7.1, including, without limitation, all registration and
filing fees, printing expenses, and fees and disbursements of counsel for
Acquiror and its affiliates (the "Registration Expenses").
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All selling commissions applicable to the sales of the Acquiror Stock and all
fees and disbursements of counsel for the Shareholders (the "Selling Expenses").
(f) Acquiror will pay all Registration Expenses in connection with
registration pursuant to this Section 7.1. All Selling Expenses in connection
with such registration will be borne by the Shareholders.
7.2 INDEMNIFICATION.
(a) Acquiror will indemnify and hold harmless the Shareholders and each
person, if any, who controls a Shareholder within the meaning of the Securities
Act, from and against any and all losses, damages, liabilities, costs and
expenses to which the Shareholders or any such controlling person may become
subject under the Securities Act, any state securities laws, or otherwise,
insofar as such losses, claims, damages, liabilities, costs or expenses are
caused by a failure to comply with such laws or by any untrue statement or
alleged untrue statement of any material fact contained in a registration
statement under which shares of Acquiror Stock are registered, any prospectus
contained therein or any amendment or supplement thereto, or arise out of or
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided,
however, that, Acquiror will not be liable in any such case to the extent that
any such loss, claim, damage, liability, cost or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by or on
behalf of any Shareholder or such controlling person in writing specifically for
use in the preparation thereof.
(b) Each of the Shareholders, jointly and severally, will indemnify and
hold harmless Acquiror and each person, if any, who controls Acquiror within the
meaning of the Securities Act, from and against any and all losses, damages,
liabilities, costs and expenses to which Acquiror or any such controlling person
may become subject under the Securities Act or otherwise, insofar as such
losses, damages, liabilities, costs or expenses are caused by any untrue
statement or alleged untrue statement of any material fact contained in a
registration statement under which shares of Acquiror Stock are registered, any
prospectus contained therein or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein, in
light of the circumstances under which they were made, not misleading, to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission was so made in reliance upon and in strict conformity with
written information furnished by or on behalf of any Shareholder specifically
for use in the preparation thereof.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraphs (a) and (b) of this Section 7.2 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said
paragraphs (a) and (b), promptly notify the indemnifying party of the
commencement thereof; but the omission to so notify the indemnifying party will
not relive if from any liability which it may
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have hereunder unless the indemnifying party has been materially prejudiced
thereby nor will such failure to so notify the indemnifying party relieve it
from any liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party shall have the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party;
provided, however, if the defendants in any action include both the indemnified
party and the indemnifying party and the indemnified parties have defenses or
may have defenses additional to or different than the indemnifying parties, or
there is a conflict of interest which would prevent counsel for the indemnifying
party from also representing the indemnified party, the indemnified party or
parties shall have the right to select separate counsel to participate in the
defense of such action on behalf of such indemnified party or parties. After
notice from the indemnifying party to such indemnified party will not be liable
to such indemnified party pursuant to the provisions of said paragraph (a) or
(b) for any legal or other expense subsequently incurred by such indemnified
party in connection with the defense thereof other than reasonable costs of
investigation, unless (i) the indemnified party shall have employed counsel in
accordance with the provisions of the preceding sentence, (ii) the indemnifying
party shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after the notice of the
commencement of the action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party.
7.3 RESTRICTIONS ON SALES. Shareholders agree that once the shares of
Acquiror Stock issued to Shareholders pursuant to this Agreement are registered
under the Securities Act, Shareholders shall not sell in the aggregate more than
twenty-five percent (25%) of the Acquiror Stock received at Closing within any
three (3) month period. Transfers of Acquired Common Stock after registration
under the Securities Act, approved at the Closing pursuant to this Agreement
among Shareholders, distributions to the partners of PVP consistent with their
ownership interests, and distributions of the Acquired Common Stock to current
employees of the Company shall not be considered sales that are subject to the
twenty-five percent (25%) restriction provided in this Section 7.3.
ARTICLE 8
NON-COMPETITION
8.1 NON-COMPETITION. During the Non-Competition Period (as defined herein)
each Shareholder hereby agrees that such Shareholder will not, and will not
permit any of such Shareholder's Affiliates to directly or indirectly, Compete
(as defined herein) with the Business in the Business Territory.
Additionally, each Shareholder hereby expressly agrees that solely for
the purposes of this Article 8, the term "Shareholder" includes the directors of
the Company, including without limitation, Xxxxx Xxxxxx, Xxxxxx Xxxx and Xxxx
Xxxxxxx.
The term "Business Territory" means the following areas in the United
States of America: (i) Alaska, Arizona, California, Idaho, Oregon and
Washington; (ii) a 30-mile radius around each of the following: (A) each of the
Facilities, (B) Acquiror's corporate headquarters.
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For purposes of this Section 8.1, the "Non-Competition Period" means,
the period commencing on the Closing and continuing for a period of five (5)
years after such date. With respect to each of the Shareholders the applicable
Non-Competition Period described herein will be extended by the number of days
during any such period in which such Shareholder is or was engaged in activities
constituting a breach of this Section 8.1.
(a) For purposes of this Article 8, the term "Compete" or "Competing"
means, with respect to the Business: (i) managing, supervising, or otherwise
participating in a management or sales capacity; or (ii) otherwise managing,
operating, controlling, participating in the ownership, management, or control
of, or being connected with or having any interest in, as a stockholder, agent,
partner, lender, consultant, advisor or otherwise, any business or Person which
provides goods, products, or services competitive with those provided by the
Business or with Acquiror's suppliers or vendors which are competitive with
Acquiror; provided, however, that nothing contained herein will prohibit a
Shareholder from owning less than five percent of any class of securities listed
on a national securities exchange or traded publicly in the over-the-counter
market; or (iii) entering into or attempting to enter into any business
substantially similar to the Business, either alone or with any other Person.
(b) For the purposes of this Article 8, the words "directly or
indirectly", as they modify the word "Compete" or "Competing" mean (i) acting as
an agent, representative, consultant, officer, director, member, independent
contractor, or employee of any Person that is Competing with the Business; (ii)
participating in any such Competing Person or enterprise as an owner, partner,
limited partner, joint venture, member, creditor, or shareholder (except as
expressly permitted herein); or (iii) communicating to any such Competing Person
or enterprise the names or addresses or any other information concerning any
past, present, or identified prospective client or customer or any other
confidential information of the Business, the Company, Acquiror, or any of their
Affiliates.
(c) For purposes of this Article 8, the term "Business" means
manufacturing and distribution of optical enhancements of display products, as
conducted by the Company and/or its Subsidiaries, Acquiror, or any of their
Affiliates immediately prior to the date hereof and/or conducted during the
Non-Competition Period.
8.2 NON-SOLICITATION OF EMPLOYEES. The Shareholders recognize that the
employees are a valuable resource of the Company and its Subsidiaries.
Accordingly, during the Employee Non-Solicitation Period (as defined herein),
each Shareholder agrees that such Shareholder will not, either alone or in
conjunction with any other Person, directly or indirectly, go into business with
any Company employee or solicit, induce, or recruit any Company employee to
leave the employ of the Company. For the purpose of this Section 8.2, Company
employee means (i) any employee of the Company or any of its Subsidiaries,
Acquiror, or any of Acquiror's Affiliates as of, or immediately prior to the
date hereof or during the Employee Non-Solicitation Period; or (ii) any former
employee of the Company or any Subsidiary, Acquiror, or any of Acquiror's
Affiliates whose employment with the Company or any Subsidiary, Acquiror, or any
of their Affiliates ceased by virtue of such employee's voluntary termination of
employment less than five (5) years before the date of such co-venturing,
solicitation, inducement, or recruitment.
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For purposes of this Section 8.2, the "Employee Non-Solicitation Period"
means, with respect to the Shareholders, the period commencing as of the Closing
and continuing for a period of five (5) years after such date. With respect to
each of the Shareholders, the applicable Employee Non-Solicitation Period
described herein will be extended by the number of days during any such period
in which such Shareholder is or was engaged in activities constituting a breach
of this Section 8.2.
8.3 NON-SOLICITATION OF CUSTOMERS. The Shareholders recognize that the
customers are a valuable asset of the Company and its Subsidiaries. Accordingly,
during the Customer Non-Solicitation Period (as defined herein), each
Shareholder agrees that such Shareholder will not, either alone or in
conjunction with any other Person, directly or indirectly, call on, solicit,
take away, accept as a client or customer, or attempt to call on, solicit, take
away, or accept as a client or customer, any Person that was a client, customer,
or prospective client or customer of the Company or any of its Subsidiaries,
Acquiror, or any of their Affiliates as of, or immediately prior to the date
hereof or during the Non-Competition Period, the Employee Non-Solicitation
Period, and the Customer Non-Solicitation Period, including, without limitation,
those clients, customers, or prospective clients or customers, wherever situated
that are listed in Schedule 3.25.
For purposes of this Section 8.3, the "Customer Non-Solicitation Period"
means, with respect to the Shareholders, the period commencing as of the Closing
and continuing for a period of five (5) years after such date. With respect to
each of the Shareholders, the applicable Customer Non-Solicitation Period
described herein will be extended by the number of days during any such period
in which such Shareholder is or was engaged in activities constituting a breach
of this Section 8.3.
8.4 EMPLOYMENT BY COMPETITORS. During the Non-Competition Period (as
defined in Section 8.1) each Shareholder agrees that such Shareholder will not,
either within or outside of the Business Territory, act as an agent,
representative, consultant, officer, director, member, independent contractor,
or employee of any entity that produces display products.
8.5 ADDITIONAL AGREEMENTS. Each Shareholder hereby expressly agrees and
acknowledges that:
(a) the Company has business interests throughout the Business
Territory, and that competition with and against such business interests would
be harmful to the Company;
(b) the covenants contained in this Article 8 are reasonable as to time
and geographical area and do not place any unreasonable burden upon such
Shareholder;
(c) the parties have entered into the covenants contained herein in
connection with and as a condition precedent to the consummation of the
Agreement, pursuant to which Acquiror has acquired the Company; the agreements,
actions, covenants, and promises contained herein are intended to protect and
ensure the value of the Company's business, including its goodwill, which
actions, covenants, and promises are a material consideration to Acquiror in
connection with the Agreement; and this Agreement shall be interpreted,
construed, and/or enforced as a covenant given in connection with the sale of a
business and its goodwill,
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notwithstanding any employment of such Shareholder by the Company following the
Closing; and
(d) such Shareholder understands and hereby agrees to each and every
term and condition contained in this Article 8.
8.6 REMEDIES; ENFORCEABILITY. Each Shareholder recognizes and acknowledges
that irreparable damage will result to the Company and Acquiror in the event of
a breach by such Shareholder or any of the Shareholder's Affiliates of the
provisions of this Article 8, and, accordingly, in the event of such a breach,
Acquiror or the Company will be entitled, in addition to any other legal or
equitable damages and remedies to which it may be entitled or which may be
available, to seek an injunction to restrain the violation thereof. If any
provision of this Article 8 shall be adjudicated by a court of competent
jurisdiction to be invalid or unenforceable because of the scope, duration, or
area of its applicability, the court making such determination will have the
power to modify such scope, duration, or area, or all of them and such provision
will then be applicable in such modified form.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION BY SHAREHOLDERS. Each of the Shareholders (provided
that Xxxxxx Xxxxxx and Xxxxxxx Xxxxxx will be responsible for Grayson N. and
Xxxxxx X. Xxxxxx, their minor children), jointly and severally, covenants and
agrees to defend, indemnify and hold harmless the Company, and Acquiror, and
their respective officers, directors, employees, agents, advisers,
representatives and Affiliates (collectively, the "Acquiror Indemnitees") from
and against, and to pay or reimburse Acquiror Indemnitees for, any and all
claims, liabilities, obligations, losses, fines, costs, royalties, proceedings,
deficiencies or damages (whether absolute, accrued, conditional, or otherwise
and whether or not resulting from third party claims) including, without
limitation, any out-of pocket expenses and reasonable attorneys' and
accountants' fees incurred in the investigation or defense of any of the same or
in asserting any of their respective rights hereunder (collectively, "Losses"),
resulting from or arising out of:
(a) any material inaccuracy of any representation or warranty made by
the Company or the Shareholders herein or in connection herewith;
(b) any failure of the Company or the Shareholders to perform any
covenant or agreement hereunder;
(c) all liabilities relating to a violation of any Applicable Law and
Costs arising out of the Company's operations or its business prior to the
Closing;
(d) any claims relating to employment rules and regulations relating to
practices or incidents prior to Closing and product liability claim with respect
to any products, goods, or services distributed or sold or for which
compensation was received prior to the Closing;
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(e) any failure by a lender to the Company or Graymor to release within
ten (10) days of the Closing any lien on any assets of the Company or Graymor
and/or any failure to obtain any of the consents required to be obtained by
Section 10.16 below; and
(f) any liability for Taxes for which adequate amounts have not been
reserved by the Company and/or Graymor through the Effective Date of the Merger.
Acquiror Indemnitees shall be entitled to indemnification pursuant to this
Agreement only if the aggregate Losses incurred or sustained by all Acquiror
Indemnitees exceed Fifty Thousand Dollars ($50,000). In the event that the
aggregate Losses incurred or sustained by all Acquiror Indemnitees exceed Fifty
Thousand Dollars ($50,000), then the Acquiror Indemnitees shall be entitled to
indemnification for all such Losses, including the first Fifty Thousand Dollars
($50,000) of such Losses; provided, however, that the aggregate Losses paid to
the Acquiror Indemnitees hereunder shall not exceed the aggregate of the sum of
the Purchase Price plus the Earnout Payment plus the aggregate fees and expenses
incurred by Acquiror in connection with the Acquisition and transactions
contemplated by this Agreement; provided, however, that the Acquiror Indemnitees
shall be entitled to indemnification for all Losses, without any limitation,
incurred or sustained by such Acquiror Indemnitee as a result of any instance
involving fraud or misrepresentations or breaches of representations set forth
in Sections 3.17 and 3.19 of this Agreement or for unpaid Taxes for which
adequate amounts have not been reserved by the Company and/or Graymor through
the Effective Date of the Merger. Notwithstanding the foregoing, in the event
that Shareholders are required to indemnify Acquiror Indemnitees for a breach of
this Agreement due to fraud or misrepresentation, the Shareholders committing
the fraud or misrepresentation shall be responsible for the entire amount of
Losses due to the fraud or misrepresentation while the liability of the other
Shareholders shall not exceed an amount equal to the Purchase Price plus the
Earnout Payment. Furthermore, each of the Former Graymor Shareholders (as
defined in the preamble to this Agreement), jointly and severally, covenant and
agree to defend, indemnify, and hold harmless Acquiror Indemnitees from and
against, and to pay or reimburse Acquiror Indemnitees for, any and all Losses,
resulting from or arising out of any inaccuracy of any representation or
warranty or breach of a covenant related to Graymor or relating to the
operations of Graymor prior to the Closing, including without limitation, Losses
occurring or existing prior to the Closing, regardless of when discovered;
provided, however, the Shareholders who are not also Former Graymor Shareholders
shall not be responsible for indemnification obligations to the Acquiror
Indemnitees to the extent such obligations specifically relate solely to
breaches of the representations and warranties or operations of Graymor.
Shareholders further covenant that PVP will remain organized as a partnership
until such time as Shareholders' indemnification obligations under this
Agreement have expired.
For purposes of Section 9.1(e) and the determination of Taxes of the
Company and Graymor through the date of the Closing, in the case of any Taxes
that are imposed on a periodic basis and are payable for a taxable period that
includes (but does not end on) the date of the Closing, the portion of such Tax
which relates to the portion of such taxable period ending on the date of the
Closing shall (x) in the case of any Taxes other than Taxes based upon or
related to income or receipts, be deemed to be the amount of such Tax for the
entire taxable period multiplied by a fraction the numerator of which is the
number of days in the taxable period ending on the date of the Closing and the
denominator of which is the number of days in the entire taxable period, and (y)
in the case of any Tax based upon or related to income or receipts
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be deemed equal to the amount which would be payable if the relevant taxable
period ended on the date of the Closing. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner consistent with
prior practice of the Company and Graymor.
9.2 INDEMNIFICATION BY ACQUIROR. Acquiror covenants and agrees to defend,
indemnify, and hold harmless the Shareholders and their respective agents,
advisors, representatives and Affiliates (collectively, the "Shareholder
Indemnitees") from and against any and all Losses, up to the amount of the
Purchase Price, resulting from or arising out of:
(a) any inaccuracy in any representation or warranty by Acquiror made
or contained in this Agreement;
(b) any failure of Acquiror to perform any covenant or agreement made
or contained in this Agreement or to fulfill any other obligation in respect
hereof; and
(c) the operation of the Company following the Closing; except, in the
case of clause (b) or (c), to the extent such Losses are attributable to acts or
circumstances occurring prior to the Closing or constitute Losses for which the
Shareholders are required to indemnify Acquiror Indemnitees under this Article
9.
9.3 ADJUSTMENTS TO INDEMNIFICATION PAYMENTS. Any payment made by the
Shareholders to Acquiror Indemnitees, on the one hand, or by Acquiror to
Shareholder Indemnitees, on the other hand, pursuant to this Article 9 in
respect of any Losses will be net of any insurance proceeds realized by and paid
to the Indemnified Party in respect of such Losses. The Indemnified Party will
use its reasonable efforts to make insurance claims relating to any Losses for
which it is seeking indemnification pursuant to this Article 9; provided,
however, that the Indemnified Party will not be obligated to make such an
insurance claim if the Indemnified Party in its reasonable good faith judgment
believes that the cost of pursuing such an insurance claim together with any
corresponding increase in insurance premiums or other chargebacks to the
Indemnified Party, as the case may be, would exceed the value of the Losses for
which the Indemnified Party is seeking indemnification.
9.4 INDEMNIFICATION PROCEDURES. In the case of any claim entitling a party
hereto to indemnification (the "Indemnified Party"), notice will be given by the
Indemnified Party to the party required to provide indemnification (the
"Indemnifying Party") promptly after such Indemnified Party has actual knowledge
of any claim as to which indemnity may be sought, and the Indemnified Party will
permit the Indemnifying Party (at the expense of such Indemnifying Party) to
assume the defense of any claim or any litigation resulting therefrom; provided
that (i) the counsel for the Indemnifying Party who shall conduct the defense of
such claim or litigation will be reasonably satisfactory to the Indemnified
Party, (ii) the Indemnified Party may participate in such defense at such
Indemnified Party's expense, and (iii) the omission by any Indemnified Party to
give notice as provided herein will not relieve the Indemnifying Party of its
indemnification obligation under this Agreement except to the extent that such
omission results in a failure of actual notice to the Indemnifying Party and
such Indemnifying Party is materially damaged as a result of such failure to
give notice. Except with the prior written consent of the Indemnified Party, no
Indemnifying Party, in the defense of any such claim or litigation, will consent
(unless it has been unsuccessful after having used all reasonable commercial
efforts to
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obtain such) to entry of any judgment or enter into any settlement that provides
for injunctive or other nonmonetary relief affecting the Indemnified Party or
that does not include as an unconditional term thereof the giving by each
claimant or plaintiff to such Indemnified Party of a release from all liability
with respect to such claim or litigation. In the event that the Indemnified
Party shall in good faith determine that the conduct of the defense of any claim
subject to indemnification thereunder or any proposed settlement of any such
claim by the Indemnifying Party would materially and adversely affect the
Indemnified Party's Tax liability or the ability of the Indemnified Party to
conduct its business, or that the Indemnified Party may have available to it one
or more defenses or counterclaims that are inconsistent with one or more of
those that may be available to the Indemnifying Party in respect of such claim
or any litigation relating thereto, the Indemnified Party will have the right at
all times to take over and assume control over the defense, settlement,
negotiations, or litigation relating to any such claim at the sole cost of the
Indemnifying Party, provided that if the Indemnified Party does so take over and
assume control, the Indemnified Party will not settle such claim or litigation
without the written consent of the Indemnifying Party, such consent not to be
unreasonably withheld. In the event that the Indemnifying Party does not accept
the defense of any matter as above provided, the Indemnified Party will have the
full right to defend against any such claim or demand and will be entitled to
settle or agree to pay in full such claim or demand. In any event, the
Indemnifying Party and the Indemnified Party will cooperate in the defense of
any claim or litigation subject to this Section 9.4 and the records of each will
be available to the other with respect to such defense.
9.5 TREATMENT OF SHAREHOLDERS. For purposes of this Article 9, and except
as otherwise specified in Section 9.1, the rights, duties, and obligations of
the Shareholders (and their respective successors and assigns) will be joint and
several.
9.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. The representations
and warranties contained in this Agreement will survive the Closing, and any
examination by or on behalf of the parties hereto through the Closing, and the
completion of the transactions contemplated herein until one year after the end
of the Earnout Period shall have been made. Additionally the representations and
warranties in Sections 3.2, 3.17, 3.18 and 3.19 shall survive until the
expiration of the applicable statutes of limitations (with extensions) and the
representations and warranties in Sections 3.4 and 3.9 shall survive
indefinitely.
ARTICLE 10
MISCELLANEOUS
10.1 CERTAIN TAX MATTERS.
(a) Tax Attributes. The Shareholders acknowledge and agree that all tax
attributes of the Company and Graymor including but not limited to tax net
operating losses, tax credits and other similar items generated through and
subsequent to the Closing will remain as tax attributes of the Company and
Graymor. Accordingly, any refunds or benefits obtained from any Tax carryback or
carryforward or other realization of such Tax attributes of the Company or
Graymor (and their respective successors) shall remain as sole property of the
Company and Graymor and any other refunds shall be the sole property of the
Company and Graymor.
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(b) Cooperation in Tax Matters. Acquiror and Shareholders shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the filing of Tax Returns pursuant to this Section 10.1 and
any audit, litigation or other proceeding with respect to Taxes of the Company
and Graymor. Such cooperation shall include the retention and (upon the other
party's request) the provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Shareholders agree to, and
Acquiror agrees to cause the Company and Graymor to retain all books and records
with respect to Tax matters pertinent to the Company or Graymor relating to any
taxable period beginning before the date of the Closing until the expiration of
the statute of limitations (including any extension thereof) of the respective
taxable periods and to abide by all record retention agreements entered into
with any taxing authority. So long as taxable periods of, or related to the
Company or Graymor ending on or before the date of the Closing remain open,
Acquiror will, and will cause the Company and Graymor to, promptly notify
sellers in writing of any pending or threatened tax audits or assessments for
which Shareholders have or may have liability. Shareholders will promptly notify
Acquiror and the Company in writing of any written or other notification
received by Shareholders from the IRS or any other taxing authority of any
proposed adjustment raised in connection with a tax audit, examination,
proceeding or determination of a taxable period of the Company or Graymor ending
on or before the date of the Closing.
(c) Tax Periods Ending on or Before the Closing Date. Shareholders
shall prepare or cause to be prepared, subject to Acquiror agreement not to be
unreasonably withheld, all Tax Returns for the Company or Graymor for all
periods ending on or before the date of the Closing the due date of which occurs
after the date of the Closing. Shareholders shall reimburse Acquiror for Taxes
of the Company or Graymor with respect to such periods within fifteen (15) days
after payment by Acquiror or the Company or Graymor to the extent such Taxes are
not reflected in the segregated accounts of the Company or Graymor referred to
in Section 3.17(a) of this Agreement.
(d) Tax Periods Beginning Before and Ending After the Closing Date.
Acquiror shall prepare or cause to be prepared, and file or cause to be filed,
any Tax Returns of the Company or Graymor for Tax periods which begin before the
date of the Closing and end after the date of the Closing. Shareholders shall
immediately reimburse Acquiror within fifteen (15) days after the date on which
Taxes are paid with respect to such Tax periods an amount equal to the portion
of such Taxes which relates to the portion of such taxable period ending on the
date of the Closing to the extent such taxes are not reflected in the reflected
in the segregated accounts of the Company or Graymor referred to in Section
3.17(a) of this Agreement. For purposes of this Section 10.1(d) in the case of
any Taxes that are imposed on a periodic basis and are payable for a taxable
period that includes (but does not end on) the date of the Closing, the portion
of such Tax which relates to the portion of such taxable period ending on the
date of the Closing shall (x) in the case of any Taxes other than Taxes based
upon or related to income or receipts, be deemed to be the amount of such Tax
for the entire taxable period multiplied by a fraction the numerator of which is
the number of days in the taxable period ending on the date of the Closing and
the denominator of which is the number of days in the entire taxable period, and
(y) in the case of any Tax based upon or related to income or receipts be deemed
equal to the
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amount which would be payable if the relevant taxable period ended on the date
of the Closing. All determinations necessary to give effect to the foregoing
allocations shall be made in a manner consistent with prior practice of the
Company and Graymor. In addition, if the Company has an income tax obligation
for the period beginning July 1, 2000, then Acquiror will pay the amount of the
tax obligation in excess of all amounts previously paid or reserved by the
Company up to an aggregate amount of $25,000; provided, however, Acquiror will
not be required to make such payment if it is unable to make use of a
substantial amount of the Company's charitable deduction carry forward.
10.2 COOPERATION AND RECORDS RETENTION. Shareholder, the Company and
Acquiror shall (i) each provide the other with such assistance as may reasonably
be requested by any of them in connection with the preparation of any return,
audit, or other examination, by any taxing authority or judicial or
administrative proceedings relating to liability for Taxes, (ii) each retain and
provide the other with any records or other information that may be relevant to
such return, audit or examination, proceeding or determination, and (iii) each
provide the other with any final determination of any such audit or examination,
proceeding, or determination that affects any amount required to be shown on any
tax return of the other for any period.
10.3 EXPENSES. Each Shareholder and Acquiror will bear their respective
expenses, costs, and fees (including attorneys', auditors' and financing
commitment fees) in connection with the transactions contemplated hereby,
including the preparation, execution, and delivery of this Agreement and
compliance herewith (the "Transaction Expenses"), whether or not the
transactions contemplated hereby shall be consummated.
10.4 SEVERABILITY. If any provision of this Agreement, including any
phrase, sentence, clause, section, or subsection is inoperative or unenforceable
for any reason, such circumstances will not have the effect of rendering the
provision in question inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision or provisions herein contained
invalid, inoperative, or unenforceable to any extent whatsoever.
10.5 NOTICES. All notices, requests, demands and other communications which
are required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given when received if personally delivered; when
transmitted if transmitted by telecopy, electronic or digital transmission
method; the day after it is sent, if sent for next day delivery to a domestic
address by recognized overnight delivery service (e.g., Federal Express); and
upon receipt, if sent by certified or registered mail, return receipt requested.
In each case notice shall be sent to:
If to Shareholders:
Panelview Partners, L.P.
0 Xxxx Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
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with a copy to:
Xxxxx & Xxxxxx, P.C.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Acquiror:
White Electric Designs Corporation
0000 Xxxx Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxx Xxxxxxxxxx -- Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxx & Xxxxxx, L.L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
10.6 HEADINGS. The headings contained in this Agreement are for purposes of
convenience only and will not affect the meaning or interpretation of this
Agreement.
10.7 ENTIRE AGREEMENT. This Agreement (including the Schedules hereto)
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof.
10.8 COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which will be deemed an original and all of which will together
constitute one and the same instrument.
10.9 GOVERNING LAW, ETC. This Agreement will be governed in all respects,
including as to validity, interpretation and effect, by the internal laws of the
State of Delaware, without giving effect to the conflict of laws rules thereof.
10.10 BINDING EFFECT. This Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors and
permitted assigns.
10.11 ASSIGNMENT. This Agreement will not be assignable or otherwise
transferable by any party hereto without the prior written consent of the other
parties hereto.
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10.12 NO THIRD PARTY BENEFICIARIES. Except as provided in Article 10 with
respect to indemnification of Indemnified Parties hereunder, nothing in this
Agreement will confer any rights upon any Person or entity other than the
parties hereto and their respective, successors, and permitted assigns. Without
limiting the generality of the foregoing, no provision of this Agreement will
constitute an offer, guaranty, or contract of employment.
10.13 AMENDMENT; WAIVERS, ETC. No amendment, modification, or discharge of
this Agreement, and no waiver hereunder, will be valid or binding unless set
forth in writing and duly executed by the party against whom enforcement of the
amendment, modification, discharge, or waiver is sought. Any such waiver will
constitute a waiver only with respect to the specific matter described in such
writing and will in no way impair the rights of the party granting such waiver
in any other respect or at any other time. Neither the waiver by any of the
parties hereto of a breach of or a default under any of the provisions of this
Agreement, nor the failure by any of the parties, on one or more occasions, to
enforce any of the provisions of this Agreement or to exercise any right or
privilege hereunder, will be construed as a waiver of any other breach or
default of a similar nature, or as a waiver of any of such provisions, rights,
or privileges hereunder. The rights and remedies herein provided are cumulative
and are not exclusive of any rights or remedies that any party may otherwise
have at law or in equity. The rights and remedies of any party based upon,
arising out of or otherwise in respect of any inaccuracy or breach of any
representation, warranty, covenant, or agreement, or failure to fulfill any
condition will in no way be limited by the fact that the act, omission,
occurrence, or other state of facts upon which any claim of any such inaccuracy
or breach is based may also be the subject matter of any other representation,
warranty, covenant, or agreement as to which there is no inaccuracy or breach.
The representations and warranties of the Company and the Shareholders will not
be affected or deemed waived by reason of any investigation made by or on behalf
of Acquiror (including, without limitation, by any of its advisors, consultants,
or representatives) or by reason of the fact that Acquiror or any of such
advisors, consultants, or representatives knew or should have known that any
such representation or warranty is or might be inaccurate.
10.14 ARBITRATION. Except as specifically provided herein, any controversy
arising after the Closing out of or relating to this Agreement or relating to
the breach hereof, shall be settled by arbitration conducted in Portland, Oregon
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect (except as otherwise expressly provided in this
Agreement. The award rendered by the arbitrator(s) shall be final and judgment
upon the award rendered by the arbitrator(s) may be entered upon it in any court
having jurisdiction thereof. The arbitrator(s) shall possess the powers to issue
mandatory orders and restraining orders in connection with such arbitration. The
expenses of the arbitration shall be borne by the losing party unless otherwise
allocated by the arbitrator(s). The agreement to arbitrate shall be specifically
enforceable under the prevailing arbitration law. During the continuance of any
arbitration proceedings, the parties shall continue to perform their respective
obligations under this Agreement. The arbitrator will award to the prevailing
party in an arbitration its reasonable attorneys' fees and costs incurred in
connection with the arbitration.
10.15 RELEASE. Effective as of the Effective Date, each Shareholder hereby
irrevocably waives and releases all known and unknown claims such Shareholder
may have against the Company and/or Graymor, or any present and former
directors, officers, agents, and employees of the Company and/or Graymor, from
any and all actions, claims, causes of action, or liabilities
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of any nature, in law or equity, known or unknown, and whether or not heretofore
asserted, which such Shareholder ever had, now has, or hereafter can, will or
may have against any of the foregoing, upon or by reason of any matter, cause,
or thing whatsoever from the formation of Graymor and/or the Company to the
Closing, except for those claims specifically related to or arising out of this
Agreement.
10.16 REQUIRED CONSENTS. The Shareholders will use their best efforts to
obtain the consents set forth in (a) and (b) below within twenty (20) days of
the Closing:
(a) the Parkside Business Center lease,
(b) the Lincoln Center lease,
(c) the Bank of America loan agreement and lien, and
(d) the U.S. Bank loan agreement and lien.
The Shareholders agree to be fully responsible for the costs incurred in
connection with obtaining items (a) and (b) above and Acquiror agrees to be
responsible for the costs incurred in connection with obtaining items (c) and
(d) up to the amount of the reserves taken. The Shareholders agree to be
responsible for the costs, losses, and damages incurred by Graymor, the Company,
and/or Acquiror as a result of failing to obtain any or all of the above
consents and releases to the extent such costs, losses, and damages exceed the
Fifty Thousand Dollar ($50,000) amount provided in Section 9.1.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
WHITE ELECTRONIC DESIGNS CORPORATION, AN
INDIANA CORPORATION
By:_______________________________________
Name:_____________________________________
Title:____________________________________
PV ACQUISITION CORP., AN OREGON
CORPORATION
By: ______________________________________
Name:_____________________________________
Title:____________________________________
PANELVIEW, INC., AN OREGON CORPORATION
By: ______________________________________
Name:_____________________________________
Title:____________________________________
PANELVIEW PARTNERS, L.P., A CALIFORNIA
LIMITED PARTNERSHIP
By: ______________________________________
Its:______________________________________
Title:____________________________________
__________________________________________
Xxxxxx Xxxxxx
__________________________________________
Xxxxxxx Xxxxxx
__________________________________________
Xxxxxxxx X. Xxxxx
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__________________________________________
Xxxx Xxxxxxx
__________________________________________
Xxxxxxx X. Xxxxxx
__________________________________________
Xxxxxx X. Xxxxxx
For the purposes of Article 8 of this
Agreement:
__________________________________________
Xxxxx Xxxxxx
__________________________________________
Xxxxxx Xxxx
__________________________________________
Xxxx Xxxxxxx
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TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS.................................................. 1
ARTICLE 2 THE MERGER; CLOSING.......................................... 6
2.1 The Merger...................................................... 6
2.2 Effect of the Merger............................................ 6
2.3 Consummation of the Merger...................................... 6
2.4 Articles of Incorporation and Bylaws; Directors and Officers.... 6
2.5 Purchase Price and Conversion of the Company Common Stock....... 7
2.6 Earnout Payment................................................. 7
2.7 Holdback........................................................ 8
2.8 Closing......................................................... 9
2.9 Surrender of Certificates....................................... 9
2.10 Taking of Necessary Action; Further Action...................... 9
2.11 Right to Offset................................................. 9
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS............... 10
3.1 Organization of the Company..................................... 10
3.2 Authorization................................................... 10
3.3 No Violation; Consents.......................................... 10
3.4 Capitalization.................................................. 11
3.5 Financial Statements............................................ 11
3.6 No Change in the Assets......................................... 12
3.7 No Liabilities.................................................. 13
3.8 Assets; Absence of Encumbrances................................. 13
3.9 Title to Assets................................................. 13
3.10 Accounts Receivables............................................ 14
3.11 Inventory....................................................... 14
3.12 Contracts and Commitments....................................... 15
3.13 Books and Records............................................... 16
3.14 Litigation...................................................... 16
3.15 Labor Matters................................................... 16
3.16 Compliance with Law; Permits.................................... 16
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TABLE OF CONTENTS
(CONTINUED)
PAGE
3.17 Tax Matters..................................................... 17
3.18 Employee Benefits............................................... 19
3.19 Environmental................................................... 21
3.20 Insurance....................................................... 21
3.21 Affiliate Transactions.......................................... 22
3.22 No Brokers...................................................... 22
3.23 Disclosure...................................................... 22
3.24 Customers....................................................... 22
3.25 Suppliers....................................................... 22
3.26 Product Warranties.............................................. 23
3.27 Patents and Trademarks.......................................... 23
3.28 Backlog......................................................... 24
3.29 Representations Regarding the Acquiror Stock.................... 24
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF ACQUIROR................... 25
4.1 Corporate Status; Authorization, etc............................ 25
4.2 No Conflicts, etc............................................... 25
4.3 Litigation...................................................... 25
4.4 Brokers, Finders, etc........................................... 25
4.5 Tax Matters..................................................... 25
4.6 Acquiror Reports................................................ 26
4.7 Acquiror Common Stock........................................... 26
ARTICLE 5 CONDUCT OF BUSINESS PENDING THE MERGER....................... 26
5.1 Conduct of Business............................................. 26
ARTICLE 6 CONDITIONS PRECEDENT......................................... 27
6.1 Conditions to Obligations of Each Party To Effect the Merger.... 27
6.2 Conditions to Obligations of Acquiror and the Merger Sub........ 27
6.3 Conditions to Obligations of the Company and Shareholders....... 28
ARTICLE 7 REGISTRATION RIGHTS.......................................... 29
7.1 Registration Procedures and Expenses............................ 29
7.2 Indemnification................................................. 30
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TABLE OF CONTENTS
(CONTINUED)
PAGE
7.3 Restrictions on Sales........................................... 32
ARTICLE 8 NON-COMPETITION.............................................. 32
8.1 Non-Competition................................................. 32
8.2 Non-Solicitation of Employees................................... 33
8.3 Non-Solicitation of Customers................................... 33
8.4 Employment By Competitors....................................... 34
8.5 Additional Agreements........................................... 34
8.6 Remedies; Enforceability........................................ 34
ARTICLE 9 INDEMNIFICATION.............................................. 34
9.1 Indemnification By Shareholders................................. 34
9.2 Indemnification by Acquiror..................................... 36
9.3 Adjustments to Indemnification Payments......................... 36
9.4 Indemnification Procedures...................................... 37
9.5 Treatment of Shareholders....................................... 37
9.6 Survival of Representations and Warranties, etc................. 38
ARTICLE 10 MISCELLANEOUS................................................ 38
10.1 Certain Tax Matters............................................. 38
10.2 Cooperation and Records Retention............................... 39
10.3 Expenses........................................................ 39
10.4 Severability.................................................... 39
10.5 Notices......................................................... 40
10.6 Headings........................................................ 40
10.7 Entire Agreement................................................ 41
10.8 Counterparts.................................................... 41
10.9 Governing Law, etc.............................................. 41
10.10 Binding Effect.................................................. 41
10.11 Assignment...................................................... 41
10.12 No Third Party Beneficiaries.................................... 41
10.13 Amendment; Waivers, etc......................................... 41
10.14 Arbitration..................................................... 42
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TABLE OF CONTENTS
(CONTINUED)
PAGE
10.15 Release......................................................... 42
10.16 Required Consents............................................... 42
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EXHIBITS
Exhibit A Plan of Merger
