SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported):
July 25, 1997
SONICS & MATERIALS, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
0-20753 06-0854713
(Commission File Number) (IRS Employer Identification No.)
4 West Kenosia Avenue
Danbury, Connecticut 06810
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code
(203) 744-4400
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On July 25, 1997, Sonics & Materials, Inc. ("Sonics") acquired, through a
wholly owned subsidiary in a triangular merger (the "Merger"), 100% of the stock
of Tooltex, Inc., an Ohio corporation ("Tooltex"). Tooltex is a manufacturer of
automated systems used in the plastics industry. Pursuant to an Agreement and
Plan of Merger (the "Plan of Merger"), dated July 25, 1997, among Sonics, SM
Sub, Inc., an Ohio corporation and a wholly owned subsidiary of Sonics ("Sonics
Sub"), Tooltex, and the shareholders of Tooltex, Tooltex was merged with and
into Sonics Sub. Sonics Sub then changed its name to Tooltex, Inc. (the
"Surviving Corporation"). Under the Plan of Merger and the Agreement of Merger,
dated July 25, 1997, among Sonics, Sonics Sub and Tooltex, the shareholders of
Tooltex received, in exchange for 100% of the stock of Tooltex, an aggregate of
70,000 shares of Sonics Common Stock, par value $.03 per share ("Sonics Common
Stock"), (ii) $70,000 and (iii) options (the "Options") to purchase 10,000
shares of Sonics Common Stock.
The Options are 10 year options first exercisable July 25, 1999 at an
exercise price of $2.94 (the fair market value of Sonics Common Stock on the
date of grant).
In determining the amount and nature of consideration given for the
Tooltex stock, Sonics reviewed the historical financial results of Tooltex,
visited Tooltex's facilities, evaluated management and considered Tooltex's
current backlog, receivables and future business potential. Sonics also
considered the past relationship between Tooltex and Sonics, where Tooltex
had acted as a distribution organization for Sonics.
The cash portion of the consideration given was from Sonics' working
capital. The stock portion was from authorized but unissued shares and the stock
options were granted under Sonics' Incentive Stock Option Plan.
In connection with the Merger, Paul Spurgeon and Benjamin Egelhoff,
shareholders of Tooltex and former President and Vice President of Tooltex,
respectively, entered into five year employment agreements with the Surviving
Corporation. Mr. Spurgeon was employed as President and Mr. Egelhoff was
employed as Vice President of the Surviving Corporation. Robert Soloff, Chairman
and Chief Executive Officer of Sonics, was elected Chairman of the Surviving
Corporation. Under the Employment Agreements with Messrs. Spurgeon and Egelhoff,
such employees are entitled to salary and additional compensation and bonuses
based upon the profit and sales of the Surviving Corporation. Messrs. Spurgeon
and Egelhoff also entered into non-competition agreements and confidentiality
agreements with the Surviving Corporation and Sonics.
<PAGE>
The Surviving Corporation also entered into a five year triple net lease
with BPT, Limited ("BPT"), the owner of Tooltex's present location in Grove
City, Ohio for an annual rental of $77,900 per year. BPT is a limited liability
company whose sole members are Messrs. Spurgeon and Egelhoff.
The Surviving Corporation also received a promissory note from BPT for
$42,000 representing amounts previously owed by BPT to Tooltex. The promissory
note will be repaid at a rate of $500 per month plus 2% interest. If either Mr.
Spurgeon's or Mr. Egelhoff's employment is terminated by the Surviving
Corporation without cause, any amounts not yet paid on the promissory note will
be forgiven.
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Audited financial statements of Tooltex, Inc. are not currently
available, and will be filed as soon as practicable, but within 60 days of
August 9, 1997.
(b) Pro-forma financial information to reflect the acquisition of
Tooltex, Inc. is not currently available, and will be filed as soon as
practicable, but within 60 days of August 9, 1997.
Exhibit 2(a):
Agreement and Plan of Merger, dated as of July 25, 1997, among Sonics
& Materials, SM Sub, Inc., Tooltex, Inc., and the persons designated
as the shareholders thereon (excluding schedules and annexes). A list
of omitted schedules and annexes appears on pages iv and v of the
Agreement and Plan of Merger. The Registrant hereby undertakes to
furnish supplementally a copy of any omitted schedule and annex to
the Commission upon request.
Exhibit 2(b):
Agreement of Merger, dated as of July 25, 1997, among Sonics &
Materials, Inc., SM Sub, Inc. and Tooltex, Inc.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SONICS & MATERIALS, INC.
Date: August 8, 1997 By: /s/ Robert S. Soloff
--------------------
Robert S. Soloff
Chairman and Chief Executive Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit 2(a): Agreement and Plan of Merger, dated as of July 25, 1997, among
Sonics & Materials, SM Sub, Inc., Tooltex, Inc., and the persons
designated as the shareholders thereon (excluding schedules and
annexes). A list of omitted schedules and annexes appears on pages iv
and v of the Agreement and Plan of Merger. The Registrant hereby
undertakes to furnish supplementally a copy of any omitted schedule
and annex to the Commission upon request.
Exhibit 2(b): Agreement of Merger, dated as of July 25, 1997, among Sonics &
Materials, Inc., SM Sub, Inc. and Tooltex, Inc.
AGREEMENT AND PLAN OF MERGER
<PAGE>
TABLE OF CONTENTS
ARTICLE I
BACKGROUND OF AGREEMENT -1-
ARTICLE II
THE MERGER -2-
2.1 The Merger -2-
2.2 Effects of the Merger -2-
ARTICLE III
CLOSING -2-
3.1 Time and Place -2-
3.2 Deliveries at the Closing -2-
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TOOLTEX AND THE SHAREHOLDERS -3-
4.1 Corporate Organization -3-
4.2 Capitalization; Ownership of Stock -3-
4.3 No Subsidiaries -4-
4.4 Authorization; Binding Agreement -4-
4.5 Financial Statements and Undisclosed Liabilities -5-
4.6 Inventory -6-
4.7 Taxes -6-
4.8 Environmental, Health and Safety Matters -7-
4.9 Title to and Condition of Assets -8-
4.10 Conduct of the Business -10-
4.11 Patents, Trade Names, Trademarks and Copyrights -10-
4.12 Contracts -11-
4.13 Litigation -12-
4.14 Insurance -13-
4.15 Employee Benefit Plans -13-
4.16 Personnel -15-
4.17 Governmental and Other Approvals -16-
4.18 Accounts Receivable -17-
4.19 Brokerage -17-
4.20 Labor Relations -17-
4.21 Product Defects -17-
4.22 Corporate Name -18-
4.23 Prepayment of Liabilities -18-
4.24 Insider Interests -18-
4.25 Disclosure -18-
4.26 No Material Change -18-
ARTICLE V
REPRESENTATIONS AND WARRANTIES BY EACH SHAREHOLDER -19-
5.1 Necessary Authority -19-
5.2 Defaults under other Instruments -19-
5.3 Good Title to Shares -19-
5.4 Brokerage -19-
5.5 Investment Representations -20-
-i-
<PAGE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SONICS SUB -20-
6.1 Corporate Organization -20-
6.2 Authorization -20-
6.3 Authority -20-
6.4 Brokerage -21-
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF SONICS -21-
7.1 Corporate Organization -21-
7.2 Authorization -21-
7.3 Authority -22-
7.4 Good Title to Shares -22-
7.5 Brokerage -22-
ARTICLE VIII
COVENANTS -23-
8.1 Restrictions on Transfer -23-
8.2 Further Assurances -23-
8.3 Consents -24-
8.4 Tax Compliance -24-
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF SONICS SUB AND SONICS -24-
9.1 Representations and Warranties True -24-
9.2 Opinion of Counsel to Tooltex and the
Shareholders -24-
9.3 Absence of Litigation -24-
9.4 Resignation of Directors -25-
9.5 Certificates -25-
9.6 Employment, Non-Compete and Non-Disclosure
Agreements -25-
9.7 Lease -25-
9.8 BPT Receivable -25-
9.9 Taxes -25-
9.10 Audit -25-
9.11 Releases -25-
ARTICLE X
CONDITIONS TO THE OBLIGATIONS OF THE SHAREHOLDERS -25-
10.1 Representations and Warranties True -26-
10.2 Opinion of Counsel to Sonics Sub -26-
10.3 Absence of Litigation -26-
10.4 Certificates -26-
10.5 Employment Agreements -26-
10.6 Lease -26-
10.7 Bank Loans -26-
10.8 Option Agreement -26-
-ii-
<PAGE>
ARTICLE XI
TERMINATION -26-
11.1 Termination of the Agreement -27-
11.2 Effect of Termination -27-
ARTICLE XII
MISCELLANEOUS -27-
12.1 Expenses -27-
12.2 Survival of Representations and Warranties -28-
12.3 Indemnification -28-
12.4 Headings -30-
12.5 Notices -30-
12.6 Assignment -31-
12.7 Complete Agreement -31-
12.8 Amendments and Waivers -31-
12.9 Counterparts -31-
12.10 Parties in Interest -31-
12.11 Governing Law -31-
-iii-
<PAGE>
ANNEXES
Annex A: Agreement of Merger (Background of Merger)
Annex B: Form of Opinion of Counsel to Tooltex and Shareholders
(Section 9.2)
Annex C: Form of Employment Agreement (Section 9.6)
Annex D: Form of Non-Compete Agreement (Section 9.6)
Annex E: Form of Non-Disclosure Agreement (Section 9.6)
Annex F: Form of Lease (Section 9.7)
Annex G: Form of BPT, LTD. Promissory Note (Section 9.8)
Annex H: Forms of Opinions of Counsel to Sonics Sub and Sonics
(Section 10.2)
Annex I: Form of Stock Option Agreement (Section 10.8)
Annex J: Form of Escrow Agreement (Section 12.3)
-iv-
<PAGE>
SCHEDULES
Schedule Description
4.1 Foreign Qualifications
4.2 Ownership of Tooltex Shares; Purchase Price
4.5 Financial Statements
4.7 Taxes
4.8 Environmental
4.9 Property
4.10 Consents, Licenses, etc.
4.11 Intellectual Property
4.12 Contracts
4.13 Litigation
4.14 Insurance
4.15 Employee Benefit Plans
4.16 Personnel
4.17 Approvals
4.23 Prepayments
4.24 Insider Interests
-v-
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of the 25th day of July, 1997 (the
"Agreement"), by and among Sonics & Materials, Inc., a Delaware corporation
("Sonics") with its principal office at West Kenosia Avenue, Danbury,
Connecticut, SM Sub, Inc., an Ohio corporation ("Sonics Sub") and a wholly owned
subsidiary of Sonics, Tooltex, Inc., an Ohio corporation ("Tooltex") with its
principal office at 6160 Seeds Road, Grove City, Ohio, and the persons
designated as the Shareholders on the signature page of this Agreement (the
"Shareholders")
ARTICLE I
BACKGROUND OF AGREEMENT
The Shareholders are the record holders and beneficial owners of all of
the issued and outstanding common stock, no par value ("Tooltex Common Stock"),
of Tooltex, which constitute all of the outstanding shares of the capital stock
of Tooltex.
The respective Boards of Directors of Sonics, Sonics Sub and Tooltex have
approved the merger of Tooltex into Sonics Sub (the "Merger") upon the terms and
subject to the conditions set forth herein.
Sonics wishes to merge Tooltex into Sonics Sub and, in the Merger have an
exchange of shares of Sonic's common stock, par value $.03 per share ("Sonics
Common Stock"), cash and options to purchase Sonics Common Stock in return for
all of the outstanding shares of Tooltex Common Stock. Tooltex believes that the
Merger is in the best interest of its Shareholders.
Subsequent to the execution and delivery of this Agreement, and pursuant
to the provisions and subject to the terms and conditions hereof, Tooltex and
Sonics Sub are to enter into an Agreement of Merger attached hereto as Annex A
(the "Agreement of Merger") which provides for the merger of Tooltex with and
into Sonics Sub (sometimes referred to herein as the "Surviving Corporation").
In the Agreement of Merger it is contemplated that all outstanding shares of
Tooltex Common Stock will be converted into the right to receive an aggregate of
(i) 70,000 shares of Sonics Common Stock, (ii) $70,000 and (iii) options to
purchase 10,000 shares of Sonics Common Stock as set forth in the form of Stock
Option Agreement attached hereto as Annex I. The parties hereto desire to enter
into this Agreement for the purpose of setting forth certain representations,
warranties, covenants and further agreements with respect to the Merger.
It is the intention of the parties to this Agreement that the Merger be a
forward triangular merger satisfying the requirements
<PAGE>
of Sections 354, 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code of
1986, as amended (the "Code").
In consideration of the mutual benefits to be derived from this Agreement
and of the representations, warranties, covenants and agreements hereinafter
contained, Sonics Sub, Sonics, Tooltex and the Shareholders agree as follows:
ARTICLE II
THE MERGER
2.1 The Merger. Subject to the terms and conditions contained herein, as
soon as practicable after the performance of all agreements and obligations of
the parties contained herein and upon fulfillment or waiver of all of the
conditions contained herein, the Agreement of Merger shall be executed and a
Certificate of Merger shall be filed with the Secretary of State of the State of
Ohio and the Merger shall become effective in accordance with the terms of the
Agreement of Merger. The time of the filing of the Certificate of Merger in Ohio
is sometimes hereinafter referred to as the "Effective Date."
2.2 Effects of the Merger. At the Effective Date, (i) the separate
existence of Tooltex shall cease and Tooltex shall be merged with and into
Sonics Sub, (ii) the Articles of Incorporation of Sonics Sub shall be the
Articles of Incorporation of the Surviving Corporation, (iii) Sonics Sub shall
change its name to "Tooltex, Inc." and (iv) the Merger shall, from and after the
Effective Date, have all the effects provided by applicable Ohio law.
ARTICLE III
CLOSING
3.1 Time and Place. Subject to the provisions of Articles IX, X and XI
hereof, the closing of the transactions contemplated hereby (the "Closing")
shall be held at the offices of Tyler Cooper & Alcorn, LLP 205 Church Street,
New Haven, Connecticut on July 25, 1997, or at such other time and place
as the parties may mutually agree upon. The date on which the Closing
occurs is referred to herein as the "Closing Date".
3.2 Deliveries at the Closing. At the Closing:
(a) There shall be delivered to Sonics, Sonics Sub and the
Shareholders the opinions, certificates and other documents and instruments
provided to be delivered under Articles IX and X hereof.
(b) Sonics, Sonics Sub and Tooltex shall cause the Certificate of
Merger to be filed in accordance with the provisions of the Ohio General
Corporation Law and shall take any and all
2.
<PAGE>
other lawful actions and do any and all other lawful things necessary to effect
the Merger and to enable the Merger to become effective.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TOOLTEX AND THE SHAREHOLDERS
Tooltex and each of the Shareholders represent and warrant to Sonics Sub
and Sonics as of the date hereof and as of the Closing Date as follows:
4.1 Corporate Organization. Tooltex is a corporation duly organized,
validly existing and in good standing under the laws of the State of Ohio.
Tooltex has full power and authority (corporate and other) to own, operate and
lease its properties and to conduct its business in the manner in which and in
the places where such properties are owned, operated or leased and such business
is now conducted. The Shareholders have previously delivered to Sonics Sub
complete and correct copies of Tooltex's charter and all amendments thereto to
the date hereof certified by the Secretary of State of the State of Ohio, and
Tooltex's by-laws and code of regulations as presently in effect certified by
the Secretary of Tooltex, and Tooltex is not in breach of any provision of
either of its charter, by-laws or code of regulations. The minute books
containing the records of meetings of the shareholders, the board of directors
and any committees of the board of directors, the stock certificate books and
the stock record books of Tooltex are correct and complete.
Tooltex is duly qualified, licensed and authorized to do business as a
foreign corporation and is in good standing as a foreign corporation in each
jurisdiction listed on Schedule 4.1, and there is no jurisdiction not so listed
in which the ownership of Tooltex's properties or the conduct of its business
requires such qualification. Tooltex has not received any written notice or
assertion within the last three years from the Secretary of State or comparable
official of any jurisdiction to the effect that Tooltex is required to be
qualified or otherwise authorized to do business therein, in which jurisdiction
Tooltex has not qualified or obtained such authorization.
4.2 Capitalization; Ownership of Stock. The authorized capital stock of
Tooltex consists of 750 shares of Tooltex Common Stock, of which 181 shares are
issued and outstanding, 563 shares are authorized and unissued and six are held
as treasury shares. All outstanding shares of Tooltex Common Stock have been
validly issued by Tooltex and are fully paid, non-assessable and free of
preemptive rights. No shares of Tooltex Common Stock have been reserved for
issuance for any purpose and there is no subscription, option, warrant, call,
right, contract, commitment, understanding or arrangement relating to the
issuance, sale or transfer by Tooltex of any shares of Tooltex Common Stock
including any right
3.
<PAGE>
of conversion or exchange under any outstanding security or other instrument.
The issuance and sale of all such shares have been in full compliance with all
applicable federal and state securities laws. The Shareholders are the only
record holders and beneficial owners of Tooltex Common Stock. Each Shareholder
holds of record and owns beneficially the numbers of shares of Tooltex Common
Stock set forth next to his name in Schedule 4.2, free and clear of any
restrictions on transfer, claims, taxes, security interests, options, warrants,
rights, contracts, calls, commitments, equities and demands. No Shareholder is a
party to any option, warrant, right, contract, call, put or other agreement or
commitment providing for the disposition or acquisition of any Tooltex Common
Stock (other than this Agreement). There is no voting trust, proxy, or other
agreement or understanding with respect to the voting of any shares of Tooltex
Common Stock.
4.3 No Subsidiaries. Tooltex has never owned, directly or indirectly, any
capital stock or other equity of any corporation or had any direct or indirect
equity or ownership interest in any other business entity. Tooltex is not
subject to any obligation or requirement to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
entity.
4.4 Authorization; Binding Agreement. Tooltex has all corporate power and
authority to enter into this Agreement and, subject to the approval of this
Agreement and the Agreement of Merger by the shareholders of Tooltex in
accordance with the Ohio General Corporation Law, to execute and delivery this
Agreement and the Agreement of Merger and to consummate the transactions
contemplated hereby and thereby. Each Shareholder has full power and authority
to execute and deliver this Agreement and to perform his obligations hereunder.
The Board of Directors of Tooltex has duly authorized the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby,
and, except for the approval of this Agreement and the Agreement of Merger by
the shareholders of Tooltex, no other corporate proceedings on the part of
Tooltex are necessary to authorize the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby. This Agreement
constitutes and, when executed and delivered, each of the other agreements and
documents and instruments delivered or to be delivered to Sonics Sub or Sonics
pursuant to this Agreement will constitute, the valid and binding obligation of
Tooltex and each of the Shareholders, enforceable against Tooltex and each of
the Shareholders in accordance with their respective terms.
The execution, delivery and performance of this Agreement or any other
agreement, document or instrument by Tooltex or the Shareholders and the
consummation of the transactions contemplated hereby and thereby do not and will
not with the passage of time or the giving of notice or both:
4.
<PAGE>
(a) conflict with or result in a breach of any provision
of the charter, by-laws or code of regulations of Tooltex;
(b) violate, or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination or in a
right of termination or cancellation of, or accelerate or create in any person
the right to accelerate the performance required by, or result in the creation
of any lien, security interest, charge or encumbrance upon any of the properties
of Tooltex under, or result in being declared void, voidable, or without further
binding effect, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, lease, contract,
agreement or other instrument or commitment or obligation to which Tooltex is a
party or by which it or any of its properties may be bound or affected;
(c) violate any order, writ, injunction, decree, judgment or ruling,
or any law, rule or regulation of any court or governmental authority, federal,
state, local or foreign, applicable to Tooltex or any of its properties; or
(d) require any consent, approval or authorization of, or
declaration, filing or registration with, any government or regulatory authority
except for the filing of the Certificate of Merger and other appropriate merger
documents, if any, as required by the laws of the State of Ohio.
4.5 Financial Statements and Undisclosed Liabilities. The Shareholders
have delivered to Sonics and Sonics Sub the balance sheets of Tooltex as at May
31, 1997, June 30, 1996, December 31, 1996 and December 31, 1995 and the related
statements of income and shareholders' equity for the 11-months ended May 31,
1997, the 6- months ended June 30, 1996, the 12-months ended December 31, 1996
and the 12-months ended December 31, 1995, including the notes thereto. Except
as provided in Schedule 4.5, such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently applied
(all of such financial statements of Tooltex are referred to collectively as the
"Financial Statements"). The Financial Statements have been prepared from and
are in accordance with the books and records of Tooltex, are true and correct
and complete, and present fairly the financial condition and results of
operations of Tooltex as of the dates and for the periods indicated, in each
case in conformity with GAAP consistently applied during such periods, except as
otherwise stated in such financial statements or on Schedule 4.5, and except to
the extent that unaudited interim financial statements may be condensed or
summary statements may omit footnotes. Except as and to the extent reflected in
the balance sheets of Tooltex as at May 31, 1997 and June 30, 1996 and as
disclosed in Schedule 4.5, Tooltex had or will have at each such
5.
<PAGE>
date no liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise and whether due or to become due).
4.6 Inventory. The inventory of Tooltex reflected on the balance sheets of
Tooltex as of May 31, 1997 consist of raw materials and supplies, manufactured
and purchased parts, goods in process and finished goods, all of which is
merchantable and fit for the purpose for which it was procured or manufactured,
and none of which is obsolete, damaged or defective, discontinued or not in
Tooltex's latest price catalogue, subject only to the reserve for inventory
write down set forth on the face of such balance sheet (rather than in any notes
thereto) in accordance with the past custom and practice of Tooltex. Purchase
commitments for raw materials and inventory are not, individually or in the
aggregate, in excess of normal requirements and none are at prices in excess of
the lowest prices available in the current market. Sales commitments for
finished goods are all at prices in excess of prices used in valuing inventory
items or of estimated costs of manufacture of items not in inventory after
allowing for selling expenses and a normal profit margin. Since May 31, 1997, no
inventory items have been sold or disposed of except through sales in the
ordinary course of business.
4.7 Taxes. (a) Except as otherwise stated on Schedule 4.7, Tooltex has
filed all income, franchise, sales and other tax returns, declarations,
statements and reports of every nature, including any schedule or attachment
thereto and including any amendment thereof ("Tax Return") required to be filed
by it accurately reflecting any and all taxes owing to the United States or any
other government or any subdivision thereof, state or local, or any other taxing
authority. Except as otherwise stated on Schedule 4.7 under the subheading
"Taxes and Other Payments Due and Owing," (i) Tooltex has paid in full or made
adequate provision in the Financial Statements for the payment of all taxes
(including penalties and interest) for which it has or may have liability,
whether or not shown on any Tax Return; (ii) there is no unassessed tax
deficiency proposed or threatened against Tooltex; and (iii) there are, and will
hereafter be, no net tax deficiencies (including penalties and interest) of any
kind assessed against or relating to Tooltex with respect to any of the taxable
periods ending on or before, or including, the Closing Date. Except as otherwise
stated on Schedule 4.7, Tooltex is not currently the beneficiary of any
extension of time within which to file any Tax Return. No claim has ever been
made by any authority in a jurisdiction where Tooltex does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction.
(b) There are no outstanding agreements or waivers extending the statutory
period of limitations applicable to any federal, state, local or foreign tax
return of Tooltex for any period. The federal income tax returns of Tooltex have
never been audited by
6.
<PAGE>
the Internal Revenue Service. No state, local or foreign taxing authority has
ever audited any tax return or report filed therewith by Tooltex for any taxable
period. The Shareholders have heretofore furnished to Sonics Sub complete and
correct copies of all reports and inquiries received by Tooltex from the
Internal Revenue Service or from any state, local or foreign taxing authority.
Proper amounts have been withheld by Tooltex from its employees, independent
contractors and other third parties in compliance with the tax withholding
provisions of all applicable federal, state, local, foreign and other laws, and
timely deposits have been made of all payroll taxes due. Payment has been timely
made by Tooltex of all estimated income taxes and other taxes of any kind due
except as provided on Schedule 4.7.
Tooltex has not filed any consent under Section 341(f) of the Internal
Revenue Code of 1986, as amended (the "Code") concerning collapsible
corporations. Tooltex has not made any payments, is not obligated to make any
payments and will not be so obligated by reason of the transactions contemplated
hereby, and is not a party to any agreement that under certain circumstances
could obligate it to make any payments, that will not be deductible under
Section 280G of the Code. Tooltex has disclosed on its federal income Tax
Returns all positions taken therein that could give rise to a substantial
understatement of federal income tax within the meaning of Section 6662 of the
Code. Tooltex is not a party to any tax allocation or sharing agreement. Tooltex
has never been a member of an Affiliated Group within the meaning set forth in
Section 1504(a) of the Code.
4.8 Environmental, Health and Safety Matters. No condition or potential
condition exists at any leased or owned facility or former facility of Tooltex
or of any business acquired by Tooltex with respect to the storage or release
into the earth or its atmosphere of effluent, waste or other materials, solid,
liquid or gaseous, nor has any material been disposed of or released in any way
or manner, which would or may in the future cause Tooltex, Sonics Sub or Sonics
to be liable for damages, fines or penalties or to incur expenses (including
legal and consulting fees) of any sort to investigate or correct any such
condition or to meet with or otherwise communicate with any governmental unit or
agency or public or private body in connection therewith. Tooltex has never
exposed any employee or other individual to any substance or condition, or owned
or operated any property or facility in any manner that would or may in the
future cause Tooltex, Sonics Sub or Sonics to be liable for damages, fines or
penalties or to incur expenses (including legal and consulting fees) in
connection with any claim of illness of or personal injury to any employee or
other individual. Without limiting the generality of the foregoing, Tooltex has
never violated or failed to comply with the Resource Conservation and Recovery
Act, 42 U.S.C. ss. 6901, et seq., the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ss. 9601, et seq., the Clean Air
Act, 42 U.S.C.
7.
<PAGE>
ss.ss. 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et
seq., the Safe Drinking Water Act, 42 U.S.C. ss.ss. 300(f) et seq., the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. ss.ss. 136 et seq., the
Occupational Safety and Health Act, 29 U.S.C. ss.ss. 651 et seq., the Superfund
Amendments and Reauthorization Act, 42 U.S.C. ss.ss. 9671 et seq., the Federal
Water Pollution Control Act, 33 U.S.C. ss.ss. 1251 et seq., the Hazardous
Material Transportation Act, 49 U.S.C. ss.ss. 1801 et seq., the Marine
Protection, Research and Sanctuaries Act, 16 U.S.C. ss.ss. 1431 et seq. and 33
U.S.C. ss.ss. 1401, et seq., the Refuse Act of 1899, or the Emergency Planning
and Community Right-to-Know Act of 1986, as such statutes may be amended, or any
similar legislation enacted by any federal, state, local or foreign government,
or any regulation adopted pursuant to any of the foregoing. Tooltex has not
received any notice, nor is any such notice pending, from any governmental,
public or private body claiming any violation or potential violation of any
zoning, building, health, safety or environmental law or ordinance, or requiring
any work, repairs, construction, alterations, noise reduction, odor elimination,
cleanup or installation, encapsulation or abatement which has not been complied
with, and the Shareholders have delivered to Sonics Sub copies of each such
notice, whether or not complied with. All properties and equipment used at any
time in the business of Tooltex or any business acquired by it have been free of
asbestos, PCBs, methylene chloride, trichloroethylene, 1,2
trans-dichloroethylene, dioxins, dibenzofurans, and any "extremely hazardous
substance" within the meaning set forth in Section 302 of the Emergency Planning
and Community Right-to-Know Act of 1986, as amended.
Schedule 4.8 lists each environmental permit relating to the business of
Tooltex or to any site at which Tooltex's business has been carried on.
4.9 Title to and Condition of Assets. Except as set forth on Schedule 4.9,
(i) Tooltex owns no real property, and (ii) Tooltex has good, valid and
marketable title to each and every other property and asset, in each case
relating to its operations, business or prospects, which it purports to own. All
such properties are held free and clear of all title defects and any liens,
pledges, claims, charges, security interests or other encumbrances and are not,
in the case of real property, subject to any rights of way, building or use
restrictions, exceptions, variances, reservations or limitations of any nature
whatsoever, except, with respect to all such properties, real and personal, (a)
as set forth in Schedule 4.9, and (b) liens for current taxes not yet due and
assessments not in default. There are no claims adverse or challenges to the
title or ownership of any property of Tooltex. All personal property and all
buildings, structures and fixtures used by Tooltex in the conduct of its
business are in good operating condition (subject to normal maintenance and
repair). Tooltex has not received any notice of any violation (which has not
been cured) of any building, zoning or other law, ordinance or
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regulation in respect of such property or structures or its use
thereof.
Schedule 4.9 lists each lease (which term shall include subleases) to
which Tooltex is a party, true copies of which leases (including all amendments
thereof and modifications thereto) have been delivered to Sonics Sub prior to
the date hereof. All such leases are valid and binding and in full force and
effect; there are no defaults by the lessors or Tooltex thereunder; and no event
has occurred which (whether with or without notice, lapse of time or both) would
constitute a default by the lessors or Tooltex thereunder. No premises leased
under any such lease are subject to any lien, encumbrance, easement, right of
way, building or use restriction, exception, variance, reservation or limitation
as might interfere with or impair the present and continued use thereof in the
usual and normal conduct of the business of Tooltex. No party to any lease has
repudiated any provision thereof and there are no disputes, oral agreements or
forbearance programs in effect as to any lease.
Except as disclosed on Schedule 4.9, all assets owned, used, or operated
by Tooltex, including without limitation dies and tooling, are located at
premises listed on Schedule 4.9.
To the best knowledge of Tooltex and each Shareholder, there is no plan,
study or effort by any governmental authority or any other person which may
prevent or hinder the continued use of any real property owned or leased by
Tooltex as heretofore used in the conduct of its business.
To the best knowledge of Tooltex and each Shareholder, there is not (i)
any intended or proposed federal, state, or local statute, ordinance, order,
requirement, law, rule or regulation (including, but not limited to, zoning
changes) which may prevent or hinder the continued use of any real property
owned or leased as heretofore used in the conduct of the business of Tooltex, or
(ii) any suit, action, claim or legal, administrative, arbitration or other
proceeding or governmental investigation pending or threatened or contemplated
against or affecting any real property owned or leased by Tooltex or the present
and continued use thereof, nor is there any basis for any of the foregoing.
To the best knowledge of Tooltex and each Shareholder, there is no
existing, proposed or contemplated plan to modify or realign any street or
highway or any existing, proposed or contemplated eminent domain proceeding that
would result in the taking of all or any part of any real property owned or
leased by Tooltex or that would prevent or hinder the continued use of such real
property as heretofore used in the conduct of the business of Tooltex. There are
no encroachments onto any such real property by any improvements on any
adjoining property. There are no encroachments onto any adjoining property by
any improvements on such real
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property that have an adverse impact on the present use of such adjoining
property. There are no unpaid taxes, local improvement levies, assessments
(special, general or otherwise) or bonds of any nature affecting such real
property or any portion thereof. All covenants, conditions, restrictions,
easements and similar matters affecting such real property have been complied
with. Neither this Agreement nor anything provided to be done under this
Agreement violates or will violate any contract, document, understanding,
agreement, arrangement or instrument affecting any such real property.
4.10 Conduct of the Business. Tooltex is not a party to, or subject to or
bound by, nor are any of its assets subject to or bound by, any agreement, oral
or written, or any statute or any judgment, rule, regulation, order, writ,
injunction or decree of any court or governmental or administrative body, which
prohibits or adversely affects or, upon the consummation of the transactions
contemplated hereby, would prohibit or adversely affect: (i) the use of any or
all of the assets and property associated with, necessary to, or used or
employed in the business of Tooltex, or (ii) the conduct of such business in the
same manner as it has been conducted. Upon consummation of the transactions
contemplated by this Agreement, Tooltex will continue to have all of the
properties and rights necessary to conduct its business in all respects in the
same manner and at the same production levels as such business has been
conducted by it prior to the Closing. Except as disclosed on Schedule 4.10,
Tooltex is not required by any person or governmental authority to obtain any
consent, authorization, license, permit, order, certificate, registration or
qualification for the ownership of its assets and the conduct of its business
(including qualifications to transact business as a foreign corporation in
various states). Tooltex's business has been, and is being, conducted in
compliance with all applicable laws, ordinances, orders or other rules or
regulations. Neither Tooltex nor any Shareholder has any reason to believe that
any customer, supplier or other person will not maintain its relationship with
Tooltex as previously maintained and conducted after the date hereof and the
Closing Date.
4.11 Patents, Trade Names, Trademarks and Copyrights. Schedule 4.11
contains a list and brief description of all domestic and foreign letters of
patent, patents, patent applications, patent and know-how licenses, trade names,
trademark registrations and applications, common law trademarks, and copyright
registrations and applications (collectively, the "Intangibles"), of or used by
Tooltex. Except as shown on Schedule 4.11, Tooltex owns, free and clear of all
liens and encumbrances, licenses and other restrictions, all Intangibles and all
trade secrets, customer lists, unregistered copyrights, inventions, technology,
processes, designs, computer programs, know-how, formulae and all other
intellectual property rights (collectively the "Intellectual Property") used in
the conduct of its business. Tooltex has not
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infringed or been charged to infringe any adversely held patent and has not
engaged in or been charged to have engaged in the unauthorized use or
misappropriation of any intangible, invention, technology, process, design,
computer program, know-how, formulae or other intellectual property right of
another, and there are no actual or threatened claims or assertions against
Tooltex relating thereto. No third party has ever infringed or engaged in the
unauthorized use of or misappropriated any Intellectual Property. All
Intellectual Property has been kept confidential.
4.12 Contracts. Schedule 4.12 Previously delivered to Sonics Sub lists and
briefly describes all contracts, commitments, plans, agreements, instruments,
arrangements and understandings (written or oral), bids and proposals, including
all amendments and supplements thereto, to which Tooltex is a party (whether or
not legally bound thereby), including without limitation:
(a) Contracts or other understandings (whether oral or written) for
or regarding the employment of any officer or employee, including, without
limitation, terms, conditions and policies relating to vacation and sick days,
severance pay and incentive and other bonuses;
(b) Collective bargaining agreements and any other
agreement or contract with any labor union or other employees'
association;
(c) Leases and agreements relating to real or personal
property;
(d) Continuing contracts for the future purchase of commodities,
materials, ingredients, supplies, merchandise, services or equipment that
involve an amount in excess of $5,000;
(e) Bonus, pension, profit-sharing, retirement,
hospitalization, or insurance or similar plans or practices, formal
or informal;
(f) Franchise, dealer, distribution, sales and agency
contracts and commitments;
(g) Contracts of sale and distribution agreements
creating any obligation of Tooltex to sell or distribute products;
(h) Guarantees and indemnities, direct or indirect,
current or contingent of the obligations of customers or any other
person or entity;
(i) Contracts with suppliers, vendors, distributors, clients,
customers or others for the future performance of services or provision of goods
by or for Tooltex and in each case involving an amount in excess of $5,000;
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(j) Insurance policies;
(k) Advertising contracts and commitments;
(l) Bank accounts, lock box and similar depository
arrangements;
(m) License agreements (as licensor or licensee);
(n) Real estate mortgages, loan or credit agreements with lenders,
indentures, pledges, conditional sale or title retention agreements, equipment
obligations and leases, and lease purchase agreements;
(o) Contracts purporting to limit the freedom of Tooltex
or any of its employees to compete in any line of business or in
any geographic area;
(p) Agreements concerning a partnership or joint
venture; and
(q) Agreements concerning confidentiality or
noncompetition.
Each contract, commitment, plan, agreement, instrument, arrangement,
understanding, bid and proposal required to be listed in Schedule 4.12 is the
valid and binding obligation of Tooltex and any other party thereto, enforceable
in accordance with its respective terms and conditions.
Except as listed on Schedule 4.12, Tooltex is not a party to any lease
relating to personal property which cannot be terminated by it, without penalty,
on 30 days' notice.
Neither Tooltex nor any other party thereto is in violation of or in
default in respect of or has failed to perform any obligation under or
repudiated any provision of any such contract, commitment, plan, agreement,
instrument, arrangement, understanding, bid or proposal, and nothing has
occurred which with lapse of time or the giving of notice or both would
constitute a breach or default by Tooltex, or any other party thereto or which
would cause acceleration of any obligation of any party thereto or the creation
thereunder of any lien, encumbrance or security interest in or upon the
properties or assets of Tooltex. Sonics Sub has been furnished with true copies
of all items listed on Schedule 4.12.
There is no outstanding power of attorney executed on behalf of Tooltex.
4.13 Litigation. Except as set forth on Schedule 4.13, there
is no action, suit, claim, demand, investigation or proceeding
pending or to the best knowledge of Tooltex or any Shareholder
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threatened against, relating to or affecting Tooltex or its business or which
would in any way affect the transactions contemplated by this Agreement or the
other agreements, documents and instruments contemplated hereby, and there is no
basis for any of the foregoing. No order, writ, injunction or decree has been
issued by or requested of any court or governmental agency which might result in
any adverse change in the business, property or assets or in the condition,
financial or otherwise, of Tooltex or which might adversely affect the
transactions contemplated by this Agreement or the other agreements, documents
and instruments contemplated hereby. Tooltex has not been subject to any
bankruptcy or other insolvency proceedings.
4.14 Insurance. Tooltex is and has been insured by financially sound and
reputable insurers unaffiliated with Tooltex, with respect to its properties and
businesses in such amounts and against such risks as are adequate to protect its
properties and business, including without limitation comprehensive general
liability and product liability insurance. Schedule 4.14 hereto lists all
insurance policies of Tooltex, showing (a) the issuer, (b) risk insured, (c)
expiration date, (d) annual premium, (e) dollar amount of coverage and (f)
dollar amount of deductible or retention. The insurance coverage provided by
such policies will not in any respect be affected by, and will not terminate or
lapse by reason of, the transactions contemplated by this Agreement. Except as
set forth on Schedule 4.14, at no time subsequent to December 31, 1992 has
Tooltex been denied any insurance or indemnity bond coverage which it has
requested or made any material reduction in the scope or amount of, or paid a
substantially increased premium for, or substantially increased any deductible
under, any of its insurance coverage, and since such date no insurance carrier
has cancelled or reduced any insurance coverage for Tooltex or given any notice
or other indication of its intention to do so.
4.15 Employee Benefit Plans. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby will
not constitute a violation of, or give rise to any liability under, Title I of
the Employee Retirement Income Security Act of 1974, as amended, and the rules
and regulations promulgated thereunder ("ERISA") or Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code"). Schedule 4.15 contains a listing
of each savings, bonus, stock purchase, deferred compensation, hospitalization
or other medical, life, health, disability or other insurance, profit-sharing,
stock appreciation, phantom stock, pension or retirement plan, policy or
arrangement, and each other "employee benefit plan" (as defined in Section 3(3)
of ERISA) or arrangement maintained or contributed to by Tooltex, whether formal
or informal and whether legally binding or not since December 31, 1985 (the
"Tooltex Plans") and states the fiscal year end for each. No such plan or
arrangement has been previously maintained or contributed to by Tooltex whose
"date of
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termination" (within the meaning of Section 4048 of ERISA) occurred after
September 1, 1974. The Shareholders have heretofore delivered to Sonics Sub true
and complete copies of the documents governing all Tooltex Plans as in effect on
the date hereof and at all times hereafter to and including the Closing Date.
Tooltex has no plan or commitment, whether formal or informal and whether
legally binding or not, to create any additional such plan or arrangement or
modify or change any existing plan or arrangement, except to the extent required
to comply with the Code or ERISA. Except with respect to plans or arrangements
identified in Schedule 4.15 as excluded from the representation made in this
sentence, the balance sheets of Tooltex as at June 30, 1997 and 1996, each
reflects in the aggregate an accrual of all amounts necessary to fund currently
benefits already accrued but unpaid under the Tooltex Plans as of such date
including accruals for current year contributions but excluding amounts which
are held by trustee(s), custodian(s) or insurance companies and irrevocably
committed to the provision of benefits under such plans. As to those matters
excluded from the representation in the preceding sentence, Schedule 4.15
accurately and completely describes by dollar amount or formula (from which a
dollar amount can be derived) the benefit(s) required to be provided, the number
and identity of persons to whom such benefits are to be provided and the
conditions, if any, on the obligation to provide such benefits and sets forth
the present value of the assets (if any) irrevocably set aside or committed to
the provision of benefits.
Except as set forth in Schedule 4.15:
(a) None of the Tooltex Plans is a "multiemployer plan" as that term
is defined in Section 3(37) of ERISA or a "defined benefit plan" as that term is
defined in Section 3(35) of ERISA .
(b) Neither any of the Tooltex Plans, nor, to the best knowledge of
Tooltex and each Shareholder, any trust created thereunder nor, to the best
knowledge of Tooltex and each Shareholder, any trustee or administrator thereof,
has engaged in a transaction in connection with which any of the Tooltex Plans,
any such trust, or any trustee or administrator thereof, or any party dealing
with the Tooltex Plans or any such trust, could be subject to either a civil
penalty assessed pursuant to Section 502(i) of ERISA, or a tax imposed by
Section 4975 of the Code.
(c) Full payment has been made of all amounts which Tooltex is
required to pay under the terms of each of the Tooltex Plans pursuant to
applicable law and GAAP, consistently applied, as a contribution to the Tooltex
Plans as of the last day of the most recent fiscal year of each of the Tooltex
Plans ended prior to the date of this Agreement and, as to each of the Tooltex
Plans to which Section 4021(a) of the Code applies, the present value of the
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assets of such plan equal or exceed the present value of the benefits currently
payable pursuant to such plan.
(d) All reports, returns and disclosures relating to the Tooltex
Plans required to be filed or distributed to participants have been timely filed
or distributed in compliance with applicable law.
(e) Other than claims in the ordinary course for benefits under the
Tooltex Plans, there is no action, suit, claim or proceeding pending or
threatened in writing, nor does there exist any basis therefor, which would
result in the imposition of any liability on any Tooltex Plan or on Tooltex with
respect to any such plan.
(f) Each of the employee benefit plans maintained or contributed to
by Tooltex including, without limitation, the Tooltex Plans, is and has been
interpreted, administered and operated in accordance with the summary thereof
provided to the employees of Tooltex and is in operational compliance with all
applicable laws, including but not limited to the Tax Reform Act of 1986 and
ERISA.
(g) As to each of the Tooltex Plans to which Section 401(a) of the
Code applies, the plan is "qualified" within the meaning of Section 401 of the
Code, each related trust is exempt from tax under Section 501(a) of the Code,
and a favorable determination letter applicable to such plan as most recently
amended (a copy of which letter is appended to Schedule 4.15 as an exhibit) has
been issued by the Internal Revenue Service and is presently in full force and
effect.
(h) The consummation of the transactions contemplated hereby will not
create or accelerate any right to receive benefits or the payment thereof under
any Tooltex Plan.
4.16 Personnel. Schedule 4.16 lists all plans, contracts, agreements,
programs and policies, whether written or oral, relating to, and all information
referred to in, the following items: (a) all employment, savings, bonus, profit
sharing, percentage compensation, deferred compensation, severance pay, pension,
employee benefit, welfare and retirement plans, contracts and agreements in each
such case with directors, officers or employees, all stock purchase and option
plans, contracts and agreements, all consulting agreements, and all labor union
and collective bargaining agreements, to which Tooltex is a party or is subject;
(b) the names and current salaries of all directors, officers, department heads
and division managers of Tooltex; (c) the wage rates for non-salaried and
non-executive salaried employees of Tooltex by classification; (d) any increase
since June 30, 1997 in the compensation payable or to become payable by Tooltex,
or any bonus, percentage compensation, service award or
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other similar benefit granted, made or accrued to the credit of, any officer,
director, employee, agent or consultant thereof except for such as are payable
to employees (other than officers and directors) pursuant to (i) regular
compensation reviews in accordance with past practice (but not across the board
general salary increases) or (ii) employment agreements in effect on June 30,
1997; (e) all group insurance programs in effect for employees of Tooltex; and
(f) since June 30, 1997, any contribution to any profit sharing or other
employee benefit plan. Tooltex is not in default with respect to any of its
obligations listed above. Except as set forth in Schedule 4.16, Tooltex is not
and will not be, by reason of anything done in connection with (or within a
period of time measured from) the execution of this Agreement or the
consummation of the transactions contemplated hereby, liable to any employees of
Tooltex for any amount of severance pay or for any other payments which are or
become payable in an increased amount by reason of the consummation of the
transactions contemplated hereby. No employee of Tooltex has been paid
compensation in any form or other amounts in any form where the payment has been
discretionary and not pursuant to a binding legal obligation of Tooltex.
Except as set forth in Schedule 4.16, there are no accrued liabilities
under any plans, programs, policies or practices maintained by Tooltex on behalf
of any of its employees which are not provided for on the books of Tooltex and
reflected in its balance sheets as at June 30, 1997 or 1996 or which have not
been fully (on an actuarial basis, or plan termination basis, where appropriate)
provided for by insurance contracts, premiums on which are currently paid in
full, or by contributions to one or more trusts established to fund the plan,
program, policy or practice in question.
The qualifications of each employee of Tooltex for employment under
applicable immigration laws have been reviewed, a properly completed Form I-9 is
on file with respect to each such employee, and Tooltex is in full compliance
with the Immigration and Control Act of 1986.
4.17 Governmental and Other Approvals. Except as set forth on Schedule
4.17 hereto, all requisite consents, authorizations, licenses, permits, orders,
certificates and approvals of all governmental authorities or other parties
necessary for Tooltex and the Shareholders to consummate the transactions
contemplated by this Agreement will be obtained as of the Closing Date. Except
as set forth on Schedule 4.17 hereto, Tooltex has all consents, licenses,
permits, approvals and certificates required under applicable law or regulation,
federal, state and local, necessary to the ownership of all of its assets and to
the operation of its business as presently conducted and as presently
contemplated.
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4.18 Accounts Receivable. All of the accounts receivable of Tooltex arose
in the ordinary and normal course of business and represent accounts validly due
for goods sold or services rendered and are validly incurred indebtedness on the
part of those obligated thereon and are not subject to counterclaim or set-off
other than with respect to credits which arose in the ordinary and normal course
of business.
4.19 Brokerage. Neither Tooltex nor any Shareholder has dealt directly or
indirectly with any broker or finder in connection with the transactions
contemplated herein, and each of the Shareholders agrees to indemnify and hold
Sonics Sub and Sonics harmless in connection with any claim for commissions or
other compensation made by any broker or finder claiming to have been employed
by or on behalf of any Shareholder or Tooltex in connection with the
transactions contemplated herein.
4.20 Labor Relations. There is no unfair labor practice complaint pending
or to the best knowledge of Tooltex or any Shareholder threatened against
Tooltex nor any basis therefor. There is no proceeding pending or to the best
knowledge of Tooltex or any Shareholder threatened before the National Labor
Relations Board that arises out of or pertains to the business of Tooltex nor
any basis therefor. Tooltex has not experienced any work stoppage or other labor
difficulty or any unionization attempt over the last five years. There is no
discrimination charge (relating to sex, age, race, national origin, handicap or
veteran status) pending before any federal or state agency or authority nor any
basis therefor, and there is no labor strike or similar dispute or labor
arbitration proceeding pending or to the best knowledge of Tooltex or any
Shareholder threatened against or involving Tooltex nor any basis therefor that
arises out of or pertains to the business of Tooltex. There is no outstanding
demand for union representation of employees of Tooltex. No representation
question is pending before the National Labor Relations Board involving any
attempt to organize a bargaining unit including any employees of Tooltex, and no
labor grievance has been filed within the past 12 months with Tooltex that
arises out of or pertains to its business. Tooltex is not a party to any
collective bargaining agreement and is not currently negotiating a collective
bargaining agreement with respect to its employees.
4.21 Product Defects. There is no defect in the design, construction or
manufacture of the products currently manufactured or sold by Tooltex which
would cause bodily injury, when such products are used in the manner intended by
Tooltex. There is no defect in the design, construction or manufacture of the
products sold by Tooltex prior to the Closing Date which would cause bodily
injury, when such products are used in the manner intended by Tooltex,
materially adversely affect the safety, performance or quality of such products,
and the purchasers of such products have been provided with adequate
instructions and warnings regarding the
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safe use and hazards of such products. The Shareholders have delivered to Sonics
Sub a copy of all warranties concerning the products sold by Tooltex.
4.22 Corporate Name. Except as disclosed on Schedule 4.22, (a) no other
person or business has received from Tooltex the right to use, nor, to the best
knowledge of Tooltex and each Shareholder, is there any person or business
using, any corporate name of Tooltex, any tradename set forth in Schedule 4.11,
or any variant thereof, singly or in combination with any other term, and (b) no
person or business has attempted since January 1, 1992 to restrain Tooltex from
using any such name or any variant thereof, singly or in combination with any
other term.
4.23 Prepayment of Liabilities. Except as disclosed on Schedule 4.23,
Tooltex has no liability for borrowed money which cannot be prepaid at any time
without penalty.
4.24 Insider Interests. Except as disclosed on Schedule 4.24, neither any
Shareholder nor any present or former officer or director or "affiliate" or
"associate" (as such terms are defined in Rule 405 under the Securities Act of
1933, as amended) of Tooltex has (a) any interest in any property used in or
pertaining to the business of Tooltex, (b) any contract, commitment, arrangement
or understanding with Tooltex or (c) any equity interest (other than an
investment in a publicly held corporation not exceeding one percent (1%) of the
outstanding capital stock of such corporation) with any customer, competitor or
supplier of Tooltex.
4.25 Disclosure. No representation or warranty in this Article IV, and no
statement contained elsewhere in this Agreement or in any schedule, exhibit,
certificate, document, instrument or agreement delivered or to be delivered by
Tooltex or the Shareholders to Sonics Sub contains or will contain any untrue
statement of fact or omits or will omit to state a fact or any fact necessary to
make the statements contained therein not materially misleading. All facts
relative to the business, operations, properties, assets, liabilities (whether
accrued, absolute, contingent or otherwise), financial condition and prospects
of Tooltex have been disclosed to Sonics Sub by Tooltex and the Shareholders.
Nothing in any Schedule to this Agreement shall be deemed adequate to disclose
an exception to a representation or warranty made herein unless such Schedule
identifies the exception with particularity and describes the relevant facts in
detail.
4.26 No Material Change. Since May 31, 1997, except as disclosed in any
schedule or financial statements delivered by the Shareholders to Sonics Sub
prior to the execution of this Agreement and incorporated herein and except as
disclosed in Schedule 4.26, Tooltex has not (a) suffered any damage, destruction
or loss (whether or not covered by insurance) exceeding $5,000 in the
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aggregate, or (b) had any materially adverse change in its financial condition,
operations, business, business outlook or property.
ARTICLE V
REPRESENTATIONS AND WARRANTIES BY EACH SHAREHOLDER
In addition to the representations and warranties set forth in Article IV,
each Shareholder, jointly and severally, represents and warrants to, and agrees
with, Sonics Sub and Sonics as follows:
5.1 Necessary Authority. All consents, approvals, authorizations and
orders necessary for the execution and delivery by each Shareholder of this
Agreement, and for the consummation of the Merger have been obtained, and each
Shareholder has full right, power and authority to enter into this Agreement.
Each Shareholder has, or will prior to the Closing Date, approved this
Agreement, the Agreement of Merger and the Merger.
5.2 Defaults under other Instruments. The performance of this Agreement
and the consummation of the transactions herein contemplated by each Shareholder
will not result in a breach or violation or any of the terms or provisions of or
constitute a default under any law, any indenture, mortgage, deed of trust, note
agreement or other agreement or instrument to which each Shareholder is a party
or by which each Shareholder is bound, or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over such Shareholder
or the property of such Shareholder.
5.3 Good Title to Shares. Each Shareholder has, and immediately prior to
the Merger each Shareholder will have, good and valid title to the shares of
Tooltex Common Stock to be exchanged in the Merger, free and clear of all liens,
encumbrances, equities or claims. The issuance of the shares of Tooltex Common
Stock to be exchanged for the issued and outstanding shares of Sonics Common
Stock pursuant to the provisions of the Agreement of Merger will have been duly
authorized and will, upon the execution and delivery of certificates therefore,
be validly issued and outstanding, fully paid and non-assessable and free of
preemptive rights.
5.4 Brokerage. Neither Shareholder has dealt directly or indirectly with
any broker or finder in connection with the transactions contemplated herein and
each Shareholder agrees to indemnify and hold Sonics Sub and Sonics harmless in
connection with any claims for commissions or other compensation made by any
broker or finder claiming to have been employed by or on behalf of each
Shareholder in connection with the transactions contemplated hereby.
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5.5 Investment Representations. Each Shareholder represents that he has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the Merger and the consideration
received in respect thereof. The Sonics Common Stock and Sonics' Options to be
acquired by each Shareholder pursuant to the Agreement of Merger will be
acquired for investment and not with a view to the distribution thereof, it
being understood that Sonics Common Stock and the Sonics' Options will not be
registered under the Securities Act of 1933, as amended (the "Securities Act").
At least 20 days prior to the date on which a meeting of Tooltex shareholders
was held considering and approving the Merger, each Shareholder received a copy
of Sonics' Annual Report to Shareholders for the fiscal year ended June 30,
1996, Annual Report on Form 10-K for the fiscal year ended June 30, 1996, 1996
Proxy Statement, Quarterly Report on Form 10-Q for each of the quarters ended
September 30, 1996, December 31, 1996, and March 31, 1997, and Current Reports
on Form 8-K filed by Sonics since June 30, 1996. Each Shareholder has had the
opportunity to ask questions and receive written answers concerning Sonics Sub
and Sonics.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SONICS SUB
Sonics Sub represents and warrants to the Shareholders as follows:
6.1 Corporate Organization. Sonics Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Ohio and
has not engaged in any operation or incurred any obligations other than incident
to its organization and the performance of this Agreement and the Agreement of
Merger.
6.2 Authorization. Sonics Sub has full corporate power and authority to
enter into this Agreement and, subject to the approval of this Agreement and the
Agreement of Merger by the sole shareholder of Sonics Sub in accordance with the
Ohio General Corporation Law, to execute and deliver this Agreement and the
Agreement of Merger and to consummate the transactions contemplated hereby and
thereby. The Board of Directors of Sonics Sub has duly authorized the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby and the sole shareholder of Sonics Sub has approved this
Agreement and the Agreement of Merger. No other corporate proceedings on the
part of Sonics Sub are necessary to authorize the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby. This
Agreement constitutes a valid and binding obligation of Sonics Sub enforceable
against Sonics Sub in accordance with its terms.
6.3 Authority. Neither the execution and delivery by Sonics
Sub of this Agreement nor the consummation by Sonics Sub of the
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transactions contemplated hereby nor compliance by Sonics Sub with any of the
provisions hereof will (a) conflict with or result in a breach of any provision
of the charter or Code of Regulations of Sonics Sub, (b) violate, conflict with
or result in a breach of any provision of, or, constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination or in a right of termination or cancellation of, or
accelerate the performance required by, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties of Sonics
Sub under, or result in being declared void, voidable or without further binding
effect, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, lease, contract, agreement
or other instrument or commitment or obligation to which Sonics Sub is a party
or by which it or any of its properties may be bound or affected, (c) violate
any order, writ, injunction, decree, judgment, law, rule, regulation or ruling
of any court or governmental authority, federal, state, local or foreign,
applicable to Sonics Sub or any of its properties, the violation of which would
be material to Sonics Sub or (d) require any consent, approval or authorization
of, or declaration, filing or registration with, any governmental or regulatory
authority except for the filing of the Certificate of Merger and other
appropriate merger documents, if any, as required by the laws of the State of
Ohio.
6.4 Brokerage. Sonics Sub has not dealt directly or indirectly with any
broker or finder in connection with the transactions contemplated herein and
Sonics Sub agrees to indemnify and hold each of the Shareholders harmless in
connection with any claims for commissions or other compensation made by any
broker or finder claiming to have been employed by or on behalf of Sonics Sub in
connection with the transactions contemplated hereby.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF SONICS
Sonics represents and warrants to the Shareholders as follows:
7.1 Corporate Organization. Sonics is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
with full power and authority (corporate and other) to own, operate and lease
its properties and to conduct its business in the manner in which and in the
places where such properties are owned or operated or leased and such business
is now conducted.
7.2 Authorization. Sonics has full corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
Board of Directors of Sonics has duly authorized the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby, and
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no other corporate proceedings on the part of Sonics are necessary to authorize
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. This Agreement constitutes a valid and binding
obligation of Sonics enforceable against Sonics in accordance with its terms.
7.3 Authority. Neither the execution and delivery by Sonics of this
Agreement nor the consummation by Sonics of the transactions contemplated hereby
nor compliance by Sonics with any of the provisions hereof will (a) conflict
with or result in a breach of any provision of the charter or by-laws of Sonics,
(b) violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties of Sonics under, or result in being declared void,
voidable or without further binding effect, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, lease, contract, agreement or other instrument or commitment
or obligation to which Sonics is a party or by which it or any of its properties
may be bound or affected, (c) violate any order, writ, injunction, decree,
judgment, law, rule, regulation or ruling of any court or governmental
authority, federal, state, local or foreign, applicable to Sonics or any of
Sonics' subsidiaries or any of their respective properties, the violation of
which would be material to Sonics and its subsidiaries, taken as a whole or (d)
require any consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority except (x) as
required by the Securities Act, the Securities Exchange Act of 1934, as amended,
or any applicable State Blue Sky laws, and (y) the filing of the Certificate of
Merger and other appropriate merger documents, if any, as required by the laws
of the State of Ohio or, in connection with the maintenance or qualification to
do business in other jurisdictions, by the laws of such other jurisdictions.
7.4 Good Title to Shares. The issuance of the shares of Sonics Common
Stock to be exchanged for the issued and outstanding shares of Tooltex Common
Stock pursuant to the provisions of the Agreement of Merger will have been duly
authorized and will be, upon the execution and delivery of certificates
therefore, validly issued and outstanding, fully paid and non-assessable and
free of pre-emptive rights.
7.5 Brokerage. Sonics has not dealt directly or indirectly with any broker
or finder in connection with the transactions contemplated herein and Sonics
agrees to indemnify and hold each of the Shareholders harmless in connection
with any claims for commissions or other compensation made by any broker or
finder
22.
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claiming to have been employed by or on behalf of Sonics in connection with the
transactions contemplated hereby.
ARTICLE VIII
COVENANTS
8.1 Restrictions on Transfer. Each Shareholder covenants and agrees not to
sell the Sonics Common Stock or the Sonics' Options received in the Merger in
the public market or in privately negotiated transactions for a period of two
years from the Closing Date. Each Shareholder acknowledges and agrees that the
certificates representing the Sonics Common Stock and each Option Agreement will
contain the following legend and each Shareholder agrees to be bound as set
forth therein:
The security evidenced hereby has not been registered under the Securities
Act of 1933, as amended, or any state securities laws and may not be sold,
transferred, assigned, pledged or otherwise distributed for value unless
(a) there is an effective registration statement under such Act and
applicable state securities laws or (b) the Corporation receives an
opinion of counsel for the holder of this security acceptable to the
Corporation (concurred in by counsel for the Corporation) stating that
such sale, transfer, assignment, pledge or distribution is exempt from the
registration and prospectus delivery requirements of such Act and such
state laws and that such sale, transfer, assignment, pledge or
distribution will not cause the original issuance of such security by the
Corporation to be in violation of the registration and prospectus delivery
requirements of such Act or such state laws.
The shares of stock represented by this certificate are subject to the
terms and restrictions of an Agreement and Plan of Merger, dated as of
July 25, 1997, which contains, among other things, restrictions on the
transfer of these shares of stock, a copy of which is on file in the
principal office of the Corporation. By accepting the shares of stock
evidenced by this certificate the holder agrees to be bound by said
Agreement and Plan of Merger.
8.2 Further Assurances. Consistent with the terms and conditions hereof,
each party hereto agrees to use his, her or its best efforts to execute and
deliver such instruments and take, or cause to be taken, such other action as is
necessary or appropriate in order to satisfy the conditions set forth in
Articles IX and X hereof and to carry out this Agreement and the transactions
contemplated hereby as promptly as practicable and to obtain in a timely manner
all waivers, consents and approvals of, and to make all filings with and
notifications to, any third parties as are
23.
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necessary in order to consummate the transactions contemplated by
this Agreement.
8.3 Consents. Each of the parties will use his, her or its best efforts to
obtain all permits, approvals, authorizations and consents of all third parties
necessary or desirable (a) for the consummation of the transactions contemplated
hereby and (b) for the continuing conduct after the Closing of the business of
Tooltex as conducted by such entities in the ordinary course of business and
consistent with past practices.
8.4 Tax Compliance. Each party to this Agreement shall properly and timely
complete all tax filings and elections required to be completed by each party to
qualify the Merger for non-recognition of gain treatment under Sections 351,
354, 355, 368(a)(1)(A) and 368(a)(2)(D) of the Code. No party to this
transaction shall take any position in a tax filing, in a tax dispute or in tax
litigation that is inconsistent with non-recognition of gain treatment of the
Merger, except to the extent that it is reasonable to do so. However, nothing in
this provision shall commit any party to incur expenses to defend the tax
position of another or to refrain from truthful statements with respect to the
Merger and the transactions contemplated hereby to tax authorities, their
accountants, attorneys and/or advisors.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF SONICS SUB AND SONICS
Each and every obligation of Sonics Sub and Sonics under this Agreement
shall be subject to the satisfaction, on or prior to the Closing Date, of each
of the following conditions, each of which may be waived by Sonics Sub and
Sonics except as otherwise provided by law:
9.1 Representations and Warranties True. The representations and
warranties of Tooltex and the Shareholders contained in this Agreement shall be
true and correct and complete in all material respects as of the date hereof and
shall be deemed to have been made again at and as of the Closing and shall then
be true and correct and complete in all material respects (except as otherwise
contemplated by this Agreement), and at the Closing Tooltex and the Shareholders
shall have delivered to Sonics Sub a certificate to that effect signed by the
President and the Chief Financial Officer of Tooltex and by each of the
Shareholders.
9.2 Opinion of Counsel to Tooltex and the Shareholders. Sonics Sub shall
have been furnished with an opinion of Feinstein, Mulligan & Fromson, counsel to
Tooltex and the Shareholders, dated the Closing Date, in the form attached
hereto as Annex B.
9.3 Absence of Litigation. No order, decree or ruling of any
court shall have been entered and no action or proceeding before
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any court or governmental or regulatory authority or body shall have been
instituted or threatened by any governmental or regulatory authority challenging
the transactions contemplated hereby.
9.4 Resignation of Directors. Sonics Sub shall have received the
resignations, effective as of the Closing, of each director of Tooltex other
than those whom Sonics Sub shall have specified in writing prior to the Closing.
9.5 Certificates. Tooltex and the Shareholders shall have furnished Sonics
Sub with such certificates to evidence compliance with the conditions set forth
in this Article IX as may be requested by Sonics Sub.
9.6 Employment, Non-Compete and Non-Disclosure Agreements. Employment
Agreements, Non-Compete Agreements and Non-Disclosure Agreements in the form of
Annexes C, D and E hereto shall have been entered into by the Sonics Sub and
each of the Shareholders.
9.7 Lease. A lease in the form of Annex F hereto shall have been entered
into by BPT, Limited and Sonics Sub.
9.8 BPT Receivable. BPT, Limited shall have given to Sonics Sub a
promissory note in the form of Annex G hereto.
9.9 Taxes. Tooltex shall have paid in full all federal, state, local and
foreign taxes inclusive of penalties for which the Tooltex is in arrears as of
the Closing Date except for those listed on Schedule 4.7 under the subheading
"Taxes and Other Payments Due and Owing."
9.10 Audit. Grant Thornton LLP shall have given to Sonics Sub and Sonics
an opinion that they would be able to conduct an audit of the Tooltex's
financial statements and render a non-qualified report of independent
accountants as defined by generally accepted accounting principles and as
required by rules under the Securities Act.
9.11 Releases. The U.S. Small Business Administration (the "SBA") and NBD
Bank (the "Bank") shall have agreed in writing to release Tooltex as a guarantor
of loans to BPT Limited from the Bank that were partially guaranteed by the SBA
under its 504 program.
ARTICLE X
CONDITIONS TO THE OBLIGATIONS OF THE SHAREHOLDERS
Each and every obligation of the Shareholders under this
Agreement shall be subject to the satisfaction, on or prior to the
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Closing Date, of each of the following conditions, each of which may be waived
by the Shareholders as provided herein, except as otherwise provided by law:
10.1 Representations and Warranties True. The representations and
warranties of Sonics Sub and Sonics contained in this Agreement shall be true
and correct and complete in all material respects as of the date hereof and
shall be deemed to have been made again at and as of the Closing and shall then
be true and correct and complete in all material respects (except as otherwise
contemplated by this Agreement), and at the Closing Sonics Sub shall have
delivered to the Shareholders a certificate to that effect signed by any duly
authorized officer.
10.2 Opinion of Counsel to Sonics Sub. The Shareholders shall have been
furnished with the opinion of Tyler Cooper & Alcorn, LLP, counsel to Sonics
Sub and Sonics, dated the Closing Date, in the form attached hereto as Annex H.
10.3 Absence of Litigation. No order, decree or ruling of any court shall
have been entered and no action or proceeding before any court or governmental
or regulatory authority or body shall have been instituted by any governmental
or regulatory authority challenging the consummation of the transactions
contemplated hereby.
10.4 Certificates. Sonics Sub and Sonics shall have furnished the
Shareholders with such certificates of its officers and others to evidence
compliance with the conditions set forth in this Article X as may be reasonably
requested by the Shareholders.
10.5 Employment Agreements. Employment Agreements in the form
of Annex C hereto shall have been entered into by each of the
Shareholders.
10.6 Lease. A lease in the form of Annex F hereto shall have been entered
into by BPT, Limited and Sonics Sub.
10.7 Bank Loans. The Bank shall have agreed to terminate any personal
guaranties given by the Shareholders and their wives with respect to a $461,000
note given by Tooltex in favor of the Bank, dated April 30, 1997.
10.8 Option Agreement. Sonics and each of the Shareholders
shall have entered into a Stock Option Agreement in the form
attached hereto as Annex I.
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ARTICLE XI
TERMINATION
11.1 Termination of the Agreement. This Agreement may be
terminated, and the Merger abandoned, at any time on or prior to
the Closing Date:
(a) by the mutual consent of Sonics Sub and the
Shareholders; or
(b) by Sonics Sub or Sonics if any of the conditions set forth in
Article IX hereof shall have become impossible to fulfill for reasons beyond the
control of Sonics Sub or Sonics, and shall not have been waived pursuant to
Section 12.8 hereof; or
(c) by both of the Shareholders, acting jointly and not severally, if
any of the conditions set forth in Article X hereof shall have become impossible
to fulfill for reasons beyond the control of the Shareholders, and shall not
have been waived pursuant to Section 12.8 hereof; or
(d) by Sonics Sub or Sonics, if there shall have been a material
misrepresentation or breach of warranty in the representations and warranties of
the Shareholders set forth in this Agreement; or
(e) by Sonics Sub or by the Shareholders if for any
reason the Closing has not occurred by the close of business on
July 31, 1997.
11.2 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 11.1:
(a) This Agreement shall become void and have no effect, without any
liability on the part of any party, except as provided in Section 12.1 hereof,
provided that nothing in this Section 11.2 shall relieve any party from
liability for any breach of this Agreement.
(b) Each party will redeliver all documents, work papers and other
material and all copies thereof of any party relating to the transactions
contemplated hereby, whether so obtained before or after the execution hereof,
to the party furnishing the same.
ARTICLE XII
MISCELLANEOUS
12.1 Expenses. Except as otherwise indicated in this Agreement, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses. In no
event will the legal fees
27.
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incurred by Tooltex in connection with the transactions
contemplated hereby exceed $8,500.
12.2 Survival of Representations and Warranties. The respective
representations and warranties, obligations, covenants and agreements of the
parties contained herein or in any agreement, instrument, document, schedule,
certificate or letter delivered pursuant hereto, including the Agreement of
Merger, shall survive the Closing and the Effective Date of the Merger and
continue in full force and effect, regardless of any knowledge or reason to know
which any party may have had with respect to any misrepresentation or breach of
warranty or covenant at the time of the Closing or the Effective Date. The
representations and warranties of Sonics Sub and Sonics shall expire on the date
eighteen months after the Closing Date. The representations and warranties of
the Shareholders shall expire on the date eighteen months after the Closing
Date, except that the representations and warranties contained in Section 4.7
shall expire with the applicability of the respective statutes of limitations
(as extended by agreement or otherwise), and the representations and warranties
contained in Section 4.8 shall expire on the date five years after the Closing
Date.
12.3 Indemnification. Each of the Shareholders agrees to indemnify and
hold harmless the Surviving Corporation and Sonics from and against any and all
losses, costs, damages and expenses (including court costs and attorneys' fees)
which the Surviving Corporation or Sonics may sustain resulting from, arising
out of, relating to or caused by (a) non-compliance by either Shareholder with
any of his obligations hereunder or non-performance by either Shareholder of any
covenant contained herein, (b) any inaccuracy in or breach of any representation
or warranty made by the Shareholders herein or in connection with the
transactions contemplated hereby or (c) any personal injury claims relating to
any product sold by Tooltex prior to the Closing Date. The Shareholders'
agreement and liability under this Section 12.3 shall be joint and several.
No claim shall be made by the Surviving Corporation or Sonics by reason of
any loss, costs, damages and expenses with respect to which the Shareholders
have agreed to indemnify and hold harmless the Surviving Corporation and Sonics
under the preceding paragraph until the aggregate of such loss, costs, damages
and expenses exceeds $10,000 after which time the Surviving Corporation and
Sonics are entitled to present to the Shareholders any and all claims for
indemnification.
In order to satisfy any claims for indemnification, the Shareholders shall
place into escrow at the Closing, the 70,000 shares of Sonics Common Stock
received by the Shareholders pursuant to the Merger. Such shares shall be held
in accordance with the Escrow Agreement attached hereto as Annex J. In addition
to the
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70,000 shares of Sonics Common Stock, in order to satisfy any claims by the
Surviving Corporation for indemnification, the surviving corporation shall have
a right of set-off against any amounts required to be paid by the Surviving
Corporation to BPT, Limited under the lease referred to in Section 10.6. The
Surviving Corporation and Sonics shall first satisfy any such claims for
indemnification through the right of set-off described in such Lease and if and
when such right of set-off is insufficient to timely satisfy the Surviving
Corporation's claims for indemnification, the Surviving Corporation and Sonics
shall then satisfy such claims by exercising their respective rights under the
Escrow Agreement. Notwithstanding the foregoing, the Sonics Common Stock placed
in escrow and the right of set-off described herein are not the exclusive remedy
to satisfy any claims for indemnification and are in addition to any other
remedy the Surviving Corporation and Sonics may have in equity or at law.
Sonics Sub and Sonics agree to indemnify and hold harmless each
Shareholder from and against any and all loss, cost, damages and expenses
(including court costs and reasonable attorneys' fees) which such Shareholder
may sustain resulting from, arising out of, relating to or caused by (a)
non-compliance by Sonics Sub and Sonics with their respective obligations
hereunder or non-performance by Sonics Sub or Sonics of any covenant contained
herein, or (b) any inaccuracy in or breach of any representation or warranty
made by Sonics Sub and Sonics hereunder or in connection with the transactions
contemplated hereby. Sonics Sub's and Sonics' agreement and liability under this
Section 12.3 shall be joint and several.
No party shall be deemed to waive any claim for indemnification hereunder
by reason of its knowledge, prior to the occurrence of the Closing, of any such
non-compliance, non-performance, inaccuracy or breach.
If an indemnified party under this Section 12.3 receives notice of the
assertion by a person who is not a party to this Agreement of any claim or of
the commencement by any such person of any action or proceeding which may give
rise to an obligation of another party to this Agreement to indemnify such
indemnified party (a "Third Party Claim"), such indemnified party shall give
such other party reasonably prompt written notice thereof but in any event not
later than 120 days after becoming aware of such Third Party Claim. Such notice
shall describe the Third Party Claim in reasonable detail, and shall indicate
the estimated amount, if practicable, of the indemnifiable loss that has been or
may be sustained by such indemnified party. Such other party may participate in
the defense or, if it has acknowledged in writing to such indemnified party its
obligation to indemnify, may elect to assume the defense of any Third Party
Claim, at such indemnifying party's own expense and by such indemnifying party's
own counsel and such indemnified party shall cooperate in good faith in such
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defense and such indemnifying party shall fully inform and consult with such
indemnified party. If such other party has acknowledged in writing to such
indemnified party its obligation to indemnify, such indemnified party shall not
settle such Third Party Claim without the prior written consent of such
indemnifying party and in any event such indemnified party shall not settle such
Third Party Claim without 20 days' notice to such other party, unless such
notice would jeopardize the opportunity for settlement.
12.4 Headings. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
12.5 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if sent by certified or registered mail,
postage prepaid, return receipt requested, addressed as follows:
If to Sonics Sub, the Surviving Corporation or Sonics,
to:
Sonics & Materials, Inc.
West Kenosia Avenue
Danbury, Connecticut 06880
Attention: Robert Soloff
Lauren Soloff
Copy to:
Tyler Cooper & Alcorn, LLP
205 Church Street
P.O. Box 1936
New Haven, Connecticut 06509-1910
Attention: Kathleen A. Maher, Esquire
If to Tooltex or the Shareholders:
Paul L. Spurgeon
P.O. Box 704
Grove City, Ohio 43123
Benjamin C. Egelhoff
4780 Arnold Avenue
Columbus, Ohio 43228
Copy to:
Feinstein, Mulligan & Fromson
3478 No. High Street
Columbus, Ohio 43214
Attention: Richard S. Mulligan
30.
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or such other address as shall be furnished in writing by either party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed.
12.6 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party
without the prior written consent of the others, except that Sonics Sub and
Sonics may assign all its respective rights and interests but not its respective
obligations hereunder to a wholly-owned subsidiary of Sonics Sub or Sonics,
provided that such subsidiary agrees in writing to be bound by all of the terms,
conditions and provisions contained herein.
12.7 Complete Agreement. This Agreement, including the agreements,
documents, instruments, schedules, exhibits and other writings referred to
herein or delivered pursuant hereto, contains the entire understanding of the
parties with respect to this Agreement and the transactions contemplated hereby
and supersedes all prior arrangements or understandings with respect thereto.
There are no restrictions, agreements, promises, warranties, covenants or
undertakings other than those expressly set forth herein.
12.8 Amendments and Waivers. Subject to the provisions contained in
Articles IX and X hereof, to the extent permitted by law, the parties hereto
may, by written agreement, modify, amend or supplement any term or provision of
this Agreement. Any written instrument or agreement referred to in this
paragraph shall be validly and sufficiently authorized for the purposes of this
Agreement if signed on behalf of Sonics Sub and Sonics by a person authorized to
sign such amendment or waiver.
12.9 Counterparts. This Agreement and the related agreements referred to
herein may be executed simultaneously in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
12.10 Parties in Interest. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or benefits or remedies under or by
reason of this Agreement on any persons other than the parties to it and their
respective successors and assigns; nor is anything in this Agreement intended to
modify or discharge the obligation or liability of any third persons to any
party to this Agreement, nor shall any provision give any other third persons
any right of subrogation or action against any party to this Agreement.
12.11 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF CONNECTICUT (REGARDLESS OF THE LAWS THAT MIGHT
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BE APPLICABLE UNDER PRINCIPLES OF CONFLICTS OF LAW) AS TO ALL
MATTERS, INCLUDING BUT NOT LIMITED TO MATTERS OF VALIDITY,
CONSTRUCTION, EFFECT AND PERFORMANCE.
IN WITNESS WHEREOF, Sonics Sub Sonics and Tooltex has each caused this
Agreement to be executed by its duly authorized officer, and each of the
Shareholders has executed this Agreement, as of the day and year first above
written.
SM SUB, INC.
[Corporate Seal] By: /s/ Robert S. Soloff
------------------------
Name: Robert S. Soloff
Attest Title: Chairman and President
SONICS & MATERIALS, INC.
[Corporate Seal] By: /s/ Robert S. Soloff
-------------------------
Name: Robert S. Soloff
Attest Title: Chairman and Chief
Executive Officer
TOOLTEX, INC.
[Corporate Seal] By: /s/ Paul L. Spurgeon
-------------------------
Name: Paul L. Spurgeon
Attest Title: President
THE SHAREHOLDERS:
By: /s/ Paul L. Spurgeon
-------------------------
Paul L. Spurgeon
By: /s/ Benjamin L. Spurgeon
-------------------------
Benjamin C. Egelhoff
c:\doc\kam\sonics\tooltex\agm&pom.ex
32.
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SCHEDULE 4.2
Merger Consideration
# of
# of Shares Shares of
Name and Address of of Tooltex Sonics' # of
Shareholder Stock Owned Stock Cash Options
- -----------------------------------------------------------------------------
Paul L. Spurgeon 100 38,674 $38,674 5,000
P.O. Box 704
Grove City, Ohio
43123
Benjamin C. Egelhoff 81 31,326 $31,326 5,000
4780 Arnold Avenue
Columbus, Ohio 43228
33.
AGREEMENT OF MERGER
Agreement of Merger, dated July 25, 1997, among SM Sub, Inc., an Ohio
corporation ("Sonics Sub"), Sonics & Materials, Inc., a Delaware corporation
("Sonics"), and Tooltex, Inc., an Ohio corporation ("Tooltex"); Sonics Sub and
Tooltex are sometimes referred to herein as "Constituent Corporations."
Tooltex is a corporation duly organized and existing under the laws of the
State of Ohio with an authorized capital consisting of 750 shares of common
stock, no par value ("Tooltex Common Stock"), of which, as of the date hereof,
181 shares are issued and outstanding and six shares are treasury shares.
Sonics Sub is a corporation duly organized and existing under the laws of
the State of Ohio with an authorized capital consisting of 850 shares of common
stock, without par value ("Sonics Sub Common Stock"), of which 100 shares are
issued and outstanding and owned by Sonics.
Sonics and the respective Boards of Directors of the Constituent
Corporations deem it advisable that Tooltex be merged with and into Sonics Sub
(the "Merger") as provided herein and in the Agreement and Plan of Merger dated
as of July 25, 1997 (the "Agreement and Plan") which sets forth certain
representations, warranties and agreements in connection with the Merger and
related transactions.
In consideration of the mutual benefits to be derived from this Agreement
and the Agreement and Plan and of the premises and of the mutual agreements
hereinafter contained, Tooltex, Sonics Sub and Sonics on the basis, terms and
conditions contained therein, and in connection herewith, agree as follows:
ARTICLE I
Surviving Corporation
In accordance with the applicable provisions of the Ohio General
Corporation Law, Tooltex shall be merged with and into Sonics Sub. Sonics Sub
shall be and is herein sometimes referred to as the "Surviving Corporation".
ARTICLE II
Effectiveness of the Merger
Section 2.1. Effective Date. Subject to the provisions of this Agreement
and the Agreement and Plan, a certificate of merger (the "Certificate of
Merger") shall be executed by Sonics
<PAGE>
Sub and Tooltex and delivered to the
Secretary of State of the State of Ohio for filing as provided in the Ohio
General Corporation Law. The Merger shall become effective at the time the
Certificate of Merger is accepted for filing by the Secretary of State of the
State of Ohio (the "Effective Date").
Section 2.2. Effects of the Merger. At the Effective Date, (i) the
separate existence of Tooltex shall cease and Tooltex shall be merged with and
into Sonics Sub, (ii) the Articles of Incorporation of Sonics Sub shall be the
Articles of Incorporation of the Surviving Corporation, (iii) Article I of the
Articles of Incorporation of the Surviving Corporation, SM Sub, Inc., shall be
amended to read as follows:
ARTICLE I
Name
The name of said corporation shall be Tooltex, Inc.
and (iv) the Merger shall, from and after the Effective Date, have all the
effects provided by applicable Ohio law.
Section 2.3. Additional Action. If, at any time after the Effective Date,
the Surviving Corporation shall consider that any further assignments or
assurances in law or any other acts are necessary or desirable (i) to vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation, title
to and possession of any property or right of Tooltex acquired or to be acquired
by reason of, or as a result of, the Merger, or (ii) otherwise to carry out the
purposes of this Agreement, Tooltex and Sonics Sub and their respective officers
and directors shall be deemed to have granted to the Surviving Corporation an
irrevocable power of attorney to execute and deliver all such proper deeds,
assignments and assurances in law and to do all acts necessary or proper to
vest, perfect or confirm title to and possession of such property or rights in
the Surviving Corporation and otherwise to carry out the purposes of this
Agreement; and the officers and directors of the Surviving Corporation are fully
authorized in the name of Sonics Sub and Tooltex or otherwise to take any and
all such action.
ARTICLE III
Effect of Merger on Capital Stock
of the Constituent Corporations
Section 3.1. Conversion of Stock of Tooltex and Sonics Sub.
At the Effective Date:
(i) All shares of Tooltex Common Stock then issued and outstanding
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive (w) shares of the common stock,
par value $.03 per share, of Sonics ("Sonics
2.
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Common Stock"), determined pursuant
to Section 3.1(ii) hereof (x) cash determined pursuant to Section 3.1(ii)
hereof, (y) options to purchase Sonics Common Stock determined pursuant to
Section 3.1(iii) hereof, and (z) the right to receive cash for a fraction of a
share, if any, pursuant to Section 3.3 hereof.
(ii) Each outstanding share of Tooltex Common Stock shall be
exchanged for (x) 386.74033 shares of Sonics Common Stock and (y) $386.74.
(iii) Each shareholder of Tooltex shall be granted an option to
purchase 5,000 shares of Sonics Common Stock in the manner and subject to the
conditions provided in Sonics' Incentive Stock Option Plan.
(iv) Each share of Tooltex Common Stock then held in the treasury of
Tooltex shall, by virtue of the Merger, and without any action on the part of
the holder thereof, be cancelled and retired and cease to exist, and no shares
of Sonics Common Stock shall be issued with respect thereto.
Section 3.2. Exchange of Certificates. On the Effective Date, each holder
of the certificates theretofore evidencing outstanding shares of Tooltex Common
Stock ("Certificate") shall surrender the same to Sonics or such other agent or
agents as shall be appointed by Sonics and shall receive in exchange therefor
(i) a certificate or certificates representing the number of full shares of
Sonics Common Stock which the holder of shares of Tooltex Common Stock
theretofore represented by the Certificate or Certificates so surrendered shall
have the right to receive as provided in this Article III, (ii) a certified
check in an amount equal to the number of shares of Tooltex Common Stock
surrendered to Sonics multiplied by $386.74 and (iii) a stock option agreement
to purchase 5,000 shares of Sonics Common Stock . Until so surrendered, each
outstanding Certificate will be deemed for all corporate purposes of Sonics to
evidence the right to receive ownership of the number of full shares of Sonics
Common Stock, cash and options; provided, however, until such outstanding
Certificates are so surrendered, no dividend payable to holders of record of
Sonics Common Stock as of any record date subsequent to the Effective Date or
cash payable in lieu of fractional shares pursuant to Section 3.3 hereof shall
be paid to the holder of such outstanding Certificate in respect thereof. All
shares of Sonics Common Stock and rights to receive cash and options for which
shares of Tooltex Common Stock shall be exchangeable pursuant to this Section
3.2 shall be deemed to have been issued and granted in full satisfaction of all
rights pertaining to such converted and exchanged shares of Tooltex Common
Stock.
Section 3.3. No Fractional Shares. No certificates or scrip for fractional
shares of Sonics Common Stock will be issued, no Sonics stock split or dividend
shall relate to any fractional share interest, and no such fractional share
interest shall entitle the owner thereof to vote or to any rights of or as a
shareholder of Sonics. In lieu of such fractional shares, the holder of Tooltex
Common Stock who would otherwise be entitled to a fraction of a share of Sonics
Common Stock (or any other person who is the record holder of certificates for
shares of Sonics Common Stock for which such shares of Tooltex Common Stock may
be exchanged) will upon surrender of said Certificate
3.
<PAGE>
or Certificates, be paid
the cash value of such fraction, which shall be equal to the fraction multiplied
by the closing price of a full share of Sonics Common Stock on the Nasdaq
National Market System on the last trading day immediately preceding the
Effective Date.
Section 3.4. Certificates in Other Names. If any certificate evidencing
shares of Sonics Common Stock is to be issued in a name other than that in which
the Certificate surrendered is issued, the Certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and the person
requesting such exchange shall pay to Sonics acting solely in its corporate
capacity any transfer or other taxes required by reason of the issuance of a
certificate for shares of Sonics Common Stock in any name other than that of the
registered holder of the Certificate surrendered or establish to the
satisfaction of Sonics acting solely in its corporate capacity that such tax has
been paid or is not payable.
Section 3.5. Adjustments. If, between the date hereof and the Effective
Date, the outstanding shares of Sonics Common Stock shall be changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment, or a stock dividend thereon shall be declared with a record date
within such period, the number of shares of Sonics Common Stock to be issued and
delivered in the Merger for each outstanding share of Tooltex Common Stock as
provided in this Agreement shall be correspondingly adjusted and any new
exchange ratio resulting from any such adjustment shall be rounded to three
decimal places.
ARTICLE IV
Miscellaneous
Section 4.1. Termination. This Agreement shall terminate in
the event of and upon the termination of the Agreement and Plan.
Section 4.2. Headings. The descriptive headings of the
several Articles and Sections of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
Section 4.3. Notices. Any notices or other communications
required or permitted hereunder shall be sufficiently given if
sent by certified or registered mail, postage prepaid, addressed
as follows:
(a) If to Sonics Sub or Sonics, to:
Sonics & Materials, Inc.
West Kenosia Avenue
Danbury, Connecticut 06810
Attn: Lauren Soloff
4.
<PAGE>
Copy to:
Tyler Cooper & Alcorn, LLP
205 Church Street
P.O. Box 1936
New Haven, Connecticut 06509
Attn: Kathleen A. Maher, Esquire
(b) If to Tooltex, to:
Tooltex, Inc.
6160 Seeds Road
Grove City, Ohio 43123
Attn: Paul L. Spurgeon
Copy to:
Feinstein, Mulligan & Fromson
3478 No. High Street
Columbus, Ohio 43214
Attn: Richard S. Mulligan
or such other address as shall be furnished in writing by either party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed.
Section 4.4. Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by either of
the parties hereto without the prior written consent of the other party, except
that Sonics Sub may assign all of rights, interests and obligations hereunder to
a first tier subsidiary of Sonics, provided that such subsidiary agrees in
writing to be bound by all of the terms, conditions and provisions contained
herein.
Section 4.5. Modifications, Amendments and Waivers. At any time prior to
the Effective Date, if authorized by their respective Boards of Directors and to
the extent permitted by law, the parties hereto may, by written agreement,
modify, amend or supplement any term or provision of this Agreement. Any written
instrument or agreement referred to in this paragraph shall be validly and
sufficiently authorized for the purposes of this Agreement if signed on behalf
of Tooltex, Sonics Sub and Sonics by a person authorized to sign this Agreement.
5.
<PAGE>
Section 4.6. Counterparts. This Agreement may be executed
in two or more counterparts, all of which shall be considered one
and the same agreement and each of which shall be deemed an
original.
Section 4.7. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF OHIO (REGARDLESS OF THE LAWS THAT MIGHT BE APPLICABLE UNDER
PRINCIPLES OF CONFLICTS OF LAW) AS TO ALL MATTERS, INCLUDING BUT NOT LIMITED TO
MATTERS OF VALIDITY, CONSTRUCTION, EFFECT AND PERFORMANCE.
IN WITNESS WHEREOF, Tooltex, Sonics Sub and Sonics have caused this
Agreement to be executed by their duly authorized officers, respectively, as of
the day and year first above written.
SM SUB, INC.
By: /s/ Robert S. Soloff
------------------------
Name: Robert S. Soloff
Title: Chairman and President
Attest:
________________________ By: /s/ Lauren H. Soloff
--------------------------
Name: Lauren Soloff
Title: Secretary
SONICS & MATERIALS, INC.
Attest:
By: /s/ Robert S. Soloff
_____________________ ------------------------
Name: Robert S. Soloff
Title: Chairman and President
TOOLTEX, INC.
By: /s/ Paul L. Spurgeon
-------------------------
Name: Paul L. Spurgeon
Title: President
Attest:
______________________ By: /s/ Benjamin C. Egelhoff
-------------------------
Name: Benjamin C. Egelhoff
Title: Secretary
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6.
