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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MOBILITY ELECTRONICS, INC.,
MAGMA TECHNOLOGIES, INC.,
MESA RIDGE TECHNOLOGIES, INC.
and
ALL OF THE SHAREHOLDERS OF
MESA RIDGE TECHNOLOGIES, INC.
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TABLE OF CONTENTS
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ARTICLE I Definitions.............................................................................................1
Section 1.1 Definitions.....................................................................................1
ARTICLE II The Merger, Effective Time and Merger Consideration....................................................1
Section 2.1 The Merger......................................................................................1
Section 2.2 Effect of the Merger............................................................................1
Section 2.3 Consummation of the Merger......................................................................2
Section 2.4 Articles of Incorporation; Bylaws; Directors and Officers.......................................2
Section 2.5 Aggregate Merger Consideration..................................................................2
Section 2.6 Conversion of Securities........................................................................3
Section 2.7 Adjustment of Merger Consideration..............................................................4
Section 2.8 Payment of Taxes................................................................................4
Section 2.9 Escrowed Shares.................................................................................4
ARTICLE III Representations and Warranties of the Company.........................................................4
Section 3.1 Organization and Good Standing; Qualification...................................................4
Section 3.2 Capitalization..................................................................................5
Section 3.3 Corporate Records...............................................................................5
Section 3.4 Authorization and Validity......................................................................5
Section 3.5 Subsidiaries....................................................................................5
Section 3.6 No Violation....................................................................................5
Section 3.7 Consents........................................................................................6
Section 3.8 Financial Statements............................................................................6
Section 3.9 Liabilities and Obligations.....................................................................6
Section 3.10 Employee Matters................................................................................6
Section 3.11 Employee Benefit Plans..........................................................................8
Section 3.12 Absence of Certain Changes......................................................................9
Section 3.13 Title; Leased Assets...........................................................................11
Section 3.14 Commitments....................................................................................11
Section 3.15 Adverse Agreements.............................................................................13
Section 3.16 Insurance......................................................................................13
Section 3.17 Patents, Trade-marks, Service Marks and Copyrights.............................................13
Section 3.18 Trade Secrets and Customer Lists...............................................................14
Section 3.19 Taxes..........................................................................................14
Section 3.20 Compliance with Laws...........................................................................15
Section 3.21 Finder's Fee...................................................................................15
Section 3.22 Litigation.....................................................................................15
Section 3.23 Accuracy of Information Furnished..............................................................15
Section 3.24 Condition of Fixed Assets......................................................................16
Section 3.25 Inventory......................................................................................16
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Section 3.26 Books of Account...............................................................................16
Section 3.27 Corporate Name.................................................................................16
Section 3.28 Backlog........................................................................................16
Section 3.29 Accounts Receivable............................................................................16
Section 3.30 Distributions and Repurchases..................................................................16
Section 3.31 Customers......................................................................................16
Section 3.32 Suppliers......................................................................................17
Section 3.33 Pricing........................................................................................17
Section 3.34 Product Warranties.............................................................................17
Section 3.35 Banking Relations..............................................................................17
Section 3.36 Ownership Interests of Interested Persons......................................................17
Section 3.37 Environmental Matters..........................................................................17
Section 3.38 Certain Payments...............................................................................18
Section 3.39 Accruals of the Financial Statements...........................................................18
ARTICLE IV Representations and Warranties of the Shareholders....................................................18
Section 4.1 Authority and Ownership........................................................................18
Section 4.2 No Breach......................................................................................19
Section 4.3 Consents and Approvals.........................................................................19
Section 4.4 Brokers and Finders............................................................................19
Section 4.5 Investment Representation......................................................................19
Section 4.6 Investments in Competitors.....................................................................19
ARTICLE V Representations and Warranties of Parent...............................................................20
Section 5.1 Organization and Good Standing.................................................................20
Section 5.2 Authorization and Validity.....................................................................20
Section 5.3 No Violation...................................................................................20
Section 5.4 SEC Reports; Financial Statements..............................................................20
Section 5.5 Finder's Fee...................................................................................20
ARTICLE VI Closing Deliveries....................................................................................20
Section 6.1 Deliveries of the Company and Shareholders.....................................................20
Section 6.2 Deliveries of Parent...........................................................................22
ARTICLE VII Post Closing Matters.................................................................................22
Section 7.1 Registration Rights............................................................................22
Section 7.2 Further Instruments of Transfer................................................................23
Section 7.3 Audit of Financial Statements..................................................................23
Section 7.4 Accrued Compensation...........................................................................23
Section 7.5 Accrued Loans..................................................................................23
Section 7.6 Payment of Share Consideration.................................................................23
Section 7.7 Payment of Attorneys' Fees.....................................................................23
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ARTICLE VIII Remedies............................................................................................23
Section 8.1 Indemnification by Shareholders................................................................23
Section 8.2 Conditions of Indemnification..................................................................24
Section 8.3 Waiver.........................................................................................25
Section 8.4 Remedies Not Exclusive.........................................................................25
Section 8.5 Offset.........................................................................................25
Section 8.6 Costs, Expenses and Legal Fees.................................................................25
Section 8.7 Specific Performance...........................................................................25
ARTICLE IX Miscellaneous.........................................................................................26
Section 9.1 Amendment......................................................................................26
Section 9.2 Assignment.....................................................................................26
Section 9.3 Parties In Interest; No Third Party Beneficiaries..............................................26
Section 9.4 Entire Agreement...............................................................................26
Section 9.5 Severability...................................................................................26
Section 9.6 Survival of Representations, Warranties and Covenants..........................................26
Section 9.7 Governing Law..................................................................................26
Section 9.8 Captions.......................................................................................27
Section 9.9 Confidentiality; Publicity and Disclosures.....................................................27
Section 9.10 Notice.........................................................................................27
Section 9.11 Shareholder Releases; Consent..................................................................28
Section 9.12 Counterparts...................................................................................28
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MERGER AGREEMENT EXHIBITS
Exhibit A Definitions
Exhibit B Shareholder Breakdown
Exhibit C Security Agreement
Exhibit D Stock Escrow Agreement
Exhibit E Wittman Legal Opinion
Exhibit F Employment Agreement
Exhibit G Consulting Agreement
Exhibit H Noncompetition Agreement
Exhibit I Lock Up Agreement
Exhibit J Jackson Walker L.L.P. Legal Opinion
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement"), dated as of
October 2, 2000, is by and between Mesa Ridge Technologies, Inc. d/b/a Magma, a
California corporation (the "Company"), the holders of all of the outstanding
capital stock of the Company (collectively, the "Shareholders"), Mobility
Electronics, Inc., a Delaware corporation ("Parent"), and Magma Technologies,
Inc., a Delaware corporation and wholly-owned subsidiary of Parent ("Merger
Sub").
WITNESSETH:
WHEREAS, Parent, as the sole shareholder of Merger Sub, and the
respective Boards of Directors of Merger Sub and the Company have each approved
the merger of the Company with and into Merger Sub (the "Merger") in accordance
with the Delaware General Corporation Law (the "DGCL") and the provisions of
this Agreement; and
WHEREAS, it is intended for federal income tax purposes that the Merger
qualify as a reorganization within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants, promises, representations, warranties and agreements contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. Certain terms used in this Agreement are
defined in Exhibit A attached hereto.
ARTICLE II
THE MERGER, EFFECTIVE TIME AND MERGER CONSIDERATION
SECTION 2.1 THE MERGER. At the Effective Time, in accordance with this
Agreement and the DGCL, the Company shall be merged with and into Merger Sub,
the separate existence of the Company shall cease, and Merger Sub shall continue
as the surviving corporation (the "Surviving Corporation").
SECTION 2.2 EFFECT OF THE MERGER. At the Effective Time, the Surviving
Corporation shall thereafter possess all of the public and private rights,
privileges, powers, assets, liabilities and obligations of Merger Sub and the
Company.
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SECTION 2.3 CONSUMMATION OF THE MERGER. As soon as practicable after
the execution of this Agreement, the parties shall cause the Merger to be
consummated by filing with the Secretary of State of Delaware articles of merger
in such form as required by, and executed in accordance with, the relevant
provisions of the DGCL (the date and time of such filing, or such later date as
agreed by the parties and set forth therein, being the "Effective Date").
SECTION 2.4 ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS.
The Articles of Incorporation and Bylaws of the Surviving Corporation shall be
the Articles of Incorporation and Bylaws of Merger Sub as in effect immediately
prior to the Effective Time. The directors of Merger Sub immediately prior to
the Effective Time shall be the initial directors of the Surviving Corporation
and shall serve until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Articles of Incorporation and Bylaws and the
DGCL. The officers of Merger Sub immediately prior to the Effective Time shall
be the initial officers of the Surviving Corporation and shall serve until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's Articles of Incorporation and Bylaws and the DGCL.
SECTION 2.5 AGGREGATE MERGER CONSIDERATION. The aggregate consideration
to be received by the Shareholders holding shares of common stock, no par value,
of the Company (the "Magma Shares") in connection with the Merger shall be each
Shareholder's share of the following (as determined by the percentages set forth
in Exhibit B) (collectively, the "Merger Consideration"):
(a) CASH CONSIDERATION. $2,000,000 in immediately payable funds (the
"Cash Consideration"), with the previous $50,000 retainer applied against the
Cash Consideration.
(b) SHARE CONSIDERATION. The amount of common stock of Parent, par
value $0.01 per share (the "Parent Common Stock"), equal to the product of
$6,000,000 divided by the average closing price of the Parent Common Stock as
quoted on the Nasdaq National Market during the 30 calendar day period prior to
Closing (the "Share Consideration").
(c) PERFORMANCE EARN OUT.
(i) For each of the two consecutive twelve-month periods
beginning on the date of this Agreement, (the "First Earn Out Period"
and the "Second Earn Out Period", respectively), Parent shall pay to
the Shareholders (1) ten percent (10%) of the Incremental Revenues, if
any, and (2) an amount equal to the product of three (3) multiplied by
the Incremental Operating Income, if any, (together, the "Performance
Amount"). "Incremental Revenues" shall mean (A) during the First Earn
Out Period, the positive amount, if any, equal to the Surviving
Corporation's Revenues during the First Earn Out Period minus $6
million (the "Base Revenues"). Revenues shall include (a) net sales
derived from the products of Surviving Corporation in process and
existing (whether or not they include integration of Parent's Split
Bridge Technology) at the date of this Agreement; (b), all net sales by
Surviving Corporation (including sales of Parent's products) to those
existing and identified customers set forth on Schedule 3.31; (c) net
sales of existing and in process products (whether or not they include
Parent's Split
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Bridge Technology) of Surviving Corporation to any new customers of the
Surviving Corporation after the date of this Agreement; and (d) net
sales of Parent products or new Split Bridge products to any mutually
agreed upon new customers (the "Revenues") and (B) during the Second
Earn Out Period, the positive amount, if any, equal to the Surviving
Corporation's Revenues during the Second Earn Out Period minus the
greater of (A) the Revenues in the immediately preceding twelve month
period or (B) the Base Revenues. "Incremental Operating Income" shall
mean (A) for the First Earnout Period, the positive amount, if any,
equal to the Surviving Corporation's operating income during the First
Earnout Period minus $503,250 (the "Base Operating Income") and (B) for
the Second Earnout Period, the positive amount, if any, equal to the
Surviving Corporation's operating income during the Second Earn Out
Period minus the greater of (i) the Surviving Corporation's operating
income in the immediately preceding twelve month period, or (ii) the
Base Operating Income. The Incremental Revenues and the Incremental
Operating Income shall be calculated in accordance with GAAP, except
that the impact of any good will amortization resulting from this
transaction will not be included in any calculation. Parent shall make
an appropriate adjustment to the Base Revenues and Base Operating
Income if such amounts are changed as a result of the Audit.
(ii) Parent shall make annual payments of the Performance
Amount to Shareholders based upon their pro rata share as set forth on
Exhibit B within 60 days of the end of each Earn Out Period. The
Performance Amount shall be payable, in Parent Common Stock. For
purposes of such payment, Parent Common Stock shall be valued at the
Current Market Price.
(iii) Notwithstanding anything in this Agreement to the
contrary, the total Performance Amount, which includes any Performance
Amount for either Earn Out Period, to be paid by Parent shall not
exceed Nine Million Dollars ($9,000,000).
(iv) The performance of Parent's obligations to pay the
Performance Amount shall be secured by a security interest in certain
assets of the Company which security interest shall be in the form set
forth in Exhibit C (the "Security Agreement").
SECTION 2.6 CONVERSION OF SECURITIES. At the Effective Time, by virtue
of the Merger and without any action on the part of Parent, Merger Sub, the
Company or the Shareholders:
(a) Each Magma Share issued and outstanding immediately prior to the
Effective Time (other than Shares held in treasury of the Company) shall be
canceled and retired and be converted into the right to receive the portion of
the total Merger Consideration payable to the respective Shareholders as set
forth on Exhibit B.
(b) Each Magma Share which is issued and outstanding immediately prior
to the Effective Time and which is held in the treasury of the Company shall be
canceled and retired and no payment shall be made with respect thereto.
(c) As a result of the Merger and without any action on the part of the
Shareholders, all Magma Shares shall cease to be outstanding, shall be canceled
and returned and shall cease to
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exist, and each holder of a certificate formerly representing any Magma Shares
shall thereafter cease to have any rights with respect to such Magma Shares (a
"Certificate"), except the right to receive, without interest, a pro-rata
portion of the Merger Consideration in accordance with Section 2.5 and Exhibit B
upon the surrender of such Certificate.
(d) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger. In lieu thereof, cash in the amount of such
fractional share of Parent Common Stock will be paid for any fractional share
that would have otherwise been issued.
(e) At the Effective Time, each share of common stock, par value $0.01
per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time as a result of the Merger shall be automatically converted into
one newly and validly issued, fully paid and nonassessable share of common stock
of the Surviving Corporation.
SECTION 2.7 ADJUSTMENT OF MERGER CONSIDERATION. In the event that,
subsequent to the date of this Agreement but prior to the Effective Time, the
outstanding shares of Parent Common Stock or Magma Stock, respectively, shall
have been changed into a different number of shares or a different class as a
result of a stock split, reverse stock split, stock dividend, subdivision,
reclassification, split, combination, exchange, recapitalization or other
similar transaction, the shares of Parent Common Stock included in the Merger
Consideration shall be appropriately adjusted.
SECTION 2.8 PAYMENT OF TAXES. Parent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any former holder of Magma Stock such amounts as Parent is required to deduct
and withhold with respect to the making of such payment under the Code, or any
other provision of federal, state, local or foreign tax law, and Parent shall
timely pay any such amounts deducted and withheld to the appropriate taxing
agency for the account of the party from whom such amounts were withheld. To the
extent that amounts are so withheld by Parent, the withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the former
holder of the Magma Stock in respect of which such deduction and withholding was
made by Parent.
SECTION 2.9 ESCROWED SHARES. Notwithstanding anything to the contrary
in this Agreement, Parent shall withhold in the aggregate twenty percent (20%)
of Parent Common Stock to be issued to the Shareholders pursuant to this
Agreement (the "Escrowed Shares"), which Escrowed Shares shall be held pursuant
to the terms of that certain Stock Escrow Agreement, substantially in the form
attached hereto as Exhibit D.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that the
following are true and correct as of the date hereof:
SECTION 3.1 ORGANIZATION AND GOOD STANDING; QUALIFICATION. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of California, with all requisite corporate power and
authority to carry on the business in which it is
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engaged, to own the properties it owns, to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The Company is duly
qualified and licensed to do business and is in good standing in all
jurisdictions where the nature of its business makes such qualification
necessary, which jurisdictions are listed in Schedule 3.1, except where the
failure to be qualified or licensed would not have a material adverse effect on
the business of the Company. The Company does not have any assets, employees or
offices in any state other than the states listed in Schedule 3.1.
SECTION 3.2 CAPITALIZATION. The authorized capital stock of the Company
consists of (i) 1,000,000 shares of common stock, no par value, of which 20,417
shares are issued and outstanding and no shares of such capital stock are held
in the treasury of the Company. All of issued and outstanding shares of capital
stock of the Company are duly authorized, validly issued, fully paid and
nonassessable. There exist no options, warrants, subscriptions or other rights
to purchase, or securities convertible into or exchangeable for, the capital
stock of the Company. Neither Shareholders nor the Company are parties to or
bound by, nor do they have any knowledge of, any agreement, instrument,
arrangement, contract, obligation, commitment or understanding of any character,
whether written or oral, express or implied, relating to the sale, assignment,
encumbrance, conveyance, transfer or delivery of any capital stock of the
Company. No shares of capital stock of the Company have been issued or disposed
of in violation of the preemptive rights of any of the Company's shareholders.
All accrued dividends on the capital stock of the Company, whether or not
declared, have been paid in full.
SECTION 3.3 CORPORATE RECORDS. The copies of the Articles of
Incorporation and all amendments thereto and the Bylaws of the Company that have
been delivered to Parent are true, correct and complete copies thereof, as in
effect on the date hereof. The minute books of the Company, copies of which have
been delivered to Parent, contain accurate minutes of all meetings of, and
accurate consents to all actions taken without meetings by, the Board of
Directors (and any committees thereof) and the shareholders of the Company since
the formation of the Company.
SECTION 3.4 AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by the Company of this Agreement and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by the Company. This Agreement and
each other agreement contemplated hereby have been duly executed and delivered
by the Company and constitute legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally or the availability of equitable
remedies.
SECTION 3.5 SUBSIDIARIES. The Company does not own, directly or
indirectly, any of the capital stock of any other corporation or any equity,
profit sharing, participation or other interest in any corporation, partnership,
joint venture or other entity.
SECTION 3.6 NO VIOLATION. Neither the execution, delivery or
performance of this Agreement or the other agreements contemplated hereby nor
the consummation of the transactions contemplated hereby or thereby will (i)
conflict with, or result in a violation or breach of the terms, conditions or
provisions of, or constitute a default under, the Articles of
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Incorporation or Bylaws of the Company or any agreement, indenture or other
instrument under which the Company is bound or to which the Magma Stock or any
of the assets of the Company are subject, or result in the creation or
imposition of any security interest, lien, charge or encumbrance upon the Magma
Stock or any of the assets of the Company, or (ii) violate or conflict with any
judgment, decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction over the Company,
the Magma Stock or the assets of the Company. The Company has complied with all
laws, regulations and licensing requirements and has filed with the proper
authorities all necessary statements and reports.
SECTION 3.7 CONSENTS. Except as set forth in Schedule 3.7, no consent,
authorization, approval, permit or license of, or filing with, any governmental
or public body or authority, any lender or lessor or any other person or entity
is required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement or the agreements contemplated hereby
on the part of the Company.
SECTION 3.8 FINANCIAL STATEMENTS. The Company has furnished to Parent
the unaudited balance sheet and related unaudited statements of income, retained
earnings and cash flows for each of the three twelve-month periods prior to and
ended June 30, 2000, including the notes thereto (collectively, the "Financial
Statements"). The Financial Statements are in accordance with the books and
records of the Company, fairly present the financial condition and results of
operations of the Company as of the dates and for the periods indicated in
accordance with income tax practices applied on a consistent basis.
The Company has the requisite historical financial information and data
to support an audit of its Financial Statements (the "Financial Statement
Support") to comply with Regulation S-X for the filing of financial statements
under Form 8-K pursuant to the Securities Exchange Act of 1934 (the "Audit").
SECTION 3.9 LIABILITIES AND OBLIGATIONS. Except as set forth in
Schedule 3.9, the Financial Statements reflect all liabilities of the Company,
accrued, contingent or otherwise (known or unknown and asserted or unasserted),
arising out of transactions effected or events occurring on or prior to the date
hereof. All reserves shown in the Financial Statements are appropriate,
reasonable and sufficient to provide for losses thereby contemplated. Except as
set forth in the Financial Statements, the Company is not liable upon or with
respect to, or obligated in any other way to provide funds in respect of or to
guarantee or assume in any manner, any debt, obligation or dividend of any
person, corporation, association, partnership, joint venture, trust or other
entity, and neither the Company nor Shareholders know of any basis for the
assertion of any other claims or liabilities of any nature or in any amount.
SECTION 3.10 EMPLOYEE MATTERS.
(a) CASH COMPENSATION. Schedule 3.10(a) contains a complete and
accurate list of the names, titles and cash compensation, including without
limitation wages, salaries, bonuses (discretionary and formula) and other cash
compensation (the "Cash Compensation") of (i) all employees of the Company and
(ii) consultants who were paid in excess of $5,000 during the past twelve
months. In addition, Schedule 3.10(a) contains a complete and accurate
description
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of (i) all increases in Cash Compensation of employees of the Company during the
current and immediately preceding fiscal years of the Company and (ii) any
promised increases in Cash Compensation of employees of the Company that have
not yet been effected.
(b) COMPENSATION PLANS. Schedule 3.10(b) contains a complete and
accurate list of all compensation plans, arrangements or practices (the
"Compensation Plans") sponsored by the Company or to which the Company
contributes on behalf of its employees, other than Employee Benefit Plans listed
in Schedule 3.11(a). The Compensation Plans include without limitation plans,
arrangements or practices that provide for severance pay, deferred compensation,
incentive, bonus or performance awards, and stock ownership or stock options.
The Company has provided Parent a copy of each written Compensation Plan and has
provided on Schedule 3.10(b) a written description of each unwritten
Compensation Plan. Each of the Compensation Plans can be terminated or amended
at will by the Company.
(c) EMPLOYMENT AGREEMENTS. Schedule 3.10(c) contains a complete and
accurate list of all employment agreements (the "Employment Agreements") to
which the Company is a party with respect to its employees. The Employment
Agreements include without limitation employee leasing agreements, employee
services agreements and noncompetition agreements. Set forth on Schedule
3.10(c)(i) is a list of each written Employment Agreement and a written
description of each unwritten Employment Agreement that the Company has provided
to Parent.
(d) EMPLOYEE POLICIES AND PROCEDURES. Schedule 3.10(d) contains a
complete and accurate list of all employee manuals, policies, procedures and
work-related rules (the "Employee Policies and Procedures") that apply to
employees of the Company. The Company has provided Parent a copy of all written
Employee Policies and Procedures and has provided on Schedule 3.10(d) a written
description of all unwritten Employee Policies and Procedures. Each of the
Employee Policies and Procedures can be amended or terminated at will by the
Company.
(e) UNWRITTEN AMENDMENTS. Except as set forth on Schedule 3.10(e), no
unwritten amendments have been made, whether by oral communication, pattern of
conduct or otherwise, with respect to any Compensation Plans, Employment
Agreements or Employee Policies and Procedures.
(f) LABOR COMPLIANCE. Except as set forth in Schedule 3.10(f), the
Company (i) has been and is in compliance with all laws, rules, regulations and
ordinances respecting employment and employment practices, terms and conditions
of employment and wages and hours, and (ii) is not liable for any arrears of
wages or penalties for failure to comply with any of the foregoing. The Company
has not engaged in any unfair labor practice or discriminated on the basis of
race, color, religion, sex, national origin, age or handicap in its employment
conditions or practices. There are no (i) unfair labor practice charges or
complaints or racial, color, religious, sex, national origin, age or handicap
discrimination charges or complaints pending or threatened against the Company
before any federal, state or local court, board, department, commission or
agency nor does any basis therefor exist or (ii) existing or threatened labor
strikes, disputes, grievances, controversies or other labor troubles affecting
the Company nor does any basis therefor exist.
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(g) UNIONS. The Company has never been a party to any agreement with
any union, labor organization or collective bargaining unit. No employees of the
Company are represented by any union, labor organization or collective
bargaining unit. To the best knowledge of the Company, the employees of the
Company have no intention to and have not threatened to organize or join a
union, labor organization or collective bargaining unit.
(h) ALIENS. All employees of the Company are citizens of, or are
authorized to be employed in, the United States.
SECTION 3.11 EMPLOYEE BENEFIT PLANS.
(a) IDENTIFICATION. Schedule 3.11(a) contains a complete and accurate
list of all employee benefit plans (the "Employee Benefit Plans") (within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) sponsored by the Company or to which the Company
contributes on behalf of its employees and all Employee Benefit Plans previously
sponsored or contributed to on behalf of its employees within the three years
preceding the date hereof. The Company has provided Parent with copies of all
plan documents, determination letters, pending determination letter
applications, trust instruments, insurance contracts, administrative services
contracts, annual reports, actuarial valuations, summary plan descriptions,
summaries of material modifications, administrative forms and other documents
that constitute a part of or are incident to the administration of the Employee
Benefit Plans. In addition, the Company has provided Parent a written
description of all existing practices engaged in by the Company or any
Subsidiary that constitute Employee Benefit Plans. Each of the Employee Benefit
Plans can be terminated or amended at will by the Company, as the case may be.
No unwritten amendment exists with respect to any Employee Benefit Plan.
(b) ADMINISTRATION. Each Employee Benefit Plan has been administered
and maintained in compliance with all laws, rules and regulations.
(c) EXAMINATIONS. No Employee Benefit Plan is currently the subject of
an audit, investigation, enforcement action or other similar proceeding
conducted by any state or federal agency.
(d) PROHIBITED TRANSACTIONS. No prohibited transactions (within the
meaning of Section 4975 of the Code) have occurred with respect to any Employee
Benefit Plan.
(e) CLAIMS AND LITIGATION. No threatened or pending claims, suits or
other proceedings exist with respect to any Employee Benefit Plan other than
normal benefit claims filed by participants or beneficiaries.
(f) QUALIFICATION. The Company has received a favorable determination
letter or ruling from the Internal Revenue Service for each Employee Benefit
Plan intended to be qualified within the meaning of Section 401(a) of the Code
and/or tax-exempt within the meaning of Section 501(a) of the Code. No
proceedings exist or have been threatened that could result in the revocation of
any such favorable determination letter or ruling.
(g) FUNDING STATUS. No accumulated funding deficiency (within the
meaning of Section 412 of the Code), whether waived or unwaived, exists with
respect to any Employee
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Benefit Plan or any plan sponsored by any member of a controlled group (within
the meaning of Section 412(n)(6)(B) of the Code) in which the Company is a
member (a "Controlled Group"). With respect to each Employee Benefit Plan
subject to Title IV of ERISA, the assets of each such plan are at least equal in
value to the present value of accrued benefits determined on an ongoing basis as
of the date hereof. With respect to each Employee Benefit Plan described in
Section 501(c)(9) of the Code, the assets of each such plan are at least equal
in value to the present value of accrued benefits as of the date hereof.
Schedule 3.11(g) contains a complete and accurate statement of all actuarial
assumptions applied to determine the present value of accrued benefits under all
Employee Benefit Plans subject to actuarial assumptions.
(h) EXCISE TAXES. Neither the Company nor any member of a Controlled
Group has any liability to pay excise taxes with respect to any Employee Benefit
Plan under applicable provisions of the Code or ERISA.
(i) MULTIEMPLOYER PLANS. Neither the Company nor any member of a
Controlled Group is or ever has been obligated to contribute to a multiemployer
plan within the meaning of Section 3(37) of ERISA.
(j) PBGC. No facts or circumstances exist that would result in the
imposition of liability against Parent by the Pension Benefit Guaranty Company
as a result of any act or omission by the Company, any Subsidiary or any member
of a Controlled Group. No reportable event (within the meaning of Section 4043
of ERISA) for which the notice requirement has not been waived has occurred with
respect to any Employee Benefit Plan subject to the requirements of Title IV of
ERISA.
(k) RETIREES. The Company has no obligation or commitment to provide
medical, dental or life insurance benefits to or on behalf of any of its
employees who may retire or any of its former employees who have retired from
employment with the Company.
SECTION 3.12 ABSENCE OF CERTAIN CHANGES. Except as set forth in
Schedule 3.12, since January 1, 2000, the Company has not
(a) suffered any material adverse change, whether or not caused by any
deliberate act or omission of the Company, or any Shareholder, in its condition
(financial or otherwise), operations, assets, liabilities, business or
prospects;
(b) contracted for the purchase of any capital assets having a cost in
excess of $5,000 or paid any capital expenditures in excess of $5,000;
(c) incurred any indebtedness for borrowed money or issued or sold any
debt securities;
(d) incurred or discharged any liabilities or obligations except in the
ordinary course of business;
(e) paid any amount on any indebtedness prior to the due date, forgiven
or cancelled any debts or claims or released or waived any rights or claims;
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(f) mortgaged, pledged or subjected to any security interest, lien,
lease or other charge or encumbrance any of its properties or assets;
(g) suffered any damage or destruction to or loss of any assets
(whether or not covered by insurance) that has materially and adversely
affected, or could materially and adversely affect, its business;
(h) acquired or disposed of any assets except in the ordinary course of
business;
(i) written up or written down the carrying value of any of its assets;
(j) changed the costing system or depreciation methods of accounting
for its assets;
(k) waived any material rights or forgiven any material claims;
(l) lost or terminated any employee, customer or supplier, the loss or
termination of which has materially and adversely affected, or could materially
and adversely affect, its business or assets;
(m) increased the compensation of any director or officer;
(n) increased the compensation of any employee except in the ordinary
course of business;
(o) made any payments to or loaned any money to any person or entity
referred to in Section 3.36;
(p) formed or acquired or disposed of any interest in any corporation,
partnership, joint venture or other entity;
(q) declared or paid any dividends or declared or made any
distributions to its shareholders;
(r) redeemed, purchased or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any of its capital stock or
securities or any rights to acquire such capital stock or securities, or agreed
to change the terms and conditions of any such rights;
(s) entered into any agreement with any person or group, or modified or
amended in any material respect the terms of any such existing agreement except
in the ordinary course of business;
(t) entered into, adopted or amended any Employee Benefit Plan; or
(u) entered into any other commitment or transaction or experienced any
other event that is material to this Agreement or to any of the other agreements
and documents executed or to be executed pursuant to this Agreement or to the
transactions contemplated hereby or thereby, or that has materially and
adversely affected, or could materially and adversely affect, the
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condition (financial or otherwise), operations, assets, liabilities, business or
prospects of the Company.
SECTION 3.13 TITLE; LEASED ASSETS.
(a) REAL PROPERTY. A description of all interests in real property
owned by the Company (collectively, the "Real Property") is set forth in
Schedule 3.13(a). Except as set forth in Schedule 3.13(a), the Company has good,
valid and marketable title to all the Real Property. The Real Property and the
leased real property referred to in Section 3.13(c) constitute the only real
property used in the conduct of the business of the Company.
(b) PERSONAL PROPERTY. Except as set forth in Schedule 3.13(b), the
Company has good, valid and marketable title to all tangible and intangible
personal property owned by them (collectively, the Personal Property"). The
Personal Property and the leased personal property referred to in Section
3.14(c) constitute the only personal property used in the conduct of the
business of the Company.
(c) LEASES. A list and brief description of all leases of real and
personal property to which the Company is a party, either as lessor or lessee,
are set forth in Schedule 3.13(c). All such leases are valid and enforceable in
accordance with their respective terms except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
the availability of equitable remedies.
(d) RIGHT TO USE ASSETS. Except for those assets acquired since
December 31, 1999, which are listed in Schedule 3.13(d), all tangible and
intangible assets used in the conduct of the business of the Company are
reflected in the Financial Statements in a manner that is in conformity with
income tax accounting practices applied on a consistent basis. The Company owns,
leases or otherwise possesses a right to use all assets used in the conduct of
the business of the Company, which will not be impaired by the consummation of
the transactions contemplated hereby.
SECTION 3.14 COMMITMENTS.
(a) Commitments; Defaults. Except as set forth in Schedule 3.14, the
Company has not entered into, nor are the Magma Stock, the assets or the
business of the Company bound by, whether or not in writing, any
(i) partnership or joint venture agreement;
(ii) deed of trust or other security agreement;
(iii) guaranty or suretyship, indemnification or contribution
agreement or performance bond;
(iv) employment, consulting or compensation agreement or
arrangement, including the election or retention in office of any
director or officer;
(v) labor or collective bargaining agreement;
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(vi) debt instrument, loan agreement or other obligation relating
to indebtedness for borrowed money or money lent or to be lent to
another;
(vii) deed or other document evidencing an interest in or contract
to purchase or sell real property;
(viii) agreement with dealers or sales or commission agents, public
relations or advertising agencies, accountants or attorneys;
(ix) lease of real or personal property, whether as lessor, lessee,
sublessor or sublessee;
(x) agreement between the Company and any affiliate of the Company;
(xi) agreement relating to any material matter or transaction in
which an interest is held by a person or entity that is an affiliate of
the Company;
(xii) any agreement for the acquisition of services, supplies,
equipment or other personal property and involving more than $5,000 in
the aggregate;
(xiii) powers of attorney;
(xiv) contracts containing noncompetition covenants;
(xv) any other contract or arrangement that involves either an
unperformed commitment in excess of $5,000 or that terminates more than
30 days after the date hereof;
(xvi) agreement relating to any material matter or transaction in
which an interest is held by any person or entity referred to in Section
3.36;
(xvii) agreement providing for the purchase from a supplier of all
or substantially all of the requirements of the Company of a particular
product or service; or
(xviii) any other agreement or commitment not made in the ordinary
course of business or that is material to the business or financial
condition of the Company.
All of the foregoing are hereinafter collectively referred to as the
"Commitments." True, correct and complete copies of the written Commitments have
heretofore been delivered or made available to Parent, and true, correct and
complete written descriptions of the oral Commitments, are set forth on Schedule
3.14. There are no existing defaults, events of default or events, occurrences,
acts or omissions that, with the giving of notice or lapse of time or both,
would constitute defaults by the Company, and no penalties have been incurred
nor are amendments pending, with respect to the Commitments, except as described
in Schedule 3.14. The Commitments are in full force and effect and are valid and
enforceable obligations of the parties thereto in accordance with their
respective terms, and no defenses, off-sets or counterclaims have been asserted
or, to the best knowledge of the Company and Shareholders, may be made by any
party thereto, nor has the Company waived any rights thereunder, except as
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described in Schedule 3.14. The Company has not received notice of any default
with respect to any Commitment.
(b) NO CANCELLATION OR TERMINATION OF COMMITMENT. Except as
contemplated hereby, neither the Company nor any Shareholder has received notice
of any plan or intention of any other party to any Commitment to exercise any
right to cancel or terminate any Commitment or agreement, and neither the
Company nor any Shareholder knows of any fact that would justify the exercise of
such a right. Neither the Company nor any Shareholder currently contemplates, or
has reason to believe any other person or entity currently contemplates, any
amendment or change to any Commitment. Except as listed in Schedule 3.14, none
of the customers or suppliers of the Company has refused, or communicated that
it will or may refuse, to purchase or supply goods or services, as the case may
be, or has communicated that it will or may substantially reduce the amounts of
goods or services that it is willing to purchase from, or sell to, the Company.
SECTION 3.15 ADVERSE AGREEMENTS. The Company is not a party to any
agreement or instrument or subject to any charter or other corporate restriction
or any judgment, order, writ, injunction, decree, rule or regulation that
materially and adversely affects, or so far as the Company or any Shareholder
can now foresee, may in the future materially and adversely affect, the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of the Company.
SECTION 3.16 INSURANCE. The Company carries property, liability,
workers' compensation and such other types of insurance as is customary in the
industry of the insured. A list and brief description of all insurance policies
of the Company are set forth in Schedule 3.16. All of such policies are valid
and enforceable policies, issued by insurers of recognized responsibility in
amounts and against such risks and losses as is customary in the industry of the
insured. Such insurance shall be outstanding and duly in force without
interruption up to and including the date of this Agreement,. True, complete and
correct copies of all such policies have been provided to Parent on or prior to
the date hereof.
SECTION 3.17 PATENTS, TRADE-MARKS, SERVICE MARKS AND COPYRIGHTS.
(a) OWNERSHIP. The Company owns all patents, trade-marks, service marks
and copyrights, if any, necessary to conduct its business, or possesses adequate
licenses or other rights, if any, therefor, without conflict with the rights of
others. Set forth in Schedule 3.17 is a true and correct description of the
following (the "Proprietary Rights"): (i) all trade-marks, trade-names, service
marks and other trade designations, including common law rights, registrations
and applications therefor, and all patents, patents pending, patent
applications, copyrights and applications currently owned, in whole or in part,
by the Company with respect to the business of the Company, and all licenses,
royalties, assignments and other similar agreements relating to the foregoing to
which the Company is a party (including expiration date if applicable); and (ii)
all agreements relating to technology, know-how or processes that the Company is
licensed or authorized to use by others, or which it licenses or authorizes
others to use.
(b) CONFLICTING RIGHTS OF THIRD PARTIES. The Company has the sole and
exclusive right to use the Proprietary Rights without infringing or violating
the rights of any third parties.
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Use of the Proprietary Rights does not require the consent of any other person
and the Proprietary Rights are freely transferable. No claim has been asserted
by any person to the ownership of or right to use any Proprietary Right or
challenging or questioning the validity or effectiveness of any license or
agreement constituting a part of any Proprietary Right, and the Company does not
know of any valid basis for any such claim. Each of the Proprietary Rights is
valid and subsisting, has not been cancelled, abandoned or otherwise terminated
and, if applicable, has been duly issued or filed.
(c) CLAIMS OF OTHER PERSONS. Except as set forth on Schedule 3.14(c),
the Company and Shareholders have no knowledge of any claim that, or inquiry as
to whether, any product, activity or operation of the Company infringes upon or
involves, or has resulted in the infringement of, any proprietary right of any
other person, corporation or other entity; and no proceedings have been
instituted, are pending or are threatened that challenge the rights of the
Company with respect thereto. Except as set forth in Schedule 3.17(c), the
Company has not given and is not bound by any agreement of indemnification for
any Proprietary Right as to any property manufactured, used or sold by it.
SECTION 3.18 TRADE SECRETS AND CUSTOMER LISTS. The Company has the
right to use, free and clear of any claims or rights of others except claims or
rights specifically set forth in Schedule 3.18, all trade secrets, customer
lists and proprietary information required for the marketing of all merchandise
and services formerly or presently sold or marketed by the Company. The Company
is not using or in any way making use of any confidential information or trade
secrets of any third party, including without limitation any past or present
employee of the Company.
SECTION 3.19 TAXES.
(a) All Tax Returns required to be filed before the date hereof by the
Company with respect to any of its income, properties or operations, are in all
material respects true, complete and correct and have been duly filed in a
timely manner, and all taxes shown as due on such Tax Returns have been paid,
except where the failure to so file or pay would not have a material adverse
effect on the Company. For purposes of this Agreement, "Tax Return" means any
return, report, statement, information statement and the like required to be
filed with any authority with respect to any tax imposed by any governmental
authority; "Tax" means any tax of any nature whatsoever, levy, assessment,
tariff, duty, deficiency, or other fee, any amount that is required to be
withheld or collected and remitted to any Governmental Entity pursuant to
applicable law, and any related charge or amount (including any fine, penalty,
interest or addition to tax), imposed, assessed or collected by or under the
authority of any Governmental Entity or payable pursuant to any tax-sharing
agreement or other contract relating to the sharing or payment of any Tax; and
"Governmental Entity" means any (i) national, state, county, city, district, or
other jurisdiction of any nature; (ii) federal, state, local, municipal,
foreign, or other government; (iii) governmental or quasi-governmental authority
of any nature; (iv) multinational organization or body; or (v) body exercising,
or entitled to exercise, any administrative, executive, judicial, legislative,
police, regulatory, or taxing authority or power of any nature.
(b) The amount of the Company's liability for unpaid Taxes does not in
the aggregate, exceed the Company's current liability accrual for Taxes.
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(c) To the Company's knowledge, (i) there are no claims, investigations
or assessments pending or threatened against the Company for any alleged
deficiency in taxes, (ii) there is no audit or investigation currently being
conducted that could cause the Company to be liable for any taxes, which in any
case would have a material adverse effect on the Company; and (iii) and no
Governmental Entity has proposed in writing any adjustment relating to any Tax
Return that has not been adequately provided for or satisfied.
(d) The Company has complied in all material respects with all Tax
withholding provisions of applicable federal, state and local laws and have paid
over to the proper governmental authorities all amounts required to be so
withheld or paid over before the date hereof, except where the failure to so
withhold or pay would not have a material adverse effect on the Company.
(e) The Company has never been a member of an affiliated group as
defined in Code Section 1504 nor has the Company ever been a party to any
tax-sharing agreement with any entity, or assumed the liability of any other
person for the payment of any Taxes.
(f) The Company has not filed a consent pursuant to Section 341(f) of
the Code (or any corresponding provision of state, local or foreign income tax
law). The Company has not made any payments, is not obligated to make any
payments, nor is a party to any agreement that under certain circumstances could
obligate it to make any payments that will not be deductible under Code Section
280G.
SECTION 3.20 COMPLIANCE WITH LAWS. The Company has complied with all
laws, regulations and licensing requirements and has filed with the proper
authorities all necessary statements and reports. There are no existing
violations by the Company or Shareholders of any federal, state or local law or
regulation that could affect the property or business of the Company. The
Company possesses all necessary licenses, franchises, permits and governmental
authorizations to conduct its business as now conducted, all of which are listed
in Schedule 3.20.
SECTION 3.21 FINDER'S FEE. The Company has not incurred any obligation
for any finder's, broker's or agent's fee in connection with the transactions
contemplated hereby.
SECTION 3.22 LITIGATION. Except as described in Schedule 3.22, there
are no legal actions or administrative proceedings or investigations instituted,
or to the best knowledge of the Company or Shareholders threatened, against or
affecting, or that could affect, the Company, any of the Magma Stock, or the
business of the Company. Neither the Company nor Shareholders are (i) subject to
any continuing court or administrative order, writ, injunction or decree
applicable specifically to the Company or to its business, assets, operations or
employees or (ii) in default with respect to any such order, writ, injunction or
decree. Neither the Company nor Shareholders know of any basis for any such
action, proceeding or investigation.
SECTION 3.23 ACCURACY OF INFORMATION FURNISHED. All information
furnished to Parent by the Company or any Shareholder hereby or in connection
with the transactions contemplated hereby is true, correct and complete in all
respects. Such information states all facts required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which such statements are made, true, correct and complete.
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SECTION 3.24 CONDITION OF FIXED ASSETS. All of the plants, structures
and equipment (the "Fixed Assets") owned by the Company are in good condition
and repair for their intended use in the ordinary course of business and conform
in all material respects with all applicable ordinances, regulations and other
laws and there are no known latent defects therein.
SECTION 3.25 INVENTORY. All of the inventory owned by the Company is in
good, current, standard and merchantable condition and is not obsolete or
defective. Purchase commitments for merchandise are not in excess of normal
requirements and, taken as a whole, are not at prices in excess of market
prices. At the date of this Agreement, the Company has the types and quantities
of inventories appropriate, taken as a whole, to conduct its business
consistently with past practices.
SECTION 3.26 BOOKS OF ACCOUNT. The books of account of the Company have
been kept accurately in the ordinary course of business, the transactions
entered therein represent bona fide transactions and the revenues, expenses,
assets and liabilities of the Company have been properly recorded in such books.
SECTION 3.27 CORPORATE NAME. There are no actions, suits or proceedings
pending, or to the best knowledge of the Company or Shareholders threatened,
against or affecting the Company that could result in any impairment of the
right of the Company or any such Subsidiary to use the name "Magma". To the best
knowledge of the Company and Shareholders, the use of the name "Magma" does not
infringe the rights of any third party nor is it confusingly similar with the
corporate name of any third party. After the date of this Agreement, no person
or business entity other than the Company will be authorized, directly or
indirectly, to use the name "Magma" or any name confusingly similar thereto.
SECTION 3.28 BACKLOG. Schedule 3.28 sets forth the backlog of the
business of the Company as of the date of this Agreement and has been accurately
derived from the internal records of backlog of unfilled firm orders for
products manufactured or sold by the Company as of the date hereof.
SECTION 3.29 ACCOUNTS RECEIVABLE. Schedule 3.29 sets forth the accounts
receivable of the Company from sales made as of the date of this Agreement and
the payments and rights to receive payments related thereto. All such accounts
receivable have arisen from bona fide transactions in the ordinary course of
business and are valid and enforceable claims subject to no right of set-off or
counterclaim.
SECTION 3.30 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or
dividend of any kind has been declared or paid by the Company on any of its
capital stock at any time. No repurchase of any of the capital stock of the
Company has been approved or effected by the Company at any time.
SECTION 3.31 CUSTOMERS. Set forth in Schedule 3.31 is a complete and
accurate list of all of the customers of the Company in terms of sales for each
of the last two fiscal years and the current fiscal year to date, showing, with
respect to each, the name, address and pricing and sales records relating to
such customer.
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SECTION 3.32 SUPPLIERS. Set forth in Schedule 3.32 is a complete and
accurate list of the twenty largest suppliers of the Company in terms of dollar
volume of transactions for each of the last two fiscal years and the current
fiscal year to date, showing, with respect to each, the name, address and
aggregate dollar volume of purchases from such supplier.
SECTION 3.33 PRICING. Set forth in Schedule 3.33 is a complete and
accurate list of the standard prices and any applicable discounts by customer
name for the Company.
SECTION 3.34 PRODUCT WARRANTIES. Except as set forth on Schedule 3.34,
there is no claim against or liability of the Company on account of product
warranties or with respect to the manufacture, sale or rental of defective
products and there is no basis for any such claim on account of defective
products heretofore manufactured, sold or rented that is not fully covered by
insurance.
SECTION 3.35 BANKING RELATIONS. Set forth in Schedule 3.35 is a
complete and accurate list of all arrangements that the Company has with any
bank or other financial institution, indicating with respect to each
relationship the type of arrangement maintained (such as checking account,
borrowing arrangements, safe deposit box, etc.) and the person or persons
authorized in respect thereof.
SECTION 3.36 OWNERSHIP INTERESTS OF INTERESTED PERSONS. Except as set
forth in Schedule 3.36, no officer, supervisory employee, director or
shareholder of the Company or any Subsidiary, or their respective spouses or
children, owns directly or indirectly, on an individual or joint basis, any
material interest in, or serves as an officer or director of, any customer or
supplier of the Company, or any organization that has a material contract or
arrangement with the Company.
SECTION 3.37 ENVIRONMENTAL MATTERS.
The Company (i) has obtained all applicable permits, licenses and other
authorizations which are required under foreign, federal, state or local laws
relating to pollution or protection of the environment, including laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into ambient air,
surface water, ground water or land or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants or hazardous or toxic materials or wastes
by the Company (or its agents) ("Environmental Laws"); (ii) is in compliance
with all terms and conditions of such required permits, licenses and
authorizations, and also are in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in such laws or contained in any regulation,
code, plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder; (iii) is not aware of nor has received
notice of any event, condition, circumstance, activity, practice, incident,
action or plan which is reasonably likely to interfere with or prevent continued
compliance with or which would give rise to any common law or statutory
liability, or otherwise form the basis of any claim, action, suit or proceeding,
based on or resulting from the Company's (or any of its agents') manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling or the emission, discharge or release into the environment, of any
pollutant, contaminant, or hazardous or toxic
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material or waste; and (iv) has taken all actions necessary under applicable
requirements of foreign, federal, state or local laws, rules or regulations to
register any products or materials required to be registered by the Company (or
any of its agents) thereunder.
SECTION 3.38 CERTAIN PAYMENTS. To the best knowledge of the Company,
neither the Company nor Shareholders nor any director, officer or employee of
the Company has paid or caused to be paid, directly or indirectly, in connection
with the business of the Company: (a) to any government or agency thereof or any
agent of any supplier or customer any bribe, kick-back or other similar payment;
or (b) any contribution to any political party or candidate (other than from
personal funds of directors, officers or employees not reimbursed by their
respective employers or as otherwise permitted by applicable law).
SECTION 3.39 ACCRUALS OF THE FINANCIAL STATEMENTS. The Company has
accrued on the Financial Statements and has appropriate documentation to support
(i) the accrual of up to $170,000 for certain loans and advances to the Company
made by the Shareholders or certain corporations owned by the Shareholders
("Accrued Loans") and (ii) the accrual of $266,731 for compensation payable to
certain corporations owned by the individual Shareholders (the "Accrued
Compensation").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder, as to itself, represents and warrants to Parent and
Merger Sub that the following are true and correct as of the date hereof:
SECTION 4.1 AUTHORITY AND OWNERSHIP.
(a) Such Shareholder has all requisite power and authority to execute
and deliver this Agreement and the Escrow Agreement and to consummate the
transactions contemplated hereby. All necessary action required to have been
taken by or on behalf of such Shareholder by applicable law or otherwise to
authorize (i) the approval, execution and delivery on its behalf of this
Agreement and the Escrow Agreement and (ii) its performance of its obligations
under this Agreement and the Escrow Agreement and the consummation of the
transactions contemplated hereby and thereby have been taken. This Agreement and
the Escrow Agreement constitutes such Shareholder's valid and binding agreement,
enforceable against such Shareholder in accordance with its terms, except (A) as
the same may be limited by applicable bankruptcy, insolvency, moratorium or
similar laws of general application relating to or affecting creditors' rights,
including without limitation, the effect of statutory or other laws regarding
fraudulent conveyances and preferential transfer, and (B) for the limitations
imposed by general principles of equity.
(b) Except as set forth on Schedule 4.1(b), such Shareholder owns,
beneficially and of record, good and marketable title to the Magma Stock listed
opposite its name on Exhibit B, free and clear of all security interests, liens,
adverse claims, encumbrances, equities, proxies, options, voting agreements,
shareholders' agreements or restrictions.
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SECTION 4.2 NO BREACH. The execution and delivery of this Agreement and
the Escrow Agreement do not, and the consummation of the transactions
contemplated hereby or thereby will not, (i) violate or conflict with and
organizational or governance document of such Shareholder or (ii) constitute a
breach or default (or an event that with notice or lapse of time or both would
become a breach or default) or give rise to any lien, third party right of
termination, cancellation, material modification or acceleration under any
agreement, understanding or undertaking to which such Shareholder is a party or
by which it is bound, or (iii) constitute a violation of any law, rule or
regulation to which such Shareholders is subject.
SECTION 4.3 CONSENTS AND APPROVALS. Neither the execution and delivery
by such Shareholder of this Agreement or the Escrow Agreement nor the
consummation by such Shareholder of the transactions contemplated hereby or
thereby will require such Shareholder to obtain any consent, approval,
authorization or permit of, or to make any filing with or give any notification
to, any governmental or regulatory authority, any lender or lessor or any other
person or entity.
SECTION 4.4 BROKERS AND FINDERS. Such Shareholder has not employed any
broker or finder or incurred any liability for any brokerage fees, commissions
or finder's fees in connection with the transactions contemplated herein.
SECTION 4.5 INVESTMENT REPRESENTATION. In connection with the receipt
of the Parent Common Stock, such Shareholder has been advised that the issuance
of the Parent Common Stock has not been registered with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act"), and the Parent Common Stock is being issued to the
Shareholders in reliance upon an exemption from such registration. In that
regard, such Shareholder is sophisticated in financial matters and is able to
evaluate the risks and benefits relating to the acquisition of the Parent Common
Stock. The Parent Common Stock is to be acquired for such Shareholder's own
account and not with a view to, or intention of, distribution thereof in
violation of the Securities Act, or any applicable state securities laws, and
the Parent Common Stock will not be disposed of by such Shareholder in
contravention of the Securities Act or any applicable state securities laws.
Such Shareholder understands that Parent is under no obligation to register the
sale, transfer or other disposition of the Parent Common Stock by such
Shareholder or on such Shareholder's behalf under the Securities Act or any
state securities law, and such Shareholder is able to bear the economic risk of
his investment in the Parent Common Stock for an indefinite period of time
because the Parent Common Stock has not been registered under the Securities Act
and, therefore, cannot be sold unless subsequently registered under the
Securities Act or an exemption from such registration is available.
Notwithstanding the above, Parent understands it has a covenant to register the
Parent Common Stock under Section 7.1 of this Agreement.
SECTION 4.6 INVESTMENTS IN COMPETITORS. Such Shareholder does not own
directly or indirectly any interests or has any investment in any corporation,
business or other person that is a competitor of the Company.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to Shareholders that the following are
true and correct as of the date hereof:
SECTION 5.1 ORGANIZATION AND GOOD STANDING. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation, with all requisite corporate power and authority to
carry on the business in which it is engaged, to own the properties it owns, to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
SECTION 5.2 AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by Parent of this Agreement and the other agreements contemplated
hereby, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by Parent. This Agreement and each other
agreement contemplated hereby have been as of the date of this Agreement, duly
executed and delivered by Parent and constitute legal, valid and binding
obligations of Parent, enforceable against Parent in accordance with their
respective terms, except as may be limited by applicable bankruptcy, insolvency
or similar laws affecting creditors' rights generally or the availability of
equitable remedies.
SECTION 5.3 NO VIOLATION. Neither the execution, delivery or
performance of this Agreement or the other agreements contemplated hereby nor
the consummation of the transactions contemplated hereby or thereby will (i)
conflict with, or result in a violation or breach of the terms, conditions and
provisions of, or constitute a default under, the Articles of Incorporation or
Bylaws of Parent or any agreement, indenture or other instrument under which
Parent is bound or (ii) violate or conflict with any judgment, decree, order,
statute, rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over Parent or the properties or
assets of Parent.
SECTION 5.4 SEC REPORTS; FINANCIAL STATEMENTS. Parent's registration
statement on Form S-1 as filed with the SEC (the "Registration Statement") was
declared effective on June 30, 2000. The financial statements contained in the
Registration Statement were prepared in accordance with GAAP and present fairly
Parent's financial condition and the results of its operations as of the
relevant dates thereof and for the periods covered thereby. The unaudited
financial statements of Parent contained in its Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 2000 were prepared in accordance with
GAAP, and present fairly Parent's financial condition and the results of its
operations as of the relevant dates thereof and for the periods covered thereby,
subject to year-end adjustments.
SECTION 5.5 FINDER'S FEE. Parent has not incurred any obligation for
any finder's, broker's or agent's fee in connection with the transactions
contemplated hereby.
ARTICLE VI
CLOSING DELIVERIES
SECTION 6.1 DELIVERIES OF THE COMPANY AND SHAREHOLDERS. Simultaneously
with the execution of this Agreement, the Company and Shareholders shall deliver
to Parent the following, all of which shall be in form and content satisfactory
to Parent and its counsel:
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(a) a copy of resolutions of the Board of Directors of the Company and
any corporate Shareholder authorizing the execution, delivery and performance of
this Agreement and all related documents and agreements, each certified by the
Secretary of that corporation as being true and correct copies of the originals
thereof subject to no modifications or amendments;
(b) a certificate of the President of the Company, and of Shareholders,
dated the date of this Agreement, as to the truth and correctness of the
representations and warranties of the Company and Shareholders contained herein
on and as of the date of this Agreement;
(c) a certificate of the President of the Company, and of Shareholders,
dated the date of this Agreement, (i) as to the performance of and compliance by
the Company and Shareholders with all covenants contained herein on and as of
the date of this Agreement;
(d) a certificate of the Secretary of the Company certifying as to the
incumbency of the directors and officers of the Company and as to the signatures
of such directors and officers who have executed documents delivered with this
Agreement on behalf of the Company;
(e) certificate, dated within five days prior to the date of this
Agreement, of the Secretary of State of California establishing that the Company
is in existence, has paid all franchise taxes and otherwise is in good standing
to transact business in its state of incorporation;
(f) certificates, dated within five days prior to the date of this
Agreement, of the Secretaries of State of the states in which the Company is
qualified to do business, to the effect that the Company is qualified to do
business and is in good standing as a foreign corporation in each of such
states;
(g) an opinion of Stephen E. Whitman of Whitman & Whitman, counsel to
the Company and Shareholders, dated as of the date of this Agreement, pursuant
to Exhibit E;
(h) all authorizations, consents, approvals, permits and licenses
referenced in Schedule 3.7;
(i) executed employment agreements between Merger Sub and each
Shareholder in the form attached as Exhibit F (the "Employment Agreements");
(j) executed consulting agreements between Parent and NR Management,
Inc., PDS Design Group, Inc., Mission Design, Inc., Schoenleber Enterprises,
Inc. and Salsipuedes Investments, Inc., in the form attached hereto as Exhibit G
(the "Consulting Agreements");
(k) executed noncompetition agreements between the Parent and each
Shareholder in the form attached as Exhibit H (the "Noncompetition Agreements");
(l) executed Stock Escrow Agreement;
(m) executed lock-up agreements between Parent and each Shareholder in
the form attached as Exhibit I (the "Lockup Agreement"); and
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(n) Parent shall have received a nonforeign affidavit, as such
affidavit is referred to in Section 1445(b)(2) of the Code, of each of
Shareholders signed under penalty of perjury and dated as of the date of this
Agreement, to the effect that such Shareholder is a United States Citizen (and
thus not a foreign person) and providing such Shareholder's United States
taxpayer identification number. Such information furnished pursuant to this
subsection shall remain confidential and shall not be disclosed to any third
party except as may be required by law.
SECTION 6.2 DELIVERIES OF PARENT Simultaneously with the execution of
this Agreement, Parent shall deliver the following to the Company or the
appropriate party:
(a) the Cash Consideration in immediately available funds;
(b) the Security Agreement;
(c) a copy of resolutions of the Board of Directors of Parent
authorizing the execution, delivery and performance of this Agreement and all
related documents and agreements, certified by the Secretary of Parent as being
a true and correct copy of the original thereof subject to no modifications or
amendments;
(d) a certificate of the President of Parent, dated the date of this
Agreement, as to the truth and correctness of the representations and warranties
of Parent contained herein on and as of the date of this Agreement;
(e) a certificate of the President of Parent, dated the date of this
Agreement, (i) as to the performance of and compliance by Parent with all
covenants contained herein on and as of the date of this Agreement;
(f) an opinion of Jackson Walker L.L.P., counsel to Parent, dated as of
the date of this Agreement, pursuant to Exhibit J;
(g) executed Employment Agreements; and
(h) executed Consulting Agreements.
ARTICLE VII
POST CLOSING MATTERS
SECTION 7.1 REGISTRATION RIGHTS. Parent shall use all commercially
reasonable efforts to prepare and file with the SEC promptly after the date of
this Agreement, a registration statement relating to the offer and sale of the
Share Consideration and shall use all commercially reasonable efforts to cause
the SEC to declare such registration statement effective as soon as practicable
thereafter. Additionally, if any portion of any Performance Amount is made in
shares of Common Stock, Parent shall use all commercially reasonable efforts to
prepare and file with the SEC promptly after the issuance of such shares, a
registration statement relating to the offer and sale of such shares and shall
use all commercially reasonable efforts to cause the SEC to declare such
registration statement effective as soon as practicable thereafter.
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SECTION 7.2 FURTHER INSTRUMENTS OF TRANSFER. Following the Closing, at
the request of Parent, Shareholders shall deliver any further instruments of
transfer and take all reasonable action as may be necessary or appropriate to
carry out more effectively the provisions of this Agreement and to establish and
protect the rights created in favor of the parties hereunder or thereunder.
SECTION 7.3 AUDIT OF FINANCIAL STATEMENTS. The Shareholders shall at
all times use their best efforts to assist Parent in the preparation of the
Audit and shall provide complete access to the Financial Statement Support.
SECTION 7.4 ACCRUED COMPENSATION. Parent and Merger Sub acknowledge
that the Company owes the Shareholders the Accrued Compensation, which shall be
payable by the Surviving Corporation after the Merger in the normal course of
business or within six months, whichever is sooner.
SECTION 7.5 ACCRUED LOANS. Parent and Merger Sub acknowledge that the
Company owes Shareholders the Accrued Loans, which shall be payable by the
Surviving Corporation after the Merger in the normal course of business or
within six months, whichever is sooner.
SECTION 7.6 PAYMENT OF SHARE CONSIDERATION. As soon as practicable
after Closing, Parent shall deliver the Share Consideration (less the Escrowed
Shares) to the Shareholders.
SECTION 7.7 PAYMENT OF ATTORNEYS' FEES. Merger Sub shall pay the
reasonable attorneys' fees of Wittman & Wittman for their representation of the
Company and Shareholders in the preparation and negotiation of this Agreement.
ARTICLE VIII
REMEDIES
SECTION 8.1 INDEMNIFICATION BY SHAREHOLDERS. Subject to the terms and
conditions of this Article and Section 9.6, Shareholders jointly and severally
agree to indemnify, defend and hold Parent and Merger Sub and their respective
directors, officers, agents, attorneys and affiliates (collectively,
"Indemnitees") harmless from and against all losses, claims, obligations,
demands, assessments, penalties, liabilities, costs, damages, attorneys' fees
and expenses (collectively, "Damages"), asserted against or incurred by such
indemnitees by reason of or resulting from a breach of any representation,
warranty or covenant of the Company or Shareholders contained herein, in any
exhibit, schedule, certificate or financial statement delivered hereunder, or in
any agreement executed in connection with the transactions contemplated hereby.
Notwithstanding anything in this Agreement to the contrary: (a) Indemnities
shall be entitled to indemnification only for those Damages in excess of $50,000
in the aggregate (the "Basket") (b) the liability for Damages shall not exceed
$4,000,000 in the aggregate, except in the case of fraud and the breach of
Section 3.17; and (c) Damages shall be paid (i) first, out of the Escrowed
Shares (with each share being valued as provided in the Stock Escrow Agreement),
and (ii) second, by the Shareholders directly. Notwithstanding anything in this
Agreement to the contrary, Shareholders jointly and severally agree to
indemnify, defend and hold Indemnitees harmless from any and all Damages that
result from the Company's failure
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to receive the consent of the Lessor of the real property set forth on Schedule
3.7 (the "Lease Indemnification"). The Basket shall not apply to the Lease
Indemnification.
SECTION 8.2 CONDITIONS OF INDEMNIFICATION. The obligations and
liabilities of the Company and Shareholders (the "indemnifying party") to Parent
or Merger Sub (the "party to be indemnified") under Section 8.1 with respect to
claims resulting from the assertion of liability by third parties ("Third Party
Claims") shall be subject to the following terms and conditions:
(a) Within 20 days (or such earlier time as might be required to avoid
prejudicing the indemnifying party's position) after receipt of notice of
commencement of any action evidenced by service of process or other legal
pleading, the party to be indemnified shall give the indemnifying party written
notice thereof together with a copy of such claim, process or other legal
pleading, and the indemnifying party shall have the right to undertake the
defense thereof by representatives of its own choosing and at its own expense;
provided that the party to be indemnified may participate in the defense with
counsel of its own choice, the fees and expenses of which counsel shall be paid
by the party to be indemnified unless (i) the indemnifying party has agreed to
pay such fees and expenses, (ii) the indemnifying party has failed to assume the
defense of such action or (iii) the named parties to any such action (including
any impleaded parties) include both the indemnifying party and the party to be
indemnified and the party to be indemnified has been advised by counsel that
there may be one or more legal defenses available to it that are different from
or additional to those available to the indemnifying party (in which case, if
the party to be indemnified informs the indemnifying party in writing that it
elects to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the party to be indemnified, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for the party to be indemnified, which firm shall be designated in writing
by the party to be indemnified).
(b) In the event that the indemnifying party, by the 30th day after
receipt of notice of any such claim (or, if earlier, by the 10th day preceding
the day on which an answer or other pleading must be served in order to prevent
judgment by default in favor of the person asserting such claim), does not elect
to defend against such claim, the party to be indemnified will (upon further
notice to the indemnifying party) have the right to undertake the defense,
compromise or settlement of such claim on behalf of and for the account and risk
of the indemnifying party and at the indemnifying party's expense, subject to
the right of the indemnifying party to assume the defense of such claims at any
time prior to settlement, compromise or final determination thereof.
(c) Notwithstanding the foregoing, the indemnifying party shall not
settle any claim without the consent of the party to be indemnified unless such
settlement involves only the payment of money and the claimant provides to the
party to be indemnified a release from all liability in respect of such claim.
If the settlement of the claim involves more than the payment of money, the
indemnifying party shall not settle the claim without the prior consent of the
party to be indemnified.
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(d) The party to be indemnified and the indemnifying party will each
cooperate with all reasonable requests of the other.
SECTION 8.3 WAIVER. No waiver by any party of any default or breach by
another party of any representation, warranty, covenant or condition contained
in this Agreement, any exhibit or any document, instrument or certificate
contemplated hereby shall be deemed to be a waiver of any subsequent default or
breach by such party of the same or any other representation, warranty, covenant
or condition. No act, delay, omission or course of dealing on the part of any
party in exercising any right, power or remedy under this Agreement or at law or
in equity shall operate as a waiver thereof or otherwise prejudice any of such
party's rights, powers and remedies. All remedies, whether at law or in equity,
shall be cumulative and the election of any one or more shall not constitute a
waiver of the right to pursue other available remedies.
SECTION 8.4 REMEDIES NOT EXCLUSIVE. The remedies provided in this
Article shall not be exclusive of any other rights or remedies available to one
party against the other, either at law or in equity.
SECTION 8.5 OFFSET. Any and all amounts owing or to be paid by Parent
to Shareholders, hereunder shall be subject to offset and reduction pro tanto by
any amounts that may be owing at any time by Shareholders to Parent in respect
of any failure or breach of any representation, warranty or covenant of the
Company or Shareholders under or in connection with this Agreement or any other
agreement with Parent or any transaction contemplated hereby or thereby, as
reasonably determined by Parent. If Parent determines that such offset is
appropriate, notice shall be given to Shareholders of such determination at
least 10 days prior to the due date of the payment to be reduced. If the
conditions upon which the reduction is based are cured by Shareholders prior to
such due date, as determined by Parent, the amount of such payment shall not be
so reduced.
SECTION 8.6 COSTS, EXPENSES AND LEGAL FEES. Whether or not the
transactions contemplated hereby are consummated, each party hereto shall bear
its own costs and expenses (including attorneys' fees and expenses and
specifically, Shareholders shall be responsible for all costs and expenses of
Shareholders and the Company in negotiating and consummating the transactions
contemplated herein, including, without limitation, legal and accounting fees
and expenses), except that each party hereto that is shown to have breached this
Agreement or any other agreement contemplated hereby agrees to pay the costs and
expenses (including reasonable attorneys' fees and expenses) incurred by any
other party in successfully (i) enforcing any of the terms of this Agreement
against such breaching party or (ii) proving that another party breached any of
the terms of this Agreement.
SECTION 8.7 SPECIFIC PERFORMANCE. The Company and Shareholders
acknowledge that a refusal by the Company or any Shareholder to consummate the
transactions contemplated hereby will cause irreparable harm to Parent, for
which there may be no adequate remedy at law and for which the ascertainment of
damages would be difficult. Therefore, Parent shall be entitled, in addition to,
and without having to prove the inadequacy of, other remedies at law, to
specific performance of this Agreement, as well as injunctive relief (without
being required to post bond or other security).
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ARTICLE IX
MISCELLANEOUS
SECTION 9.1 AMENDMENT. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto.
SECTION 9.2 ASSIGNMENT. Neither this Agreement nor any right created
hereby or in any agreement entered into in connection with the transactions
contemplated hereby shall be assignable by any party hereto, except by Parent to
an affiliate of Parent.
SECTION 9.3 PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARIES. Except
as otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and assigns of the parties hereto. Neither this
Agreement nor any other agreement contemplated hereby shall be deemed to confer
upon any person not a party hereto or thereto any rights or remedies hereunder
or thereunder.
SECTION 9.4 ENTIRE AGREEMENT. This Agreement and the agreements
contemplated hereby constitute the entire agreement of the parties regarding the
subject matter hereof, and supersede all prior agreements and understandings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof.
SECTION 9.5 SEVERABILITY. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
SECTION 9.6 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties and covenants contained herein shall survive the
Closing and all statements contained in any certificate, exhibit or other
instrument delivered by or on behalf of the Company, Shareholders or Parent
pursuant to this Agreement shall be deemed to have been representations and
warranties by the Company and Shareholders or Parent, as the case may be, and,
notwithstanding any provision in this Agreement to the contrary, shall survive
the Closing for a period of two years (the "Indemnification Period") except for
(i) representations and warranties with respect to any tax or tax-related
matters, any ERISA matters or Proprietary Rights matters, which shall survive
the Closing until the running of any applicable statutes of limitation and (ii)
indemnification provisions for the violation of any Environmental Law, which
shall survive the Closing and shall continue indefinitely.
SECTION 9.7 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS (BUT NOT THE RULES GOVERNING
CONFLICTS OF LAWS) OF THE STATE OF DELAWARE.
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SECTION 9.8 CAPTIONS. The captions in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of the
terms or provisions hereof.
SECTION 9.9 CONFIDENTIALITY; PUBLICITY AND DISCLOSURES. Each party
shall keep this Agreement and its terms confidential, and shall make no press
release or public disclosure, either written or oral, regarding the transactions
contemplated by this Agreement without the prior knowledge and consent of the
other parties hereto; provided that the foregoing shall not prohibit any
disclosure (i) by press release, filing or otherwise that is required by federal
securities laws or the rules of the Nasdaq National Market, (ii) to attorneys,
accountants, investment bankers or other agents of the parties assisting the
parties in connection with the transactions contemplated by this Agreement and
(iii) by Parent in connection with obtaining financing for the transactions
contemplated by this Agreement and conducting an examination of the operations
and assets of the Company.
SECTION 9.10 NOTICE. All notices and other communications hereunder
shall be in writing and shall be given by personal delivery, mailed by
registered or certified mail (postage prepaid, return receipt requested), sent
by a nationally recognized overnight courier service or sent by electronic
submission to the parties at the following addresses (or at such other address
for a party as is specified by like change of address):
If to Parent: Mobility Electronics, Inc.,
7955 East Redfield Road
Scottsdale, Arizona 85260
Attn: Chief Executive Officer
With a copy to: Jackson Walker L.L.P.
901 Main Street, Suite 6000
Dallas, Texas 75202
Attn: Richard F. Dahlson, Esq.
If to the Company Mesa Ridge Technologies, Inc.
or Shareholder: 9918 Via Pasar
San Diego, California 92126
Attn: Nancy Rubinstein
With a copy to: Stephen Wittman
Wittman & Wittman
402 E. Broadway
Suite 1210
San Diego, California 92101
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Notice shall be deemed received (a) on the business day following the
date on which it is deposited with a nationally recognized and reputable
overnight courier service, (b) on the date on which it is delivered personally,
(c) when sent by facsimile with confirmation of receipt received by sender, or
(d) on the third business day following the date on which it is deposited in the
U. S. mail.
SECTION 9.11 SHAREHOLDER RELEASES; CONSENT. Effective as of the
Effective Date, each Shareholder hereby irrevocably waives, releases, and
discharges the Company and each affiliate of the Company and its subsidiaries
from any and all liabilities and obligations to such Shareholder of any kind or
nature whatsoever, whether as a stockholder, officer, director or employee of
the Company, any of its subsidiaries or otherwise, existing as of the Effective
Time including without limitation liabilities or obligations relating to rights
of contribution or indemnification, in each case whether absolute or contingent,
liquidated or unliquidated, and whether arising at law or in equity, and each
Shareholder hereby agrees that it will not seek to recover any amounts in
connection therewith or thereunder from the Company, or any of its subsidiaries;
provided that nothing in this Section 9.11 will constitute a waiver of any
claims the Shareholders may have against the Parent or Merger Sub arising under
this Agreement or the agreements contemplated hereby and hereby agrees that any
and all agreements to which such Shareholder is a party and which relate to
Shareholder's ownership or voting of Magma Shares or options to acquire Magma
Shares or the right to designate directors are terminated and of no further
force or effect. By executing and delivering this Agreement the Shareholders
irrevocably consent pursuant to Section 307 of the California Business
Corporation Act to this Agreement, the Merger, and all of the transactions
contemplated by this Agreement, such consent to have the same effect as a vote
by the Shareholders at a meeting duly called and held for the purpose of acting
on proposals to approve this Agreement, the Merger, and the other transactions
contemplated by this Agreement.
SECTION 9.12 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
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EXECUTED as of the date first above written.
PARENT:
MOBILITY ELECTRONICS, INC.
By: /s/ Charles R. Mollo
Charles R. Mollo,
Chief Executive Officer
and President
MERGER SUB:
MAGMA TECHNOLOGIES, INC.
By: /s/ Charles R. Mollo
Charles R. Mollo,
Vice President
COMPANY:
MESA RIDGE TECHNOLOGIES, INC.
By: /s/ Nancy Rubinstein
Title: President
SHAREHOLDERS:
/s/ Nancy Rubinstein
--------------------
Nancy Rubinstein
/s/ Edward Romascan
-------------------
Edward Romascan
/s/ Paul Smith
--------------
Paul Smith
/s/ John Dickerson
------------------
John Dickerson
/s/ Bruce Schoenleber
---------------------
Bruce Schoenleber
<PAGE> 35
EXHIBIT A
DEFINITIONS
"ACCRUED LOANS" shall have the meaning set forth in Section 3.39.
"ACCRUED COMPENSATION" shall have the meaning set forth in Section
3.39.
"AGREEMENT" shall mean this Agreement and Plan of Merger.
"AUDIT" shall have the meaning set forth in Section 3.8.
"BASE OPERATING INCOME" shall have the meaning set forth in Section
2.5(c)(i).
"BASE REVENUES" shall have the meaning set forth in Section 2.5(c)(i).
"BASKET" shall have the meaning set forth in Section 8.1.
"CASH COMPENSATION" shall have the meaning set forth in Section
3.10(a).
"CASH CONSIDERATION" shall have the meaning set forth in Section
2.5(a).
"DGCL" means the Delaware General Corporation Law.
"CERTIFICATE" shall have the meaning set forth in Section 2.6(c).
"CLOSING" shall mean the closing of the transactions contemplated by
this Agreement, which shall occur at 10:00 a.m., local time, on October 2, 2000,
in the offices of Jackson Walker L.L.P., 901 Main Street, Suite 6000, Dallas,
Texas 75202, or at such other time and place as shall be mutually agreed in
writing by the parties hereto.
"CODE" shall mean the Internal Revenue Code of 1986.
"COMMITMENTS" shall have the meaning set forth in Section 3.14.
"COMPENSATION PLANS" shall have the meaning set forth in Section
3.10(b).
"CONSTITUENT CORPORATIONS," and "CONSTITUENT CORPORATION" shall have
the meaning set forth in Section 2.1.
"CONSULTING AGREEMENTS" shall have the meaning set forth in Section
6.1(j).
"CONTROLLED GROUP" shall have the meaning set forth in Section 3.11(g).
"CURRENT MARKET PRICE" shall mean (i) if the principal trading market
for the Common Stock is a United States national or regional securities
exchange, the average closing price on such exchange for the thirty trading days
prior to the day in question; or (ii) if sales prices for shares of Common Stock
are reported by the Nasdaq National Market System or Small Cap
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Market System (or a similar system then in use), the average last reported sales
price so reported for the thirty trading days prior to the day in question; or
(iii) if neither (i) nor (ii) above are applicable, and if bid and ask prices
for shares of Common Stock are reported in the over-the-counter market by Nasdaq
(or, if not so reported, by the National Quotation Bureau), the average of the
high bid and low ask prices so reported for the thirty trading days prior to the
day in question. Notwithstanding the foregoing, if there is no reported closing
price, last reported sales price, or bid and ask prices, as the case may be, for
the thirty days prior to the day in question, then the current market price
shall be determined as of the latest thirty consecutive trading days for which
such closing price, last reported sales price, or bid and ask prices, as the
case may be, are available, unless such securities have not been traded on an
exchange or in the over-the-counter market for thirty (30) or more days
immediately prior to the day in question, in which case the current market price
shall be determined in good faith by, and reflected in a formal resolution of,
the Board of Directors of the Company.
"DGCL" shall mean the Delaware General Corporation Law.
"DAMAGES" shall have the meaning set forth in Section 8.1.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"EFFECTIVE DATE" shall have the meaning set forth in Section 2.3.
"EMPLOYEE BENEFIT PLAN" shall have the meaning set forth in Section
3.11(a).
"EMPLOYEE POLICIES AND PROCEDURES" shall have the meaning set forth in
Section 3.10(d).
"EMPLOYMENT AGREEMENTS" shall have the meaning set forth in Section
3.10(c).
"ENVIRONMENTAL LAWS" shall have the meaning set forth in Section 3.37.
"ESCROWED SHARES" shall have the meaning set forth in Section 2.9.
"FINANCIAL STATEMENT SUPPORT" shall have the meaning set forth in
Section 3.8.
"FINANCIAL STATEMENTS" shall have the meaning set forth in Section 3.8.
"FIRST EARN OUT PERIOD" shall have the meaning set forth in Section
2.5(c)(i).
"FIXED ASSETS" shall have the meaning set forth in Section 3.24.
"GAAP" shall mean United States generally accepted accounting
principles applied on a consistent basis for all time periods.
"GOVERNMENTAL ENTITY" shall have the meaning set forth in Section 3.19.
"INCREMENTAL OPERATING INCOME" shall have the meaning set forth in
Section 2.5(d)(i).
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<PAGE> 37
"INCREMENTAL REVENUES" shall have the meaning set forth in Section
2.5(c)(i).
"INDEMNIFICATION PERIOD" shall have the meaning set forth in Section
9.6.
"INDEMNITEES" shall have the meaning set forth in Section 8.1.
"INDEMNIFYING PARTY" shall have the meaning set forth in Section 8.2.
"LEASE INDEMNIFICATION" shall have the meaning set forth in Section
8.1.
"LOCKUP AGREEMENT" shall have the meaning set forth in Section 6.1(m).
"MAGMA SHARES" shall have the meaning set forth in Section 2.5.
"MERGER CONSIDERATION" shall have the meaning set forth in Section 2.5.
"NONCOMPETITION AGREEMENTS" shall have the meaning set forth in Section
6.1(k)
"ORDINARY COURSE OF BUSINESS" means the usual and customary way in
which the Company or any Subsidiary, as the case may be, has conducted its
business in the past.
"PARENT COMMON STOCK" shall have the meaning set forth in Section
2.5(b).
"PARTY TO BE INDEMNIFIED" shall have the meaning set forth in Section
8.2.
"PERFORMANCE AMOUNT" shall have the meaning set forth in Section
2.5(d)(i).
"PROPRIETARY RIGHTS" shall have the meaning set forth in Section
3.17(a).
"PARENT COMMON STOCK" shall have the meaning set forth in Section
2.5(b).
"REAL PROPERTY" shall have the meaning set forth in Section 3.13(a).
"REGISTRATION STATEMENT" shall have the meaning set forth in Section
5.4.
"REVENUES" shall have the meaning set forth in Section 2.5(c)(i).
"SEC" shall mean the Securities and Exchange Commission.
"SECOND EARN OUT PERIOD" shall have the meaning set forth in Section
2.5(c)(i).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SECURITY AGREEMENT" shall have the meaning set forth in 2.5(d)(iv)
"SHARE CONSIDERATION" shall have the meaning set forth in Section
2.5(b).
"SUBSIDIARY" shall mean any corporation, partnership, joint venture or
other legal entity of which the Company owns, directly or indirectly, 100% of
the stock or other equity interests
A-3
<PAGE> 38
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation or other legal
entity; and shall include within the meaning of the term each Subsidiary, as
defined above, of any Subsidiary of the Company.
"SURVIVING CORPORATION" shall have the meaning set forth in Section
2.1.
"TAX" shall have the meaning set forth in Section 3.19.
"TAX RETURN" shall have the meaning set forth in Section 3.19.
"THIRD PARTY CLAIMS" shall have the meaning set forth in Section 8.2.
A-4
<PAGE> 39
EXHIBIT B
<TABLE>
<CAPTION>
Magma Shares Owned Merger Consideration
------------------ -------------------------------------------
Parent Percentage of
Name of Common Performance
Shareholder Number Percentage Cash ($) Stock Amount
----------- --------- ----------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Nancy Rubinstein 6,333.33 31.019901% 620,398 174,362 20%
Ed Romascan 6,333.33 31.019901% 620,398 174,362 20%
Paul Smith 6,333.33 31.019901% 620,398 174,362 20%
John Dickerson 1,005.00 4.922371% 98,447 27,668 20%
Bruce Schoenleber 412.00 2.017927% 40,359 11,344 20%
--------- ----------- --------- -------- ------
20,416.99 100% 2,000,000 100%
</TABLE>
B-1
