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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: JULY 2, 1999
HIGH VOLTAGE ENGINEERING CORPORATION
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(Exact name of registrant as specified in its charter)
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MASSACHUSETTS 1-4737 04-2035796
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<S> <C> <C>
(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer
Incorporation) Identification No.)
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401 EDGEWATER PLACE, SUITE 680, WAKEFIELD, MASSACHUSETTS 01880
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Address of principal executive offices
Registrant's telephone number, including area code: (781) 224-1001
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 2, 1999, the Registrant consummated the purchase of all of
the outstanding capital stock of Charles Evans & Associates, a California
corporation ("CEA"), from the holders thereof (the "CEA Stockholders"), for
an aggregate cash purchase price of $35,000,000 plus an amount equal to the
incremental state and federal income tax to be paid by the CEA Stockholders
as a result of the election by the parties to treat the acquisition of such
stock as an asset sale under Section 338(h)(10) of the Internal Revenue Code
of 1986, as amended, such amount to be determined after the closing based
upon the allocation of the purchase price among the assets of CEA as of the
closing date. The Registrant used cash on hand to fund the purchase price for
the stock of CEA. Charles Evans & Associates, whose principal executive
offices are located in Redwood City, California, is engaged in the provision
of surface analysis services to industrial and governmental clients,
including in particular the semiconductor manufacturing industry.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Not applicable.
(b) PRO FORMA FINANCIAL INFORMATION. Pro forma financial
information required by this item will be filed by amendment
to this initial report no later than 60 days after the date an
initial report must be filed with the Securities and Exchange
Commission.
(c) Exhibits.
EXHIBIT NO. DESCRIPTION
2.1 Stock Purchase Agreement, dated as of June
2, 1999, among (i) Physical Electronics,
Inc.; (ii) for the purposes of certain
sections only, Charles Evans & Associates
("CEA"); (iii) the Trustee of the Charles
Evans & Associates Employee Stock Ownership
Plan (the "ESOP"), on behalf of the ESOP;
and (iv) the stockholders of CEA named on
SCHEDULE A thereto.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: July 19, 1999 HIGH VOLTAGE ENGINEERING
CORPORATION
By: /s/ JOSEPH W. MCHUGH, JR.
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Name: Joseph W. McHugh, Jr.
Title: Chief Financial Officer
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Exhibit 2.1
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "AGREEMENT"), dated as of the
second day of June, 1999, is by and among (i) Physical Electronics, Inc., a
Delaware corporation ("PHI") and wholly owned subsidiary of High Voltage
Engineering Corporation, a Massachusetts corporation ("HVE"); (ii) solely for
purposes of Section 5 and 14.16 hereof, Charles Evans & Associates, a California
corporation (the "COMPANY"); (iii) the undersigned Trustee (the "TRUSTEE") of
the Charles Evans & Associates Employee Stock Ownership Plan and Trust (the
"ESOP"), on behalf of the ESOP; and (iv) the holders of the capital stock of the
Company named on SCHEDULE A hereto (the "INDIVIDUAL SHAREHOLDERS" and,
collectively with the ESOP, the "SHAREHOLDERS"), for whom Dr. Charles A. Evans,
Jr., Dr. Richard S. Hockett and Kurt J. Fraenkel are acting as the Shareholders'
Committee (as defined in Section 14.15).
WHEREAS, the Company has an authorized capital of 2,000,000 shares of
Common Stock, no par value (the "COMPANY STOCK"), of which 858,200 shares are
issued and outstanding as of the date hereof, and has issued and there are
outstanding options and warrants or other rights to purchase or otherwise cause
the issuance of up to an additional 174,150 shares of the Company Stock
(collectively, the "OUTSTANDING RIGHTS," and each an "OUTSTANDING RIGHT");
WHEREAS, HVE and its wholly-owned subsidiary, Physical Electronics,
Inc. ("PHI"), desire to expand PHI's presence and activities in the area of
surface microanalysis and to own and operate a world-wide laboratory system;
WHEREAS, the Company wishes to align itself closer to a leading
instrument manufacturer in the surface and microanalytical area and expand its
presence as a world-wide commercial analytical services business;
WHEREAS, PHI desires to purchase all of the outstanding the Company
Stock and any shares of the Company Stock issuable upon exercise or conversion
of any "vested" Outstanding Rights, and the Shareholders desire to sell such the
Company Stock to PHI;
WHEREAS, the Trustee has elected, on behalf of all ESOP participants
(each, a "PARTICIPANT") to enter into this Agreement and consummate the
transactions contemplated hereby, including the sale of all of the Company Stock
held by the ESOP to PHI;
WHEREAS, the Shareholders have agreed to join PHI in making an election
under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended (the
"CODE"), in connection with the recognition of gain and loss with respect to the
transactions contemplated under this Agreement; and
WHEREAS, PHI desires to acquire the stock of the Company free of all
debt, with the exception of certain specified debt, and the Shareholders have
accordingly agreed to repay such debt of the Company out of the purchase price
for the Company Stock, simultaneous with or immediately prior to the closing of
such transactions.
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NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. THE STOCK PURCHASE.
1.1. CLOSING AND EFFECTIVE DATE. Subject to the provisions of Sections
6 and 7, a closing (the "CLOSING") shall be held at the offices of the Company,
301 Chesapeake Drive, Redwood City, California, or at such other location as may
be agreed to by the parties, such Closing to occur on a mutually acceptable date
not later than ten (10) business days after the receipt by PHI and the
Shareholders of notice of the expiration of any applicable waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT") or, if early termination of such waiting period is granted, not later than
fifteen (15) business days after the receipt by PHI and the Shareholders of such
notice, or at such other time or at such other place including by electronic
means, as PHI and the Shareholders' Committee may agree, subject to the
satisfaction of all closing conditions. The date on which the Closing is
actually held hereunder is sometimes referred to herein as the "CLOSING DATE".
On the Closing Date, the Shareholders shall sell, assign and transfer to PHI,
and PHI shall purchase from the Shareholders, all of the outstanding Company
Stock (the "PURCHASED SHARES") for the consideration set forth herein. The
Closing shall be effective as of the end of the day on the Closing Date (the
"EFFECTIVE TIME").
1.2. PURCHASE PRICE.
The purchase price for the Purchased Shares (the "PURCHASE PRICE")
shall consist of (i) a fixed closing payment of Thirty-Five Million Dollars
($35,000,000) (the "FIXED CLOSING PAYMENT"), and (ii) the Gross-Up Amount (as
defined below). At the Closing, $250,000 of the Fixed Closing Payment shall be
deposited into escrow pursuant to an Escrow Agreement in the form of EXHIBIT A
hereto (the "ESCROW AGREEMENT"), among PHI, the Shareholders' Committee, the
Trustee on behalf of the ESOP and United States Trust Company as escrow agent
(the "ESCROW AGENT"), and shall be distributed in accordance with the terms
hereof and thereof. The Purchase Price shall be subject to adjustment as set
forth in Section 2.2.
1.3. GROSS-UP AMOUNT.
(a) As used in this Agreement the "GROSS-UP AMOUNT" shall mean the
amount equal to the sum of: (i) the additional state and federal income taxes
that will become payable by the Shareholders by reason of the making by PHI and
the Shareholders of an election to have the purchase and sale of the Purchased
Shares treated as an asset sale under Section 338(h)(10) of the Code (the
"338(h)(10) Election"), rather than a purchase of equity, over and above the
taxes that would have been payable by the Shareholders as a result of such sale
in the absence of the 338(h)(10) Election, (2) an amount equal to the additional
federal and state income taxes payable as a result of the payment of the
Gross-Up Amount; and (3) an amount equal to any incremental state franchise or
income taxes payable by the Company as a result of the 338(h)(10) Election. This
calculation shall be made using the Asset Allocation (as defined below) and
using for all
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Shareholders only the following tax rates: the maximum federal and California
individual ordinary income tax rates in effect at the Closing Date (currently
39.6% and 9.3%, respectively) and the maximum federal and California individual
capital gains rates in effect at the Closing Date (currently 20% and 9.3%,
respectively). The Gross-Up Amount shall (i) be calculated on the Purchase Price
as finally determined after any adjustments required pursuant to Section 2.2.,
and (ii) include the effect of the Company's ownership interest in Evans East,
Evans Texas, Cascade Scientific Ltd. (d/b/a Evans Europa) and Masstek Services
Ltd. (collectively, the "EVANS AFFILIATES"), to the extent relevant. Attached as
SCHEDULE 1.3-1 hereto is a model calculation of the Gross-Up Amount prepared
using the balance sheet of the Company as of March 31, 1999 attached as SCHEDULE
1.3-2 hereto.
(b) No later than sixty (60) days after the Closing Date, PHI shall
deliver to the Shareholders' Committee its allocation of the amount of the
Purchase Price among the assets of the Company on the Closing Date (the "ASSET
ALLOCATION").
(c) No later than thirty (30) days after the Asset Allocation is
delivered to the Shareholders' Committee, the Shareholders' Committee shall
deliver to PHI a certificate (the "GROSS-UP CERTIFICATE") certifying as to their
calculation of the Gross-Up Amount.
(d) During the twenty-one (21) day period following the delivery of
the Gross-Up Certificate, PHI and its accountants, shall have the right to take
such actions as are necessary to verify the amount of the Gross-Up Amount set
forth on such certificate; including, but not limited to, obtaining access to
the members of the Shareholders' Committee and the Company's independent
accountants, and their related books, records and work papers.
(e) Within twenty-one (21) days after receipt of the Gross-Up
Certificate, PHI shall notify the Shareholders' Committee of its agreement or
disagreement with the accuracy of the Gross-Up Certificate and the related
calculation of the Gross-Up Amount. If PHI agrees with the accuracy of the
Closing Certificate, the amount of the Gross-Up Amount reflected on the Gross-Up
Certificate shall constitute the final Gross-Up Amount. If PHI shall dispute the
amount of the Gross-Up Amount set forth on the Gross-Up Certificate for any
reason, PHI shall provide the members of the Shareholders' Committee with notice
of its disagreement with such calculation and PHI shall appoint a representative
to meet with the members of the Shareholders' Committee to resolve such dispute.
PHI and the Shareholders' Committee shall determine the appropriate manner in
which to resolve the dispute, which may involve engaging an additional
independent auditor to review the calculations.
(f) Upon the final determination of the Gross-Up Amount, PHI shall pay
an amount equal to the sum of (i) the Gross-Up Amount PLUS (ii) interest
calculated on the amount of the Gross-Up Amount at an annual rate of 5.5% for
the period between the Closing Date and the date on which the amount of the
Gross-Up Amount is deposited into escrow, to the Escrow Agent to be held in
escrow pursuant to the terms of the Escrow Agreement (such payment, together
with the funds initially deposited into the escrow at the Closing in accordance
with Sections 1.2 and 2.1, shall be referred to hereinafter as the "ESCROWED
FUNDS"). The Escrowed Funds shall be held by the Escrow Agent and distributed
pursuant to the terms of the Escrow Agreement.
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2. PROCEDURES; PAYMENTS, ETC.
2.1. PROCEDURES PRIOR TO, AT AND AFTER THE CLOSING.
(a) At the Closing, each Shareholder shall surrender to PHI all
certificates representing shares of the Company Stock owned of record by such
Shareholder, duly endorsed for transfer to PHI with signatures (including any
required or necessary spousal signatures) guaranteed or notarized or witnessed
by the Company's legal counsel. After receipt of the certificates representing
the Company Stock described in the preceding sentence, PHI shall pay the amount
of the Fixed Closing Payment as follows:
(i) PHI shall pay out of the Fixed Closing Payment the amount
of $100,000, which amount shall constitute the Shareholders' Committee
Account referred to in Section 14.14 hereof, to an account designated
by the Shareholders' Committee;
(ii) PHI shall repay on behalf of the Company and the
Shareholders out of the Fixed Closing Payment the amount of all Company
Indebtedness, other than any Permitted Company Indebtedness (as defined
in Section 9), including all fixed obligations of the Company to
Merrill Lynch Business Financial Services, Inc. ("MLBFS") and Richard
J. Blattner as listed on SCHEDULE 2.1(a)(ii) hereto and outstanding as
of, or accruable up to, the Effective Time and including all principal
and any accrued and unpaid interest thereon and any prepayment
penalties or premiums associated with such prepayment (the "LOAN
AGREEMENTS"), except that with respect to MLBFS Loan Number 9806340201
(the "MLBFS ESOP LOAN"), the amount to be paid directly to MLBFS shall
only be the amount equal to the amount by which the balance due Merrill
Lynch under the MLBFS ESOP Loan exceeds, as of the Closing Date, the
amount due (the "COMPANY ESOP LOAN"), from the ESOP to the Company
under the ESOP Loan and Pledge Agreement (as defined in Section 3.5)
with the balance of the MLBFS ESOP Loan to be paid by the Company to
MLBFS immediately after the ESOP pays the Company the balance of the
Company ESOP Loan pursuant to paragraph (d) below;
(iii) PHI shall pay to the Escrow Agent out of the Fixed
Closing Payment the amount of $250,000 to be held and distributed in
accordance with the terms of the Escrow Agreement; and
(iv) PHI shall pay to the Shareholders, by certified or bank
check or wire transfer to accounts designated by the respective
Shareholders prior to the Closing, the amount of the Fixed Closing
Payment that remains after the payments described in clauses (i)
through (iii) above, with such amount to be allocated among the various
Shareholders in accordance with their respective percentage ownership
of the Company Stock at the Effective Time. Notwithstanding the
foregoing, PHI shall not be obligated to make any payments of any
portions of the Fixed Closing Payment with respect to any shares of
Company Stock prior to receipt of certificates representing such shares
of Company Stock which have been duly endorsed for transfer in
accordance with the first sentence of this Section 2.1(a).
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(b) Upon receipt by the ESOP of its portion of the amount distributed
pursuant to clause (iv) above, the ESOP shall immediately repay all obligations
of the ESOP to the Company under the Company ESOP Loan, including all principal
and accrued and unpaid interest thereon.
(c) If requested by PHI not less than five (5) business days prior to
the Closing, the Shareholders shall deliver to PHI pay-off letters and lien
discharges (or agreements therefor) from any person, including MLBFS and Richard
Blattner, to whom the Company or any Subsidiary owes any Company Indebtedness
(other than any Permitted Company Indebtedness).
(d) Payment by PHI of the amounts set forth in paragraph (a) above
shall be deemed for all purposes to be satisfaction of PHI's obligation to pay
the Fixed Closing Payment.
2.2. DETERMINATION OF TANGIBLE NET ASSETS.
(a) For purposes of this Agreement, the term "CLOSING ASSETS" shall
mean the total assets set forth on the Company's balance sheet on the Closing
Date determined in accordance with GAAP and consistent with the format of the
presentation of the total assets of the Company set forth on the Audited Balance
Sheet (as defined in Section 3.8), REDUCED by the balance of the prepaid
interest account of the Company on the Closing Date.
(b) For purposes of this Agreement, the term "TARGET ASSETS" shall
mean (i) the amount of $14,900,000 (which represents the amount of the Closing
Assets determined as of December 31, 1998), REDUCED by (ii) any depreciation
expense and amortization expense incurred by the Company between December 31,
1998 and the Closing Date.
(c) No later than twelve (12) days after the Closing Date, the
Shareholders' Committee and the President and Chief Financial Officer of the
Company shall deliver to PHI a certificate (the "CLOSING CERTIFICATE") setting
forth a calculation of the amount of the Closing Assets and certifying to the
accuracy and completeness of such calculation and the amount of the Closing
Assets, as well as the depreciation and amortization expense for the period
between January 1, 1999 and the Closing Date.
(d) During the twenty-one (21) day period following the delivery of
the Closing Certificate, PHI and its accountants shall have the right to take
such actions as are necessary to verify the amount of the Closing Assets
including, but not limited to, obtaining access to the members of the
Shareholders' Committee and the Company's independent accountants, and their
related books, records and work papers. In no way shall actions taken pursuant
to the preceding sentence relieve the Shareholders from any liability pursuant
to representations and warranties made by the Shareholders in this Agreement.
(e) Within twenty-one (21) days after receipt of the Closing
Certificate, PHI shall notify the Shareholders' Committee of its agreement or
disagreement with the accuracy of the Closing Certificate and the related
calculation of the Closing Assets as of the Closing Date. If PHI agrees with the
accuracy of the Closing Certificate, the amount of Closing Assets reflected on
the Closing Certificate shall constitute the final Closing Assets. If PHI shall
dispute the
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amount of the Closing Assets for any reason, PHI shall provide the members of
the Shareholders' Committee with notice of its disagreement with such
calculation and PHI shall appoint a representative to meet with the members of
the Shareholders' Committee to resolve such dispute. PHI and Shareholders'
Committee shall determine the appropriate manner in which to resolve the
dispute, which may involve engaging an additional independent auditor to review
the calculations.
(f) In the event that the amount of the final Closing Assets is less
than the Target Assets, the Purchase Price shall be adjusted by the amount, if
any, of such difference (the "DIFFERENTIAL AMOUNT"), and such adjustment shall
be paid or repaid as follows:
(i) If the Differential Amount is greater than zero, but less
than $250,000, then (A) the amount of the Differential Amount shall be
distributed to PHI from the Escrowed Funds; and (B) the amount by which
$250,000 exceeds the Differential Amount shall be distributed to the
Shareholders from the Escrowed Funds;
(ii) If the Differential Amount is greater than $250,000, then
(A) the Differential Amount shall be distributed to PHI from the
Escrowed Funds (to the extent available); and (B) to the extent that
the Differential Amount is greater than the amount of Escrowed Funds
currently available for distribution (the "EXCESS AMOUNT"), PHI shall
reduce the amount of the Gross-Up Amount, if any, that it is required
to deposit into escrow pursuant to Section 1.3(f) by up to the first
$100,000 of such Excess Amount, and, to the extent that the Excess
Amount exceeds $100,000, the amount of such excess shall be promptly
paid to PHI by the Shareholders; and
(iii) If the Differential Amount is zero or less than zero,
then the full amount of $250,000 shall be distributed to the
Shareholders from the Escrowed Funds.
Any distributions from the Escrowed Funds shall be made in accordance with the
terms of the Escrow Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. Each of the
Shareholders, jointly and severally, represents and warrants to PHI as follows:
3.1. ORGANIZATION; AUTHORITY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. The Company is duly qualified and in good standing as a foreign
corporation in all jurisdictions, both within and outside of the United States,
in which the character of the properties owned or leased or the nature of the
activities conducted by it makes such qualification necessary. The Shareholders
have delivered to PHI complete and correct copies of each of the Company's
Articles of Incorporation and By-Laws and all amendments thereto, and any other
such corporate organization documents. The Company has all requisite power and
authority to own or lease and operate its properties and to carry on its
business as such business is now conducted, both within and outside of the
United States, and the consummation of the transactions contemplated hereby
shall not interfere with or adversely affect such right, power and authority.
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3.2. RIGHTS TO SELL OUTSTANDING SHARES, APPROVALS; BINDING EFFECT. Each
Shareholder has all requisite power and full legal right to enter into this
Agreement and to perform all of such Shareholder's agreements and obligations
hereunder. The ESOP (or the Trustee) has obtained all necessary authorizations
and approvals in compliance with the terms of the ESOP and all applicable laws
required for the execution and delivery of this Agreement and the Escrow
Agreement and the consummation of the transactions contemplated hereby and
thereby. This Agreement has been duly executed and delivered by each Shareholder
and constitutes, the legal, valid and binding obligation of such Shareholder
enforceable against such Shareholder in accordance with its terms.
3.3. SUBSIDIARIES AND OTHER INTERESTS. The Company has no
"Subsidiaries" (as defined in Section 9). Except as set forth on SCHEDULE 3.3,
the Company owns no capital stock or other equity or partnership interest in any
other corporation, partnership, joint venture or other business organization or
entity.
3.4. CAPITALIZATION. The authorized capital of the Company consists of
2,000,000 shares of common stock, without par value, 858,200 shares of which are
issued and outstanding on the date hereof. All of the shares of the Company
Stock are owned of record and/or beneficially by the Shareholders as set forth
in the Shareholders' Committee Disclosure Schedule delivered by the
Shareholders' Committee to PHI contemporaneous with the execution and delivery
hereof (the "SHAREHOLDERS' COMMITTEE DISCLOSURE SCHEDULE"). All of the
outstanding Company Stock is validly issued, fully paid and non-assessable and
has not been issued in violation of any pre-emptive rights or Federal or state
securities laws. Except as set forth on the Shareholders' Committee Disclosure
Schedule, there are no commitments for the purchase or sale of, and no options,
warrants or other rights to subscribe for or purchase, any securities of the
Company, or other Outstanding Rights or any obligations of the Company to
purchase or redeem any such securities.
3.5. TITLE TO STOCK, LIENS, ETC. Other than arising under (i) the Stock
Restriction Agreements (as defined in Section 14.16), (ii) the ESOP Loan and
Pledge Agreement, dated June 5, 1998, between the Company and the ESOP (the
"ESOP LOAN AND PLEDGE AGREEMENT"), or (iii) the Stock Purchase and Option
Agreement, dated as of June 5, 1998 by and among the Company, the ESOP and
Charles A. Evans, Jr. and Christina Evans as trustees of the Evans Family 1993
Trust, each Shareholder has sole record and beneficial ownership of all of the
outstanding shares of the Company Stock described as being owned by such
Shareholder on the Shareholders' Committee Disclosure Schedule free and clear of
any mortgage, lien, pledge, charge, security interest, encumbrance, title
retention agreement, option, equity or other adverse claim thereto.
3.6. NON-CONTRAVENTION. Except as set forth on SCHEDULE 3.6 hereto, the
execution and delivery of this Agreement and the Escrow Agreement and the
consummation by the Shareholders of the transactions contemplated hereby and
thereby will not (a) violate or conflict with any provision of the Articles of
Incorporation or By-Laws of the Company as amended to date; or (b) constitute a
violation of, or be in conflict with, or constitute or create a default under,
or result in the creation or imposition of any encumbrance upon any property of
the Company pursuant to (i) any agreement or instrument to which either the
Company, or any of the
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Shareholders is a party or by which any of the properties
of the Company are bound, or (ii) any statute, judgment, decree, order,
regulation or rule of any court or governmental or regulatory authority within
or outside of the United States.
3.7. GOVERNMENTAL CONSENTS; TRANSFERABILITY OF LICENSES, ETC. Except as
set forth on SCHEDULE 3.7, no consent, approval or authorization of, or
registration, qualification or filing with, any governmental agency or authority
is required for the execution and delivery by the Shareholders of this Agreement
or for the consummation by the Shareholders of the transactions contemplated
hereby. The Company has and maintains, and the permits listed on SCHEDULE 3.7
hereto include, all licenses, permits and other authorizations from all
governmental authorities (collectively, the "PERMITS") as are necessary or
desirable for the conduct of the Company's business. True and complete copies of
such Permits have previously been delivered to PHI.
3.8. FINANCIAL STATEMENTS. The Shareholders have delivered the
following financial statements (the "FINANCIAL STATEMENTS") to PHI, and they are
attached as SCHEDULE 3.8 hereto: (a) the audited balance sheet of the Company as
of December 31, 1998 and the reviewed balance sheets of the Company as of August
31, 1997 and August 31, 1996 (such balance sheet as of December 31, 1998 being
referred to herein as the "AUDITED BALANCE SHEET"), and the related reviewed
statements of income, retained earnings and cash flows of the Company for each
of the fiscal years then ended; and (b) the unaudited balance sheet of the
Company as of May 1, 1999 and the related unaudited statements of income,
retained earnings and cash flows of the Company for the four (4) month period
then ended (collectively, the "INTERIM FINANCIALS"). Each of the Financial
Statements is true and correct and has been prepared in accordance with GAAP
(subject, in the case of the Interim Financials, to the absence of footnotes and
to year-end audit adjustments); and fairly and accurately present the financial
condition of the Company as of its respective date; and such statements of
income, retained earnings and cash flows fairly and accurately present the
results of operations for the periods covered thereby.
3.9. ABSENCE OF CERTAIN CHANGES. Since January 1, 1999, except as set
forth on SCHEDULE 3.9 hereto or the Shareholders' Committee Disclosure Schedule,
there have not been (a) any material changes in the assets, liabilities, sales,
income or business of the Company; (b) any changes in its relationships with
suppliers, customers or lessors, other than changes which were both in the
ordinary course of business and have not been, either in any case or in the
aggregate, materially adverse; (c) any acquisition or disposition by the Company
of any asset or property other than in the ordinary course of business; (d) any
damage, destruction or loss, whether or not covered by insurance, materially and
adversely affecting, either in any case or in the aggregate, the property or
business of the Company; (e) any direct or indirect redemption, purchase or
other acquisition of any of the Company Stock; (f) any change in pension or
other benefits payable or to become payable by the Company to any officers or
employees; (g) any changes in the personnel other than changes which were both
in the ordinary course of business and have not been, either in any case or in
the aggregate, materially adverse; (h) any forgiveness or cancellation of any
debt or claim by the Company or any waiver of any right of material value other
than compromises of accounts receivable in the ordinary course of business; (i)
any entry by the Company into any transaction other than in the ordinary course
of business; (j) any incurrence by the Company of any obligations, commitments
or liabilities, whether absolute, accrued, contingent or otherwise (including,
without limitation, liabilities as guarantor or
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otherwise with respect to obligations of others), other than obligations and
liabilities incurred in the ordinary course of business; (k) any mortgage,
pledge, lien, lease, security interest or other charge or encumbrance placed on
any of the assets, tangible or intangible, of the Company; (l) any discharge or
satisfaction by the Company of any lien or encumbrance or payment by the Company
of any obligation or liability (fixed or contingent) other than (A) current
liabilities included in the Audited Balance Sheet and (B) current liabilities
incurred since the date of the Audited Balance Sheet in the ordinary course of
business. Except as set forth on SCHEDULES 3.9, 3.10, 3.22, 3.23 AND 3.24, the
Company has no liabilities of any nature whatsoever other than the liabilities
set forth on the balance sheet included in the Interim Financials, and except
for other liabilities of the Seller incurred in the ordinary course of business
since the date of the balance sheet included in the Interim Financials. The
reserves established for such liabilities on such balance sheet were established
based on reasonable assumptions made in good faith and consistent with the
Company's past practices.
3.10. LITIGATION, ETC. Except as set forth on SCHEDULE 3.10 hereto, no
action, suit, proceeding or investigation is pending or, to the knowledge of the
Shareholders, threatened against the Company (nor is there any basis therefor
known to any of the Shareholders).
3.11. CONFORMITY TO LAW. To the Shareholders' knowledge, the Company
has complied with, and is in compliance with (a) all laws, statutes,
governmental regulations and all judicial or administrative tribunal orders,
judgments, writs, injunctions, decrees or similar commands applicable to the
Company or any of its properties (including, without limitation, any labor,
environmental, occupational health, zoning or other law, regulation or
ordinance), both within and outside of the United States, and (b) all unwaived
terms and provisions of all contracts, agreements and indentures to which the
Company is a party, or by which the Company or any of its properties is subject.
To the Shareholders' knowledge, the Company has not committed, been charged
with, or been under investigation with respect to, nor, to the knowledge of the
Shareholders, does there exist, any violation of any provision of any federal,
state, local or foreign law or administrative regulation in respect of the
Company or any of its properties.
3.12. TITLE TO PROPERTY, REAL PROPERTY LEASES, ETC. Except as set forth
on SCHEDULE 3.12(a) hereto, and the underlying UCC-1 filing by Merrill Lynch
with respect thereto, the Company has good and marketable title to all of its
properties and assets, including, without limitation, all those reflected in the
Audited Balance Sheet (except for properties or assets sold or otherwise
disposed of in the ordinary course of business since the date of the Audited
Balance Sheet), all free and clear of all liens, pledges, charges, security
interests, encumbrances or title retention agreements of any kind or nature. All
such properties and assets are adequate and sufficient to carry on its business
as presently conducted. SCHEDULE 3.12(b) hereto sets forth a complete and
correct list of all capital assets of the Company having a book or fair market
value in excess of $40,000 of original cost per asset. There are no material
defects in any such capital assets, as to title, not described on SCHEDULE
3.12(b). The Company has never owned any real property. SCHEDULE 3.12(c) hereto
sets forth a complete and correct description of all leases of real property
(the "REAL PROPERTY") to which the Company is a party. Complete and correct
copies of all such leases have been delivered to PHI. Each such lease is valid
and in full force and effect and, to the knowledge of the Shareholders, except
as set forth on SCHEDULE 3.12(c), no event or condition exists which
constitutes, or after notice or lapse of time or both would
<PAGE>
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constitute, a default thereunder. To the Shareholders' knowledge, none of the
leasehold interests of the Company is subject to any lien or other encumbrance,
and the Company is in quiet possession of the properties covered by such leases.
None of the Shareholders, nor the Company, has received any notice that either
the whole or any portion of the Real Property is to be condemned, requisitioned
or otherwise taken by any public authority.
3.13. REAL PROPERTY; SAFETY, ZONING AND ENVIRONMENTAL MATTERS.
(a) To the Shareholders' knowledge, none of the plants, offices or
properties in or on which the Company carries on its business nor the activities
carried on therein are in violation of any United States or foreign zoning,
health or safety law or regulation, including, without limitation, the
Occupational Safety and Health Act of 1970, as amended, and similar foreign law,
as applicable, if any.
(b) Except as set forth on SCHEDULE 3.13:
(i) To the Shareholders' knowledge, the Company is not in
violation or alleged violation of any judgment, decree, order, law,
license, rule or regulation pertaining to environmental matters,
including without limitation those arising under the Resource
Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 as amended ("CERCLA"),
the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the
Federal Water Pollution Control Act, the Solid Waste Disposal Act, as
amended, the Federal Clean Water Act, the Federal Clean Air Act, the
Toxic Substances Control Act, any state or local statute, regulation,
ordinance, order or decree relating to health, safety or the
environment (hereinafter "ENVIRONMENTAL LAWS");
(ii) none of the Shareholders, nor the Company, has received
notice from any third party, including without limitation any federal,
state, or local governmental authority, (A) that the Company or any
predecessor in interest to the Company has been identified by the
United States Environmental Protection Agency ("EPA") as a potentially
responsible party under CERCLA with respect to a site listed on the
National Priorities List, 40 C.F.R. Part 300 Appendix B (1986); (B)
that any hazardous waste, as defined by 42 U.S.C. ss.6903(5), any
hazardous substance as defined by 42 U.S.C. ss.9601(14), any pollutant
or contaminant as defined by 42 U.S.C. ss.9601(33) or any toxic
substance, oil or hazardous material or other chemical or substance
regulated by any Environmental Laws ("HAZARDOUS SUBSTANCES") which the
Company, or any predecessor in interest to the Company has generated,
transported or disposed of or that any such materials disposed of by
the Company or any predecessor in interest has been found at any site
at which a federal, state, or local agency or other third party has
conducted or has ordered that the Company or any predecessor in
interest conduct a remedial investigation, removal or other response
action pursuant to any Environmental Law; or (C) that the Company or
any predecessor in interest to the Company is or shall be a named party
to any claim, action, cause of action, complaint, (contingent or
otherwise) legal or administrative proceeding arising out of any third
party's incurrence of costs, expenses,
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losses or damages of any kind whatsoever in connection with the release
of Hazardous Substances or other similar substances;
(iii) Except as set forth on SCHEDULE 3.13, (A) no portion of
any real property presently or formerly owned, leased or operated by
the Company has been used by the Company for the handling,
manufacturing, processing, storage or disposal of Hazardous Substances
except in accordance with applicable Environmental Laws; and, to the
Shareholders' knowledge, no underground tank or other underground
storage receptacle for Hazardous Substances is located on such
properties; (B) in the course of any activities conducted by the
Company as to any real property presently leased or operated by the
Company (the "REAL PROPERTY"), no Hazardous Substances have been
generated or are being used on such properties except in accordance
with applicable Environmental Laws; (C) to the Shareholders' knowledge,
all real properties presently or formerly leased or operated by the
Company are free from groundwater, surface water, soil, sediment and
air contamination, and, to the Shareholders' knowledge, such properties
do not contain asbestos in any form, urea formaldehyde foam insulation,
transformers or other equipment containing polychlorinated biphenyls or
any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any Environmental Law, or which
poses a hazard to the health and safety of the occupants of such
properties or those adjacent thereto; (D) to the Shareholders'
knowledge, there have been no releases (i.e., any past or present
releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, disposing or dumping) or threatened
releases of Hazardous Substances on, upon, into or from any real
property presently or formerly leased or operated by the Company except
in accordance with applicable Environmental Laws; (E) to the
Shareholders' knowledge, there have been no releases of Hazardous
Substances on, upon, from or into any real property in the vicinity of
any real property presently or formerly leased or operated by the
Company which, through soil or groundwater contamination, may have come
to be located on such real property; and (F) to the Shareholders'
knowledge, any Hazardous Substances that have been generated on any
real property presently or formerly leased or operated by the Company
have been transported offsite only by carriers having identification
numbers issued by the EPA and have been treated or disposed of only by
treatment or disposal facilities maintaining valid permits as required
under applicable Environmental Laws, which transporters and facilities
have been and are, to the Shareholders' knowledge, operating in
compliance with such permits and applicable Environmental Laws; and
(iv) to the Shareholders' knowledge, none of the Real Property
is or shall be subject to any applicable environmental cleanup
responsibility law or environmental restrictive transfer law or
regulation, by virtue of the transactions set forth herein and
contemplated hereby.
(d) Attached as part of SCHEDULE 3.13 is a list of all documents,
reports, site assessments, data, communications or other materials, in the
possession of the Company, or any of the Shareholders, or otherwise known to any
of the Shareholders, which contain any material information with respect to
potential environmental liabilities associated with any real property presently
or formerly leased or operated by the Company and relating to compliance with
<PAGE>
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Environmental Laws or the environmental condition of such properties and
adjacent properties. Except as set forth on SCHEDULE 3.13, the Shareholders have
furnished to PHI complete and accurate copies of all of the documents, reports,
site assessments, data, communications and other materials listed on SCHEDULE
3.13 hereto.
3.14. INSURANCE. SCHEDULE 3.14 hereto lists all policies of fire,
liability, workmen's compensation, life, property, casualty, and other insurance
owned or held by the Company. Except as set forth on SCHEDULE 3.14, all such
policies (a) are in full force and effect, (b) are sufficient for compliance by
the Company with all agreements to which the Company is a party or, to the
Shareholders' knowledge, all applicable requirements of law, (c) provide that
they will remain in full force and effect through the respective dates set forth
on such Schedule, and (d) will not in any way be affected by, or terminate or
lapse by reason of, the transactions contemplated by this Agreement. The Company
is not in default with respect to its obligations under any of such insurance
policies and has not received any notification of cancellation of any such
insurance policies.
3.15. CONTRACTS. SCHEDULE 3.15 sets forth a complete and accurate list
of all contracts to which the Company is a party or by or to which it or any of
the Company's assets or properties is bound or subject, except (a) contracts
entered into in the ordinary course of business after the date hereof and prior
to the Closing, which will be identified to PHI in writing prior to the Closing;
(b) contracts terminable (without any surviving obligation) by the Company upon
30 days' notice or less without the payment of any termination fee or penalty;
(c) contracts that will not result in the payment by the Company of more than
$50,000, or the receipt by the Company of payment of more than $100,000, over
their respective terms (other than any contracts requiring that the Company
indemnify any person); (d) other than purchase orders for the delivery of
services before December 31, 2000 entered into in the ordinary course of
business; (e) contracts under which the Company's sole remaining obligation is
to preserve the confidentiality of a third party's proprietary information; and
(f) contracts listed in other Schedules hereto. As used in this Section 3.15,
the word "CONTRACT" means and includes every agreement or understanding of any
kind, written or oral, which is legally enforceable by or against the Company,
and specifically includes (i) contracts and other agreements with any current or
former officer, director, employee, consultant or shareholder or any
partnership, corporation, joint venture or any other entity in which any such
person has an interest; (ii) agreements with any labor union or association
representing any employee; (iii) contracts and other agreements for the
provision of services by the Company; (iv) bonds or other security agreements
provided by any party in connection with the business of the Company; (v)
contracts and other agreements for the sale of any of the Company's assets or
properties other than in the ordinary course of business or for the grant to any
person of any preferential rights to purchase any of the Company's assets or
properties; (vi) joint venture agreements relating to the assets, properties or
business of the Company or by or to which it or any of its assets or properties
are bound or subject; (vii) contracts or other agreements under which the
Company agrees to indemnify any party, to share tax liability of any party, or
to refrain from competing with any party; (viii) any contracts or other
agreements with regard to Indebtedness; or (ix) any other contract or other
agreement whether or not made in the ordinary course of business. The
Shareholders have delivered to PHI true, correct and complete copies of all
contracts listed on SCHEDULE 3.15, together with all modifications and
supplements thereto. Each of the contracts
<PAGE>
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listed on SCHEDULE 3.15 hereto or any of the other Schedules hereto is in full
force and effect, the Company is not in breach of any of the provisions of any
such contract, nor, to the knowledge of any of the Shareholders, is any other
party to any such contract in default thereunder, nor does any event or
condition exist which with notice or the passage of time or both would
constitute a default thereunder. To the Shareholders' knowledge, the Company has
in all material respects performed all obligations required to be performed by
it to date under each such contract. Except as set forth on SCHEDULE 3.15, no
approval or consent of any person is needed in order that the contracts listed
on SCHEDULE 3.15 and other Schedules hereto continue in full force and effect
following the consummation of the transactions contemplated by this Agreement,
and no such contract includes any provision the effect of which may be to
enlarge or accelerate any obligations of the Company thereunder or give
additional rights to any other party thereto or will in any other way be
affected by, or terminate or lapse by reason of, the transactions contemplated
by this Agreement Notwithstanding the foregoing provisions of this Section 3.15,
contracts of the Company which require that the Company maintain the terms and
conditions, or the existence, of the contract in confidence and to not disclose
the same to third parties shall not be listed on SCHEDULE 3.15 until and unless
the other party to such contract consents to such listing and disclosure to PHI,
PROVIDED, that the Company and the Shareholders represent and warrant that none
of such undisclosed contracts impose any obligations on the Company: (i) to
share any tax obligation with any other Person; (ii) to indemnify any other
person for any matter other than the breach of such contract by the Company;
(iii) not to compete with any Person in any business or any area; (iv) to supply
any Person's requirements of any services or products or purchase any Person's
output of a product or services; or (v) to engage in any action prohibited by
law or contract, or to omit to take any action required by law or contract. The
Company and the Shareholders shall use their best efforts to obtain the
requisite consents of the other parties to such contracts prior to the Effective
Time.
3.16. EMPLOYEE BENEFIT PLANS. (a) Except for the arrangements set forth
on SCHEDULE 3.16(a), the Company does not now maintain or contribute to, and has
not in the current or preceding two (2) calendar years maintained or contributed
to, any pension, profit-sharing, deferred compensation, bonus, stock option,
share appreciation right, severance, group or individual health, dental,
medical, life insurance, survivor benefit, or similar plan, policy or
arrangement, whether formal or informal, for the benefit of any director,
officer, consultant or employee, whether active or terminated, of the Company.
Each of the arrangements set forth on SCHEDULE 3.16(a) is hereinafter referred
to as an "EMPLOYEE BENEFIT PLAN".
(b) The Shareholders have heretofore delivered to PHI true, correct
and complete copies of each Employee Benefit Plan of the Company, and with
respect to each such Plan (i) any associated trust, custodial, insurance or
service agreements, (ii) any annual report, actuarial report, or disclosure
materials (including specifically any summary plan descriptions) submitted to
any governmental agency or distributed to participants or beneficiaries
thereunder in the current or any of the two (2) preceding calendar years, and
(iii) the most recently received IRS determination letters and any governmental
advisory opinions or rulings.
(c) To the Shareholders' knowledge, each Employee Benefit Plan is and
has heretofore been maintained and operated in compliance with the terms of such
Plan and with the requirements prescribed (whether as a matter of substantive
law or as necessary to secure
<PAGE>
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favorable tax treatment) by any and all statutes, governmental or court orders,
or governmental rules or regulations in effect from time to time, including but
not limited to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code and applicable to such Plan. Except as set forth on
SCHEDULE 3.16(c), each Employee Benefit Plan which is intended to qualify under
Section 401(a) of the Code has been determined to be so qualified by the IRS and
nothing has occurred since the date of the last such determination which has
resulted or is likely to result in the revocation of such determination.
(d) Except as set forth on SCHEDULE 3.16(d),
(i) there is no pending or, to the Shareholders' knowledge,
threatened legal action, proceeding or investigation, other than
routine claims for benefits, concerning any Employee Benefit Plan or
any fiduciary or service provider thereof and, to the Shareholders'
knowledge, and the Company's knowledge, there is no basis for any such
legal action or proceeding;
(ii) to the Shareholders' knowledge, no Employee Benefit Plan
nor any party in interest with respect thereof, has engaged in a
prohibited transaction which could subject the Company directly or
indirectly to liability under Section 409 or 502(i) of ERISA or Section
4975 of the Code;
(iii) to the Shareholder's knowledge, no communication, report
or disclosure has been made which, at the time made, did not accurately
reflect the terms and operations of any Employee Benefit Plan;
(iv) no Employee Benefit Plan provides welfare benefits
subsequent to termination of employment to employees or their
beneficiaries (except to the extent required by applicable state
insurance laws and Title I, Part 6 of ERISA);
(v) no benefits due under any Employee Benefit Plan have been
forfeited subject to the possibility of reinstatement (which
possibility would still exist at or after Closing); and
(vi) neither the Company nor the Subsidiaries has undertaken
to maintain any Employee Benefit Plan for any period of time and each
such Plan is terminable at the sole discretion of the sponsor thereof,
subject only to such constraints as may be imposed by applicable law.
(e) With respect to each Employee Benefit Plan for which a separate
fund of assets is required to be maintained, full payment has been made of all
amounts that the Company is required, under the terms of each such Plan, to have
paid as contributions to that Plan as of the end of the most recently ended plan
year of that Plan, and no accumulated funding deficiency (as defined in Section
302 of ERISA and Section 412 of the Code), whether or not waived, exists with
respect to any such Plan.
<PAGE>
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(f) Except as set forth on SCHEDULE 3.16(f), the execution of this
Agreement and the consummation of the transactions contemplated hereby will not
result in any payment (whether of severance pay or otherwise) becoming due from
any Employee Benefit Plan to any current or former director, officer, consultant
or employee of the Company or result in the vesting, acceleration of payment or
increases in the amount of any benefit payable to or in respect of any such
current or former director, officer, consultant or employee.
(g) No Employee Benefit Plan is a multi-employer plan.
(h) No Employee Benefit Plan is a plan subject to Title IV of ERISA.
(i) For purposes of this Section 3.16, "multi-employer plan", "party
in interest", "current value", "accrued benefit", "reportable event" and
"benefit liability" have the same meaning assigned such terms under Sections 3,
4043(b) or 4001(a) of ERISA, and "affiliate" means any entity which under
Section 414 of the Code is treated as a single employer with the Company.
(j) The Trustee, on behalf of the ESOP, has obtained all necessary
authorizations and approvals in compliance with the terms of ESOP and all
applicable laws required for the execution and delivery of this Agreement, and
the consummation of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by the Trustee, and constitutes the legal,
valid and binding obligation of the Trustee, on behalf of the ESOP, enforceable
against the Trustee, on behalf of the ESOP, in accordance with its terms. The
ESOP has (subject to the terms of the pertinent ESOP plan and trust documents
and the ESOP Loan and Pledge Agreement), and as of the consummation of the
Closing, PHI will have, sole record and beneficial ownership of, and good and
marketable title to, all of the Company Stock owned by the ESOP, free and clear
of any mortgage, lien, pledge, charge, security interest, encumbrance, title
retention agreement, option, equity or other adverse claim thereto. The
execution and delivery of this Agreement and the consummation by the Trustee of
the transactions contemplated hereby will not (A) violate or conflict with any
provision of the constitutive or operative documents governing the ESOP; or (B)
constitute a violation of, or be in conflict with, or constitute or create a
default under, or result in the creation or imposition of any encumbrance upon
any the Company Stock pursuant to (i) any agreement or instrument to which the
Company, the Trustee or the ESOP (including the participants) is a party or by
which any of the Company Stock is encumbered, or (ii) any statute, judgment,
injunction, award, decree, order, regulation or rule of any court or
governmental or regulatory authority within or outside of the United States.
3.17. LABOR RELATIONS. The Company is in compliance with all applicable
Federal and state laws respecting employment and employment practices, terms and
conditions of employment, wages and hours and nondiscrimination in employment,
and is not engaged in any unfair labor practice. There is no charge pending or,
to the Shareholders' knowledge, threatened against the Company alleging unlawful
discrimination in employment practices before any court or agency and there is
no charge of or proceeding with regard to any unfair labor practice against the
Company pending before the National Labor Relations Board. There is no labor
strike, dispute, slow-down or work stoppage actually pending or, to the
Shareholders' knowledge,
<PAGE>
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threatened against or involving the Company. No one has petitioned within the
last five (5) years, and no one is now petitioning, for union representation of
any of the Company's employees. No grievance or arbitration proceeding arising
out of or under any collective bargaining agreement is pending against the
Company and no claim therefor has been asserted. None of the employees of the
Company is covered by any collective bargaining agreement, and no collective
bargaining agreement is currently being negotiated by the Company. Except as
fully described on Schedule 3.17 hereto, the Company has not experienced any
work stoppage during the last three (3) years due to any disputes with any
employee of the Company.
3.18. POTENTIAL CONFLICTS OF INTEREST. Except as set forth on SCHEDULE
3.18 hereto, no officer, director or stockholder of the Company (a) owns,
directly or indirectly, any interest in (excepting not more than one percent
(1%) stock holdings for investment purposes in securities of publicly held and
traded companies) or is an officer, director, employee or consultant of any
Person which is a competitor, lessor, lessee, customer or supplier of the
Company; (b) owns, directly or indirectly, in whole or in part, any tangible or
intangible property which the Company is using or the use of which is necessary
for the business of the Company; or (c) has any cause of action or other claim
whatsoever against, or owes any amount to, the Company, except for claims in the
ordinary course of business, such as for accrued vacation pay, accrued benefits
under Employee Benefit Plans and similar matters and agreements.
3.19. PATENTS, ETC.
(a) SCHEDULE 3.19(a) hereto sets forth a complete and accurate list
of (i) all patents, trademarks, trade names and copyrights registered in the
name of, owned by, or licensed to the Company or used or proposed to be used by
the Company in connection with its business, all applications therefor, and all
licenses and other agreements relating thereto, and (ii) all agreements relating
to Intellectual Property that the Company has licensed to, or authorized for use
by, others or that has been licensed to or authorized for use by the Company
(the "THIRD PARTY IP LICENSES"), necessary to conduct the business of the
Company, as currently conducted by the Company. "INTELLECTUAL PROPERTY" means
the patents, copyrights, any and all other registered and unregistered
trade-marks, trade-names, inventions, licences, trade secrets, patterns,
drawings, computer software, formulae, technical information, research data,
concepts, methods, procedures, designs, know-how and other intellectual property
specifically relating to or necessary for the operation of the Company's
business.
(b) Except to the extent set forth on SCHEDULE 3.19(b), the Company
is the sole and exclusive licensee or owner of the entire legal and beneficial
right, title and interest in and to the Intellectual Property listed on SCHEDULE
3.19(a) registered in the name of, owned by, or licensed to the Company, free
and clear of any lien, charge, security interest or other encumbrance, and has
the sole and exclusive right to use all Intellectual Property used or necessary
for the ordinary course of business as presently conducted or proposed to be
conducted, and the consummation of the transactions contemplated hereby will not
alter or impair any such right. Each of the Third Party IP Licenses described on
SCHEDULE 3.19(a) is binding and enforceable on the Company and, to the
Shareholders' knowledge, each other party thereto, and, subject to the Company
obtaining consents hereto prior to the Closing Date, any successors and assigns,
including any successors
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to the business of such entity through merger, sale of all or substantially all
of the stock, assets or other interest in or of such party.
(c) To the Shareholders' knowledge, neither the Company nor, to the
Shareholders' knowledge, the other party or parties thereto, is in breach of any
license, sublicense or other agreement, including the Third Party IP Licenses,
relating to Intellectual Property. To the Shareholders' knowledge, the Company
has complied with all of its obligations of confidentiality in respect of the
Intellectual Property of others and knows of no violation of such obligations of
confidentiality as are owed to the Company.
(d) The Company and the Shareholders have received no notice, either
written or verbal, that the use of the Intellectual Property owned by or
licensed to the Company in the manner currently used or currently contemplated
to be used by the Company infringes or will infringe a third party's patent,
trademark or other Intellectual Property rights. Except as disclosed on SCHEDULE
3.19(d), the Company and the Shareholders have not received any indication or
notice that any of the Intellectual Property owned by or licensed to the Company
or contemplated to be used by the Company in the conduct of its businesses is or
will be the subject of an interference proceeding, opposition proceeding,
reissue or reexamination proceeding, nullity action or other legal proceeding
affecting such Intellectual Property rights in any court or regulatory or
governmental office or tribunal, and the Company has not made any declaration of
any such Intellectual Property rights to the public. The Company has not sent
any notices or made any threats, either written or verbal, regarding any
Intellectual Property owned by or licensed to the Company or contemplated to be
used by the Company in the conduct of its businesses. The Company has not
commenced any interference proceedings, opposition proceedings, nullity actions
or other legal proceedings with respect to the Intellectual Property rights of
any third party. Except as disclosed on SCHEDULE 3.19(d), no claims have been
asserted, and to the knowledge of the Shareholders, no claims are pending, by
any Person regarding the use of any Intellectual Property owned or licensed to
the Company, or contemplated to be used by the Company in the conduct of its
business, or challenging or questioning the validity or effectiveness of any
license or agreement relating to such Intellectual Property, and to the
knowledge of the Shareholders there is no basis for such claim. Except as set
forth on SCHEDULE 3.19(d), the Company and the Shareholders have not received
notice of any default notice or threat thereof with respect to any Third Party
IP License, agreement or other arrangement relating to the Company's
Intellectual Property and the Company has no reasonable basis for suspecting
that such action will be forthcoming. Each of the patents to which the Third
Party IP Licenses described on SCHEDULE 3.19(a) relate (the "PATENTS"), are
currently in compliance with formal legal requirements (including payment of
filing, examination and maintenance fees and proofs of working or use). The
Company is not aware of any facts that could cause the Patents to be invalid or
unenforceable. Except as set forth on SCHEDULE 3.19(d) and to the knowledge of
the Shareholders, there is no potentially interfering patent or patent
application of any third party; and, to the knowledge of the Company, no Patent
is infringed or has been challenged or threatened in any way.
(e) Except as set forth on SCHEDULE 3.19(e), the Company's ability to
use any of the Intellectual Property registered in the name of, owned by, or
licensed to the Company set forth
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on any of the schedules referred to in this Section 3.19 will not be adversely
affected by the consummation of the transactions contemplated hereby.
3.20. SUPPLIERS AND CUSTOMERS. SCHEDULE 3.20 sets forth the Company's
ten (10) largest suppliers for calendar year 1998 (excluding utility service
providers, capital equipment lessors, and capital lease and equipment providers)
and ten (10) largest customers for calendar years 1997 and 1998, including the
following information: (i) the revenues received from such customers or amounts
paid to such suppliers during such years, and (ii) the identity of such
customers or suppliers (except where the Company is prohibited from disclosing
the identity of such customers by contract with such customer). The
relationships of the Company with such suppliers and customers are good
commercial working relationships and, except as set forth on SCHEDULE 3.20, the
Shareholders are not aware, and have no reason to believe, that any supplier or
customer of material importance to the Company has canceled or otherwise
terminated, or threatened to cancel or otherwise to terminate, its relationship
with the Company or has during the last twelve (12) months decreased materially,
or threatened to decrease or limit materially, its services, supplies or
materials for use by the Company or its usage or purchase of the services or
products of the Company except for normal cyclical changes related to customers'
businesses. None of the Shareholders has any knowledge that any such supplier or
customer intends to cancel or otherwise substantially modify its relationship
with the Company or to decrease materially or limit such customer's services,
supplies or materials to the Company, or such customer's usage or purchase of
the Company's services or products, and, to the Shareholders' knowledge, the
consummation of the transactions contemplated hereby will not adversely affect
the relationship of PHI with any such supplier or customer.
3.21. ACCOUNTS RECEIVABLE. Except as set forth on SCHEDULE 3.21, all
accounts and notes receivable reflected on the Audited Balance Sheet, and all
accounts and notes receivable arising subsequent to the date of such Audited
Balance Sheet, have arisen in the ordinary course of business, represent valid
obligations owing to the Company and have been collected or, subject to the
reserves set forth on the Interim Balance Sheet, are collectible in the
aggregate recorded amounts thereof in accordance with their terms. In addition,
all accounts and notes receivable arising subsequent to the date of the Audited
Balance Sheet, if collected, have been collected in the ordinary course of
business and without any unusual discounts.
3.22. NO UNDISCLOSED LIABILITIES. Except to the extent (a) reflected or
reserved against in the Audited Balance Sheet, (b) incurred in the ordinary
course of business after the date of the Audited Balance Sheet and either
discharged prior to Closing or adequately reserved against on the Interim
Balance Sheet or (c) described on SCHEDULE 3.22 hereto, the Company has no
liabilities or obligations of any nature, whether accrued, absolute, contingent
or otherwise (including without limitation as guarantor or otherwise with
respect to obligations of others), other than performance obligations with
respect to the Company's contracts that would not be required to be reflected or
reserved against on a balance sheet prepared in accordance with GAAP or in the
footnotes thereto.
3.23. TAXES. Except as set forth on SCHEDULE 3.23; (a) the Company has
timely and duly filed with the appropriate government agencies, whether within
or outside of the United States, all of the income, sales, use, employment and
other tax returns and reports required to be filed by
<PAGE>
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it, each such tax return and report has been prepared in compliance with all
applicable laws and regulations and all such tax returns were true and correct
at the time made in all material respects. No waiver of any statute of
limitations relating to taxes has been executed or given by the Company. All
taxes, assessments, fees and other governmental charges upon the Company or upon
any of its properties, assets, revenues, income and franchises which are owed by
the Company with respect to any period ending on or before the Closing Date have
been paid, other than those currently payable without penalty or interest
reflected on the Interim Balance Sheet. No federal tax return of the Company is
currently under audit by the IRS (as defined in Section 9) and no tax return of
the Company is currently under audit by any other taxing authority. Neither the
IRS nor any other taxing authority is now asserting or, to the Shareholders'
knowledge, threatening to assert nor have such authorities ever asserted or
threatened to assert against the Company any deficiency or claim for additional
taxes or interest thereon or penalties in connection therewith or any adjustment
that would have an adverse effect on the Company. The Company has not consented
to extend the time in which any tax may be assessed or collected by any taxing
authority. The Company has not requested or been granted an extension of the
time for filing any tax return to a date on or after the Closing Date. The
Company has never been a member of any Affiliated Group (as defined in Section
1504(a) of the Code and the Treasury Regulations promulgated thereunder), or
filed or been included in a combined, consolidated, or unitary tax return. The
Company has withheld and paid all taxes required to have been withheld and paid
by it in connection with amounts paid or owing to any employee, creditor,
independent contractor, or other person.
(b) The Company has elected pursuant to Section 1362 of the Code, to
be treated as an "S" corporation pursuant to Subchapter S of the Code (the
"SUBCHAPTER S ELECTION"), commencing September 1, 1979, and the Company and the
Shareholders have reported income and filed tax returns consistently therewith
since that date. The Company will continue to qualify as a "small business
corporation" within the meaning of Section 1361(b) of the Code to and including
the Closing. The Company has not had and will not have liability or any
potential or deferred liability for taxes pursuant to Section 1371(d)(2),
Section 1374 or Section 1375 of the Code, nor has the Company been subjected to
any other taxes (other than state income taxes) imposed pursuant to or resulting
from its Subchapter S Election. Apart from thereafter subjecting the Company to
income taxation for periods after the termination of the Subchapter S Election,
such termination will not have a material adverse effect on the Company, its
financial condition, or its business as presently conducted or proposed to be
conducted or any of its properties or material assets. All material elections
with respect to the Company's taxes made or in effect during the fiscal years
ending December 31, 1996, 1997 and 1998 are reflected on the Company's tax
returns for such periods, copies of which have been provided or made available
to PHI. After the date of this Agreement, no material election with respect to
taxes will be made without the prior written consent of PHI, which consent will
not be unreasonably withheld or delayed. Except as set forth on SCHEDULE 3.23,
the Company is not party to any joint venture, partnership, or other arrangement
or contract which could be treated as a partnership for federal income tax
purposes. The Company is not currently and never has been subject to the
reporting requirements of Section 6038A of the Code. There is no agreement,
contract or arrangement to which the Company is a party that could, individually
or collectively, result in the payment of any amount that would not be
deductible by reason of Sections 280G (as determined without regard to Section
280G(b)(4)), 162(a) (by reason of being unreasonable in amount), 162(b)
<PAGE>
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through (p) or 404 of the Code. The Company has no current or potential
contractual obligation to indemnify any other person with respect to the payment
of any taxes, is not a party to or bound by any tax indemnity, tax sharing or
tax allocation agreement (whether written or unwritten or arising under
operation of federal law as a result of being a member of a group filing
consolidated tax returns, under operation of certain state laws as a result of
being a member of a unitary group, or under comparable laws of other states or
foreign jurisdictions) which includes a party other than the Company nor does
the Company owe any amount under any such Agreement.
3.24. INDEBTEDNESS. Except as set forth on SCHEDULE 3.24, there is no
Company Indebtedness outstanding at the date hereof. The Company is not in
default with respect to any outstanding Company Indebtedness or any instrument
relating thereto and no such Company Indebtedness or any instrument or agreement
relating thereto purports to limit the issuance of any securities by the Company
or the operation of the business of the Company. Complete and correct copies of
all instruments (including all amendments, supplements, waivers and consents)
relating to any Company Indebtedness have been furnished to PHI.
3.25. BANK ACCOUNTS, SIGNING AUTHORITY, POWERS OF ATTORNEY. Except as
set forth on SCHEDULE 3.25 hereto, the Company does not have any account or safe
deposit box in any bank and no Person has any power, whether singly or jointly,
to sign any checks on behalf of the Company, to withdraw any money or other
property from any bank, brokerage or other account of the Company or to act
under any power of attorney granted by the Company at any time for any purpose.
SCHEDULE 3.25 also sets forth the names of all persons authorized to borrow
money or sign notes on behalf of the Company.
3.26. SUPPLIES. The supplies of the Company are adequate for their
respective present needs, and, except as set for in SCHEDULE 3.26, are in usable
and saleable condition in the ordinary course of business as currently
conducted.
3.27. MINUTE BOOKS. The minute books and corporate records of the
Company made available to PHI for inspection accurately record therein all
actions taken by the Company's Board of Directors and shareholders.
3.28. BROKER. None of the Shareholders has retained, utilized or been
represented by any broker, agent, finder or intermediary in connection with the
negotiation or consummation of the transactions contemplated by this Agreement.
3.29. ACCOUNTS PAYABLE. Except as shown on SCHEDULE 3.29, all accounts
payable reflected on the Audited Balance Sheet, and all accounts payable arising
between the date of such Audited Balance Sheet and the Effective Time, have
arisen or will arise in the ordinary course of business, represent valid
obligations of the Company and have been paid, will be paid and/or are obligated
to be paid within a time period consistent with that which has historically
arisen in the ordinary course of business of the Company.
3.30. DISCLOSURE. No representation or warranty by any of the
Shareholders in this Agreement or in any schedule, certificate or other document
delivered or to be delivered to PHI
<PAGE>
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pursuant hereto or in connection with the consummation of the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact required to be stated
therein or necessary to make the statements contained therein not misleading.
There is no fact known to the Shareholders that has not been disclosed to PHI
that materially adversely affects the Company, or to the knowledge of the
Shareholders, could reasonably be excepted to have a material adverse effect on
the Company.
3.31. FOREIGN CORRUPT PRACTICES ACT. The Company has not taken any
action which would cause it to be in violation of the Foreign Corrupt Practices
Act of 1977, as amended, or any rules and regulations thereunder. To the
Shareholders' knowledge, there is not now, and there has never been, any
employment by the Company, or beneficial ownership in the Company by, any
governmental or political official in any country in the world.
3.32. YEAR 2000.
(a) DEFINITIONS. For purposes of this Section 3.32:
(i) "MILLENNIUM COMPLIANT" means, as to any software or
equipment containing or dependent upon microchips or other processors,
that no operation of such software, computer or equipment will fail, be
interrupted or produce incorrect or ambiguous results as a result of
the century change (or any related date dependence, including, without
limitation, 9/9/99, leap year, etc.) irrespective of (a) whether the
date data involved is before, on or after January 1, 2000 (or involves
more than one of the foregoing) or (b) the date upon which the
operations are performed.
(ii) "YEAR 2000 PROCESSING" shall have the same meaning as
that given under the Year 2000 Information and Readiness Disclosure
Act.
(b) INTERNAL SYSTEMS. Year 2000 Processing by any software or
computer-controlled device that is owned, operated, used or useful in the
Company's business will not adversely affect the Company's business.
(c) PRODUCTS; SERVICES. To the knowledge of the Shareholders and the
Company, based upon the investigations described in paragraph (d) below, all
software, computer-controlled devices and services currently being sold,
licensed, distributed or otherwise provided by the Company, or currently under
development by the Company, are Millennium Compliant. To the knowledge of the
Shareholders and the Company, based upon the investigations described in
paragraph (d) below, except as set forth on SCHEDULE 3.32(c), all software,
computer-controlled devices and services sold, licensed, distributed or
otherwise provided by the Company, prior to the date hereof, are Millennium
Compliant, and, if not Millennium Compliant, are no longer under warranty,
extended maintenance obligation or similar obligation that would require the
Company to repair, replace or otherwise be responsible for such noncompliance.
To the knowledge of the Shareholders and the Company, based upon the
investigations described in paragraph (d) below, to the extent any liabilities
may arise due to the failure of the Company's software or computer-controlled
devices to be Millennium Compliant, such liabilities would not have a Material
Adverse Effect on the Company or its business.
<PAGE>
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(d) READINESS INVESTIGATION. The Company and the Shareholders have
taken all steps reasonably necessary to access whether or not the Company's
products and services are Millenium Compliant and whether any Year 2000
Processing by any device used or useful in the Company's business will adversely
affect the Company's business.
(e) FORM OF REPRESENTATIONS. SCHEDULE 3.32(e) sets forth the
Company's standard form of representations and disclosures as to the Company's
Year 2000 readiness as have been, and are being, provided to the Company's
customers, suppliers, and other such third-parties. Such representations and
disclosures set forth on Schedule 3.32 are true and in all respects fully
performable by the Company.
4. REPRESENTATIONS AND WARRANTIES OF PHI. PHI represents and
warrants to each of the Shareholders as follows:
4.1. ORGANIZATION OF PHI; AUTHORITY. PHI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. PHI has all requisite power and authority to execute and deliver this
Agreement and the Escrow Agreement and to carry out all of the actions required
of it pursuant to the terms hereof and thereof.
4.2. CORPORATE APPROVAL; BINDING EFFECT. PHI has obtained all
necessary authorizations and approvals from its Board of Directors and
stockholders required for the execution and delivery of this Agreement and the
Escrow Agreement and the consummation of the transactions contemplated hereby
and thereby. Each of this Agreement and the Escrow Agreement, when executed and
delivered by PHI and the other parties thereto shall constitute the legal, valid
and binding obligation of PHI, enforceable against PHI in accordance with their
respective terms, except as enforceability thereof may be limited by any
applicable bankruptcy, reorganization, insolvency or other laws affecting
creditors' rights generally or by general principles of equity.
4.3. NON-CONTRAVENTION. Except as set forth on SCHEDULE 4.3, the
execution and delivery by PHI of this Agreement and the Escrow Agreement and the
consummation by PHI of the transactions contemplated hereby and thereby will not
(a) violate or conflict with any provisions of the Certificate of Incorporation
or By-Laws of PHI, each as amended to date; or (b) constitute a violation of, or
be in conflict with, constitute or create a default under, or result in the
creation or imposition of any lien upon any property of PHI pursuant to (i) any
agreement or instrument to which PHI is a party or by which PHI or any of its
properties is bound or to which PHI or any of its properties is subject, or (ii)
any statute, judgment, decree, order, regulation or rule of any court or
governmental authority to which PHI is subject.
4.4. GOVERNMENTAL CONSENTS. Except for any required notification
report form under the HSR Act, no consent, approval or authorization of, or
registration, qualification or filing with, any governmental agency or authority
is required for the execution and delivery by PHI of this Agreement or the
Escrow Agreement or for the consummation by PHI of the transactions contemplated
hereby or thereby.
<PAGE>
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4.5. BROKERS. PHI has not retained, utilized or been represented by
any broker, agent, finder or other intermediary in connection with the
negotiation or consummation of the transactions contemplated by this Agreement.
4.6. DISCLOSURE. No representation or warranty by PHI in this
Agreement or in any Schedule or certificate delivered or to be delivered to the
Shareholders hereto or in connection with the consummation of the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact required to be stated herein
or necessary to make the statements contained therein not misleading.
4.7. INVESTMENT REPRESENTATION. PHI is acquiring the Company Stock for
its own account for investment purposes only and not with a view to or for sale
in connection with any distribution thereof, nor with any present intention of
reselling or granting any participation in all or part of the Company Stock to
any person.
5. COVENANTS PENDING CLOSING. Each of the Shareholders and the
Company, jointly and severally, covenants and agrees that, from and after the
date of this Agreement and until the Closing, except as otherwise specifically
consented to or approved by PHI in writing:
5.1. FULL ACCESS. The Company shall, and the Shareholders shall cause
the Company to, afford to PHI and its authorized representatives full access
during normal business hours to all properties, books, records, contracts and
documents of the Company and a full opportunity to make such reasonable
investigations as they shall desire to make of the Company, and the Shareholders
shall furnish or cause to be furnished to PHI and its authorized representatives
all such information with respect to the affairs and businesses of the Company
as PHI may reasonably request. Notwithstanding the foregoing, PHI acknowledges
and agrees that (i) PHI's right to, and the Company's obligation to provide,
such access and information is subject to compliance with the Company's safety
procedures and security requirements mandated by the Company's government
contracts, and (ii) PHI's right to access shall not apply to information which
the Company is obligated to maintain in confidence pursuant to agreements with
certain third parties and/or security requirements pertaining to the Company's
work for or with governmental entities. Upon request by PHI, the Company, will
however, use its reasonable best efforts to secure the consent of any such third
party to the disclosure of such information.
5.2. CARRY ON IN REGULAR COURSE. The Company shall, and the
Shareholders shall cause the Company to, maintain their owned and leased
properties in good operating condition and repair, and to make all necessary
renewals, additions and replacements thereto, and to carry on their business
diligently and substantially in the same manner as heretofore and not make or
institute any changes of management or accounting practices other than those in
the ordinary course of business.
5.3. NO GENERAL INCREASES. The Company and the Shareholders have
previously provided PHI with the current annual base salaries of all of the
employees of the Company. The Company shall not, and the Shareholders shall not
permit the Company to, grant any general or uniform increase in the rates of pay
of employees of the Company, nor grant any general or
<PAGE>
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uniform increase in the benefits available under any bonus plan except that the
Company may elect to pay a second quarter bonus calculated in accordance with,
and not exceeding, the formula set forth on SCHEDULE 5.3 hereto, or pension plan
or other contract or commitment to, for or with any such employees; the Company
shall not, and the Shareholders shall not permit the Company to, generally
increase the compensation payable or to become payable to officers, key salaried
employees or agents, or increase any bonus, insurance, pension or other benefit
plan, payment or arrangement made to, for or with any such officers, key
salaried employees or agents; and the Company shall not make any material
changes in its personnel, except to the extent required to replace departing
employees or as necessitated by growth of the business.
5.4. NO DIVIDENDS, ISSUANCES, REPURCHASES, ETC. The Company shall not,
and the Shareholders shall not permit the Company to, declare or pay any
dividends (whether in cash, shares of stock or otherwise) on, or make any other
distribution in respect of, any shares of its capital stock, or issue, purchase,
redeem or acquire for value any shares of its capital stock, except for vested
incentive stock options. Notwithstanding the foregoing, the Company shall be
permitted to pay prior to the Closing a dividend distribution not to exceed 50%
of its cash basis profit for the period of April 1, 1999, to the Closing Date.
5.5. CONTRACTS AND COMMITMENTS. The Company shall not, and the
Shareholders shall not permit the Company to, enter into any contract or
commitment which will result in the payment (either to or from the Company) of
more than $25,000 over its term or engage in any transaction not in the usual
and ordinary course of business and consistent with the business practices of
the Company.
5.6. PURCHASE AND SALE OF CAPITAL ASSETS. Except for any capital
expenditures approved by the Company prior to the date hereof and the capital
expenditures and dispositions described on SCHEDULE 5.6 hereto, the Company
shall not, and the Shareholders shall not permit the Company to, purchase or
sell or otherwise dispose of any capital asset with a market value in excess of
$50,000, or of capital assets of market value aggregating in excess of $250,000,
without the prior written consent of PHI, and in no event shall purchase, sell
or otherwise dispose of any capital asset other than in the ordinary course of
business with the exception of those described in SCHEDULE 5.6.
5.7. INSURANCE. The Company shall, and the Shareholders shall cause
the Company to, maintain the insurance coverage described on SCHEDULE 3.14
through and including the Closing Date. After the Closing, PHI shall purchase a
"tail" policy that will continue in effect, for a period of three years after
the Closing Date and covering actions occurring prior to the Closing Date, the
level of D&O, E&O and fiduciary insurance coverage listed on SCHEDULE 3.14.
5.8. PRESERVATION OF ORGANIZATION. The Company shall, and the
Shareholders shall cause the Company to, preserve its business organization
intact, to keep available to PHI the present key officers and employees of the
Company and to preserve for PHI the present relationships of the Company's
suppliers and customers and others having business relations with the Company.
<PAGE>
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5.9. NO DEFAULT. The Company shall not, and the Shareholders shall not
permit the Company to, do any act or omit to do any act, or permit any act or
omission to act, which will cause a material breach of any contract, commitment
or obligation of the Company.
5.10. COMPLIANCE WITH LAWS. The Company shall, and the Shareholders
shall cause the Company to, comply with all laws, regulations and orders, both
within and outside the United States, applicable with respect to its business.
5.11. ADVICE OF CHANGE. The Company and the Shareholders will promptly
advise PHI in writing of any material adverse change in the business, condition,
operations, prospects or assets of the Company.
5.12. NO SHOPPING. The Company shall not, and the Shareholders shall
not permit the Company or any agent thereof to, directly or indirectly, initiate
discussions, negotiate for, solicit, entertain or respond to overtures of offers
from, provide any information to or enter into any agreement with respect or in
relation to the sale of the Company Stock or any substantial portion of the
assets of the Company or any merger or other business combination of the
Company. The Shareholders and the Company will promptly advise PHI in writing of
any indication of interest in a potential acquisition received from any third
party, except those general mailings received routinely from companies such as
The Geneva Group.
5.13. CONSENTS OF THIRD PARTIES. The Company and the Shareholders will
employ their respective best efforts to secure, before the Closing Date, the
consent, in form and substance satisfactory to PHI and PHI's counsel, to the
consummation of the transactions contemplated by this Agreement by each party to
any contract, commitment or obligation of the Company under which such
transactions would constitute a default, would accelerate obligations of the
Company or would permit cancellation of any such contract.
5.14. SATISFACTION OF CONDITIONS PRECEDENT. The Company and the
Shareholders will use their respective best efforts to cause the satisfaction of
the conditions precedent contained herein.
5.15. HSR ACT. As promptly as practicable, and in no event later than
the twelfth (12th) business day following the execution and delivery of this
Agreement by the parties, the Company and the Shareholders and PHI shall each
prepare and file any required notification and report form under HSR Act in
connection with the transactions contemplated hereby. The Company and the
Shareholders and PHI shall each request early termination of the waiting period
thereunder; and the Company and the Shareholders and PHI shall respond with
reasonable diligence and dispatch to any request for additional information made
in response to such filings.
5.16. COOPERATION. The Company, and the Shareholders shall use their
respective best efforts to facilitate the conduct of the environmental reviews
referred to in Section 6.9, including with respect to facilitating the
acquisition of any consents required from any lessor of any of the Real Property
to perform sampling of the soil at any locations deemed necessary by PHI or any
of the persons engaged to deliver the reports referred to in Section 6.9.
<PAGE>
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5.17. NO OUTSTANDING RIGHTS AT EFFECTIVE TIME. The Company and the
Shareholders shall use all reasonable efforts to cause the Company to, cause the
acceleration, exercise, waiver or termination of all Outstanding Rights,
including any outstanding subscriptions, options, warrants, calls, commitments
or agreements of any kind or character calling for the Company to issue, deliver
or sell, or cause to be issued, delivered or sold any shares of the Company
Stock or any other equity security of the Company or any securities convertible
into, exchangeable for or representing the right to subscribe for, purchase or
otherwise receive any shares of the Company Stock or any other equity security
of the Company or obligating the Company to grant, extend or enter into any such
subscriptions, options, warrants, calls, commitment or agreements, prior to the
Effective Time.
6. CONDITIONS PRECEDENT TO PHI'S OBLIGATIONS. The obligation of PHI
to consummate the Closing shall be subject to the satisfaction at or prior to
the Closing of each of the following conditions (to the extent noncompliance is
not waived in writing by PHI, PROVIDED, HOWEVER, that the condition set forth in
Section 6.18 below, may not be waived by either PHI or the Company):
6.1. REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations and warranties made by the Shareholders in or pursuant to this
Agreement shall be true and correct at and as of the Closing Date with the same
effect as though such representations and warranties had been made or given at
and as of the Closing Date.
6.2. COMPLIANCE WITH AGREEMENT. The Shareholders shall have performed
and complied with all of their obligations under this Agreement to be performed
or complied with by them on or prior to the Closing Date.
6.3. NO MATERIAL CHANGE. There shall not have been or, threatened to
be, any material damage to or loss or destruction of any properties or assets
owned or leased by the Company (whether or not covered by insurance) or any
material adverse change in the condition (financial or otherwise), operations,
business or assets of the Company or imposition of any laws, rules or
regulations which would materially adversely affect the condition (financial or
otherwise), operations, business or assets of the Company. For the purposes of
this Section 6.3, "materiality" shall be defined, with respect to any Person, as
being reasonably likely to have an impact on at least 10% of the assets of such
Person or at least 5% of the net income of such Person.
6.4. SHAREHOLDERS' AGREEMENTS. The Shareholders shall have delivered
to PHI in writing, at and as of the Closing, individual agreements duly executed
by each of the Shareholders, in form and substance satisfactory to PHI and PHI's
counsel, containing the following: (i) a certification that the conditions in
each of Section 6.1, Section 6.2 and Section 6.3 (to the knowledge of such
Shareholder) have been satisfied, (ii) an agreement on the part of such
Shareholder to release the Company from and against all claims the Shareholder
may have with respect to matters existing on the Closing Date, such release to
be in the form of EXHIBIT B hereto, (iii) an agreement by such Shareholder to
surrender, and consent to the termination of, all Outstanding Rights held by
such Shareholder that are outstanding as of the Effective Time, and (iv) the
grant by PHI to such Shareholder, in exchange for the surrender of
<PAGE>
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all Outstanding Rights, if any, held by such Shareholder that have not "vested"
(I.E., become exercisable) prior to the Closing Date (the "UNVESTED RIGHTS"), of
an interest in an employee benefit plan to be sponsored by PHI having the value
described on SCHEDULE 6.4 hereto with respect to each Unvested Right
(collectively, the "SHAREHOLDER AGREEMENTS").
6.5. OPINION OF COUNSEL. Einar Sunde, Esq., counsel to the Shareholders
and the Company, shall have delivered to PHI a written opinion, addressed to PHI
and dated the Closing Date, in the form of EXHIBIT C hereto.
6.6. APPROVALS. All corporate and other approvals and consents required
to be obtained by the Shareholders, or the Company in connection with the
transactions contemplated by this Agreement and the form and substance of all
certificates and other documents delivered hereunder shall have been obtained
and shall be reasonably satisfactory in form and substance to PHI and its
counsel.
6.7. NO LITIGATION. No restraining order or injunction shall prevent
the transactions contemplated by this Agreement and no action, suit or
proceeding shall be pending or threatened before any court or administrative
body (a) in which it will be or is sought to restrain or prohibit or obtain
damages or other relief in connection with this Agreement or the consummation of
the transactions contemplated hereby, or (b) in connection with any claim for
damages in excess of $25,000 against the Company.
6.8. DUE DILIGENCE. PHI shall have been afforded the opportunity to
conduct a due diligence investigation on the Company, the Evans Affiliates and
their respective operations, employees, financial condition and prospects, and
shall be satisfied with the results of such investigation.
6.9. ENVIRONMENTAL REPORTS. PHI shall have obtained, at its own
expense, a report or reports (including soil sampling), in form and substance
satisfactory to it, of an environmental engineering firm or firms selected by
PHI in the exercise of its sole discretion, as to (i) compliance of any or all
of the Real Property (and any adjoining property) with all applicable
Environmental Laws, including without limitation the absence of any spills or
releases of any oil or Hazardous Substance on such Real Property, and (ii) the
absence of any liability of the Company (including soil sampling) under any
Environmental Laws.
6.10. CONSENT OF LENDERS. Each of PHI and HVE shall have obtained all
consents and approvals from its lenders and noteholders as are or may be
necessary to the consummation of the transactions contemplated by this
Agreement.
6.11. CONSENTS OF THIRD PARTIES. The Shareholders will have obtained
the consent, in form and substance satisfactory to PHI and PHI's counsel, to the
consummation of the transactions contemplated by this Agreement by each party to
any contract, commitment or other obligation of the Company under which such
transactions would constitute a default, would accelerate obligations of the
Company or PHI or would permit cancellation of any such contract.
<PAGE>
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6.12. TAX ELECTION. Each Shareholder shall have executed and delivered
to PHI all documents reasonably requested by PHI prior to the Closing Date, so
that PHI may make the necessary filings and elect to treat the transactions
contemplated hereby under Section 338(h)(10) of the Code.
6.13. PROCEEDINGS AND DOCUMENTS SATISFACTORY. All proceedings in
connection with the transactions contemplated by this Agreement and all
certificates and documents delivered to PHI in connection with the transactions
contemplated by this Agreement shall be satisfactory in all reasonable respects
to PHI, and PHI shall have received the originals or certified or other copies
of all such records and documents as PHI may reasonably request.
6.14. TENDER OF ALL SHARES. Each holder of Common Stock outstanding on
the Closing Date shall have become parties to this Agreement and all of the
outstanding shares of Company Stock shall have been tendered for sale in
accordance with Section 1.
6.15. NO OUTSTANDING RIGHTS. At and as of the Effective Time, the
Company shall not have or be bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any kind or character calling for
the Company to issue, deliver or sell, or cause to be issued, delivered or sold
any shares of Company Stock or any other equity security of the Company or any
securities convertible into, exchangeable for or representing the right to
subscribe for, purchase or otherwise receive any share of Company Stock or any
other equity security of the Company or obligating the Company to grant, extend
or enter into any such subscriptions, options, warrants, calls, commitment or
agreements and PHI shall have received evidence satisfactory to it of the
termination or other extinguishment as of the Effective Time of all Outstanding
Rights. Each holder of an Unvested Right who is not a Shareholder (each, an
"OPTIONEE") shall have executed and delivered to PHI an agreement pursuant to
which: (i) such Optionee shall release the Company from and against all claims
the Optionee may have with respect to matters existing before the Closing Date,
such release to be in the form of EXHIBIT B hereto, (ii) such Optionee shall
agree to surrender, and consent to be terminated, all Outstanding Rights held by
such Shareholder that are outstanding as of the Effective Time; and (iii) PHI
shall grant to such Optionee in exchange for the surrender of all Unvested
Rights held by such Optionee of an interest in an employee benefit plan of PHI
having the value set forth on SCHEDULE 6.4 with respect to all such Unvested
Rights (collectively, the "OPTIONEE AGREEMENTS").
6.16. PAY-OFF LETTERS. PHI shall have received pay-off letters or other
evidence of the amounts necessary to discharge all Company Indebtedness (other
than Permitted Company Indebtedness), in form reasonably satisfactory to PHI, no
later than three (3) business days prior to the Effective Time.
6.17. ESCROW AGREEMENT. The Shareholders' Committee, the Trustee and
the Escrow Agent shall have executed and delivered to PHI the Escrow Agreement,
and the Escrow Agreement shall be in full force and effect.
6.18. FINAL ESOP CONTRIBUTION. The Company shall have made prior to the
Closing the final contribution due to the ESOP equal to 10% of the "eligible
compensation" (as defined in the ESOP plan) for the period between January 1,
1999 and the Closing Date.
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6.19. STOCK RESTRICTION AGREEMENTS. The Stock Restriction Agreements
shall have been terminated and the Company and the Shareholders shall have no
continuing obligations thereunder.
6.20. ESOP LOAN AND PLEDGE AGREEMENT. The shares of the Company Stock
held subject to the ESOP Loan and Pledge Agreement shall have been released from
the pledge thereunder and shall be freely transferable hereunder.
6.21. WAIVER UNDER EVANS EAST PARTNERSHIP AGREEMENT. Each of Evans East
Inc., a New Jersey Corporation ("EEI"), and each person who may constitute a
"Principal Shareholder of EEI" as defined in the General Partnership Agreement,
dated as of August 1, 1991, of Evans East (the "EVANS EAST PARTNERSHIP
AGREEMENT"), shall have irrevocably waived, and agreed not to exercise, any
rights such parties may have to purchase any partnership interests of the
Company in Evans East pursuant to Section 13.1(c) of the Evans East Partnership
Agreement as a result of the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, including the purchase by
PHI of the Company Stock, such waiver and agreement not to exercise to be in
form satisfactory to PHI and its counsel.
7. CONDITIONS PRECEDENT TO THE SHAREHOLDERS' OBLIGATIONS. The
obligation of the Shareholders to consummate the Closing shall be subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(to the extent noncompliance is not waived in writing by the Shareholders):
7.1. REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations and warranties made by PHI in this Agreement shall be true and
correct at and as of the Closing Date with the same effect as though such
representations and warranties had been made or given at and as of the Closing
Date.
7.2. COMPLIANCE WITH AGREEMENT. PHI shall have performed and complied
with all of its obligations under this Agreement that are to be performed or
complied with by it at or prior to the Closing.
7.3. CLOSING CERTIFICATE. PHI shall have delivered to the Company in
writing, at and as of the Closing, a certificate duly executed by each of the
President and Treasurer of PHI, in form and substance satisfactory to the
Shareholders and the Shareholders' counsel, to the effect that the conditions in
each of Section 7.1 and Section 7.2 have been satisfied.
7.4. APPROVALS. All corporate and other approvals required to be
obtained by PHI or HVE in connection with the transactions contemplated by this
Agreement and the form and substance of all certificates and other documents
delivered hereunder shall have been obtained and shall be reasonably
satisfactory to the Shareholders and their counsel.
7.5. NO LITIGATION. No restraining order or injunction shall prevent
the transactions contemplated by this Agreement and no action, suit or
proceeding shall be pending or threatened before any court or administrative
body in which it will be or is sought to restrain or prohibit or
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obtain damages or other relief in connection with this Agreement or the
consummation of the transactions contemplated hereby.
7.6. PROCEEDINGS AND DOCUMENTS SATISFACTORY. All proceedings in
connection with the transactions contemplated by this Agreement and all
certificates and documents delivered to the Shareholders in connection with the
transactions contemplated by this Agreement shall be satisfactory in all
reasonable respects to the Shareholders, and the Shareholders shall have
received the originals or certified or other copies of all such records and
documents as the Shareholders may reasonably request.
7.7. OPINION OF COUNSEL. Bingham Dana LLP, counsel to PHI, shall have
delivered to the Shareholders a written opinion, addressed to the Shareholders'
Committee and dated the Closing Date, in the form of EXHIBIT D hereto.
7.8. RELEASE OF GUARANTEES. The guarantees of certain obligations of
the Company or other security for obligations of the Company by certain of the
Shareholders and set forth on SCHEDULE 7.8 hereto shall have been fully and
unconditionally released (except that they may be released contingent on the
consummation of the Closing and the repayment of the underlying obligations of
the Company).
7.9. SHAREHOLDER AGREEMENTS AND OPTIONEE AGREEMENTS. PHI shall have
executed and delivered to each of the Shareholders and Optionees the Shareholder
Agreement or Optionee Agreement to which such Shareholder or Optionee is to be a
party.
7.10. ESCROW AGREEMENT. PHI and the Escrow Agent shall have executed
and delivered the Escrow Agreement, and the Escrow Agreement shall be in full
force and effect.
8. CONFIDENTIAL INFORMATION.
Each of PHI and the Company hereby specifically agree that the
Confidentiality and Nondisclosure Agreement by and between the Company and PHI
and HVE dated January 25, 1999 shall continue in full force and effect and which
agreement shall take precedence over any conflicting provision of this
Agreement. The obligations of the parties under this Section 8 and under any
separate confidentiality agreement executed in connection with the transactions
contemplated under this Agreement shall survive any termination of this
Agreement (except that the Confidentiality and Nondisclosure Agreement between
the Company and PHI and HVE shall terminate effective upon the Closing). If this
Agreement is terminated for any reason without the Closing having occurred, each
party shall return all of the other parties' information in tangible form,
including all copies, extracts, summaries and other versions thereof.
9. DEFINITIONS. As used herein the following terms not otherwise
defined have the following respective meanings:
"COMPANY INDEBTEDNESS": shall mean any Indebtedness of the Company or
Indebtedness guaranteed by the Company.
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"GAAP": shall mean United States generally accepted accounting
principles as in effect from time to time, consistently applied.
"INDEBTEDNESS": As applied to any Person (as defined in this Section
9), (a) all indebtedness of such Person for borrowed money, whether current or
funded, or secured or unsecured, (b) all indebtedness of such Person for the
deferred purchase price of property or services represented by a note or other
security, (c) all indebtedness of such Person created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the Shareholder
or lender under such agreement in the event of default are limited to
repossession or sale of such property), (d) all indebtedness of such Person
secured by a purchase money mortgage or other lien to secure all or part of the
purchase price of property subject to such mortgage or lien, (e) all obligations
under leases which shall have been or must be, in accordance with generally
accepted accounting principles, recorded as capital leases in respect of which
such Person is liable as lessee, (f) any liability of such Person in respect of
banker's acceptances or letters of credit, (g) any matured obligations to pay
prepay penalties in connection with the extinguishment of other Indebtedness and
(h) all indebtedness referred to in clause (a), (b), (c), (d), (e), (f) or (g)
above which is directly or indirectly guaranteed by such Person or which such
Person has agreed (contingently or otherwise) to purchase or otherwise acquire
or in respect of which it has otherwise assured a creditor against loss.
"IRS": The United States Internal Revenue Service.
"MATERIAL ADVERSE EFFECT": with respect to any entity or group of
entities means any event, change or effect that is materially adverse to the
condition (financial or otherwise), properties, assets (including intangible
assets), liabilities, business, operations or results of operations of such
entity, taken as a whole.
"PERMITTED COMPANY INDEBTEDNESS": Any of the Company Indebtedness
listed on SCHEDULE 9-1 hereto, but only to the extent it does not exceed the
respective maximum amounts set forth thereon.
"PERSON" or "PERSON": A corporation, an association, a partnership, a
limited liability company, an organization, a business, an individual, a
government or political subdivision thereof or a governmental agency.
"STATE": Any state or commonwealth of the United States of America; the
District of Columbia; the Commonwealth of Puerto Rico; and any other dependency,
possession or territory of the United States of America.
"SUBSIDIARIES": With respect to any Person, any corporation a majority
(by number of votes) of the outstanding shares of any class or classes of which
shall at the time be owned by such Person or by a subsidiary of such Person, if
the holders of the shares of such class or classes (a) are ordinarily, in the
absence of contingencies, entitled to vote for the election of a majority of the
directors (or persons performing similar functions) of the issuer thereof, even
though the right so to vote has been suspended by the happening of such a
contingency, or (b) are at the time
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entitled, as such holders, to vote for the election of a majority of the
directors (or persons performing similar functions) of the issuer thereof,
whether or not the right so to vote exists by reason of the happening of a
contingency.
"TAX" or "TAXES": means any U.S., state, local, or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise, severance, stamp,
occupation, premium, windfall profit, customs, duties, real property, personal
property, capital stock, intangibles, social security, unemployment, disability,
payroll, license, employee, or other tax or levy, of any kind whatsoever,
including any interest, penalties, or additions to tax in respect of the
foregoing.
"TO THE SHAREHOLDERS' KNOWLEDGE": means within the actual knowledge of
one or more of the Shareholders.
10. INDEMNIFICATION.
10.1. INDEMNITY BY THE SHAREHOLDERS. Subject to the limitations,
minimum amounts and time limitations set forth in Section 10.5, each of the
Shareholders jointly and severally agrees to indemnify and hold PHI and the
Company (and their respective directors, officers, employees and affiliates)
harmless from and with respect to any and all claims, liabilities, losses,
damages, costs and expenses, including without limitation the fees and
disbursements of counsel (collectively, the "LOSSES") arising, directly or
indirectly, out of:
(i) any failure or any breach by the Shareholders of any
representation or warranty, covenant, obligation or undertaking made by
any of the Shareholders in this Agreement, any Schedule or Exhibit
hereto, or any other agreement, statement, certificate or other
instrument delivered pursuant hereto or in connection herewith;
(ii) any actual or alleged tax liability of the Company in
respect of any period through the Closing Date;
(iii) any Company Indebtedness outstanding at the Effective
Time (after payment of the amounts specified by Section 2.1(b)), other
than any Permitted Company Indebtedness ("INDEBTEDNESS CLAIMS");
(iv) any liability of the Company or any of the Individual
Shareholders with respect to the professional fees and expenses
incurred by the Company or any of the Individual Shareholders prior to
the Closing Date and not paid by the Company or such Individual
Shareholders prior to the Closing Date (including any fees and expenses
incurred in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
("FEE CLAIMS");
(v) any liability of the Company to the Trustee pursuant to
the indemnification provisions set forth in the ESOP trust agreement
with respect to actions or omissions occurring prior to the Closing
Date, after the application of any insurance proceeds applicable
thereto ("ESOP CLAIMS"); and
<PAGE>
(vi) any liability or losses of the Company or PHI incurred as
a result of the settlement or other disposition of the DCAA audit
described in the footnotes to the Financial Statements, but only to the
extent that such liability or losses exceed the Company's reserves
therefor as of December 31, 1998 (taking into account any reduction in
such reserves as a result of any settlement payments or rebates made by
the Company after December 31, 1998 and any offsets to any such
liability available as a result of any costs which previously were
unbillable) (the "DCAA CLAIMS").
10.2. INDEMNITY BY PHI. PHI agrees to indemnify and hold the
Shareholders (and their respective directors, officers, employees, affiliates,
heirs and personal representative) harmless from and with respect to any and all
Losses arising, directly or indirectly, out of (i) any breach by PHI of any
representation or warranty, covenant, obligation or undertaking made by PHI in
this Agreement, any Schedule or Exhibit hereto, or any other statement,
certificate or other instrument delivered pursuant hereto, or (ii) any actual or
alleged tax liability of the Company in respect of any period after the Closing
Date, or of PHI for any period before or after the Closing Date, or in respect
of any additional tax liability of any of the Shareholders to the IRS or other
state taxing authority as a result of the making of the Section 338(h)(10)
Election and arising out of challenges by the IRS or such other taxing authority
of the calculation of the Gross-Up Amount by virtue of the Asset Allocation.
10.3. CLAIMS.
(a) NOTICE. Any party seeking indemnification hereunder (the
"INDEMNIFIED PARTY") shall promptly notify the other party hereto (the
"INDEMNIFYING PARTY") of any action, suit, proceeding, demand or breach (a
"CLAIM") with respect to which the Indemnified Party claims indemnification
hereunder, PROVIDED, THAT, failure of the Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations under this Section
10 except to the extent, if at all, that such Indemnifying Party shall have been
prejudiced thereby.
(b) THIRD PARTY CLAIMS. If such Claim relates to any action, suit,
proceeding or demand instituted against the Indemnified Party by a third party
(a "THIRD PARTY CLAIM"), the Indemnifying Party shall be entitled to participate
in the defense of such Third Party Claim after receipt of notice of such claim
from the Indemnified Party. Within thirty (30) days after receipt of notice of a
particular matter from the Indemnified Party, the Indemnifying Party may assume
the defense of such Third Party Claim, in which case the Indemnifying Party
shall have the authority to negotiate, compromise and settle such Third Party
Claim, if and only if the following conditions are satisfied:
(i) the Indemnifying Party shall have confirmed in writing
that it is obligated hereunder to indemnify the Indemnified Party with
respect to the full amount of such Third Party Claim; and
(ii) the named parties to such Third Party Claim include both
the Indemnifying Party and the Indemnified Party, and the Indemnified
Party has been advised in writing by counsel that there may be one or
more legal defenses available to
<PAGE>
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the Indemnified Party that are different from or additional to those
available to the Indemnifying Party.
If the Indemnifying Party assumes the defense of a Third Party Claim,
(i) the Indemnified Party shall be entitled to employ its own counsel and to
participate in the defense of any Third Party Claim, but the Indemnified Party
shall bear and shall be solely responsible for its own costs and expenses in
connection with such representation, and (ii) the Indemnifying Party shall be
entitled to compromise or settle such Third Party Claim, provided, however, that
any compromise or settlement shall be made only with the written consent of the
Indemnified Party.
If the Indemnifying Party does not assume the defense of such claim,
the Indemnified Party shall have the right to defend, compromise and settle such
claim, PROVIDED, HOWEVER, that any compromise or settlement that may reasonably
be expected to result in, or requires, any indemnification from an Indemnifying
Party shall be made only with the written consent of the Indemnifying Party,
which consent shall not be unreasonably withheld.
10.4. METHOD AND MANNER OF PAYING CLAIMS. In the event of any Claims
under this Section 10, the claimant shall advise the party or parties who are
required to provide indemnification therefor in writing of the amount and
circumstances surrounding such claim. With respect to liquidated claims, if
within thirty (30) days the other party has not contested such claim in writing,
the other party will pay the full amount thereof within ten (10) days after the
expiration of such period. Any amount owed by an Indemnifying Party hereunder
with respect to any Claim may be set-off by the Indemnified Party against any
amounts owed by the Indemnified Party to any Indemnifying Party.
10.5. LIMITATIONS ON INDEMNIFICATION.
(a) For purposes of this Section 10.5, the following terms shall have
the following meanings:
(i) "UNLIMITED AMOUNT CLAIMS" shall mean any Losses
suffered by PHI or the Company with respect to inaccuracies in any of
the representations or warranties made by the Shareholders in Sections
3.4 or 3.5, and any Indebtedness Claims, Fee Claims or ESOP Claims; and
(ii) "TAX CLAIMS" shall mean any Losses suffered by
PHI or the Company with respect to inaccuracies in any of the
representations or warranties made by the Shareholders in Section 3.23,
or any Claims made pursuant to Section 10.1(ii).
(b) No Indemnifying Party shall be required to indemnify an
Indemnified Party hereunder except to the extent that the aggregate amount of
Losses for which the Indemnified Party is otherwise entitled to indemnification
pursuant to this Section 10 exceeds the greater of (i) $100,000 or (ii) the
amount, if any, that the amount of the finally determined Closing Assets exceeds
the amount of the Target Assets, with such greater amount being referred to
herein as the "DEDUCTIBLE AMOUNT", whereupon the Indemnified Party shall be
entitled to be paid each dollar of Losses in excess of the Deductible Amount,
subject to the limitations on maximum
<PAGE>
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amount of recovery set forth in paragraphs (c) and (d) below; PROVIDED, THAT,
Losses relating to or arising directly or indirectly out of any Unlimited Amount
Claims and Tax Claims shall not be subject to the limitations set forth in this
Section 10.5(b).
(c) The aggregate Losses payable by an Indemnifying Party pursuant to
this Section 10 with respect to all claims, other than Losses related to or
arising directly or indirectly out of any Unlimited Amount Claims or Tax Claims,
shall not exceed an amount equal to the final Gross-Up Amount.
(d) The aggregate Losses payable by the Shareholders with respect to
any Tax Claims shall not exceed $5,000,000.
(e) In the event that the Shareholders are an Indemnifying Party
pursuant to this Section 10, each Shareholder's maximum liability under this
Section 10, other than with respect to Unlimited Amount Claims, shall be limited
to such proportion of the Purchase Price allocable to such Shareholder
determined with reference to such Shareholder's proportional ownership interest,
whether direct or indirect, of the Company Stock as set forth on the
Shareholders' Committee Disclosure Schedule (ignoring for purposes of any such
calculation any ownership interest of the ESOP), and the aggregate liability of
all of the Shareholders under this Section 10, other than with respect to
Unlimited Amount Claims and Tax Claims, shall be limited to the amount of the
Escrowed Funds. Each Shareholders' maximum liability under this Section 10 with
respect to Unlimited Amount Claims shall be limited to the amount of the
Purchase Price actually received by such Shareholder, whether directly or
through distribution from the ESOP. The ESOP's liability under this Section 10
shall be limited to its proportionate share of the Escrowed Funds.
(f) Any liability arising hereunder and resulting from a breach by a
Shareholder of the representations and warranties made by such Shareholder in
Sections 3.5 or 3.30, or arising from a breach by such Shareholder of the
provisions of Sections 13.1 or 13.2, shall be borne solely and exclusively by
the breaching Shareholder.
(g) No Indemnifying Party shall be liable for any Losses pursuant to
this Section 10 unless a written claim for indemnification in accordance with
Section 10.4 is given by the Indemnified Party to the Indemnifying Party with
respect thereto within two (2) years after the Closing, except that PHI may
pursue claims for Losses arising out of (i) inaccuracies in the representations
and warranties made in Sections 3.4 and 3.5 indefinitely, and (ii) out of any
Tax Claims until the expiration of the relevant statutes of limitations
therefor.
11. TERMINATION OF ESOP. As soon as reasonably practicable following
the receipt by the Company of a determination letter evidencing the approval by
the IRS of the termination of the ESOP, the Trustee will distribute to the
Participants their respective portions of the Purchase Price in accordance with
their respective interests in the ESOP and, to the extent permitted by
applicable law, the terms of the ESOP and the Charles Evans & Associates 401(k)
Retirement Plan (the "401(K) PLAN"), participants in the ESOP shall be permitted
to direct the ESOP to roll-over their respective payments into their accounts in
the 401(k) Plan. As soon as
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reasonably practicable following the Closing, the Company, at its sole expense,
shall file an application with the IRS for its approval of the termination of
the ESOP. As soon as practicable after receipt of such approval by the IRS, the
Trustee will distribute to the Participants their respective portions of the
Purchase Price in accordance with their respective interests in the ESOP. In any
event, the Company shall undertake the responsibility for all required final
disclosures to the Participants, ESOP filings with governmental agencies and tax
withholding and reporting responsibilities regarding all such ESOP distributions
pending the completion of all distributions of the ESOP in accordance herewith.
All expenses of terminating the ESOP shall be borne by the Company.
12. TERMINATION. This Agreement may be terminated upon the mutual
written consent of each of the parties hereto. If the Shareholders and PHI fail
to consummate the transactions contemplated by this Agreement on or before
September 1, 1999, for reasons other than those related to the HSR Act, this
Agreement shall automatically, without any further action on the part of the
parties hereto, terminate.
13. NON-COMPETITION AND NON-SOLICITATION AGREEMENT.
13.1. NON-COMPETITION; NON-SOLICITATION. Each Individual Shareholder
acknowledges that the covenants and agreements of such Individual Shareholder in
this Section 13 are a condition precedent to PHI's obligations to acquire the
Company Stock from the Shareholders and to such Shareholder's right to receive
the payment therefor, and that PHI would not purchase the Company Stock and the
payment therefor would not be made but for such Shareholder's and PHI's
agreements herein. Each Individual Shareholder, the Company and PHI acknowledge
that the Company will sell analytical services to customers located in markets
in any territory, domain or sector in which the Company conducts its business at
the Termination Date referred to below (the "COVERED TERRITORY") and that
engagement by such Individual Shareholder in any part of the Designated Industry
(as hereinafter defined) in the Covered Territory could cause the Company or its
affiliates irreparable damage. For a period (the "RESTRICTED PERIOD") beginning
on the date hereof and ending on the eighteen-month anniversary of the
termination of such Shareholder's employment with the Company or its affiliates,
such Shareholder will not (a) engage directly or indirectly in competition with
the Company in any part of the Designated Industry anywhere in the world, alone
or as a shareholder, equity owner, partner, officer, director, employee or
consultant of any other business organization, (b) divert to any competitor of
the Company any customer or supplier of the Company nor (c) solicit, or arrange
to have any other person or entity solicit, any person or entity engaged by the
Company as an employee, any customer, any supplier, or any consultant or advisor
to the Company to terminate such party's relationship with the Company. The
foregoing restriction shall not prevent each individual Shareholder from owning
five percent (5%) or less of the equity securities of any publicly traded
company. For purposes of this Section 13, the term "DESIGNATED INDUSTRY" shall
mean the business of providing commercial analytical services for outside
customers in competition with the Company or the Evans Affiliates on the Closing
date or at the time of termination of employment. The parties agree that the
foregoing shall in no event be interpreted so as to prevent an Individual
Shareholder from being employed or otherwise engaged by a company which operates
an analytical laboratory so long as such company's analytic services are
rendered for its own use and not provided for commercial sale. If at any time
the provisions of this Section 13
<PAGE>
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shall be determined to be invalid or unenforceable, by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section 13 shall be
considered divisible and shall become and be immediately amended to only such
area, duration and scope of activity as shall be determined to be reasonable and
enforceable by the court or other body having jurisdiction over the matter; and
each Shareholder agrees that this Section 13 as so amended shall be valid and
binding as though any invalid or unenforceable provision had not been included
herein.
13.2. CONFIDENTIAL INFORMATION. Each Individual Shareholder recognizes
and acknowledges that certain of the assets of the Company, including without
limitation, information regarding the existence, status or terms of this
Agreement and the transactions contemplated hereby, customers, pricing policies,
methods of operation, proprietary computer programs, sales, products, profits,
costs, markets, key personnel, formulae, product applications, technical
processes and trade secrets (hereinafter called "CONFIDENTIAL INFORMATION") are
valuable, special, and unique assets of the Company. During the Restricted
Period and thereafter, except as authorized by the Company in the performance of
an Individual Shareholder's duties as an employee of the Company, each
Individual Shareholder shall not disclose any or any part of the Confidential
Information to any person, firm, corporation, association, or any other entity
for any reason or purpose whatsoever, directly or indirectly, except as required
by law or (to the extent the Company has received prior notice thereof and has
been given an opportunity to obtain a protective order concerning such
Confidential Information), as required in connection with litigation among PHI,
such Shareholder or the Company unless and until such Confidential Information
becomes publicly known or available other than as a consequence of the breach by
such Shareholder of his confidentiality obligations hereunder.
13.3. REMEDIES. Each Individual Shareholder acknowledges and agrees
that the remedy of PHI and the Company at law for a breach or threatened breach
of any of the provisions of Section 13 of this Agreement would be inadequate
and, in recognition of this fact, in the event of a breach or threatened breach
by such Shareholder of any of the provisions of this Agreement it is agreed
that, in addition to its remedy at law, PHI and the Company shall be entitled,
without posting any bond, to equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent injunction or
any other equitable remedy which may then be available. Nothing herein contained
shall be construed as prohibiting PHI and the Company from pursuing any other
remedies available to it for such breach or threatened breach. For purposes of
this Section 13, "THREATENED BREACH" shall mean any indication, verbal or
otherwise, of such Shareholder's intention to breach, or of such Shareholder's
impending breach of, any of the provisions of this Section 13.
14. GENERAL.
14.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the parties hereto contained in this Agreement or otherwise
made in writing in connection with the transactions contemplated hereby (in each
case except as affected by the transactions contemplated by this Agreement)
shall be deemed material and, notwithstanding any investigation by PHI, shall be
deemed to have been relied on by PHI and shall survive the Closing, and the
consummation of the transactions contemplated hereby. Each representation and
warranty made by any of the Shareholders or PHI in this Agreement shall expire
on the last
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day, if any, that Claims for breaches of such representation or warranty may be
made pursuant to Section 10.5 hereof, except that any such representation or
warranty that has been made the subject of a Claim prior to such expiration date
shall survive with respect to such Claim until the final resolution of such
Claim pursuant to Section 10.
14.2. SALES TAX; EXPENSES; 338(h)(10) ELECTION. (a) PHI shall pay any
sales, use, or other tax payable in connection with the transaction hereunder,
except that the Shareholders shall pay any stock transfer taxes payable in
connection with the sale of the Company Stock. All expenses of the preparation,
execution and consummation of this Agreement and of the transactions
contemplated hereby, including without limitation attorneys', accountants' and
outside advisers' fees and disbursements, shall be borne by the party incurring
such expenses, except that (i) the Company shall pay all expenses incurred by
the ESOP in this regard, and (ii) the Company shall be permitted to pay, in its
discretion, professional fees incurred on behalf of the Shareholders in
connection with the transactions contemplated hereby prior to the Closing.
(b) PHI and the Shareholders hereby agree that PHI and the
Shareholders will join in making the 338(h)(10) Election with respect to the
purchase and sale of the Company Stock. PHI will be responsible for preparing
and filing all documents and materials necessary in connection with making the
Section 338(h)(10) Election, and each of the Shareholders agrees to cooperate
with PHI in connection therewith (including, without limitation, signing and
returning to PHI any documents sent to such Shareholder for such Shareholder's
signature in connection therewith within ten (10) business days of his or her
receipt of such documents). PHI, the Company and the Shareholders will file all
tax returns on a basis consistent with the Section 338(h)(10) Election and the
Asset Allocation, and all taxes imposed on the deemed sale of assets resulting
from the Section 338(h)(10) Election will be included in the tax returns of the
Shareholders, as applicable, and will be paid by the Shareholders.
14.3. NOTICES. All notices, demands and other communications hereunder
shall be in writing or by written telecommunication, and shall be deemed to have
been duly given if delivered personally or if mailed by certified mail, return
receipt requested, postage prepaid, or if sent by overnight courier, or sent by
written telecommunication, as follows:
If to any or all of the Shareholders, to:
Charles Evans & Associates
301 Chesapeake Drive
Redwood City, CA 94063
Attention: Dr. Charles A. Evans, Jr.
with a copy sent contemporaneously to:
Einar Sunde, Esq.
2600 El Camino Real, Suite 201
Palo Alto, CA 94306
If to PHI, to:
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Physical Electronics, Inc.
c/o High Voltage Engineering Corporation
401 Edgewater Place, Suite 680
Wakefield, MA 01880-6210
Attention: Mr. Joseph W. McHugh, Jr.
with a copy sent contemporaneously to:
Michael P. O'Brien, Esq.
Johan V. Brigham, Esq.
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Any such notice shall be effective (a) if delivered personally, when
received, (b) if sent by overnight courier, when receipted for, (c) if mailed,
five (5) days after being mailed as described above, and (d) if sent by written
telecommunication, when dispatched.
14.4. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties, supersedes all prior agreements and understandings
relating to the subject matter hereof and shall not be amended except by a
written instrument hereafter signed by all of the parties hereto.
14.5. GOVERNING LAW. The validity and construction of this Agreement
shall be governed and construed and enforced in accordance with the internal
laws (and not the choice-of-law rules) of the Commonwealth of Massachusetts.
14.6. SECTIONS AND SECTION HEADINGS. The headings of sections and
subsections are for reference only and shall not limit or control the meaning
thereof.
14.7. ASSIGNS. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors and
permitted assigns. Neither this Agreement nor the obligations of any party
hereunder shall be assignable or transferable by such party without the prior
written consent of the other party hereto; PROVIDED, HOWEVER, that nothing
contained in this Section 14.7 shall prevent PHI, without the consent of the
Shareholders, (a) from transferring or assigning this Agreement or its rights or
obligations hereunder to another entity controlling, under the control of, or
under common control with PHI or (b) from assigning all or part of its rights or
obligations hereunder by way of collateral assignment to any bank or financing
institution providing financing for the acquisition contemplated hereby, but no
such transfer or assignment made pursuant to clauses (a) or (b) shall relieve
PHI of its obligation under this Agreement.
14.8. SEVERABILITY. In the event that any covenant, condition, or other
provision herein contained is held to be invalid, void, or illegal by any court
of competent jurisdiction, the same
<PAGE>
-40-
shall be deemed to be severable from the remainder of this Agreement and shall
in no way affect, impair, or invalidate any other covenant, condition, or other
provision contained herein.
14.9. FURTHER ASSURANCES. The parties agree to take such reasonable
steps and execute such other and further documents as may be necessary or
appropriate to cause the terms and conditions contained herein to be carried
into effect.
14.10. NO IMPLIED RIGHTS OR REMEDIES. Except as otherwise expressly
provided herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or to give any person, firm or corporation, other than
the Shareholders and PHI and their respective shareholders, if any, any rights
or remedies under or by reason of this Agreement.
14.11. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.12. SATISFACTION OF CONDITIONS PRECEDENT. Each of the Shareholders
and PHI will use its best efforts to cause the satisfaction of the conditions
precedent contained in this Agreement; provided, HOWEVER, that nothing contained
in this Section 14.12 shall obligate either party hereto to waive any right or
condition under this Agreement.
14.13. PUBLIC STATEMENTS OR RELEASES. Each of the parties hereto agrees
that prior to the consummation of the Closing no party to this Agreement will
make, issue or release any public announcement, statement or acknowledgment of
the existence of, or reveal the status of, this Agreement or the transactions
provided for herein, without first obtaining the consent of the Shareholders'
Committee and PHI. Nothing contained in this Section 14.13 shall prevent the
Shareholders' Committee and PHI from making such disclosures as either party may
consider necessary to satisfy such party's legal or contractual obligations.
14.14. WAIVER UNDER PARTNERSHIP AGREEMENT. Each Shareholder, to the
extent that it may be a "Principal Shareholder of CE&A" as defined in the Evans
East Partnership Agreement, hereby irrevocably waives, and agrees not to
exercise, any rights such Shareholder may have to acquire any of the partnership
interests of the Company in Evans East pursuant to the terms of Section 13.1(c)
of the Evans East Partnership Agreement as a result of the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, including the purchase by PHI of the Company Stock from the
Shareholders.
14.15. SHAREHOLDERS' COMMITTEE. (a) By the execution and delivery of
this Agreement, each Shareholder shall be deemed to have appointed Charles A.
Evans, Jr., Richard S. Hockett and Kurt J. Fraenkel as the initial members of a
three-person committee (the "SHAREHOLDERS' COMMITTEE"), to have irrevocably
designated the Shareholders' Committee as the agent of each of the Shareholders
with full power and authority, except as otherwise provided in this Agreement,
in the name of and on behalf of the Shareholders, or in the name of the
Shareholder' Committee, to take all actions required or permitted under this
Agreement, to execute in the name of and on behalf of the Shareholders the
Escrow Agreement, to take all actions required or permitted under the Escrow
Agreement, and to bind and act on behalf of the Shareholders with
<PAGE>
-41-
respect to any matters which may arise under or in connection with this
Agreement and the Escrow Agreement. Without limiting the foregoing, the
authority and responsibilities of the Shareholders' Committee shall include, but
not necessarily be limited to, the power:
(i) to act for the Shareholders with regard to matters
pertaining to indemnification referred to in this Agreement, including
the power to compromise any Claim on behalf of the Shareholders and to
transact matters of litigation;
(ii) to execute and deliver the Escrow Agreement and all other
ancillary agreements, certificates and documents that the Shareholders'
Committee deems necessary or appropriate in connection with the
consummation of the transactions contemplated by this Agreement;
(iii) to receive funds and give receipts for funds, including
in respect of any adjustments to the Purchase Price and any payments
out of the Escrowed Funds;
(iv) to do or refrain from doing any further act or deed on
behalf of the Shareholders that the Shareholders' Committee deems
necessary or appropriate in his sole discretion relating to the subject
matter of this Agreement as fully and completely as the Shareholders
could do if personally present;
(v) to receive service of process in connection with any
Claims under this Agreement; and
(vi) to engage accountants, lawyers and other person which, in
the discretion of the Shareholders' Committee, shall be necessary or
advisable in connection with carrying out its responsibilities under
this Agreement and the Escrow Agreement.
(b) By execution and delivery of this Agreement, each Shareholder
shall be deemed to have approved the following terms and conditions pertaining
to the Shareholders' Committee:
(i) Actions of the Shareholders' Committee shall require
approval by a majority of the members then serving. Decisions of the
Shareholders' Committee, when evidenced by a writing executed by a
majority of the members of the Shareholders' Committee shall be final,
binding and conclusive upon each Shareholder. Third parties, including
but not limited to PHI and the Escrow Holder under the Escrow
Agreement, may rely upon any such decision, act or instruction as being
the decision, act or instruction of each Shareholder and any notice
given to the Shareholders' Committee under this Agreement or the Escrow
Agreement shall constitute effective notice to all the Shareholders. In
the event of the disability, death, or resignation of any member of the
Shareholders' Committee, the remaining member or members, or if there
is none, a majority in interest of the Shareholders based on their pro
rata percentage interest as shown on the Shareholders' Committee
Disclosure Schedule, shall designate the successor member or members to
fill such vacancy or vacancies. The Shareholders' Committee shall send
notice of changes in members of the Shareholders' Committee to each
Shareholder at his or her last address of record.
<PAGE>
-41-
(ii) In taking any action under this Agreement or the Escrow
Agreement, the members of the Shareholders' Committee shall be
protected in relying upon any notice or other document reasonably
believed to be genuine, or upon any evidence reasonably deemed by them
to be sufficient.
(iii) The members of the Shareholders' Committee shall not be
liable to the Shareholders for any loss, damage, cost, expense
whatsoever arising under this Agreement or the Escrow Agreement,
excepting only to the extent such damage, cost or expense was caused
solely by the gross negligence or willful misconduct of the individual
member of the Shareholders' Committee against whom a claim is made.
(iv) Each member of the Shareholders' Committee, and their
respective successors, shall be indemnified and held harmless by the
Shareholders to the fullest extent permissible under California law
(including attorneys' fees, judgments, fines, and amounts paid or to be
paid in settlement) reasonably incurred or suffered by such person in
connection with their role as members of the Shareholders' Committee;
PROVIDED that the indemnification obligation of the Shareholders
hereunder shall be several and only in proportion to their respective
shareholdings in the Company prior to the Closing. The foregoing right
to indemnification shall include advances to cover expenses incurred in
defending any proceeding in advance of its final disposition, PROVIDED,
THAT such advances shall be made only upon an undertaking, by or on
behalf of the indemnitee, that such advances will be repaid if it shall
ultimately be determined that such person is not entitled to be
indemnified. The foregoing right to indemnification shall continue as
to a person who has ceased to be a member of the Shareholders'
Committee and shall inure to the benefit of his heirs, executors and
administrators.
(v) The members of the Shareholders' Committee shall serve
without compensation but shall be reimbursed by the Shareholders for
attorney fees and other out-of-pocket expenses reasonably incurred or
suffered by such person in connection with their role as members of the
Shareholders' Committee, or in connection with any dispute arising
under this Agreement or the Escrow Agreement.
(vi) Out of the Purchase Price otherwise due the Shareholders
at the Closing, the Shareholders hereby irrevocably authorize PHI to
deposit $100,000 to an interest bearing account established by and in
the name of the Shareholders' Committee (the "SHAREHOLDERS' COMMITTEE
ACCOUNT"). The funds in the Shareholders' Committee Account shall be
used exclusively by the Shareholders' Committee in carrying out its
responsibilities under this Agreement and the Escrow Agreement and to
reimburse and/or indemnify the Shareholders' Committee as authorized in
this Section 14.14. The Shareholders' Committee shall provide prompt
written notice to the Shareholders of all disbursements from the
Shareholders' Committee Account. All funds in the Shareholders'
Committee Account shall be disbursed to the Shareholders, in accordance
with their respective pro rata percentage interest as shown on SCHEDULE
1, at the first anniversary of the Closing, provided, however, that if
any claim under the
<PAGE>
-43-
indemnification provisions of Section 10 is then pending then the
balance of such funds shall be disbursed promptly after settlement or
final disposition of such claim or claims.
(vii) The authority conferred under this Section 14.14 shall
be an agency coupled with an interest, and all authority conferred
hereby is irrevocable and not subject to termination by the
Shareholders or any one of them or by operation of law.
14.16. TERMINATION OF CEA STOCK RESTRICTION AGREEMENTS. By
execution and delivery of this Agreement:
(a) the Company and each Shareholder who is a party to the Stock
Restriction Agreement dated May 15, 1987, as amended, (the "5/15/87 AGREEMENT")
hereby agree that (i) each Shareholder who is party to the 5/15/87 Agreement may
execute this Agreement notwithstanding the restrictions on transfer contained in
the 5/15/87 Agreement, and the Company and each Shareholder who is a party
thereto hereby waives any right under the 5/15/87 Agreement to acquire shares of
a Shareholder who is a party to the 5/15/87 Agreement by reason of such
Shareholder executing this Agreement, and (ii) the 5/15/87 Agreement shall
automatically and without further action by the parties thereto terminate
effective as of the Closing under this Agreement. Except as specifically
provided in this Section 14.15(a), the 5/15/87 Agreement shall remain in full
force and effect until and unless such Closing occurs.
(b) The Company and Charles Evans Jr. and Christina Evans as
trustees of the Evans Family 1993 Trust (the "EVANS TRUST"), the parties to the
Stock Restriction Agreement dated January 27, 1993 (the "1/27/93 AGREEMENT"),
hereby agree that (i) the Evans Trust may execute this Stock Purchase Agreement
notwithstanding the restrictions on transfer contained in the 1/27/93 Agreement,
and the Company hereby waives any right under the 1/27/93 Agreement to acquire
shares of the Evans Trust by reason of such Shareholder executing this
Agreement, and (ii) the 1/27/93 Agreement shall automatically and without
further action by the parties thereto terminate effective as of the Closing
under this Agreement. Except as specifically provided in this Section 14.15(b),
the 1/27/93 Agreement shall remain in full force and effect until and unless
such Closing occurs.
(c) The Company and each Shareholder who is a party to a Stock
Purchase and Restriction Agreement (each, an "INDIVIDUAL RESTRICTION AGREEMENT",
and collectively with the 5/15/87 Agreement and the 1/27/93 Agreement, the
"STOCK RESTRICTION AGREEMENTS"), executed in connection with the exercise of a
stock option granted under the Company's 1996 Stock Option Plan, hereby agree
that (i) each such Shareholder may execute this Agreement notwithstanding the
restrictions on transfer contained in such Individual Restriction Agreement, and
the Company hereby waives any right under such Individual Restriction Agreements
to acquire shares of such Shareholder by reason of such Shareholder executing
this Agreement, and (ii) each Individual Restriction Agreement shall
automatically and without further action by the parties thereto terminate
effective as of the Closing under this Agreement. Except as specifically
provided in this Section 14.15(c), each Individual Restriction Agreement shall
remain in full force and effect until and unless such Closing occurs.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE>
-44-
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have caused this Agreement to be duly executed and delivered as a
sealed instrument as of the date and year first above written.
PHI:
PHYSICAL ELECTRONICS, INC.
By: /s/ JOHN R. HADDOCK
------------------------------------
Name: John R. Haddock
Title: President
THE COMPANY:
CHARLES EVANS & ASSOCIATES
By: /s/ CHARLES A. EVANS, JR.
-----------------------------------
Name: Charles A. Evans, Jr.
Title: President
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-1
SHAREHOLDER:
/s/ VICTOR CHIA
---------------------------------------
Name: Victor Chia
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-2
SHAREHOLDER:
/s/ PAUL K. CHU
---------------------------------------
Name: Paul K. Chu
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-3
SHAREHOLDER:
/s/ CARL COLVARD
---------------------------------------
Name: Carl Colvard
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-4
SHAREHOLDER:
/s/ MICHAEL J. EDGELL
---------------------------------------
Name: Michael J. Edgell
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-5
SHAREHOLDER:
EVANS FAMILY 1993 TRUST
By: /s/ CHARLES A. EVANS, JR.
------------------------------------
Charles A. Evans, Jr., Trustee
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-6
SHAREHOLDER:
/s/ SHIRLEY FARRELL
---------------------------------------
Name: Shirley Farrell
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-7
SHAREHOLDER:
DECLARATION OF TRUST DATED
MAY 15, 1981, AS AMENDED
By: /s/ KURT J. FRAENKEL
------------------------------------
Kurt J. Fraenkel, Trustee
By: /s/ JOANNE H. FRAENKEL
------------------------------------
Joanne H. Fraenkel, Trustee
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-8
SHAREHOLDER:
/s/ CHARLES J. HITZMAN
---------------------------------------
Name: Charles J. Hitzman
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-9
SHAREHOLDER:
HOCKETT FAMILY 1997 TRUST
By: /s/ RICHARD S. HOCKETT
------------------------------------
Richard S. Hockett, Trustee
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-10
SHAREHOLDER:
/s/ JOHN C. HUNEKE
---------------------------------------
Name: John C. Huneke
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-11
SHAREHOLDER:
/s/ MARIUS KENDALL
---------------------------------------
Name: Marius Kendall
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-12
SHAREHOLDER:
/s/ JEFFREY R. KINGSLEY
---------------------------------------
Name: Jeffrey R. Kingsley
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-13
SHAREHOLDER:
/s/ KEN KOBYLENSKI
---------------------------------------
Name: Ken Kobylenski
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-14
SHAREHOLDER:
/s/ MICHAEL J. KRISTO
---------------------------------------
Name: Michael J. Kristo
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-15
SHAREHOLDER:
/s/ PATRICIA M. LINDLEY
---------------------------------------
Name: Patricia M. Lindley
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-16
SHAREHOLDER:
/s/ DAVID MARTEL
---------------------------------------
Name: David Martel
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-17
SHAREHOLDER:
/s/ SALMAN MITHA
---------------------------------------
Name: Salman Mitha
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-18
SHAREHOLDER:
/s/ CAROL NEWMARK
---------------------------------------
Name: Carol Newmark
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-19
SHAREHOLDER:
/s/ WESLEY R. NIEVEEN
---------------------------------------
Name: Wesley R. Nieveen
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-20
SHAREHOLDER:
ODOM-BROSNAHAN REVOCABLE TRUST
By: /s/ ROBERT ODOM
------------------------------------
Robert Odom, Trustee
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-21
SHAREHOLDER:
/s/ DAVID R. REED
---------------------------------------
Name: David R. Reed
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-22
SHAREHOLDER:
/s/ DAVID B. SAMS
--------------------------------------
Name: David B. Sams
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-23
SHAREHOLDER:
/s/ STEPHEN P. SMITH
--------------------------------------
Name: Stephen P. Smith
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-24
SHAREHOLDER:
/s/ XIAO-DONG WANG
---------------------------------------
Name: Xiao-Dong Wang
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-25
SHAREHOLDER:
/s/ IAN D. WARD
---------------------------------------
Name: Ian D. Ward
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-26
SHAREHOLDER:
/s/ DONALD H. WAYNE
---------------------------------------
Name: Donald H. Wayne
******************************************************************************
PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
******************************************************************************
<PAGE>
S-27
SHAREHOLDER:
CHARLES EVANS & ASSOCIATES
EMPLOYEE STOCK OWNERSHIP TRUST
By: /s/ KURT J. FRAENKEL
------------------------------------
Kurt J. Fraenkel, Trustee
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PURSUANT TO SECTIONS 13.2 AND 14.13 OF THIS AGREEMENT AND EXCEPT AS PROVIDED
THEREIN, NO PARTY TO THIS AGREEMENT MAY MAKE, ISSUE OR RELEASE ANY PUBLIC
ANNOUNCEMENT, STATEMENT OR ACKNOWLEDGMENT OF THE EXISTENCE OF, OR REVEAL THE
STATUS OF, OR IN ANY WAY DISCLOSE INFORMATION REGARDING, THIS AGREEMENT OR THE
TRANSACTIONS PROVIDED FOR HEREIN.
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SCHEDULE A
1. Victor Chia
2. Paul K. Chu
3. Carl Colvard
4. Michael J. Edgell
5. Evans Family 1993 Trust (Charles A. Evans, Jr. as Trustee)
6. Shirley Farrell
7. Declaration of Trust dated May 15, 1981, as amended (Kurt J. Fraenkel
and Joanne H. Fraenkel as Trustees)
8. Charles J. Hitzman
9. Hockett Family 1997 Trust (Richard S. Hockett as Trustee)
10.John C. Huneke
11.Marius Kendall
12.Jeffrey R. Kingsley
13.Ken Kobylenski
14.Michael J. Kristo
15.Patricia M. Lindley
16.David Martel
17.Salman Mitha
18.Carol Newmark
19.Wesley R. Nieveen
20.Odom-Brosnahan Revocable Trust (Robert Odom as Trustee)
21.David R. Reed
22.David B. Sams
23.Stephen P. Smith
24.Xiao-Dong Wang
25.Ian D. Ward
26.Donald H. Wayne
27.Charles Evans & Associates Employee Stock Ownership Trust (Kurt J. Fraenkel
as Trustee)
