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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) OCTOBER 2, 1995
KULICKE AND SOFFA INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PENNSYLVANIA 0-121 23-1498399
(STATE OR OTHER (COMMISSION FILE NUMBER) (IRS EMPLOYER
JURISDICTION OF IDENTIFICATION NO.)
INCORPORATION)
2101 BLAIR MILL ROAD, WILLOW GROVE, PA 19090
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (215) 784-6000
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 2, 1995, Kulicke and Soffa Industries, Inc. (the "Company")
completed the previously reported acquisition of American Fine Wire
Corporation ("AFW"), through the merger of a subsidiary of the Company into
Circle "S" Industries, Inc., the privately held parent corporation of AFW
("CSI"). AFW is a leading manufacturer of fine gold and aluminum wire for use
in the wire bonding process, with sales of approximately $68.8 million for the
year ended December 31, 1994. AFW has production facilities in Singapore,
Selma, Alabama, and Zurich, Switzerland, and has product offerings in gold,
aluminum and specialty wire. The Company presently intends to continue to use
the assets acquired substantially in the manner they were used by AFW prior to
the acquisition.
The preliminary purchase price totaled approximately $53.6 million, subject
to possible upward or downward adjustment, based upon completion and audit of
the closing balance sheet. Of this amount, approximately $34.4 million was
paid in the form of short-term promissory notes (the "Promissory Notes"),
approximately $12.9 million was paid in cash, approximately $4.3 million was
placed in escrow against certain contingent liabilities, and $2.0 million was
withheld in a closing reserve until completion and audit of the closing
balance sheet, in accordance with terms of the acquisition, merger and escrow
agreements.
The Company will account for the acquisition using the purchase method. The
excess of the purchase price, including transaction related costs, over the
fair value of the net assets acquired is expected to approximate $44 million,
consisting primarily of goodwill, which is expected to be amortized over
twenty years.
The Company financed the cash portion of the purchase price with borrowings
under a new $50.0 million unsecured bank credit facility with Midlantic Bank,
N.A. (the "Bank Credit Facility"). Letters of credit securing the Promissory
Notes also were issued under this facility. To the extent this loan under the
Bank Credit Facility is not repaid within 90 days after the closing of the AFW
acquisition, it will be converted automatically to a five-year term loan
payable in equal monthly installments. This loan bears interest at 50 basis
points over LIBOR before such conversion. If such conversion were to occur,
the Company would have the option to fix the interest rate at 115 basis points
over the five-year U.S. Treasury securities rate, or to retain a floating rate
at 100 basis points above LIBOR, and the loan would become subject to a
prepayment premium. Borrowings under the Bank Credit FAcility are subject to
the Company's compliance with certain financial and other covenants. The
Promissory Notes issued by the Company in partial payment of the purchase
price for the acquisition become due and payable January 5, 1996 and bear
interest at the rate of 6.4375% per year, less costs associated with
maintaining the letters of credit which secure the Promissory Notes which is
equal to 1% per annum.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
Audited financial statements of Circle "S" Industries, Inc. for the year
ended December 31, 1994 and unaudited financial data as of June 30, 1995
and for the six month periods ended June 30, 1994 and 1995 (incorporated
herein by reference to Item 7(a) of the Company's Current Report on Form 8-
K dated September 14, 1995).
(b) Pro Forma Financial Information.
Unaudited pro forma financial information required pursuant to Article 11
of Regulation S-X (incorporated herein by reference to Item 7(b) of the
Company's Current Report on Form 8-K dated September 14, 1995).
2
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(c)Exhibits
2.1(a) Agreement and Plan of Acquisition dated September 14, 1995,
between the Company, CSI and Certain Stockholders of CSI.*
2.1(b) Agreement and Plan of Merger dated October 2, 1995, between the
Company, Kulicke and Soffa Acquisition Corporation and CSI.*
2.1(c) Escrow Agreement dated October 2, 1995, between the Company,
Larry D. Striplin, Jr. and Mellon Bank, N.A.*
10.1 Restated Loan Agreement between Registrant and Midlantic Bank,
N.A., dated September 14, 1995 (incorporated herein by reference
to Exhibit 10.1 to the Company's Current Report on Form 8-K dated
September 14, 1995)
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* Appendices, schedules and exhibits to these agreements have been
omitted pursuant to Item 601(b)(2) of Regulation S-K. A list of the
schedules and exhibits to the Agreement and Plan of Acquisition
appears at page iv of that Agreement. Lists of the appendices and
exhibits to the Agreement and Plan of Merger and the Escrow Agreement
are attached to said agreements. The Company agrees to furnish
supplementally a copy of any such omitted appendix, schedule or
exhibit to the Commission upon request.
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, thereunto duly authorized.
KULICKE AND SOFFA INDUSTRIES, INC.
/s/ Clifford G. Sprague
By: _________________________________
CLIFFORD G. SPRAGUE,
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Date: October 6, 1995
3
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Exhibit 2.1(a)
AGREEMENT AND PLAN OF ACQUISITION
by and among
KULICKE AND SOFFA INDUSTRIES, INC.,
KULICKE AND SOFFA ACQUISITION CORPORATION,
CIRCLE "S" INDUSTRIES, INC.,
AND
CERTAIN STOCKHOLDERS OF
CIRCLE "S" INDUSTRIES, INC.
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TABLE OF CONTENTS
Page
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SECTION 1 - THE MERGER..................................................... 2
1.1 The Merger....................................................... 2
1.2 Effective Time of Merger......................................... 2
1.3 Closing.......................................................... 2
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF CSI.......................... 3
2.1 Organization..................................................... 3
2.2 Capitalization................................................... 3
2.3 Certificate of Incorporation and Bylaws.......................... 5
2.4 Power and Authority.............................................. 5
2.5 No Conflict; Consents and Approvals.............................. 5
2.6 Investments and Subsidiaries..................................... 7
2.7 Compliance with Laws............................................. 8
2.8 Litigation....................................................... 8
2.9 Financial Statements............................................. 9
2.10 Absence of Undisclosed Liabilities............................... 9
2.11 Title to Properties; Encumbrances................................ 9
2.12 Condition and Sufficiency of Assets.............................. 10
2.13 Accounts Receivable.............................................. 11
2.14 Inventory........................................................ 11
2.15 Product Design; Warranties....................................... 11
2.16 Taxes............................................................ 12
2.17 List of Certain Assets, Rights, Contracts, etc................... 13
2.18 Contracts........................................................ 15
2.19 Intellectual Property............................................ 16
2.20 Customers and Suppliers.......................................... 17
2.21 Labor Matters.................................................... 18
2.22 Employee Benefits................................................ 19
2.23 Relationships With Related Persons............................... 22
2.24 Environmental Matters............................................ 22
2.25 Absence of Certain Changes and Events............................ 25
2.26 Books and Records................................................ 26
2.27 Insurance........................................................ 27
2.28 Brokers and Finders.............................................. 28
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF K&S AND KSAC................. 29
3.1 Organization and Good Standing................................... 29
3.2 Power and Authorization.......................................... 29
3.3 No Conflict; Consents and Approvals.............................. 29
3.4 SEC Reports; Financial Statements................................ 30
3.5 Absence of Changes............................................... 31
3.6 Brokers and Finders.............................................. 31
SECTION 4 - OBLIGATIONS OF THE PARTIES UNTIL CLOSING....................... 31
4.1 Conduct of Business Pending Closing.............................. 31
4.2 Negative Covenants............................................... 32
4.3 Access to Information............................................ 33
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Page
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4.4 CSI Stockholders Meeting........................................ 35
4.5 Conditions to Closing; Consents and Approvals................... 35
4.6 Notifications................................................... 36
4.7 Options; Transfer of Shares..................................... 36
4.8 Spin-Off Sale................................................... 37
4.9 Inter-Company Payables.......................................... 38
4.10 Additional Financial Statements................................. 38
4.11 Employee Benefit Plans.......................................... 39
4.12 Guaranties...................................................... 39
4.13 Estimated Closing Statement..................................... 39
4.14 Payments Prior to Closing....................................... 41
4.15 Tax Returns..................................................... 41
4.16 Releases........................................................ 41
SECTION 5 - CONDITIONS PRECEDENT.......................................... 41
5.1 Conditions to Obligations of Each Party Under This
Agreement....................................................... 41
5.2 Additional Conditions to Obligations of K&S and
KSAC............................................................ 41
5.3 Additional Conditions to Obligations of CSI and
the Stockholders................................................ 45
SECTION 6 - POST-CLOSING COVENANTS........................................ 46
6.1 Indemnification by the CSI Stockholders......................... 46
6.2 Escrow.......................................................... 56
6.4 Non-Competition; Confidentiality................................ 56
6.5 Election of LDS as Director..................................... 59
6.6 K&S Guaranty of Agreement....................................... 59
6.7 Sharing of Tax Benefits......................................... 59
6.8 401(k) Spin Off................................................. 59
6.9 Insurance Proceeds.............................................. 60
SECTION 7 - TERMINATION AND ABANDONMENT................................... 60
7.1 Termination..................................................... 60
7.2 Procedure for Termination; Effect of Termination................ 61
7.3 Termination Fee................................................. 61
SECTION 8 - MISCELLANEOUS................................................. 62
8.2 Expenses........................................................ 62
8.3 Further Assurances.............................................. 62
8.4 Public Announcements............................................ 62
8.5 Notices......................................................... 63
8.6 Assignment and Benefit.......................................... 64
8.7 Amendment and Modification...................................... 64
8.8 Waiver.......................................................... 65
8.9 Independence of Representations and Warranties;
Covenants and Agreements........................................ 65
8.10 Governing Law................................................... 65
8.11 Section Headings and Defined Terms.............................. 65
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Page
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8.12 Arbitration.................................................... 66
8.13 Severability................................................... 66
8.14 Counterparts................................................... 66
8.15 Entire Agreement............................................... 66
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APPENDICES, SCHEDULES AND EXHIBITS
Appendix Glossary of Defined Terms
Schedules:
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Schedule 2.6 List of CSI Subsidiaries
Schedule 3.4 List of K&S SEC Reports
Schedule 4.8 Non-AFW Assets And Liabilities
Schedule 4.12 List of Guaranty and other Obligations
of LDS and the Non-Acquired Companies
Schedule 5.2(o) Agreed Upon Adjustments to CSI Financial Statements
Schedule 6.1(a)(iv) Additional Indemnification by the
CSI Stockholders
Schedule 6.1(a)(vi) Additional Environmental Indemnification
Schedule 6.1(e) List of Percentage Allocation of Certain
Indemnification Obligations Among Former CSI
Stockholders
Exhibits:
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Exhibit A Agreement and Plan of Merger (preamble)
Exhibit B-1 Methodology for Calculation of WIP ((S)4.13(a))
Exhibit B-2 Example of Calculation of Net Deficit ((S)4.13(e))
Exhibit C Forms of Opinions of Bradley, Arant, Rose & White and
other counsel ((S)5.2(h))
Exhibit D Form of R. Kelly Payne Employment Agreement ((S)5.2(i))
Exhibit E Form of Opinion of Drinker Biddle & Reath ((S)5.3(d))
Exhibit F Map of Portions of World Within Non-
Compete Territory ((S)6.4(a))
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AGREEMENT AND PLAN OF ACQUISITION
THIS AGREEMENT AND PLAN OF ACQUISITION is dated as of September 14,
1995 (the "Agreement") by and among KULICKE AND SOFFA INDUSTRIES, INC., a
Pennsylvania corporation ("K&S"), KULICKE AND SOFFA ACQUISITION CORPORATION, a
Delaware corporation ("KSAC"), CIRCLE "S" INDUSTRIES, INC., an Alabama
corporation ("CSI"), LARRY D. STRIPLIN, JR. ("LDS"), R. KELLY PAYNE ("RKP"), and
the other stockholders of CSI listed on the signature pages hereof (LDS, RKP and
such other stockholders, collectively, the "Stockholders"). A glossary of
certain defined terms is attached as an Appendix hereto.
W I T N E S S E T H :
WHEREAS, CSI is a holding company which owns, inter alia, all of the
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outstanding capital stock of American Fine Wire Corporation, an Alabama
corporation ("AFW");
WHEREAS, AFW is engaged, directly and through certain of its
subsidiaries, in the business of manufacturing, selling and distributing gold,
aluminum and specialty bonding wires (the "Business");
WHEREAS, the parties hereto desire to provide for the acquisition of
the Business by K&S through the merger of KSAC with and into CSI, in accordance
with the applicable statutes of the States of Alabama and Delaware and an
Agreement and Plan of Merger (the "Merger Agreement") attached hereto as Exhibit
A (the merger provided for therein being herein called the "Merger"); and
WHEREAS, pursuant to the terms and conditions of an escrow agreement
substantially in the form set forth in Exhibit A to the Merger Agreement (the
"Escrow Agreement"), the parties desire to provide for a cash escrow of
$4,260,000 (in respect of indemnification claims) of the aggregate cash
otherwise payable as the result of the conversion of CSI shares of common stock
in the Merger; and
WHEREAS, the Stockholders are the beneficial owners of, and have or
will have prior to the Closing the right to vote, in excess of 67% of the CSI
capital stock entitled to vote on the Merger and, in order to induce K&S to
enter into this Agreement, are agreeing herein, inter alia, to vote their shares
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of CSI capital stock in favor of the Merger; and
WHEREAS, K&S and CSI have each filed a Notification and Report Form
relating to the transactions contemplated herein under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976,
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as amended (the "HSR Act"), and the applicable waiting period thereunder has
been terminated.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
SECTION 1.
THE MERGER
1.1 The Merger. In accordance with the terms and conditions of the
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Merger Agreement, the Alabama Business Corporation Act and the Delaware General
Corporation Law, at the Effective Time (as defined in Section 1.2 hereof), KSAC
shall be merged with and into CSI and the separate existence of KSAC shall
thereupon cease.
1.2 Effective Time of Merger. The Merger shall become effective on
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the later to occur of (i) the filing with the Secretary of the State of Alabama
of properly executed articles of merger substantially in the form set forth in
Appendix I to the Merger Agreement and (ii) the filing of a properly executed
certificate of merger substantially in the form set forth in Appendix II to the
Merger Agreement with the Secretary of State of the State of Delaware (the date
and time when the later to occur of such events has occurred is referred to
herein as the "Effective Time"). Such filings shall be made concurrently with
or as soon as practicable after the closing of the transactions contemplated in
this Agreement in accordance with Section 1.3 hereof.
1.3 Closing. The closing of the transactions contemplated by this
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Agreement (the "Closing") shall take place at the offices of Bradley, Arant,
Rose & White, 1400 Park Place Tower, 2001 Park Place, Birmingham, Alabama 35203,
at 10:00 a.m., local time, on the earlier (or, in K&S's sole discretion, the
later) to occur of (i) October 2, 1995 or (ii) the date that is three business
days following the day on which all conditions to Closing set forth in Section 5
hereof are satisfied or waived, or at such other date, time and place as K&S and
CSI shall mutually agree (the date on which the Closing occurs is referred to
herein as the "Closing Date").
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SECTION 2.
REPRESENTATIONS AND WARRANTIES OF CSI
For purposes of this Agreement, "to the knowledge of the Acquired
Companies" means the actual knowledge of LDS, RKP, Charles Morello, Hans Drack
and Wai Fun Goh.
CSI hereby represents and warrants to K&S and KSAC as follows:
2.1 Organization.
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(a) Each of CSI, AFW and AFW's subsidiaries listed on Part II of
Schedule 2.6 hereto (collectively, the "Acquired Companies" and individually, an
"Acquired Company") is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation. Each
Acquired Company has all necessary corporate power and authority to carry on its
business as presently conducted, to own, lease and operate all of the properties
and the assets that it owns or leases and to perform all its obligations under
each agreement and instrument by which it is bound.
(b) Each Acquired Company is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each jurisdiction
in which the character or location of the properties and assets owned or leased
by it or the nature of its activities requires such qualification, except where
the failure to qualify would not have a material adverse effect on the financial
condition, results of operation or business of the Acquired Companies taken as a
whole (a "CSI Material Adverse Effect").
2.2 Capitalization.
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(a) CSI's authorized capital stock consists of 1,100,000 shares
of Common Stock, par value $.10 per share ("CSI Common Stock"). As of the date
of this Agreement, there were 275,733 shares of CSI Common Stock issued and
outstanding, and 295,071 shares of CSI Common Stock were held in the treasury of
CSI. Except as described in Section 2.2(a) of the Disclosure Statement delivered
by CSI to K&S concurrently with the execution of this Agreement (the "CSI
Disclosure Statement"), there are no outstanding options, rights, warrants or
other agreements or commitments of any nature whatsoever (either firm or
conditional) obligating any Acquired Company or, to the knowledge of the
Acquired Companies, any stockholder thereof to issue, deliver or sell, or cause
to be issued, delivered or sold, any shares of capital stock or other equity
securities of any Acquired Company or obligating any Acquired Company or, to the
knowledge of the
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Acquired Companies, any stockholder thereof to grant, extend or enter into any
such option, right, warrant, agreement or commitment. Section 2.2(a) of the CSI
Disclosure Statement sets forth the name of, and the number of shares of CSI
Common Stock owned by, each stockholder of CSI as of the date hereof. Each of
the issued shares of capital stock of each Acquired Company has been duly
authorized and validly issued and is fully paid and nonassessable and has not
been issued in violation of (nor are any of the authorized shares of capital
stock of any Acquired Company subject to) any preemptive or similar rights
created by statute, the certificate of incorporation or bylaws (or the
equivalent organizational documents) of any Acquired Company or any agreement to
which any Acquired Company is a party or is bound, and, except as described in
Section 2.2(a) of the CSI Disclosure Statement, all of such issued shares owned
by any Acquired Company are owned free and clear of all security interests,
liens, claims, pledges, agreements, limitations on such Acquired Company's
voting rights, charges or other encumbrances of any nature whatsoever.
(b) Except as described in Section 2.2(b) of the CSI Disclosure
Statement and except as set forth below in Section 4.4 hereof, there are no
stockholders' agreements, voting trusts, proxies or other agreements or
arrangements restricting transfers or voting of any of the capital stock of any
Acquired Company or any other agreement or contract affecting the corporate
governance of any Acquired Company.
(c) Except as described in Section 2.2(c) of the CSI Disclosure
Statement, there are no obligations, contingent or otherwise, of any Acquired
Company to (i) repurchase, redeem or otherwise acquire any securities of any
Acquired Company or (ii) provide material funds to, or make any material
investment in (in the form of a loan, capital contribution or otherwise) or
provide any guarantee with respect to the material obligations of any Acquired
Company or any Non-Acquired Company (as defined in Section 2.6 hereof) (the
Acquired Companies and the Non-Acquired Companies are referred to herein
collectively as the "Companies").
(d) Section 2.2(d) of the CSI Disclosure Statement sets forth the
authorized, issued and outstanding capital stock and other securities of each
Acquired Company other than CSI.
(e) No securities of any of the Companies are or ever have been
(i) registered under or required to be registered under the Securities Act of
1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or equivalent laws of any state, local or foreign
jurisdiction, (ii) offered to the public, or (iii) listed
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for trading on any stock exchange, market or system; and no registration
statement or application has been filed, nor agreement entered into, to so
register or list any such securities or to offer them to the public.
2.3 Certificate of Incorporation and Bylaws. CSI has heretofore
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furnished or made available to K&S complete and correct copies of the
certificate of incorporation and the bylaws (or the equivalent organizational
documents) of each Acquired Company, in each case as amended or restated to
date. No Acquired Company is in violation of its certificate of incorporation
or bylaws (or equivalent organizational documents).
2.4 Power and Authority. CSI has all requisite corporate power and
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authority to execute, deliver and (subject to, in the case of the Merger, the
approval and adoption of this Agreement and the Merger Agreement by the
stockholders of CSI as set forth in Section 4.4 hereof) perform its obligations
under this Agreement, the Merger Agreement and all other agreements and
documents required to be delivered by it prior to or at the Closing
(collectively, the "CSI Transaction Documents"). The execution, delivery and
performance by CSI of the CSI Transaction Documents have been duly authorized by
all necessary corporate action on the part of CSI (subject to, in the case of
the Merger, the approval and adoption of this Agreement and the Merger Agreement
by the stockholders of CSI as set forth in Section 4.4 hereof). This Agreement
has been duly and validly executed and delivered by CSI and the Stockholders
and, assuming due authorization, execution and delivery thereof by K&S and KSAC
and subject, in the case of CSI, to approval by the stockholders of CSI,
constitutes the legal, valid and binding obligation of each of CSI and the
Stockholders, enforceable against each of them in accordance with its terms.
When executed and delivered as contemplated herein, each of the other CSI
Transaction Documents shall, assuming due authorization, execution and delivery
by the other parties thereto, constitute a legal, valid and binding obligation
of each of CSI and each Stockholder that is a party thereto, enforceable against
each of them that is a party thereto in accordance with its terms.
2.5 No Conflict; Consents and Approvals.
-----------------------------------
(a) Except as described in Section 2.5 of the CSI Disclosure
Statement, the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by the CSI Transaction Documents
will not (in each case, with or without the passage of time or the giving of
notice):
(i) violate or conflict with the certificate of
incorporation or bylaws (or equivalent organiza-
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tional documents) of any of the Companies or result in a material violation of
or conflict with any existing (as of the date hereof) law (including, without
limitation, principles of common law), statute, regulation, permit, license,
certificate, judgment, order, award or other decision or requirement of any
arbitrator, court, government or governmental agency or instrumentality
(federal, state, local or foreign) (collectively, "Laws") applicable to any of
the Stockholders or any of the Companies or by or to which any material
properties or assets of any of the Companies or any of the Stockholders is bound
or subject;
(ii) except as would not result in a CSI Material Adverse
Effect or as will be cured or waived (without the imposition of any liability or
the loss of any benefit) prior to the Effective Time, violate or conflict with,
result in a breach of, or constitute a default or otherwise cause any loss of
benefit under, or give to others any rights (including rights of termination,
amendment, foreclosure, cancellation or acceleration), in or with respect to,
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument to which any of the Companies or any of
the Stockholders is a party or by which any assets or properties of any of the
Companies or any of the Stockholders is bound or affected; or
(iii) result in, require or permit the creation or
imposition of any restriction, mortgage, deed of trust, pledge, lien, security
interest or other charge, claim or encumbrance upon or with respect to any of
the Companies or any properties or assets of any of the Companies or any of the
Stockholders.
(b) The execution and delivery of this Agreement by CSI and the
Stockholders do not, and the consummation by CSI and the Stockholders of the
transactions contemplated by the CSI Transaction Documents will not, require any
of the Companies to obtain any consent, license, permit, waiver, approval,
authorization or order of, or to make any filing, registration or declaration
with or notification to, any court, government, governmental agency or
instrumentality (federal, state, local or foreign), except (i) as have been or
may be made under the HSR Act, (ii) the filing and recordation of appropriate
merger documents as required under Alabama and Delaware law, (iii) as described
in Section 2.5(b) of the CSI Disclosure Statement, and (iv) any such consent,
license, permit, waiver, approval, authorization, order, registration,
notification, filing or declaration, the failure to obtain or make which would
not prevent or delay consummation of the Merger or otherwise prevent CSI or the
Stockholders from performing any of their respective obligations under the CSI
Transaction Documents and would not
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result in a CSI Material Adverse Effect or permit the termination of, or make
void or voidable by any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association or other entity or governmental authority or
instrumentality (each, a "Person"), or constitute a default or give rise to any
liability to any third party under, any note, bond, indenture, lease, license,
permit, franchise, agreement or other instrument to which any of the Companies
is a party or by which any assets or properties of any of the Companies is bound
or affected, under any Laws or otherwise.
(c) There are no actions, proceedings or investigations pending
or, to the knowledge of the Acquired Companies, threatened, that question any of
the transactions contemplated by this Agreement or the validity of any of the
CSI Transaction Documents or which, if adversely determined, could reasonably be
expected to have a material adverse effect upon CSI's or the Stockholders'
ability to enter into or perform their respective obligations under the CSI
Transaction Documents.
2.6 Investments and Subsidiaries. Except for (i) CSI's direct
----------------------------
beneficial ownership of all of the outstanding capital stock of those current
subsidiaries of CSI that are to be disposed of by CSI pursuant to the Spin-Off
Sale described in Section 4.8 hereof (collectively, the "Non-Acquired
Companies"), each of which is listed in Part I of Schedule 2.6 hereto, and (ii)
CSI's beneficial ownership of all of the outstanding capital stock of each
Acquired Company other than CSI (all such Acquired Companies being listed in
Part II to Schedule 2.6 hereto), CSI does not directly or indirectly own,
control or have any investment or other interest in any Person. Except as
described in Section 2.6 of the CSI Disclosure Statement, none of the Acquired
Companies has agreed, contingently or otherwise, to share any profits, losses,
costs or liabilities or to indemnify any Person or to guaranty the obligations
of any Person. The Business is, and has since January 1, 1991 been, conducted
solely by and through the Acquired Companies other than CSI and through or by no
other Person. All of the outstanding capital stock and other equity securities
of each Acquired Company other than CSI are owned beneficially and of record by
an Acquired Company. Part III of Schedule 2.6 lists, to the knowledge of the
Acquired Companies, all of the Persons that CSI formerly, directly or
indirectly, owned or controlled or in which CSI formerly had any investment or
interest (collectively, the "Former CSI Subsidiaries").
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2.7 Compliance with Laws.
--------------------
(a) Except as described in Section 2.7(a) of the CSI Disclosure
Statement, each of the Companies is, and has at all material times in the past
been, in compliance with all applicable Laws and has not received any notice,
order or other communication from any government, governmental agency or
instrumentality of any alleged, actual, or potential violation of or failure to
comply with any Laws except where the failure to comply would not result in a
CSI Material Adverse Effect.
(b) Without limiting the generality of the foregoing, none of the
Companies and no Person authorized to act on behalf of any of the Companies has
made any payment to, or conferred any benefit directly or indirectly on, any
supplier, customer, employee or agent of a supplier or customer or any official
or employee of any government or agency or instrumentality or any political
party or candidate for office that was unlawful either in the United States or
in the place where, and at the time when, such payment or benefit was
authorized, given or received.
(c) Except as described in Section 2.7(c) of the CSI Disclosure
Statement, each of the Companies is and has at all material times in the past
been in possession of all federal, state, local, foreign and other governmental
consents, licenses, permits, variances, franchises, exemptions, orders,
approvals, grants and authorizations necessary to own, lease and operate its
properties and to carry on its business as currently conducted and as conducted
at all material times in the past (collectively, the "Authorizations"). Except
as described in Section 2.7(c) of the CSI Disclosure Statement, the
Authorizations are in full force and effect without any default or violation
thereunder by any of the Companies or, to the knowledge of the Acquired
Companies, by any other party thereto. None of the Companies has received any
notice of any claim or charge that any of the Companies is or at any material
time in the past has been in violation of or in default under any Authorization.
2.8 Litigation. Except as described in Section 2.8 of the CSI
----------
Disclosure Statement, there are no, and during the last four years there have
not been any, claims, actions, suits, proceedings (arbitration or otherwise) or,
to the knowledge of the Acquired Companies, investigations involving or
affecting any of the Companies, any properties or assets of any of the Companies
or any directors, officers or stockholders of any of the Companies in their
capacities as such, before or by any court, government, governmental agency or
instrumentality (federal, state, local or foreign), or before an arbitrator of
any kind. To the knowledge of the Acquired Companies, no such claim, action,
suit, proceeding or investigation is presently
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<PAGE>
threatened or contemplated, and to the knowledge of the Acquired Companies,
there are no facts which could reasonably serve as a basis for any such claim,
action, suit, proceeding or investigation. There are no unsatisfied judgments,
penalties or awards against or affecting any of the Companies or any properties
or assets of any of the Companies which could reasonably be expected to have a
CSI Material Adverse Effect.
2.9 Financial Statements. Section 2.9 of the CSI Disclosure
--------------------
Statement includes: (a) the consolidated balance sheet of CSI as of December
31, 1994 (including the notes thereto, the "CSI Balance Sheet") and as of
December 31 in each of the years 1992 and 1993 and the related consolidated
statements of revenues and expenses, stockholders' equity and cash flow for each
of the fiscal years then ended, together with the reports thereon of Deloitte &
Touche LLP, independent accountants; and (b) the unaudited consolidated balance
sheet of CSI as at June 30, 1995 (including notes thereto, the "Interim CSI
Balance Sheet"), and the related consolidated unaudited statements of revenues
and expenses, stockholders' equity and cash flow for the six months then ended,
together with the corresponding period of the preceding fiscal year, in each
case in the foregoing subclauses (a) and (b) presenting the Non-Acquired
Companies as discontinued operations. The foregoing financial statements and
notes are true, complete and correct in all material respects, were prepared
from the books and records of CSI and its subsidiaries and fairly present the
consolidated financial condition, cash flow and results of operations of CSI as
of the respective dates thereof and for the periods therein referred to, all in
accordance with United States generally accepted accounting principles ("GAAP")
consistently applied, subject, in the case of the interim financial statements,
to recurring year-end adjustments normal in nature and amount and the absence of
notes.
2.10 Absence of Undisclosed Liabilities. There are no liabilities of
----------------------------------
any of the Companies (whether absolute, accrued, contingent or otherwise),
except liabilities: (a) described in Section 2.10 of the CSI Disclosure
Statement; (b) as, and only to the extent, reflected or reserved against in the
Interim CSI Balance Sheet or disclosed in the notes thereto; (c) incurred in the
ordinary course of business consistent with past practice after June 30, 1995
and prior to the Closing Date and which are neither material in amount nor
inconsistent with any of the representations or warranties made herein; or (d)
that could not have a CSI Material Adverse Effect.
2.11 Title to Properties; Encumbrances. Section 2.11 of the CSI
---------------------------------
Disclosure Statement contains a complete and accurate list of all interests in
real property owned, leased or occupied by any of the Acquired Companies or, to
the knowledge of the
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<PAGE>
Acquired Companies, any of the Non-Acquired Companies. Except as described in
the following sentence, each of the Companies has good, valid and marketable
title to, or a valid leasehold interest in, all of its properties and assets
(real, personal and mixed, tangible and intangible), including, without
limitation, all the properties and assets reflected in the Interim CSI Balance
Sheet (except for properties and assets disposed of in the ordinary course of
business and consistent with past practices since June 30, 1995). None of such
properties or assets are subject to any liability, obligations, claim, lien,
mortgage, pledge, security interest, conditional sale agreement, charge or
encumbrance of any kind (whether absolute, accrued, contingent or otherwise),
except (i) as set forth in Sections 2.11 or 2.17(k) of the CSI Disclosure
Statement, and (ii) minor imperfections of title and encumbrance, if any, which
are not substantial in amount, do not materially detract from the value of the
property or assets subject thereto and do not impair the operations of any of
the Companies. All buildings, plants and structures owned or leased by any
Acquired Company lie wholly within the boundaries of the real property owned or
leased by such Acquired Company and do not encroach upon the property of, or
otherwise conflict with the property rights of, any other Person. No
condemnation proceeding is pending or, to the knowledge of the Acquired
Companies, threatened with respect to any real property identified in the CSI
Disclosure Statement, nor, to the knowledge of the Acquired Companies, is any
change in any Law pending or threatened which would interfere with the use of
any such building, structure or other appurtenance thereon.
2.12 Condition and Sufficiency of Assets.
-----------------------------------
(a) All of the buildings, plants, structures and equipment owned,
leased or used by the Acquired Companies, are in good operating condition,
normal wear and tear excepted, and are adequate for the uses to which they are
being put, and none of such buildings, plants, structures, or equipment is in
need of maintenance or repairs except for ordinary, routine maintenance and
repairs that are not material in nature or cost. All of the buildings, plants,
structures and equipment of the Acquired Companies are sufficient for the
continued conduct of the Business after the Closing in substantially the same
manner as it has been conducted since December 31, 1992 except for ordinary and
routine maintenance and repairs.
(b) Except as described in Section 2.12(b) of the CSI Disclosure
Statement, none of the Non-AFW Assets (as hereinafter defined) and none of the
assets or properties owned by any Non-Acquired Company have been used in
connection with the conduct of the Business or the operation of AFW or any of
its subsidiaries.
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<PAGE>
2.13 Accounts Receivable. Except as described in Section 2.13 of the
-------------------
CSI Disclosure Statement, all accounts and notes receivable that are reflected
in the CSI Balance Sheet or the Interim CSI Balance Sheet or on the accounting
records of any Acquired Company as of the Closing Date (collectively, the
"Accounts Receivable") represent or will represent valid obligations from bona
fide sales actually made or services actually performed by an Acquired Company
in the ordinary course of business. The respective reserves relating to
Accounts Receivable shown on the CSI Balance Sheet and Interim CSI Balance Sheet
and on the accounting records of the Acquired Companies as of the Closing Date
are or will be calculated consistent with past practice and, in the case of the
reserve as of the Closing Date, will not represent a greater percentage of the
Accounts Receivable as of the Closing Date than the reserve reflected in the CSI
Balance Sheet represented of the Accounts Receivable reflected therein and will
not represent a material adverse change in the composition of such Accounts
Receivable in terms of aging. No representation or warranty is being made with
respect to the collectibility of any Accounts Receivable.
2.14 Inventory. All inventory of the Acquired Companies, whether or
---------
not reflected in the CSI Balance Sheet or the Interim CSI Balance Sheet,
consists of a quality and quantity useable and salable in the ordinary course of
business consistent with past practice, except for obsolete items and items of
below-standard quality which are not useable and salable, all of which have been
written off or written down to net realizable value in the CSI Balance Sheet,
the Interim CSI Balance Sheet or on the accounting records of the Acquired
Companies as of the Closing Date, as the case may be. All inventories not
written off have been priced at the lower of cost or market on a first in, first
out basis. The quantities of each item of inventory (whether raw materials,
work-in-process, or finished goods) are reasonable in the present circumstances
of the Acquired Companies.
2.15 Product Design; Warranties. Except as described in Section 2.15
--------------------------
of the CSI Disclosure Statement, (i) there are no warranties (express or
implied) outstanding with respect to any products created, manufactured, sold,
distributed or licensed, or any services rendered, by any of the Companies other
than any such implied by law pursuant to Sections 2-312 and 2-314 of the Uniform
Commercial Code and (ii) to the knowledge of the Acquired Companies, there are
no design, manufacturing or other defects, latent or otherwise, with respect to
any such products. A copy of each standard warranty of each Acquired Company is
included in Section 2.15 of the CSI Disclosure Statement. Except as described
in Section 2.15 of the CSI Disclosure Statement, no Acquired Company has
modified or expanded its warranty obligation to any customer beyond that set
forth in such standard warranties. Except as described in Section 2.15 of the
CSI
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<PAGE>
Disclosure Statement, no products have been sold or distributed by any Acquired
Company under an understanding that such products would be returnable.
2.16 Taxes.
-----
(a) All federal, state, local and foreign tax returns and tax,
duty and value added statements and reports (or extensions relating thereto)
required to be filed by or with respect to any of the Companies or any affiliate
thereof, including, without limitation, those relating to or affecting the
Business, have been filed on a timely basis with the appropriate governments or
governmental agencies or instrumentalities in all jurisdictions in which such
returns, statements and reports are required to be filed, and all such returns,
statements, and reports were true and correct when filed.
(b) All federal, state, local and foreign income, duties,
profits, franchise, sales, use, payroll, premium, occupancy, property,
severance, excise, withholding, value added and other taxes (including, without
limitation, interest and penalties) (collectively, "Taxes") due from any of the
Companies or any affiliate thereof, including, without limitation, those
relating to the Business, have been fully and timely paid or, to the extent that
a liability has accrued (in a financial reporting sense) but is not yet due and
payable, have been adequately provided for on the Interim CSI Balance Sheet or,
in the case of Taxes accruing after June 30, 1995, on the books and records of
the Companies.
(c) There are no levies, liens, or other encumbrances existing,
threatened or pending with respect to any assets or properties of any Acquired
Company relating to any Taxes.
(d) To the knowledge of the Acquired Companies, Section 2.16(d)
of the CSI Disclosure Statement lists all federal, state, local and foreign
income and franchise tax returns of, or covering, any of the Companies or
affiliates which have been examined or which are currently under examination by
the Internal Revenue Service or by other appropriate taxing authorities, and,
except as and to the extent described in Section 2.16(d) of the CSI Disclosure
Statement or provided for on the Interim CSI Balance Sheet, all deficiencies
asserted or assessments made as a result of such examinations have been fully
paid, and there are no other unpaid deficiencies asserted or assessments made by
any taxing authority against any of the Companies or affiliates thereof or
otherwise affecting any assets or properties of any of the Companies.
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<PAGE>
(e) Section 2.16(e) of the CSI Disclosure Statement lists all
elections by or with respect to any of the Companies for federal or state income
or franchise tax purposes that are currently applicable. Except as described in
Section 2.16(e) of the CSI Disclosure Statement, none of the Companies: has
filed any consent under section 341(f)(1) of the Internal Revenue Code of 1986,
as amended (the "Code"), or agreed to have the provisions of the Code section
341(f)(2) apply to any dispositions of "subsection (f) assets" as such term is
defined in Code section 341(f)(4); has agreed to or is required to make any
adjustments under Code section 481(a) by reason of a change in accounting method
or otherwise; employs the LIFO method of accounting for inventories for federal
income tax purposes; has made a transfer of intangible property on which Code
section 367(d) or 482 will require the recognition of additional income for any
period after the date hereof; or owns stock in a "passive foreign investment
company" within the meaning of Code section 1296(a). The books and records of
each of the Companies are sufficient to prove the correctness of all tax returns
for open tax years and to determine and to prove the adjusted tax basis for
federal income tax purposes of each asset of each of the Companies.
(f) Except as described in Section 2.16(f) of the CSI Disclosure
Statement, none of the Companies is a party to any tax sharing agreement or tax
indemnification agreement.
(g) CSI is not, and has not been at any time in the last five
years, a United States real property holding corporation, as defined in Code
section 897(c)(2).
2.17 List of Certain Assets, Rights, Contracts, etc. Section 2.17 of
----------------------------------------------
the CSI Disclosure Statement contains a complete and accurate list of the items
described below, and CSI has delivered to K&S true and complete copies of each
agreement, contract or commitment described below:
(a) All vehicles, items of machinery, equipment and other
tangible assets with a book or fair market value in excess of $10,000 in respect
of any item, owned, leased, used or held by any Acquired Company and the
location thereof (together, if applicable, with the identity of the lessor and
lessee, the annual rental and unexpired term of the lease);
(b) All Authorizations held by any Acquired Company or that
otherwise relate to the business of, or to any of the assets owned or used by,
any Acquired Company;
(c) All (i) fictitious business names, tradenames, registered and
unregistered trademarks, service marks and related applications, (ii) patents,
patent rights and patent
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<PAGE>
applications, (iii) registered and unregistered copyrights in published and
material unpublished works, computer programs and software that are material to
any Acquired Company's business and (iv) agreements, contracts and commitments
relating to any of the foregoing to which any Acquired Company is a party or by
which any Acquired Company is bound, and each agreement, commitment, or contract
to which any Acquired Company is a party or by which any Acquired Company is
bound relating to: know-how, trade secrets, confidential information, software,
technical information, process technology, plans, drawings and blue prints (the
items referred to in clauses (i)-(iii) above and referred to following the
immediately preceding colon are collectively referred to herein as "Intellectual
Property"), in each case owned, leased, used, held by, granted to or licensed
by, as either licensor or licensee, any Acquired Company;
(d) All outstanding loans or advances (excluding advances to
employees for ordinary and necessary business expenses made in the ordinary
course of business) by any Acquired Company to any director, officer, employee
or stockholder of any Company or to any other Person;
(e) All contracts, agreements or commitments which restrict or
purport to restrict any business activities or freedom of any Acquired Company
(or, to the knowledge of the Acquired Companies, any of their respective
officers or employees) to engage in any business or to compete with any Person;
(f) All contracts, agreements or commitments to which any
Acquired Company is a party or is otherwise bound providing for payments
(contingent or otherwise) to or by any Person based on sales, purchases or
profits, other than direct payments for goods and services;
(g) All forms of contracts, agreements and commitments and
catalogs and brochures used by any Acquired Company as a standard form in the
ordinary course of business;
(h) All notes, debt instruments, other evidences of indebtedness,
letters of credit and guaranties issued by or for the benefit of any Acquired
Company, and all loan and other agreements relating thereto;
(i) All contracts, agreements or commitments for capital
expenditures;
(j) All agreements, contracts or commitments to which any
Acquired Company is a party or by which any Acquired Company or any of its
assets are bound that:
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<PAGE>
(i) involves performance of services or sale or lease of
goods or materials by such Acquired Company of an
amount or value in excess of $5,000;
(ii) involves performance of services or sale or lease of
goods or materials to such Acquired Company of an
amount or value in excess of $5,000;
(iii) is not in the ordinary course of business and involves
expenditures or receipts by such Acquired Company of
more than $5,000; or
(iv) is otherwise material to the business, operations,
financial condition or prospects of such Acquired
Company; and
(k) All leases, rental or occupancy agreements, licenses,
installment and conditional sale agreements, and all other agreements, contracts
or commitments affecting the ownership of, leasing of, title to, use of, or any
leasehold or other interest in, any real or personal property (except personal
property leases and installment and conditional sales agreements having a value
per item or aggregate payments of less than $5,000 and with terms of less than
one year);
(l) Each outstanding proxy or power-of-attorney or similar power
granted by any Acquired Company for any purpose whatsoever;
(m) Each bank or other financial institution in which any
Acquired Company has a deposit account, line of credit or safe deposit box, the
relevant account or other identifying number and the name of all Persons
authorized to act or deal in connection therewith; and
(n) Each amendment, supplement and modification (whether oral or
written) in respect of any of the agreements, contracts or commitments described
above.
2.18 Contracts.
---------
(a) Except as described in Section 2.18 of the CSI Disclosure
Statement, each of the contracts, agreements and commitments to which any
Acquired Company is a party or by which any Acquired Company or any of its
assets are bound (including any such required to be identified in the CSI
Disclosure Statement) was made in the ordinary course of business, is in full
force and effect and is valid, binding and enforceable
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<PAGE>
against the parties thereto in accordance with its terms except as such
enforceability may be limited by the effect of bankruptcy, insolvency or similar
law affecting creditors' rights generally. Except as described in Section 2.18
of the CSI Disclosure Statement, each Acquired Company has performed in all
material respects all obligations required to be performed by it under each, and
is not in default or otherwise in breach of any, such contract, agreement and
commitment to which it is a party or by which it or its assets are bound
(including, without limitation, the Gold Supply Agreement among Rothschild
Australia Limited, AFW, American Fire Wire Limited, Dr Muller Feindraht AG and
the financing relating thereto (collectively, the "Gold Agreements")). Without
limiting the generality of the foregoing, to the knowledge of the Acquired
Companies, no condition exists or event has occurred with respect to any such
contract, agreement or commitment which with notice or lapse of time would
constitute a default or a basis for delay, non-performance, termination,
modification or acceleration of maturity or performance by any Acquired Company
or by any other party thereto. To the knowledge of the Acquired Companies, no
Acquired Company is a party to any contract, agreement or commitment upon which,
upon completion, it would be likely to recognize a material loss on its books
and records.
(b) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to any
Acquired Company under current or completed agreements, contracts or
commitments. All agreements, contracts and commitments relating to the sale,
design, manufacture or provision of products or services by or to any Acquired
Company have been entered into in the ordinary course of business and have been
entered into without the commission of any act or any consideration having been
paid or promised that is or would be in violation of any Law.
(c) Except as described in Section 2.18(c) of the CSI Disclosure
Statement, the Acquired Companies provide goods and services only pursuant to
duly executed written agreements or written purchase orders, and none of them is
obligated to provide services or goods to any Person pursuant to any agreement
or understanding which is not contained in a written document or purchase order.
2.19 Intellectual Property.
---------------------
(a) Except as otherwise described in Section 2.19 of the CSI
Disclosure Statement: the Acquired Companies are the owners of all right, title
and interest in and to, or have the perpetual right to use without payment to a
third party, all Intellectual Property, free and clear of any lien, security
interest, encumbrance, charge, equity or other adverse claim; and
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<PAGE>
no Acquired Company has granted or licensed to any Person any rights with
respect to any of the Intellectual Property and no other Person has any rights
in or to any of the Intellectual Property (including, without limitation, any
rights to market or distribute any of the Intellectual Property). The
Intellectual Property is sufficient for the conduct of the Business as it has
been conducted at all material times in the past and as it is presently
conducted.
(b) All of the Intellectual Property that is owned by any
Acquired Company and, to the knowledge of the Acquired Companies, all of the
Intellectual Property that is used (but not owned) by any Acquired Company is in
compliance with all applicable legal requirements (including registration,
payment of filing, examination and maintenance fees and proofs of working or
use), and the Acquired Companies' rights therein are valid and enforceable. None
of the Intellectual Property that is owned by any Acquired Company is subject to
any maintenance fees or taxes or required actions falling due within ninety days
after the Closing Date. Except as described in Section 2.19(b) of the CSI
Disclosure Statement, none of the Intellectual Property that is owned by any
Acquired Company and, to the knowledge of the Acquired Companies, none of the
Intellectual Property that is used (but not owned) by any Acquired Company has
been infringed or, to the knowledge of the Acquired Companies, challenged or
threatened in any way. None of the products or services manufactured or sold by
any Acquired Company nor any processes or Intellectual Property infringe or are
alleged to infringe any trademark, copyright, patent or other proprietary right
of any Person. The Acquired Companies have taken all reasonable precautions to
preserve and document their trade secrets and to protect the secrecy,
confidentiality and value of their trade secrets.
2.20 Customers and Suppliers.
-----------------------
(a) Section 2.20 of the CSI Disclosure Statement lists the names
of the twenty (20) customers of AFW to whom AFW made the most sales during 1994
and the aggregate revenues attributable to each in such year, and of the twenty
(20) suppliers and vendors from whom AFW made the most purchases during such
period and the aggregate expenditures attributable to each in such year.
(b) No customer or customers that in the aggregate accounted for
more than 5% of the sales of any Acquired Company since December 31, 1992 have
terminated or materially reduced or have given notice that they intend to
terminate or materially reduce, the amount of business done with any Acquired
Company. No supplier or suppliers or vendor or vendors that accounted for more
than 1% of the purchases of any Acquired
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<PAGE>
Company since December 31, 1992 have terminated or materially reduced or have
given notice that they intend to terminate or materially reduce, the amount of
business done with any Acquired Company. No Acquired Company is aware of any
such intention on the part of any such customer, supplier or vendor, whether or
not in connection with the transactions contemplated hereunder.
(c) Except as described in Section 2.20(c) of the CSI Disclosure
Statement, there are no, and during the last four years there have not been any,
disputes or controversies between any Acquired Company and any customer or
supplier or any other Person regarding the quality, merchantability or safety
of, or involving a claim of breach of warranty which has not been fully resolved
with respect to, or defect in, any product purchased, manufactured or sold by
such Acquired Company. To the knowledge of the Acquired Companies, each
Acquired Company enjoys good working relationships under all arrangements and
agreements with customers and suppliers necessary to the normal operation of its
businesses. Except as described in Section 2.20(c) of the CSI Disclosure
Statement, alternative sources of supply, on substantially similar terms and
conditions, exist for all material goods or services purchased by or supplied to
any Acquired Company.
2.21 Labor Matters.
-------------
(a) Except as described in Section 2.21 of the CSI Disclosure
Statement: (i) since December 31, 1990, no Acquired Company has been or is a
party to any collective bargaining or other labor agreement, contract or
commitment; (ii) no application or petition for certification of a collective
bargaining agent is pending or, to the Acquired Companies' knowledge, is
threatened, and none of the employees of any Acquired Company is, or since
December 31, 1990 has been, represented by any union or other bargaining
representative; (iii) since December 31, 1990, no union has attempted to
organize any group of any Acquired Company's employees, and no such group has
sought to organize into a union or similar organization for the purpose of
collective bargaining, and, to the Acquired Companies' knowledge, no such
organizational activity is threatened or contemplated by any Person; (iv) there
has not been, there is not presently pending or existing and, to the Acquired
Companies' knowledge, there is not threatened any strike, slowdown, picketing,
work stoppage, grievance, labor arbitration, or proceeding in respect of or
arising from any labor dispute against or affecting any Acquired Company or its
premises; (v) since December 31, 1990, there has been no lockout of any
employees by any Acquired Company, and no such action is contemplated by any
Acquired Company; and (vi) no agreement restricts any Acquired Company from
relocating, closing or terminating any of its operations or facilities or any
portion
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thereof. Except as described in Section 2.21 of the CSI Disclosure Statement,
no Acquired Company: has incurred liability under the Workers' Adjustment and
Retraining Notification Act or any other federal, state, local or foreign "plant
closing" or similar law; is a contractor or subcontractor with the government of
the United States or any state, municipality or foreign jurisdiction such that
it has an obligation to maintain any affirmative action plan; has failed at any
material time in the past to be in compliance with the United States Fair Labor
Standards Act and similar federal, state, local and foreign laws with respect to
hours worked by and payments made to its employees; and, to the knowledge of the
Acquired Companies, has been cited for violations of the Occupational Safety and
Health Act of 1970, as amended ("OSHA"), any regulation promulgated pursuant to
OSHA or any other federal, state, local or foreign statute, ordinance, rule or
regulation establishing standards of workplace safety or paid any fines or
penalties with respect to such citation.
(b) Section 2.21(b) of the CSI Disclosure Statement sets forth
the following information for each director, officer and salaried management
employee of each Acquired Company and for each consultant and independent
contractor regularly retained (including each such Person on leave or layoff
status): employee name and job title; current annual rate of compensation
(identifying bonuses separately), any change in compensation since December 31,
1994 and any future changes in compensation that may have been promised;
vacation accrued and service credited for purposes of vesting and eligibility to
participate in applicable Employee Benefit Plans; and any automobile leased or
owned by an Acquired Company primarily for use by any of the foregoing Persons.
Section 2.21(b) of the CSI Disclosure Statement describes each employment,
severance, change of control, consulting, commission, agency and representative
agreement, obligation (statutory or otherwise) or arrangement to which any
Acquired Company is a party or is otherwise bound, including, without
limitation, all agreements and commitments relating to wages, hours, severance,
retirement benefits or annuities, or other terms or conditions of employment
(other than unwritten employment arrangements terminable at will without payment
of any contractual severance or other amount). None of the employees of any
Acquired Company has, to the knowledge of the Acquired Companies, indicated a
desire to terminate his or her employment, or any intention to do so in
connection with the transactions contemplated hereunder.
2.22 Employee Benefits. Except as described in Section 2.22 of the
-----------------
CSI Disclosure Statement,
(a) Neither CSI, any of the other Companies nor any ERISA
Affiliate (as defined below), for the benefit of any of
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their respective employees, maintains, contributes or is or was within the past
four years obligated to make payments to any employee pension benefit plan
("Pension Plan"), as defined in section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), any employee welfare benefit plan
("Welfare Plan"), as defined in section 3(1) of ERISA, any deferred compensation
plan, or any other plan, arrangement or commitment maintained by or on behalf of
any of the Companies or any ERISA Affiliate to provide benefits to employees or
former employees of any of the Companies or any ERISA Affiliate (collectively,
"Employee Benefit Plans"). As used herein, "ERISA Affiliate" shall refer to any
trade or business, whether or not incorporated, under common control with CSI
within the meaning of section 414(b), (c), (m) or (o) of the Code.
(b) Neither CSI, any of the other Companies nor any ERISA
Affiliate has incurred any material liability under any provision of ERISA or
other applicable Law relating to any Employee Benefit Plan. Each Employee
Benefit Plan has been administered in compliance with its terms in all material
respects and is in compliance with the applicable provisions of ERISA
(including, but not limited to, the reporting and disclosure, funding and
prohibited transactions provisions thereof), the Code and other applicable Laws.
(c) Neither CSI, any of the other Companies nor any ERISA
Affiliate knows of any inquiries or proceedings pending or threatened by the
Internal Revenue Service, the U.S. Department of Labor, the Pension Benefit
Guaranty Corporation, or by any participant or beneficiary, with respect to any
Employee Benefit Plan now or formerly maintained by any of the Companies or an
ERISA Affiliate or to which any of the Companies or an ERISA Affiliate has
contributed.
(d) The Companies have made or provided for all contributions to
Employee Benefit Plans disclosed on the CSI Disclosure Statement required under
the terms of such Employee Benefit Plans for all periods through Closing. There
have been no "prohibited transactions" (as defined in Section 4975 of the Code
or in Part 4 of Subtitle B of Title I of ERISA) with respect to any Employee
Benefit Plan.
(e) Neither CSI, any of the other Companies nor any ERISA
Affiliate has, since September 2, 1974, contributed or been required to
contribute to, or withdrawn or partially withdrawn from, any multiemployer plan
("Multiemployer Plan"), as defined in section 3(37) of ERISA.
(f) CSI has a current favorable determination letter from the
Internal Revenue Service with respect to each Pension Plan maintained by any of
the Companies or any ERISA
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Affiliate which is intended to be a qualified plan within the meaning of section
401 of the Code. Neither CSI, any of the other Companies nor any ERISA
Affiliate is aware of any fact or circumstance which would adversely affect the
qualified status of any such Pension Plan. Each Pension Plan maintained by any
of the Companies or any ERISA Affiliate which contains an arrangement described
in section 401(k) of the Code has been maintained in compliance with the
requirements of section 401(k) of the Code and is a qualified cash or deferred
arrangement. No Pension Plan maintained by any of the Companies or any ERISA
Affiliate has been the subject of a "reportable event" (as defined in Section
4043 of ERISA). The actuarial present value of accumulated benefits (both
vested and invested) of each such Pension Plan which is a defined benefit plan
are fully funded in accordance with the actuarial assumptions used by the
Pension Benefit Guaranty Corporation to determine the level of funding required
in the event of the termination of such Plan. No Employee Benefit Plan that is
subject to the minimum funding requirements of Part 3 of Subtitle B of Title I
of ERISA or subject to Section 412 of the Code has incurred any "accumulated
funding deficiency" within the meaning of Section 302 of ERISA or Section 412 of
the Code and there has been no waived funding deficiency within the meaning of
Section 303 of ERISA or Section 412 of the Code.
(g) Each trust created under any Pension Plan maintained by any
of the Companies or any ERISA Affiliate has been at all times exempt from
Federal income tax under section 501(a) of the Code. No trust under any such
Pension Plan has at any time had any "unrelated business taxable income," as
that term is defined in section 512 of the Code, nor has any such trust been
subject to tax thereon under section 511 of the Code.
(h) None of the Companies is bound by any collective bargaining
agreement or legally binding arrangement to maintain or contribute to any
Employee Benefit Plan.
(i) There has been no violation of the "continuation coverage
requirements" of former section 162(k) of the Code (as in effect for tax years
beginning on or before December 31, 1988) and of section 4980B of the Code (as
in effect for tax years beginning on and after January 1, 1989) and Part 6 of
Subtitle B of Title I of ERISA with respect to any Welfare Plan to which such
continuation coverage requirements apply.
(j) Neither CSI, any of the other Companies nor any ERISA
Affiliate formerly maintained or contributed to any Pension Plan which has been
terminated ("Terminated Pension Plan"). The representations and warranties set
forth in sections 2.22(b), (c), (d), (f) and (g) above are also true with
respect to each Terminated Pension Plan. With respect to each Terminated
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Pension Plan which was intended to be a qualified plan within the meaning of
section 401 of the Internal Revenue Code, the Internal Revenue Service
determined that the termination of the Plan did not adversely affect its tax
qualified status. All of the liabilities of each Terminated Pension Plan to
participants and beneficiaries have been fully satisfied; and there are no
outstanding liabilities or potential liabilities with respect to such Plan.
2.23 Relationships With Related Persons. Except as described in
----------------------------------
Section 2.23 of the CSI Disclosure Statement, no present or former officer,
director or shareholder of any Company, no member of the immediate family of any
such Person, and no Person controlling, controlled by or under common control
with, directly or indirectly, any of the foregoing (collectively "Affiliated
Persons") has, or has had since December 31, 1990, any interest in any property
(whether real, personal, or mixed and whether tangible or intangible) or assets
used in any Acquired Company's business. Except as described in Section 2.23 of
the CSI Disclosure Statement, no Affiliated Person owns, or since December 31,
1990 has owned, of record or as a beneficial owner, an equity interest or any
other financial or profit interest in any Person that has (i) had business
dealings or a material financial interest in any transaction with any Acquired
Company, or (ii) engaged in competition with any Acquired Company with respect
to any line of the products or services of any Acquired Company (a "Competing
Business") in any market presently served by any Acquired Company except for
less than one percent of the outstanding capital stock of any Competing Business
that is publicly traded on any recognized exchange or in the over-the-counter
market. Except as set forth in Section 2.23 of the CSI Disclosure Statement, no
Affiliated Person is a party to any agreement, contract or commitment with, or
has any claim or right against, any Acquired Company other than, in the case of
Affiliated Persons who are employed by an Acquired Company and disclosed in
Section 2.23 of the CSI Disclosure Statement, accrued compensation and benefits
payable in the ordinary course of business and reflected on such Acquired
Company's books and records.
2.24 Environmental Matters.
---------------------
(a) Except as described in Section 2.24 of the CSI Disclosure
Statement:
(i) Each of the Companies, including all of its businesses
and operations, is and always has been operated in compliance with all
Environmental Laws (as defined below), except where the failure to be in such
compliance would not result in a CSI Material Adverse Effect;
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(ii) There are no conditions on, about, beneath or arising
from any of the premises owned, used or leased by any of the Companies
(collectively, the "Premises") which would, under any Environmental Law, (A)
give rise to liability or the imposition of a statutory lien, or (B) which would
or may require any "Response," "Removal" or "Remedial Action" (as those terms
are defined below) or any other action, including, without limitation,
reporting, monitoring, cleanup or contribution;
(iii) There were no conditions on, about, beneath or arising
from any real property which was, but is no longer, owned, used or leased to or
by any of the Companies ("Former Real Property"), during the period of such
ownership, use, or lease, which would, under any Environmental Law, (A) give
rise to liability or the imposition of a statutory lien, or (B) which would or
may require any "Response," "Removal" or "Remedial Action" or any other action,
including without limitation reporting, monitoring, cleanup or contribution;
(iv) None of the Companies has received any notification of
a release or threat of a release of a "Hazardous Substance" (as defined below)
at any site or location, including, without limitation, the Premises or the
Former Real Property;
(v) No Hazardous Substances have been used, handled,
generated, processed, treated, stored, transported to or from, released,
discharged or disposed of by any of the Companies or any third party on, about
or beneath the Premises, except in the ordinary course of business, in
compliance with applicable law and in such a manner as could not result in the
imposition of any material liability on any of the Companies;
(vi) During the ownership, use or lease of the Former Real
Property by any of the Companies, no Hazardous Substances were used, handled,
generated, processed, treated, stored, transported to or from, released,
discharged or disposed of by any of the Companies or any third party on, about
or beneath the Former Real Property, except in the ordinary course of business,
in compliance with applicable law and in such a manner as could not result in
the imposition of any material liability on any of the Companies;
(vii) There are no above or underground storage tanks,
asbestos or transformers containing or contaminated with PCBs on, about or
beneath the Premises. During the ownership, use or lease of the Former Real
Property by any of the Companies, there were no above or underground storage
tanks, or transformers containing or contaminated with PCBs on, about or beneath
the Former Real Property;
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(viii) None of the Companies has received notice or
otherwise has knowledge of:
(A) any claim, demand, investigation, enforcement,
Response, Removal, Remedial Action, statutory lien or other governmental or
regulatory action instituted or threatened against any of the Companies, the
Premises or any Former Real Property pursuant to any of the Environmental Laws;
(B) any claim, demand, suit or action, made or
threatened by any Person against any of the Companies, the Premises or any
Former Real Property relating to (1) any form of damage, loss or injury
resulting from, or claimed to result from, any Hazardous Substance on, about
beneath or arising from the Premises or any Former Real Property or (2) any
alleged violation of the Environmental Laws by any of the Companies; or
(C) any communication to or from any governmental or
regulatory agency arising out of or in connection with Hazardous Substances on,
about, beneath, arising from or generated at the Premises or any Former Real
Property, including without limitation, any notice of violation, citation,
complaint, order, directive, request for information or response thereto, notice
letter, demand letter or compliance schedule; and
(ix) No wastes generated by any of the Companies have ever
been directly or indirectly sent, transferred, transported to, treated, stored
or disposed of at any site listed or formally proposed for listing on the
National Priority List promulgated pursuant to CERCLA or to any site listed in
any state list of sites requiring or recommended for investigation or clean-up.
(b) As used in this Agreement:
(i) The term "Environmental Laws" shall mean any Law or
Authorization (including foreign) concerning or relating to the protection of
health and/or the environment, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S)9601 et
seq., as amended ("CERCLA"), the Resource Conservation and Recovery Act, 42
U.S.C. (S)6901 et. seq., as amended, the Federal Water Pollution Control Act, 33
U.S.C. (S)1251 et seq., as amended, the Clean Air Act, 42 U.S.C. (S)7401 et
seq., as amended, the Toxic Substances Control Act, 15 U.S.C. (S)2601 et seq.,
as amended, the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.
(S)136 et seq., as amended, or the Safe Drinking Water Act, 42 U.S.C. (S)300 et
seq., as amended, or regulations promulgated thereunder.
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(ii) The terms "Response," "Removal" and "Remedial Action"
shall have the meanings ascribed to them in Sections 101(23)-101(25) of CERCLA.
(iii) The term "Hazardous Substances" or "Hazardous
Substance" shall mean any substance regulated under any of the Environmental
Laws, including, without limitation, any substance which is: (A) petroleum,
asbestos or asbestos-containing material, urea formaldehyde or polychlorinated
biphenyls; (B) a "hazardous substance," "pollutant" or "contaminant" (as defined
in Sections 101(14), (33) of CERCLA or the regulations designated pursuant to
Section 102 of CERCLA), including any element, compound, mixture, solution or
substance that is designated pursuant to Section 102 of CERCLA; (C) listed in
the United States Department of Transportation Hazardous Material Tables, 49
C.F.R. (S)172.101; (D) defined, designated or listed as a "Hazardous Waste"
pursuant to the Resource Conservation and Recovery Act, as amended; or (E)
listed as a "Hazardous Air Pollutant" under Section 112 of the Clean Air Act, as
amended (42 U.S.C. (S)7412).
2.25 Absence of Certain Changes and Events
-------------------------------------
(a) Except as described in Section 2.25 of the CSI Disclosure
Statement and except as otherwise expressly provided herein, since December 31,
1994, each of the Companies has conducted its business only in the usual and
ordinary course consistent with past practice and there has not been any:
(i) declaration or payment of any dividend or other
distribution or payment in respect of the shares of capital stock of any of the
Companies, or any repurchase or redemption of any such shares of capital stock;
(ii) amendment to the certificate or articles of
incorporation, bylaws or other organizational document of any of the Companies;
(iii) payment or increase by any Acquired Company of any
bonuses, salaries, or other compensation (except for payment of salary in the
ordinary course consistent with past practice) to any shareholder, director,
officer or employee of any Acquired Company or entry into (or amendment of) any
employment, severance or similar agreement with any director, officer or
employee of any Acquired Company;
(iv) adoption of, change in or increase in the payments to
or benefits under any Employee Benefit Plan or labor policy of any Acquired
Company;
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<PAGE>
(v) damage, destruction or loss to any material asset or
property of any Acquired Company, whether or not covered by insurance;
(vi) entry into, amendment, termination or receipt of notice
of termination of, any agreement, contract or commitment which is required to be
disclosed in the CSI Disclosure Statement or which relates to any material
transaction, whether or not in the ordinary course of business;
(vii) sale (other than sales of inventory in the ordinary
course of business and the sale of the Non-Acquired Companies as described in
Section 4.8 hereof), assignment, conveyance, lease, or other disposition of any
asset or property of any Acquired Company or mortgage, pledge, or imposition of
any lien or other encumbrance on any asset or property of any of the Companies;
(viii) cancellation or waiver of any claims or rights with a
value to any Acquired Company in excess of $5,000 (either individually or
collectively);
(ix) change in the accounting methods, principles or
practices followed by any Acquired Company or any change in any of the
assumptions underlying, or methods of calculating, any bad debt, contingency or
other reserve;
(x) acceleration of collection of accounts receivable or
other amounts owed to any Acquired Company, or deferral of payment of accounts
payable or other amounts owed by any Acquired Company, in each case in relation
to past practice;
(xi) change in the amount of prepayments required of
customers of any Acquired Company, in relation to past practice; or
(xii) agreement, whether or not in writing, to do any of
the foregoing.
(b) Since December 31, 1994, there has not been any material
adverse change in the business, operations, properties, assets, working capital,
or condition (financial or otherwise) of any Acquired Company or any event,
condition or contingency that is likely to result in such a material adverse
change.
2.26 Books and Records. The books and records of each Acquired
-----------------
Company, including financial records and books of account, are complete and
accurate in all material respects and have been maintained in accordance with
sound business practices. Such books and records accurately and fairly reflect
its income,
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expenses, assets and liabilities and each Acquired Company maintains internal
accounting controls which provide reasonable assurance that: (a) transactions
are executed in accordance with management's authorization; (b) transactions are
recorded as necessary to permit preparation of reliable financial statements and
to maintain accountability for earnings and assets; (c) access to assets is
permitted only in accordance with management's authorization; (d) the recorded
accountability of all assets is compared with existing assets at reasonable
intervals; and (e) except as described in Section 2.26 of the CSI Disclosure
Statement, all intercompany transactions, charges and expenses among or between
any Acquired Company and any Affiliated Person are accurately reflected at fair
arms length value in all financial statements.
2.27 Insurance.
---------
(a) Section 2.27(a) of the CSI Disclosure Statement contains a
complete and accurate list of all policies and binders of insurance (including,
without limitation, property, casualty, liability, life, health, accident,
workers' compensation and disability insurance and bonding arrangements) owned
by or maintained for the benefit of any Acquired Company or to which any
Acquired Company is a party or under which any Acquired Company, or any director
thereof, is covered.
(b) Section 2.27(b) of the CSI Disclosure Statement describes
each contract or arrangement, other than a policy of insurance, for the transfer
or sharing of any risk by any Acquired Company.
(c) Section 2.27(c) of the CSI Disclosure Statement sets forth,
by year for the current policy year and each of the two preceding policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance
policy for an amount in excess of $5,000, which sets forth: (A) the name of the
claimant; (B) the description of the policy by insurer, type of insurance, and
period of coverage; and (C) the amount and a brief description of the claim; and
(iii) a statement describing the loss experience for all
claims that were self-insured, including the number and aggregate cost of such
claims.
(d) Section 2.27(d) of the CSI Disclosure Statement describes all
obligations of any Acquired Company to provide coverage to third parties (such
as, for example, under
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leases or service agreements) and identifies the policy under which such
coverage is provided.
(e) Section 2.27(e) of the CSI Disclosure Statement describes any
self-insurance arrangement by or affecting any Acquired Company, including any
reserves established thereunder.
(f) Except as set forth on Section 2.27(f) of the CSI Disclosure
Statement:
(i) All policies to which any Acquired Company is a party or
that provide coverage to any Acquired Company or director thereof:
(A) are valid, outstanding, and enforceable; and
(B) are sufficient for compliance with all laws and
contracts, agreements and commitments to which
such Acquired Company is a party or by which it is
bound.
(ii) No Acquired Company has received (A) any refusal of
coverage or any notice that a defense will be afforded with reservation of
rights; (B) any notice that an issuer of any insurance policy has filed for
protection under applicable bankruptcy laws or is otherwise in the process of
liquidating or has been liquidated; (C) any notice of cancellation or any other
indication that any insurance policy is no longer in full force and effect or
that the issuer of any policy is not willing or able to perform its obligations
thereunder; or (D) any notice from an insurer to discontinue any coverage
afforded to such Acquired Company or director thereof.
(iii) Each Acquired Company has paid all premiums due, and
has otherwise performed its obligations, under each policy listed or required to
be listed in Section 2.27 of the CSI Disclosure Statement.
(iv) Each Acquired Company has given timely notice to the
insurer of all existing claims.
2.28 Brokers and Finders. None of the Companies or any of their
-------------------
respective directors, officers of employees has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions or similar payments in connection with the transactions contemplated
by this Agreement.
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SECTION 3.
REPRESENTATIONS AND WARRANTIES OF K&S AND KSAC.
K&S and KSAC hereby jointly and severally represent and warrant to the
Stockholders and to CSI as follows:
3.1 Organization and Good Standing.
------------------------------
(a) Each of K&S and KSAC is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation.
(b) Each of K&S and KSAC has all necessary corporate power and
authority to carry on its business as presently conducted, to own, lease and
operate all of the properties and the assets that it owns or leases and to
perform all its obligations under each agreement and instrument by which it is
bound.
3.2 Power and Authorization. Each of K&S and KSAC has all requisite
-----------------------
corporate power to execute, deliver and perform its obligations under this
Agreement, the Merger Agreement, the promissory notes of K&S to be issued in the
Merger (the "Notes") and all other agreements and documents required to be
delivered by it prior to or at the Closing (collectively, the "Acquiror
Transaction Documents"). The execution, delivery and performance by K&S and
KSAC of the Acquiror Transaction Documents have been duly authorized by all
necessary corporate action on the part of K&S and KSAC. This Agreement has been
duly and validly executed and delivered by K&S and KSAC and, assuming due
authorization, execution and delivery thereof by CSI and the Stockholders,
constitutes the legal, valid and binding obligation of each of K&S and KSAC,
enforceable against each of them in accordance with its terms. When executed
and delivered as contemplated herein, each of the other Acquiror Transaction
Documents shall, assuming due authorization, execution and delivery by the other
parties thereto, constitute the legal, valid and binding obligation of each of
K&S and KSAC that is a party thereto, enforceable against each of them that is a
party thereto in accordance with its terms.
3.3 No Conflict; Consents and Approvals.
-----------------------------------
(a) Subject to paragraph (b) below, the execution and delivery of
this Agreement do not, and the consummation of the transactions contemplated by
the Acquiror Transaction Documents will not (in each case, with or without the
passage of time or the giving of notice): (i) violate or conflict with the
articles of incorporation or bylaws (or other organizational
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documents) of K&S or KSAC or any Law applicable to K&S or KSAC or by or to which
any material properties or assets of K&S or KSAC are bound or subject; or (ii)
except as would not result in a material adverse effect on the financial
condition or results of operations of K&S and its subsidiaries taken as a whole
(a "K&S Material Adverse Effect") or as will be cured or waived prior to the
Effective Time, violate or conflict with, result in a breach of, or constitute a
default or otherwise cause any loss of benefit under or give to others any
rights in or with respect to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument to which K&S or
KSAC is a party or by which any assets or properties of K&S or KSAC are bound or
affected.
(b) The execution and delivery of this Agreement by K&S and KSAC
do not, and the consummation by K&S and KSAC of the transactions contemplated by
the Acquiror Transaction Documents will not, require K&S or KSAC to obtain any
consent, license, permit, waiver, approval, authorization or order of, or to
make any filing, registration or declaration with or notification to, any court,
government, governmental agency or instrumentality (federal, state, local or
foreign), except for (i) those as have been or may be made under the HSR Act,
(ii) filings or other actions required under the Exchange Act, (iii) filings or
other action required by NASDAQ, (iv) the filing of such documents with, and the
obtaining of such orders from, the various state and foreign authorities,
including state securities authorities, that may be required under state
securities and blue sky laws or similar foreign laws in connection with the
issuance of the Notes, (v) the filing and recordation of appropriate merger
documents as required under Alabama and Delaware law, and (vi) any such consent,
license, permit, waiver, approval, authorization, order, registration,
notification, filing or declaration, the failure to obtain or make which would
not prevent or delay consummation of the Merger or otherwise prevent K&S or KSAC
from performing any of their respective obligations under the Acquiror
Transaction Documents and would not result in a K&S Material Adverse Effect.
(c) There are no actions, proceedings or investigations pending
or, to the knowledge of K&S, threatened, that question any of the transactions
contemplated by this Agreement or the validity of any of the Acquiror
Transaction Documents or which, if adversely determined, could reasonably be
expected to have a material adverse effect upon K&S's or KSAC's ability to enter
into or perform their respective obligations under the Acquiror Transaction
Documents.
3.4 SEC Reports; Financial Statements. The common stock of K&S is
---------------------------------
registered under Section 12 of the Exchange Act. K&S has provided to CSI a true
and complete copy (without
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exhibits) of the reports and proxy statements filed by K&S with the SEC pursuant
to Sections 13(a) and 14(a) of the Exchange Act since September 30, 1993, a list
of which is attached as Schedule 3.4 hereto (collectively, the "SEC Reports"),
which are all the reports and proxy statements that K&S was required to file
with the SEC pursuant to Sections 13(a) and 14(a) of the Exchange Act since such
date. Each of the balance sheets (including the related notes) included in the
SEC Reports fairly presents the consolidated financial position of K&S and its
subsidiaries as of the respective dates thereof, and the other related
statements (including the related notes) included therein fairly present the
results of operations and the changes in financial position of K&S and its
subsidiaries for the respective periods or as of the respective dates set forth
therein, all in conformity with GAAP consistently applied during the periods
involved except (i) as otherwise noted therein, (ii) in the case of unaudited
statements, as permitted by Form 10-Q of the SEC and (iii) in the case of
unaudited statements, for recurring audit adjustments normal in nature and
amount.
3.5 Absence of Changes. Except as K&S may otherwise have advised CSI
------------------
or as set forth in the SEC Reports, since September 30, 1994 there has not been
any material adverse change in the business, operations, properties, assets,
working capital or condition (financial or otherwise) of K&S and its
subsidiaries, taken as a whole, or any event, condition or contingency that is
likely to result in such a material adverse change.
3.6 Brokers and Finders. Except for such fees and expenses, if any,
-------------------
as may be owed to Prudential Securities as a result of K&S's actions or
omissions (which shall be solely the obligation of K&S), neither K&S nor any of
its subsidiaries or any of their respective directors, officers or employees has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or similar payments in connection
with the transactions contemplated by this Agreement.
SECTION 4.
OBLIGATIONS OF THE PARTIES UNTIL CLOSING
4.1 Conduct of Business Pending Closing. Except as expressly
-----------------------------------
provided herein, between the date hereof and the Closing, without the prior
written consent of K&S, CSI shall, and CSI shall cause each of the other
Acquired Companies to:
(a) maintain its corporate existence, pay and discharge all
debts, liabilities and obligations as they become
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<PAGE>
due (including, without limitation, the payment or discharge of trade accounts
payable), and operate solely in the ordinary course in a manner consistent with
past practice and the provisions of this Agreement and in compliance with all
applicable Laws, Authorizations, contracts and agreements (including, without
limitation, those identified in the CSI Disclosure Statement);
(b) maintain its tangible properties, assets and facilities in
the same state of repair, order and condition as they were on the date hereof,
reasonable wear and tear excepted;
(c) use reasonable efforts to preserve intact its business
organization, retain the services of its respective officers and key employees
and to maintain its relationships with its respective customers and suppliers;
and
(d) maintain its books and records in accordance with past
practice, and to use reasonable efforts to maintain in full force and effect all
Authorizations and all insurance policies and binders.
4.2 Negative Covenants. Except as expressly provided herein or as
------------------
described in Section 4.2 of the CSI Disclosure Statement, between the date
hereof and the Closing, without the prior written consent of K&S, CSI shall not,
and CSI shall not permit any of the other Acquired Companies to:
(a) take any action or, to the extent within any Acquired
Company's reasonable control, permit to occur any event which would breach any
covenant of CSI contained herein or cause any representation or warranty of CSI
contained herein to be untrue if made immediately after such event;
(b) make any change in its authorized or issued capital stock,
grant any stock option or other right to purchase shares of its capital stock or
other securities, issue or make any commitment to issue any capital stock or
other securities, or purchase, redeem, retire or make any other acquisition of
any shares of any capital stock or other securities;
(c) fail to pay or discharge when due any of its liabilities or
obligations;
(d) incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities; or
(e) solicit or encourage (including by way of furnishing
nonpublic information), or take any other action to facilitate (or permit any of
its officers, directors or employees
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or any investment banker, financial advisor, attorney, accountant or other
representative or agent retained by it to do any of the foregoing) any inquiries
or the making of any proposal which constitutes, or may reasonably be expected
to lead to, any Takeover Proposal (as defined below), or agree or endorse any
Takeover Proposal, or participate in any discussions or negotiations, or provide
third parties with any nonpublic information, relating to any such inquiry or
proposal. CSI shall promptly advise K&S orally and in writing of any such
inquiries or proposals, including all of the material terms thereof. As used in
this Agreement, "Takeover Proposal" shall mean any tender or exchange offer,
proposal for a merger, consolidation, purchase of substantially all assets of,
amalgamation, arrangement or other business combination involving CSI or any
other Acquired Company or any proposal or offer to acquire in any manner a
substantial equity interest in, or a substantial portion of the assets of, CSI
or any other Acquired Company other than the transactions contemplated or
permitted by this Agreement.
4.3 Access to Information.
---------------------
(a) CSI shall, and shall cause its subsidiaries to (i) afford to
K&S and its officers, directors, employees, accountants, consultants, legal
counsel, agents and other representatives (collectively, the "Acquiror
Representatives") reasonable access at reasonable times, upon reasonable prior
notice and upon such other reasonable terms as CSI may determine are appropriate
(including the right of CSI to notify K&S in writing that access shall be
reasonably limited to contact with CSI through certain designated employees or
other representatives of CSI), to the officers, employees, accountants, agents,
properties, offices and other facilities of CSI and its subsidiaries and to the
books and records thereof and (ii) furnish promptly to K&S and the Acquiror
Representatives such information concerning the business, properties, contracts,
records and personnel of CSI and its subsidiaries (including, without
limitation, financial, operating and other data and information) as may be
reasonably requested, from time to time, by K&S.
(b) K&S shall (i) afford to CSI and its officers, directors,
employees, accountants, consultants, legal counsel, agents and other
representatives (collectively, the "CSI Representatives") reasonable access at
reasonable times, upon reasonable prior notice and upon such other reasonable
terms as K&S may determine are appropriate (including the right of K&S to notify
CSI in writing that access shall be reasonably limited to contact with K&S
through certain designated employees or other representatives of K&S), to the
books and records thereof of K&S and (ii) furnish promptly to CSI and the CSI
Representatives such information concerning the business, properties, contracts,
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records and personnel of K&S as may be reasonably requested, from time to time,
by CSI (including, without limitation, financial, operating and other data and
information relevant to K&S's ability to repay the Notes).
(c) Notwithstanding the foregoing provisions of this Section 4.3,
neither CSI nor K&S shall be required to grant access or furnish information to
the other party to the extent that such access or the furnishing of such
information is prohibited by Law. No investigation by the parties hereto made
heretofore or hereafter shall affect the representations and warranties of the
parties that are contained herein, and each such representation and warranty
shall survive such investigation, provided that prior to Closing K&S advises CSI
of any breaches of such representation or warranty of which K&S becomes, prior
to Closing, actually aware and of which the Acquired Companies are not actually
aware.
(d) Except as required by Law, the rules of NASDAQ (in the case
of K&S) or as otherwise contemplated herein, the receiving party shall hold all
such confidential information in confidence and shall not disclose all or any
portion thereof to any Person other than such party's directors, officers and
employees on a need to know basis, its legal counsel, independent public
accountants and other outside consultants engaged by such party (collectively,
"Confidential Information Representatives"), except with the written consent of
the other party. Such information shall be used by the receiving party solely
for the purpose of evaluating the transactions described herein. Each
Confidential Information Representative to whom such information is disclosed
shall be advised, prior to receiving such information, of its confidential
nature and of the terms of this Agreement regarding such information. In the
event that this Agreement is terminated, each party shall return all copies of
all data and other information obtained from the other party or its
representatives in the course of its investigation.
(e) The provisions of this Section 4.3 shall be in addition to
and not in lieu of the provisions set forth in the Confidentiality Agreements
dated February 14, 1994 between CSI and K&S (collectively, the "Confidentiality
Agreements"), provided that in the event of a conflict between the terms of this
Section 4.3 and those set forth in the Confidentiality Agreements, the terms of
the Confidentiality Agreements shall control, and provided further that from and
after the Closing, the obligations of K&S and K&S's Confidential Information
Representatives under this Section 4.3 and the Confidentiality Agreements shall
terminate except with respect to confidential information concerning the Non-
Acquired Companies which shall continue after Closing to be governed by the
terms of the Confidentiality Agreements.
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4.4 CSI Stockholders Meeting. CSI and the Stockholders shall take
------------------------
all steps necessary to duly call, give notice of, convene and hold a meeting of
CSI's stockholders (the "CSI Stockholders Meeting") to be held as soon as is
reasonably practicable after the date hereof for the purpose of voting upon the
approval of this Agreement and the Merger Agreement. CSI shall use its best
efforts to secure the vote or consent of stockholders required by the Alabama
Business Corporation Act and CSI's Certificate of Incorporation and Bylaws to
approve and adopt this Agreement and the Merger Agreement, and the Board of
Directors of CSI shall, subject to its fiduciary duties, recommend to the CSI
stockholders such approval and adoption. K&S and CSI shall coordinate and
cooperate with respect to the timing of the CSI Stockholders Meeting. Each of
the Stockholders shall vote, or cause to be voted, at the CSI Stockholders
Meeting, any adjournment thereof and any other meeting at which such matters are
to be considered or voted upon, all shares of CSI capital stock of which such
Stockholder has beneficial ownership on the date hereof (and any shares that are
acquired prior to the record date for the CSI Stockholders Meeting) in favor of
the Merger and the adoption and approval of this Agreement and the Merger
Agreement and, if applicable, shall formally consent to such adoption and
approval; provided, however, that the foregoing shall not be construed to
require approval or consent of any grant of options, payment of bonuses or any
other matter that is to be proposed for approval by the CSI stockholders other
than the approval of the Merger and the approval and adoption of this Agreement
and the Merger Agreement.
4.5 Conditions to Closing; Consents and Approvals. (a) Between the
---------------------------------------------
date of this Agreement and the Closing Date, CSI and the Stockholders shall use
all reasonable efforts to cause the conditions in Sections 5.1 and 5.2 to be
satisfied, and K&S shall use all reasonable efforts to cause the conditions in
Section 5.1 and 5.3 to be satisfied.
(b) As promptly as practicable after the date of this Agreement,
each party shall make all filings required by Law to be made by them in order to
consummate the transactions contemplated herein. Between the date of this
Agreement and the Closing Date, each party shall cooperate with the other
parties (and their affiliates) in connection with all filings required by Law to
be made by the other parties (and their affiliates) to consummate the
transactions contemplated herein; provided that nothing in this Agreement shall
require K&S or any of its affiliates to dispose of or make any change in any
portion of its business or to incur any material burden in order to obtain any
consent, approval, license, waiver or other authorization. As promptly as
practicable after the date of this Agreement, CSI shall use all reasonable
efforts to obtain all consents, approvals, waivers and other authorizations of
all third parties
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necessary for the consummation of the transactions contemplated herein.
4.6 Notifications. Between the date of this Agreement and the
-------------
Closing Date, K&S and KSAC, on the one hand, and CSI and the Stockholders, on
the other hand, shall promptly notify the other in writing if such party becomes
actually aware of any fact or condition that causes or constitutes a breach of
its or their representations and warranties set forth herein as of the date of
this Agreement, or if such party becomes actually aware of the occurrence of any
fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a breach of any such representation or warranty
had such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition. During the same period, K&S and KSAC, on
the one hand, and CSI and the Stockholders, on the other hand, shall promptly
notify the other party of the occurrence of any breach of any covenant of such
other party in this Agreement or of the occurrence of any event that may make
the satisfaction of the conditions in Section 5 impossible or unlikely of which
the notifying party actually shall become aware.
4.7 Options; Transfer of Shares.
---------------------------
(a) Prior to Closing, CSI and the Stockholders shall take such
actions as are necessary to (a) terminate or cause to be terminated (in
exchange, if appropriate, for cash payments made prior to Closing but without
further liability or obligation to any Acquired Company) any outstanding equity
appreciation rights and all other options, rights, warrants or other agreements
or commitments of any nature whatsoever to acquire capital stock or other equity
securities of any Acquired Company. Prior to Closing, the stockholders of CSI
shall vote to determine whether options to purchase capital stock of CSI, as
described in Section 2.2(a) of the CSI Disclosure Statement, shall be granted to
LDS and RKP, and, if such options are approved by an affirmative vote of at
least 75% of the stockholders who are unrelated to LDS and RKP, such options
shall be granted to LDS and RKP and prior to Closing each of LDS and RKP shall
exercise, in accordance with the terms thereof, all of their respective options
so granted, and CSI shall issue shares of CSI Common Stock to LDS and RKP
pursuant thereto.
(b) Prior to Closing, CSI and LDS shall take all steps necessary
to effect a transfer to LDS of record ownership all of the 110,574 shares of CSI
Common Stock owned of record by The Larry D. Striplin Family Trust on the date
hereof so that as of Closing all such shares shall be owned beneficially and of
record by LDS except for approximately 9,000 of such shares which shall be
transferred, prior to Closing, to charitable entities.
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4.8 Spin-Off Sale. (a) Prior to Closing, LDS ("Buyer") shall acquire
-------------
from CSI (such transactions being referred to herein as the "Spin-Off Sale"):
(i) all of the outstanding shares of capital stock of Nelson-Brantley Glass
Contractors, Inc., an Alabama corporation ("Nel-Bran"), (ii) all of the
outstanding shares of capital stock of Clearview Properties, Inc., an Alabama
corporation ("Clearview"), and (iii) all of CSI's right, title and interest in
and to the assets specifically identified on Schedule 4.8 hereto (collectively,
the "Non-AFW Assets"). The transactions described in subclauses (i) and (ii) of
this Section 4.8(a) shall be effected by means of forward cash mergers (i.e.,
----
mergers effected under applicable state law in which CSI would receive cash in
an amount equal to the applicable portion of the purchase price described below
and that shall be treated, for federal income tax purposes, as taxable asset
sales by Nel-Bran and Clearview followed immediately by tax-free liquidations of
Nel-Bran and Clearview) of Clearview and Nel-Bran with and into Buyer or one or
more corporations controlled by Buyer and not otherwise affiliated with CSI.
(b) The purchase price for the Spin-Off Sale, which shall be paid to
and received by CSI prior to the Closing, shall be equal to the sum of (i) a
cash payment in an amount reasonably determined to be appropriate by the CSI
Board of Directors plus (ii) the assumption by Buyer of liabilities of CSI
specified in Schedule 4.8 hereto.
(c) The Spin-Off Sale shall be made pursuant to terms and conditions
set forth in one or more fully-integrated agreements (the "Spin-Off Sale
Agreements") between CSI and Buyer. The Spin-Off Sale Agreements shall (i)
provide for the sale of the Non-AFW Assets and the acquisition of shares of
capital stock of Clearview and Nel-Bran through mergers on an "as is" basis and
without any representations or warranties from CSI or any other Acquired
Company, (ii) contain a release executed by Buyer releasing the Acquired
Companies, their officers, directors, employees and stockholders from any and
all claims relating to the Non-AFW Assets or the Non-Acquired Companies, (iii)
not impose any obligations on CSI or any other Acquired Company with respect to
the period following the closing of the Spin-Off Sale, (iv) shall contain a
representation and warranty of Buyer to CSI to the effect that Nel-Bran and
Clearview are, immediately prior to the Spin-Off Sale, solvent, and (v) provide
that Buyer shall indemnify and hold CSI (and its successors and assigns,
including, without limitation, K&S and KSAC) harmless from and against all
losses, claims and liabilities arising, in whole or in part, from or with
respect to the liabilities of CSI specified in Schedule 4.8 hereto or the
operation of any of the Non-Acquired Companies, either prior to or after the
closing of the Spin-Off Sale or any breach of or inaccuracy in the
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representation and warranty referred to in the preceding subclause (iv).
Further, CSI and the Stockholders shall cause each of Clearview and Nel-Bran to
execute and deliver to CSI at the closing of the Spin-Off Sale a separate
agreement in favor of CSI (and its successors and assigns, including, without
limitation, K&S and KSAC) (A) indemnifying CSI for all losses, claims and
liabilities arising, in whole or in part, from or with respect to such Non-
Acquired Company's operations, either prior to or after the closing of the Spin-
Off Sale, and (B) providing for non-competition undertakings of Clearview and
Nel-Bran and their respective subsidiaries, if any, with terms and conditions
comparable to those set forth in Section 6.4 hereof. CSI shall provide K&S with
copies of the proposed Spin-Off Sale Agreements and such separate agreements a
reasonable time prior to their execution for approval by K&S, which approval
shall not be unreasonably withheld.
4.9 Inter-Company Payables. Prior to Closing, all intercompany
----------------------
payables owed by any Acquired Company to any Non-Acquired Company shall be
discharged in full either through cash payments by an Acquired Company to the
applicable Non-Acquired Company or, in the event such actions do not generate
any tax or other liabilities for any Acquired Company, through either a
forgiveness of such indebtedness by the applicable Non-Acquired Company
evidenced in writing or through dividends between and among the Acquired and
Non-Acquired Companies.
4.10 Additional Financial Statements. Between the date hereof and the
-------------------------------
Closing, CSI shall furnish to K&S as promptly as possible and in any event not
later than 25 days following the end of each month an unaudited consolidated
balance sheet of CSI as of the end of such month and consolidated statements of
revenues and expenses, stockholders' equity and cash flow for the period
beginning January 1, 1995 and ending at the end of such month, together with, in
the case of any quarterly financial statements, the corresponding period of the
preceding fiscal year, in each case (x) certified by the chief financial officer
of CSI as having been prepared in accordance with past practices of CSI and (y)
presenting the Non-Acquired Companies as discontinued operations. Such
financial statements shall be prepared in conformity with GAAP consistently
applied and shall fairly present the consolidated financial condition and
results of operations of CSI, as of the dates and for the periods covered by
such statements (except for the absence of notes and subject to normal recurring
year-end adjustments, the effect of which will not, individually or in the
aggregate, be material).
4.11 Employee Benefit Plans. Prior to Closing, CSI shall take all
----------------------
actions necessary to cause: (i) all of the Employee Benefit Plans maintained by
or on behalf of any of the Acquired Companies to continue to cover only the
eligible
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employees of the Acquired Companies (and their dependents, as appropriate) from
and after the Closing, (ii) all such Employee Benefit Plans to cease, prior to
Closing, to cover any employees or former employees of any of the Non-Acquired
Companies, and (iii) the Acquired Companies and such Employee Benefit Plans to
have no liability, from and after the Closing, with respect to any employee of
any Non-Acquired Company. Prior to Closing, CSI shall use all reasonable efforts
to cause the assets and liabilities of the CSI 401(k) plan attributable to Nel-
Bran employees to be spun off into a new 401(k) plan to be established by Nel-
Bran. Such spin-off shall be carried out in accordance with applicable law.
4.12 Guaranties. Prior to Closing, K&S, CSI and LDS shall use
----------
reasonable efforts to secure a release of LDS and each of the Non-Acquired
Companies, effective from and after the Closing, from the guaranty and other
obligations described in Schedule 4.12 hereto.
4.13 Estimated Closing Statement.
---------------------------
(a) For the purpose of calculating "Net Excess" or "Net Deficit"
under the Merger Agreement, CSI shall prepare a statement of certain assets and
liabilities (the "Estimated Closing Statement") which sets forth, as of the
close of business on the second business day immediately preceding the Closing
Date (but taking into account the adjustments specified in Schedule 5.2(o)
hereto) and in accordance with GAAP consistently applied, (i) the Acquired
Companies' cash and cash equivalents (for this purpose, bonuses that are to be
paid prior to Closing that have not been paid as of the time the Estimated
Closing Statement is prepared shall be deemed to have been paid and the amount
of such deemed payment shall be deducted from estimated cash) ("Closing Cash"),
(ii) the Acquired Companies' net inventory (for this purpose, Work in Process
shall be valued in accordance with the methodology described in Exhibit B-1
hereto) ("Closing Inventory"), (iii) the Acquired Companies' net accounts
receivable ("Closing A/Rs"), (iv) the Acquired Companies' net property, plant
and equipment ("Closing PP&E"), (v) the Acquired Companies' trade accounts
payable and accrued expenses ("Closing Payables"), (vi) the Acquired Companies'
long-term and short-term indebtedness (excluding Closing Payables) ("Closing
Debt"), (vii) any liability of CSI and all other Acquired Companies for Taxes
attributable to the Spin-Off Sale ("Closing Tax Liability"), (viii) the Acquired
Companies' liabilities other than the Closing Tax Liability, the Closing
Payables, the Closing Debt and any current income tax or deferred income tax
liabilities (the "Closing Liabilities"), (ix) the value (based on the price of
gold at the close of business on the business day immediately preceding the date
on which the Estimated Closing Statement is prepared) of the deficit, if any, in
the gold supply that is
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determined as a result of the gold supply inventory referred to in Section
5.2(p) hereof (the "Gold Deficit"), and (x) the value (based on the price of
gold at the close of business on the business day immediately preceding the date
on which the Estimated Closing Statement is prepared) of the surplus, if any, in
the gold supply that is determined as a result of the gold supply inventory
referred to in Section 5.2(p) hereof (the "Gold Surplus"). Such statement shall
be prepared with respect to CSI and the other Acquired Companies, on a
consolidated basis, provided that for this purpose, the Non-Acquired Companies,
even if they then remain CSI subsidiaries, shall be treated as if the Spin-Off
Sale had been effected. For purposes of the Estimated Closing Statement,
additions to Closing PP&E and Closing A/Rs relating to the insurance proceeds
referred to in Section 6.9 hereof shall be eliminated.
(b) The Estimated Closing Statement shall also set forth, in
accordance with GAAP consistently applied, the net sales of CSI and the other
Acquired Companies, on a consolidated basis, for the fiscal quarter of CSI
ending September 30, 1995 ("Base Net Sales").
(c) The Estimated Closing Statement shall also set forth the
following calculations: (i) there shall be added to the Closing Cash (A) the
amount, if any, by which the Closing PP&E exceeds $3,400,000 and (B) the Gold
Surplus (such sum, the "Consolidated Closing Cash"); and (ii) there shall be
added to the Closing Debt (A) the Closing Tax Liability, (B) the amount, if any,
by which Closing Inventory is less than 9% of Base Net Sales, (C) the amount, if
any, by which Closing A/Rs are less than 50% of Base Net Sales, (D) the amount,
if any, by which Closing PP&E is less than $3,400,000 and (E) the amount, if
any, by which the sum of Closing Payables and Closing Liabilities exceeds 11% of
the Base Net Sales and (F) the Gold Deficit (the sum described in this subclause
(ii), the "Consolidated Closing Debt").
(d) CSI shall deliver a draft of the Estimated Closing
Statement to K&S four business days prior to the Closing Date and the final
Estimated Closing Statement to K&S by 1:00 p.m., Eastern Time, on the business
day immediately preceding the Closing Date.
(e) Exhibit B-2 hereto sets forth an example of how the "Net
Deficit" (as defined in the Escrow Agreement) would have been calculated
hereunder based upon the CSI financial statements as of June 30, 1995. The
parties acknowledge that Exhibit B is included herein for illustrative purposes
only and that the Estimated Closing Statement and the calculations described
above shall be based upon CSI's financial statements
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and accounting records as of the Closing Date (as adjusted in accordance with
Schedule 5.2(o) hereof).
4.14 Payments Prior to Closing. Prior to Closing, CSI shall (i) cause
-------------------------
American Fire Wire, Ltd. to pay the Singapore tax authorities all tax
withholding amounts that are due or payable (and all penalties and interest with
respect thereto) and (ii) pay Birmingham Southern the outstanding balance of the
Companies' charitable pledge to Birmingham Southern.
4.15 Tax Returns. All 1994 income tax returns for the Companies
-----------
(federal, state or foreign) shall be filed with the applicable taxing
authorities prior to Closing.
4.16 Releases. Prior to Closing, CSI may, in its discretion, release
--------
LDS, RKP, Charles Morello, all of the directors of CSI and all of the
stockholders of CSI (collectively, the "Released Parties") from any and all
claims which CSI might have against the Released Parties except for any action
or omission by any Released Party that constitutes a felony under applicable
criminal statutes or that gives rise to liability for sexual harassment, and
except for claims arising pursuant to Section 6 of this Agreement; provided,
however, that such releases shall be conditioned and contingent upon the
execution and delivery by the Released Parties of releases in favor of CSI in
form satisfactory to K&S.
SECTION 5.
CONDITIONS PRECEDENT.
5.1 Conditions to Obligations of Each Party Under This Agreement.
------------------------------------------------------------
The respective obligations of each party to effect the Merger and the other
transactions contemplated hereby shall be subject to the satisfaction at or
prior to Closing of the following condition:
(a) Stockholder Approval. This Agreement and the Merger Agreement
--------------------
shall have been approved and adopted by the requisite vote or consent of the
stockholders of CSI.
5.2 Additional Conditions to Obligations of K&S and KSAC. The
----------------------------------------------------
obligations of K&S and KSAC to effect the Merger and the other transactions
contemplated by this Agreement are also subject to the satisfaction at or prior
to Closing of each of the following conditions:
(a) Each of the representations and warranties of CSI set forth
in this Agreement that is qualified by materiality shall be true and correct,
and each of the representations and
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warranties of CSI set forth in this Agreement that is not so qualified shall be
true and correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date. K&S and KSAC shall have received a certificate of the Chairman or
President and the Chief Financial Officer of CSI and from the Stockholders,
dated the Closing Date, to such effect.
(b) The Acquired Companies and the Stockholders shall have
performed or complied in all material respects with all agreements and covenants
required by the CSI Transaction Documents to be performed or complied with by
them on or prior to the Closing Date. K&S and KSAC shall have received a
certificate of the Chairman or President and the Chief Financial Officer of CSI
and from the Stockholders, dated the Closing Date, to that effect.
(c) No injunction, order or decree of any court or governmental
agency or instrumentality of competent jurisdiction restraining or prohibiting
the Merger shall have been issued and remain in effect, and no suit, action or
other proceeding shall be pending or threatened before any such court or
governmental agency or instrumentality which, in the reasonable opinion of K&S,
presents a substantial risk of the restraint or prohibition of the Merger or any
material transactions contemplated in this Agreement or the obtaining of
material damages or other material relief in connection therewith.
(d) All authorizations and approvals of any third parties,
including, without limitation, federal, state, local and foreign regulatory
bodies and officials, necessary, in the reasonable opinion of K&S, for the
consummation of the Merger and the transactions contemplated in this Agreement,
or the continuation in all material respects of the combined business of K&S,
CSI and their respective subsidiaries (other than the Non-Acquired Companies)
without interruption after the Effective Time in substantially the manner in
which such businesses are presently conducted shall have been received and shall
be in full force and effect.
(e) The holders of not more than 5% in the aggregate of the
outstanding shares of CSI Common Stock shall have perfected or preserved their
dissenters' or appraisal rights under the Alabama Business Corporation Act.
(f) No suit, claim or other action brought by or on behalf of one
or more stockholders or former stockholders of CSI or any other of the Companies
(or Persons claiming rights as or through a stockholder or former stockholder)
shall be pending or threatened before any court or governmental agency or
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instrumentality of competent jurisdiction against CSI or any other Company.
(g) The Agreement of Employment dated January 2, 1990 between LDS
and CSI shall have been amended, in form and substance satisfactory to K&S.
(h) K&S shall have received opinions of BAR&W and other counsel,
dated the Closing Date, in form and substance satisfactory to K&S, substantially
to the effect set forth in Exhibit C hereto and covering such other matters
incident to the transactions contemplated in this Agreement as K&S may
reasonably request.
(i) RKP shall have executed and delivered to K&S an Employment
Agreement, including non-competition covenants, substantially in the form set
forth in Exhibit D hereto.
(j) The Acquired Companies shall have entered into arrangements,
satisfactory to K&S, providing for the continuation after Closing of the Gold
Agreements on terms and conditions reasonably satisfactory to K&S and no less
favorable than in effect as of the date hereof, and all consents of Rothschild
Australia Limited (and any affiliate thereof) required under the Gold Agreements
in order to consummate the transactions contemplated hereby shall have been
obtained.
(k) The Acquired Companies shall have received resignations and
releases from such of the officers and directors of the Acquired Companies as
K&S shall have requested.
(l) Subject to Section 8.2 hereof, CSI shall have paid all of its
expenses in connection with this Agreement and the transactions contemplated
hereby (including, without limitation, all legal and accounting expenses).
(m) The representative of the CSI stockholders appointed in the
Merger Agreement to act as agent for the CSI stockholders (the "Sellers'
Representative") shall have duly executed and delivered the Escrow Agreement.
(n) Each of the CSI stockholders who is to receive, in whole or
in part, Notes in the Merger (the "Note Recipients") shall have delivered to K&S
a duly executed investment representation letter in which such Note Recipient
represents to K&S that such Note Recipient (i) is acquiring Notes in the Merger
for its, his or her account, as applicable, and not with a view to distribution
within the meaning of Section 2(11) of the Securities Act and (ii) constitutes
an "accredited investor" within the meaning of Rule 501 promulgated under the
Securities Act.
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(o) All adjustments appropriate or required to reflect the
liabilities of the Acquired Companies described in Schedule 5.2(o) hereto on the
accounting records of the Acquired Companies shall have been made.
(p) A definitive inventory of all gold quantities in the
possession of the Acquired Companies shall be taken within two business days
immediately preceding the Closing Date at a time mutually agreed upon by K&S and
CSI (with representatives of K&S and Rothschild Australia Limited entitled to
participate in such process), and the results thereof shall be satisfactory to
K&S in light of the requirements of the Gold Agreements.
(q) The chief financial officer of CSI shall have executed and
delivered to K&S a certificate pursuant to U.S. Treasury Regulation
(S)1.897-2(h)(1) to the effect that CSI is not, and has not been during the
past five years, a United States real property holding corporation.
(r) Releases of the Acquired Companies and their present and
former officers and directors, satisfactory to K&S, duly executed by all of the
beneficial owners of CSI Common Stock listed on Schedule 6.1(e) hereto, shall
have been delivered to CSI.
(s) Joinder Agreements, satisfactory to K&S, duly executed by all
of the beneficial owners of CSI Common Stock listed on Schedule 6.1(e) hereto
other than the Stockholders, in which the signatories thereto agree to be bound
by the indemnification undertakings in Section 6.1(a) hereof, shall have been
delivered to K&S.
(t) Each of the Note Recipients that is a party hereto shall
have, as of the Closing Date, the respective beneficial and record ownership of
CSI Common Stock as is set forth on Schedule 6.1(e) hereof, except as
contemplated by Section 4.7 hereof.
(u) The Sellers' Representative and all of the stockholders of
CSI (including, without limitation, charitable entities and other Persons that
are not stockholders on the date hereof but that become stockholders prior to
Closing) shall have duly executed and delivered an agreement, in a form
reasonably satisfactory to K&S, providing for the appointment of the Sellers'
Representative as the agent of the CSI stockholders and for other matters
relating thereto (including, without limitation, providing that any such
charitable entity or Person shall be subject to the indemnity holdback provided
for in the Merger Agreement).
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(v) The Merger Agreement, substantially in the form set forth in
Exhibit A hereto, shall have been duly executed and delivered by CSI.
(w) The proposed bonuses for management referred to in the CSI
Disclosure Statement, the Agreement referred to in Section 5.2(g) hereof and any
other payments (including, without limitation, any deemed payments with respect
to stock options) that could otherwise constitute "excess parachute payments"
within the meaning of Code section 280G(b)(1) shall have been submitted for vote
of the CSI stockholders in compliance with the shareholder approval requirements
of Code section 280G(b)(5)(B) and proposed regulations thereunder.
5.3 Additional Conditions to Obligations of CSI and the Stockholders.
----------------------------------------------------------------
The obligations of CSI and the Stockholders to effect the Merger and the other
transactions contemplated hereby are also subject to the satisfaction at or
prior to Closing of each of the following conditions:
(a) Each of the representations and warranties of K&S and KSAC
set forth in this Agreement that is qualified by materiality shall be true and
correct, and each of the representations and warranties of K&S and KSAC set
forth in this Agreement that is not so qualified shall be true and correct in
all material respects, in each case as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date. CSI shall have
received a certificate of the Chairman or a Vice President and the Chief
Financial Officer of K&S, dated the Closing Date, to such effect.
(b) K&S and KSAC shall have performed or complied in all material
respects with all agreements and covenants required by Acquiror Transaction
Documents to be performed or complied with by them on or prior to the Closing
Date. CSI shall have received a certificate of the Chairman or a Vice President
and the Chief Financial Officer of K&S, dated the Closing Date, to that effect.
(c) No injunction, order or decree of any court or governmental
agency or instrumentality of competent jurisdiction restraining or prohibiting
the Merger shall have been issued and remain in effect.
(d) CSI shall have received an opinion of Drinker Biddle & Reath,
counsel for K&S and KSAC, dated the Closing Date, in form and substance
satisfactory to CSI, substantially to the effect set forth in Exhibit E hereto.
(e) K&S shall have duly executed and delivered the Escrow
Agreement.
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(f) The Merger Agreement, substantially in the form set forth in
Exhibit A hereto, shall have been duly executed and delivered by K&S and KSAC.
(g) Midlantic Bank, N.A., or another banking institution
reasonably satisfactory to CSI, shall have been appointed to serve as paying
agent with respect to the Notes.
SECTION 6.
POST-CLOSING COVENANTS
6.1 Indemnification by the CSI Stockholders. (a) Subject to
---------------------------------------
subparagraphs (d) and (e) below, the beneficial owners of the CSI Common Stock
listed on Schedule 6.1(e) hereto (collectively, the "Indemnifying Persons")
shall, severally in proportion to the respective percentages set forth on
Schedule 6.1(e) hereto, indemnify, defend and hold harmless K&S, KSAC and their
respective officers, directors, shareholders, employees, agents, representatives
and affiliates, including, without limitation, the Acquired Companies
(collectively, "Indemnified Persons"), against and in respect of any and all
losses, costs, expenses (including, without limitation, costs of investigation
and defense and reasonable attorneys' fees), claims, damages, obligations or
liabilities (including, without limitation, indemnification obligations or
liabilities of any Acquired Company), whether or not involving a third-party
claim but excluding in all cases, in the absence of fraud or knowing
misrepresentation, any consequential damages and any claims for recovery of
direct punitive damages (collectively, "Damages"), arising out of, based upon or
otherwise in respect of:
(i) any inaccuracy in or breach of any representation or warranty
of CSI (giving effect to subparagraph (g) below) set forth in
Sections 2.1, 2.2, 2.4, 2.5, 2.6, 2.7, 2.8, 2.9, 2.10, 2.11,
2.12(b), 2.13, 2.15, 2.16, 2.17, 2.18(a) and (b), 2.19,
2.20(b), 2.21, 2.22, 2.23, 2.24, 2.25, 2.26 or 2.28 made in
this Agreement (or corresponding sections of the CSI Disclosure
Statement) or pursuant to the certificate referred to in
Section 5.2(a) of this Agreement (which certificate, for this
purpose, will be deemed to have stated that such
representations and warranties are true and correct as of the
Closing Date as if made on the Closing Date);
(ii) any breach of any covenant or obligation of CSI, the other
Acquired Companies or the Stockholders (other than covenants
and obligations set forth
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in Section 6.4, with respect to which only LDS shall be
liable) contained in this Agreement;
(iii) the operation of or resulting from or attributable to, in whole
or in part, any Non-Acquired Company or Former CSI Subsidiary,
whether prior to or after the Merger;
(iv) any liability set forth on Schedule 4.8 hereto or on Schedule
6.1(a)(iv) hereto;
(v) any Taxes due or owing as a result of the Spin-Off Sale or as a
result of the operations of the Non-Acquired Companies since
January 1, 1995 other than any such Tax liability that is taken
into account in the calculation of "Net Excess" or "Net
Deficit" under the Merger Agreement to the extent such Tax
liability reduces the aggregate purchase price payable under
the Merger Agreement;
(vi) the presence, use, handling, generation, processing, treatment,
storage, transportation, release, discharge or disposal of any
Hazardous Substance or other hazardous waste at or from any
site or location resulting from, arising out of, or otherwise
involving the operations of any of the Acquired Companies prior
to the Closing Date or the existence prior to the Closing Date
of any Hazardous Substance or other hazardous waste at, on,
about, or beneath any portion of the Premises or the Former
Real Property or any other real property, in each case owned,
used or leased by any Acquired Company or any liability set
forth on Schedule 6.1(a)(vi) hereto;
(vii) the presence, use, handling, generation, processing, treatment,
storage, transportation, release, discharge or disposal of any
Hazardous Substance or other hazardous waste at or from any
site or location resulting from, arising out of, or otherwise
involving the operations of any of the Non-Acquired Companies
or any of the Former CSI Subsidiaries or the existence of any
Hazardous Substance or other hazardous waste at, on, about, or
beneath any portion of the Premises, the Former Real Property
or any other real property, in each case owned, used or
leased by any Non-Acquired Company or any Former CSI
Subsidiary, in each case whether prior to or after the Closing;
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(viii) any claim, suit, proceeding or other action by any present or
former stockholder of CSI or any other of the Companies (or
Persons claiming rights as or through a stockholder or former
stockholder) (whether brought directly or derivatively) other
than any such claim, suit, proceeding or other action asserting
or seeking to enforce obligations of K&S or KSAC under this
Agreement, the Merger Agreement, the Notes or any other
Acquiror Transaction Document; and
(ix) the loss of any income tax deduction as the result of the fact
that any portion of any payment (including, without limitation,
any deemed payments with respect to stock options) provided for
in any agreement, contract or commitment to which any Acquired
Company is a party or is otherwise bound on or prior to the
Closing Date (including, without limitation, the amended
Agreement of Employment described in Section 5.2(g) hereof)
constitutes an "excess parachute payment" within the meaning of
Section 280G of the Code.
The amount of any Damages subject to indemnification under this Agreement shall
be reduced by the amount, if any, of any tax or insurance recovery or benefit
(net of reasonable expenses and Tax and other costs incurred or associated in
obtaining said recovery or benefit) which the Indemnified Person under this
Agreement shall have received or otherwise enjoyed with respect thereto within,
in the case of a Tax benefit, two tax years following the event that triggered
the Damages that are to be reduced; and if such a recovery or benefit is
received or enjoyed by an Indemnified Person after such Indemnified Person has
received payment or other credit under this Agreement with respect to a loss (an
"Indemnity Payment") and such recovery or benefit was not previously netted
against Damages paid by Indemnifying Persons, then a refund equal to the
aggregate amount of the recovery or benefit (net of reasonable expenses and Tax
and other costs incurred or associated in obtaining such recovery or benefit)
shall be made promptly to the Person which made such Indemnity Payment. In
determining whether an Indemnified Person has suffered Damages, Damages that are
the subject of recovery under any insurance policy shall not, to the extent of
such recovery by such Indemnified Person (net of reasonable expenses and other
costs incurred in obtaining such recovery), be the basis of any claim pursuant
to this Section 6.1(a) by such Indemnified Person. In addition, if any insurance
policy or policies are in effect at the time a claim is made for indemnification
pursuant to this Section 6.1(a) which afford coverage for the Damages suffered
by an Indemnified Person
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underlying such claim, and such Indemnified Person elects not to pursue a
recovery under such policy, then the amount of Damages suffered by such
Indemnified Person shall be reduced by an amount equal to one-half of the
recovery which such Indemnified Person would reasonably be expected to have
received had it pursued recovery under such insurance policy. For all purposes
of this Section 6.1(a), the amount of any adjustments due to federal, state or
local Tax benefits or refund of Taxes shall be conclusively determined by the
independent public accounting firm regularly employed by K&S at the time of such
determination.
(b)(i) Within 15 days after receipt by an Indemnified Person of
notice of the making against it of any claim or the commencement of any
proceeding against it to which the indemnification in Section 6.1(a) hereof
relates, such Indemnified Person shall, if a claim is to be made against the
Indemnifying Persons under 6.1(a), give notice to the Sellers' Representative of
the making of such claim or the commencement of such proceeding, but the failure
to notify the Sellers' Representative shall not relieve the Indemnifying Persons
of any liability that they may have to any Indemnified Person, except to the
extent that the Sellers' Representative demonstrates that the defense of such
claim or action is materially prejudiced by the Indemnified Person's failure to
give such notice.
(ii) If any proceeding referred to in Section 6.1(b)(i) hereof is
brought against an Indemnified Person and it gives notice to the Sellers'
Representative of the commencement of such proceeding, the Sellers'
Representative shall be entitled to participate in such proceeding and, to the
extent that the Sellers' Representative wishes (unless (A) any of the
Indemnifying Persons are also parties to such proceeding and the Indemnified
Person reasonably determines that joint representation would be inappropriate,
or (B) the Sellers' Representative fails to provide reasonable assurance to the
Indemnified Person of the financial capacity of the Indemnifying Persons to
defend such proceeding and provide indemnification with respect to such
proceeding), to assume the defense of such proceeding with counsel (or with such
other representation as may be appropriate to the proceeding) satisfactory to
the Indemnified Person in its reasonable discretion and, after notice from the
Sellers' Representative to the Indemnified Person of his election to assume the
defense of such proceeding, the Indemnifying Persons shall not, as long as the
Sellers' Representative diligently conducts such defense, be liable to the
Indemnified Person under Section 6.1 hereof for any fees of other counsel or any
other expenses with respect to the defense of such proceeding, in each case
subsequently incurred by the Indemnified Person in connection with the defense
of such proceeding, other than reasonable costs of investigation. If the
Sellers' Representative assumes the defense of a proceeding, (A) no
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compromise or settlement of such claims may be effected by the Sellers'
Representative without the Indemnified Person's consent unless (I) there is no
finding or admission of any violation of Law or any violation of the rights of
any Person by or on the part of the Indemnified Person and no adverse effect on
the Indemnified Person with respect to any other claims relating thereto that
may be made against the Indemnified Person, and (II) the sole relief provided is
monetary damages (including Taxes owed) that are paid in full by the
Indemnifying Persons; and (B) the Indemnifying Persons shall have no liability
with respect to any compromise or settlement of the claims underlying such
proceeding effected without the consent of the Sellers' Representative (which
shall not unreasonably be withheld). Notwithstanding the foregoing, if notice is
given to the Sellers' Representative of the commencement of any proceeding and
the Sellers' Representative does not, within thirty days (or such shorter period
as may be reasonable and necessary under the circumstances in order to avoid a
delay in the election by Sellers' Representative that would materially prejudice
the defense of such claim, but in no event shall such period be less than ten
days) after the Indemnified Person's notice is given, give notice to the
Indemnified Person of the election to assume the defense of such proceeding, the
Indemnifying Persons shall be bound by any determination made in such proceeding
or any compromise or settlement effected by the Indemnified Person in good
faith.
(iii) Notwithstanding the foregoing, if an Indemnified Person
determines in good faith that there is a reasonable probability that a
proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the Indemnified Person may, by notice to the Sellers' Representative,
assume the exclusive right to defend, compromise, or settle such proceeding, but
the Indemnifying Persons shall not be bound by any determination of a proceeding
so defended or any compromise or settlement effected without the consent of the
Sellers' Representative (which consent shall not be unreasonably withheld).
(c) A claim for indemnification not involving a third-party claim
may be asserted by any Indemnified Person by notice to the Sellers'
Representative.
(d)(i) In the absence of fraud or knowing misrepresentation by
the Stockholders, CSI or any other of the Acquired Companies, the Indemnifying
Persons shall have no obligation to indemnify any Indemnified Person with
respect to any matter described in Sections 6.1(a)(i) and 6.1(a)(vi) hereof
until the aggregate of all Damages with respect to all matters described in
Section 6.1(a)(i) and 6.1(a)(vi) hereof exceeds
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$375,000; in which event Indemnified Persons shall be entitled to
indemnification for the full amount of all Damages suffered or incurred in
excess of $375,000; provided, however, that the limitations of this subparagraph
(d)(i) shall not apply to any claim for Damages pursuant to Sections 6.1(a)(ii),
(iii), (iv), (v), (vii), (viii) or (ix) hereof.
(ii) Except as may otherwise expressly be provided in this
Section 6 of this Agreement and in the absence of fraud or knowing
misrepresentation by the Stockholders, CSI or any other of the Acquired
Companies, no claim for indemnification with respect to any matter described in
(A) Section 6.1(a)(i) hereof, based upon a breach of or an inaccuracy in any
representation or warranty set forth in Sections 2.1(b), 2.13 or 2.26, shall be
made unless a claim arises and written notice pursuant to Section 6.1(b) or (c)
is delivered to the Sellers' Representative within fifteen months following the
Closing Date; (B) Section 6.1(a)(i) hereof, based upon a breach of or an
inaccuracy in any representation or warranty listed in Section 6.1(a)(i) other
than the representations and warranties set forth in Sections 2.1(b), 2.13,
2.16, 2.24 and 2.26, shall be made unless a claim arises and written notice
pursuant to Section 6.1(b) or (c) is delivered to the Sellers' Representative on
or prior to the third anniversary of the Closing Date; (C) Section 6.1(a)(iii),
Section 6.1(a)(iv) or Section 6.1(a)(vii) hereof shall be made unless a claim
arises and written notice pursuant to Section 6.1(b) or (c) is delivered to the
Sellers' Representative on or prior to the seventh anniversary of the Closing
Date; (D) Section 6.1(a)(i) hereof, based upon a breach of or an inaccuracy in
any representation or warranty set forth in Section 2.16, or Section 6.1(a)(v)
or Section 6.1(a)(ix) shall be made unless a claim arises and written notice
pursuant to Section 6.1(b) or (c) is delivered to the Sellers' Representative on
or prior to any time prior to ninety (90) days after the expiration of the
longest statute of limitations period (without giving effect to any voluntary
waiver of any such statute of limitations by K&S or any of its affiliates)
applicable to an action brought by the appropriate taxing agency or authority
with respect to the matters forming the basis for such claim; (E) Section
6.1(a)(vi) or Section 6.1(a)(i) hereof, based, in the case of Section 6.1(a)(i),
upon a breach of or any inaccuracy in a representation or warranty set forth in
Section 2.24, shall be made unless a claim arises and written notice pursuant to
Section 6.1(b) or (c) is delivered to the Sellers' Representative on or prior to
the fifth anniversary of the Closing Date; or (F) Section 6.1(a)(ii) hereof,
based upon the breach of a covenant or obligation to be performed and complied
with prior to the Closing Date, shall be made unless a claim arises and written
notice pursuant to Section 6.1(b) or (c) is delivered to the Sellers'
Representative on or prior to the third anniversary of the Closing Date.
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(iii) To the extent that any claim for indemnification may
be made both under Section 6.1(a)(i) hereof and any other provision of Section
6.1 of this Agreement, then such claim shall be deemed for purposes of Sections
6.1(d)(i) and (ii) hereof to have arisen only under such other provision and not
under Section 6.1(a)(i) hereof. Without limiting the preceding sentence,
indemnification pursuant to Sections 6.1(a)(ii) through (ix) hereof shall not be
affected by any disclosure made in the CSI Disclosure Statement. In addition,
subject to Section 7.1(f) below, disclosures made after the date hereof (whether
or not pursuant to Section 4.6 hereof) and any knowledge that is acquired about
the accuracy or inaccuracy of or compliance with any representation, warranty,
covenant or obligation set forth herein shall not in any manner affect rights to
indemnification hereunder based on any such representation, warranty, covenant
or obligation. Subject to Section 7.1(f) hereof, the waiver of any condition
based on the accuracy of any representation or warranty, or compliance with any
covenant or obligation, will not affect any right to indemnification based on
such representations, warranties, covenants and obligations unless otherwise
expressly agreed in writing by K&S.
(e) (i) Following the Closing, in the absence of
fraud or knowing misrepresentation by the Stockholders, CSI or any other of the
Acquired Companies, and except as set forth in Section 6.1(e)(ii) below, the
indemnification obligations of the Indemnifying Persons contained in this
Section 6.1 shall be the exclusive remedy of the Indemnified Persons with
respect to the matters covered by indemnification (other than the covenants and
obligations set forth in Sections 4.3(d) and (e), 6.4, 8.2 and 8.3 hereof with
respect to which the limitations in this Section 6.1(d) and (e) shall be
inapplicable) and the liability of the Indemnifying Persons with respect to
possible indemnification claims shall be limited to the amount of $4,260,000 in
the aggregate, and in addition, shall be limited by the several (not joint and
several) nature of the Indemnifying Persons' obligations hereunder so that any
claim by Indemnified Persons pursuant to Section 6.1 of this Agreement which
exceeds the amount then held in escrow pursuant to the Escrow Agreement, as
defined in the preamble of this Agreement, shall be made against the
Indemnifying Persons only on a pro rata basis according to the percentage
amounts described on Schedule 6.1(e) hereto; provided, however, that in the case
of indemnification claims made by an Indemnified Person pursuant to (i) Section
6.1(a)(i) hereof, based upon any breach of or an inaccuracy in any
representation or warranty made in Section 2.24 (a "Section 2.24 Breach"), or
(ii) Section 6.1(a)(vi) hereof (a "Section 6.1(a)(vi) Breach"), the liability of
the Indemnifying Persons with respect to such indemnification claims shall be
limited to the amount of $6,000,000, in the aggregate, including any claims
arising out of a breach of or an inaccuracy in a
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representation or warranty which does not constitute a Section 2.24 Breach or a
Section 6.1(a)(vi) Breach. For example, if on the first anniversary of the
Closing Date, the Indemnifying Persons had been liable for (and had satisfied)
indemnification claims in the aggregate amount of $4,260,000, and a Section 2.24
Breach occurred with respect to which the Indemnified Persons suffered Damages
of $10,000,000, the Indemnifying Persons' liability with respect to such Section
2.24 Breach would be limited to $1,740,000 (i.e., $6,000,000 aggregate
----
limitation less $4,260,000 in prior indemnification claims) rather than the
$10,000,000 of Damages suffered by the Indemnified Persons.
(ii) The limitations on the aggregate dollar amount of
liability of the Indemnifying Persons with respect to possible indemnification
claims made by the Indemnified Persons imposed by Section 6.1(e)(i) above shall
not apply to indemnification claims made pursuant to Sections 6.1(a)(ii),
6.1(a)(iii), 6.1(a)(iv), 6.1(a)(v), 6.1(a)(vii), 6.1(a)(viii) or 6.1(a)(ix)
hereof, and Damages that are indemnified against pursuant to such Sections shall
not be considered in determining whether the aggregate dollar limitations
specified in Section 6.1(e)(i) have been reached; provided, however, that the
Indemnifying Persons shall not under any circumstances (in the absence of fraud
and knowing misrepresentation and subject, in the case of LDS, to the following
proviso) be liable for indemnification claims exceeding $8,000,000 in the
aggregate; provided further, however, that LDS shall not under any circumstances
(in the absence of fraud and knowing misrepresentation) be liable for
indemnification claims exceeding $20,300,000 in the aggregate.
(iii) Notwithstanding anything to the contrary herein, the
Indemnified Persons shall have, with respect to the indemnification obligations
set forth in Section 6.1(a) hereof, no recourse, other than to make a claim
against and receive funds held in escrow under the Escrow Agreement, against the
Indemnifying Persons other than LDS in the case of any matter covered by Section
6.1(a)(iii) or Section 6.1(a)(vii) hereof, in either case that relates to the
Non-Acquired Companies (but not matters referred to in either Section
6.1(a)(iii) or Section 6.1(a)(vii) that relate to any of the Former CSI
Subsidiaries). If the Indemnified Persons elect to make a claim against LDS
directly, rather than to make a claim against funds held under the Escrow
Agreement, with respect to matters covered by the foregoing sentence, LDS shall,
notwithstanding anything to the contrary herein, be liable for 100% of the
amount to which the Indemnified Persons are entitled.
(f) Notwithstanding any other provision of this Agreement, the
Indemnifying Persons shall have no obligation to indemnify the Indemnified
Persons with respect to any Taxes
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which result from or which arise with respect to any election (deemed or
express) made by K&S or any Acquired Company after the Closing Date under
Section 338 of the Code (including, without limitation, Section 338(h)(10)
thereof), or under any similar or corresponding provision of the laws of any
state or other taxing jurisdiction.
(g) Notwithstanding anything to the contrary set forth herein,
for purposes of this Section 6, all materiality qualifications contained in the
representations and warranties of CSI set forth in this Agreement expressed
using the phrase "CSI Material Adverse Effect" shall not be given effect (i.e.,
----
such representations and warranties shall be read and interpreted as if such
materiality qualifications were absent) (for example, the representation and
warranty set forth in Section 2.10 hereof shall be read and construed as if
subclause (d) thereof did not exist) for purposes of determining (i) whether any
such representation or warranty is inaccurate or has been breached, or (ii) the
amount of Damages that have been incurred as the result of a breach of or
inaccuracy in any such representation or warranty.
(h) From and after the Closing, K&S shall prepare and deliver
to the Sellers' Representative, on a calendar quarter basis, a report describing
amounts of Damages that were, to the best of K&S's knowledge, incurred by
Indemnified Persons during such calendar quarter and for which Indemnified
Persons would have been entitled to seek indemnification hereunder but for the
limitations set forth in Section 6.1(d)(i) hereof (each such report, a
"Quarterly Report"). The failure of K&S to report Damages in a timely fashion
shall not preclude any Indemnified Person from making a claim for
indemnification except to the extent that such failure materially prejudices the
Indemnifying Persons. Unless the Sellers' Representative notifies K&S in
writing of any objections with respect to a Quarterly Report within thirty days
of receipt of a Quarterly Report, the Sellers' Representative shall be deemed to
have accepted the amount of such Damages shown in such Quarterly Report and such
amount shall be conclusively deemed to apply against the $375,000 threshold
described in Section 6.1(d)(i) hereof. If the Sellers' Representative makes a
timely written objection with respect to all or a portion of the Damages shown
on a Quarterly Report, K&S shall have thirty days from its receipt of such
objection to notify (the "Counter-Notification") the Sellers' Representative in
writing that K&S continues to assert that some or all of the Damages objected to
by the Sellers' Representative should be counted in determining whether the
threshold in Section 6.1(d)(i) has been satisfied. If K&S fails to make such a
Counter-Notification, the amount of Damages originally objected to by the
Sellers' Representative (or the portion thereof that K&S does not continue to
assert in its Counter-Notification) shall not be
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counted in determining whether the Section 6.1(d)(i) threshold has been
satisfied. If K&S has made a timely Counter-Notification, K&S and the Sellers'
Representative shall each have the option of submitting such dispute to
arbitration immediately pursuant to Section 8.12 hereof or deferring the
resolution of such dispute until such time, if any, as an Indemnified Person
submits a claim to the Sellers' Representative for indemnification that is
dependent, in whole or in part, upon whether the threshold in Section 6.1(d)(i)
has been exceeded.
(i) None of the Indemnifying Persons shall have rights, hereunder
or otherwise, to indemnification or contribution from CSI or any other Acquired
Company with respect to any matter, including, without limitation, any
inaccuracy in or breach of any representation or warranty of CSI made in or
pursuant to this Agreement, or any breach or nonfulfillment of any covenant or
obligation of CSI or any other Acquired Company contained in this Agreement or
any CSI Transaction Document, and the Indemnifying Persons hereby irrevocably
release CSI and the Acquired Companies from any liability for any such claim.
(j) Notwithstanding anything to the contrary herein, the
limitation set forth in Section 6.1(a) hereof regarding the several (not joint
and several) nature of the liability of any single Indemnifying Person shall not
affect in any manner the right of the Indemnified Persons to recover 100% of the
Damages which are indemnified against pursuant to Section 6.1(a) through a Claim
(as defined in the Escrow Agreement) made pursuant to the Escrow Agreement and
to be satisfied out of funds held under the Escrow Agreement.
(k) Notwithstanding anything to the contrary herein, the
liability of LDS for breaches of the covenants set forth in Section 6.4 hereof
shall include, without limitation, any consequential damages arising therefrom.
(l) Following the Closing, K&S shall cause CSI not to enter into
any closing agreement with the Internal Revenue Service that relates to the
subject matter of CSI's submission to the Internal Revenue Service prior to
Closing described in the CSI Disclosure Statement without the written consent of
the Sellers' Representative, such consent not to be unreasonably withheld.
Following the Closing, K&S shall cause CSI not to file any Forms 5500 relating
to CSI plans for plan years ending prior to the Closing Date under any amnesty
program administered by the Department of Labor or the Internal Revenue Service
without the written consent of the Sellers' Representative, such consent not to
be unreasonably withheld.
6.2 Escrow. Upon notice to the Sellers' Representative specifying
------
in reasonable detail the basis
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therefor, K&S may give notice of a Claim (as defined in the Escrow Agreement)
arising from the indemnification undertakings set forth herein in a specified
amount. Neither the giving nor the failure to give a notice of such a Claim
under the Escrow Agreement will constitute an election of remedies or limit K&S
or KSAC in any manner in the enforcement of any other remedies that may be
available to them.
6.3 Indemnification by K&S. (a) K&S shall indemnify, defend and
----------------------
hold harmless the stockholders of CSI as of the date hereof against and in
respect of Damages arising out of, based upon or otherwise in respect of: (i)
any inaccuracy in or breach of any representation or warranty made by K&S or
KSAC in this Agreement or pursuant to the certificate delivered pursuant to
Section 5.3(a) hereof (which certificate, for this purpose, shall be deemed to
have stated that such representations and warranties are true and correct as of
the Closing Date as if made on the Closing Date); and (b) any liability with
respect to the guaranties and endorsements by LDS and the Non-Acquired Companies
described on Schedule 4.12 hereof.
(b) K&S shall indemnify, defend and hold harmless each of the
officers and directors of CSI and AFW prior to the date hereof against and in
respect of Damages arising out of, based upon or otherwise in respect of any
default by CSI or AFW in satisfying its obligations under its respective bylaws
to indemnify and advance expenses to officers and directors; provided, however,
that the foregoing indemnification obligation of K&S shall not apply in
instances where the matter giving rise to the obligation of AFW or CSI to
indemnify in accordance with its bylaws constitutes a matter with respect to
which K&S (or an Acquired Company) would be entitled to make a claim for
indemnification pursuant to Section 6.1(a) hereof.
(c) K&S shall indemnify, defend and hold harmless LDS, Nel-Bran
and Clearview from and against any Taxes due or owing as a result of the
operations of the Acquired Companies since January 1, 1995 to the extent that
such Taxes are recorded in the accounting records of the Acquired Companies at
the Closing.
6.4 Non-Competition; Confidentiality.
--------------------------------
(a) During the period commencing on the Closing Date and ending
on the fifth anniversary of the Closing Date, neither LDS nor any Seller
Affiliate (as defined below) shall, directly or indirectly: (i) engage, anywhere
in that portion of the world marked on the map set forth in Exhibit F hereto in
the Business or in the manufacture, assembly, design, distribution or marketing
of any product or equipment substantially similar to or in competition with any
product or
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equipment which at any time during the twenty-four months immediately preceding
the Closing Date was manufactured, sold or distributed by AFW or any of its
subsidiaries or any product or equipment which AFW or any of its subsidiaries
was developing during such period for future manufacture, sale or distribution;
(ii) be or become a stockholder, partner, owner, officer, director or employee
or agent of, or a consultant to or give financial or other assistance to, any
Person considering engaging in any such activities or so engaged; (iii) seek in
competition with the business of AFW or any of its subsidiaries to produce
orders from or do business with any customer of AFW or any of its subsidiaries;
(iv) solicit, or contact with a view to the engagement or employment by any
Person of, any Person who is an employee of AFW or any of its subsidiaries; (v)
seek to contract with or engage (in such a way as to adversely affect or
interfere with the business of AFW or any of its subsidiaries) any Person who
has been contracted with or engaged to manufacture, assemble, supply or deliver
products, goods, materials or services to AFW or any of its subsidiaries; or
(vi) engage in or participate in any effort or act to induce any of the
customers, associates, consultants, or employees of AFW or any of its
subsidiaries or any of its affiliates to take any action which might be
disadvantageous to AFW or any of its subsidiaries or any of its affiliates;
provided, however, that nothing herein shall prohibit Seller Affiliates and LDS
from owning, as passive investors, in the aggregate not more than 5% of the
equity of any publicly-held corporation so engaged. The duration of the
covenants set forth in this Section shall be extended by a period of time equal
to the number of days, if any, during which a Seller Affiliate or LDS is in
violation of any of the provisions hereof.
(b) Neither any Seller Affiliate nor LDS shall, directly or
indirectly, use in furtherance of any of their business affairs or otherwise and
to the detriment of AFW or any of its subsidiaries with respect to the Business,
or disclose to any third party except as required by Law, any trade secret,
customer list, supplier list, financial data, pricing or marketing policy or
plan or any other proprietary or confidential information relating to the
Business or any of its products or services so long as the same is not publicly
known (other than by the act of any Seller Affiliate, a Non-Acquired Company or
LDS).
(c) For the purposes of this Agreement, a "Seller Affiliate"
means: (i) any corporation of which LDS owns or otherwise possesses the power to
direct the vote, directly or indirectly, of an amount of voting securities
sufficient to elect a majority of the board of directors of such corporation,
and (ii) any other Person controlled by LDS. For the purposes of this
definition, "control" means the power to direct the management and policies of a
Person, directly or indirectly, whether through the ownership of voting
securities, by contract
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<PAGE>
or otherwise; provided that, any Person of which LDS owns beneficially or of
record, either directly or through one or more intermediaries, more than 20% of
the ownership interests, shall be conclusively presumed to be a "Seller
Affiliate."
(d) K&S may, in its sole discretion, afford a Seller Affiliate or
LDS an opportunity to remedy or otherwise cure any breach or potential breach of
this Section 6.4 before seeking legal redress, provided that a Seller Affiliate
or LDS is actively seeking to cure or remedy such breach or potential breach;
but such opportunity to remedy shall be without prejudice to the right of K&S to
seek and obtain injunctive or other relief.
(e) LDS acknowledges that damages alone shall not be an adequate
remedy for any breach by LDS or any Seller Affiliate of the covenants contained
in this Section 6.4; accordingly, in addition to any other remedies which K&S
may have, K&S shall be entitled to injunctive relief in any court of competent
jurisdiction for any breach or threatened breach of any such covenants by LDS
and/or any Seller Affiliate.
(f) LDS acknowledges that the covenants contained in this Section
6.4 are fair and reasonable in light of the consideration paid hereunder and in
order to protect K&S's investment through its acquisition of the Business, and
the invalidity or unenforceability of any particular provision, or part of any
provision, of this Section shall not affect the other provisions or parts
hereof. If any provision hereof is determined to be invalid or unenforceable by
a court of competent jurisdiction by reason of the duration or geographical
scope of the covenants contained therein, such duration or geographical scope,
or both, shall be considered to be reduced to a duration or geographical scope
to the extent necessary to cure such invalidity. To the extent that the
foregoing cure is not permitted or the covenants are determined to be invalid or
unenforceable for other reasons, LDS shall negotiate in good faith to provide
K&S with protection as nearly equivalent to that found to be invalid or
unenforceable.
(g) The obligations set forth in this Section 6.4 are in addition
to and shall in no way be limited by any other non-competition obligations to
which LDS may be bound (including, without limitation, any such set forth in the
employment agreement referred to in Section 5.2(g) hereof).
6.5 Election of LDS as Director. At its first regularly scheduled
---------------------------
meeting following the Closing, the Board of Directors of K&S shall elect LDS to
the K&S Board of directors for a term expiring at K&S's Annual Meeting in 1996,
it being
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<PAGE>
K&S's intent that LDS would continue as a director of K&S for at least five
years after the Closing.
6.6 K&S Guaranty of Agreement. K&S hereby guarantees to LDS that
-------------------------
CSI will perform CSI's obligations to LDS arising after the Closing Date under
the agreement referred to in Section 5.2(g) hereof.
6.7 Sharing of Tax Benefits. Promptly following the filing by K&S
-----------------------
of the U.S. federal income tax returns (covering the Acquired Companies) for the
taxable years ended September 30, 1996 and September 30, 1997, K&S shall
calculate and pay to the Sellers' Representative an amount equal to 50% of the
Applicable Tax Benefit Amount (as defined below) for such taxable year. The
Sellers' Representative shall allocate any amounts paid to it by K&S pursuant to
this Section 6.7 among the CSI former shareholders in accordance with the
agreement referred to in Section 5.2(u) hereof. For purposes hereof, the
"Applicable Tax Benefit Amount" with respect to a taxable year shall mean the
amount, if any, of the excess of (x) the aggregate consolidated U.S. federal
income tax liability of the affiliated group that includes the Acquired
Companies that would have been incurred for such taxable year if the actual tax
liability for such taxable year (as reflected in the U.S. federal income tax
return filed by K&S) was adjusted to eliminate the effect, if any, on such
actual tax liability resulting from the exercise of CSI options by LDS and RKP
referred to in Section 4.7 hereof and the payment by CSI of $1,000,000 of
management bonuses referred to in the CSI Disclosure Statement over (y) the
actual aggregate consolidated federal income tax liability of the affiliated
group that includes the Acquired Companies for such taxable year. Any disputes
regarding calculations of Applicable Tax Benefit Amount shall be resolved by
K&S' auditors, whose determinations shall be deemed to be final and binding on
the parties for purposes hereof.
6.8 401(k) Spin Off. In the event that the spin-off relating to
---------------
the CSI 401(k) plan contemplated by Section 4.11 hereof is not consummated prior
to Closing, LDS shall cause Nel-Bran to cooperate reasonably with K&S, CSI and
AFW after Closing to effect such spin-off.
6.9 Insurance Proceeds. K&S shall cause the Acquired Companies
------------------
promptly to pay the Sellers' Representative all insurance proceeds, net of
amounts owed by the Acquired Companies to third parties as a result of the May
22, 1995 fire in the AFW Singapore facility that have not been paid by the
Acquired Companies prior to Closing, that may be paid to the Acquired Companies
following the Closing in respect of the damage arising from such fire.
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<PAGE>
6.10 D&O Insurance. From and after the Closing and through December
-------------
31, 1995, K&S shall cause CSI to maintain directors and officers liability
insurance comparable to the directors and officers insurance that has been
maintained by CSI during 1995 prior to Closing.
SECTION 7
TERMINATION AND ABANDONMENT
7.1 Termination. This Agreement may be terminated and the
-----------
transactions contemplated herein may be abandoned at any time prior to the
Effective Time, whether before or after approval by the stockholders of CSI:
(a) by K&S or CSI, if the Closing has not occurred (other than
through the failure of any party seeking to terminate this Agreement to comply
fully on a timely basis with its obligations under this Agreement) on or before
December 31, 1995, or such later date as K&S and CSI may agree upon;
(b) by mutual consent of K&S and CSI;
(c) by K&S or CSI, if a material breach of any provision of this
Agreement has been committed by the other (a breach of any portion of this
Agreement by the Stockholders being treated, for this purpose, as a breach by
CSI) and such breach has not been waived;
(d) (i) by K&S, if any of the conditions in Section 5.1 or 5.2
has not been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of K&S or
KSAC to comply with its obligations under this Agreement) and K&S has not waived
such condition on or before the Closing Date; or
(ii) by CSI, if any of the conditions in Section 5.1 or 5.3
has not been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of CSI or the
Stockholders to comply with its or their obligations under this Agreement) and
CSI has not waived such condition on or before the Closing Date; or
(e) by K&S, if the requisite approval and adoption of this
Agreement and the Merger Agreement by the stockholders of CSI either has not
been given on or before October 13, 1995 or, if given on or prior to October 13,
1995, has thereafter been rescinded; or
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<PAGE>
(f) by CSI, if following the date hereof CSI becomes aware for
the first time of a breach of or inaccuracy in a representation or warranty made
by CSI which breach or inaccuracy itself appears reasonably likely to result in
liability to Indemnifying Persons pursuant to Section 6.1(a) hereof in excess of
$2,000,000; provided, however, that a purported termination pursuant to this
subclause (f) shall not take effect if K&S agrees in writing, within twenty
business days of receipt of notice thereof, to waive its rights to
indemnification from the Indemnifying Persons under Section 6.1(a) hereof with
respect to such disclosed breach of or inaccuracy in such a representation or
warranty.
7.2 Procedure for Termination; Effect of Termination. A party
------------------------------------------------
terminating this Agreement pursuant to Section 7.1 shall give written notice
thereof to each other party hereto, whereupon this Agreement shall terminate and
the transactions contemplated hereby shall be abandoned without further action
by any party or any of their respective officers, directors or stockholders and
all further obligations of the parties under this Agreement shall terminate,
except the obligations in Sections 4.3(d) and (e), 8.2 and 8.4 shall survive;
provided, however, that if such termination is (x) pursuant to Section 7.1(c),
the terminating party's right to pursue all legal remedies shall survive such
termination unimpaired and (y) pursuant to Section 7.1(d), based upon the
failure or impossibility of the condition set forth in Section 5.1 hereof, or
Section 7.1(e) above, the provisions of Section 7.3 hereof shall apply.
7.3 Termination Fee. (a) In the event this Agreement is terminated
----------------
pursuant to Section 7.1(d), based upon the failure or impossibility of the
condition set forth in Section 5.1 hereof, or Section 7.1(e) above, then CSI
shall pay to K&S the sum of $2,500,000 and all further obligations of the
parties under this Agreement shall terminate, provided that the obligations in
Sections 4.3(d) and (e), 8.2 and 8.4 shall survive and provided further that
nothing shall preclude K&S from pursuing all legal remedies against any
Stockholder who shall have breached his obligations under Section 4.4 hereof.
(b) Any payment required to be made by CSI pursuant to Section
7.3(a) shall be made as promptly as practicable but not later than five business
days after any such termination of this Agreement and shall be made by wire
transfer of immediately available funds to an account designated by K&S for such
purpose.
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<PAGE>
SECTION 8
MISCELLANEOUS
8.1 Survival of Representations and Warranties. The
-------------------------------------------
representations and warranties in this Agreement shall terminate at the
Effective Time except for (i) the representations and warranties set forth in
Sections 2.1, 2.2, 2.4, 2.5, 2.6, 2.7, 2.8, 2.9, 2.10, 2.11, 2.12(b), 2.13,
2.15, 2.16, 2.17, 2.18(a) and (b), 2.19, 2.20(b), 2.21, 2.22, 2.23, 2.24, 2.25,
2.26 and 2.28, which shall survive the Effective Time and (ii) the
representations and warranties set forth in Sections 3.1 through 3.6, which
shall survive until the third anniversary of the Closing Date.
8.2 Expenses. All costs and expenses incurred in connection with
--------
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such costs or expenses, except that the HSR Act filing fee shall
be borne entirely by K&S and except that costs and expenses relating to the
Spin-Off Sale shall be paid by the Non-Acquired Companies.
8.3 Further Assurances. Each party hereto shall use all reasonable
------------------
efforts to comply with all requirements imposed hereby on such party and to
cause the transactions contemplated hereby to be consummated as contemplated
hereby and shall, from time to time and without further consideration, either
before or after the Closing, execute such further instruments and take such
other actions as any other party hereto shall reasonably request in order to
fulfill its obligations under this Agreement or the Merger Agreement and to
effectuate the purposes of this Agreement and the Merger Agreement and to
provide for the orderly and efficient transition of the Business to K&S.
8.4 Public Announcements. Neither K&S, on the one hand, nor CSI or
--------------------
the Stockholders on the other shall issue any press release or make any public
announcement or disclosure relating in any way to the transactions contemplated
hereby or the negotiations concerning same without prior consultation with the
other party as to form and content of such announcement or disclosure; provided,
however, that, as to announcements or disclosures required by law or by the
rules of NASDAQ, K&S shall only be required to use its best efforts to advise
CSI of the form and content of any such announcement or disclosure.
8.5 Notices. All notices or other communications permitted or
-------
required under this Agreement or the Merger Agreement shall be in writing and
shall be sufficiently given if and when delivered personally, sent by documented
overnight delivery service, mailed by registered or certified mail, postage
prepaid, return receipt requested, or telecopied (with
-62-
<PAGE>
confirmation by first class U.S. mail) to the parties at the addresses set forth
below (or to such other Person or Persons and/or at such other address or
addresses as shall be furnished in writing by any party hereto to the others).
Any such notice or communication shall be deemed to have been given as of the
date received, in the case of personal delivery, or on the date shown on the
receipt or confirmation therefor in all other cases.
To K&S:
------
Kulicke and Soffa Industries, Inc.
2101 Blair Mill Road
Willow Grove, Pennsylvania 19090
Telecopy: (215) 657-5947
Attention: C. Scott Kulicke, Chairman & CEO
With copies to:
Drinker Biddle & Reath
1100 Philadelphia National Bank Bldg.
1345 Chestnut Street
Philadelphia, PA 19107-3496
Telecopy: (215) 988-2757
Attention: John C. Bennett, Jr., Esquire
Robert D. Denious, Esquire
To CSI:
------
Circle "S" Industries, Inc.
2924 Third Avenue S.
Birmingham, Alabama 35233
Attention: Larry D. Striplin, Jr.
-63-
<PAGE>
With copies to:
Bradley, Arant, Rose & White
1400 Park Place Tower
2001 Park Place
Birmingham, Alabama 35203
Telecopy: (205) 521-8714
Attention: Thomas N. Carruthers, Esquire
M. Williams Goodwyn, Jr., Esquire
To the Sellers' Representative:
-------------------------------
Larry D. Striplin, Jr.
2924 Third Avenue S.
Birmingham, Alabama 35233
8.6 Assignment and Benefit.
----------------------
(a) K&S may assign this Agreement in whole or in part to any
corporation which is a majority-owned subsidiary of K&S or to any Person which
becomes a successor in interest (by purchase of assets or stock, or by merger or
otherwise) to K&S; but no such assignment shall, without the consent of CSI,
relieve K&S of its obligations hereunder. CSI shall not assign this Agreement
or any rights hereunder, or delegate any obligations hereunder, without prior
written consent of K&S. Subject to the foregoing, this Agreement and the rights
and obligations set forth herein shall inure to the benefit of, and be binding
upon, the parties hereto, and each of their respective heirs, personal
representatives, successors and assigns.
(b) This Agreement shall not be construed as giving any Person,
other than the parties hereto and their permitted successors and assigns, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any of the provisions herein contained, this Agreement and all provisions and
conditions hereof being intended to be, and being, for the sole and exclusive
benefit of such parties, and permitted successors and assigns and for the
benefit of no other Person.
8.7 Amendment and Modification. K&S and CSI may amend or modify
--------------------------
this Agreement in any respect, by action taken or authorized by their respective
Boards of Directors, at any time before or after approval by the stockholders of
CSI, but after such approval, no amendment shall be made which by law requires
further approval by such stockholders without such further approval. This
Agreement may not be amended or modified except in a writing signed on behalf of
K&S and CSI.
-64-
<PAGE>
8.8 Waiver. The rights and remedies of the parties to this Agreement
------
are cumulative and not alternative. At any time prior to the Effective Time,
the parties hereto, by a writing executed by the Chairman and Chief Executive
Officer or the Senior Vice President and Chief Financial Officer of K&S and by
the Chairman of CSI, (i) extend the time for the performance of any of the
objections or other acts of the parties hereto, (ii) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto, (iii) waive compliance with any of the agreements or conditions
contained herein except the condition set forth in Section 5.1; provided that no
failure or delay by any party hereto in exercising any rights hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right hereunder.
8.9 Independence of Representations and Warranties; Covenants and
-------------------------------------------------------------
Agreements. All of the representations and warranties and covenants and
- ----------
agreements set forth in this Agreement shall be given independent effect so that
if a particular action, event or condition is prohibited by any one of such
covenants or agreements (or would breach any one of such representations and
warranties), the fact that it would be permitted by an exception to, or
otherwise be in compliance within the provisions of, another covenant or
agreement (or would be consistent with other representations and warranties)
shall not in any manner affect the fact that such action, event or condition is
prohibited (or creates a breach) hereunder.
8.10 Governing Law. This Agreement is made pursuant to, and shall
-------------
be construed and enforced in accordance with, the laws of the Commonwealth of
Pennsylvania (and United States federal law, to the extent applicable),
irrespective of the principal place of business, residence or domicile of the
parties hereto, and without giving effect to otherwise applicable principles of
conflicts of law. Subject to Section 8.12 hereof, nothing contained herein or
in any Transaction Document shall prevent or delay K&S, CSI or the Stockholders
from seeking, in any court of competent jurisdiction, specific performance or
other equitable remedies in the event of any breach or intended breach by CSI,
the Stockholders or K&S of any of their respective obligations hereunder.
8.11 Section Headings and Defined Terms. The section headings
----------------------------------
contained herein are for reference purposes only and shall not in any way affect
the meaning and interpretation of this Agreement. The terms defined herein and
in any agreement executed in connection herewith include the plural as well as
the singular and the singular as well as the plural, and the use of masculine
pronouns shall include the feminine and neuter.
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<PAGE>
8.12 Arbitration.
-----------
(a) All disputes arising out of or relating to Section 6.1 or
Section 6.3 of this Agreement which cannot be settled by the parties shall
promptly be submitted to and determined in arbitration in Atlanta, Georgia,
before one arbitrator pursuant to the rules and regulations then obtaining of
the American Arbitration Association; provided that nothing in this Section 8.12
shall preclude K&S or any other Indemnified Person from seeking, in any court of
competent jurisdiction, damages, specific performance or other equitable
remedies pursuant to any provision of this Agreement other than Sections 6.1 or
6.3 hereof. The decision of the arbitrator shall be final and binding upon the
parties and judgment upon such decision may be entered in any court of competent
jurisdiction.
(b) Discovery shall be allowed pursuant to the intendment of the
United States Federal Rules of Civil Procedure and as the arbitrator determines
appropriate under the circumstances.
(c) The arbitrator shall be required to apply the contractual
provisions hereof in deciding any matter submitted to him and shall not have any
authority, by reason of this Agreement or otherwise, to render a decision that
is contrary to the mutual intent of the parties as set forth in this Agreement.
8.13 Severability. The invalidity or unenforceability of any
------------
particular provision, or part of any provision, of this Agreement shall not
affect the other provisions or parts hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provisions or
parts were omitted.
8.14 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original; and any Person may
become a party hereto by executing a counterpart hereof, but all of such
counterparts together shall be deemed to be one and the same instrument. It
shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
8.15 Entire Agreement. This Agreement, together with the CSI
----------------
Disclosure Statement, the Confidentiality Agreements and the agreements,
exhibits, schedules and certificates referred to herein or delivered pursuant
hereto, constitute the entire agreement between the parties hereto with respect
to its subject
-66-
<PAGE>
matter and supersede all prior agreements and understandings with respect to the
subject matter thereof except as may otherwise expressly be provided herein.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement, all as of the date first above written.
KULICKE AND SOFFA INDUSTRIES, INC.
By:_______________________________
Name:
Title:
KULICKE AND SOFFA ACQUISITION
CORPORATION
By:_______________________________
Name:
Title:
CIRCLE "S" INDUSTRIES, INC.
By:_______________________________
Name:
Title:
__________________________________
Larry D. Striplin, Jr.
__________________________________
R. Kelly Payne
__________________________________
Robert E. Barnes
__________________________________
Neal R. Berte
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<PAGE>
__________________________________
Carolyn W. Booker
__________________________________
Cynthia S. Victor, as Custodian for
Beverly Ann Carter
__________________________________
Cynthia S. Victor, as Custodian for
Nancy K. Carter
__________________________________
Cynthia S. Victor, as Custodian for
Holly Jean Carter
__________________________________
Johnny R. Edwards
__________________________________
Janet Striplin, as Custodian for
Scott Andrew Fussell
__________________________________
Elizabeth W. Johnson
__________________________________
Patricia O. Mathews
__________________________________
William W. McTyeire, Jr.
__________________________________
J. Paul Risner
__________________________________
Leo Seal, Jr.
__________________________________
David Randall Striplin
__________________________________
Janet Striplin
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<PAGE>
LARRY D. STRIPLIN III TRUST
By: _______________________________
Larry D. Striplin, Jr., as
Trustee
__________________________________
Larry D. Striplin, Jr., as Custodian
for Lauren M. Striplin
__________________________________
David R. Striplin, as Custodian for
Taylor Gray Striplin
__________________________________
David R. Striplin, as Custodian for
Christina L. Striplin
__________________________________
Doris B. Talbert
__________________________________
Cynthia S. Victor
__________________________________
Janet S. Weavil, as Custodian for
Megan Marie Weavil
__________________________________
Ferrell Wood
-69-
<PAGE>
APPENDIX
GLOSSARY OF DEFINED TERMS
-------------------------
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Accounts Receivable................................................... 11
Acquired Companies.................................................... 3
Acquired Company...................................................... 3
Acquiror Representatives.............................................. 33
Acquiror Transaction Documents........................................ 29
Affiliated Persons.................................................... 22
AFW................................................................... 1
Agreement............................................................. 1
Authorizations........................................................ 8
Business.............................................................. 1
CERCLA................................................................ 24
Clearview............................................................. 37
Closing............................................................... 2
Closing Date.......................................................... 2
Code.................................................................. 13
Companies............................................................. 4
Competing Business.................................................... 22
Confidential Information Representatives.............................. 34
Confidentiality Agreements............................................ 34
Control............................................................... 58
Counter-Notification.................................................. 55
CSI................................................................... 1
CSI Balance Sheet..................................................... 9
CSI Common Stock...................................................... 3
CSI Disclosure Statement.............................................. 3
CSI Material Adverse Effect........................................... 3
CSI Representatives................................................... 33
CSI Stockholders Meeting.............................................. 35
CSI Transaction Documents............................................. 5
Damages............................................................... 46
Effective Time........................................................ 2
Employee Benefit Plans................................................ 20
Environmental Laws.................................................... 24
ERISA................................................................. 20
ERISA Affiliate....................................................... 20
Escrow Agreement...................................................... 1
Exchange Act.......................................................... 4
Former CSI Subsidiaries............................................... 7
Former Real Property.................................................. 23
GAAP.................................................................. 9
Gold Agreements....................................................... 16
Hazardous Substance................................................... 23
Indemnified Persons................................................... 46
Indemnifying Persons.................................................. 46
Intellectual Property................................................. 14
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Interim CSI Balance Sheet........................................... 9
K&S................................................................. 1
K&S Material Adverse Effect......................................... 30
KSAC................................................................ 1
Laws................................................................ 6
Merger.............................................................. 1
Merger Agreement.................................................... 1
Multiemployer Plan.................................................. 20
Nel-Bran............................................................ 37
Net Deficit......................................................... 40
Non-Acquired Companies.............................................. 7
Non-AFW Assets...................................................... 37
Note Recipients..................................................... 43
Notes............................................................... 29
OSHA................................................................ 19
Pension Plan........................................................ 20
Person.............................................................. 7
Premises............................................................ 23
Quarterly Report.................................................... 54
Released Parties.................................................... 41
Remedial Action..................................................... 23
Removal............................................................. 23
Response............................................................ 23
SEC Reports......................................................... 31
Section 2.24 Breach................................................. 53
Section 6.1(a)(vi) Breach........................................... 53
Securities Act...................................................... 4
Seller Affiliate.................................................... 58
Sellers' Representative............................................. 43
Spin-Off Sale....................................................... 37
Spin-Off Sale Agreements............................................ 37
Stockholders........................................................ 1
Subsection (f) assets............................................... 13
Takeover Proposal................................................... 33
Taxes............................................................... 12
To the knowledge of Acquired Companies.............................. 3
Welfare Plan........................................................ 20
</TABLE>
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<PAGE>
Exhibit 2.1(b)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of October 2,
1995 by and among KULICKE AND SOFFA INDUSTRIES, INC., a Pennsylvania corporation
("K&S"), KULICKE AND SOFFA ACQUISITION CORPORATION, a Delaware corporation
("KSAC"), and CIRCLE "S" INDUSTRIES, INC., an Alabama corporation ("CSI"). KSAC
and CSI are hereinafter sometimes collectively referred to as the "Constituent
Corporations." K&S is a party to this Agreement as a third party and not as a
Constituent Corporation.
Background
----------
KSAC is a corporation duly organized and validly existing under the
laws of the State of Delaware. The authorized capital stock of KSAC consists of
100 shares of Common Stock, par value $.01 per share ("KSAC Common Stock"), all
of which shares are issued and outstanding as of the date hereof and owned by a
wholly-owned subsidiary of K&S.
CSI is a corporation duly organized and validly existing under the
laws of the State of Alabama. The authorized capital stock of CSI consists of
1,100,000 shares of Common Stock, par value $.10 per share ("CSI Common Stock"),
of which, as of the date hereof, 305,733 shares of CSI Common Stock are issued
and outstanding and 265,071 shares of CSI Common Stock are held in the treasury
of CSI.
The parties hereto are entering into this Agreement in order to set
forth the terms and conditions of the proposed merger of KSAC into CSI (the
"Merger"), the mode of carrying the same into effect, the manner of converting
the outstanding shares of CSI Common Stock and KSAC Common Stock and related
matters. The parties hereto, together with certain shareholders of CSI, have
executed and delivered an Agreement and Plan of Acquisition dated as of
September 14, 1995 (the "Acquisition Agreement"), setting forth certain
representations, warranties, covenants and agreements with respect to the Merger
and related transactions.
The respective Boards of Directors and shareholders of KSAC and CSI,
and the Board of Directors of K&S, by resolutions duly adopted, have approved
and adopted this Agreement. No approval by the shareholders of K&S is required
for the authorization, execution, delivery or consummation of this Agreement by
K&S.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Acquisition Agreement, the
<PAGE>
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. Capitalized terms not otherwise defined herein
-----------
shall have the meanings ascribed thereto in the Acquisition Agreement. As used
herein, the following terms shall have the following meanings:
"Closing Cash Consideration" shall mean an amount equal to the sum of
the Group A Closing Cash Allocation, the Group B Closing Cash Allocation and the
Group C Closing Cash Allocation.
"Closing Statement Reserve" shall mean $2,000,000.
"CSI Common Stock" shall have the meaning set forth in the Background
section hereof.
"Dissenting Shareholders" shall have the meaning set forth in Section
4.2(a) hereof.
"Dissenting Shares" shall have the meaning set forth in Section 4.2(a)
hereof.
"Effective Time" shall have the meaning set forth in Section 2.3
hereof.
"Escrow Agent" shall have the meaning set forth in Section 4.4(a)
below.
"Escrow Agreement" shall mean the Escrow Agreement dated as of October
2, 1995 among Larry D. Striplin, Jr., K&S and Mellon Bank, N.A.
"Group A Closing Cash Allocation" shall mean an amount of cash equal
to 22.899% of the Stated CSI Closing Value minus an amount equal to 22.899% of
-----
the Closing Statement Reserve minus an amount equal to 26.885% of the Indemnity
-----
Holdback Amount.
"Group B Closing Cash Allocation" shall mean an amount of cash equal
to 1.415% of the Stated CSI Closing Value minus an amount equal to 1.415% of the
-----
Closing Statement Reserve.
"Group C Closing Cash Allocation" shall mean an amount of cash equal
to a fraction, the numerator of which is 10,000 and the denominator of which is
21,596, of the RKP Closing Allocation.
-2-
<PAGE>
"Indemnity Holdback Amount" shall mean $4,260,000.
"KSAC Common Stock" shall have the meaning set forth in the Background
section hereof.
"Merger" shall have the meaning set forth in the Background section
hereof.
"Net Deficit" shall mean the excess, if any, of CSI's Consolidated
Closing Debt over CSI's Consolidated Closing Cash, in each case as set forth in
the Estimated Closing Statement described in Section 4.13 of the Acquisition
Agreement.
"Net Excess" shall mean the excess, if any, of CSI's Consolidated
Closing Cash over CSI's Consolidated Closing Debt, in each case as set forth in
the Estimated Closing Statement described in Section 4.13 of the Acquisition
Agreement.
"RKP Closing Allocation" shall mean 7.064% of the Stated CSI Closing
Value minus 7.064% of the Closing Statement Reserve minus 8.293% of the
----- -----
Indemnity Holdback Amount.
"Sellers' Representative" shall have the meaning set forth in Section
5.1 hereof.
"Sellers' Representative Agreement" shall mean the Sellers'
Representative Agreement dated as of September 30, 1995 among the former CSI
shareholders.
"SRB" shall mean Steven R. Berryman.
"Stated CSI Closing Value" shall mean $53,000,000 plus the Net Excess,
----
if any, or minus the Net Deficit, if any.
-----
"Surviving Corporation" shall have the meaning set forth in Section
2.1 hereof.
ARTICLE II.
THE MERGER
2.1 Merger of KSAC into CSI. In accordance with the provisions of
-----------------------
this Agreement, the Acquisition Agreement, the Alabama Business Corporation Act
and the Delaware General Corporation Law, at the Effective Time, KSAC shall be
merged into CSI, which shall be the surviving corporation (hereinafter sometimes
referred to as the "Surviving Corporation"). After the Effective Time, the
Surviving Corporation shall continue its corporate existence as an Alabama
corporation. At the Effective Time, the separate existence of KSAC shall cease.
-3-
<PAGE>
2.2 Effect of the Merger. At the Effective Time, the effect of the
--------------------
Merger shall be as provided in the applicable provisions of Delaware and Alabama
law. Without limiting the generality of the foregoing, and subject thereto and
to the Acquisition Agreement, at the Effective Time, except as may be otherwise
provided herein, the Surviving Corporation shall succeed, without other
transfer, to all property, rights, privileges, powers and franchises of KSAC,
and all debts, liabilities and duties of KSAC shall become the debts,
liabilities and duties of the Surviving Corporation as if the Surviving
Corporation had itself incurred them.
2.3 Effective Time. The Merger shall become effective upon the later
--------------
to occur of: (i) the filing with the Secretary of State of the State of Alabama
of properly executed articles of merger substantially in the form set forth in
Appendix I to this Agreement and (ii) the filing of a properly executed
certificate of merger substantially in the form set forth in Appendix II hereto
with the Secretary of State of the State of Delaware.
ARTICLE III.
SURVIVING CORPORATION
3.1 Certificate of Incorporation. From and after the Effective Time
----------------------------
and until amended in accordance with the Alabama Business Corporation Act, the
Certificate of Incorporation of CSI in effect immediately prior to the Effective
Time shall continue to be the Certificate of Incorporation of the Surviving
Corporation.
3.2 Bylaws. From and after the Effective Time and until amended in
------
the manner provided in the Bylaws of CSI and the Alabama Business Corporation
Act, the Bylaws of CSI in effect immediately prior to the Effective Time shall
continue to be the Bylaws of the Surviving Corporation.
3.3 Directors and Officers.
----------------------
(a) The directors of KSAC at the Effective Time shall be the
initial directors of the Surviving Corporation after the Effective Time and
shall hold office from the Effective Time until their respective successors are
duly elected or appointed and qualify in the manner provided in the Certificate
of Incorporation and Bylaws of the Surviving Corporation or as otherwise
provided by law.
(b) The officers of KSAC at the Effective Time shall be the
initial officers of the Surviving Corporation after the Effective Time and shall
hold office from the Effective Time until their respective successors are duly
elected or appointed
-4-
<PAGE>
and qualify in the manner provided in the Certificate of Incorporation and
Bylaws of the Surviving Corporation or as otherwise provided by law.
ARTICLE IV.
CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES
4.1 Conversion of CSI Common Stock. At the Effective Time, by virtue
------------------------------
of the Merger and without any action on the part of K&S, KSAC, CSI or the
holders of shares of CSI Common Stock:
(a) Each share of CSI Common Stock validly issued and outstanding
immediately prior to the Effective Time (excluding shares of CSI Common Stock
described in Sections 4.1(b), 4.1(c), 4.1(d) and 4.2(a) hereof) shall be
converted into the right to receive: (i) out of the cash paid by K&S to the
Sellers' Representative pursuant to Section 4.4(a) hereof, cash in an amount
equal to the quotient derived by dividing the Group A Closing Cash Allocation by
70,008, (ii) a fraction, the numerator of which is one (1) and the denominator
of which is 70,008, of 22.899% of the Shareholder Return Amount (as defined in
the Escrow Agreement), if any, required to be paid by K&S to the Sellers'
Representative pursuant to Section 7(h) of the Escrow Agreement; and (iii) a
fraction, the numerator of which is one (1) and the denominator of which is
70,008, of 26.885% of any amount paid by the Escrow Agent to the Sellers'
Representative out of funds held in the Indemnity Holdback Escrow Fund (as
defined in the Escrow Agreement) pursuant to the terms of the Escrow Agreement.
(b) All of the shares of CSI Common Stock owned by each of the
persons listed on Exhibit B hereto immediately prior to the Effective Time shall
be converted, in the aggregate, into the right to receive: (i) a promissory note
of K&S in favor of such person that has terms substantially as provided in
Exhibit C hereto, is entitled to the benefits of an irrevocable standby letter
of credit substantially in the form set forth in Exhibit A hereto and has an
original aggregate principal amount equal to the applicable amount set forth on
Exhibit B hereto; (ii) in the case only of shares of CSI Common Stock owned by
R. Kelly Payne immediately prior to the Effective Time, cash in an amount equal
to the Group C Closing Cash Allocation; (iii) the applicable percentage set
forth on Exhibit B hereto of the Shareholder Return Amount (as defined in the
Escrow Agreement), if any, required to be paid by K&S to the Sellers'
Representative pursuant to Section 7(h) of the Escrow Agreement; and (iv) the
applicable percentage set forth on Exhibit B hereto of the amount paid by the
Escrow Agent to the Sellers' Representative out of the funds held in the
Indemnity Holdback Escrow Fund (as defined
-5-
<PAGE>
in the Escrow Agreement) pursuant to the terms of the Escrow Agreement.
(c) All of the shares of CSI Common Stock owned by SRB
immediately prior to the Effective Time shall be converted, in the aggregate,
into the right to receive: (i) a promissory note of K&S in favor of SRB that has
terms substantially as provided in Exhibit C hereto, is entitled to the benefits
of an irrevocable standby letter of credit substantially in the form set forth
in Exhibit A hereto and has an original aggregate principal amount equal to
13.412% of the Stated CSI Closing Value minus an amount equal to 13.412% of the
Closing Statement Reserve; and (ii) 13.412% of the Shareholder Return Amount (as
defined in the Escrow Agreement), if any, required to be paid by K&S to the
Sellers' Representative pursuant to Section 7(h) of the Escrow Agreement.
(d) Each share of CSI Common Stock validly issued and outstanding
immediately prior to the Effective Time that is owned by the Woodmont Baptist
Church, The Trustees of the First Presbyterian Church of Tuscumbia, Alabama or
B.A.S.I.C. Training, Inc. shall be converted into the right to receive: (i) out
of the cash paid by K&S to the Sellers' Representative pursuant to Section
4.4(a) hereof, cash in an amount equal to the quotient derived by dividing the
Group B Closing Cash Allocation by 4,327 and (ii) a fraction, the numerator of
which is one (1) and the denominator of which is 4,327, of 1.415% of the
Shareholder Return Amount (as defined in the Escrow Agreement), if any, required
to be paid by K&S to the Sellers' Representative pursuant to Section 7(h) of the
Escrow Agreement.
(e) Each share of CSI Common Stock held in the treasury of CSI
and each share of CSI Common Stock, if any, owned by K&S or any subsidiary of
K&S or CSI immediately prior to the Effective Time shall be cancelled and
extinguished without any conversion thereof and no payment shall be made with
respect thereto.
(f) Each certificate previously representing any outstanding
share of CSI Common Stock that was converted into the right to receive the
consideration described in Section 4.1(a) hereof shall represent only the right
to receive the consideration into which such share of CSI Common Stock was
converted, and each certificate previously representing any outstanding share of
CSI Common Stock that was not so converted as a result of the operation Section
4.2(a) hereof shall represent only the right to receive any amounts to which
such holder may be entitled under Article 13 of the Alabama Business Corporation
Act or, under the circumstances specified in Section 4.2(a) hereof, the
consideration described in Section 4.1(a).
-6-
<PAGE>
(g) The issued and outstanding shares of the KSAC Common Stock
shall be converted into 100 shares of CSI Common Stock (one share of CSI Common
Stock for each outstanding share of KSAC Common Stock).
4.2 Dissenting Shareholders.
-----------------------
(a) Any shares of CSI Common Stock for which the holder thereof
has, as of the Effective Time, asserted or preserved, and not effectively
withdrawn or otherwise lost, his dissenters' rights pursuant to Article 13 of
the Alabama Business Corporation Act (all such holders, collectively, the
"Dissenting Shareholders" and all such shares, the "Dissenting Shares") shall
not be converted into the right to receive the consideration described in
Section 4.1(a), but the Dissenting Shareholders shall be entitled to payment of
the value of the Dissenting Shares in accordance with the provisions of Article
13 of the Alabama Business Corporation Act, provided, however, that if, after
the Effective Time, any Dissenting Shareholder fails to perfect or otherwise
loses any such dissenters' rights pursuant to Article 13 of the Alabama Business
Corporation Act, any such Dissenting Shareholder shall forfeit the right to
appraisal of such Dissenting Shares, and to the extent that the Alabama Business
Corporation Act requires such treatment, such Dissenting Shares shall thereupon
be deemed to have been converted into and to have been exchangeable for, as of
the Effective Time, the right to receive the consideration described in Section
4.1(a) hereof, without any interest unless otherwise required by law.
(b) CSI shall give prompt notice to K&S with respect to any
preservation or assertion of rights under Article 13 of the Alabama Business
Corporation Act by any holder of CSI Common Stock. CSI shall not, except with
the prior written consent of K&S, voluntarily make any payment with respect to,
or settle or offer to settle, any rights of any Dissenting Shareholder.
4.3 Surrender of Certificates.
--------------------------
(a) At the Effective Time, the Sellers' Representative shall
surrender to K&S certificates that immediately prior to the Effective Time
represented the then issued and outstanding shares of CSI Common Stock (other
than such shares described in Section 4.2(a) hereof). K&S shall mark all
certificates delivered pursuant to this Section 4.3(a) to indicate their
cancellation and shall promptly thereafter deliver the same to the Surviving
Corporation for disposal. The holder of a certificate that represented an issued
and outstanding share of CSI Common Stock immediately prior to the Effective
Time shall have no rights after the Effective Time with respect to such shares
of CSI Common Stock, except to: (A) receive the consideration provided for in
Sections 4.1(a), 4.1(b), 4.1(c) or
-7-
<PAGE>
4.1(d) hereof, as applicable, in exchange therefor, or (B) to perfect the rights
to appraisal for such shares which are Dissenting Shares.
(b) The Boards of Directors of K&S and the Surviving Corporation
are empowered to adopt further rules and regulations, not materially
inconsistent with the provisions of this Agreement, regarding the surrender and
exchange of certificates representing the issued and outstanding shares of CSI
Common Stock immediately prior to the Effective Time.
4.4 Consideration and Payment.
-------------------------
(a) Subject to the terms and conditions set forth in the
Acquisition Agreement, in reliance upon the representations, warranties,
covenants and agreements of CSI contained in the Acquisition Agreement, and in
consideration of the Merger and the other transactions contemplated by the
Acquisition Agreement, K&S shall, at the Effective Time, deliver or cause to be
delivered, in full payment (subject to its obligations pursuant to Section 7(h)
of the Escrow Agreement) in respect of the Merger, the following:
(i) To Sellers' Representative. Subject to Section 4.4(b)
--------------------------
below, cash in an amount equal to the Closing Cash Consideration shall be
delivered to the Sellers' Representative by wire transfer of immediately
available funds to an account designated by Sellers' Representative for such
purpose.
(ii) To the Escrow Agent. Cash in an amount equal to the
-------------------
Indemnity Holdback Amount shall be delivered to Mellon Bank, N.A., as escrow
agent (the "Escrow Agent") under the Escrow Agreement, by wire transfer of next-
day funds to an account designated by the Escrow Agent for such purpose, to be
held in escrow pursuant to Section 2 and the other terms and conditions of the
Escrow Agreement.
(iii) To Sellers' Representative. Upon delivery to K&S of all
--------------------------
certificates representing shares of CSI Common Stock described in Section 4.1(b)
hereof owned by a CSI stockholder listed on Exhibit B hereto, the promissory
note to which such stockholder is entitled pursuant to Section 4.1(b) hereof,
duly executed by K&S, together with the irrevocable standby letter of credit
issued by Midlantic Bank, N.A., or such other banking institution mutually
agreed upon by CSI and K&S, referenced in Section 4.1(b) hereof, shall be
delivered to the Sellers' Representative.
(iv) To SRB. Upon delivery to K&S of all certificates
------
representing shares of CSI Common Stock described in Section 4.1(c) hereof, the
promissory note described in Section 4.1(c) hereof, duly executed by K&S,
together with the
-8-
<PAGE>
irrevocable standby letter of credit issued by Midlantic Bank, N.A., or such
other banking institution mutually agreed upon by SRB and K&S, referenced in
Section 4.1(c) hereof, shall be delivered to SRB.
(b) (i) If the Sellers' Representative delivers certificates to
K&S pursuant to Section 4.3(a) hereof that represent fewer than all of the
shares of CSI Common Stock (excluding the shares of CSI Common Stock described
in Sections 4.1(b), 4.1(c), 4.1(d) and 4.2(a) hereof) outstanding immediately
prior to the Effective Time, K&S shall be entitled to withhold from its payment
to Sellers' Representative pursuant to Section 4.4(a)(i) hereof an amount in
dollars equal to the product of the number of shares of CSI Common Stock
(excluding the shares of CSI Common Stock described in Sections 4.1(b), 4.1(c),
4.1(d) and 4.2(a) hereof) for which certificates were not delivered multiplied
by the quotient derived by dividing the Group A Closing Cash Allocation by
70,008, until such date as such certificates are delivered by the Sellers'
Representative to K&S.
(ii) If the Sellers' Representative delivers certificates to
K&S pursuant to Section 4.3(a) hereof that represent fewer than all of the
shares of CSI Common Stock described in Section 4.1(d) hereof outstanding
immediately prior to the Effective Time, K&S shall be entitled to withhold from
its payment to Sellers' Representative pursuant to Section 4.4(a)(i) hereof an
amount in dollars equal to the product of the number of shares of CSI Common
Stock described in Section 4.1(d) hereof for which certificates were not
delivered multiplied by the quotient derived by dividing the Group B Closing
Cash Allocation by 4,327, until such date as such certificates are delivered by
the Sellers' Representative to K&S.
(iii) K&S shall, in addition, be entitled to withhold from
its payment to Sellers' Representative pursuant to Section 4.4(a)(i) hereof an
amount in dollars equal to (A) in the case of shares that but for such
dissension would be described in Section 4.1(a) hereof, the product of the
number of such Dissenting Shares multiplied by the quotient derived by dividing
the Group A Closing Cash Allocation by 70,008 and (B) in the case of shares that
but for such dissension would be described in Section 4.1(d) hereof, the product
of the number of such Dissenting Shares multiplied by the quotient derived by
dividing the Group B Closing Cash Allocation by 4,327, in each case, until such
date, if any, as the holders thereof become eligible, pursuant to the terms of
Section 4.2(a) hereof, to receive the consideration described in Section 4.1(a)
or 4.1(d) hereof, as applicable.
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<PAGE>
ARTICLE V.
MISCELLANEOUS
5.1 Sellers' Representative. LDS and, in the event of the
-----------------------
unavailability of LDS to serve, the person then serving in such capacity
pursuant to the terms of the Sellers' Representative Agreement (the "Sellers'
Representative"), shall, as provided in the Sellers' Representative Agreement,
act as agent and representative of the shareholders of CSI in connection with:
(i) the distribution of the Closing Cash Consideration described in Section
4.4(a)(i) hereof; (ii) the distribution of the promissory notes and standby
letters of credit described in Section 4.4(a)(iii) hereof; (iii) claims made
under the Escrow Agreement; (iv) the distribution to the former CSI shareholders
of any funds released to the Sellers' Representative from the escrow account
established under the Escrow Agreement; (v) the distribution to the former CSI
shareholders of the Shareholder Return Amount paid by K&S to the Sellers'
Representative in accordance with Section 7(h) of the Escrow Agreement; and (vi)
such other matters as are provided for in the Sellers' Representative Agreement.
5.2 Consummation. The obligation of each of the parties hereto to
------------
effect the Merger shall be subject to all of the terms and conditions to such
party's obligations under the Acquisition Agreement.
5.3 Amendment and Modification. The parties hereto may amend or
--------------------------
modify this Agreement in any respect, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval hereof by
the shareholders of CSI but prior to the Effective Time, but after such
approval, no amendment shall be made which by law requires further approval by
such shareholders without such further approval. This Agreement may not be
amended or modified except in a writing signed on behalf of each party hereto.
5.4 Termination. This Agreement shall automatically be terminated
-----------
and the transactions contemplated herein shall automatically be abandoned upon a
termination of the Acquisition Agreement.
5.5 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but which
together shall constitute a single agreement.
5.6 Governing Law. This Agreement shall be governed in all respects,
-------------
including validity, interpretation and effect,
-10-
<PAGE>
by the laws of the States of Delaware and Alabama, to the extent applicable to
the Merger, and in all other respects, by the laws of the Commonwealth of
Pennsylvania, without regard to internal conflict of law principles.
IN WITNESS WHEREOF, K&S and each of the Constituent Corporations have
caused this Agreement to be executed by their respective officers hereunto duly
authorized, all as of the date first above written.
KULICKE AND SOFFA INDUSTRIES, INC.
By:_______________________________
Name:
Title:
KULICKE AND SOFFA ACQUISITION
CORPORATION
By:_______________________________
Name:
Title:
CIRCLE "S" INDUSTRIES, INC.
By:_______________________________
Name:
Title:
-11-
<PAGE>
Agreement and Plan of Merger
List of Omitted Appendices and Exhibits
---------------------------------------
Appendix I - Form of Articles of Merger
Appendix II - Form of Certificate of Merger
Exhibit A - Form of Irrevocable Standby Letter of Credit securing Promissory
Notes
Exhibit B - List of persons receiving and amounts of Promissory Notes
Exhibit C - Form of Promissory Notes
-12-
<PAGE>
Exhibit 2.1(c)
ESCROW AGREEMENT
ESCROW AGREEMENT dated as of the 2nd day of October, 1995, among
Kulicke and Soffa Industries, Inc., a Pennsylvania corporation ("K&S"), Larry D.
Striplin, Jr. ("LDS") and Mellon Bank, N.A. ("Bank"), as escrow agent hereunder
("Escrow Agent"). Definitions of certain terms used herein appear in Section 16
hereof.
BACKGROUND
Pursuant to an Agreement and Plan of Acquisition dated as of September
14, 1995 (the "Acquisition Agreement") by and among K&S, Circle "S" Industries,
Inc. ("CSI"), Kulicke and Soffa Acquisition Corporation ("KSAC") and certain
shareholders of CSI and an Agreement and Plan of Merger (the "Merger Agreement")
dated as of the date hereof by and among K&S, CSI and KSAC, K&S has acquired CSI
and the American Fine Wire business through the merger of KSAC with and into
CSI.
In accordance with Section 4.4(a)(ii) of the Merger Agreement,
$4,260,000 is required to be deposited into escrow on the date hereof by K&S in
respect of the Indemnity Holdback Amount.
Pursuant to the Merger Agreement and the Sellers' Representative
Agreement dated as of September 30, 1995 (the Sellers' Representative
Agreement") among the shareholders of CSI and the Sellers' Representative, the
Sellers' Representative has been appointed to act as agent and representative of
the former CSI shareholders for purposes of this Escrow Agreement.
K&S and the Sellers' Representative now wish to enter into this
agreement with the Escrow Agent providing for, inter alia, the appointment of an
----- ----
escrow agent to hold the aforementioned escrow funds and to set forth the terms
and conditions under which such funds shall be disbursed.
NOW, THEREFORE, in consideration of the premises set forth above and
the mutual covenants and agreements set forth herein, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Appointment of Escrow Agent. K&S and the Sellers' Representative
---------------------------
hereby jointly appoint Mellon Bank, N.A. as the escrow agent under this Escrow
Agreement, and Escrow Agent hereby accepts such appointment. Escrow Agent shall
hold all of the funds deposited into escrow with it pursuant to this Agreement,
together with all interest and income thereon and other proceeds thereof,
including proceeds of the sale or maturity of
<PAGE>
investments constituting any of the assets held by Escrow Agent hereunder
(collectively, the "Escrow Money"), in accordance with the terms hereof and
shall perform its other duties hereunder.
2. Establishment of Escrow Account. Escrow Agent hereby acknowledges
-------------------------------
receipt of $4,260,000 paid to it by wire transfer by K&S. Escrow Agent shall
hold such Escrow Money (and interest, income and proceeds thereof) in a
segregated account or accounts entitled "Mellon Bank, N.A., as Indemnity
Holdback Escrow Agent pursuant to the Escrow Agreement dated as of October 2,
1995," and invest and disburse it pursuant to the terms of this Agreement. Such
Escrow Money, together with the interest, income and other proceeds thereof, is
referred to herein as the "Indemnity Holdback Escrow Fund."
3. Investment of Escrow Money. Until all of the Escrow Money shall
--------------------------
have been disbursed as provided in this Agreement, Escrow Agent shall, within
two business days after receipt of written instructions signed by the two
persons identified in Exhibit A hereto and specifying, to the satisfaction of
the Escrow Agent, the exact investment or reinvestment, invest and reinvest the
same only in one or more of the following investments or in such other
investment as shall be authorized (and confirmed in writing) by K&S and the
Sellers' Representative (the "Obligations"):
(i) Direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, or issued
by an agency or instrumentality of, the United States of
America; or
(ii) Certificates of Deposit issued, or day of deposit to day of
withdrawal interest bearing accounts offered, by any bank,
trust company or national banking association having capital
stock, surplus and undivided profits not less than $50,000,000
as indicated in its most recently published statement of
condition at the time of investment; or
(iii) Money Market Investment Options identified in Exhibit B hereto;
provided that no Obligation in the Holdback Indemnity Escrow Fund shall have a
maturity which exceeds the shorter of (i) one year from the date of purchase or
(ii) such period of time as remains between the date of purchase and the third
anniversary of the date first written above; provided further that investments
in Money Market Investment Options identified in Exhibit B hereto and deposits
in a day of deposit to day of withdrawal interest bearing account shall be
deemed to have a maturity of one day.
-2-
<PAGE>
In the absence of timely written instructions as to the investment of the Escrow
Money, the Escrow Agent shall invest and reinvest the Escrow Money in the
Dreyfus/Laurel Money Market Fund (as described on Exhibit B hereto).
Investments may be made in Obligations of Bank or any affiliate of
Bank. The Escrow Agent may purchase Obligations through Bank and its
affiliates, and Bank and its affiliates may retain any charges or commissions
customarily imposed for such purchases as if Bank were not Escrow Agent
hereunder. If the Escrow Agent determines that any investment instruction is
not satisfactory to it, the Escrow Agent shall use reasonable efforts to obtain
a satisfactory investment instruction in lieu thereof. Any loss incurred from
an investment, including, without limitation, market loss resulting from early
liquidation of assets, and all costs of investment or liquidation, and
withholding and other taxes, will be borne by the Indemnity Holdback Escrow
Fund. All income earned on and other proceeds of the Escrow Money shall be
added to the amount thereof and distributed in accordance with the terms hereof.
Such income shall be treated as income of K&S for income tax purposes and shall
be subject to any applicable withholding taxes. Whenever required by this
Agreement to disburse any of the Escrow Money, Escrow Agent shall promptly
liquidate sufficient investments to permit such disbursement to be made;
provided, however, that if the party to whom such disbursement is to be made
reasonably determines that liquidation of any investment would result in a loss,
Escrow Agent, upon the written direction of the party or parties to whom such
disbursement is to be made, shall delay such payment as provided by the written
direction of such party or parties.
Escrow Agent shall, on a quarterly basis, provide K&S and the Sellers'
Representative with an accounting of the Escrow Money in the Holdback Indemnity
Escrow Fund and of all debits and credits thereto. Such accounting shall also
describe the face value and maturity dates of any investment of the Escrow
Money. Escrow Agent shall, from time to time upon the request of any party
hereto, orally advise such party of the balances of the Escrow Money held in the
Holdback Indemnity Escrow Fund.
4. Disposition of Escrow Money. Escrow Agent shall disburse the
---------------------------
Escrow Money held in the Indemnity Holdback Escrow Fund pursuant to the mutual
written direction of the Sellers' Representative and K&S, or in the absence of
such directions, pursuant to Sections 5(a), 5(b), 5(c), 5(d) and 5(e) hereof.
-3-
<PAGE>
5. Delivery of Escrow Money by Escrow Agent.
----------------------------------------
(a) On January 3, 1997, Escrow Agent shall deliver to the Sellers'
Representative an amount of Escrow Money held in the Indemnity Holdback Escrow
Fund equal to $760,000 minus the amount of any Escrow Money that has been
-----
disbursed prior to that date and minus the amount of Escrow Money that is
-----
subject to one or more pending Claims (as defined in Section 5(d) below).
(b) On the first business day following the second anniversary of
the date hereof, Escrow Agent shall deliver to the Sellers' Representative an
amount of Escrow Money held in the Indemnity Holdback Escrow Fund equal to the
sum of $500,000 and the First Pay-Out Holdback (as defined below) minus the
-----
amount of any Escrow Money that has been disbursed prior to that date (other
than amounts disbursed pursuant to Section 5(a) hereof) and minus the amount of
-----
Escrow Money that is subject to one or more pending Claims. For purposes hereof,
"First Pay-Out Holdback" means $760,000 minus the amount disbursed by the Escrow
-----
Agent pursuant to Section 5(a) hereof.
(c) On the first business day following the third anniversary of
the date hereof (the "Termination Date"), Escrow Agent shall deliver to the
Sellers' Representative that portion of the Escrow Money held in the Indemnity
Holdback Escrow Fund that has neither been disbursed prior to that date nor is
subject to a pending Claim.
(d) If Escrow Agent receives from K&S prior to the Termination
Date a Claim Notice (as defined in Section 6(a) below) stating that K&S is
entitled, pursuant to Section 6 of the Acquisition Agreement or pursuant to
Section 7(i) hereof, to be indemnified by the former CSI shareholders from the
Indemnity Holdback Escrow Fund (a "Claim"), Escrow Agent shall disburse or
retain Escrow Money from the Indemnity Holdback Escrow Fund in the amount of the
Claim pursuant to Section 6 hereof.
(e) K&S shall be entitled, from time to time prior to the
Termination Date, to deliver a written notice to Escrow Agent and the Sellers'
Representative specifying the amount of income tax that K&S has incurred as a
result of the treatment of income earned with respect to the Escrow Money as
income of K&S. Promptly following receipt of such notice, Escrow Agent shall
disburse to K&S, from funds held in the Indemnity Holdback Escrow Fund, the
amount of Escrow Money specified in such notice.
6. Claims Procedures.
-----------------
(a) If, prior to the Termination Date, K&S determines to assert a
Claim, then K&S shall give Escrow Agent
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and the Sellers' Representative written notice of the Claim, specifying in
reasonable detail the basis therefor and the amount and calculation thereof in
accordance with the provisions of the Acquisition Agreement or Section 7(i)
hereof (a "Claim Notice"). If the Sellers' Representative does not deliver to
K&S and Escrow Agent written notice of his objection to the Claim within ten
business days after receipt of the Claim Notice relating thereto, Escrow Agent
shall, out of the Escrow Money held in the Indemnity Holdback Escrow Fund,
promptly pay K&S such amount. If the Sellers' Representative shall timely
deliver to K&S and Escrow Agent such written notice of objection, then Escrow
Agent shall not make any payment to K&S with respect to such Claim until: (i)
it has received written instructions signed by K&S and the Sellers'
Representative which refer to such Claim and direct the payment to K&S of the
amount of Escrow Money specified in such instructions; or (ii) it has received a
copy of a judgment, decree or order of a court, or copy of an arbitration award,
adjudicating the dispute with respect to such Claim, whereupon Escrow Agent
shall distribute from such Escrow Money such amount as provided therein.
(b) Any Escrow Money in excess of the amount required to satisfy
the full amount claimed under all Claims pending as of the Termination Date
shall be paid promptly to the Sellers' Representative pursuant to Section 5(c).
7. Closing Statement.
-----------------
(a) Promptly following the Closing, K&S shall prepare a statement
of certain assets and liabilities of the Acquired Companies (the "Closing
Statement"). The Closing Statement shall set forth, as of the opening of
business on the Closing Date and in accordance with generally accepted
accounting principles:
(i) the Acquired Companies' cash and cash equivalents (for this
purpose, any bonuses that are to be paid prior to Closing that
have not been paid as of the time the Closing Statement is
prepared shall be deemed to have been paid and the amount of
such deemed payment shall be deducted from actual cash)
("Closing Cash"),
(ii) the Acquired Companies' net inventory (for this purpose, Work
in Process shall be valued and credited to net inventory in
accordance with the methodology described in Exhibit B-1 to the
Acquisition Agreement) ("Closing Inventory"),
(iii) the Acquired Companies' net accounts receivable ("Closing
A/Rs"),
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<PAGE>
(iv) the Acquired Companies' net property, plant and equipment
("Closing PP&E"),
(v) the Acquired Companies' trade accounts payable and accrued
expenses ("Closing Payables"),
(vi) the Acquired Companies' long-term and short-term indebtedness
(excluding trade accounts payable) ("Closing Debt"),
(vii) any liability of CSI and all other Acquired Companies for Taxes
attributable to the Spin-Off Sale ("Closing Tax Liability"),
(viii) the Acquired Companies' liabilities other than the Closing Tax
Liability, the Closing Payables, the Closing Debt and any
current income tax or deferred income tax liabilities (the
"Closing Liabilities"),
(ix) the net sales of the Acquired Companies for the fiscal quarter
ended September 30, 1995 ("Base Net Sales"),
(x) the value (based on the price of gold at the close of business
on the business day immediately preceding the Closing) of the
deficit, if any, in the gold supply that is determined as a
result of the gold supply inventory referred to in Section
5.2(p) of the Acquisition Agreement (the "Gold Deficit"), and
(xi) the value (based on the price of gold at the close of business
on the business day immediately preceding the Closing) of the
surplus, if any, in the gold supply that is determined as a
result of the gold supply inventory referred to in Section 5.2
(p) of the Acquisition Agreement (the "Gold Surplus").
For purposes of the Closing Statement, additions to Closing PP&E and Closing
A/Rs relating to the insurance proceeds referred to in Section 6.9 of the
Acquisition Agreement shall be eliminated.
(b) Following preparation of the Closing Statement, K&S shall
prepare a Statement of Net Excess or Net Deficit that shall contain a
calculation of Net Excess or Net Deficit (each, as defined below), as
applicable. "Net Excess", if any, shall mean the excess of the Consolidated
Closing Cash (as defined below) over the Consolidated Closing Debt (as defined
below). "Net Deficit", if any, shall mean the excess of the Consolidated Closing
Debt over the Consolidated Closing Cash.
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<PAGE>
For purposes hereof, "Consolidated Closing Debt" shall equal the sum
of:
(i) Closing Debt, plus
----
(ii) Closing Tax Liability, plus
----
(iii) the amount, if any, by which Closing Inventory is less than 9%
of Base Net Sales, plus
----
(iv) the amount, if any, by which Closing A/R's are less than 50% of
Base Net Sales, plus
----
(v) the amount, if any, by which Closing PP&E is less than
$3,400,000, plus
----
(vi) the amount, if any, by which Closing Payables and Closing
Liabilities exceed 11% of the Base Net Sales, plus
----
(vii) the amount, if any, of the Gold Deficit.
For purposes hereof, "Consolidated Closing Cash" shall equal the sum
of:
(i) Closing Cash, plus
----
(ii) the amount, if any, by which the Closing PP&E exceeds
$3,400,000, plus
----
(iii) the amount, if any, of the Gold Surplus.
(c) K&S promptly shall deliver the Closing Statement and the
Statement of Net Excess or Net Deficit to Price Waterhouse LLP, which promptly
shall audit the statements in accordance with auditing standards generally
accepted in the United States ("GAAS") and, after any adjustments as may be made
as a result of such audits, Price Waterhouse LLP shall express its opinions (i)
as to whether the Closing Statement presents fairly, in all material respects,
the balance of the specific assets and liabilities described in 7(a) above, and
(ii) as to whether the Statement of Net Excess or Net Deficit presents fairly,
in all material respects, the Net Excess or Net Deficit (as defined above). Upon
receipt of Price Waterhouse LLP's opinions, K&S promptly shall deliver the
audited Closing Statement and the audited Statement of Net Excess or Net Deficit
to the Sellers' Representative (the "Audited Statements").
(d) Upon receipt of the Audited Statements, the Sellers'
Representative shall have ten business days to notify K&S whether the Sellers'
Representative intends to engage a "Big Six" national accounting firm ("Firm")
to review the Audited
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<PAGE>
Statements to determine if they agree or disagree with Price Waterhouse LLP's
audit opinion(s).
If such notification is not received by K&S within such period, the
Audited Statements shall be deemed to be final and binding for all purposes. If
such timely notification is received, the Firm shall have fifteen business days
to perform its review, and in connection therewith shall receive complete access
to all relevant records of the Acquired Companies and to Price Waterhouse LLP
supporting workpapers.
(e) If, as a result of the Firm's review, the Sellers'
Representative delivers a written objection to K&S within twenty business days
of the Sellers' Representatives' original notification stating that the Firm
disagrees with Price Waterhouse LLP's opinion on either of the Audited
Statements, then K&S and the Sellers' Representative shall cause Price
Waterhouse LLP and the Firm to confer to ascertain whether the objection can be
resolved. If such difference cannot be resolved within twenty business days
after delivery by the Sellers' Representative of such timely written objection,
then the matter shall be submitted to and resolved by a national "Big Six"
accounting firm reasonably acceptable to K&S and the Sellers' Representative.
The fees and expenses of any such accounting firm incurred in resolving the
disputed matters shall be equitably apportioned by such accountants based upon
the extent to which K&S, on the one hand, or the Sellers' Representative, on the
other hand, is determined by such accountants to be the prevailing party in the
resolution of such disputed matters. The Closing Statement and the Statement of
Net Excess or Net Deficit shall, after resolution of any disputes pursuant to
this Section 7(e), be final, binding and conclusive on all parties hereto.
(f) All expenses of the Firm engaged by the Sellers'
Representative shall be paid by the Sellers' Representative. All Price
Waterhouse LLP's expenses shall be paid by K&S.
(g) Exhibit C hereto sets forth an example of how the Net Deficit
would have been calculated hereunder based upon (and assuming the accuracy of)
the June 30, 1995 financial information provided by CSI. The parties
acknowledge that Exhibit C hereto is included for illustrative purposes only and
that the Statement of Net Excess or Net Deficit shall be based upon the
applicable assets and liabilities of the Acquired Companies as of the close of
business on the Closing Date (with adjustments thereto as contemplated in the
Acquisition Agreement).
(h) Promptly following the calculation of the Net Excess or Net
Deficit as described in this Section 7, as the case may be, K&S shall calculate
and pay to the Sellers'
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<PAGE>
Representative (by wire transfer of immediately available funds to an account
designated by the Sellers' Representative for such purpose) the Shareholder
Return Amount (as hereafter defined). "Shareholder Return Amount" means the sum
of (i) the excess, if any, of (x) $53,000,000 plus the Net Excess, if any, or
----
minus the Net Deficit, if any, over (y) the Stated CSI Closing Value (as defined
- -----
in the Merger Agreement) minus the Closing Statement Reserve (as defined in the
-----
Merger Agreement) and (ii) an amount equal to the interest on the amount
specified in the preceding subclause (i) that shall be deemed to have accrued
from the date hereof through the date of payment pursuant to this Section 7(h)
at an interest rate of 6.4375% per annum.
(i) If the Shareholder Return Amount is zero because the amount
described in subclause (y) in subparagraph (h) above exceeds the amount
described in subclause (x) in subparagraph (h) above, K&S shall be entitled to
recoup such excess from the Indemnity Holdback Escrow Fund upon submitting to
the Escrow Agent a Claim Notice therefor pursuant to Section 6(a) hereof.
8. Resignation or Removal of Escrow Agent. Escrow Agent may
--------------------------------------
resign at any time upon 30 days' prior notice to K&S and the Sellers'
Representative, and may be removed by the mutual consent of K&S and the Sellers'
Representative, upon 30 days' prior notice to Escrow Agent. Prior to the
effective date of the resignation or removal of Escrow Agent or any successor
escrow agent, K&S and the Sellers' Representative shall jointly appoint a
successor escrow agent having its principal place of business in Philadelphia,
Pennsylvania, to hold the Escrow Money, and any such successor escrow agent
shall execute and deliver to the predecessor escrow agent an instrument
accepting such appointment, upon which such successor agent shall, without
further act, become vested with all of the rights, powers and duties of the
predecessor escrow agent as if originally named herein. If no successor escrow
agent is appointed prior to the effective date of the termination or resignation
of the Escrow Agent, Escrow Agent may place all of the Escrow Money at the
disposal of a court and petition the court to act as the successor escrow agent
or to appoint another entity to act as the successor escrow agent.
9. Liability of Escrow Agent.
-------------------------
(a) K&S shall indemnify, defend, and hold the Escrow Agent
harmless against all losses, claims, damages, demands, liabilities and expenses
(including reasonable attorney's fees and expenses), arising out of or in
connection with this Agreement or any transaction related hereto, except to the
extent that any such loss, liability, or expense results from the gross
negligence or willful misconduct of the Escrow Agent.
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<PAGE>
The foregoing indemnity shall survive the resignation of the Escrow Agent and
the termination of this Agreement.
(b) The Escrow Agent's duties are only such as are specifically
provided herein, and the Escrow Agent shall incur no fiduciary or other
liability whatsoever to K&S or the Sellers' Representative, or any other person,
except to the extent K&S or the Sellers' Representative incur loss or liability
due to the Escrow Agent's gross negligence or willful misconduct. The Escrow
Agent may consult with counsel and shall be fully protected in any action taken
in good faith in accordance with such advice. The Escrow Agent may rely and
shall be fully protected in acting upon any written instructions received by it
hereunder and believed by it to have been properly executed, and will have no
responsibility hereunder other than to follow faithfully the instructions
contained herein. The Escrow Agent shall not be liable for interest on the
Escrow Account.
(c) The Escrow Agent shall be entitled to receive, as compensation
for the ordinary administrative services to be rendered hereunder, the amount(s)
set forth on Exhibit D hereto. The Escrow Agent shall also be entitled to
reimbursement of all reasonable expenses, including its reasonable attorney's
fees and expenses, which it may reasonably incur in connection with the
performance of its duties under this Agreement or the enforcement of the
indemnity provided in Section 9(a). Any amounts to be paid to the Escrow Agent
pursuant to this subsection (c) shall be paid by K&S.
(d) It is understood that should any dispute arise with respect to
the payment and/or ownership or right of possession of the Escrow Funds, the
Escrow Agent may retain in its possession, without liability to anyone, all or
any part of said Escrow Funds until such dispute shall have been settled either
by agreement of the parties to such dispute or by the final order, decree or
judgment of a court or other tribunal of competent jurisdiction after the time
for appeal has expired and no appeal has been perfected. The Escrow Agent shall
be under no duty whatsoever to institute or defend any such proceedings. The
Escrow Agent may turn over all or any part of the Escrow Funds to or upon
instruction of such court or tribunal, without liability to any person, in the
case of any such dispute.
(e) Bank and its affiliates may, without having to account
therefor to any person, accept deposits from, extend credit (on a secured or
unsecured basis) to and generally engage in any kind of banking, trust or other
business with K&S or any of its affiliates as if it were not acting as the
Escrow Agent, and may accept fees and other consideration for services in
connection with this Agreement or otherwise without having to account for the
same to any person.
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<PAGE>
10. Notices. All notices hereunder shall be in writing and shall be
-------
sufficiently given if hand delivered, receipt acknowledged, sent by documented
overnight delivery service or registered or certified mail, postage prepaid,
return receipt requested or by fax or telecopy (with copy sent by first class
U.S. mail) addressed as set forth below or to such other person and/or at such
other address as may be furnished in writing by any party hereto to the other.
Any such notice shall be deemed to have been given as of the date received, in
the case of personal delivery, or on the date shown on the receipt or
confirmation therefor, in all other cases.
(a) If to K&S:
Kulicke and Soffa Industries, Inc.
2101 Blair Mill Road
Willow Grove, PA 19090
Attention: Chief Financial Officer
Fax No: 215-784-6258
With copies to:
John C. Bennett, Jr., Esq. and
Robert D. Denious, Esq.
Drinker Biddle & Reath
1100 Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
Fax No: 215-988-2757
(b) If to Sellers' Representative:
Larry D. Striplin, Jr.
2924 Third Avenue S.
Birmingham, Alabama 35233
(c) If to the Escrow Agent:
Mellon Bank, N.A.
Mellon Independence Center
701 Market Street
Philadelphia, PA 19106
Attention: Corporate Trust Group
Fax No: 215-553-0933
11. Entire Agreement and Modification. This Agreement constitutes
---------------------------------
the entire agreement among the parties hereto with respect to the matters
contemplated herein and supersedes all prior agreements and understandings with
respect thereto. Any amendment, modification, or waiver of this Agreement shall
not be effective unless in writing. Neither the failure nor any delay on the
part of any party to exercise any right, remedy, power, or
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<PAGE>
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power, or privilege
with respect to any occurrence be construed as a waiver of any right, remedy,
power, or privilege with respect to any other occurrence.
12. Governing Law. This Agreement is made pursuant to, and shall be
-------------
construed and enforced in accordance with, the internal laws of the Commonwealth
of Pennsylvania (and United States federal law, to the extent applicable),
without giving effect to otherwise applicable principles of conflicts of law.
13. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original and all of which,
when taken together, shall be deemed to constitute but one and the same
Agreement.
14. Further Assurances. Each of the parties hereto shall execute
------------------
such further instruments and take such other actions as any other party shall
reasonably request in order to effectuate the purposes of this Agreement.
15. Binding Effect. This Agreement shall be binding upon and
--------------
inure to the benefit of the parties hereto and their respective successors,
assigns, heirs, executors, and administrators. If any provision of this
Agreement shall be or become illegal or unenforceable in whole or in part for
any reason whatsoever, the remaining provisions shall nevertheless be deemed
valid, binding and subsisting.
16. Definitions. Capitalized terms not otherwise defined herein
-----------
shall have the meanings ascribed thereto in the Acquisition Agreement. As used
herein, the following terms shall have the following meanings:
"Acquisition Agreement" shall have the meaning set forth in the
Background section hereof.
"Bank" shall mean Mellon Bank, N.A.
"Claim" shall have the meaning set forth in Section 5(d) hereof.
"Claim Notice" shall have the meaning set forth in Section 6(a)
hereof.
"Closing Statement" shall have the meaning set forth in Section 7(a)
hereof.
"Consolidated Closing Debt" shall have the meaning set forth in
Section 7(b) hereof.
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<PAGE>
"Consolidated Closing Cash" shall have the meaning set forth in
Section 7(b) hereof.
"Escrow Agent" shall mean Mellon Bank, N.A..
"Escrow Money" shall have the meaning set forth in Section 1 hereof.
"Indemnity Holdback Escrow Fund" shall have the meaning set forth in
Section 2 hereof.
"K&S" shall mean Kulicke and Soffa Industries, Inc.
"LDS" shall mean Larry D. Striplin, Jr.
"Merger Agreement" shall have the meaning set forth in the Background
section hereof.
"Obligations" shall have the meaning set forth in Section 3 hereof.
"Sellers' Representative" shall mean LDS or, in the event of LDS'
unavailability to serve, the person then serving in such capacity pursuant to
the terms of the Sellers' Representative Agreement.
"Sellers' Representative Agreement" shall have the meaning set forth
in the Background section hereof.
"Shareholder Return Amount" shall have the meaning set forth in
Section 7(h) hereof.
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<PAGE>
"Termination Date" shall have the meaning set forth in Section 5(c)
hereof.
17. Change of Sellers' Representative. In the event that LDS is
---------------------------------
unavailable to serve as the Sellers' Representative, K&S shall promptly inform
the Escrow Agent of the name and address of the person then serving in such
capacity pursuant to the terms of the Sellers' Representative Agreement.
IN WITNESS WHEREOF, this Escrow Agreement has been executed as of the
date and year first above written.
KULICKE AND SOFFA INDUSTRIES, INC.
By:_______________________________
Name:
Title:
__________________________________
Larry D. Striplin, Jr., as Sellers'
Representative
MELLON BANK, N.A., as Escrow Agent
By:_______________________________
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Escrow Agreement
List of Omitted Exhibits
------------------------
Exhibit A - List of authorized persons to direct investments
Exhibit B - Money Market Investment Options
Exhibit C - Example of Statement of Net Deficit
Exhibit D - Escrow Agent's compensation schedule
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