SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES ACT OF 1934
Date of Report (Date of earliest event reported): May 8, 1995
OPTICAL COATING LABORATORY, INC.
(Exact name of Registrant as specified in its charter)
Delaware 0-2537 68-0164244
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) Number)
2789 Northpoint Parkway, Santa Rosa, California 95407-7397
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (707) 545-6440
Item 2. Acquisition of Controlling Interest in Flex Products, Inc.
On May 8, 1995, the Registrant acquired controlling ownership of
Flex Products, Inc. ("Flex") with the purchase of an additional 20%
interest in Flex from ICI Americas Inc. ("ICIA") and ICI American
Holdings Inc. ("ICIAH"), affiliates of Imperial Chemical Industries
PLC. Since 1988, Flex has been a joint venture between the
Registrant and ICIA, with ICIA owning 60% and the Registrant owning
40%. In conjunction with the Registrant's increased ownership,
ICIA's remaining 40% interest in Flex was acquired by SICPA Holding
S.A. ("SICPA"), a privately-held Swiss Corporation headquartered in
Lausanne, Switzerland. SICPA is the largest manufacturer of printing
inks in the world and a major customer of Flex.
Flex was founded as a division of the Registrant in the early 1980's
and subsequently established as a joint venture between the
Registrant and ICIA in 1988. In connection with the formation of
the joint venture in 1988, the Registrant wrote-off its remaining
40% interest in Flex because of the uncertainty of realizing such
investment from future operations of Flex as disclosed in the
Registrant's previously issued financial statements.
Flex manufactures optical coatings on
flexible substrates utilizing roll-to-roll coaters. Among Flex's
products are optically variable pigment (OVP) used to produce
optically variable ink for anti-counterfeiting applications and
optically variable paint currently being introduced into the
automotive industry. Flex also produces energy efficient window
film and ground planes for photoreceptor belts used in photocopiers.
Flex recorded sales of $24 million for the year ended December 25,
1994.
Pursuant to the terms of the Stock and Note Purchase Agreement dated
May 1, 1995 by and among the Registrant, SICPA, ICIA, ICIAH and
Flex, the Registrant acquired the incremental 20% interest in Flex
for a cash payment of $8.4 million and paid ICIA approximately $7.0
million in cash to acquire a 60% interest in an $11.7 million
promissory note issued by Flex to ICIA to cover Flex's working
capital requirements. SICPA acquired aq 40% interest in Flex and
the balance of the note. The purchase price was based upon Flex's
expected business potential and its assets and net worth as of
December 25, 1994.
The cash payments made by the Registrant totaling $15.4 million came
from a $4 million borrowing from a portion of the Registrant's
existing bank line of credit with Bank of America, NT&SA, and from
the issuance of $12 million in convertible redeemable preferred stock
of the Registrant. The 8% Series C Convertible Redeemable Preferred
Stock ("Preferred Stock") was placed via a private offering with
nine institutional investors. The Preferred Stock is redeemable
by the Registrant commencing two years from the date of issuance and
is convertible into the common stock of the Registrant at anytime
by the holders at a conversion price (subject to adjustment) of
$10.50 per share. The Preferred Stock yields an 8% dividend
payable quarterly.
A copy of the Registrant's May 8, 1995 news release is attached as
Exhibit 28A.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
7(a) Financial Statements of Flex Products, Inc.:
The following financial statements of Flex Products, Inc. are
attached as Exhibit 28B.
Exhibit 28B
Cover Page
Accountants' Report
Balance Sheets as of December 25, 1994 and
December 26, 1993
Statements of Operations for the periods ended
December 25, 1994 and December 26, 1993
Statements of Cash Flows for the periods ended
December 25, 1994 and December 26, 1993
Notes to Financial Statements
7(b) Pro Forma Condensed Combined Financial Information
The following pro forma condensed combined financial statements for
the periods indicated are attached as Exhibit 28C. Such pro forma
condensed combined financial statements include the estimated
effects of the business combination to be accounted for as a
purchase transaction.
Pro Forma Condensed Combined Balance Sheet at January 31, 1995
Pro Forma Condensed Combined Statements of Earnings for the year
ended October 31, 1995
Pro Forma Condensed Combined Statements of Earnings for the quarters
ended January 31, 1995 and 1994.
Notes to Pro Forma Condensed Combined Financial Statements
7(c) Exhibits
2A Stock and Note Purchase Agreement by and among Optical
Coating Laboratory, Inc., SICPA Holding S.A., ICI Americas
Inc., ICI American Holdings Inc. and Flex Products, Inc.
28A News Release, dated May 8, 1995, announcing that the
Registrant had acquired controlling interest in Flex Products,
Inc. and issued $12 million in Preferred Stock.
28B Financial Statements of Flex Products, Inc.
28C Pro Forma Condensed Combined Financial Statements of
the Registrant and Flex Products, Inc.
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.
Dated: May 23, 1995
OPTICAL COATING LABORATORY, INC.
(Registrant)
By: /s/JOSEPH ZILS
Vice President,
General Counsel and
Corporate Secretary
EXHIBIT INDEX
Exhibit
2A Stock and Note Purchase Agreement by and among Optical Coating
Laboratory, Inc., SICPA Holding S.A., ICI Americas Inc., ICI
American Holdings Inc. and Flex Products, Inc.
28A News Release, dated May 8, 1995, announcing that the Registrant had
acquired controlling interest in Flex Products, Inc. and issued $12
million in preferred stock.
28B Financial Statements of Flex Products, Inc.
28C Pro Forma Condensed Combined Financial Statements of the Registrant
and Flex Products, Inc.
Additional Appendices to the Stock and Note Purchase Agreement are
presented herein for EDGAR filing purposes as additional correspondence
documents to Form 8-K, as follows:
1(a) Financial Statements of Flex Products, Inc, for the periods
December 26, 1993 and December 27, 1992
1(b) Financial Statements of Flex Products, Inc., for the periods
December 27, 1992 and December 29, 1991.
2 Insurance Manual
3 Flex Products, Inc. Patents
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5/1/95
STOCK AND NOTE PURCHASE AGREEMENT
BY AND AMONG
OPTICAL COATING LABORATORY, INC.,
SICPA HOLDING S.A.,
ICI AMERICAS INC.,
ICI AMERICAN HOLDINGS INC.
AND
FLEX PRODUCTS, INC.
MAY 1, 1995
TABLE OF CONTENTS
1. Definitions 1
2. Purchase and Sale of FLEX Shares and Note 6
(a) Basic Transactions 6
(b) Purchase Price for the Shares 7
(c) Purchase Price for the Note 7
(d) The Closing 7
(e) Deliveries at the Closing 7
(f) Failure of One Buyer to Close 8
(g) No Effect on Intercompany Debt 8
3. Representations and Warranties Concerning the
Transaction 8
(a) Representations and Warranties of ICIA
Individually 8
(i) Power and Authority to Transfer the
FLEX Shares 9
(ii) No Pending Proceedings 9
(iii) Validity 9
(iv) Current Unencumbered Ownership 9
(v) No Responsibility of Buyers or of FLEX
for any Agent Representing ICIA 10
(vi) ICIA Financial Condition 10
(vii) No Implied Warranty 10
(b) Representations and Warranties of ICIAH
Individually 10
(i) Power and Authority to Transfer the
Note 11
(ii) No Pending Proceedings 11
(iii) Validity 11
(iv) Current Unencumbered Ownership 11
(v) No Responsibility of Buyers or of FLEX
for any Agent Representing ICIAH 12
(vi) ICIAH Financial Condition 12
(vii) No Implied Warranty 12
(c) Representations and Warranties of the Buyers 12
(i) No Responsibility of ICIA or ICIAH for
any Agent Representing Buyers 12
(ii) No Default 13
(iii) Purchase for Own Account 13
(iv)Acknowledgement that FLEX Shares and
Note have not been Registered 13
(v) Information 13
(vi) Disclosure 14
(d) Representations and Warranties of
OCLI Individually 14
(i) Disclosure to SICPA 14
4. Representations and Warranties to SICPA
Concerning FLEX 14
(a) Organization, Power and Authority 14
(b) Charter Documents 15
(c) Capital Structure 15
(d) Subsidiaries; Etc 16
(e) Good Title to Assets 16
(f) No Commitments for Dividends or Other
Stockholder Distributions 16
(g) Officers and Directors 16
(h) Financial Statements 16
(i) Absence of Certain Changes 17
(j) Tax Matters 19
(k) Debt 20
(l) Real Estate Owned and Leased 20
(m) Receivables 20
(n) Litigation 21
(o) Compliance With Laws 21
(p) Permits 23
(q) Insurance 23
(r) Absence of Sensitive Payments 23
(s) Records, Corporate Minutes and Stock Ledger 24
(t) Labor Relations 24
(u) Employee Benefit Plans 24
(v) Proprietary Rights 25
(w) Non-Contravention 27
(x) Machinery and Equipment 28
(y) Information Relating to Material Contracts 28
(z) Relationships with Suppliers and Customers 29
5. Representations and Warranties to OCLI
Concerning FLEX 29
(a) Organization, Power and Authority 29
(b) Charter Documents 29
(c) Capital Structure 30
(d) Subsidiaries 30
(e) Good Title to Assets 31
(f) Officers and Directors 31
(g) Financial Statements 31
(h) Absence of Certain Changes 31
(i) Tax Matters 33
(j) Debt 34
(k) Real Estate Owned and Leased 34
(l) Receivables 35
(m) Litigation 35
(n) Compliance With Laws 35
(o) Permits 37
(p) Insurance 37
(q) Absence of Sensitive Payments 37
(r) Records, Corporate Minutes and Stock Ledger 38
(s) Labor Relations 38
(t) Employee Benefit Plans 38
(u) Proprietary Rights 39
(v) Non-Contravention 41
(w) Machinery and Equipment 41
(x) Information Relating to Material Contracts 41
(y) Relationships with Suppliers and Customers 42
6. Pre-Closing Covenants 42
(a) General 42
(b) Notices and Consents 42
(c) Operation of Business 43
(d) Preservation of Business 43
(e) Due Diligence 43
(f) Notice of Developments 45
(g) Exclusivity 45
(h) Beta III Machine 45
7. Post-Closing Covenants 46
(a) General 46
(b) Books and Records of FLEX 46
(c) Litigation Support 46
(d) Transition 46
(e) Confidentiality 47
(f) Employment of FLEX's Personnel 47
(g) Taxes 47
(h) Funding of Research, Development and
Engineering Agreement 49
(i) Assignment of Personal Property Leases 49
(j) Payment of Insurance Premiums 49
8. Conditions to Obligation to Close 49
(a) Conditions to Obligation of the Buyers 49
(b) Conditions to Obligations of ICIA and ICIAH 51
9. Remedies for Breaches of This Agreement 53
(a) Survival of Representations and Warranties 53
(b) Indemnification Provisions by ICIA for
Benefit of the Buyers 53
(c) Indemnification Provisions by ICIAH for
Benefit of the Buyers 54
(d) Indemnification Provisions for Benefit
of ICIA and ICIAH 55
(e) Matters Involving Third Parties 55
(f) Insurance; Exclusive Remedy 56
(g) Mitigation 57
(h) Adjustment to Purchase Price 57
10. Termination 57
(a) Termination of Agreement 57
(b) Effect of Termination 58
11. Miscellaneous 58
(a) Press Releases and Public Announcements 58
(b) No Third-Party Beneficiaries 58
(c) Entire Agreement 58
(d) Joint Venture Agreement 59
(e) Succession and Assignment 60
(f) Counterparts 60
(g) Headings 60
(h) Notices 60
(i) Governing Law 62
(j) Amendments and Waivers 62
(k) Severability 63
(l) Expenses 63
(m) Construction 63
(n) Incorporation of Exhibits, Appendices,
and Schedules; Construction of Disclosure
Schedule 63
(o) Consent to Jurisdiction and Forum Selection 63
(p) Attorneys' Fees and Costs 64
STOCK AND NOTE PURCHASE AGREEMENT
THIS AGREEMENT is executed on the 1st day of May, 1995, by and
among Optical Coating Laboratory, Inc., a Delaware corporation, having
an office at 2789 Northpoint Parkway, Santa Rosa, California 95407-
7397 (hereinafter referred to as "OCLI"), SICPA Holding S.A., a Swiss
corporation, having an office at 2 rue de la Paix, 1002 Lausanne,
Switzerland (hereinafter referred to as "SICPA" and, together with
OCLI, sometimes hereinafter referred to collectively as the "Buyers"),
ICI Americas Inc., a Delaware corporation, having an office at Concord
Plaza, 3411 Silverside Road, Wilmington, Delaware 19850 (hereinafter
referred to as "ICIA"), ICI American Holdings Inc., a Delaware
corporation, having an office at Concord Plaza, 3411 Silverside Road,
Wilmington, Delaware 19850 (hereinafter referred to as "ICIAH") and,
solely for purposes of Section 11(d) below, Flex Products, Inc., a
Delaware corporation, having an office at 2793 Northpoint Parkway,
Santa Rosa, California 95407-7397 (hereinafter referred to as "FLEX").
OCLI, SICPA, ICIA and ICIAH are referred to collectively herein as the
"Parties."
W I T N E S E T H :
WHEREAS, ICIA owns 120 shares of common stock ("Common Stock")
and 12 shares of Series B Preferred Stock ("Series B Stock") of FLEX;
WHEREAS, ICIAH owns the Note, as defined below;
WHEREAS, OCLI and SICPA desire to buy and ICIA desires to sell
all of ICIA's shares of Common Stock (the "Common Shares") and Series
B Stock (the "Series B Shares" and, together with the Common Shares,
collectively the "FLEX Shares") and OCLI and SICPA desire to buy and
ICIAH desires to sell the Note;
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations,
warranties, and covenants herein contained, the Parties agree as
follows:
1. Definitions.
"Adverse Consequences" means all actions, suits,
proceedings, hearings, investigations, charges, complaints, claims,
demands, injunctions, judgments, orders, decrees, rulings, damages,
dues, penalties, fines, costs, amounts paid in settlement made with
the Indemnifying Party's concurrence, liabilities, obligations, liens,
losses, expenses, and fees, including court costs and attorneys' fees
and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as
amended.
"Applicable Law" has the meaning set forth in
Section 3(a)(iii) below.
"Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence,
event, incident, action, failure to act, or transaction that forms or
would reasonably be expected to form the basis for any specified
consequence.
"Beta III Machine" means the machine and related equipment
to be purchased by FLEX pursuant to the Purchase Order.
"Business" means the business conducted by FLEX on or prior
to the Closing Date.
"Buyers" has the meaning set forth in the preface above.
"Cause" has the meaning set forth in Section 7(f) below.
"Ceiling" has the meaning set forth in Section 9(b) below.
"Closing" has the meaning set forth in Section 2(d) below.
"Closing Date" has the meaning set forth in Section 2(d)
below.
"Confidential Information" means any information concerning
the Business and affairs of FLEX other than such information (i) which
is in the public domain, (ii) with respect to any Person, which is
already properly and lawfully in such Person's possession and is not
subject to any obligation of secrecy on such Person's part, (iii) with
respect to any Person, which becomes available to such Person on a non-
confidential basis from a source which is not a party hereto or any
Affiliate of a party hereto (including FLEX) or (iv) with respect to
any Person (other than FLEX), which such Person can prove was
generated independently by it without reference to any information
made available pursuant to this Agreement or the Letter of Intent or
any other relationship with FLEX, including without limitation, as a
customer or shareholder of FLEX.
"Disclosure Schedule" has the meaning set forth in Section 4
below.
"Employee Benefit Plan" means any (i) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee
Pension Benefit Plan, (ii) qualified defined contribution retirement
plan or arrangement which is an Employee Pension Benefit Plan, (iii)
qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan), or
(iv) Employee Welfare Benefit Plan or material fringe benefit plan or
program.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Section 3(1).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Financial Statements" has the meaning set forth in
Section 4(h) below.
"FLEX" has the meaning set forth in the preface above.
"FLEX Shares" has the meaning set forth in the third recital
above.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Hazardous Material" has the meaning set forth in Section
4(o) below.
"ICIA" has the meaning set forth in the preface above.
"ICIAH" has the meaning set forth in the preface above.
"Indemnified Party" has the meaning set forth in
Section 9(e) below.
"Indemnifying Party" has the meaning set forth in
Section 9(e) below.
"IRS" means the Internal Revenue Service of the United
States of America.
"JV Agreement" has the meaning set forth in Section 11(d)
below.
"Knowledge" means actual knowledge without a presumption of
due inquiry into the matter in question. The foregoing
notwithstanding, knowledge as used in Section 4 shall include matters
that would have been known by ICIA had it conducted due inquiry into
such matters; in this respect ICIA shall ask Messrs. Michael Sullivan,
William H. Mayers and Colin Waters to read Section 4 and advise ICIA
if they are aware of any incorrect or misleading representation or
warranty contained therein. Matters known to William Mayers or Colin
Waters which are not otherwise within the knowledge of ICIA or ICIAH
shall in no event be deemed to be known by or within the knowledge of
ICIA or ICIAH.
"Letter of Intent means that certain Letter of Intent dated
January 9, 1995, among the Parties.
"Material trade secret" has the meaning set forth in
Section 4(v) below.
"Most Recent Balance Sheet" has the meaning set forth in
Section 4(h) below.
"Multiemployer Plan" has the meaning set forth in ERISA
Section 3(37).
"Note" means FLEX's promissory note payable to the order of
ICIAH and dated April 30, 1995, evidencing indebtedness owed to ICIAH
under a line of credit loan to FLEX, a true, correct and complete copy
of which (including all amendments thereto) is attached hereto as
Exhibit A.
"Note Purchase Price" has the meaning set forth in
Section 2(c) below.
"Notice" has the meaning set forth in Section 4(o) below.
"OCLI" has the meaning set forth in the preface above.
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with
respect to quantity and frequency).
"Parties" has the meaning set forth in the preface above.
"Permits" has the meaning set forth in Section 4(p) below.
"Person" means an individual, a partnership, a corporation,
a limited liability company, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization, or a
governmental entity (or any department, agency, or political
subdivision thereof).
"Process Know-how" has the meaning set forth in Section 4(s)
below.
"Properties" means all property of whatever nature used by
FLEX in the conduct of the Business, including, without limitation,
any buildings, machinery and equipment under lease.
"Purchase Order" means that certain purchase order dated
December 12, 1994, and that certain Apparatus Sale Agreement dated as
of October 14, 1994, by and between FLEX and DIPLING, Hilmar Weinert,
Vakuum-Verfahenstchnik GmbH ("Weinert"), pursuant to which FLEX is
required to purchase and Weinert is required to sell the Beta III
Machine.
"Real Estate" has the meaning set forth in Section 4(l)
below.
"Records" has the meaning set forth in Section 4(s) below.
"Release" has the meaning set forth in Section 4(o) below.
"Securities Act" means the Securities Act of 1933, as
amended.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than liens for
taxes not yet due and payable.
"Share Purchase Price" has the meaning set forth in
Section 2(b) below.
"SICPA" has the meaning set forth in the preface above.
"Software" has the meaning set forth in Section 4(v) below.
"Subsidiary" means any corporation with respect to which a
specified Person (or an Affiliate thereof) owns a majority of the
common stock or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors.
"Transfer" has the meaning set forth in Section 4(i) below.
"Third-Party Claim" has the meaning set forth in
Section 9(e) below.
2. Purchase and Sale of FLEX Shares and Note.
(a) Basic Transactions.
(i) On the Closing Date, ICIA shall sell to OCLI and
SICPA, and OCLI and SICPA shall purchase from ICIA, the FLEX Shares,
free and clear of all Security Interests of any nature whatsoever,
except those arising by reason of action or inaction by, or with
respect to, either Buyer. Each Buyer shall purchase the number of
FLEX Shares set opposite its respective name as set forth on
Schedule 2(a)(i) attached hereto.
(ii) On the Closing Date, ICIAH shall sell to OCLI and
SICPA, and OCLI and SICPA shall purchase from ICIAH, the Note, free
and clear of all Security Interests of any nature whatsoever, except
those arising by reason of action or inaction by, or with respect to,
either Buyer. Each Buyer shall purchase that portion of the Note set
opposite its respective name as set forth on Schedule 2(a)(ii)
attached hereto. The Buyers shall have no recourse against ICIAH
solely as a result of any default of FLEX under the Note, including,
without limitation, any default resulting from FLEX's failure to make
any payment of principal or interest under the Note when due.
(b) Purchase Price for the Shares. The purchase price
("Share Purchase Price") for the FLEX Shares shall be an amount equal
to $24,500,000.00. Of the Share Purchase Price $1,800,000.00 shall be
allocated to the purchase of the Series B Shares and the balance shall
be allocated to the purchase of the Common Shares. Each Buyer shall
pay that portion of the Share Purchase Price set opposite its
respective name as set forth on Schedule 2(a)(i) attached hereto.
(c) Purchase Price for the Note. The purchase price for
the Note shall be an amount equal to the outstanding and unpaid
balance of principal, interest and all other amounts then owing
thereunder including commitment fees accrued but unpaid under the Note
(the "Note Purchase Price"). Assuming Closing occurs during the
period May 8 to May 15, 1995, the Note Purchase Price shall be an
amount equal to $11,695,000.00 plus accrued interest and commitment
fee through the Closing Date as set forth on Schedule 2(a)(ii). Each
Buyer shall pay that portion of the Note Purchase Price set opposite
their respective names as set forth on Schedule 2(a)(ii) attached
hereto.
(d) The Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the
offices of Collette & Erickson, 555 California Street, Suite 4350, San
Francisco, California, commencing at 9:00 a.m. California time on such
date as the Buyers, ICIA and ICIAH may mutually agree but in no event
later than May 15, 1995 (the "Closing Date").
(e) Deliveries at the Closing. At the Closing, (i) ICIA
and ICIAH shall deliver to the Buyers the various certificates,
instruments, and documents referred to in Section 8(a) below, (ii) the
Buyers shall deliver to ICIA and ICIAH the various certificates,
instruments, and documents referred to in Section 8(b) below, (iii)
ICIA shall deliver to the Buyers stock certificates representing all
the FLEX Shares, endorsed in blank or accompanied by duly executed
assignment documents, (iv) ICIAH shall deliver to the Buyers the Note,
endorsed without recourse pursuant to Section 2(a)(ii) in blank or
accompanied by duly executed assignment documents, (v) the Buyers
shall each deliver to ICIA their respective portions of the Share
Purchase Price as set forth on Schedule 2(a)(i), and (vi) the Buyers
shall each deliver to ICIAH their respective portions of the Note
Purchase Price as set forth on Schedule 2(a)(ii). The delivery of
funds by the Buyers pursuant to the foregoing clauses (v) and (vi)
shall be by wire transfer of immediately available funds to an account
designated by ICIA or ICIAH, as the case may be, by notice delivered
to each Buyer prior to the Closing Date.
(f) Failure of One Buyer to Close. In the event either
Buyer fails to purchase the FLEX Shares such Buyer is required to
purchase as set forth on Schedule 2(a)(i) attached hereto or that
portion of the Note such Buyer is required to purchase as set forth on
Schedule 2(a)(ii), the other Buyer may waive the condition to Closing
set forth in Section 8(a)(xii) below and may, but shall not be
obligated to, purchase in its name and on its own behalf all, but not
less than all, of the FLEX Shares and the Note by delivering the Share
Purchase Price and the Note Purchase Price in full and by otherwise
complying with the terms hereof, in which case ICIA and ICIAH shall be
deemed to have waived the condition to Closing set forth in Section
8(b)(ix), but only to the extent that it requires the tender of the
Share Purchase Price and the Note Purchase Price by each Buyer rather
than either Buyer. Neither such waiver nor such additional purchase
shall constitute a waiver by the purchasing Buyer, ICIA or ICIAH of
any rights or remedies for breach of this Agreement by the
nonpurchasing Buyer if such failure were to constitute a breach.
Notwithstanding the foregoing, if one Buyer fails to close on the
Closing Date or gives notice prior to the Closing Date that it will
fail to do so and the other Buyer chooses to purchase at the Closing
all of the Flex Shares and the Note pursuant to the foregoing, the
Closing Date shall be extended to June 23, 1995.
(g) No Effect on Intercompany Debt. The Parties
acknowledge and agree that payment of the Share Purchase Price and the
Note Purchase Price shall not extinguish or otherwise affect any
obligations of FLEX to ICIA, ICIAH or their respective Affiliates
except as otherwise specified herein.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of ICIA Individually.
To induce the Buyers to enter into this Agreement and to consummate
the transactions called for hereunder, ICIA hereby represents and
warrants to the Buyers and each of them that the following statements
contained in this Section 3(a) are true, correct and complete as of
the date hereof and will be true, correct and complete as of the
Closing (as though made then and as if the date of the Closing were
substituted for the date hereof throughout this Section 3(a)):
(i) Power and Authority to Transfer the FLEX Shares.
ICIA has full power and authority to sell all of the FLEX Shares.
ICIA has good and valid title to the FLEX Shares, free and clear of
all liens and encumbrances of every nature.
(ii) No Pending Proceedings. There is no legal
proceeding pending, and ICIA knows of no proceeding threatened, which
in any way interferes or may interfere with the delivery of the FLEX
Shares to the Buyers. ICIA knows of no Basis for any such proceeding.
(iii) Validity. This Agreement has been duly and
validly executed and delivered by and constitutes a valid and binding
obligation of ICIA, enforceable against it in accordance with its
terms. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (A) violate
the terms of any existing agreement or instrument to which ICIA is a
party, is bound or under which ICIA holds the FLEX Shares, (B) violate
any law, statute, rule, regulation, ordinance, decree, injunction,
notice, approval, judgment, authorization, permit or other restriction
of any federal, state or local government or government agency, court,
board or other authority in effect as of or prior to the Closing Date
("Applicable Law"), or (C) conflict with, result in the breach of,
constitute a default under, create in any party the right to
accelerate, terminate, modify, cancel, or require notice under any
agreement, contract, license, instrument, permit or other arrangement
to which ICIA is a party or by which it is bound or to which any of
its assets is subject.
(iv) Current Unencumbered Ownership. ICIA presently
owns of record and beneficially the FLEX Shares, free and clear of any
restriction on transfer except for restrictions under the Securities
Act and applicable state securities laws, and free and clear of all
taxes, security interests, options, warrants, purchase rights,
contracts, commitments, equities, claims and demands other than as
provided for herein and other than certain redemption rights relating
to the Series B Stock. ICIA is not a party to any option, warrant,
purchase right or other contract or commitment (other than this
Agreement) that could require ICIA to sell, transfer or otherwise
dispose of any of the FLEX Shares. ICIA is not a party to any voting
trust, proxy or other agreement or understanding with respect to the
voting of any of the FLEX Shares. At the Closing, subject to the
Buyers' payment of the Share Purchase Price therefor, ICIA shall
convey to the Buyers valid record title and beneficial ownership of
the FLEX Shares, and as between the Buyers, each as to those of the
FLEX Shares as set forth on Schedule 2(a)(i). All such FLEX Shares
shall be transferred by ICIA to the respective Buyer free and clear of
all Security Interests or other restrictions except those arising by
action or inaction by, or with respect to, either Buyer and
restrictions upon subsequent transfer imposed by applicable securities
laws.
(v) No Responsibility of Buyers or of FLEX for any
Agent Representing ICIA. ICIA has not engaged the services of any
broker, finder or agent in connection with the transactions
contemplated hereby, for which either the Buyers, or either of them,
or FLEX shall have any obligation as a result of this Agreement or the
transactions contemplated hereby, and ICIA shall indemnify, hold
harmless and defend the Buyers and each of them from and against any
and all such obligations to any such agents retained or utilized by
ICIA in such connection.
(vi) ICIA Financial Condition. ICIA has a net worth,
as determined in accordance with GAAP, of not less than $100,000,000.
(vii) No Implied Warranty. EXCEPT FOR THE EXPRESS
REPRESENTATIONS AND WARRANTIES SPECIFICALLY PROVIDED FOR IN THIS
AGREEMENT, ICIA MAKES NO EXPRESS OR IMPLIED WARRANTY TO EITHER SICPA
OR OCLI (A) OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR
AS TO ANY OTHER MATTER, AS TO ANY OR ALL OF THE TANGIBLE ASSETS OWNED
OR LEASED BY FLEX, INCLUDING WITHOUT LIMITATION THE BETA III MACHINE
OR (B) AS TO THE ACCURACY OF ANY PROSPECTIVE FINANCIAL INFORMATION
PROVIDED TO BUYERS AT ANY TIME PRIOR TO OR AT THE CLOSING DATE IN
CONNECTION HEREWITH, INCLUDING WITHOUT LIMITATION FORECASTS, BUDGETS,
PLANS AND PROJECTIONS.
(b) Representations and Warranties of ICIAH Individually.
To induce the Buyers to enter into this Agreement and to consummate
the transactions called for hereunder, ICIAH hereby represents and
warrants to the Buyers and each of them that the following statements
contained in this Section 3(b) are true, correct and complete as of
the date hereof and will be true, correct and complete as of the
Closing (as though made then and as if the date of the Closing was
substituted for the date hereof throughout this Section 3(b)):
(i) Power and Authority to Transfer the Note. ICIAH
has full power and authority to sell the Note. ICIAH has good and
valid title to the Note, free and clear of all liens and encumbrances
of every nature.
(ii) No Pending Proceedings. There is no legal
proceeding pending, and ICIAH knows of no proceeding threatened, which
in any way interferes or may interfere with the delivery of the Note
to the Buyers. ICIAH knows of no Basis for any such proceeding.
(iii) Validity. This Agreement has been duly and
validly executed and delivered by and constitutes a valid and binding
obligation of ICIAH, enforceable against it in accordance with its
terms. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (A) violate
the terms of any existing agreement or instrument to which ICIAH is a
party, is bound or under which ICIAH holds the Note, (B) violate any
Applicable Law, or (C) conflict with, result in the breach of,
constitute a default under, create in any party the right to
accelerate, terminate, modify, cancel, or require notice under any
agreement, contract, license, instrument, permit or other arrangement
to which ICIAH is a party or by which it is bound or to which any of
its assets is subject.
(iv) Current Unencumbered Ownership. ICIAH presently
owns of record and beneficially the Note, free and clear of any
restriction on transfer except for restrictions under the Securities
Act and applicable state securities laws, and free and clear of all
taxes, security interests, options, warrants, purchase rights,
contracts, commitments, equities, claims and demands other than as
provided for herein. ICIAH is not a party to any option, warrant,
purchase right or other contract or commitment (other than this
Agreement) that could require ICIAH to sell, transfer or otherwise
dispose of the Note. At the Closing, subject to the Buyers' payment
of the Note Purchase Price therefor, ICIAH shall convey to the Buyers
valid record title and beneficial ownership of the Note, and as
between the Buyers, each as to that portion of the Note as set forth
on Schedule 2(a)(ii). The Note shall be transferred by ICIAH to the
respective Buyer free and clear of all Security Interests or other
restrictions except those arising by action or inaction by, or with
respect to, either Buyer and restrictions upon subsequent transfer
imposed by applicable securities laws.
(v) No Responsibility of Buyers or of FLEX for any
Agent Representing ICIAH. ICIAH has not engaged the services of any
broker, finder or agent in connection with the transactions
contemplated hereby, for which either the Buyers, or either of them,
or FLEX shall have any obligation as a result of this Agreement or the
transactions contemplated hereby, and ICIAH shall indemnify, hold
harmless and defend the Buyers and each of them from and against any
and all such obligations to any such agents retained or utilized by
ICIAH in such connection.
(vi) ICIAH Financial Condition. ICIAH has a net
worth, as determined in accordance with GAAP, of not less than
$100,000,000.
(vii) No Implied Warranty. EXCEPT FOR THE EXPRESS
REPRESENTATIONS AND WARRANTIES SPECIFICALLY PROVIDED FOR IN THIS
AGREEMENT, ICIAH MAKES NO EXPRESS OR IMPLIED WARRANTY TO EITHER SICPA
OR OCLI (A) OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR
AS TO ANY OTHER MATTER, AS TO ANY OR ALL OF THE TANGIBLE ASSETS OWNED
OR LEASED BY FLEX, INCLUDING WITHOUT LIMITATION THE BETA III MACHINE
OR (B) AS TO THE ACCURACY OF ANY PROSPECTIVE FINANCIAL INFORMATION
PROVIDED TO BUYERS AT ANY TIME PRIOR TO OR AT THE CLOSING DATE IN
CONNECTION HEREWITH, INCLUDING WITHOUT LIMITATION FORECASTS, BUDGETS,
PLANS AND PROJECTIONS.
(c) Representations and Warranties of the Buyers. To
induce ICIA and ICIAH to enter into this Agreement and to consummate
the transactions contemplated hereunder, each Buyer, for itself only,
represents and warrants to ICIA and ICIAH that the following
statements contained in this Section 3(c) are true, correct and
complete as of the date hereof and will be true, correct and complete
as of the Closing (as though made then and as though the date of
Closing were substituted for the date hereof throughout this Section
3(c)):
(i) No Responsibility of ICIA or ICIAH for any Agent
Representing Buyers. Each Buyer represents that it has not engaged
the services of any broker, finder or agent in connection with the
transactions contemplated hereby, for which ICIA or ICIAH shall have
any obligation as a result of this Agreement or the transactions
contemplated hereby, and the Buyers shall each, severally but not
jointly, indemnify, hold harmless and defend ICIA and ICIAH from and
against any and all such obligations to any such agents retained or
utilized by either Buyer in such connection.
(ii) No Default. Each Buyer represents that the
execution, delivery and carrying out of this Agreement and compliance
with the provisions hereof by such Buyer will not violate, with or
without the giving of notice or the passage of time, any provisions of
Applicable Law.
(iii) Purchase for Own Account. Each Buyer represents
that it is acquiring its allocated number of FLEX Shares and its
allocated portion of the Note for its own account, for investment with
no present intention of reselling or distributing such FLEX Shares or
portion of the Note, and that it shall not sell, assign, transfer,
pledge, hypothecate or otherwise dispose of any of the FLEX Shares or
portion of the Note unless such sale or transfer is exempt from the
registration requirements of, or covered by an effective registration
statement under, the Securities Act, and is in compliance with all
applicable state securities laws.
(iv) Acknowledgement that FLEX Shares and Note have
not been Registered. Each Buyer understands and acknowledges that
neither the FLEX Shares nor the Note have been or will be prior to the
Closing Date registered under the Securities Act or registered or
qualified under any state securities or blue sky law but were issued
pursuant to specific exemptions therefrom, and as such are subject to
restrictions on retransfer, and that the certificates evidencing the
FLEX Shares and the Note to be issued and sold to the Buyers shall
bear an appropriate legend reflecting the restrictions on transfer
under applicable federal and state securities laws.
(v) Information. Each Buyer represents that, to its
knowledge, it has been furnished all materials relating to FLEX, its
business, financial condition, assets and results of operations, the
sale of the FLEX Shares and the Note and any other matters which it
has requested. Each Buyer further represents that it has been
afforded the opportunity to ask questions of and receive answers from
the officers and accountants of FLEX and certain officers of ICIA and
ICIAH concerning the terms and conditions of the sale of the FLEX
Shares and the Note and, to its knowledge, to obtain any additional
information which FLEX, ICIA or ICIAH possesses or can acquire related
to the FLEX Shares or the Note without unreasonable effort or expense;
provided, however, that Buyers have not, prior to the date hereof,
been furnished with certain materials containing Process Know-How and
the names of the other party or parties to and technical
specifications contained in certain agreements that by their terms are
not disclosable.
(vi) Disclosure. No representation or warranty by the
Buyers, and no certificate or statement furnished or to be furnished
to ICIA or ICIAH pursuant to this Agreement or in connection with the
transactions contemplated hereby, contains or shall contain any untrue
statement of material fact necessary in order to make the statements
contained herein and therein not misleading.
(d) Representations and Warranties of OCLI Individually. To
induce ICIA and ICIAH to enter into this Agreement and to consummate
the transactions contemplated hereunder, OCLI, for itself only,
represents and warrants to ICIA and ICIAH that the following
statements contained in this Section 3(d) are true, correct and
complete as of the date hereof and will be true, correct and complete
as of the Closing (as though made then and as though the date of
Closing were substituted for the date hereof throughout this Section
3(d)):
(i) Disclosure to SICPA. No director or officer of
OCLI or, to OCLI's knowledge employee of OCLI, has provided
information (whether oral or written) to SICPA materially inconsistent
with the representations and warranties made in this Agreement by
ICIA.
4. Representations and Warranties to SICPA Concerning FLEX. To
induce SICPA to enter into this Agreement and to consummate the
transactions called for hereunder, ICIA represents and warrants to
SICPA that the following statements contained in this Section 4 are
true, correct and complete as of the date of this Agreement and will
be true, correct and complete in all material respects as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 4),
except as set forth in the disclosure schedule attached hereto as
Schedule 4 (the "Disclosure Schedule"):
(a) Organization, Power and Authority. FLEX is a
corporation duly organized, legally existing and in good standing
under the laws of the State of Delaware and has full corporate power
and authority to own or lease its Properties and to carry on the
Business as it is now being conducted, and is duly qualified to do
business and is in good standing in the State of California and in all
other jurisdictions where its failure to be so qualified and in good
standing would have a material adverse effect on the Business,
conditions (financial or otherwise), Properties or operations of FLEX.
(b) Charter Documents. ICIA has delivered to SICPA copies,
all certified by the Delaware Secretary of State, of the Certificate
of Incorporation and any Certificates of Designation of FLEX and all
amendments thereto through the date hereof and the Bylaws of FLEX as
amended to the date hereof and certified by the Secretary of FLEX.
FLEX is not in default under or in violation of any provision of its
Certificate of Incorporation, any Certificates of Designation or
Bylaws.
(c) Capital Structure. The entire authorized capital stock
of FLEX presently consists of 1,000 shares of Common Stock, $0.01 par
value, of which a total of 200 shares are presently issued and
outstanding, and 1,000 shares of Preferred Stock, $0.01 par value, of
which 80 shares have been designated as Series A Preferred Stock and
12 shares have been designated as Series B Preferred Stock, and of
which no shares of Series A Preferred Stock and 12 shares of Series B
Preferred Stock are presently issued and outstanding. Of the issued
and outstanding shares of FLEX's capital stock, ICIA owns, of record
and beneficially, a total of 120 shares of Common Stock and 12 shares
of Series B Preferred Stock. To ICIA's knowledge, OCLI is the sole
other shareholder of FLEX. All of the presently issued and
outstanding shares of FLEX's capital stock have been duly authorized,
are validly issued, fully paid and nonassessable, and, to ICIA's
knowledge, have been so issued in compliance with all United States
federal and state securities laws and other Applicable Law. There are
no outstanding subscriptions, warrants, options, calls, commitments,
conversion rights, exchange rights, agreements or other rights,
contracts or commitments of any kind to which ICIA or FLEX are parties
or by which either of them is bound relating to the authorized or
issued capital stock of FLEX, except for a call option held by ICIA
and a put option held by OCLI with respect to OCLI's shares of FLEX's
capital stock, which ICIA and OCLI, respectively, shall relinquish
without exercise as of the Closing, and for certain redemption rights
relating to the Series B Stock. The foregoing notwithstanding, ICIA
makes no representations or warranties respecting any voting trusts or
other voting agreements, or any subscriptions, warrants, options,
calls, commitments, conversion rights, exchange rights, agreements or
other rights, contracts or commitments of any kind relating to any
shares of capital stock of FLEX held by OCLI.
(d) Subsidiaries; Etc. Except for the existing development
joint venture created pursuant to that certain Joint Venture Agreement
dated July 1, 1993, by and between FLEX and SICPA Industries of
America, Inc., FLEX has no Subsidiaries and does not own, directly or
indirectly, any interest or investment or exercise any control (as
stockholder or in any other manner) in any corporation, limited
liability company, partnership, business, trust or other entity.
(e) Good Title to Assets. Except as set forth in Paragraph
4(e) of the Disclosure Schedule, FLEX has good, valid and marketable
title to, or a valid leasehold in, all of the Properties and assets,
whether tangible or intangible, used by it, located on its premises or
shown on the Most Recent Balance Sheet (as defined below) or acquired
after the date thereof, free and clear of any Security Interest
excepting any Security Interest securing an indebtedness or other
liability not in excess of $20,000.
(f) No Commitments for Dividends or Other Stockholder
Distributions. Except with respect to the redemption provisions
relating to the Series B Stock as set forth in the Certificate of
Designation, Preferences and Rights of Series B Preferred Stock of
FLEX, as filed with the Delaware Secretary of State on December 15,
1988, FLEX is not a party to any agreement and has not otherwise
become obligated to (i) declare, set aside or pay any dividend or make
any distribution in respect of its capital stock; or (ii) directly or
indirectly purchase, redeem or otherwise acquire any shares of its
capital stock.
(g) Officers and Directors. Paragraph 4(g) of the
Disclosure Schedule sets forth the name and title of each officer and
director of FLEX.
(h) Financial Statements. Attached as Appendix 1 to the
Disclosure Schedule are the financial statements (the "Financial
Statements") of FLEX consisting of balance sheets and statements of
operations for each of the four fiscal years ended December 25, 1994,
December 26, 1993, December 27, 1992, and December 29, 1991, each of
which was audited and certified by KPMG Peat Marwick or its
predecessor. The balance sheet of FLEX as of December 25, 1994 shall
hereinafter be referred to as the "Most Recent Balance Sheet". Except
as set forth in Paragraph 4(h) of the Disclosure Schedule, the
Financial Statements (i) have been prepared in accordance with GAAP
applied consistently with the accounting policies set forth in the
respective Footnotes 1 to such Financial Statements and (ii) fairly
present the financial condition and results of operations of FLEX as
at the dates and for the periods stated therein.
(i) Absence of Certain Changes. Since the date of the Most
Recent Balance Sheet and except as set forth in Paragraph 4(i) of the
Disclosure Schedule, there has not been any:
(i) Transaction by FLEX except in the Ordinary Course
of Business and except for FLEX's order and purchase of the Beta III
Machine and any related commitment regarding installation of the Beta
III Machine.
(ii) Capital expenditure by FLEX, other than for the
purchase or installation of the Beta III Machine, exceeding in the
aggregate $250,000.
(iii) Change in accounting methods or practices
(including, without limitation, any change in depreciation or
amortization policies or rates) by FLEX.
(iv) Revaluation by FLEX of any of its assets.
(v) Increase in the salary or other compensation
payable or to become payable by FLEX to any of its officers, directors
or employees, or the declaration, payment or commitment or obligation
of any kind for the payment by FLEX of a bonus or other additional
salary or compensation to any such person, except for bonuses to
employees generally consistent with previously adopted written bonus
commitments or prior years' practices.
(vi) Loan to or entering into any other transaction by
FLEX with any of its officers, directors or employees, except for
standard forms of confidentiality and assignment of inventions
agreements and other agreements routinely executed by employees in the
ordinary course of their employment.
(vii) Adoption, execution or entering into or
modification or termination of any employment contract or collective
bargaining agreement, bonus, profit-sharing, incentive, severance or
other plan, contract or commitment by FLEX for the benefit of any of
its officers, directors or employees.
(viii) Obligation or liability, whether absolute or
contingent, of a type required to be disclosed under GAAP, incurred by
FLEX other than current obligations and liabilities incurred in the
Ordinary Course of Business, except with respect to the order and
purchase of the Beta III Machine and any commitment regarding
installation of the Beta III Machine.
(ix) Damage, destruction or loss of any asset of FLEX
(whether or not covered by insurance) which, in the aggregate and net
of insurance coverage, exceeds $100,000.
(x) Other than those amendments or terminations that
occur in the Ordinary Course of Business, amendment or termination of
any contract, agreement or license to which FLEX is a party.
(xi) Loan by FLEX to any person or entity, or guaranty
by FLEX of any loan.
(xii) Issuance or sale by FLEX of any shares of its
capital stock of any class, or any other of its securities except for
drawdowns by it under the Note.
(xiii) Grant, creation or imposition of any Security
Interest affecting any asset, whether tangible or intangible, of FLEX
excepting any Security Interest securing an indebtedness or other
liability not in excess of $20,000 made in the Ordinary Course of
Business.
(xiv) Sale, transfer, lease, assignment, abandonment
or other disposition ("Transfer") or any agreement or other
arrangement for the Transfer of any asset of FLEX except in the
Ordinary Course of Business.
(xv) Cancellation of debts owed to or waiver or
release of any rights or claims held by FLEX except in the Ordinary
Course of Business.
(xvi) Declaration, setting aside or paying by FLEX of
any dividend or making by FLEX of any distribution in respect of
FLEX's capital stock, or direct or indirect purchase, redemption or
other acquisition by FLEX of any of its capital stock.
(xvii) Agreement or commitment by FLEX to do any of
the things described in this Section 4(i).
(xviii) Other change, condition or event which, net of
all other changes, conditions or events would reasonably be expected
materially adversely to affect the Business or financial condition of
FLEX.
(j) Tax Matters.
(i) Except as set forth in Paragraph 4(j) of the
Disclosure Schedule, FLEX has filed or will file all tax returns and
reports required to be filed by it prior to the Closing Date,
including without limitation all federal, state, county, local and
foreign income, excise, property, sales, payroll, occupation and other
tax returns, and has paid in full or in the case of federal and state
income taxes made adequate provision by the establishment of adequate
reserves for any such taxes which have become due, whether pursuant to
such returns or otherwise or are payable with respect to tax periods
ending prior to the date hereof or pursuant to any assessment which
has become payable. To ICIA's knowledge, except as set forth in
Paragraph 4(j) of the Disclosure Schedule, there is no tax deficiency
existing, proposed or threatened against FLEX. Except as set forth in
Paragraph 4(j) of the Disclosure Schedule, prior to the Closing Date,
FLEX has not received notice of any federal, state or foreign tax
liability resulting from a completed examination of federal, state and
foreign income tax returns by the IRS or a state or foreign taxing
authority which is not reflected as a liability on the Most Recent
Balance Sheet.
(ii) All taxes and other assessments and levies which
FLEX was required by law to withhold or to collect have been duly
withheld and collected, and, to the extent due and payable, have been
paid over to the proper governmental entity, and all such withholdings
and collections due in connection therewith are duly reflected in the
Most Recent Balance Sheet to the extent arising prior to the date
thereof.
(iii) Except for statutory extensions and except as
set forth in Paragraph 4(j) of the Disclosure Schedule, there are no
outstanding agreements or waivers extending the statute of limitations
applicable to any federal or state tax returns of FLEX for any period.
(k) Debt. Except as set forth in Paragraph 4(k) of the
Disclosure Schedule or as set forth on the Most Recent Balance Sheet
and apart from the Note, FLEX has no debt other than trade debt
incurred in the Ordinary Course of Business and tax liabilities which
are not yet past due.
(l) Real Estate Owned and Leased.
(i) To ICIA's knowledge, except as set forth in
Paragraph 4(l) of the Disclosure Schedule, FLEX is not in violation of
any building code, zoning or other Applicable Law (excluding any
environmental laws and regulations) relating to any portion of the
real estate leased by FLEX (the "Real Estate") or the use thereof by
FLEX, and to ICIA's knowledge, no proceeding with respect to any
alleged violation is contemplated by any governmental authority. To
ICIA's knowledge, all building codes, zoning and any other Applicable
Law (excluding any environmental laws and regulations), permit the
existence of the improvements and the continuation of the operations
and other uses presently conducted on the Real Estate. To ICIA's
knowledge, there are no pending or threatened condemnation
proceedings, law suits or administrative actions relating to FLEX and
its occupancy or use of any of the Real Estate or other matters
directly relating to the Real Estate adversely affecting the current
use or occupancy of any of the Real Estate.
(ii) Except as set forth in Paragraph 4(l) of the
Disclosure Schedule, FLEX owns no real estate.
(iii) With respect to Real Estate that is leased by
FLEX (but without making any representation or warranty in this
subsection (iii) of Section 4(l) with respect to such Real Estate
leased by FLEX from OCLI and located at Building D, 2789 Northpoint
Parkway, Santa Rosa, California) FLEX has a valid leasehold interest
to each such parcel of Real Estate. Except as set forth in Paragraph
4(l) to the Disclosure Schedule, none of the leases have been amended
or modified. All of the leases covering any Real Estate are in full
force and effect, and FLEX is not in material default or breach under
any such lease. ICIA has no knowledge of any material breach or
anticipatory breach by the other parties to any such lease.
(m) Receivables. Except as set forth in Paragraph 4(m) of
the Disclosure Schedule, and further except as arising after April 27,
1995, all receivables of FLEX, including accounts receivable, notes
receivable and insurance proceeds receivable, are set forth in the
Most Recent Balance Sheet. All such receivables were, as of the dates
as of which the information is given therein, and are, as of the date
hereof, valid receivables subject to no set-offs or counterclaims, are
or shall be current and collectible or have been or shall be collected
in full, except to the extent of the allowance for uncollectible
receivables set forth in the Most Recent Balance Sheet as adjusted for
the passage of time through the date hereof in accordance with the
past custom and practice of FLEX.
(n) Litigation. Except as set forth in Paragraph 4(n) of
the Disclosure Schedule, there is no litigation, action or proceeding
pending or, to ICIA's knowledge, threatened, or, to ICIA's knowledge,
any investigation pending or threatened, against or affecting FLEX by
or before any court, commission, board or other government agency,
domestic or foreign, or any private or public arbitration board or
tribunal, which would reasonably be expected to result individually or
in the aggregate in any material adverse change in the Business,
condition, operations, Properties or assets of FLEX or in any material
liabilities to any third party. Neither FLEX nor, to ICIA's
knowledge, any officer of FLEX as such is in default with respect to
any order, writ, injunction, decree, ruling or decision of any court,
commission, board or other government agency, domestic or foreign, or
any private or public arbitration board or tribunal.
(o) Compliance With Laws.
(i) To ICIA's knowledge, except as set forth in
Paragraph 4(o) of the Disclosure Schedule, FLEX has complied in all
material respects with all Applicable Law relating to its Properties,
facilities, assets, employees, operations and other items and
circumstances relating to or arising from the Business, including,
without limitation, all laws governing the handling, treatment,
transportation, storage and disposition of hazardous waste materials.
To ICIA's knowledge, except as set forth in Paragraph 4(o) of the
Disclosure Schedule, all waste materials resulting from the operation
by FLEX of the Business have been disposed of in a manner that is in
compliance with all Applicable Law governing the disposal of such
waste material, including, without limitation, all applicable
requirements of the Resource, Conservation and Recovery Act, the
Federal Solid Waste Disposal Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Clean Air Act, the Clean
Water Act, the Toxic Substances Control Act, the National
Environmental Policy Act, the Refuse Act, the Safe Drinking Water Act
and regulations and guidelines thereunder that pertain to the
generation, collection, transportation, handling, storage or disposal
of waste material as well as applicable Department of Transportation
Regulations.
(ii) To ICIA's knowledge, except as set forth in
Paragraph 4(o) of the Disclosure Schedule and except where such
Release (as hereinafter defined) has occurred in compliance with
Applicable Law, FLEX has not caused or permitted the release,
spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing or dumping (the "Release") of
any hazardous or toxic substances, pollutants, waste or materials that
are regulated by any federal authority or by any state or local
government authority ("Hazardous Material") under Applicable Law where
the Hazardous Material is located.
(iii) Except as set forth in Paragraph 4(o) of the
Disclosure Schedule, FLEX has not received any written summons,
citation, directive, order, or notice of any claim, actual or
threatened, litigation, investigation, proceeding, judgment, letter or
other written communication, from any federal, state or local agency
or authority or any other person or entity (for purposes of this
Section 4(o) and Section 5(n), "Notice") regarding any act or omission
which has resulted in or would reasonably be expected to result in a
Release of Hazardous Material. FLEX has not received any Notice that
FLEX has been or will be named a potentially responsible party for a
federal, state, municipal or local clean-up site or corrective action
under any Applicable Law nor, to ICIA's knowledge, is it the subject
of any investigation with respect thereto. FLEX has not received any
Notice of non-compliance with, and to ICIA's knowledge has not failed
to comply with, any Applicable Law, and has not caused or permitted
the Business to be used to generate, manufacture, refine, transport,
treat, store, handle, dispose, transfer, produce or process Hazardous
Material, except in compliance with Applicable Law.
(iv) To ICIA's knowledge, except as set forth in
Paragraph 4(o) of the Disclosure Schedule, no action of FLEX prior to
Closing would reasonably be expected to give rise to any claim,
demand, or action seeking the clean-up of any site, location, body of
water, surface or subsurface, wherever located, according to any
Applicable Law.
(v) To ICIA's knowledge, no employee of FLEX has
suffered any disease, injury or death by reason of his or her handling
or becoming exposed to or otherwise having been harmed by any
Hazardous Material or other substance which may at any time up to the
date hereof have been present at his or her work place in the course
of his or her employment by FLEX.
(p) Permits. FLEX has all governmental licenses, permits,
registrations and approvals incident to or necessary to conduct the
Business or required by Applicable Law ("Permits"). The Permits are
in full force and effect and shall remain in full force and effect up
to and including the Closing Date. Except as set forth in
Paragraph 4(p) of the Disclosure Schedule, no violations have been
recorded in respect to any of such Permits, and no proceeding is
pending or, to ICIA's knowledge, threatened to revoke or limit any of
them. FLEX has maintained all environmental documents and records
substantially in the manner and for the time periods required by
Applicable Law. The sale of the FLEX Shares and the Note shall not in
and of itself violate, terminate or otherwise affect such Permits.
(q) Insurance. Since December 19, 1988, FLEX has had in
effect the insurance coverages described in the Insurance Manual for
ICI US Operations attached as Appendix 2 to the Disclosure Schedule or
as described in prior iterations of said Insurance Manual in effect
since December 19, 1988.
(r) Absence of Sensitive Payments. To ICIA's knowledge,
neither FLEX nor any of its officers or key employees has (i) made any
contributions, payments or gifts to, or for the private use of, any
domestic or foreign governmental official, employee or agent where
either the payment or the purpose of such contribution, payment or
gift is illegal under the laws of the United States or any other
jurisdiction; (ii) established or maintained any unrecorded fund or
asset for any purpose or made any false or artificial entry on its
books; (iii) made any payment to any person with the intention or
understanding that any part of such payment was to be used for any
purpose other than that described in the documentation supporting such
payment; or (iv) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977.
(s) Records, Corporate Minutes and Stock Ledger. Except to
the extent that SICPA or its agents or representatives have agreed
that the production of such material is not necessary, ICIA has
furnished to or permitted inspection by SICPA or its agents or
representatives of copies of all operating data and records of FLEX
requested in writing by SICPA or such agents or representatives,
including without limitation corporate documents and records, stock
ledgers, customer lists, financial, accounting and credit records,
correspondence, budgets, all documents required to be maintained by
law and other similar documents and records ("Records"), but excluding
certain detailed operational process know-how of FLEX ("Process
Know-How") and excluding the identification of the other party or
parties and any Process Know-How and technical specifications set
forth in certain agreements that by their terms are not disclosable.
The Records are accurate and complete in all material respects, except
to the extent redacted to avoid disclosure of Process Know-How or to
avoid committing a breach of the confidentiality covenants of the
foregoing agreements. A record of all action taken by the
stockholders and the Board of Directors of FLEX and all minutes of
their meetings are contained in the minute books of FLEX and are
accurate and complete. The minute books and stock ledgers of FLEX
contain an accurate and complete record of all issuances, transfers
and cancellations of FLEX stock.
(t) Labor Relations. There is not pending or, to ICIA's
knowledge, threatened any labor dispute, strike or work stoppage which
affects or which would reasonably be expected to affect the Business
or interfere with the continued operation of the Business. To ICIA's
knowledge, neither FLEX nor any agent, representative or employee of
FLEX has committed any unfair labor practice. There has been no
strike, walkout or work stoppage involving any of the employees of
FLEX. To ICIA's knowledge, except as set forth in Paragraph 4(t) of
the Disclosure Schedule, no executive nor key employee or group of
employees has any plans to terminate his, her or their employment with
FLEX.
(u) Employee Benefit Plans. To ICIA's knowledge, except as
set forth in Paragraph 4(u) of the Disclosure Schedule, there are no
threatened or pending actions, suits, audits, or claims (other than
claims covered by workers' compensation insurance and claims made for
the benefits designed to be provided pursuant to the Employee Benefit
Plans of FLEX) which have been instituted or asserted by participants,
beneficiaries or any governmental agencies, or any other person or
entity against the Employee Benefit Plans of FLEX or against FLEX (or
any of its directors, officers or employees) with respect to their
participation in the Employee Benefit Plans of FLEX (nor is there any
basis for such a claim). To ICIA's knowledge, with respect to FLEX
employees, all reporting and disclosure requirements applicable to
such Employee Benefit Plans under ERISA, and the Department of Labor
and the Internal Revenue Service regulations promulgated thereunder,
and all other Applicable Law have been satisfied with respect to the
Employee Benefit Plans of FLEX. Except as set forth in Paragraph 4(u)
of the Disclosure Schedule, FLEX has not entered into any severance or
similar arrangement in respect of any present or former employee that
will result in any obligation, absolute or contingent, of the Buyers
or FLEX to make any payment to any present or former employee
following termination of employment.
(v) Proprietary Rights.
(i) To ICIA's knowledge, all patents and applications
for patents owned by FLEX and all patent applications filed by FLEX
which are currently pending, a list of all of which is attached to the
Disclosure Schedule as Appendix 3, are not subject to any delinquent
taxes, maintenance fees or actions which have resulted in the lapse of
any such patents or applications. There have not been any
interference actions or other judicial, arbitration or adversary
proceedings concerning such patents or applications for patents.
Except as set forth in Paragraph 4(v) of the Disclosure Schedule, to
ICIA's knowledge (without any presumption of due inquiry,
notwithstanding the definition of "knowledge" set forth in Section 1
above), each such patent is valid and enforceable in the jurisdiction
where issued, and, further to ICIA's knowledge (without any
presumption of due inquiry, notwithstanding the definition of
"knowledge" set forth in Section 1 above), there is no dominating
patent held by any third party which would affect any such patents or
the claims under such patent applications in any manner materially
adverse to FLEX. To ICIA's knowledge, each patent application is
awaiting action by its respective patent office or by FLEX, which
action is not due in less than 30 days. To ICIA's knowledge, the
manufacture, use or sale of products currently sold by the Business
and covered by the patents and applications for patents do not violate
or infringe on any patent or any proprietary or personal right of any
entity or person, and further, to ICIA's knowledge, no claim has been
asserted that FLEX has infringed or is infringing on any patent or
other right belonging to any entity. Each license, agreement, or
arrangement to which FLEX is a party, whether as licensee, licensor,
indemnitor or otherwise, with respect to any patent, application for
patent, invention, design, model, process, trade secret or formula is
valid and binding on each of the parties to the license, agreement or
arrangement, except as the same may be limited by bankruptcy,
insolvency, moratorium and other laws of general application affecting
the enforcement of creditors' rights. To ICIA's knowledge, FLEX owns,
has the right and authority to use, or can obtain the right and
authority to use on reasonable commercial terms, all inventions, trade
secrets, processes, designs and formulae as are necessary to enable it
to conduct and to continue to conduct all phases of the Business in
the manner presently conducted by it, and, to ICIA's knowledge, such
use does not conflict with, infringe on, or violate any patent or
other proprietary rights of others. To ICIA's knowledge, FLEX owned
and had, at the appropriate time, the right and authority to use all
inventions, trade secrets, processes, designs and formulae as
necessary to enable it to conduct all phases of the Business in the
manner conducted by it in the past, and, to ICIA's knowledge, such use
did not conflict with, infringe, or violate any patent or other
proprietary rights of others.
(ii) To ICIA's knowledge, FLEX owns or holds adequate
licenses or other rights to use all trade names, trademarks, service
marks and copyrights necessary for the Business as now conducted by
it, and, to ICIA's knowledge, such use does not conflict with,
infringe on or otherwise violate any rights of others. Each license,
agreement or arrangement, whether as licensor, licensee, indemnitor or
otherwise, with respect to any trade names, trademarks, service marks
or applications for them, or any copyrights, is valid and binding on
the parties to such license, agreement or arrangement, except as the
same may be limited by bankruptcy, insolvency, moratorium and other
laws of general application affecting the enforcement of creditors'
rights.
(iii) A "material trade secret" is one in which its
loss of trade secret status would have a materially adverse effect on
the Business, operations or financial condition of FLEX. To ICIA's
knowledge and except as set forth in Paragraph 4(v) of the Disclosure
Schedule, FLEX is the sole owner of, or the licensee of OCLI to, each
material trade secret, free and clear of any liens, encumbrances,
restrictions or legal or equitable claims of others. FLEX has taken
reasonable security measures to protect the secrecy and
confidentiality of such material trade secrets. All of FLEX's
employees and any other person who, either alone or in concert with
others, developed, invented, discovered, derived, programmed or
designed such material trade secrets, or who have knowledge of or
access to information related to them, have been put on notice of
FLEX's rights and their obligations, and have entered into appropriate
confidentiality agreements. To ICIA's knowledge, none of such
material trade secrets is part of the public knowledge or literature,
nor have any of them been used, divulged or appropriated for the
benefit of any persons without the protection of reasonable security
measures.
(iv) To ICIA's knowledge and except for software
programs used by it which are generally commercially available or have
been made available by ICIA or OCLI prior to the Closing Date, FLEX
has proprietary rights in all software material to the Business as now
conducted by it, and to ICIA's knowledge, such software does not and
will not conflict with, infringe on or otherwise violate any rights of
others. FLEX has taken reasonable efforts to protect such proprietary
rights in all such software. All copies of such software, including
all copies of any source code, are in FLEX's possession and control.
For purposes of this Section 4(v) and Section 5(u), "software"
includes any set of instructions (including, without limitation,
arithmetic, logical, data transfer, data manipulation, and/or
input/output) meant to run on, or to control the operation of, any
computer or microprocessor, whether those instructions are a complete
program, a collection of programs making up a subsystem or system, or
are merely subroutines or macroroutines meant to operate in
conjunction with other software, and whether such instructions must be
run through another computer program (compiler) before being usable on
a computer or microprocessor, whether such instructions must be used
at execution time in conjunction with another computer program
(interpreter), or whether such instructions are in a form that can be
run on a computer or microprocessor "as is" without additional
programs.
(w) Non-Contravention. Neither the execution and delivery
of this Agreement nor the consummation of the transactions
contemplated hereby will (i) conflict with or violate any provision of
the Certificate of Incorporation, Certificates of Designation or
Bylaws of FLEX, or any Applicable Law, (ii) conflict with or result in
any breach of or default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify, cancel or
require notice under any contract, agreement, mortgage, indenture,
license, instrument, trust or other arrangement to which FLEX is a
party or is either binding upon or enforceable against FLEX or its
assets; or (iii) violate any legally protected right of any individual
or entity or give to any individual or entity a right or claim against
the Buyers or FLEX's assets. Except as set forth in Paragraph 4(w) of
the Disclosure Schedule, no consent or approval by any party to any
contract, lease, agreement or other commitment to which FLEX is a
party, or by which it or its Properties is bound, is required in
connection with the execution and delivery of this Agreement or the
consummation by ICIA and ICIAH of the transactions contemplated
hereby.
(x) Machinery and Equipment. To ICIA's knowledge (without
any presumption of due inquiry, notwithstanding the definition of
"knowledge" set forth in Section 1 above), all of the Properties,
including all of the machinery, equipment, furniture, fixtures,
computer hardware and software and other tangible property of FLEX
currently in use for the Business are in good working order and
condition, subject to ordinary down time and maintenance and normal
wear and tear excepted, and are suitable and fit for the use and
purpose for which they are currently being used.
(y) Information Relating to Material Contracts.
Paragraph 4(y) of the Disclosure Schedule lists all material contracts
(including employment contracts), licenses, purchase or customer
orders, commitments and other binding arrangements of FLEX (except
those to which SICPA or any of its Affiliates is a party); provided
that Paragraph 4(y) of the Disclosure Schedule may describe
generically, without description of specific items, any contracts,
licenses, commitments, purchase or customer orders or other binding
arrangements which were entered into in the Ordinary Course of
Business and will not as to any individual item require FLEX or the
other party to make payments in excess of $100,000 (including
cancellation payments, if applicable) before the contract, lease,
license, commitment, purchase or customer order or other binding
arrangement can be canceled by FLEX. All such contracts, licenses,
permits, orders, commitments and other binding arrangements are valid
and binding and are in full force and effect, except as the same may
be limited by bankruptcy, insolvency, moratorium and other laws of
general application affecting the enforcement of creditors' rights.
FLEX is not in default under or in breach or violation of any term or
provision of any of such contracts, leases, licenses, permits, orders,
commitments or other binding arrangements, and, to ICIA's knowledge,
no other party to any such contracts, leases, licenses, permits,
orders, commitments or other binding arrangements is in default
thereunder. ICIA has made, or has caused FLEX to make, available to
SICPA, true, correct and complete copies, including all amendments
thereto, of all such contracts, leases, licenses, permits, orders,
commitments or other binding arrangements.
(z) Relationships with Suppliers and Customers. No current
supplier to FLEX or customer of FLEX (other than OCLI or SICPA, as to
which ICIA makes no representation or warranty) has notified FLEX or
ICIA in writing of any intention to terminate or substantially alter
its existing business relationship with FLEX. To ICIA's knowledge,
except as set forth in Paragraph 4(z) of the Disclosure Schedule, FLEX
is not dependent upon any supplier of a raw material or component
where a second source of supply is not readily available in the
market.
5. Representations and Warranties to OCLI Concerning FLEX. To
induce OCLI to enter into this Agreement and to consummate the
transactions called for hereunder, ICIA represents and warrants to
OCLI that the following statements contained in this Section 5 are
true, correct and complete as of the date of this Agreement and will
be true, correct and complete in all material respects as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 5),
except as set forth in the Disclosure Schedule:
(a) Organization, Power and Authority. FLEX is a
corporation duly organized, legally existing and in good standing
under the laws of the State of Delaware and has full corporate power
and authority to own or lease its Properties and to carry on the
Business as it is now being conducted, and is duly qualified to do
business and is in good standing in the State of California and in all
other jurisdictions where its failure to be so qualified and in good
standing would have a material adverse effect on the Business,
conditions (financial or otherwise), Properties or operations of FLEX.
(b) Charter Documents. ICIA has delivered to OCLI copies,
all certified by the Delaware Secretary of State, of the Certificate
of Incorporation and any Certificates of Designation of FLEX and all
amendments thereto through the date hereof and the Bylaws of FLEX as
amended to the date hereof and certified by the Secretary of FLEX.
FLEX is not in default under or in violation of any provision of its
Certificate of Incorporation, any Certificates of Designation or
Bylaws.
(c) Capital Structure. The entire authorized capital stock
of FLEX presently consists of 1,000 shares of Common Stock, $0.01 par
value, of which a total of 200 shares are presently issued and
outstanding, and 1,000 shares of Preferred Stock, $0.01 par value, of
which 80 shares have been designated as Series A Preferred Stock and
12 shares have been designated as Series B Preferred Stock, and of
which no shares of Series A Preferred Stock and 12 shares of Series B
Preferred Stock are presently issued and outstanding. Of the issued
and outstanding shares of FLEX's capital stock, ICIA owns, of record
and beneficially, a total of 120 shares of Common Stock and 12 shares
of Series B Preferred Stock. To ICIA's knowledge, OCLI is the sole
other shareholder of FLEX. All of the presently issued and
outstanding shares of FLEX's capital stock have been duly authorized,
are validly issued, fully paid and nonassessable, and, to ICIA's
knowledge, have been so issued in compliance with all United States
federal and state securities laws and other Applicable Law. There are
no outstanding subscriptions, warrants, options, calls, conversion
rights, exchange rights, agreements or other rights, contracts or
commitments of any kind to which ICIA or FLEX are parties or by which
either of them is bound relating to the authorized or issued capital
stock of FLEX, except for a call option held by ICIA and a put option
held by OCLI with respect to OCLI's shares of FLEX's capital stock,
which ICIA and OCLI, respectively, shall relinquish without exercise
as of the Closing, and for certain redemption rights relating to the
Series B Stock. The foregoing notwithstanding, ICIA makes no
representations or warranties respecting any voting trusts or other
voting agreements, or any subscriptions, warrants, options, calls,
conversion rights, exchange rights, agreements or other rights,
contracts or commitments of any kind relating to any shares of capital
stock of FLEX held by OCLI.
(d) Subsidiaries. Except for the existing development
joint venture created pursuant to that certain Joint Venture Agreement
dated July 1, 1993, by and between FLEX and SICPA Industries of
America, Inc., FLEX has no Subsidiaries and does not own, directly or
indirectly, any interest or investment or exercise any control (as
shareholder or in any other manner) in any corporation, limited
liability company, partnership, business, trust or other entity.
(e) Good Title to Assets. Excluding any contract, lease or
other agreement to which OCLI is a party or any rights or privileges
arising therefrom, and except as set forth in Paragraph 4(e) of the
Disclosure Schedule, FLEX has good, valid and marketable title to, or
a valid leasehold in, all of the Properties and assets, whether
tangible or intangible, used by it, located on its premises or shown
on the Most Recent Balance Sheet (as defined below) or acquired after
the date thereof, free and clear of any Security Interest excepting
any Security Interest securing an indebtedness or other liability not
in excess of $20,000.
(f) Officers and Directors. Paragraph 4(g) of the
Disclosure Schedule sets forth the name and title of each officer and
director of FLEX.
(g) Financial Statements. Except as set forth in Paragraph
4(h) of the Disclosure Schedule, the Financial Statements (i) have
been prepared in accordance with GAAP applied consistently with the
accounting policies set forth in the respective Footnotes 1 to such
Financial Statements and (ii) fairly present the financial condition
and results of operations of FLEX as at the dates and for the periods
stated therein.
(h) Absence of Certain Changes. To ICIA's knowledge, since
the date of the Most Recent Balance Sheet and except as set forth in
Paragraph 4(i) of the Disclosure Schedule, there has not been any:
(i) Transaction by FLEX (other than with OCLI), except
in the Ordinary Course of Business as conducted on that date and
except for FLEX's order and purchase of the Beta III Machine and any
related commitment regarding installation of the Beta III Machine.
(ii) Capital expenditure by FLEX, other than for the
purchase or installation of the Beta III Machine, exceeding in the
aggregate $250,000.
(iii) Change in accounting methods or practices
(including, without limitation, any change in depreciation or
amortization policies or rates) by FLEX.
(iv) Revaluation by FLEX of any of its assets.
(v) Increase in the salary or other compensation
payable or to become payable by FLEX to any of its officers, directors
or employees, or the declaration, payment or commitment or obligation
of any kind for the payment by FLEX of a bonus or other additional
salary or compensation to any such person, except for bonuses to
employees generally consistent with previously adopted written bonus
commitments or prior years' practices.
(vi) Loan to or entering into any other material
transaction by FLEX with any of its officers, directors or employees,
except for standard forms of confidentiality and assignment of
inventions agreements and other agreements routinely executed by
employees in the ordinary course of their employment.
(vii) Adoption, execution or entering into or
modification or termination of any employment contract or collective
bargaining agreement, bonus, profit-sharing, incentive, severance or
other plan, contract or commitment by FLEX for the benefit of any of
its officers, directors or employees.
(viii) Obligation or liability, whether absolute or
contingent, of a type required to be disclosed under GAAP, incurred by
FLEX other than current obligations and liabilities incurred in the
Ordinary Course of Business, except with respect to the order and
purchase of the Beta III Machine and any related commitment regarding
installation of the Beta III Machine.
(ix) Damage, destruction or loss of any asset of FLEX
(whether or not covered by insurance), which, in the aggregate and net
of insurance coverage, exceeds $100,000.
(x) Other than those amendments or terminations that
occur in the Ordinary Course of Business, amendment or termination of
any contract, agreement or license to which FLEX is a party.
(xi) Material loan by FLEX to any person or entity, or
material guaranty by FLEX of any loan.
(xii) Issuance or sale by FLEX of any shares of its
capital stock of any class, or any other of its securities except for
drawdowns by it under the Note.
(xiii) Mortgage, hypothecation, pledge, encumbrance or
lien affecting any asset, whether tangible or intangible, of FLEX
excepting any such mortgage, hypothecation, pledge, encumbrance or
lien securing an indebtedness or other liability not in excess of
$20,000.
(xiv) Transfer or any agreement or other arrangement
for the Transfer of any asset of FLEX except in the Ordinary Course of
Business.
(xv) Cancellation of debts owed to or waiver or
release of any rights or claims held by FLEX except in the Ordinary
Course of Business.
(xvi) Agreement or commitment by FLEX to do any of the
things described in this Section 5(h).
(i) Tax Matters.
(i) Except as set forth in Paragraph 4(j) of the
Disclosure Schedule, FLEX has filed or will file all tax returns and
reports required to be filed by it prior to the Closing Date,
including without limitation all federal, state, county, local and
foreign income, excise, property, sales, payroll, occupation and other
tax returns, and has paid in full or in the case of federal and state
income taxes made adequate provision by the establishment of adequate
reserves for any such taxes which have become due, whether pursuant to
such returns or otherwise or are payable with respect to tax periods
ending prior to the date hereof or pursuant to any assessment which
has become payable. To ICIA's knowledge, except as set forth in
Paragraph 4(j) of the Disclosure Schedule, there is no tax deficiency
existing, proposed or threatened against FLEX. Except as set forth in
Paragraph 4(j) of the Disclosure Schedule, prior to the Closing Date,
FLEX has not received notice of any federal, state or foreign tax
liability resulting from a completed examination of federal, state and
foreign income tax returns by the IRS or a state or foreign taxing
authority which is not reflected as a liability on the Most Recent
Balance Sheet.
(ii) All taxes and other assessments and levies which
FLEX was required by law to withhold or to collect have been duly
withheld and collected, and, to the extent due and payable, have been
paid over to the proper governmental entity, and all such withholdings
and collections due in connection therewith are duly reflected in the
Most Recent Balance Sheet to the extent arising prior to the date
thereof.
(iii) Except for statutory extensions and except as
set forth in Paragraph 4(j) of the Disclosure Schedule, there are no
outstanding agreements or waivers extending the statute of limitations
applicable to any federal or state tax returns of FLEX for any period.
(j) Debt. Except as set forth in Paragraph 4(k) of the
Disclosure Schedule or as set forth on the Most Recent Balance Sheet
and apart from the Note, FLEX has no debt other than trade debt
incurred in the Ordinary Course of Business and tax liabilities which
are not yet past due.
(k) Real Estate Owned and Leased.
(i) To ICIA's knowledge, except as set forth in
Paragraph 4(l) of the Disclosure Schedule, FLEX is not in violation of
any building code, zoning or other Applicable Law (excluding any
environmental laws and regulations) relating to any portion of the
Real Estate or the use thereof by FLEX, and to ICIA's knowledge, no
proceeding with respect to any alleged violation is contemplated by
any governmental authority. To ICIA's knowledge, all building codes,
zoning and any other Applicable Law (excluding any environmental laws
and regulations), permit the existence of the improvements and the
continuation of the operations and other uses presently conducted on
the Real Estate. To ICIA's knowledge, there are no pending or
threatened condemnation proceedings, law suits or administrative
actions relating to FLEX and its occupancy or use of any of the Real
Estate or other matters directly relating to the Real Estate adversely
affecting the current use or occupancy of any of the Real Estate. The
representations and warranties made by ICIA with respect to any matter
under this Section 5(k)(i) do not apply to the Real Estate leased by
FLEX from OCLI and located at Building D, 2789 Northpoint Parkway,
Santa Rosa, California, except to extent that FLEX is responsible for
such matter pursuant to the lease covering said Real Estate.
(ii) Except as set forth in Paragraph 4(l) to the
Disclosure Schedule, FLEX owns no real estate.
(iii) With respect to Real Estate that is leased by
FLEX (but without making any representation or warranty in this
subsection (iii) of Section 5(k) with respect to such Real Estate
leased by FLEX from OCLI and located at Building D, 2789 Northpoint
Parkway, Santa Rosa, California) (A) FLEX has a valid leasehold
interest to each such parcel of Real Estate, (B) except as set forth
in Paragraph 4(l) of the Disclosure Schedule, none of the leases have
been amended or modified, (C) all of the leases covering any Real
Estate are in full force and effect, and FLEX is not in material
default or breach under any such lease, and (D) ICIA has no knowledge
of any material breach or anticipatory breach by the other parties to
any such lease.
(l) Receivables. Except as set forth in Paragraph 4(m) of
the Disclosure Schedule, and further except as arising after April 27,
1995, all receivables of FLEX, including accounts receivable, notes
receivable and insurance proceeds receivable, are set forth in the
Most Recent Balance Sheet. All such receivables were, as of the dates
as of which the information is given therein, and are, as of the date
hereof, valid receivables subject to no set-offs or counterclaims, are
or shall be current and collectible or have been or shall be collected
in full, except to the extent of the allowance for uncollectible
receivables set forth in the Most Recent Balance Sheet as adjusted for
the passage of time through the date hereof in accordance with the
past custom and practice of FLEX.
(m) Litigation. To ICIA's knowledge, except as set forth
in Paragraph 4(n) of the Disclosure Schedule, there is no litigation,
action, proceeding or investigation pending or threatened against or
affecting FLEX by or before any court, commission, board or other
government agency, domestic or foreign, or any private or public
arbitration board or tribunal, which would reasonably be expected to
result individually or in the aggregate in any material adverse change
in the Business, condition, operations, Properties or assets of FLEX
or in any material liabilities to any third party. To ICIA's
knowledge, neither FLEX nor any officer of FLEX as such is in default
with respect to any order, writ, injunction, decree, ruling or
decision of any court, commission, board or other government agency,
domestic or foreign, or any private or public arbitration board or
tribunal.
(n) Compliance With Laws.
(i) To ICIA's knowledge, except as set forth in
Paragraph 4(o) of the Disclosure Schedule, FLEX has complied in all
material respects with all Applicable Law relating to its Properties,
facilities, assets, employees, operations and other items and
circumstances relating to or arising from the Business, including,
without limitation, all laws governing the handling, treatment,
transportation, storage and disposition of hazardous waste materials.
To ICIA's knowledge, except as set forth in Paragraph 4(o) of the
Disclosure Schedule, all waste materials resulting from the operation
by FLEX of the Business have been disposed of in a manner that is in
compliance with all Applicable Law governing the disposal of such
waste material, including, without limitation, all applicable
requirements of the Resource, Conservation and Recovery Act, the
Federal Solid Waste Disposal Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Clean Air Act, the Clean
Water Act, the Toxic Substances Control Act, the National
Environmental Policy Act, the Refuse Act, the Safe Drinking Water Act
and regulations and guidelines thereunder that pertain to the
generation, collection, transportation, handling, storage or disposal
of waste material as well as applicable Department of Transportation
Regulations.
(ii) To ICIA's knowledge, except as set forth in
Paragraph 4(o) of the Disclosure Schedule and except where such
Release has occurred in compliance with Applicable Law, FLEX has not
caused or permitted the Release of any Hazardous Materials that are
regulated by any federal authority or by any state or local government
authority where the Hazardous Material is located.
(iii) To ICIA's knowledge, except as set forth in
Paragraph 4(o) of the Disclosure Schedule, FLEX has not received any
Notice regarding any act or omission which has resulted in or would
reasonably be expected to result in a Release of Hazardous Material.
To ICIA's knowledge, FLEX has not received any Notice that FLEX has
been or will be named a potentially responsible party for a federal,
state, municipal or local clean-up site or corrective action under any
Applicable Law nor, to ICIA's knowledge, is it the subject of any
investigation with respect thereto. To ICIA's knowledge, FLEX has not
received any Notice of non-compliance with, and has not failed to
comply with, any Applicable Law, and has not caused or permitted the
Business to be used to generate, manufacture, refine, transport,
treat, store, handle, dispose, transfer, produce or process Hazardous
Material except in compliance with Applicable Law.
(iv) To ICIA's knowledge, except as set forth in
Paragraph 4(o) of the Disclosure Schedule, no action of FLEX prior to
Closing would reasonably be expected to give rise to any claim,
demand, or action seeking the clean-up of any site, location, body of
water, surface or subsurface, wherever located, according to any
Applicable Law.
(v) To ICIA's knowledge, no employee of FLEX has
suffered any disease, injury or death by reason of his or her handling
or becoming exposed to or otherwise having been harmed by any
Hazardous Material or other substance which may at any time up to the
date hereof have been present at his or her work place in the course
of his or her employment by FLEX.
Notwithstanding anything contained herein, the provisions of this
Section 5(n) are not intended to and shall not in any way interfere,
by way of offset or otherwise, with any of the rights, privileges or
remedies of ICIA under the JV Agreement or any claims ICIA might have
pursuant thereto against OCLI or FLEX, nor shall they interfere, by
way of offset or otherwise, with any of the rights, privileges or
remedies of FLEX under its lease with OCLI or any claims FLEX might
have pursuant thereto.
(o) Permits. To ICIA's knowledge, FLEX has all material
Permits. To ICIA's knowledge, the material Permits are in full force
and effect and shall remain in full force and effect up to and
including the Closing Date. Except as set forth in Paragraph 4(p) of
the Disclosure Schedule, to ICIA's knowledge, no violations have been
recorded in respect to any of such material Permits, and no proceeding
is pending or threatened to revoke or limit any of them. To ICIA's
knowledge, FLEX has maintained all environmental documents and records
substantially in the manner and for the time periods required by
Applicable Law. The sale of the FLEX Shares and the Note shall not in
and of itself violate, terminate or otherwise affect such Permits.
(p) Insurance. Since December 19, 1988, FLEX has had in
effect the insurance coverages described in the Insurance Manual for
ICI US Operations attached as Appendix 2 to the Disclosure Schedule or
as described in prior iterations of said Insurance Manual in effect
since December 19, 1988.
(q) Absence of Sensitive Payments. To ICIA's knowledge,
neither FLEX nor any of its officers or key employees has (i) made any
contributions, payments or gifts to, or for the private use of, any
domestic or foreign governmental official, employee or agent where
either the payment or the purpose of such contribution, payment or
gift is illegal under the laws of the United States or any other
jurisdiction; (ii) established or maintained any unrecorded fund or
asset for any purpose or made any false or artificial entry on its
books; (iii) made any payment to any person with the intention or
understanding that any part of such payment was to be used for any
purpose other than that described in the documentation supporting such
payment; or (iv) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977.
(r) Records, Corporate Minutes and Stock Ledger. ICIA has
furnished to or permitted inspection by OCLI or its agents or
representatives of copies of the Records requested in writing by OCLI
or such agents or representatives. To ICIA's knowledge, the Records,
to the extent ICIA has been responsible for their maintenance, are
accurate and complete in all material respects.
(s) Labor Relations. To ICIA's knowledge, there is not
pending or threatened any labor dispute, strike or work stoppage which
affects or which would reasonably be expected to affect the Business
or interfere with the continued operation of the Business. To ICIA's
knowledge, neither FLEX nor any agent, representative or employee of
FLEX has committed any unfair labor practice. There has been no
strike, walkout or work stoppage involving any of the employees of
FLEX. To ICIA's knowledge, except as set forth in Paragraph 4(u) of
the Disclosure Schedule, no executive nor key employee or group of
employees has any plans to terminate his, her or their employment with
FLEX.
(t) Employee Benefit Plans. To ICIA's knowledge, except as
set forth in Paragraph 4(u) of the Disclosure Schedule, there are no
threatened or pending actions, suits, audits, or claims which have
been instituted or asserted by participants, beneficiaries or any
governmental agencies, or any other person or entity relating to the
Flex Products, Inc. 401(k) Plan and Trust Agreement (the "401(k)
Plan") or against FLEX (or any of its directors, officers or
employees) with respect to their participation in the 401(k) Plan (nor
is there any basis for such a claim). All reporting and disclosure
requirements applicable to the 401(k) Plan under ERISA, and the
Department of Labor and the Internal Revenue Service regulations
promulgated thereunder, and all other Applicable Law have been
satisfied. Except as set forth in Paragraph 4(u) of the Disclosure
Schedule, FLEX has not entered into any severance or similar
arrangement in respect of any present or former employee that will
result in any obligation, absolute or contingent, of the Buyers or
FLEX to make any payment to any present or former employee following
termination of employment.
(u) Proprietary Rights.
(i) To ICIA's knowledge, all patents and applications
for patents owned by FLEX and all patent applications filed by FLEX
which are currently pending, a list of all of which is attached to the
Disclosure Schedule as Appendix 3, are not subject to any delinquent
taxes, maintenance fees or actions which have resulted in the lapse of
any such patents or applications. There have not been any
interference actions or other judicial, arbitration or adversary
proceedings concerning such patents or applications for patents. To
ICIA's knowledge, each patent application is awaiting action by its
respective patent office or by FLEX, which action is not due in less
than 30 days. To ICIA's knowledge, the manufacture, use or sale of
products currently sold by the Business and covered by the patents and
applications for patents do not violate or infringe on any patent or
any proprietary or personal right of any entity or person, and
further, to ICIA's knowledge, no claim has been asserted that FLEX has
infringed or is infringing on any patent or other right belonging to
any entity. Except those to which OCLI is also a party, each license,
agreement, or arrangement to which FLEX is a party, whether as
licensee, licensor, indemnitor or otherwise, with respect to any
patent, application for patent, invention, design, model, process,
trade secret or formula is valid and binding on each of the parties to
the license, agreement or arrangement, except as the same may be
limited by bankruptcy, insolvency, moratorium and other laws of
general application affecting the enforcement of creditors' rights.
To ICIA's knowledge, FLEX owns, has the right and authority to use, or
can obtain the right and authority to use on reasonable commercial
terms, all inventions, trade secrets, processes, designs and formulae
as are necessary to enable it to conduct and to continue to conduct
all phases of the Business in the manner presently conducted by it,
and, to ICIA's knowledge, such use does not conflict with, infringe
on, or violate any patent or other proprietary rights of others. To
ICIA's knowledge, FLEX owned and had, at the appropriate time, the
right and authority to use all inventions, trade secrets, processes,
designs and formulae as necessary to enable it to conduct all phases
of the Business in the manner conducted by it in the past, and, to
ICIA's knowledge, such use did not conflict with, infringe, or violate
any patent or other proprietary rights of others.
(ii) To ICIA's knowledge, FLEX owns or holds adequate
licenses or other rights to use all trade names, trademarks, service
marks and copyrights necessary for the Business as now conducted by
it, and, to ICIA's knowledge, such use does not conflict with,
infringe on or otherwise violate any rights of others. To ICIA's
knowledge, each license, agreement or arrangement, whether as
licensor, licensee, indemnitor or otherwise, with respect to any trade
names, trademarks, service marks or applications for them, or any
copyrights, is valid and binding on the parties to such license,
agreement or arrangement, except as the same may be limited by
bankruptcy, insolvency, moratorium and other laws of general
application affecting the enforcement of creditors' rights.
(iii) To ICIA's knowledge and except as set forth in
Paragraph 4(v) of the Disclosure Schedule, FLEX is the sole owner of,
or the licensee of OCLI to, each material trade secret, free and clear
of any liens, encumbrances, restrictions or legal or equitable claims
of others. FLEX has taken reasonable security measures to protect the
secrecy and confidentiality of such material trade secrets. All of
FLEX's employees and any other person who, either alone or in concert
with others, developed, invented, discovered, derived, programmed or
designed such material trade secrets, or who have knowledge of or
access to information related to them, have been put on notice of
FLEX's rights and their obligations, and have entered into appropriate
confidentiality agreements. To ICIA's knowledge, none of such
material trade secrets is part of the public knowledge or literature,
nor have any of them been used, divulged or appropriated for the
benefit of any persons without the protection of reasonable security
measures.
(iv) To ICIA's knowledge and except for software
programs used by it which are generally commercially available or have
been made available by ICIA or OCLI prior to the Closing Date, FLEX
has proprietary rights in all software material to the Business as now
conducted by it, and to ICIA's knowledge, such software does not and
will not conflict with, infringe on or otherwise violate any rights of
others. FLEX has taken reasonable efforts to protect such proprietary
rights in all such software. All copies of such software, including
all copies of any source code, are in FLEX's possession and control.
(v) Notwithstanding any of the representations and
warranties made by ICIA in subsections (i), (ii), (iii) and (iv) of
this Section 5(u), ICIA makes no representations regarding the
"Intellectual Property Rights," as such term is defined in the JV
Agreement, transferred to FLEX by OCLI pursuant to the terms of
Section 3.1(a)(iv) of the JV Agreement.
(v) Non-Contravention. To ICIA's knowledge, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) conflict with or result in
any breach of or default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify, cancel or
require notice under any contract, agreement, mortgage, indenture,
license, instrument, trust or other arrangement to which FLEX is a
party or is either binding upon or enforceable against FLEX or its
assets; or (ii) violate any legally protected right of any individual
or entity or give to any individual or entity a right or claim against
the Buyers or FLEX's assets. To ICIA's knowledge, except as set forth
in Paragraph 4(w) of the Disclosure Schedule, no consent or approval
by any party to any contract, lease, agreement or other commitment to
which FLEX is a party, or by which it or its Properties is bound, is
required in connection with the execution and delivery of this
Agreement or the consummation by ICIA and ICIAH of the transactions
contemplated hereby.
(w) Machinery and Equipment. To ICIA's knowledge, all of
the Properties, including all of the material machinery, equipment,
furniture, fixtures, computer hardware and software and other tangible
property of FLEX currently in use for the Business are in good working
order and condition, subject to ordinary down time and maintenance and
normal wear and tear excepted.
(x) Information Relating to Material Contracts.
Paragraph 4(y) of the Disclosure Schedule lists all material contracts
(including employment contracts), licenses, purchase or customer
orders, commitments and other binding arrangements of FLEX (except
those to which SICPA or any of its Affiliates is a party); provided
that Paragraph 4(y) of the Disclosure Schedule may describe
generically, without description of specific items, any contracts,
licenses, commitments, purchase or customer orders or other binding
arrangements which were entered into in the ordinary course of
business and will not as to any individual item require FLEX or the
other party to make payments in excess of $100,000 (including
cancellation payments, if applicable) before the contract, lease,
license, commitment, purchase or customer order or other binding
arrangement can be canceled by FLEX. All such contracts, licenses,
permits, orders, commitments and other binding arrangements (except
those to which OCLI is a party, as to which ICIA makes no
representation or warranty under this Section 5(x)) are valid and
binding and are in full force and effect, except as the same may be
limited by bankruptcy, insolvency, moratorium and other laws of
general application affecting the enforcement of creditors' rights.
FLEX is not in default under or in breach or violation of any term or
provision of any of such contracts, leases, licenses, permits, orders,
commitments or other binding arrangements, and, to ICIA's knowledge,
no other party to any such contracts, leases, licenses, permits,
orders, commitments or other binding arrangements is in default
thereunder. ICIA has made, or has caused FLEX to make, available to
OCLI, true, correct and complete copies, including all amendments
thereto, of all such contracts, leases, licenses, permits, orders,
commitments or other binding arrangements.
(y) Relationships with Suppliers and Customers. No current
supplier to FLEX or customer of FLEX (other than OCLI or SICPA, as to
which ICIA makes no representation or warranty) has, to ICIA's
knowledge, notified FLEX or ICIA in writing of any intention to
terminate or substantially alter its existing business relationship
with FLEX. To ICIA's knowledge, except as set forth in Paragraph 4(z)
of the Disclosure Schedule, FLEX is not dependent upon any supplier of
a raw material or component where a second source of supply is not
readily available in the market.
6. Pre-Closing Covenants. The Parties agree as follows with
respect to the period between the execution of this Agreement and the
Closing:
(a) General. Each of the Parties shall use its reasonable
best efforts to take all action and to do all things necessary,
proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfaction,
but not waiver, of the closing conditions set forth in Section 8
below).
(b) Notices and Consents. ICIA shall cause FLEX to give
any notices to third parties, and shall cause FLEX to use its
reasonable best efforts to obtain any third party consents, that the
Buyers reasonably may request in connection with the matters referred
to in Sections 4(w) and 5(v) above. Each of the Parties shall (and
ICIA shall cause FLEX to) give any notices to, make any filings with,
and use its reasonable best efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies in
connection with the matters referred to in Section 3(a)(iii), Section
3(b)(iii), Section 4(w) and Section 5(v) above.
(c) Operation of Business. Except as contemplated hereby
with respect to capital expenditures relating to the Beta III Machine,
ICIA shall not cause or permit FLEX to engage in any practice, take
any action, or enter into any transaction outside the Ordinary Course
of Business. Without limiting the generality of the foregoing, ICIA
shall not cause or permit FLEX to (i) declare, set aside, or pay any
dividend or make any distribution with respect to its capital stock or
redeem, purchase, or otherwise acquire any of its capital stock, (ii)
otherwise engage in any practice, take any action, or enter into any
transaction of the sort described in Section 4(i) or Section 5(h)
above or (iii) repay ICIAH except with respect to matters other than
the Note or take further advances from ICIAH under the Note.
(d) Preservation of Business. Presuming reasonable
cooperation by OCLI, ICIA shall cause FLEX to use its reasonable best
efforts to keep the Business and Properties substantially intact,
including its present operations, physical facilities, working
conditions, and relationships with lessors, licensors, suppliers,
customers, and employees.
(e) Due Diligence. During the period from the date of this
Agreement to the Closing Date, ICIA shall permit, and shall cause FLEX
to permit, Buyers and each of them and their respective attorneys,
accountants, environmental consultants and other representatives
access to FLEX's Properties, books, contracts, commitments, documents
and records (including tax records), including those documents and
records pertaining to Process Know-How for the purpose of conducting
an investigation of all matters relating to the Business, Properties
and FLEX's assets and ICIA shall cause FLEX's personnel to assist
Buyers and each of them and their representatives in making such
investigations and shall cause the counsel, accountants and employees
of FLEX and its other representatives to be available to the Buyers
and each of them for such purposes; provided, however, that such
investigation shall be conducted in a manner that does not interfere
with the normal operations of FLEX. During such investigations Buyers
and each of them and their respective representatives shall have the
right to make copies of such records, files, tax returns and other
materials as they may deem advisable. Until the Closing, ICIA shall
cause FLEX's accountants to cooperate fully with Buyers and each of
them and their respective agents in making available all financial
information reasonably requested, including certain of the working
papers relating to the 1994 audited financial statements of FLEX
prepared by such accountants. Upon the reasonable request of Buyers
or either of them, ICIA shall cause FLEX to use its reasonable best
efforts to provide Buyers access to FLEX's customers, creditors,
suppliers and other Persons having business dealings with FLEX so long
as a FLEX or ICIA representative is also present or otherwise
participates in any such meeting, communication or other contact
between one or more of the Buyers or their representatives and each
FLEX customer, creditor, supplier or other Person. The Buyers shall
treat and hold as such any Confidential Information they receive (or
either of them receives) from ICIA, ICIAH and FLEX, and, as to SICPA,
from OCLI, or in each case, from any of the agents or representatives
of ICIA, ICIAH, FLEX or OCLI in the course of the reviews contemplated
by this Section 6(e), shall not use any of the Confidential
Information except in connection with this Agreement and, if this
Agreement is terminated for any reason whatsoever, shall return to
ICIA and FLEX all tangible embodiments (and all copies) of the
Confidential Information which are in their possession. If this
Agreement is terminated for any reason whatsoever and in the event
that OCLI or SICPA is requested or required (by oral question or
request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, OCLI or SICPA, as
the case may be, will notify ICIA and FLEX promptly of the request or
requirement so that ICIA and FLEX may seek an appropriate protective
order or waive compliance with the provisions of this Section 6(e).
If, in the absence of a protective order or the receipt of a waiver
hereunder, OCLI or SICPA, as the case may be, is, on the advice of
counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, OCLI or SICPA, as the case
may be, may disclose the Confidential Information to the tribunal;
provided, however, that the disclosing Party shall use its reasonable
best efforts to obtain, at the reasonable request of ICIA and FLEX, or
either of them, and at ICIA's sole expense, an order or other
assurance that confidential treatment will be accorded to such portion
of the Confidential Information required to be disclosed as ICIA or
FLEX, as the case may be, shall designate. Notwithstanding the
foregoing, except as provided in Section 8(a)(x) below and except to
the extent any such investigation conducted after the date of this
Agreement shall reveal a material breach of any of the representations
and warranties made herein by ICIA or ICIAH, the Buyers shall not have
any right to terminate this Agreement based on anything found in the
materials furnished pursuant hereto or in any other information
furnished pursuant hereto.
(f) Notice of Developments. ICIA shall give prompt written
notice to the Buyers of any material adverse development causing a
breach of any of the representations and warranties in Section 4 or
Section 5 above. Each Party shall give prompt written notice to the
others of any material adverse development causing a breach of any of
its own representations and warranties in Section 3 above. No
disclosure by any Party pursuant to this Section 6(f), however, shall
be deemed to amend or supplement the Disclosure Schedule or to prevent
or cure any misrepresentation, breach of warranty, or breach of
covenant.
(g) Exclusivity. Neither ICIA nor ICIAH shall (and ICIA
shall not cause or permit FLEX to) (i) solicit, initiate, or encourage
the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities of
FLEX, including, without limitation, the FLEX Shares, or any
substantial portion of the assets, of FLEX or the Note (including any
acquisition structured as a merger, consolidation, or share exchange)
or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to
do or seek any of the foregoing. ICIA shall not vote the FLEX Shares
in favor of any such acquisition structured as a merger,
consolidation, or share exchange. Notwithstanding the foregoing, the
restrictions set forth in this Section 6(g) shall terminate on the
first to occur of the termination of this Agreement or the Closing.
(h) Beta III Machine. Absent a breach by the other party
to the Purchase Order and a failure to cure any such breach within any
applicable cure period, ICIA shall not, and shall cause FLEX to not,
cancel the Purchase Order or commit any breach or default in the
performance of any of its terms prior to the Closing or the
termination of this Agreement. ICIA shall cause FLEX to expend such
funds as have been budgeted in FLEX's budget for the purpose of
purchasing and installing the Beta III Machine and ICIAH shall provide
FLEX with funds sufficient for that purpose provided, however, that
this obligation shall terminate at Closing.
7. Post-Closing Covenants. The Parties agree as follows with
respect to the period following the Closing:
(a) General. In case at any time after the Closing any
further action is necessary to carry out the purposes of this
Agreement, each of the Parties shall take such further reasonable
action (including the execution and delivery of such further
instruments and documents) as any other Party reasonably may request,
all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under
Section 9 below).
(b) Books and Records of FLEX. ICIA acknowledges and
agrees that from and after the Closing ICIA shall deliver to FLEX all
documents, books, records (including tax records), agreements and
financial data of any sort belonging to FLEX, provided ICIA may, at
its expense, make and maintain copies of same for its own records.
(c) Litigation Support. In the event and for so long as
any Party actively is contesting or defending against any action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing Date
involving FLEX, each of the other Parties shall use its reasonable
best efforts to cooperate with it and its counsel in the contest or
defense, make available their personnel, and provide such testimony
and access to their books and records as shall be necessary in
connection with the contest or defense so long as such action does not
have an effect materially detrimental to such party, all at the sole
cost and expense of the contesting or defending Party (unless the
contesting or defending Party shall be entitled to indemnification
therefor under Section 9 below).
(d) Transition. None of ICIA, ICIAH or any of their
respective Affiliates shall take any action that is designed or
intended to have the effect of discouraging any lessor, licensor,
customer, supplier, employee, consultant or other business associate
of FLEX from maintaining the same business relationships with FLEX
after the Closing as it maintained with FLEX prior to the Closing.
(e) Confidentiality. ICIA, ICIAH and their respective
Affiliates shall treat and hold as confidential all of the
Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement or in defending
itself against any claims relating hereto. In the event that ICIA or
ICIAH is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand, or similar process) to disclose
any Confidential Information, ICIA or ICIAH, as the case may be, will
notify the Buyers promptly of the request or requirement so that the
Buyers may seek an appropriate protective order or waive compliance
with the provisions of this Section 7(e). If, in the absence of a
protective order or the receipt of a waiver hereunder, ICIA or ICIAH,
as the case may be, is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand
liable for contempt, ICIA or ICIAH, as the case may be, may disclose
the Confidential Information to the tribunal; provided, however, that
the disclosing Party shall use its reasonable best efforts to obtain,
at the reasonable request and sole expense of the Buyers, or either of
them, an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to
be disclosed as the requesting Buyer or Buyers shall designate.
(f) Employment of FLEX's Personnel. For a period of at
least six months following the Closing, SICPA and OCLI shall cause
FLEX to retain all employees of FLEX as of the day immediately
preceding the Closing Date with total compensation and benefits to be
no less favorable in the aggregate than those in effect immediately
prior to the Closing; provided, however, that any such employee may be
terminated for Cause. "Cause" for purposes for this Section 7(f)
means (i) the willful and continued failure of an employee to perform
his or her duties, (ii) the conviction of an employee of a felony, or
(iii) the willful engaging by an employee in misconduct that is
materially injurious of FLEX.
(g) Taxes.
(i) Each of the parties hereto shall provide each of
the other parties hereto with such cooperation and information as any
of them reasonably may request of any other in filing any tax return,
amended return or claim for refund, determining a liability for taxes
or a right to a refund of taxes, or in conducting any audit or other
proceeding in respect of taxes. Such cooperation and information,
however, shall not include providing copies of income or franchise tax
returns or portions thereof. Each party shall make its employees
available on a mutually convenient basis to provide explanation of any
documents or information provided hereunder. Each party will retain
all returns, schedules and work papers and all material records or
other documents relating to tax matters of FLEX for the taxable year
ending after the Closing Date and for all previous years, until the
expiration of the statute of limitations of the taxable years to which
such returns and other documents relate (and, to the extent notified
by the other party in writing, any extensions thereof).
(ii) On and after the Closing Date, each party hereto
will afford or cause to be afforded to any other party who so requests
and its agents reasonable access to the properties, books, records,
employees and auditors of FLEX to the extent necessary to permit such
other party to determine any matter relating to the Business or its
rights and obligations hereunder for any period ending on or before
the Closing Date.
(iii) Each party hereto will hold, and will use its
best efforts to cause its officers, directors, employees, accountants,
counsel, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or
by other requirements of law, or otherwise for the purpose of
defending itself against any claims, all confidential documents and
information concerning each other party's business or the business of
Flex provided to it pursuant to this Section 7(g).
(iv) ICIA shall have the sole right to conduct any
audit or any other proceeding before any taxing authority, to prepare
and file any amended tax return, claim for refund or Tax Court
petition, to prosecute any such claim and to select counsel, to engage
in litigation and to consent to any settlement in connection therewith
with respect to any taxes relating to FLEX, its Properties or assets
or the Business, for any period during which ICIA owned any shares of
FLEX, and each other party hereto shall execute and deliver, or cause
to be executed and delivered, to ICIA or its designees, all
instruments (including without limitation, powers of attorney)
reasonably requested by ICIA in order to implement the provisions of
this Section 7(g).
(v) ICIA, at FLEX's cost and expense as normally
charged FLEX in prior years, shall prepare or cause to be prepared,
subject to FLEX's review and approval, all federal and state income
tax returns required for FLEX to file for FLEX's 1994 tax year.
(h) Funding of Research, Development and Engineering
Agreement. ICIA shall contribute to FLEX an aggregate of $658,277
pursuant to Section 7.9 of the JV Agreement, with each portion of such
contribution to be remitted by ICIA within 15 days following FLEX's
request, as "Costs" (as such term is defined in that certain Research,
Development and Engineering Agreement dated December 19, 1988, by and
between FLEX and OCLI) are incurred by FLEX pursuant to Section 4.1 of
said Research, Development and Engineering Agreement, less any amounts
contributed by ICIA to FLEX in respect of said Costs from and after
the date hereof to the Closing. The $658,277 amount is inclusive of a
current invoice for costs for March, 1995, in the amount of $30,844.
(i) Assignment of Personal Property Leases. ICIA shall use
its reasonable best efforts (without any obligation to incur out-of-
pocket third party expenses) to cause those automobile and other
personal property leases relating to automobiles and personal property
leased by ICIA or any of its Affiliates for the use and benefit of
FLEX to be assigned to FLEX, as lessee except to the extent such
personal property leases are by their terms not assignable.
(j) Payment of Insurance Premiums. ICIA shall pay to FLEX
one-half of the premium required to be paid by FLEX to secure so-
called "nose cover" or "gap" insurance coverage for any claim or
claims that are first made after Closing for any loss arising during
the period December 20, 1988 to Closing up to a maximum payment by
ICIA of $25,000.
8. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyers. The respective
obligations of each of the Buyers to consummate the transactions to be
performed by it in connection with the Closing shall be subject to
satisfaction (or the waiver by the Buyer for whose benefit such
condition is provided herein) of all of the following conditions:
(i) The representations and warranties set forth in
Section 3(a), Section 3(b), Section 4 and Section 5 above applicable
to such Buyer shall be true and correct in all material respects at
and as of the Closing Date.
(ii) ICIA and ICIAH shall have performed and complied
with all of their respective covenants applicable to such Buyer
hereunder in all material respects through the Closing.
(iii) FLEX shall have procured all of the material
third party consents specified in Section 6(b) above.
(iv) No action, suit, or proceeding shall be pending
before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) affect adversely the right of the Buyers to own the
FLEX Shares or the Note or to control FLEX, or (D) affect materially
and adversely the right of FLEX to own its Properties and assets and
to operate the Business (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect).
(v) ICIA and ICIAH each shall have delivered to the
Buyers a certificate to the effect that each of the conditions
specified above in Section 8(a)(i)-(iii) is satisfied in all respects.
(vi) The Parties and FLEX shall have received all
material authorizations, consents, and approvals of governments and
governmental agencies referred to in Section 6(b) above.
(vii) The Buyers shall have received from counsel to
ICIA opinions in form and substance as set forth in Exhibit B attached
hereto, addressed to the Buyers, and dated as of the Closing Date.
(viii) The Buyers shall have received from counsel to
ICIAH opinions in form and substance as set forth in Exhibit B
attached hereto, addressed to the Buyers, and dated as of the Closing
Date.
(ix) James A. Alles, Dennis Lancaster, and Trevor
Gazard, and their respective successors elected to office prior to the
Closing, shall have resigned, effective as of the Closing, as
directors of FLEX.
(x) Representatives of Buyers and each of them shall
have had access to all documents and information reasonably requested
pursuant to Section 6(e) above and, as to SICPA only, its due
diligence investigation with respect only to Process Know-How and the
names of the other party or parties to and technical specifications
contained in certain agreements that by their terms are not
disclosable and have not heretofore been disclosed to SICPA shall not
have revealed any condition, event or circumstance or set of
conditions, events or circumstances which would, either alone or in
the aggregate, materially negatively impact Flex's Business, operating
results or financial condition; provided, however, that SICPA shall
have the burden of proving that any such condition, event or
circumstance or set of conditions, events or circumstances so revealed
would, either alone or in the aggregate, materially negatively impact
Flex's Business, operating results or financial condition.
(xi) All actions to be taken by ICIA and ICIAH in
connection with consummation of the transactions contemplated hereby
shall have been taken and all certificates, opinions, instruments, and
other documents required to effect the transactions contemplated
hereby shall be reasonably satisfactory in form and substance to the
Buyers.
(xii) The other Buyer shall have tendered its portion
of the Share Purchase Price and the Note Purchase Price.
The Buyers may waive any condition specified in this Section 8(a) if
each of them executes a written waiver, or either Buyer may waive a
condition applicable only to it by executing a written waiver, so
stating at or prior to the Closing.
(b) Conditions to Obligations of ICIA and ICIAH. The
respective obligations of ICIA and ICIAH to consummate the
transactions to be performed by them in connection with the Closing
are subject to satisfaction (or the waiver of the Party for whose
benefit such condition is provided herein) of all of the following
conditions:
(i) The representations and warranties set forth in
Sections 3(c) and 3(d) above shall be true and correct in all material
respects at and as of the Closing Date.
(ii) The Buyers shall have performed and complied with
all of their respective covenants hereunder in all material respects
through the Closing.
(iii) No action, suit, or proceeding shall be pending
before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect).
(iv) The Buyers each shall have delivered to ICIA and
ICIAH a certificate to the effect that each of the conditions
specified above in Section 8(b)(i)-(ii) is satisfied in all respects.
(v) The Parties and FLEX shall have received all other
material authorizations, consents, and approvals of governments and
governmental agencies referred to in Section 6(b) above.
(vi) ICIA and ICIAH shall have received from counsel
to OCLI an opinion in form and substance as set forth in Exhibit C
attached hereto, addressed to ICIA and ICIAH, and dated as of the
Closing Date.
(vii) ICIA and ICIAH shall have received from counsel
to SICPA an opinion in form and substance as set forth in Exhibit D
attached hereto, addressed to ICIA and ICIAH, and dated as of the
Closing Date.
(viii) All actions to be taken by the Buyers in
connection with consummation of the transactions contemplated hereby
shall have been taken and all certificates, opinions, instruments, and
other documents required to effect the transactions contemplated
hereby will be reasonably satisfactory in form and substance to ICIA
and ICIAH.
(ix) Each Buyer shall have tendered its portion of the
Share Purchase Price and the Note Purchase Price.
ICIA and ICIAH may waive any condition specified in this Section 8(b)
if they execute a writing so stating at or prior to the Closing.
9. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Parties contained in this
Agreement shall survive the Closing and continue in full force and
effect (i) for a period of five (5) years following the Closing with
respect to the representations and warranties of ICIA contained in
Sections 4(o) and 5(n) above as such representations relate in any way
to environmental matters and (ii) for a period of three (3) years
following the Closing with respect to all other representations and
warranties of the Parties made herein.
(b) Indemnification Provisions by ICIA for Benefit of the
Buyers. In the event ICIA breaches any of its representations,
warranties, and covenants contained herein, and, if there is an
applicable survival period pursuant to Section 9(a) above, provided
that the Buyers (or either of them) make a written claim for
indemnification against ICIA pursuant to Section 11(h) below within
such survival period, then ICIA shall indemnify the Buyers from and
against the entirety of any Adverse Consequences the Buyers, or either
of them, may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the Buyers, or
either of them, may suffer after the end of any applicable survival
period) resulting from, arising out of, relating to, in the nature of,
or caused by the breach. The foregoing notwithstanding, ICIA shall
not have any obligation to indemnify the Buyers from and against any
Adverse Consequences resulting from, arising out of, relating to, in
the nature of, or caused by the breach of any representation or
warranty of ICIA contained in Section 4 or Section 5 above (A) until
the Buyers shall have suffered Adverse Consequences by reason of all
such indemnifiable matters in excess of $300,000 in the aggregate, and
then only to the extent of such excess, (B) in excess of an aggregate
ceiling (inclusive of interest and the costs of enforcing ICIA's
obligations hereunder, including all legal fees inclusive of legal
fees recoverable pursuant to Section 11(p)) as to each Buyer equal to
the sum of that portion of the Share Purchase Price and the Note
Purchase Price payable by such Buyer (the "Ceiling") which Ceiling, as
to each Buyer, shall be reduced in equal monthly increments on the
last day of each month, beginning with the last day of the month
immediately following the month in which the Closing shall occur and
ending twelve months thereafter, by an amount equal to one twelfth of
that portion of the Note Purchase Price paid by each Buyer, or (C) for
incidental, exemplary or consequential damages of the Buyers caused by
such breach. ICIA shall not have any obligation to indemnify OCLI
from and against any Adverse Consequences resulting from, arising out
of, relating to, in the nature of or caused in whole or in part by any
events or occurrences taking place on or before December 19, 1988. To
the extent indemnity is based upon claims, demands, liabilities or
damages made against or suffered by FLEX or the Buyers and relating
to, in the nature of, or caused by the breach of any representation or
warranty of ICIA contained in Section 4 or Section 5 above (which
shall include reasonable attorneys' fees incurred in the defense of
Third Party Claims), ICIA's obligation to indemnify each Buyer shall
be relative to the percentage of the total outstanding Common Stock of
FLEX to be purchased by such Buyer from ICIA, as contemplated in
Section 2 above (i.e., if a breach of any representation or warranty
of ICIA contained in Section 4 or Section 5 above results in total
Adverse Consequences to FLEX and the Buyers (which shall include
reasonable attorneys' fees incurred in the defense of third party
claims) of a given amount, then ICIA shall never be liable (i) to
SICPA for more than 40% of such amount and (ii) to OCLI for more than
20% of such amount). After the Closing, ICIA shall not be liable for
any claim under this Section 9 by a Buyer to the extent that such
claim is based upon the falsity, inaccuracy, incompleteness or breach
of a representation, warranty, covenant, condition, agreement or
obligation contained herein if such Buyer had knowledge of such
falsity, inaccuracy, incompleteness or breach prior to or at the
Closing Date.
(c) Indemnification Provisions by ICIAH for Benefit of the
Buyers. In the event ICIAH breaches any of its representations,
warranties, and covenants contained herein, and, if there is an
applicable survival period pursuant to Section 9(a) above, provided
that the Buyers (or either of them) make a written claim for
indemnification against ICIAH pursuant to Section 11(h) below within
such survival period, then ICIAH shall indemnify the Buyers from and
against the entirety of any Adverse Consequences the Buyers, or either
of them, may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the Buyers, or
either of them, may suffer after the end of any applicable survival
period) resulting from, arising out of, relating to, in the nature of,
or caused by the breach.
(d) Indemnification Provisions for Benefit of ICIA and
ICIAH. In the event either of the Buyers breaches any of their
respective representations, warranties, and covenants contained
herein, and, if there is an applicable survival period pursuant to
Section 9(a) above, provided that ICIA or ICIAH makes a written claim
for indemnification against the breaching Buyer pursuant to
Section 11(h) below within such survival period, then the breaching
Buyer (but not the other Buyer) shall indemnify each of ICIA and ICIAH
from and against the entirety of any Adverse Consequences ICIA and
ICIAH may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences ICIA and ICIAH may
suffer after the end of any applicable survival period) resulting
from, arising out of, relating to, in the nature of, or caused by the
breach.
(e) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification against any
other Party (the "Indemnifying Party") under this Section 9, then the
Indemnified Party shall promptly notify each Indemnifying Party
thereof in writing; provided, however, that no delay on the part of
the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is
prejudiced.
(ii) Any Indemnifying Party shall have the right to
assume the defense of the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party at any time within 30
days after the Indemnified Party has given notice of the Third Party
Claim; provided, however, that the Indemnifying Party shall conduct
the defense of the Third Party Claim actively and diligently
thereafter in order to preserve its rights in this regard; and
provided further that the Indemnified Party may retain separate co-
counsel at its sole cost and expense and participate in the defense of
the Third Party Claim.
(iii) So long as the Indemnifying Party has assumed
and is conducting the defense of the Third Party Claim in accordance
with Section 9(e)(ii) above, (A) the Indemnifying Party shall not
consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of
the Indemnified Party (not to be withheld unreasonably) unless the
judgment or proposed settlement involves only the payment of money
damages by one or more of the Indemnifying Parties and does not impose
an injunction or other equitable relief upon the Indemnified Party and
(B) the Indemnified Party shall not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party (not
to be withheld unreasonably).
(iv) In the event none of the Indemnifying Parties
shall assume and conduct the defense of the Third Party Claim in
accordance with Section 9(e)(ii) above, however, (A) the Indemnified
Party may defend against, and consent to the entry of any judgment or
enter into any settlement with respect to, the Third Party Claim in
any manner it reasonably may deem appropriate (and the Indemnified
Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith) and (B) the Indemnifying
Parties shall remain responsible for any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim to the
fullest extent provided in this Section 9.
(f) Insurance; Exclusive Remedy. The indemnities provided
by this Section 9 shall apply only to damages, losses, liabilities and
expenses for which the party seeking indemnification has not obtained
reimbursement through third party insurance; provided that the
Indemnified Party shall not be obligated to claim such insurance
unless the Indemnifying Party shall have agreed in form and substance
reasonably satisfactory to the Indemnified Party to reimburse the
Indemnified Party for all reasonable out of pocket costs, fees and
expenses incurred in connection therewith (including reasonable
attorneys' fees thereby incurred or incurred in the defense of Third
Party Claims asserted in such connection) and provide indemnification
to the extent required pursuant to this Agreement pending recovery of
insurance proceeds; provided further, however, that upon any such
recovery of insurance proceeds the Indemnified Party shall reimburse
the Indemnifying Party up to the amount of such insurance proceeds to
the extent the Indemnifying Party shall have made payments hereunder.
The sole and exclusive remedy of Buyers against ICIA or ICIAH and the
sole and exclusive remedy of ICIA or ICIAH against either Buyer for
the falsity, inaccuracy, incompleteness or breach of any
representation, warranty, covenant, condition, agreement or obligation
under this Agreement or any certificate or other writing delivered
pursuant hereto, or for any other matter arising from or related to
the transactions contemplated hereunder, shall be pursuant to this
Section 9 and all other remedies to which such parties may otherwise
have been entitled at law or in equity pursuant to applicable law or
otherwise are hereby waived to the fullest extent allowed by the law.
(g) Mitigation. Each party shall use its reasonable best
efforts to mitigate any liabilities and damages for which it may claim
indemnification under this Section 9.
(h) Adjustment to Purchase Price. All indemnity payments
made by ICIA to either Buyer or to ICIA by either Buyer shall be
deemed to be adjustments to the Share Purchase Price. All indemnity
payments made by ICIAH to either Buyer or to ICIAH by either Buyer
shall be deemed to be adjustments to the Note Purchase Price.
10. Termination.
(a) Termination of Agreement. Certain of the Parties may
terminate this Agreement as provided below:
(i) the Buyers and ICIA may terminate this Agreement
by mutual written consent at any time prior to the Closing;
(ii) either Buyer may terminate this Agreement by
giving written notice to ICIA at any time prior to the Closing (A) in
the event either of ICIA or ICIAH has breached any material
representation, warranty or covenant contained in this Agreement and
applicable to such Buyer in any material respect, such Buyer has
notified ICIA of the breach, and the breach has continued without cure
for a period of 30 days after the notice of breach or (B) if the
Closing shall not have occurred on or before May 15, 1995, by reason
of the failure of any condition precedent set forth in Section 8(a)
above (unless the failure results primarily from the Buyers themselves
breaching any representation, warranty or covenant contained in this
Agreement); and
(iii) ICIA or ICIAH may terminate this Agreement by
giving written notice to the Buyers at any time prior to the Closing
(A) in the event the Buyers, or either of them, have breached any
material representation, warranty, or covenant contained in this
Agreement in any material respect, ICIA has notified the Buyers of the
breach, and the breach has continued without cure for a period of 30
days after the notice of breach or (B) if the Closing shall not have
occurred on or before May 15, 1995, by reason of the failure of any
condition precedent set forth in Section 8(b) above (unless the
failure results primarily from either of ICIA or ICIAH themselves
breaching any representation, warranty or covenant contained in this
Agreement).
(b) Effect of Termination. If any Party terminates this
Agreement pursuant to Section 10(a) above, all rights and obligations
of the Parties hereunder shall terminate without any liability of any
Party to any other Party (except for any liability of any Party then
in breach); provided, however, that Sections 11(i) and 11(o) and the
confidentiality provisions contained in Section 6(e) above shall
survive termination.
11. Miscellaneous.
(a) Press Releases and Public Announcements. No Party
shall issue any press release or make any public announcement relating
to the subject matter of this Agreement prior to the Closing without
the prior written approval of the Buyers and ICIA; provided, however,
that any Party may make any public disclosure it shall believe in good
faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its best efforts to advise the other Parties
and furnish copies to them of the intended disclosure prior to making
the disclosure).
(b) No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person, including, without
limitation, any employee, officer or director of FLEX, other than the
Parties and their respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the
documents referred to herein) constitutes the entire agreement among
the Parties and supersedes any prior understandings, agreements, or
representations by or among the Parties, written or oral, to the
extent they related in any way to the subject matter hereof. The
foregoing notwithstanding, this Agreement does not supersede (i) that
certain Agreement between OCLI and SICPA dated as of December 13, 1994
or (ii) that certain Confidentiality Agreement between ICI Plc. and
SICPA dated as of September 29, 1994.
(d) Joint Venture Agreement.
(i) Excepting as otherwise provided in this
Section 11(d), the rights and obligations of ICIA, ICIAH and their
respective Affiliates (other than FLEX) set forth in that certain
Joint Venture Agreement dated December 19, 1988, among ICIA (as
successor in interest to ICIAH), OCLI and FLEX (the "JV Agreement")
shall, effective on the Closing, terminate and all terms, conditions
and obligations thereunder as they relate to ICIA shall be deemed
satisfied and released.
(ii) Excepting as otherwise set forth in this
Section 11(d), the rights and obligations of OCLI with respect to
ICIA, ICIAH and their respective Affiliates (other than FLEX) set
forth in the JV Agreement shall, effective on the Closing, terminate
and all terms, conditions and obligations with application to OCLI vis-
a-vis ICIA, ICIAH and their respective Affiliates (other than FLEX)
shall be deemed satisfied and released.
(iii) Notwithstanding the provisions of
subsections (i) and (ii) of this Section 11(d), the rights and
obligations of ICIA and OCLI set forth in Sections 7.5 (as modified
pursuant to this Section 11(d)) and 7.9 (as provided in Section 7(h)
hereinabove) and Articles 8, 9, 10 and 11 of the JV Agreement shall
remain in full force and effect and the agreement regarding
confidentiality set forth in Section 7.7 of the JV Agreement shall
remain in full force and effect except to the extent that Confidential
Information shall have been disclosed pursuant to the Letter of
Intent, the Confidentiality Agreements referred to therein or hereto.
Section 7.5 of the JV Agreement is hereby amended to extend its
duration to five years from the Closing Date.
(iv) In all respects other than as provided in this
Section 11(d) the JV Agreement shall remain in full force and effect.
Furthermore, this Section 11(d) is not intended to and does not affect
any of the agreements entered into between OCLI and FLEX pursuant to
Article 6 of the JV Agreement.
(v) Notwithstanding anything to the contrary in this
Section 11(d), any rights which ICIA may have pursuant to Articles 10
or 11 of the JV Agreement shall be in addition to any rights or
remedies it may have under applicable law, under this Agreement or
otherwise.
(e) Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and
their respective successors and permitted assigns. No Party may
assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the Buyers
and ICIA; provided, however, that each of the Buyers may (i) assign
any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform
its obligations hereunder (in any or all of which cases the assigning
Buyer nonetheless shall remain responsible for the performance of all
of its obligations hereunder).
(f) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
(g) Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in
any way the meaning or interpretation of this Agreement.
(h) Notices. Any notice, report or any other communication
required or permitted to be given by one Party to another Party by
this Agreement shall be in writing and either (i) served personally on
the other Party, (ii) sent by express, registered or certified first-
class mail, postage prepaid, addressed to the other party at its
address as indicated below, or to such other address as the addressee
shall have theretofore furnished to the other party by proper notice,
(iii) delivered by commercial courier to the other party, or (iv) sent
by telefax to the other party at its telefax number indicated below or
to such other telefax number as the party shall have theretofore
furnished to the other party by proper notice, with machine
confirmation of transmission. Notice shall be deemed given upon
actual physical delivery or upon the receipt of telefax, or on the
fifth day following the deposit in the mails as contemplated above:
If to ICIA:
ICI Americas Inc.
Concord Plaza
3411 Silverside Road
Wilmington, Delaware 19850
Attention: Barbara S. Curran, Esq.
Telefax No. 302-887-1178
with a copy to:
Pillsbury Madison & Sutro
725 South Figueroa Street, Suite 1200
Los Angeles, California 90017
Attention: Blase P. Dillingham, Esq.
Telefax No. 213-629-1033
If to ICIAH:
ICI American Holdings Inc.
Concord Plaza
3411 Silverside Road
Wilmington, Delaware 19850
Attention: Barbara S. Curran, Esq.
Telefax No. 302-887-1178
with a copy to:
Pillsbury Madison & Sutro
725 South Figueroa Street, Suite 1200
Los Angeles, California 90017
Attention: Blase P. Dillingham, Esq.
Telefax No. 213-629-1033
If to OCLI:
Optical Coating Laboratory, Inc.
2789 Northpoint Parkway
Santa Rosa, California 95407-7397
United States of America
Attention: Herbert M. Dwight, Jr.
Joseph C. Zils, Esq.
Telefax No. (707)525-7410
with a copy to:
John V. Erickson, Esq.
Collette & Erickson
555 California Street, Suite 4350
San Francisco, California 94104-1791
United States of America
Telefax No. (415)788-6929
If to SICPA:
Maurice A. Amon
SICPA Holding S.A.
2, rue de la Paix
1002 Lausanne, Switzerland
Telefax No. 41-21-312-6895
with a copy to:
William E. Horwich, Esq.
Proskauer Rose Goetz & Mendelsohn
555 California Street, Suite 4604
San Francisco, CA 94104-1791
United States of America
Telefax No. (415)956-2324
Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by
giving the other Parties notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of
California without giving effect to any choice or conflict of law
provision or rule (whether of the State of California or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of California.
(j) Amendments and Waivers. No amendment of any provision
of this Agreement shall be valid unless the same shall be in writing
and signed by the Buyers, ICIA and ICIAH. No waiver by any Party of
any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to
any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining terms
and provisions hereof or the validity or enforceability of the
offending term or provision in any other situation or in any other
jurisdiction.
(l) Expenses. Each of the Parties and FLEX shall bear its
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated
hereby. ICIA and ICIAH represent, warrant and covenant that FLEX has
not borne and shall not bear any of ICIA's or ICIAH's costs and
expenses (including any of their legal fees and expenses) in
connection with this Agreement or any of the transactions contemplated
hereby.
(m) Construction. The Parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the Parties and
no presumption or burden of proof shall arise favoring or disfavoring
any Party by virtue of the authorship of any of the provisions of this
Agreement. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires
otherwise. The word "including" shall mean including without
limitation.
(n) Incorporation of Exhibits, Appendices, and Schedules;
Construction of Disclosure Schedule. The Exhibits, Appendices, and
Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof. The inclusion of any item in one
paragraph of the Disclosure Schedule shall be deemed for purposes of
this Agreement to be an inclusion of such item in all other paragraphs
of the Disclosure Schedule in which such item should have been listed
pursuant to this Agreement.
(o) Consent to Jurisdiction and Forum Selection. The
parties hereto agree that all actions or proceedings arising in
connection with this Agreement shall be tried and litigated
exclusively in the State and Federal courts located in San Francisco,
California. The aforementioned choice of venue is intended by the
parties to be mandatory and not permissive in nature, thereby
precluding the possibility of litigation between the parties with
respect to or arising out of this Agreement in any jurisdiction other
than that specified in this Section 11(o). Each party hereby waives
any right it might have to assert the doctrine of forum non conveniens
or similar doctrine or to object to venue with respect to any
proceeding brought in accordance with this Section 11(o), and
stipulates that the State and Federal courts located in San Francisco,
California shall have in personam jurisdiction and venue over each of
them for the purpose of litigating any dispute, controversy or
proceeding arising out of or relating to this Agreement. Each party
hereby authorizes and accepts service of process sufficient for
personal jurisdiction in any action against it as contemplated by this
Section 11(o) if given in the manner set forth in Section 11(h)
hereof. Any final judgment rendered against a party in any action or
proceeding shall be conclusive as to the subject of such final
judgment and may be enforced in any other jurisdictions in any manner
provided by law.
(p) Attorneys' Fees and Costs. In the event of any
litigation, arbitration or proceeding or other dispute arising as a
result of this Agreement, the prevailing party shall be entitled, in
addition to any other damages assessed, to its reasonable attorneys'
fees and all other costs and expenses incurred in connection with
settling or resolving such dispute. The attorneys' fees which the
prevailing party shall be entitled to recover shall include any fees
for prosecuting or defending any appeal and supplemental proceedings
until the final judgment is satisfied in full, and for any post-
judgment proceedings to collect or enforce the judgment. Subject to
the provisions of local law, the prevailing party shall recover all
such fees, costs or disbursements as costs taxable by the court or
arbiter in the action or proceeding itself without the necessity for a
cross-action by the prevailing party.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement on as of the date first above written.
OPTICAL COATING LABORATORY, INC.
By: /s/HERBERT M. DWIGHT, JR.
Herbert M. Dwight, Jr.,
Chief Executive
Officer
SICPA HOLDING, S.A.
By: /s/EDUARDO BERUFF
Eduardo Beruff
Authorized Signatory
By: /s/WILLIAM E. HORWICH
William E. Horwich
Authorized Signatory
ICI AMERICAS INC.
By: ____________________________
Its: ____________________________
ICI AMERICAN HOLDINGS INC.
By: ____________________________
Its: ____________________________
FLEX PRODUCTS, INC.
By: /s/MICHAEL SULLIVAN
President
EXHIBIT A
[ICI Letterhead]
PROMISSORY NOTE
For value received Flex Products, Inc. (hereinafter called Flex)
promises to pay to the order of ICI American Holdings Inc.
(hereinafter called Holdings) by wire transfer or as agreed by the
parties hereto, at its offices in Wilmington, Delaware, the aggregate
unpaid principal amount set forth on the reverse side hereof, but not
more than Fifteen Million Dollars ($15,000,000) in lawful money of the
United States of America not later than May 31, 1995.
Flex also promises to pay interest to Holdings in like money at
said office by wire transfer or as agreed by the parties hereto from
the date hereof at a rate equal to the Prime Rate as published by
Citibank, N.A. plus 1% as determined on the date of this Note. Said
interest shall be calculated at the termination of this Note based on
the average daily aggregate principal amount outstanding during the
term of the Note times the number of actual days elapsed over a year
of 360 days. Interest payments will be due to Holdings at the
termination of the Note.
Flex shall be entitled to prepay all or a portion of the
aggregate principal amount outstanding and accrued interest thereon
prior to May 31, 1995 by giving written notice to Holdings not less
than three business days prior to the date of its intention to make
such prepayment.
In the event Holdings ceases to own in excess of fifty percent
(50%) of the voting stock of Flex then Holdings may by notice in
writing to Flex declare the entire principal amount outstanding and
interest accrued thereon to be due and payable immediately, and upon
any such declaration the same shall become immediately due and
payable.
A commitment fee of 3/8% (three-eighths percent) per annum will
be payable on the unused balance ($15 million - average daily
aggregate principal amount outstanding) for the term of the loan on
May 31, 1995.
ICI AMERICAN HOLDINGS INC. FLEX PRODUCTS, INC.
By /s/ N. SCHUEFTAN By /s/W.H. MAYERS
TREASURER
REVERSE OF NOTE
AVERAGE
AGGREGATE UNPAID AGGREGATE DAILY
DATE PRINCIPAL AMOUNT PRINCIPAL AMOUNT
April 30, 1995 $11,695,000.00 $11,320,535.71
INTEREST SIGNATURE
RATE OF BORROWER
10% /s/WHM (Initialed)
EXHIBIT B
[PILLSBURY, MADISON & SUTRO LETTERHEAD]
May 8, 1995
Optical Coating Laboratory, Inc.
2789 Northpoint Parkway
Santa Rosa, California 95407-7397
SICPA Holding, S.A.
2, rue de la Paix
1002 Lausanne, Switzerland
Re: Agreement for the Purchase of Stock and Note of Flex
Products, Inc.
Dear Sirs:
We have acted as special counsel to ICI Americas Inc., a
Delaware corporation ("ICIA") and ICI American Holdings Inc., a
Delaware corporation ("ICIAH"), (collectively, the "Sellers" and each,
individually, a "Seller"), with respect to the negotiation and
execution of that certain Stock and Note Purchase Agreement dated May
1, 1995 (the "Agreement"), by and among SICPA Holding S.A. ("SICPA"),
Optical Coating Laboratory, Inc. ("OCLI"), the Sellers and for certain
limited purposes, Flex Products, Inc., a Delaware corporation
("Flex"). Terms defined in the Agreement have the same meaning
herein. This opinion is rendered pursuant to Sections 8(a)(vii) and
8(a)(viii) of the Agreement.
We have examined executed copies of the Agreement and such
other documents and certificates of public officials and representa
tives of Sellers and/or Flex as we have deemed necessary as a basis
for the opinions expressed herein. As to questions of fact material
to such opinions, we have, when relevant facts were not independently
established, relied upon certificates of officers of Sellers and/or
Flex.
We have assumed the genuineness of all signatures and
documents submitted as originals, that all copies submitted to us
conform to the originals, the legal capacity of all natural persons,
and as to documents executed by entities other than Sellers, that each
such entity has complied with any applicable requirement to file
returns and pay taxes under the California Franchise Tax law and had
the power to enter into and perform its obligations thereunder, and
that such documents have been duly authorized, executed and delivered
by, and are binding upon and enforceable against, such entities.
We have assumed the completeness, correctness and accuracy
of all matters opined upon by William J. Hutchinson, Esq. in his
opinion relating to the transactions contemplated by the Agreement and
delivered concurrently herewith and have relied thereupon in rendering
this opinion.
We assume that neither SICPA nor OCLI knows of any
agreements, understandings or negotiations between the parties not set
forth in the Agreement that would modify the provisions thereof or
rights and obligations of the parties thereunder.
We express no opinion as to the laws of any jurisdiction
other than California, Delaware and the United States, nor as to the
effect on the transaction of the antitrust laws or securities laws of
any such jurisdiction.
Based on the foregoing and subject to the qualifications set
forth below, it is our opinion that:
Flex is a corporation duly organized, validly existing
and in good standing under the laws of Delaware, and is duly qualified
and in good standing to do business as a foreign corporation in
California and Pennsylvania.
The Agreement is a valid and binding obligation of each
Seller, enforceable in accordance with its terms and the modification
of the Joint Venture Agreement contained in Section 11(d) of the
Agreement is valid and binding upon ICIA.
The entire authorized capital stock of Flex presently
consists of 1,000 shares of Common Stock, $0.01 par value, of which a
total of 200 shares are presently issued and outstanding, and 1,000
shares of Preferred Stock, $0.01 par value, of which 80 shares have
been designated as Series A Preferred Stock and 12 shares have been
designated as Series B Preferred Stock, and of which no shares of
Series A Preferred Stock and 12 shares of Series B Preferred Stock are
presently issued and outstanding. All of the FLEX Shares have been
duly authorized, are validly issued, fully paid and nonassessable.
The opinions set forth above are subject to the following
qualifications:
Our opinion in paragraph 2 above is subject to and
limited by: (i) the effect of bankruptcy, insolvency, reorganization,
receivership, conservatorship, arrangement, moratorium or other laws
affecting or relating to the rights of creditors generally; (ii) the
rules governing the availability of specific performance, injunctive
relief or other equitable remedies and general principles of equity,
regardless of whether considered in a proceeding in equity or at law;
(iii) the effect of applicable court decisions, invoking statutes or
principles of equity, which have held that certain covenants and
provisions of agreements are unenforceable where the breach of such
covenants or provisions imposes restrictions or burdens upon an
obligor, and it cannot be demonstrated that the enforcement of such
restrictions or burdens is necessary for the protection of the
creditor, or which have held that the creditor's enforcement of such
covenants or provisions under the circumstances would violate the
creditor's covenants of good faith and fair dealing implied under
California law; (iv) the effect of statutes and rules of law which
cannot be waived prospectively by an obligor or, (iv) the effect of
California Civil Code sections 1670.5, 1698 and 1717 and California
Business & Professions Code sections 16600 and 16601, and sections
cited therein, and of cases applying such statutes and cases denying
enforcement of indemnities against the indemnitee's negligence,
wrongdoing or violation of law.
We render no opinion as to the enforceability of
Section 11(o) of the Agreement to the extent it purports to confer
subject matter jurisdiction upon any federal court of the United
States in the absence of the statutory requirements for such
jurisdiction.
This opinion is rendered solely for your information in
connection with the transaction described above and may not be relied
upon by any other person for any purpose without our prior written
consent.
Very truly yours,
PILLSBURY, MADISON & SUTRO
[ICI LETTERHEAD]
EXHIBIT C
[COLLETTE & ERICKSON LETTERHEAD]
May 8, 1995
ICI Americas Inc. and
Concord Plaza
3411 Silverside Road
Wilmington, Delaware 19850
ICI American Holdings Inc.
Concord Plaza
3411 Silverside Road
Wilmington, Delaware 19850
RE: STOCK AND NOTE PURCHASE AGREEMENT BY AND AMONG OPTICAL
COATING LABORATORY, INC., SICPA HOLDING, S.A., ICI AMERICAS
INC., ICI AMERICAN HOLDINGS INC. AND FLEX PRODUCTS, INC.
Ladies and Gentlemen:
We have acted as counsel to Optical Coating Laboratory, Inc., a
Delaware corporation (the "Company"), in connection with the execution
and delivery by the Company of that certain Stock and Note Purchase
Agreement dated May 1, 1995 (the "Agreement"), by and among The
Company, SICPA Holding S.A. ("SICPA"), ICI Americas Inc. ("ICIA"), ICI
American Holdings Inc.("ICIAH") and Flex Products, Inc. ("Flex"), for
the purchase by the Company and SICPA of all of ICIA's right, title
and interest in and to the issued and outstanding Common Stock and
Series B Preferred Stock of Flex held by ICIA (the "Flex Shares") and
for the purchase of all of ICIAH's right, title and interest in and to
that certain promissory note of Flex payable to the order of ICIAH and
dated April 30, 1995 (the "Note"). This firm also represents the
Company on a regular basis, although our engagement has been limited
to specific matters as to which we have been consulted by the Company.
We are delivering this opinion to you pursuant to Section 8(b)(vi) of
the Agreement. All capitalized terms used and not expressly defined
herein shall have the meaning given to them in the Agreement.
In connection with the foregoing we have been furnished with
originals or copies certified to our satisfaction of such corporate or
other records of the Company, with such certificates of officers and
representatives of the Company, and with such other documents, and we
have made such other examinations, investigations and inquiries of the
Company and its officers, as we have deemed necessary as a basis for
the opinions expressed below.
In connection with this opinion, we have examined and relied upon
originals, or copies certified or otherwise identified to our
satisfaction as being true copies, of the following, each dated this
date unless otherwise indicated:
A. The Agreement and all exhibits and schedules attached
thereto;
B. A Certificate of the Secretary of the Company (the
"Secretary's Certificate") certifying as to (i) the Certificate of
Incorporation of the Company, (ii) the Bylaws of the Company and (iii)
resolutions adopted by the Board of Directors of the Company;
C. A certificate executed by Herbert M. Dwight, President,
Chief Executive Officer and Chief Financial Officer of the Company,
and Joseph C. Zils, Vice President, General Counsel and Secretary of
the Company (the "Company's Certificate"), certifying as to certain
factual matters;
D. A certificate of the Secretary of State of Delaware, dated
April 24, 1995, attesting to the continued corporate existence and
good standing of, and current payment of franchise taxes by, the
Company in that state;
E. A certificate of the Secretary of State of California, dated
April 24, 1995, attesting that the Company is qualified to transact
business as a foreign corporation in that state;
F. A certificate of the Franchise Tax Board of California,
dated April 24, 1995, attesting to the good standing of the Company
with that agency; and
G. Originals, or copies certified or otherwise identified to
our satisfaction, of such other documents, records, instruments and
certificates of public officials as we have deemed necessary or
appropriate to enable us to render this opinion.
We have also examined originals or copies of the documents listed
in the Company's Certificate and in the Secretary's Certificate.
In conducting our examination we have assumed, without
investigation, the genuineness of all signatures, the correctness of
all certificates, the authenticity of all certificates and documents
submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and
the authenticity of the originals of such copies, and the accuracy and
completeness of all records made available to us by the Company. We
have also assumed, without investigation, the accuracy of the
representations and warranties as to factual matters made by any party
in the Agreement and the accuracy of the representations and
statements made to us by officers or employees of the Company and by
public officials. In making our examination of documents and
instruments executed by any person or entity, we have assumed, without
investigation, that each such person or entity has (i) the power,
capacity, right and legal authority to enter into and perform all of
its obligations under such documents and instruments, (ii) duly
authorized all requisite action with respect to such documents and
instruments, (iii) duly executed and delivered such documents and
instruments and (iv) complied with any applicable requirement to file
returns and pay taxes under the California Franchise Law. We have
not, however, made the assumptions set forth in the immediately
preceding sentence with respect to the Company or its power, capacity,
right, authority, authorization or execution of documents and
instruments.
Whenever a statement below is qualified by the phrases "known to
us" or "to our knowledge," it is intended to indicate that during the
course of our representation of the Company, no information that would
give us actual knowledge of, or a reasonable belief concerning, the
inaccuracy of such statement has come to the attention of those
attorneys in this firm who have rendered legal services to the
Company. Except as otherwise expressly indicated, we have not
undertaken any independent investigation to determine the accuracy of
such statement, and any limited inquiry undertaken by us during the
preparation of this opinion letter should not be regarded as such an
investigation. No inference as to our knowledge of any matters
bearing on the accuracy of any such statement should be drawn from the
fact of our representation of the Company.
In rendering the opinions hereinafter expressed, we have also
assumed, without investigation, that the following facts are true:
Each of ICIA and ICIAH will enforce its respective rights
under the Agreement in circumstances and in a manner in which it is
commercially reasonable to do so, and in accordance with all
procedural requirements under applicable law.
Other than the Company, no party to the Agreement or any
agreement relating thereto is subject to any statute, rule, or
regulation, or to any impediment to which contracting parties are
generally not subject, which requires the Company or any other person
or party to obtain the consent of or to make a declaration or filing
with any governmental authority or other person or entity.
3. None of ICIA, ICIAH or SICPA knows of any agreements,
understandings or negotiations among the parties not set forth in the
Agreement that would modify the terms or rights and obligations of the
parties thereunder.
The opinions expressed below are subject to the following
qualifications:
Our opinions below are subject to the following: (a) the
effect of bankruptcy, insolvency, fraudulent conveyance,
reorganization, arrangement, moratorium and other similar laws now or
hereafter in effect relating to or affecting the rights of creditors
generally; (b) the rules governing the availability of specific
performance, injunctive relief or other equitable remedies and general
principles of equity, regardless of whether considered in a proceeding
in equity or at law; (c) the compliance or noncompliance with
applicable anti-fraud statutes under the rules and regulations
applicable to state and federal laws concerning the purchase or sale
of securities; (d) the limitations upon the ability of the Company or
any other party to the Agreement to waive any rights, claims or
defenses available to such party at law or in equity pursuant to
statute or otherwise and (e) the effect of California Civil Code
Sections 1670.5, 1698 and 1717 and California Business & Professions
Code Sections 16600 and 16601, and sections cited therein, and of
cases applying such statutes and cases denying enforcement of
indemnities against the indemnitee's negligence, wrongdoing or
violation of law.
2. We are members of the Bar of the State of California and do
not hold ourselves out as experts on the law of any other state.
Consequently, our opinions below are limited to the effect of the laws
of the State of California and of the federal laws of the United
States and, with respect only to our opinions expressed in paragraphs
(a) and (c) below, of the General Corporation Law of the State of
Delaware. Accordingly, we express no opinion with respect to the laws
of any other jurisdiction, or the effect thereof, on the transactions
contemplated by the Agreement. Furthermore, we express no opinion
with respect to the effect on the transactions contemplated by the
Agreement of the antitrust laws or securities laws of any
jurisdiction.
3. We express no opinion as to the enforceability of Section
11(o) of the Agreement to the extent it purports to confer subject
matter jurisdiction upon any federal court of the United States in the
absence of the statutory requirements for such jurisdiction.
4. Our opinions below are limited to matters expressly set
forth in this opinion letter, and no opinion is to be implied or may
be inferred beyond the matters expressly so stated.
Based upon and subject to the foregoing, we are of the opinion
that:
The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and is qualified to do business and in good standing as a foreign
corporation in the State of California.
The Agreement is a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, and the
modification of the JV Agreement as set forth in Section 11(d) of the
Agreement is valid and binding upon the Company.
The Agreement has been duly authorized by all necessary
corporate action on the part of the Company, and has been duly
executed and delivered by the Company.
Execution and delivery of the Agreement and performance
thereunder by the Company of its obligations thereunder do not
conflict with or violate (i) the Company's Certificate of
Incorporation or Bylaws, (ii) to our knowledge, any applicable law or
regulation (other than ordinances and regulations of counties and
political subdivisions thereof), or (iii) to our knowledge, any order
of court or arbitrator.
This opinion letter is rendered solely for your benefit in
connection with the transaction described in the Agreement. Without
our prior written consent, this opinion letter may not be (a) relied
upon by any other person or entity or used for any other purpose; (b)
quoted in whole or in part or otherwise referred to in any report or
document; or (c) furnished (the original or copies thereof) to any
person or entity except in connection with the enforcement of the
Agreement by you.
Very truly yours,
/S/COLLETTE & ERICKSON
JVE:JGP:cs
EXHIBIT D
[PROSKAUER ROSE GOETZ & MENDELSOHN LETTERHEAD]
May 8, 1995
ICI Americas Inc.
Concord Plaza
3411 Silverside Road
Wilmington, Delaware 19850
ICI American Holdings Inc.
Concord Plaza
3411 Silverside Road
Wilmington, Delaware 19850
Re: Agreement For The Purchase Of Stock And Note Of Flex
Products, Inc.
Dear Sirs:
We have acted as counsel to SICPA Holding S.A., a Swiss
corporation ("SICPA"), with respect to the negotiation and execution
of that certain Stock And Note Purchase Agreement dated May 1, 1995
(the "Agreement"), by and among SICPA, Optical Coating Laboratory,
Inc., ICI Americas Inc. ("ICIA"), ICI American Holdings Inc.("ICIAH")
and for certain limited purposes, Flex Products, Inc. Terms defined
in the Agreement have the same meaning herein. This opinion is
rendered pursuant to Section 8(b)(vii) of the Agreement.
Examination Of Documents. In rendering this opinion, we
have examined originals, or copies certified or otherwise identified
to our satisfaction as being true copies, of the following documents
(collectively, the "Reference Documents"):
The Agreement and all of its exhibits and schedules.
Resolutions adopted by the membres du Conseil
d'Administration (the Swiss equivalent of the Board of Directors) of
SICPA.
A Reliance Certificate provided to us by Mr. Nicklaus
Huber, general legal counsel to SICPA (the "Reliance Certificate"), a
copy of which is attached hereto as Exhibit A.
Assumptions.
In the examination of the Reference Documents, we have
assumed (i) the genuineness of all signatures; (ii) the authenticity
of all documents submitted to us as originals and the conformity to
originals of documents submitted to us as certified or photostatic
copies; (iii) that all signatories (except the signatories for SICPA
on the Agreement) have adequate power and authority and have taken all
necessary actions to execute and deliver all of these documents; (iv)
that each person signing a document is a competent adult person not
operating under any legal disability, duress or having been defrauded
in the execution of such documents; and (v) as to documents executed
by entities other than SICPA, that each such entity has complied with
any applicable requirement to file returns and pay taxes under the
California Franchise Tax law and had the power to enter into and
perform its obligations thereunder, and that such documents have been
duly authorized, executed and delivered by, and are binding upon and
enforceable against, such entities.
We have relied, as to all matters of fact upon which
the conclusions of law expressed herein are based, exclusively upon
the Reference Documents. We have not independently verified the
information set forth in any of these Reference Documents.
For purposes of this opinion, we have made the
following additional assumptions:
The representations set forth in the Reliance
Certificate are true and correct in all respects.
Except for the Agreement and the other documents
and instruments contemplated therein, there are no other documents,
understandings or agreements between or among the parties which would
expand or otherwise modify the obligations of the respective parties
to the Agreement regarding the transactions contemplated thereby and
which would have an effect on the opinions rendered herein, and
neither ICIA nor ICIAH knows of any agreements, understandings or
negotiations between or among the parties not set forth in the
Agreement that would modify the terms or rights and obligations of the
parties thereunder.
As to the status and good standing of SICPA under
Swiss law, and as to matters relating to the effectiveness and
enforceability of SICPA's consents, as set forth in the Agreement, to
jurisdiction, forum selection and consent to service of process in the
courts or similar tribunals of Switzerland when applied to SICPA, we
have relied exclusively upon the Reliance Certificate.
As to matters relating to the effectiveness and
enforceability of SICPA's consent to jurisdiction, forum selection and
consent to service of process under the Agreement in the courts of the
States of California and Delaware and in the courts of the United
States, we have relied exclusively upon general legal jurisdictional
principles of "minimum contacts".
Whenever a statement herein is qualified by "known to
us", "to our current actual knowledge", "to the best of our knowledge"
or similar phrase, it is intended to indicate that, during the course
of our representation of SICPA, no information that would give us
current actual knowledge of the inaccuracy of such statement has come
to the attention of those attorneys in this firm who have rendered
legal services in connection with the representation described in the
introductory paragraph of this opinion letter. However, except as
otherwise expressly indicated, we have not undertaken any independent
investigation to determine the accuracy of such statement, and any
limited inquiry undertaken by us during the preparation of this
opinion letter should not be regarded as such an investigation; no
inference as to our knowledge of any matters bearing on the accuracy
of any such statement should be drawn from the fact of our
representation of SICPA in other matters in which such attorneys are
not involved.
Opinion. Based on the foregoing and subject to the
conditions, limitations, observations and further assumptions set
forth herein, it is our opinion that:
SICPA is a corporation duly organized, validly existing
and in good standing under the laws of Switzerland.
The Agreement is a valid and binding obligation of
SICPA, enforceable in accordance with its terms.
The Agreement has been duly authorized by all necessary
corporate action on the part of SICPA, and has been duly executed and
delivered by SICPA.
The execution and delivery of the Agreement and
performance by SICPA of its obligations thereunder do not conflict
with or violate its charter documents corresponding to articles of
incorporation and bylaws, or to the best of our knowledge, any
applicable law or regulation or any order of court or arbitrator or
similar authority known to us, and to the best of our knowledge, do
not conflict with and will not constitute a material breach of the
provisions of any material contract known to us by which SICPA is
bound.
Under California, federal, Delaware and Swiss law,
Section 11(o) of the Agreement, including without limitation the
consent to jurisdiction, forum selection and consent to service of
process provisions of such section, would be upheld by the courts of
the States of California and Delaware, the federal courts of the
United States and the courts or similar tribunals of Switzerland when
applied to SICPA.
Qualifications To And Limitations Of Opinion. This opinion
is subject to, and limited by, the following qualifications,
exceptions and reservations:
The effect of bankruptcy, insolvency, reorganization
and similar laws or equitable principles relating to or limiting
creditors' rights generally and moratorium laws from time to time in
effect, including, without limitation, the applicability or effect of
Section 548 of the Bankruptcy Code, 11 U.S.C. Section 548, or any
other federal or state laws regarding fraudulent conveyances or
transfers.
The effect of general equitable principles, including
the discretion of any court of competent jurisdiction in awarding
equitable remedies including, without limitation, specific performance
or injunctive relief.
The effect of applicable court decisions invoking
statutes or principles of equity, which have held that certain
covenants and provisions of agreements are unenforceable where the
breach of such covenants or provisions imposes restrictions or burdens
upon an obligor, and it cannot be demonstrated that the enforcement of
such restrictions or burdens is necessary for the protection of the
creditor, or which have held that the creditor's enforcement of such
covenants or provisions under the circumstances would violate the
creditor's covenants of good faith and fair dealing implied under
California law.
The effect of statutes and rules of law which cannot be
waived prospectively by an obligor.
The effect of California Civil Code sections 1670.5,
1698 and 1717 and California Business & Professions Code sections
16600 and 16601, and sections cited therein, and of cases applying
such statutes and cases denying enforcement of indemnities against the
indemnitee's negligence, wrongdoing or violation of law.
The effect of court decisions construing or applying
California law which have held that certain covenants or provisions of
agreements are unenforceable where enforcement of such provisions or
covenants would violate implied or expressed covenants of good faith
and fair dealing.
In addition, we render no opinion as to the enforceability of
Section 11(o) of the Agreement to the extent it purports to confer
subject matter jurisdiction upon any federal court of the United
States in the absence of the statutory requirements for such
jurisdiction; and we express no opinion as to the laws of any
jurisdiction other than California, Delaware, Switzerland and the
United States, nor as to the effect on the transaction of the
antitrust laws or securities laws of any such jurisdiction.
This opinion is rendered to you solely in connection with the
transactions contemplated by the Agreement and may not be relied upon
by any other person or for any other purposes. This opinion may not
be quoted or used, in whole or in part, for any other purpose or
delivered to any person, except with our prior written consent. This
opinion is stated as of the date hereof, and we assume no
responsibility to advise you or any other person
or entity of changes which may hereafter be brought to our attention.
Very truly yours,
PROSKAUER ROSE GOETZ & MENDELSOHN
By /s/WILLIAM E. HORWICH
WILLIAM E. HORWICH, a member
of the firm
WEH:mmb
cc: Maurice A. Amon
Julian Briant
Jeremy Lewis
RELIANCE CERTIFICATE
The undersigned, NICKLAUS H. HUBER, furnishes this certificate
knowing that it will be relied upon by Proskauer Rose Goetz &
Mendelsohn in rendering their opinion to ICI Americas Inc. ("ICIA")
and ICI American Holdings Inc.("ICIAH") in connection with the
negotiation and execution of that certain Stock And Note Purchase
Agreement (the "Agreement") by and among SICPA Holding S.A., a Swiss
corporation ("SICPA"), Optical Coating Laboratory, Inc. ("OCLI"), ICIA
and ICIAH. Capitalized terms utilized herein, unless specifically
defined herein, shall have the meaning attributed thereto in the
Agreement.
For the purposes of giving this Reliance Certificate, the
undersigned has examined a "red-lined" draft, dated April 27, 1995, of
the Agreement (the "Draft"), and such other documents as the
undersigned has considered necessary.
In giving this Reliance Certificate, the undersigned has assumed
that the form and substance of the Draft submitted to him conforms to
the form and substance of the Agreement.
The undersigned expresses no opinion as to any laws other than
the laws of Switzerland in force as of the date of this Reliance
Certificate and he has assumed that there is nothing in any other body
of law that affects his opinion as expressed herein.
Based upon and subject to the above, the undersigned hereby
represents as follows:
I. I am an attorney admitted to practice under the
laws of Switzerland, and I currently am general legal counsel to SICPA.
II. Attached to this Reliance Certificate is a true and
complete copy of resolutions adopted by the members of the Conseil
d'Administration of SICPA. Such resolutions were duly and properly
adopted in accordance with the laws of Switzerland, represent the
corporate authorization of SICPA's Conseil d'Administration and have
not been supplemented, rescinded, modified or amended.
III. SICPA is a corporation duly organized, validly existing
and in good standing under the laws of Switzerland. SICPA has all
requisite power and authority under the laws of Switzerland to own
and operate its properties and to conduct its business as now conducted,
and has adequate power and authority to make and perform the Agreement and
the other documents and instruments made in connection therewith and
to perform its obligations thereunder.
IV. The execution, delivery and performance of the Agreement
and all documents and instruments executed pursuant thereto by SICPA
have been duly authorized by all requisite action by the members of the
Conseil d'Administration of SICPA; no further action by any member of
the Conseil d'Administration, officer or shareholder of SICPA is required
to authorize such action; and the Agreement shall be a valid and binding
obligation of SICPA, enforceable in accordance with its terms, if and
when executed in due form.
V. The execution and delivery of the Agreement and performance
by SICPA of its obligations thereunder do not conflict with or
violate its charter documents, or any applicable law or regulation or any
order of court or arbitrator or similar authority known to me, and do not
conflict with and will not constitute a material breach of the provisions
of any material contract known to me by which SICPA is bound.
VI. Under Swiss law, Section 11(o) of the Agreement,
including without limitation the consent to jurisdiction, forum selection
and consent to service of process provisions of such section, would be
upheld by the courts or similar tribunals of Switzerland when applied
to SICPA.
This Reliance Certificate and the opinions set forth herein are
subject to the following qualifications:
Under Swiss law an order of court (other than for the
payment of money) will not necessarily be specifically enforced but in
such cases damages may be awarded in lieu of specific performance.
The enforceability of the Agreement may be limited by
applicable bankruptcy, insolvency or other similar laws of general
application.
Any final and conclusive judgment for a definite sum
obtained for the recovery of amounts due and unpaid under the
Agreement in the California courts referred to in Section 11(o) of the
Draft would be enforceable against SICPA in the appropriate courts of
Switzerland without re-examination or re-litigation of the matters
adjudicated provided that the requirements of Sections 25 and 27 of
the Bundesgesetz uber das Internationale Privatrecht (Swiss Federal
Act on International Private Law) are met, in particular that:
Recognition of the foreign judgment is not contrary to
the public policy as understood in Switzerland.
SICPA has unconditionally joined the proceedings or has
been properly served with writs either through its process agent in
California or through judicial aid granted by Switzerland.
SICPA has been given a fair trial (as understood in
Switzerland) and in particular has been given the possibility properly
to defend its case.
No action between the same parties and on the same
subject matter has been commenced first in any other competent Swiss
or foreign court, and no judgment has been first rendered on the same
subject matter in any other competent court.
Proceedings may be commenced in Switzerland for the
enforcement of agreements governed by a foreign law; under the Swiss
Federal Act on International Private Law, in any such proceedings the
judge shall apply that foreign law, the relevant provisions of which
may have to be proved by the parties, but, if the contents of foreign
law cannot be determined, Swiss law will be applied.
To the extent that the Draft and the Agreement deal with the
manner of service of process, this provision will have no legal effect
with respect to legal actions or proceedings initiated in the courts
of Switzerland since procedural matters are governed by mandatory
provisions of the Swiss Federal and State Codes of Civil Procedure.
Notwithstanding Section 11(h) in the Draft entitled
"Notices", under Swiss law, a notice required to be given to SICPA may
be considered properly given only if and when actually received by it.
Swiss courts may refuse to give effect to any provision in
the Agreement under which SICPA undertakes to indemnify any other
party thereto against any costs, loss, expense or liability in respect
of the costs of unsuccessful litigation, or where the court by itself
made an order for costs.
This Reliance Certificate is addressed to you solely for the
benefit of you and solely for the purpose of the transactions
contemplated by the Agreement. It is not to be transmitted to anyone
else nor is it to be relied upon by anyone else or for any other
purpose without the express consent of the undersigned.
IN WITNESS WHEREOF, the undersigned has executed this Reliance
Certificate on May ___, 1995.
/S/NICKLAUS HUBER
SCHEDULES
SCHEDULE 2(A)(I)
DISTRIBUTION OF FLEX SHARES AND
ALLOCATION OF SHARE PURCHASE PRICE
No. and Class Portion of
Buyer of Shares Shareholder Price
OCLI 40 Common $ 7,800,000.00
4 Series B Preferred $ 600,000.00
SICPA 80 Common $14,900,000.00
8 Series B Preferred $ 1,200,000.00
SCHEDULE 2(A)(II)
ALLOCATION OF NOTE AND NOTE PURCHASE PRICE
Portion of Note and
Buyer Date Note Purchase Price
OCLI May 8, 1995 $ 7,032,759
SICPA May 8, 1995 $ 4,688,506
OCLI May 9, 1995 $ 7,034,728
SICPA May 9, 1995 $ 4,689,819
OCLI May 10, 1995 $ 7,036,698
SICPA May 10, 1995 $ 4,691,132
OCLI May 11, 1995 $ 7,038,668
SICPA May 11, 1995 $ 4,692,445
OCLI May 12, 1995 $ 7,040,638
SICPA May 12, 1995 $ 4,693,759
OCLI May 15, 1995 $ 7,046,547
SICPA May 15, 1995 $ 4,697,698
SCHEDULE 4
DISCLOSURE SCHEDULE
4(e)
Title to Assets
FLEX owes the following amounts under certain personal property
leases, that might, under certain circumstances, be construed to be
financing arrangements resulting in a Security Interest in the
property leased.
IBM P.O. 301823
to 10/31/97
AS 400 Hardware
AS 400 Software
$1080.36/month x 30 months = $32,411
XEROX P.O. 302176
to 10/31/97
Base $715.89 x 30 months = $21,477
Copies nominal 15,000 @ $.0094 x 30 months = $ 4,230
$25,707
ARI paid to Core States Bank
No. of
Year Make Payment Months Total
'93 Lincoln $819.10 x 25 $ 20,478
'93 Dodge $476.68 x 25 $ 11,917
'93 Toyota $505.77 x 27 $ 13,656
'93 Acura $745.79 x 27 $ 20,136
'93 Volvo $713.86 x 31 $ 22,130
'91 Pontiac $357.95 x 3 $ 1,074
'95 Eagle* $505.00 x 50 $ 25,250
$114,641
'91 Forklift $615.24 x 3 $ 1,846
'91 Forklift $702.94 x 5 $ 3,515
$ 5,361
*Leased from PHH.
Paragraph 4(g)
Officers and Directors of FLEX
Officers:
Michael B. Sullivan - President and Chief Executive Officer
William H. Mayers - Chief Financial Officer and Secretary
Directors:
James A. Alles - Chairman
John McCullough
Trevor N. Gazard
Dr. James Seeser
H. Dennis Lancaster
Paragraph 4(h)
Financial Statements
Paragraph 4(i)
Certain Changes
(v) Exempt employees received annual performance reviews and
salary increases on January 1, 1995.
At its meeting of February 23, 1995, the Board of Directors of
FLEX (A) approved payments under the 1994 Flex Products, Inc.
Management Incentive Plan aggregating $167,000 and (B) adopted the
Flex Products, Inc. Productivity and Safety Bonus Plan for Fiscal
1995; the Flex Products, Inc. Management Incentive Plan for Fiscal
1995 and the Flex Products, Inc. 1995-1997 Long Term Incentive Plan
for the President and Chief Executive Officer.
Attached hereto are printouts of FLEX's payroll as of
December 22, 1994, and as of April 13, 1995.
(vii) SICPA and OCLI have agreed, pursuant to this Agreement, to
cause FLEX to retain all its employees as of the day immediately
preceding the Closing Date with total compensation and benefits to be
no less favorable in the aggregate than those in effect immediately
prior to Closing; provided, however, that any such employee may be
terminated for Cause (as defined in this Agreement).
(viii) See paragraph 4(k)
FLEX PRODUCTS, INC.
PAYROLL REPORT AT 12/22/95 AND 4/27/95
100410 083819 SNYDER,LOWELL V. 32.71
100410 084770 TEGLIA,DAWNA J. 15.40
100410 088044 BIE,ROY W. 51.31
100420 080106 DILLON,DON D 27.42
100420 081083 HARTMAN,JACK L 31.88
100420 084823 BENTZ,BRUCE L 25.34
100420 088014 TAYLOR,MICHAEL J 38.59
100420 088025 CONTARDI,LARRY D 30.63
100430 080855 WILLIAMS,LAWRENCE K 22.85
100430 083077 WILLIAMS,DONALD L. 25.75
100430 083408 WILLISON,KRAIG R 20.45
100430 083410 COOK,B. DANE 16.79
100430 083932 MORAN,JAMES B 21.98
100430 084052 DELAFUENTE,DAVID J 16.81
100430 084346 JACQUES,RUBEN 16.18
100430 084596 WILLIAMS,TANA L 20.89
100430 084599 SHUEY,BRIAN J. 13.79
100430 084691 BERTAO,LEONCIO B. 13.39
100430 084710 FOSTER,THOMAS G. 14.34
100430 084762 GLOYD,CHRISTOPHER M 13.08
100430 084812 BRUNING,JERRY M 11.36
100430 084824 EZIRM,CHARLES C 10.32
100430 088004 SAUCEDA,JESSE C 10.46
100430 088005 STERNE,GREGORY M 9.99
100430 088006 BATHKE,TROY T 10.05
100430 088009 MOELLER,KENNETH A 11.93
100430 088013 KROH,KEVIN T 11.98
100430 088019 FINNIGAN,DENNIS M 19.78
100430 088021 WHITRIGHT,LEIGH JAY 14.84
100430 088024 WROSCH,CHARLOTTE M 20.15
100430 088027 WHITRIGHT,RICHARD 9.97
100430 088029 LIVINGSTON,TIMOTHY 10.47
100430 088030 NINO-ANAYA,ADRIAN 10.26
100430 088033 HALL,JERRY V 8.73
100430 088034 SAHAGUN,REDENTOR L 8.53
100430 088042 VOLLMER,DEBORAH J 10.47
100430 088043 SCHICKER,THOMAS F 9.98
100430 088048 JIMENEZ,JONATHAN B. 9.10
100430 088049 OCEGUERA,CESAR R. 8.93
100430 088050 CUPPOLETTI,WILLIAM J 11.55
100430 088051 BOONE,TANYA L. 8.70
100430 088052 GIBLIN,SCOTT A. 8.62
100430 088053 FREITAS,DARRYL W. 8.76
100430 088054 ROSS,NANCY D. 8.67
100430 088055 JAMESON,JEFFREY L. 8.48
100430 088059 BEWLEY,R. MARK 8.50
100430 088061 RUDOLPH,SHAUN M. 8.46
100430 088062 EDMONDO,CLARK D. 11.00
100430 088063 OROZCO,ANTHONY T. 8.25
100430 088064 MCCLOSKEY,MICHAEL V. 8.25
100430 088065 MYERS,ERIC L. 9.69
100430 088068 PHILLIPS,MARK A. 8.50
100430 088069 LARSON,GARY D. 8.25
100430 088073 SHERMAN,MICHAEL R. 8.25
100430 088074 HENDERSON,DONALD R. 8.75
100430 088075 WILLIAMS,MALCOLM A. 10.00
100440 083194 TUCKER,BRIAN C 20.12
100440 084825 RHOADES,GLENN R 36.26
100440 088001 SHEFFIELD,MATTHEW G 23.78
100440 088017 SCHMIDT,DAVID T 22.95
100440 088028 WHITE,STEVEN E 21.61
100440 088032 PETERSON,MICHAEL J 15.50
100440 088036 CORY,RICHARD A 21.74
100440 088039 GOMEZ,RAUL 14.56
100510 082708 PHILLIPS,ROGER W 46.47
100510 084760 DAVIS,GREGORY F. 18.82
100510 084792 NEIFERT,STEPHEN R. 35.53
100510 088038 KITTLER,WILFRED C 45.95
100510 088041 BONKOWSKI,RICHARD L 67.52
100510 088057 FISHER,SHARI POWELL 30.02
100520 084820 BUNN,KEVIN R. 30.23
100520 088066 KUNKEL,FRANCYNE L. 13.00
100620 081849 SHIMETZ,TONY L 26.32
100620 082117 HAWORTH,PAMELA E 17.84
100620 088047 SULLIVAN,MICHAEL B. 91.35
100630 083010 KITAYAMA,DAVID T 32.55
100630 083498 STONE,DIANE S. 17.65
100630 084709 TAXER,MARSHALL 36.00
100630 088016 DAVIES,BARBARA L 12.42
100710 080121 MATTEUCCI,JOHN S 51.08
100710 080927 RIEDEL,HANS J 39.35
100710 082451 MATSON,BRUCE A 32.20
100710 082509 BLAIR,DEBORAH A. 17.34
100710 083100 HIGGINS,PATRICK K 50.74
100710 088067 BURDICK,VICTORIA P. 11.50
100730 080619 HARMS,GUNTHER K. 25.09
100730 082751 BROWN,IVAN W 25.09
100730 088022 TARTER,B SCOTT 30.10
100740 081574 BELEW,LORI J 19.12
100740 082580 HOLLINGSWORTH,KEITH 17.05
100740 083952 LEGALLEE,CHARLOTTE 26.43
100740 084748 LASKEY,PETER J 13.13
100750 082345 NOFI,MICHAEL R 28.30
100750 083621 LEARN,RONALD C 17.76
100750 084826 BADGER,TIM M 13.06
100750 088026 HOLTON,REBECCA A 11.40
100750 088058 SLUSSER,ROBERT G. 16.69
100750 088072 DAY,HOWARD E. 11.50
100810 083110 MARKANTES,CHARLES T 20.47
100810 084054 DROLL,F. JERRY 38.04
100810 088045 COOMBS,PAUL G. 32.82
100810 088070 GIBBONS,MARIAN S. 12.00
Paragraph 4(j)
Tax Matters
(i) Flex has not filed any tax returns in connection with its
Joint Development Agreement and associated Memorandum of Alliance with
SICPA Industries of America, Inc.
(iii) FLEX has entered into an agreement with the Sonoma County
Assessor, waiving the statute of limitations specified by Revenue and
Taxation Code Section 532 and agreeing to extend the statute of
limitations for making an assessment or correction for property which
may be assessable pursuant to California law for fiscal year 1989/1990
and 1990/1991 to December 31, 1995.
FLEX has waived the federal statute of limitations for its tax
year ended December 30, 1990 until December 31, 1995 and has received
a request from the Internal Revenue Service to waive it again until
December 31, 1996.
FLEX has waived the federal statute of limitations for its tax
year ended December 29, 1991 until December 31, 1996.
Paragraph 4(k)
Debt
FLEX owed OCLI $324,078.60 as of March 26, 1995.
FLEX owed ICIA, ICIAH and their affiliates $425,106.54 as of
March 26, 1995.
Paragraph 4(l)
Real Estate
(ii) Beta I and Beta II have been determined to be real property
for California sales tax purposes. Certain fixtures and leasehold
improvements owned by FLEX, including, without limitation Beta I and
Beta II, might be considered to be real property for certain purposes.
Paragraph 4(m)
Receivables
Attached hereto is a printout of all of FLEX's outstanding
accounts receivable as of April 27, 1995. There were no outstanding
notes receivable or insurance proceeds receivable as of such date.
Paragraph 4(n)
Litigation
FLEX has received a letter, dated February 27, 1995, from Briceno
& Freed, attorneys to a terminated employee, requesting that such
employee be reinstated. The letter does not explicitly threaten
litigation.
Paragraph 4(o)
Compliance with Laws
FLEX has exceeded its permitted acetone emission levels for the
1994 calendar year.
FLEX does not have in its possession a current air permit for its
oven. Although it does have documentation showing that it has paid
for such permit through June, 1995.
There is groundwater contamination at FLEX's main facility.
FLEX produces vacuum/blast room dusts, waste acetone,
contaminated foil containing heavy metals, used oil, oil contaminated
debris and acetone containing solvents which it delivers, at its site,
to third party contractors which FLEX believes are reputable and who
have represented to FLEX that they are appropriately licensed and will
dispose of such materials lawfully.
A plastic tub containing some used oil, owned by FLEX, overflowed
due to rain and some oil escaped in to a sump on February 1, 1993.
According to a memorandum from OCLI to FLEX, OCLI has received a
notice from the Industrial Waste Superintendent of Santa Rosa,
California that it is approaching its discharge limits for total toxic
organics. Also according to such memorandum, the largest constituent
of such discharge is acetone, a by-product of FLEX's operations.
Paragraph 4(p)
Permits
See paragraph 4(o)
Permit Number SR-NR4898, relating to the discharge of industrial
wastewater to the City of Santa Rosa's sewer system and issued by
the City of Santa Rosa to FLEX, states that a sale of FLEX shall
obligate the purchaser to seek prior written approval of the City
for continued discharge to the sewer system.
Paragraph 4(t)
Labor Relations
William H. Mayers and Colin Waters intend to terminate their
employment with FLEX.
Paragraph 4(u)
Severance Agreements
Severance Agreement and Release, dated as of January 13, 1993, by
and between FLEX and Danforth Joslyn
Letter Agreement, dated as of September 15, 1993, by and between
FLEX and Michael Sullivan
Paragraph 4(v)
Intellectual Property
Only one assignment of a foreign patent was determined to have
been recorded in its corresponding foreign patent office. Australian
patent 66451/86, from the US patent 5,059,245, originally assigned to
OCLI then re-assigned to FLEX via bulk assignment. The assignment was
recorded in the Australian Patent Office.
All of the 9 foreign patents derived from the US patent
4,702,963, recite an incorrect parent application in the
specification.
EPC patent 84.114798.6, from the US patent 4,581,282, recites the
incorrect frame numbers of the parent application in the
specification.
FLEX's use of certain intellectual property is restricted
pursuant to that certain License Agreement, dated as of December 19,
1988, by and between OCLI and FLEX.
BASF Aktiengesellschaft has made certain statements in writing
regarding its belief that certain of FLEX's patents are invalid.
That certain License and Supply Agreement, dated as of
December 2, 1994, by and between FLEX and SICPA may affect the
validity and/or enforceability of certain of FLEX's patents and/or
patent applications.
Paragraph 4(w)
Contravention
A sale of the majority of the voting stock of FLEX is considered
an assignment under a lease, dated March 19, 1991, between Santa Rosa
Corporate Center Associates, as lessor, and FLEX, as lessee.
Therefore, FLEX must obtain the consent of such lessor to consummate
the transactions contemplated hereby. The lease also provides that
the documentation relating to the assignment must be provided to the
lessor and that the lessee must pay the lessor's legal expenses
incurred in connection with reviewing such documents.
Paragraph 4(y)
Material Contracts
Purchase Order and Apparatus Sale Agreement dated December 12,
1994 and October, 1994, respectively, by and between FLEX and DIPLING,
Hilmar Weinert, Vakuum-Verfahrenstechnik GMBH.
Purchase Agreement, dated as of April 1, 1994, by and between
FLEX and EM Industries, Inc.
Basic Ordering Agreement, dated as of January 1, 1995, by and
between FLEX and the Decorative Films Division of Avery Dennison
Corporation.
Employment Contract, dated January 1, 1993, by and between FLEX
and John Matteucci, Manager-Equipment Engineering and Process
Technology.
Employment Contract, dated January 1, 1993, by and between FLEX
and David Kitayama, Controller.
Employment Contract, dated January 1, 1993, by and between FLEX
and Patrick Higgins, Director-Research, Development and Engineering.
Employment Contract, dated January 1, 1993, by and between FLEX
and Roger Phillips, Manager-Product Technology.
Severance Agreement and Release, dated January 13, 1993, by and
between FLEX and Danforth Joslyn.
Letter Agreement, dated as of September 15, 1993, by and between
FLEX and Michael Sullivan
Lease, dated as of December 19, 1988, as amended by letter
agreement, dated as of July 7, 1993, by and between OCLI and FLEX.
Lease, dated October 20, 1994, by and between FLEX and Stony
Point Investors II.
Lease, dated March 19, 1991, by and between FLEX and Santa Rosa
Corporate Center Associates.
Warehousing Agreement, dated as of January 1, 1993, by and
between FLEX and Zeneca, Inc.
Joint Venture Agreement, dated as of December 19, 1988, by and
among FLEX, ICIAH (as predecessor in interest to ICIA) and OCLI.
License Agreement, dated as of December 19, 1988, by and between
FLEX and OCLI.
Research, Development and Engineering Agreement, dated as of
December 19, 1988, by and between FLEX and OCLI.
Support and Administrative Services Agreement, dated as of
December 19, 1988, by and between FLEX and OCLI.
Joint Development Letter Agreement, dated as of February 11,
1995, by and between FLEX and Catalina Coatings, Inc.
FLEX is a party to numerous non-disclosure and mutual non-
disclosure agreements and agreements for the confidential provision of
engineering samples, which by their terms may not be disclosed to
third parties.
Letter of Intent, dated as of April 18, 1995, by and between FLEX
and 3M.
Supply Agreement, dated as of April 14, 1995, by and between FLEX
and BASF Corporation.
As of April 27, 1995 FLEX was also a party to certain purchase
orders for more than $100,000 as shown on the attached list and other
purchase orders for less than $100,000.
As of April 27, 1995 FLEX was party to the customer orders shown
on the attached list.
FLEX PRODUCTS, INC.
OUTSTANDING PURCHASE ORDERS GREATER THAN $100,000.00
Report Date: 4/27/95
PURCHASE
VENDOR NAME ORDER NUMBER TOTAL
Avery c/o Northern Trust Co. 8566 $533,541.05
Cerac Incorporated 8031 589,000.00
EM Industries, Inc. 6181 1,029,000.00
8571 2,060,000.00
General Vacuum Equipment 8188 250,000.00
Hoechst Diafoil Company 6783 136,070.64
8662 133,056.00
8665 153,442.80
Safety-Kleen 7311 103,444.25
Varian Associates, Inc. 8835 137,230.00
Weinert Vakuum-Verfahrenstech 8674 1,160,445.46
FLEX PRODUCTS, INC.
CUSTOMER ORDERS BY CUSTOMER
Report Date: 4/27/95
Number of
Customer Name Orders Total Dollars
Litchfield Precision Component 1 1,050.00
Lexmark International Inc. 11 270,912.00
3M Company 52 449,775.83
SICPA S.A. 32 2,785,519
Xerox 38 1,282,341.18
OCE Nederland B.V. 8 240,816.69
BASF Corporation 1 9,900.00
Rexham Custom 2 65.38
Boehringer Mannheim Corp. 1 0.00
Total Orders 161 $5,040,380.58
Paragraph 4(z)
Suppliers
FLEX is dependent upon DIPLING, Hilmar Weinert, Vakuum-
Verfahrenstechnik GMBH to supply the BETA III.
FLEX is dependent upon Hoechst Diafoil, Avery Dennison
Corporation and ICI Films for the provision of polyester films. Avery
Dennison is the sole supplier of release coated PET film for the OVP
product.
FLEX is dependent upon EM Industries, Inc. for the provision of
magnesium fluoride, EM Industries is the only viable supplier of
magnesium fluoride in the volumes used by FLEX.
CONTACT: Herb Dwight Joseph C. Zils
President and CEO Vice President and
(707) 525-7662 General Counsel
(707) 525-7030
OCLI COMPLETES ACQUISITION OF CONTROLLING INTEREST IN
FLEX PRODUCTS, INC. AND
ISSUES $12 MILLION IN PREFERRED STOCK
FOR IMMEDIATE RELEASE:
SANTA ROSA, CALIFORNIA, MONDAY, MAY 8, 1995. OPTICAL COATING LABORATORY,
INC. (NASDAQ:OCLI) announced today that it has completed its previously
announced acquisition of a controlling interest in Flex Products, Inc.
(Flex) from an affiliate of Imperial Chemical Industries PLC (ICI). For
the past six years, Flex has been a joint venture, with ICI owning 60% and
OCLI owning 40%. OCLI has increased its ownership in Flex to 60%, with the
remaining 40% of Flex now owned by SICPA Holding S.A. (SICPA), a privately-
held Swiss corporation. SICPA is headquartered in Lausanne, Switzerland
and is the largest manufacturer of printing inks in the world, with
facilities in more than 30 countries and employing over 4,000 people.
SICPA is also a major customer of Flex, which had sales of $24 million in
the year ended December 31, 1994.
In addition to the $8.4 million in cash paid to acquire the incremental 20%
interest in Flex, OCLI has paid ICI approximately $7.0 million in cash to
acquire a 60% interest in an $11.7 million promissory note issued by Flex
to ICI to cover Flex's working capital requirements. SICPA has acquired
the balance of the note.
In conjunction with the acquisition of its controlling interest in Flex,
OCLI also announced the issuance of $12 million in convertible redeemable
preferred stock. The 8% Series C Convertible Redeemable Preferred Stock
(Preferred Stock) was placed via a private offering with nine institutional
investors through Hambrecht & Quist. The Preferred Stock is redeemable by
OCLI commencing two years from the date of issuance and is convertible into
the common stock of OCLI at anytime by the holders at a conversion price of
$10.50 per share. The Preferred Stock yields an 8% dividend payable
quarterly.
Flex, founded as a division of OCLI in the early 1980's and subsequently
established as a joint venture between ICI and OCLI in 1988, manufactures
optical coatings on flexible substrates utilizing roll coaters. Among
Flex's products are optically variable pigment (OVP) used to produce
optically variable ink for anti-counterfeiting applications and optically
variable paint currently being introduced into the automotive industry.
Flex also produces energy efficient window film and ground planes for
photoreceptor belts used in photocopiers.
"The markets for Flex's proprietary and patent-protected OVP products
continue to grow rapidly, and a new coating machine under construction will
double its OVP capacity. Flex will continue to operate from its current
location on OCLI's campus in Santa Rosa, where it shares OCLI's technical
resources and has access to OCLI's technical and management personnel. For
financial reporting purposes, the Flex operations will be consolidated into
OCLI's financial statements, with SICPA's interest shown as a minority
interest," said Herb Dwight, OCLI's president and chief executive officer.
OCLI is the world's largest independent manufacturer of thin film coated
components. OCLI's products are found in many applications, including
computer monitors, flat panel displays, photocopiers, medical/analytical
equipment and instruments, lighting systems, communications satellites and
aerospace and defense systems.
FLEX PRODUCTS, INC.
(A Joint Venture of ICI Americas Inc. and
Optical Coating Laboratory, Inc.)
Financial Statements
December 25, 1994 and December 26, 1993
(With Independent Auditors' Report Thereon)
Independent Auditors' Report
The Board of Directors and Stockholders
Flex Products, Inc.:
We have audited the accompanying balance sheets of Flex
Products, Inc. (the Company), a joint venture of ICI
Americas Inc. and Optical Coating Laboratory, Inc., as of
December 25, 1994 and December 26, 1993, and the related
statements of operations, stockholders' equity and cash
flows for the periods then ended. These financial
statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Flex Products, Inc. as of December 25, 1994 and
December 26, 1993, and the results of its operations and its
cash flows for the periods then ended, in conformity with
generally accepted accounting principles.
As discussed in note 5, at December 25, 1994, the Company is
indebted to ICI American Holdings Inc. under a line of
credit agreement totaling $10,715,000 which is due March 31,
1995. The Company does not expect to have the funds
available to repay its indebtedness on the scheduled matu
rity date, and will, therefore, be required to obtain an
extension of the line of credit or complete alternate
financing arrangements. Management's plans in regard to
these matters are described in note 5. The uncertainty
regarding the Company's ability to obtain required financing
raises substantial doubt about the Company's ability to
continue as a going concern. The financial statements do
not include any adjustments relating to the outcome of this
uncertainty.
As discussed in note 1(h), the Company adopted Statement of
Financial Accounting Standards No. 106, "Employer's
Accounting for Postretirement Benefits Other Than Pensions,"
effective December 27, 1993.
/S/KPMG PEAT MARWICK LLP
February 3, 1995
FLEX PRODUCTS, INC.
Balance Sheets
December 25, 1994 and December 26, 1993
(Dollars in thousands, except share amounts)
Assets 1994 1993
Current assets:
Cash $ 494 -
Trade accounts receivable,
net of allowance of $110 and $70,
respectively 2,567 3,498
Inventories 1,231 2,360
Deferred taxes 462 353
Other current assets 95 110
Total current assets 4,849 6,321
Property and equipment,
net of accumulated depreciation
and amortization of $9,530 and
$7,870, respectively 8,164 7,408
Intangible assets, net of
accumulated amortization of
$7,430 and $6,359, respectively 9,721 10,792
Goodwill, net of accumulated
amortization of $1,514 and
$1,263, respectively 3,505 3,756
Deferred taxes 4,310 -
Other assets 70 70
Total assets $ 30,619 28,347
Liabilities and Stockholders' Equity
Current liabilities:
Bank overdraft - 666
Accounts payable 160 179
Accrued expenses 1,180 1,061
Due to affiliates 785 448
Note payable to ICI
American Holdings Inc. 10,715 14,105
Total current liabilities 12,840 16,459
Other liabilities 105 234
Deferred taxes - 656
Total liabilities 12,945 17,349
Stockholders' equity:
Preferred stock:
Series A, $.01 par value;
authorized 1,000 shares,
none issued and outstanding - -
Series B, $.01 par value;
authorized 1,000 shares,
issued and outstanding 12
shares, aggregate
liquidation preference $1,800 1 1
Common stock, $.01 par value;
authorized 1,000 shares,
issued and outstanding 200 shares 2 2
Additional paid-in capital 34,291 34,070
Accumulated deficit (16,620) (23,075)
Total stockholders' equity 17,674
Commitments and contingencies (note 10)
Total liabilities and
stockholders' equity $ 30,619 28,347
FLEX PRODUCTS, INC.
Statements of Operations
Periods ended December 25, 1994 and December 26, 1993
(Dollars in thousands)
1994 1993
Net sales $ 23,624 21,633
Cost of goods sold 13,663 12,524
Gross margin 9,961 9,109
Expenses:
General and administrative 1,618 2,045
Support services 82 119
Selling and marketing 1,131 1,188
Research and development 3,342 3,903
Amortization and write-off
of intangibles 1,322 1,621
7,495 8,876
Other expense, principally interest 908 471
Income (loss) before tax
benefit and cumulative
effect of change in
accounting principle 1,558 (238)
Tax benefit 4,966 99
Income (loss) before cumulative
effect of change in accounting
principle 6,524 (139)
Cumulative effect of change in
accounting principle, net of
$43 tax benefit (69) -
Net income (loss) $ 6,455 (139)
FLEX PRODUCTS, INC.
Statements of Cash Flows
Periods ended December 25, 1994 and December 26, 1993
(Dollars in thousands)
1994 1993
Cash flows from operating activities:
Net income (loss) $ 6,455 (139)
Adjustments to reconcile net
income (loss) to net cash
provided by operations:
Cumulative effect of change
in accounting principle 112 -
Deferred tax benefit (5,075) (136)
Loss on disposal of property
and equipment 37 95
Loss on write-off of
intangible asset - 272
Depreciation 1,660 1,727
Amortization of intangibles 1,322 1,349
Net change in allowance for
doubtful accounts 40 (23)
Net change in reserve for
inventory obsolescence 165 -
Changes in assets and liabilities:
Decrease (increase) in receivables 891 (491)
Decrease (increase) in inventories 964 (1,109)
Decrease (increase) in other
current assets 15 (46)
Decrease in accounts payable (19) (359)
Increase in accrued expenses 7 586
(Decrease) increase in
other liabilities (129) 234
(Decrease) increase in
due to affiliates 337 (96)
Net cash provided by operating
activities 6,782 1,864
Cash flows from investing activities:
Purchase of property and equipment (2,453) (335)
Net cash used in investing activities (2,453) (335)
Cash flows from financing activities:
Bank overdraft - 666
Net payment from line of credit with ICI
American Holdings Inc. (3,390) (3,040)
Capital contributions related
to research and development 221 717
Net cash used in financing activities (3,169) (1,657)
Net increase (decrease) in cash 1,160 (128)
(Bank overdraft) cash at beginning
of period (666) 128
Cash at end of period $ 494 -
Supplemental disclosures of
cash flow information:
Cash paid during the period
for interest $ 889 488
Cash paid during the period
for income taxes $ 38 -
Supplemental disclosure of noncash financing activities:
In 1993, the Company transferred $5 million in note
payable to ICI American Holdings Inc. to the line
of credit with ICI American Holdings Inc.
FLEX PRODUCTS, INC.
Notes to Financial Statements
December 25, 1994 and December 26, 1993
(1) Summary of Significant Accounting Policies
(a)Nature of Operations
Flex Products, Inc., a Delaware corporation, (the
Company or Flex) was formed as a joint venture between
ICI American Holdings Inc. (ICIH) and Optical Coating
Laboratory, Inc. (OCLI). ICIH subsequently changed its
name to ZENECA Holdings Inc. (ZENECA) and transferred
beneficial ownership of the joint venture to an
affiliated company named ICI Americas Inc. (ICI).
The Company develops, markets and manufactures products
made by depositing one or more layers of materials on
flexible substrates. The Company was formed in October
1988 and began operations on the effective date of the
joint venture, December 19, 1988 (note 2).
(b)Inventories
Inventories are stated at the lower of cost or market.
Cost is determined using the weighted average method.
At December 25, 1994 and December 26, 1993, inventories
consisted of raw materials of $444,000 and $1,508,000;
work-in-process of $486,000 and $404,000; and finished
goods of $301,000 and $448,000, respectively.
(c)Property and Equipment
Property and equipment are stated at cost.
Depreciation on property and equipment is calculated
using the straight-line method over the estimated
useful lives of the assets, ranging from three to eight
years. Leasehold improvements are amortized using the
straight-line method over the shorter of the lease
terms or the estimated useful lives of the assets. For
tax reporting purposes, depreciation is computed using
both accelerated and straight-line methods.
Repairs and maintenance are charged to expense as
incurred; significant renewals and improvements are
capitalized. Gains and losses on the disposition of
fixed assets are credited or charged to operations as
incurred.
(d)Goodwill
Goodwill represents the excess of purchase price over
fair value of net assets acquired and is amortized by
the straight-line method over 20 years.
(e) Revenue Recognition
The Company recognizes revenue when the product is
shipped. Revenues from contract research are
recognized ratably over the period of performance as
the related costs are incurred.
(f)Income Taxes
The Company accounts for income taxes in accordance
with the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income
Taxes." Under Statement 109, deferred tax assets and
liabilities are recognized for the future tax
consequences attributable to differences between the
financial statement carrying amounts of existing assets
and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are
expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that
includes the enactment date.
(g)Fiscal year
The Company's fiscal year ends on the last Sunday in
December. Fiscal years in 1994 and 1993 consisted of
52 weeks and ended on December 25 and December 26,
respectively.
(h)Postretirement Benefits Other than Pensions
In December 1990, the Financial Accounting Standards
Board issued Statement No. 106, "Employer's Accounting
for Postretirement Benefits Other Than Pensions,"
(Statement 106), which required adoption of a new
method of accounting for postretirement benefits. The
Statement establishes standards for providing an
obligation for future postretirement benefits due to
employees over the service period of such employees
rather than expensed as incurred. The Company adopted
Statement 106 as of the beginning of the year ended
December 25, 1994 and elected to recognize this change
in accounting on the immediate recognition basis.
(2) Joint Venture
On December 19, 1988, the Company began operations when
the joint venture agreement by and between ICIH, and
OCLI became effective. OCLI transferred assets worth
$24,000,000 and assigned a note payable of $12,000,000
to the Company in exchange for 80 shares of Series A
Preferred Stock. ICIH purchased 120 shares of Common
Stock and 12 shares of Series B Preferred Stock of the
Company for $16,200,000 and $1,800,000, respectively.
ICIH subsequently contributed its interest in the
Company to a subsidiary, ICI, on December 27, 1992.
In addition, ICIH advanced $5,000,000 to the Company in
exchange for an interest-free note payable. ICIH
agreed to assist in providing working capital as
considered necessary by the Company's Board of
Directors to fund operations of the Company through
1993 unless the Company had not achieved gross margins
of $12 million and $14 million in the 1992 and 1993
fiscal years, respectively. The Company transferred
the $5,000,000 balance on the interest-free note
payable to the working capital line of credit during
1993 (note 5). During 1994 and 1993, the Company paid
down $3,390,000 and $3,040,000, respectively, under the
working capital line of credit. The underlying note
has a variable interest rate, at 8.75% at December 25,
1994.
The term of the joint venture was for at least
five years, after which time ICI has the option to
purchase or OCLI has the option to cause ICI to
purchase OCLI's investment in the Company for a formula
price based upon the product sales of the Company,
adjusted for value added technology and ICI additional
funding as defined in the joint venture agreement.
Neither ICI nor OCLI has exercised its option (see note
11).
(3) Property and Equipment
At December 25, 1994 and December 26, 1993, property
and equipment consisted of the following (in
thousands):
1994 1993
Machinery and equipment $ 14,180 13,843
Office furniture 759 607
Leasehold improvements 592 550
Vehicles 17 7
Construction in progress 2,146 271
17,694 15,278
Less accumulated depreciation
and amortization (9,530) (7,870)
$ 8,164 7,408
In 1994, the Company agreed to purchase a new asset for
manufacturing purposes for a total estimated cost of
$9.4 million. The Company paid for approximately
$1.6 million of the asset as of December 25, 1994.
(4) Intangible Assets
At December 25, 1994 and December 26, 1993, net
intangible assets consisted of the following (amounts
in thousands) which are amortized using the straight-
line method:
Estimated
1994 1993 useful life
Patents $ 8,979 8,979 14-16 years
Unpatented technology 931 931 16 years
Covenant not to compete 6,000 6,000 15 years
Trademarks 71 71 20 years
Computer software 50 50 5 years
Assembled work force 200 200 12 years
Customer supply contract 480 480 1.5 years
Employment contracts 440 440 3 years
17,151 17,151
Less accumulated
amortization (7,430) (6,359)
Net intangible assets $ 9,721 10,792
Management assesses annually the likelihood of any
impairment of the recorded intangible assets by
comparing the carrying values and estimated remaining
useful lives of intangible assets to projected cash
flows from operations.
(5) Transactions with Affiliates
The Company has entered into various agreements with
OCLI which require the Company to reimburse OCLI for
certain assets used by the Company or services
performed by OCLI for the Company. Additionally, the
Company has a line of credit and several intercompany
transactions with ICIH. The terms of the agreements
are as follows:
License Agreement - At December 18, 1988, the
Company entered into a perpetual license agreement
with OCLI for the use of certain technology owned by
OCLI as defined by the agreement. The license
agreement requires the Company to pay OCLI royalties
of 10%, 8%, 6%, 5% and 4% of net sales in each of
the first five years of the agreement, respectively,
and 4% thereafter until the cumulative royalties
paid amount to $13,700,000, at which time the
license will be fully paid. Royalty fees are
included in cost of goods sold and amounted to
$945,000 and $867,000 in 1994 and 1993,
respectively. Cumulative fees paid as of
December 25, 1994 were $4,310,000.
Research, Development and Engineering Agreement -
The Company entered into a five-year research,
development and engineering agreement with OCLI
commencing December 19, 1988. The agreement
requires the Company to reimburse OCLI for costs
incurred on an agreed joint project basis plus 10%
of those costs to a maximum of $5,000,000. For the
years ended December 25, 1994 and December 26, 1993,
the Company incurred $171,000 and $695,000,
respectively, of expenses related to this agreement.
If the total costs for the first five contract years
are less than $5,000,000, then the agreement period
shall be extended for a period of time necessary for
the total cost to reach $5,000,000. Cumulative fees
paid as of December 25, 1994 were $4,309,000.
Under the joint venture agreement, ICI shall
contribute to the Company funds to pay for research
and development costs. Such contributions are not
to be repaid and are recorded as capital
contributions. ICI contributed $221,000 and
$717,000 in the periods ended December 25, 1994 and
December 26, 1993, respectively.
Support and Administrative Services Agreement - The
Company entered into an agreement with OCLI whereby
OCLI provides the Company with various technical
support and administrative services for periods of
up to five years. The administrative services are
charged based upon a percentage allocation of OCLI's
costs in each administrative area. The Company can
reduce the amount of administrative services after
the first year if they are not needed. In addition,
the Company will reimburse OCLI for an allocated
portion of OCLI's corporate research expenses not to
exceed 30% of OCLI's total expenses. The Company
incurred expenses related to this agreement in the
periods ended December 25, 1994 and December 26,
1993 of $1,538,000 and $1,321,000, respectively.
Lease - The Company extended a lease for office and
manufacturing space in a building owned by OCLI for
a period of five years beginning December 19, 1993.
The rent is $27,641 per month plus an allocation of
related maintenance and overhead charges. Rent and
expenses under this lease for the periods ended
December 25, 1994 and December 26, 1993 was $884,000
and $694,000, respectively.
Line of Credit - The Company extended its line of
credit agreement with ICIH on September 30, 1994
that allows the Company to borrow up to $15,000,000.
Interest on borrowings is at the prevailing prime
rate as published by Citibank, N.A. plus 1%, as
determined on the first day of each accounting
quarter of Flex. A commitment fee of 3/8% per annum
is payable on the unused balance for each preceding
accounting quarter. Borrowings under the line of
credit were $10,715,000 and $14,105,000 at
December 25, 1994 and December 26, 1993,
respectively. The aggregate unpaid principal amount
was payable not later than December 31, 1994,
however, the Company and ICIH extended the line of
credit through March 31, 1995.
The Company does not expect to have funds available
to repay its indebtedness on the scheduled maturity
date, and will, therefore, be required to obtain an
extension of the line of credit or complete
alternate financing arrangements. Management
believes that it has sufficient financing
alternatives, including the extension of the current
line of credit arrangement, in order to continue its
business.
Other - The Company also purchased $333,000 and
$833,000 of inventory from ICI and $28,000 and
$26,000 in technical support for the periods ended
December 25, 1994 and December 26, 1993, respec
tively.
(6) Income Taxes
As discussed in note 1, the Company adopted
Statement 109 as of December 30, 1991.
Total income tax benefit of $5,015,000 for the period
ended December 25, 1994 represents a deferred income
tax benefit attributable to income from continuing
operations, net of alternative minimum tax.
The tax effects of temporary differences that give rise
to significant portions of the deferred tax assets and
deferred tax liabilities at December 25, 1994 and
December 26, 1993 are presented below (dollars in
thousands):
1994 1993
Deferred tax assets:
Accounts receivable,
principally due to
allowance for doubtful
accounts $42 28
Inventories, principally
due to additional
costs inventoried for
tax purposes pursuant to
the Tax Reform Act of 1986
and nondeductible reserves 43 20
Compensated absences,
postretirement benefits and
bonuses, principally due to
accrual for financial reporting
purposes 377 305
Alternative minimum tax 100 -
Other 50 38
Net operating loss
carryforwards 5,894 8,231
Total gross deferred
tax assets 6,506 8,622
Less valuation allowance - (6,515)
$ 6,506 2,107
Deferred tax liabilities:
Plant and equipment,
principally due to
differences in depreciation
and bases of assets $ 378 803
Intangible assets, principally
due to differences in bases 1,356 1,597
Other - 10
Total gross deferred tax
liabilities 1,734 2,410
Net deferred tax
asset (liability) $ 4,772 (303)
The valuation allowance for deferred tax assets as of
December 26, 1993 was $6,515,000. The net change in
total valuation allowance for the period ended
December 25, 1994 was a reduction of $6,515,000.
At December 25, 1994, the Company has net operating
loss carryforwards (NOLs) of approximately $17 million
for U.S. federal income tax purposes. If these
carryforwards are not offset against future taxable
income, they will expire in 2002 through 2008. Net
operating losses for California tax purposes have been
utilized by ICIH and/or its affiliates in unitary state
tax filings. In addition, the Company has a research
and development credit carryforward of approximately
$112,000 for U.S. federal income taxes expiring in
2005.
The Company's net operating loss carryforwards would be
subject to limitation upon a "change of ownership" as
provided for in the Internal Revenue Code (note 11).
(7) Preferred Stock
Series A Preferred Stock with a par value of $.01 per
share is subordinated to the Series B Preferred Stock
and has voting rights identical to those of the
Company's common stock. Series A preferred
shareholders have the right to elect two of the
Company's directors. On December 31, 1992, the
preferred stock automatically converted to common stock
according to a formula conversion price.
Series B Preferred Stock with a par value of $.01 per
share must be redeemed at a price per share of $150,000
as soon as funds are available. The shares have
liquidation preference over all other classes of stock.
The shares have no voting rights and are nonconvertible
to common stock. Upon any liquidation, dissolution or
winding up of the Company, no distribution shall be
made to the holders of shares of any other class or
series of capital stock until all outstanding shares of
Series B Preferred Stock have been redeemed.
(8) Major Customers
For the period ended December 25, 1994, the Company had
three customers which accounted for 77%, 20% and 3% of
net sales. At December 25, 1994, all finished goods
and a substantial portion of raw materials inventory
related to expected sales to these three customers. In
addition, as of December 25, 1994, approximately
$2.658 million of receivables were due from the largest
customer.
(9) Employee Benefits
Effective April 1, 1989, the Company adopted the Flex
Products 401(k) Plan and Trust Agreement (the Plan).
The Plan covers substantially all employees of the
Company except those who are covered by a collective
bargaining agreement or who are covered under another
retirement plan of Imperial Chemical Industries PLC
(ICIP) or of any company in which ICIP holds a 50% or
more ownership or otherwise effectively controls such
company. Costs related to the Plan recognized in the
periods ended December 25, 1994 and December 26, 1993
were $154,478 and $132,776, respectively.
Each participant may elect to defer an amount not in
excess of 15% of his or her compensation as salary
reduction and contribution to the Plan. The Company
will match contributions at 75% of the Participant's
elective deferrals made for each Plan year, not to
exceed 6% of the Participant's compensation.
The Company also sponsors a contributory defined
benefit postretirement plan which provides medical,
dental and life insurance benefits to all U.S.
employees who meet age and years of service
requirements prior to retirement and agree to
contribute a portion of the cost. The Company has the
right to modify or terminate these benefits.
The Company's contribution to the contributory defined
benefit postretirement plan is a set amount per retiree
depending on the retiree's years of service and
dependent status at the date of retirement and the age
of the retiree and dependents when benefits are
provided. Cost increases are paid by the retiree.
This is a nonfunded plan.
As discussed in note 1, the Company adopted
Statement 106 as of the beginning of the year ended
December 25, 1994 and recorded the discounted present
value of expected future benefits attributed to
employees' service rendered as of December 26, 1993 as
a cumulative effect of change in accounting principle
totaling $112,000. Net postretirement benefit costs
for fiscal 1994 were immaterial.
(10)Commitments
(a)Operating Leases
At December 25, 1994, future minimum lease payments
under operating leases on offices, warehouse space,
machinery and equipment in excess of one year were
(dollars in thousands):
1995 $ 817
1996 810
1997 640
1998 592
Thereafter -
$ 2,859
(b)Purchase and Trade Sales Agreements
The Company has entered into an exclusive selling
agreement with a customer. The agreement obligates the
Company to sell one particular product line exclusively
to one customer through June 1998 at specified prices
and terms (note 11).
(11)Subsequent Events
On January 9, 1995, ICI, OCLI and a significant
customer of the Company signed a letter of intent for
the sale of ICI's interest in the Company to OCLI and
the customer. The letter of intent also provides for
the sale to OCLI and the customer of the note payable
to ICI under the existing line of credit agreement on
similar terms (note 5).
In conjunction with the execution of the letter of
intent, the Company and its customer also finalized a
revision to their license and supply agreement
(note 10) which provides for exclusive sales at
specified prices and licenses through December 31,
2009.
EXHIBIT 28B
OPTICAL COATING LABORATORY, INC. & SUBSIDIARIES
PRO FORMA CONDENSED COMBINED BALANCE SHEET
(Dollars in thousands)
(Unaudited)
OCLI FLEX
AS OF AS OF PRO FORMA PRO FORMA
1/31/95 12/25/94(1) ADJUSTMENTS COMBINED
ASSETS
Current Assets:
Cash and short-term
investments $16,452 $ 494 $ 308 (A) 17,254
Accounts receivable 24,767 2,567 (423) (B) 26,911
Inventories 12,187 1,231 606 (D) 14,024
Deferred income tax assets 4,946 462 0 5,408
Other current assets 2,464 95 0 2,559
Total Current Assets 60,816 4,849 491 66,156
Other Assets and Investments 9,054 17,606 (9,939) (D) 16,721
Property, Plant and
Equipment, Net 53,562 8,164 5,963 (D) 67,689
Total $123,432 $30,619 $(3,485) $150,566
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable 6,503 945 (423) (B) 7,025
Accrued expenses 9,253 740 250 (D) 10,243
Accrued compensation expenses 5,398 440 0 5,838
Income taxes payable 3,019 0 0 3,019
Current maturities on
long-term debt 6,947 0 4,000 (A) 10,947
Notes payable 613 0 0 613
Deferred revenue 844 0 0 844
Total Current Liabilities 32,577 2,125 3,827 38,529
Accrued Postretirement
Health Benefits and Pension
Liabilities 1,907 0 0 1,907
Deferred Income Tax Liabilities 853 0 54 (D) 907
Long-Term Debt 34,955 10,820 (10,820) (C) 34,955
Minority Interest 0 0 9,928 (C,D) 9,928
Preferred Stock (Series C) 0 0 11,200 (A) 11,200
Common Stockholders' Equity 53,140 17,674 (17,674) (D) 53,140
Total $123,432 $30,619 $(3,485) $150,566
See adjustments and notes to Pro Forma Condensed Combined Balance Sheet.
OPTICAL COATING LABORATORY, INC. & SUBSIDIARIES
PRO FORMA CONDENSED COMBINED BALANCE SHEET
(Dollars in thousands)
(Unaudited)
PRO FORMA BALANCE SHEET ADJUSTMENTS AND NOTES
DEBIT CREDIT
A) Purchase Transaction
Cash and short-term investments 308
OCLI equity investment in Flex Products 8,400
OCLI loan investment in Flex Products 6,492
Preferred stock (Series C) (11,200)
Current maturities on
long-term debt (4,000)
To record purchase of incremental 20% equity in Flex Products, Inc.;
assumption of 60% of working capital loan from ICI to Flex Products, Inc.;
issuance of $12 million OCLI Series C Preferred Stock; and borrowing of
$4 million from an existing line of credit to complete the Flex Products,
Inc. acquisition.
B) Intercompany Account Elimination
Accounts payable 423
Accounts receivable (423)
To eliminate OCLI/Flex Products intercompany current account balance.
C) Flex Loan Elimination
Long-Term debt 10,820
OCLI loan investment in Flex Products (6,492)
Minority interest (4,328)
To eliminate OCLI/Flex Products intercompany loan balance and to reclassify
Flex Products loan balance to minority shareholder to the minority interest
classification.
D) Revaluation of Assets Acquired and Elimination
of Flex Products Equity
Inventories 606
Machinery and equipment 5,963
Deferred income taxes (2,628)
Goodwill and intangibles (9,939)
Deferred income taxes 2,574
Minority interest (5,600)
Flex Products common stock 3
Flex Products paid-in capital 34,291
Flex Products retained earnings (16,620)
Accrued expenses (250)
OCLI equity investment in Flex Products (8,400)
To allocate the purchase in accordance with APB No. 116 by increasing the
acquired tangible assets based on appraised values; reducing the value of
Flex Products' intangible assets to the acquisition values; record the
resulting related deferred tax effects; record the accrual of Flex Products
acquisition expenses; and to eliminate intercompany investment and equity
accounts on consolidation.
(1) Note 1 (related to Balance Sheet):
The pro forma condensed combined balance sheet is prepared on the basis of
Optical Coating Laboratory, Inc.'s fiscal 1995 first quarter ending January
31, 1995, and Flex Products, Inc.'s calendar year-end, December 25, 1994,
audited balance sheet.
OPTICAL COATING LABORATORY, INC. & SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
(UNAUDITED)
OCLI FLEX
YEAR END YEAR END PRO FORMA PRO FORMA
(Amounts in thousands, 10/31/94 12/25/94(1) ADJUSTMENTS COMBINED
except per share data)
Net sales and other revenues $131,780 $ 23,624 $(1,116) (A) $154,288
Costs and Expenses:
Cost of sales 84,001 13,663 295(A,B,C) 97,959
Research & development 5,229 3,342 (171) (A) 8,400
Selling and administrative 31,341 2,831 - 34,172
Amortization of intangibles 648 1,322 (254)(D) 1,716
Total Costs and Expenses 121,219 21,158 (130) 142,247
Earnings (loss) from
operations 10,561 2,466 (986) 12,041
Other Income (Expense):
Interest income 338 - - 338
Interest expense (3,215) (908) 521 (E) (3,602)
Earnings (loss) before income
taxes, minority interest and
cumulative effect of change in
accounting principle 7,684 1,558 (465) 8,777
Income taxes (credit) 3,080 (4,966) (5,403)(F) 3,517
Earnings (loss) before minority
interest and cumulative effect
of change in accounting
principle 4,604 6,524 (5,868) 5,260
Minority interest in income
of consolidated joint venture - - 710(G) 710
Earnings (loss) before
cumulative effect of change
in accounting principle 4,604 6,524 (6,578) 4,550
Cumulative effect of change
in accounting principle - 69 - 69
Net earnings (loss) 4,604 6,455 (6,578) 4,481
Dividends on preferred stock - - 960(H) 960
Net earnings (loss) applicable
to common stock 4,604 6,455 (7,538) 3,521
Net earnings per common and common
equivalent shares:
Earnings before cumulative
effect of change in
accounting principle $ 0.51 $ 0.73 $ (0.84) $ (0.40)
Cumulative effect of change
in accounting principle - (0.01) - (0.01)
Net earnings (loss)
per share $ 0.51 $ 0.72 $ (0.84) $ 0.39
Average common and common
equivalent shares used to
compute earnings per share 9,023 9,023 9,023 9,023
OPTICAL COATING LABORATORY, INC. & SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
(UNAUDITED)
OCLI FLEX
QTR END QTR END PRO FORMA PRO FORMA
(Amounts in thousands, 1/31/95 3/31/95 ADJUSTMENTS COMBINED
except per share data)
Net sales and other revenues $ 35,993 $ 6,536 $ (325)(A) $ 42,204
Cost and Expenses:
Cost of sales 21,352 4,019 531(A,B,C) 25,902
Research and development 1,387 843 (64)(A) 2,166
Selling and administrative 9,244 953 - 10,197
Amortization of intangibles 171 330 (275)(D) 226
Total Costs and Expenses 32,154 6,145 192 38,491
Earnings (loss) from operations 3,839 391 (517) 3,714
Other Income (Expense):
Interest income 226 - - 226
Interest expense (920) (204) 107(E) (1,017)
Earning (loss) before income
taxes, minority interest and
cumulative effect of change
in accounting principle 3,145 188 (410) 2,923
Income taxes (credit) 1,321 77 (166)(F) 1,232
Earnings (loss) before minority
interest and cumulative
effect of change in accounting
principle 1,824 111 (244) 1,691
Minority interest in income of
consolidated joint venture - - 127 (G) 127
Earnings (loss) before
cumulative effect of change
in accounting principle 1,824 111 (371) 1,564
Cumulative effect of change
in accounting principle - - - -
Net earnings (loss) 1,824 111 (371) 1,564
Dividends on preferred stock - - 240(H) 240
Net earnings (loss) applicable
to common stock 1,824 111 (611) 1,324
Net earnings per common and common
equivalent shares:
Earnings before cumulative
effect of change in
accounting principle $ 0.20 $ 0.01 $ (0.07) $ 0.15
Cumulative effect of change
in accounting principle $ - $ - $ - $ -
Net earnings (loss) per share $ 0.20 $ 0.01 $ (0.07) $ 0.15
Average common and common
equivalent shares used to
compute earnings per share 9,024 9,024 9,024 9,024
OPTICAL COATING LABORATORY, INC. & SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
(UNAUDITED)
OCLI FLEX
QTR END QTR END PRO FORMA PRO FORMA
(Amounts in thousands, 1/31/94 3/31/94 ADJUSTMENTS COMBINED
except per share data)
Net sales and other revenues $30,091 $ 5,437 $ (321)(A) $ 35,207
Costs and Expenses:
Cost of sales 19,017 3,007 464 (A,B,C)22,488
Research and development 1,111 1,006 (104)(A) 2,013
Selling and administrative 7,208 676 - 7,884
Amortization of intangibles 166 330 (63)(D) 433
Total Costs and Expenses 27,502 5,019 297 32,818
Earnings (loss) from
operations 2,589 418 (618) 2,389
Other Income (Expense):
Interest income 9 - - 9
Interest expense (698) (202) 105(E) (795)
Earnings (loss) before
income taxes, minority interest
and cumulative effect of
change in accounting
principle 1,900 216 (513) 1,603
Income taxes (credit) 798 21 (140)(F) 679
Earnings (loss) before minority
interest and cumulative effect
of change in accounting
principle 1,102 195 (373) 924
Minority interest in income of
consolidated joint venture - - 133(G) 133
Earnings (loss) before cumulative
effect of change in accounting
principle 1,102 195 (506) 791
Cumulative effect of change in
accounting principle - - - -
Net earnings (loss) 1,102 195 (506) 791
Dividends on preferred stock - - 240(H) 240
Net earnings (loss) applicable
to common stock 1,102 195 (746) 551
Net earnings per common and
common equivalent shares:
Earnings before cumulative
effect of change in
accounting principle $ 0.12 $ 0.02 $ (0.08) $ 0.06
Cumulative effect of change
in accounting principle - - - -
Net earnings (loss)
per share $ 0.12 $ 0.02 $ (0.08) $ 0.06
Average common and common
equivalent shares used to
compute earnings per share 9,019 9,019 9,019 9,019
OPTICAL COATING LABORATORY, INC. & SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENTS OF EARNINGS
FISCAL YEAR ENDED OCTOBER 31, 1994 AND
FISCAL FIRST QUARTERS ENDED JANUARY 31, 1995 AND 1994
(DOLLARS IN THOUSANDS)
(UNAUDITED)
STATEMENTS OF EARNINGS ADJUSTMENTS AND NOTES:
A) Elimination-Intercompany Activity 1st Qtr 1st Qtr
Fiscal 1994 1995 1994
Sales 1,116 325 321
R & D support contract (171) (64) (104)
Royalty expense (cost of sales) (945) (261) (217)
To eliminate intercompany royalty revenue and research and development
expense between OCLI and Flex Products, Inc.
B) Depreciation of Increase in Fixed Asset Values
Depreciation expense
(cost of sales) 745 186 186
Accumulated depreciation (745) (186) (186)
To record depreciation expense on the increase in fixed asset values
over the estimated useful lives of 8 years.
C) Inventory Revaluation to Cost of Sales
Cost of sales 495 606 495
Inventory (495) (606) (495)
To expense the increase in inventory amounts to net realizable values
assuming turnover within the three month period after acquisition.
D) Amortization of Intangibles
Goodwill amortization expense (1,322) (330) (330)
Accumulated goodwill amortization 1,322 330 330
Goodwill amortization expense 1,068 55 267
Accumulated goodwill amortization (1,068) (55) (267)
To eliminate Flex Products' amortization of intangibles and to record
amortization of intangibles per consolidated balances for intangibles
over the estimated useful lives of 15 years.
E) Intercompany Interest Expense
and Interest Expense on $4M Draw
Interest expense (908) (204) (202)
Interest payable 908 204 202
Interest expense 387 97 97
Interest payable (387) (97) (97)
To eliminate OCLI and Flex Products intercompany interest; reclassify
minority shareholder interest; and record interest expense on assumed $4
million new borrowings.
F) Taxes
Tax Expense (186) (164) (205)
Deferred Taxes 186 164 205
To record income tax provision at 40% for pro forma adjustments.
Tax Expense 5,589 (2) 65
Deferred Taxes (5,589) 2 (65)
To reverse the deferred tax asset recorded by Flex in 1994 resulting
from the removal of a valuation allowance associated primarily with
prior year operating losses and to establish a composite statutory
income tax rate of 40% for such operations.
G) Minority Interest
Minority interest
(income statement, interest) 363 81 81
Minority interest
(income statement, earnings) 2,582 45 78
Minority interest
(income statement, impact of
tax adjustment F) (2,235) 1 (26)
Minority interest (balance sheet) (710) (127) (133)
To record minority interest in earnings of Flex Products, Inc. for the
periods, to recognize the minority interest impact of tax adjustment
(Note F) and to reclassify minority interest expense to minority interest.
H) Preferred Stock Dividend
Dividend Expense 960 240 240
Dividend Payable (960) (240) (240)
To record pro forma preferred stock dividends for the periods.
Note 1 related to Statement of Earnings:
The pro forma condensed combined statements of earnings were prepared on
the basis of Optical Coating Laboratory, Inc.'s fiscal year ended October
31, 1994 combined with Flex Products, Inc.'s calendar year ended December
25, 1994 audited statements of earnings and Optical Coating Laboratory,
Inc.'s first quarters ended January 31, 1995 and 1994 combined with Flex
Products, Inc.'s first quarters ended March 31, 1995 and 1994.
