<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OF 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report
(Date of earliest event reported): January 29, 1996
------------------------------
PACIFIC SCIENTIFIC COMPANY
--------------------------------------------------
(Exact name of registrant as specified in charter)
California 1-7744 94-0744970
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS employer
of incorporation) file no.) identification no.)
620 Newport Center Drive, Suite 700, Newport Beach, CA 92660
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 720-1714
--------------
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Pursuant to an Agreement and Plan of Merger between Pacific Scientific
Company (the "Company") and the shareholders of Met One, Inc. ("Met One")
which was executed on December 29, 1995 and placed into escrow, a wholly-owned
subsidiary of the Company merged with and into Met One on January 29, 1996.
The merger resulted in the exchange of 983,092 shares of the Company's common
stock for all of the outstanding shares of Met One together with certain real
property utilized by Met One as its company headquarters. Pursuant to a
Registration Rights Agreement, the Company agreed to use its best efforts to
file before March 15, 1996 a registration statement covering the shares of
common stock issued in the transaction.
Met One is a manufacturer of instruments to detect, calculate and
measure contaminate particles, primarily in air. The Company will use the
pooling-of-interests method to account for this transaction and will report the
Company's results of operations for 1995 and prior periods as if the merger
took place at the beginning of such periods.
As a condition of obtaining clearance of the transaction under the
Federal Hart-Scott-Rodino and Clayton Acts, the Company agreed to divest its
drinking water quality monitoring assets to another company. During 1995, the
Company's sales of monitors for drinking water quality represented less than
one-half of one percent of the Company's 1995 annual sales. Until such
drinking water quality monitoring assets have been divested, the Company is
required to operate Met One as a separate and distinct business.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired.
Financial Statements of Met One, Inc. for the fiscal years
ended June 30, 1995, 1994, and 1993, together with the related independent
auditors' report thereon appear on pages F-1 through F-15 attached hereto and
are incorporated herein by reference.
-2-
<PAGE> 3
(b) Pro Forma Financial Information.
The registrant intends to file its Annual Report on Form 10-K
not later than 60 days after this Current Report on Form 8-K must be filed with
the Securities and Exchange Commission and the registrant's financial
statements included in the Form 10-K will be restated for all periods to give
effect to the acquisition disclosed in this report. Accordingly, no pro forma
financial information will be filed as an amendment to this Form 8-K.
(c) Exhibits.
The following exhibits are filed with this report:
<TABLE>
<CAPTION>
<S> <C>
2.1 Agreement and Plan of Merger
2.2 Registration Rights Agreement
23 Consent of Independent Accountants
</TABLE>
SIGNATURES
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.
PACIFIC SCIENTIFIC COMPANY,
a California corporation
Dated: February 12, 1996 By: /s/ Richard V. Plat
--------------------------------
Richard V. Plat
Executive Vice President,
Chief Financial Officer and
Secretary
-3-
<PAGE> 4
MET ONE, INC.
Financial Statements
June 30, 1995, 1994 and 1993
(With Independent Auditors' Report Thereon)
F-1
<PAGE> 5
[KPMG LETTERHEAD]
Independent Auditors' Report
The Board of Directors
Met One, Inc.:
We have audited the accompanying balance sheets of Met One, Inc. as of June 30,
1995, 1994 and 1993, and the related statements of income, stockholders'
equity, and cash flows for the years 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 Met One, Inc. as of June 30,
1995, 1994, and 1993, and the results of its operations and its cash flows for
the years then ended in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
September 19, 1995
Portland, Oregon
F-2
<PAGE> 6
MET ONE, INC.
Balance Sheets
June 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Assets 1995 1994 1993
------ ---- ---- ----
<S> <C> <C> <C>
Current assets:
Cash $ - - -
Trade accounts receivable, less allowance for
doubtful accounts of $30,000 in 1995, $11,000
in 1994, and $18,000 in 1993 2,281,044 1,914,605 1,741,754
Notes receivable - 26,602 24,184
Other receivables 30,000 28,599 209,010
Inventory 2,412,381 1,509,565 1,291,258
Prepaid expenses 76,510 82,831 152,728
Deferred income taxes 432,164 462,456 445,356
---------- --------- ---------
Total current assets 5,232,099 4,024,658 3,864,290
---------- --------- ---------
Property, plant and equipment:
Land 45,900 259,160 259,160
Plant and equipment 2,728,731 2,566,280 2,513,239
---------- --------- ---------
2,774,631 2,825,440 2,772,399
Less accumulated depreciation 1,676,362 1,665,760 1,505,281
---------- --------- ---------
Property, plant and equipment, net 1,098,269 1,159,680 1,267,118
---------- --------- ---------
Other assets 59,141 41,001 46,156
Deferred income taxes 13,895 18,712 18,271
---------- --------- ---------
$6,403,404 5,244,051 5,195,835
========== ========= =========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 7
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity 1995 1994 1993
------------------------------------ ---- ---- ----
<S> <C> <C> <C>
Current liabilities:
Trade accounts payable $ 506,420 266,010 208,481
Cash overdraft 598,095 591,946 637,660
Line of credit 1,636,190 1,753,906 1,636,470
Current portion of long-term debt 589,361 165,274 189,356
Notes payable to shareholder - - 190,000
Accrued expenses 1,379,413 1,023,724 849,855
---------- --------- ---------
Total current liabilities 4,709,479 3,800,860 3,711,822
Long-term debt, less current portion 63,918 773,333 915,875
---------- --------- ---------
Total liabilities 4,773,397 4,574,193 4,627,697
---------- --------- ---------
Stockholders' equity:
Common stock; $1 par value, 75,000 shares
authorized and issued; 500 shares outstanding 500 500 500
Additional paid-in capital 124,950 124,950 124,950
Notes receivable from shareholders (125,000) (125,000) (125,000)
Retained earnings 1,629,557 669,408 567,688
---------- --------- ---------
Total stockholders' equity 1,630,007 669,858 568,138
Commitments
---------- --------- ---------
$6,403,404 5,244,051 5,195,835
========== ========= =========
</TABLE>
F-4
<PAGE> 8
MET ONE, INC.
Statements of Income
Years ended June 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net sales $15,190,380 11,803,350 10,813,544
Cost of sales 6,624,996 5,471,398 5,048,278
----------- ---------- ----------
Gross profit 8,565,384 6,331,952 5,765,266
Selling, general and administrative expenses 5,745,150 4,783,405 4,835,493
Research and development expense 970,599 878,424 882,747
----------- ---------- ----------
Income from operations 1,849,635 670,123 47,026
----------- ---------- ----------
Other income (expense):
Interest income 10,677 - 15,564
Interest expense (251,882) (251,659) (246,695)
Other, net 93,953 (153,518) (43,805)
----------- ---------- ----------
Income (loss) before income taxes 1,702,383 264,946 (227,910)
Income tax expense (benefit) 742,234 163,226 (38,046)
----------- ---------- ----------
Net income (loss) $ 960,149 101,720 (189,864)
=========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 9
MET ONE, INC.
Statements of Stockholders' Equity
Years ended June 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Common stock Additional Notes
------------------ paid-in receivable from Retained Total
Shares Amount capital shareholders earnings equity
------ ------ ------- ------------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1992 450 $450 - - 757,552 758,002
Net loss - - - - (189,864) (189,864)
Issuance of stock 50 50 124,950 (125,000) - -
--- ---- ------- -------- --------- ---------
Balance at June 30, 1993 500 500 124,950 (125,000) 567,688 568,138
Net income - - - - 101,720 101,720
--- ---- ------- -------- --------- ---------
Balance at June 30, 1994 500 500 124,950 (125,000) 669,408 669,858
Net income - - - - 960,149 960,149
--- ---- ------- -------- --------- ---------
Balance at June 30, 1995 500 $500 124,950 (125,000) 1,629,557 1,630,007
=== ==== ======= ======== ========= =========
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE> 10
MET ONE, INC.
Statements of Cash Flow
Years ended June 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 960,149 101,720 (189,864)
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Depreciation and amortization 128,188 171,230 216,367
(Gain) loss on asset disposition (93,189) 6,680 3,396
Deferred income tax expense (benefit) 35,109 (17,541) (62,123)
Changes in operating assets and liabilities:
Trade accounts and other receivables (357,840) 17,560 (548,993)
Inventory (902,816) (218,307) (140,218)
Prepaid expenses 6,321 69,897 (84,470)
Other assets (18,140) 5,155 (2,416)
Trade accounts payable 240,410 57,529 (59,337)
Accrued expenses 355,689 173,869 195,271
--------- -------- --------
Net cash provided (used) by operating
activities 353,881 367,792 (672,387)
--------- -------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment (269,415) (70,472) (123,231)
Proceeds from asset disposition 295,827 - -
--------- -------- --------
Net cash provided (used) by investing activities 26,412 (70,472) (123,231)
--------- -------- --------
Cash flows from financing activities:
Payments on long-term debt (311,328) (187,729) (5,047)
Proceeds from issuance of long-term debt 26,000 21,105 42,737
Net change in line of credit (117,716) 117,436 209,894
Payments on notes payable to shareholders - (190,000) -
Proceeds from issuance of notes payable to shareholder - - 160,000
Net change in cash overdraft 6,149 (45,714) 373,850
Net change in notes receivable 16,602 (12,418) 14,184
--------- -------- --------
Net cash provided (used) by financing
activities (380,293) (297,320) 795,618
--------- -------- --------
Net change in cash $ - - -
========= ======== ========
Supplemental disclosure of cash flow information:
Federal and state income taxes paid $ 544,943 157,881 70,670
Interest paid 251,882 251,659 246,659
Supplemental disclosure of noncash transactions:
Notes receivable issued in exchange for
common stock $ - - 125,000
========= ======== ========
</TABLE>
See accompanying notes to financial statements
F-7
<PAGE> 11
MET ONE, INC.
Notes to Financial Statements
June 30, 1995, 1994 and 1993
(1) Summary of Significant Accounting Policies
Accounting policies and methods of their application that significantly
affect the determination of financial position, cash flows and results of
operations are as follows:
(a) Business Description
Met One, Inc. (the Company) manufactures particle counters which are used
in various manufacturing processes. When the Company was founded, its
main emphasis was on manufacturing meteorological and weather
instruments. Particle counters were also produced. During the late
1980's, particle counters became the focus of the Company and the
meteorological instrument line was sold in 1989. The Company has since
concentrated on manufacturing of particle counters for air, water, and
hydraulic systems.
Sales are made to both domestic and foreign customers. During the years
ended June 30, 1995, 1994 and 1993, sales to Japan comprised
approximately 12.5%, 7.2%, and 8.7%, respectively, of total sales.
(b) Basis for Reporting
The Company maintains its records on the accrual basis of accounting.
(c) Inventories
Inventories are valued at the lower of cost or market using the first-in,
first-out (FIFO) method for raw material and production costs.
(d) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation on plant
and equipment is provided using the declining balance and straight-line
methods over the estimated useful lives of the assets. Maintenance and
repairs are expensed in the year incurred; major renewals and betterments
of equipment are capitalized and depreciated over the remaining life of
the asset.
(e) Research and Development
Expenditures for research and development are charged to operations as
incurred.
(Continued)
F-8
<PAGE> 12
MET ONE, INC.
Notes to Financial Statements
(f) Income Taxes
The Company uses the asset and liability method of accounting for income
taxes (Statement 109). Under the asset and liability method, deferred
tax assets and liabilities are recognized for the estimated 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. Under Statement 109, 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) Warranty Obligations
The Company provides the customer with a 12-month warranty from the date
of purchase. Estimated warranty costs are provided at the time of sale.
(2) Notes Receivable
During 1989, the Company sold its meteorology division, which was engaged
primarily in the sale of meteorological instruments. The sale was financed
by the Company through a long-term note, bearing interest at 10% per year.
The balance of the note was received during the fiscal year ended June 30,
1995.
(3) Other Receivables
At June 30, 1993, other receivables consisted primarily of a sales tax
refund of $181,000. The amount was paid in 1994.
(4) Inventory
Inventory consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Raw material $1,411,747 821,388 777,893
Work in process 397,585 188,556 63,124
Finished goods 182,489 150,435 62,682
Demonstration and other 565,560 489,186 507,559
Reserve for slow moving inventory (145,000) (140,000) (120,000)
--------- --------- ---------
$2,412,381 1,509,565 1,291,258
========== ========= =========
</TABLE>
(Continued)
F-9
<PAGE> 13
MET ONE, INC.
Notes to Financial Statements
(5) Accrued Expenses
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Accrued payroll and payroll taxes $ 261,000 217,500 221,193
Accrued vacation 224,000 333,100 297,100
Accrued warranty obligations 250,000 100,000 50,000
Accrued sales and use taxes 405,458 297,932 281,562
Accrued income taxes 190,585 28,979 -
Miscellaneous 48,370 46,213 -
---------- --------- -------
$1,379,413 1,023,724 849,855
========== ========= =======
</TABLE>
(6) Line of Credit
At June 30, 1995, the Company has an inventory and accounts receivable
financing line of credit with Western Bank which is unsecured and expires
on November 30, 1995. Generally, the revolving line of credit permits
borrowing of up to the lesser of 80% of eligible accounts receivable plus
40% of eligible inventory or $3,000,000. Interest is payable monthly at
the bank's prime rate plus 1%, 10% at June 30, 1995, with a minimum rate of
8% per annum and a maximum rate of 16% per annum.
The line of credit agreement contains restrictive covenants. At June 30,
1995, the Company was not in compliance with certain of these restrictive
covenants. The bank has granted a waiver as of that date for these events
of default.
(Continued)
F-10
<PAGE> 14
MET ONE, INC.
Notes to Financial Statements
(7) Long-term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
General Motors Acceptance Corporation,
various interest rates ranging from 9.5%
to 13%, requiring monthly principal and
interest payments with maturities ranging
from 1995 to 1998, secured by vehicles $ 51,451 58,538 91,948
Equipment notes payable to the Company's
principal interest requiring monthly
payments of principal plus interest at prime
(9% at June 30, 1995) plus 1.5%. Mature
in 1996. Secured by equipment 85,129 190,495 295,433
Mortgage payable to Josephine County,
requiring semi-annual payments of principal
and interest at 12%, maturing in 2002.
Secured by land 33,015 34,976 36,721
Mortgage payable to West One Bank,
requiring monthly payments of principal
and interest at 7.75%. Paid in 1995.
Secured by real property - 142,996 145,664
Mortgage payable to First Interstate Bank,
requiring monthly payments of principal
and interest at 11.35%, maturing in 1995.
Secured by real property 483,684 511,602 535,465
-------- ------- ---------
Total long-term debt 653,279 938,607 1,105,231
Less current portion 589,361 165,274 189,356
-------- ------- ---------
Long-term debt, less current portion $ 63,918 773,333 915,875
======== ======= =========
</TABLE>
(Continued)
F-11
<PAGE> 15
MET ONE, INC.
Notes to Financial Statements
Future maturities of long-term debt are as follows:
<TABLE>
<S> <C>
Year ending June 30,
1996 $589,361
1997 26,697
1998 11,672
1999 3,128
2000 3,514
Thereafter 18,907
--------
Total $653,279
========
</TABLE>
(8) Related Party Transactions
(a) Notes Receivable from Shareholders
On July 1, 1992, the Company issued 25 shares of common stock to each of
two employees in exchange for notes receivable. The stock issued is
pledged as security on the notes. The notes are due July 1, 1996 and
bear interest at 8% per year.
Pursuant to a stock redemption agreement, the Company has reserved the
right to purchase the shares issued to these employees if they terminate
employment with the Company before July 1, 1996 or if they have not paid
the outstanding notes related to the stock issuance after that date.
(b) Notes Payable to Shareholder
As of June 30, 1993, the Company's President and majority shareholder had
loaned the Company an aggregate of $190,000 in exchange for notes bearing
interest at 10% per year. The notes were repaid by the Company during
the year ended June 30, 1994.
(c) Leases from Shareholder
The Company has entered into several operating lease arrangements with
the Company's President and majority shareholder for facilities and
vehicles.
The vehicle lease arrangements are month-to-month and are terminable on
one months' notice.
(Continued)
F-12
<PAGE> 16
MET ONE, INC.
Notes to Financial Statements
A portion of the Company's primary manufacturing facility is leased to
the Company under a ten year operating lease expiring on July 1, 2003.
The lease agreement requires the Company to pay all executory costs such
as insurance, property taxes, and maintenance, and provides that all
leasehold improvements will revert to the lessor upon expiration of the
lease. The required monthly rental payments are adjusted annually based
on the Consumer Price Index for the Portland, Oregon metropolitan area.
Future minimum lease payments required by the facility lease are as
follows:
<TABLE>
<S> <C>
Year ending June 30,
1996 $ 281,220
1997 281,220
1998 281,220
1999 281,220
2000 281,220
Thereafter 843,660
----------
Total $2,249,760
==========
</TABLE>
(d) Lease to Shareholder
During 1993, the Company leased rental property to its President and
majority shareholder for use as his principal residence. Rental income
for 1993 was approximately $12,000. The house was unoccupied during 1994
and was sold during 1995.
(9) Income Taxes
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $513,637 115,711 8,686
State 193,488 65,056 15,391
-------- ------- -------
Total current 707,125 180,767 24,077
Deferred 35,109 (17,541) (62,123)
-------- ------- -------
Income tax expense (benefit) $742,234 163,226 (38,046)
======== ======= =======
</TABLE>
(Continued)
F-13
<PAGE> 17
MET ONE, INC.
Notes to Financial Statements
The provision for income taxes at the Company's effective tax rate differed
from the provision for income taxes at the statutory federal tax rate (34%)
as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Computed tax expense (benefit) at the
federal statutory rate $578,810 90,081 (77,489)
State taxes, net of federal tax benefit 127,702 42,937 10,158
Other 35,722 30,208 29,285
-------- ------- -------
Income tax expense (benefit) $742,234 163,226 (38,046)
======== ======= =======
</TABLE>
Deferred income taxes reflect the impact of "temporary differences" between
amounts of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws. These temporary differences are
determined in accordance with Statement 109 and are more inclusive in
nature than "timing differences" as determined under previously applicable
accounting principles.
The tax effect of temporary differences and carryforwards which give rise
to significant portions of deferred tax assets and deferred tax liabilities
at June 30, 1995, 1994 and 1993, are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Deferred tax assets:
Accounts receivable, due to allowance
for doubtful accounts $ 11,278 4,129 6,840
Inventory, due to additional costs
inventoried for tax purposes and
reserve for slow moving inventory 138,766 99,714 80,156
Accrued vacation pay 85,120 126,578 112,898
Warranty and other accrued liabilities 247,000 150,480 98,040
Tax credit carryforwards - 131,555 197,422
Other 21,495 22,512 18,271
-------- ------- -------
Total gross deferred tax assets 503,659 534,968 513,627
-------- ------- -------
Less valuation allowance (50,000) (50,000) (50,000)
-------- ------- -------
Net deferred tax assets 453,659 484,968 463,627
Deferred tax liabilities:
Other 7,600 3,800 -
-------- ------- -------
Total gross deferred tax liabilities 7,600 3,800 -
-------- ------- -------
Net deferred tax asset $446,059 481,168 463,627
======== ======= =======
</TABLE>
(Continued)
F-14
<PAGE> 18
MET ONE, INC.
Notes to Financial Statements
There has been no change in the valuation allowance for deferred tax assets
since June 30, 1992. The Company has determined that it is not necessary
to establish a valuation allowance for deferred tax assets of $453,659 at
June 30, 1995, since it is more likely than not that such amount will be
realized through carryback to taxable income in prior years and through
anticipated future taxable income.
(10) Operating Leases
The Company has several noncancelable operating leases, primarily for
office space, transportation equipment, and computer equipment. Rental
expense related to operating lease agreements was $103,733, $65,757, and
$39,148 in 1995, 1994, and 1993, respectively.
Future minimum lease payments under noncancellable operating leases are as
follows:
<TABLE>
<S> <C>
Year ending June 30,
1996 $132,407
1997 97,844
1998 38,701
1999 19,918
2000 6,639
--------
$295,509
========
</TABLE>
(11) Subsequent Event
On September 7, 1995, the Company's majority shareholder signed a letter of
intent to sell 100% of the common stock of the Company.
F-15
<PAGE> 19
EXHIBIT INDEX
NO. EXHIBIT
2.1 Agreement and Plan of Merger
2.2 Registration Rights Agreement
23 Consent of Independent Accountants
<PAGE> 1
EXHIBIT 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
AMONG
PACIFIC SCIENTIFIC COMPANY
M1 ACQUISITION CORP.,
MET ONE, INC.
AND
THE SHAREHOLDERS OF
MET ONE, INC.
December 29, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.2 Articles of Incorporation; By-laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.3 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.4 Exchange of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.5 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.6 Real Estate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 3 REPRESENTATIONS AND WARRANTIES CONCERNING THE SHAREHOLDERS . . . . . . . . . . . . . . . . 16
3.1 Ownership of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.2 Execution and Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.3 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.4 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.5 Investment Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.6 No Purchases of PSC's Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 4 REPRESENTATIONS AND WARRANTIES CONCERNING M1 . . . . . . . . . . . . . . . . . . . . . . . 19
4.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.2 No Conflicts; Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.4 Financial Statements; Personal Property; Encumbrances . . . . . . . . . . . . . . . . . . . 21
4.5 Title to Real Property; Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.6 Accounts Receivable and Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.7 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.8 Trademarks, Patents, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.9 Banking and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.10 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.11 Judgments; Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.12 Income and Other Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.13 Questionable Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.14 Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.15 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
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4.16 Permits, Licenses, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.17 Regulatory Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.18 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.19 Material Contracts; No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.20 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.21 Employees and Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.22 Affiliations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.23 Principal Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.24 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.25 Product Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.26 Product Liability and Product Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . 45
4.27 Corporate Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
4.28 Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
4.29 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
4.30 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PSC . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.1 Organization and Good Standing of PSC . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.2 Organization and Good Standing of Acquisition . . . . . . . . . . . . . . . . . . . . . . . 47
5.3 Execution and Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.4 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.5 Form S-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.6 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.7 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.8 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.9 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.11 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 6 ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.1 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.3 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.4 Inconsistent Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.5 General Employment Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.6 Petralli Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.7 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.8 Pooling Restrictions on Transactions in PSC Stock . . . . . . . . . . . . . . . . . . . . . 52
6.9 Automobile Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.10 Buy-Sell Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
</TABLE>
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6.11 Employee Stock Purchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.12 Petralli Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.13 Release of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 7 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 56
7.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.3 Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.4 Limitation on Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.5 Indemnification Non-Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 8 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.2 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.5 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.6 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.8 Recitals, Schedules and Annexes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.9 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.10 Shareholders' Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
</TABLE>
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<PAGE> 5
ANNEXES
Annex A - Agreement of Merger
Annex B - Officers' Certificate of Acquisition
Annex C - Officers' Certificate of M1
Annex D - Legal Opinion of Counsel for M1
Annex E - Petralli Noncompetition Agreement
Annex F - Registration Rights Agreement
Annex G - Shareholder Noncompetition Agreements
Annex H - Stock Pledge Agreements
Annex I - Purchase and Sale Agreement and Joint Escrow Instructions
Annex J - Legal Opinion of Counsel for PSC
Annex K - Shareholders of M1
Annex L - Sommer Employment Agreement
Annex M - Wittkopp Employment Agreement
Annex N - Armstrong Employment Agreement
Annex O - Siebert Employment Agreement
Annex P - Lawson Employment Agreement
Annex Q - Gunning Employment Agreement
Annex R - Petralli Employment Agreement
DISCLOSURE SCHEDULES
Schedule 3.1 - Proxies, Voting Trusts, etc.
Schedule 4.1(a) - Foreign Jurisdictions
Schedule 4.2 - Agreements Requiring Consents of Third
Parties
Schedule 4.3 - Liens Concerning M1 Shares
Schedule 4.4(a) - Financial Statements
Schedule 4.4(d) - Exceptions to Assets on Balance Sheet
Schedule 4.4(e) - Personal Property in Excess of $1,000
Schedule 4.4(f) - Personal Property Leases
Schedule 4.5(a)(i) - Plot Plan of Grants Pass Property
Schedule 4.5(a)(ii) - Legal Description of Petralli Real Property
Schedule 4.5(a)(iii) - Legal Description of Owned Real Property
Schedule 4.5(d) - Real Property Leases
Schedule 4.5(f) - Exceptions to Real Property Matters
Schedule 4.5(h) - Inspections of Grants Pass Property
Schedule 4.6(a) - Aging of Accounts Receivable
Schedule 4.7 - Summary of Inventory
Schedule 4.8(a) - List of Registered Rights; Exceptions
Schedule 4.8(c) - Licenses and Rights
Schedule 4.9(a) - Banking Information
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<PAGE> 6
Schedule 4.9(b) - Insurance Information
Schedule 4.10(a) - Liabilities and Obligations
Schedule 4.10(b) - Guaranties
Schedule 4.11 - Judgments and Litigation
Schedule 4.12 - Income and Other Taxes
Schedule 4.12(d) - Tax Deficiencies; Waivers
Schedule 4.12(e) - Tax Audits and Actions
Schedule 4.12(g) - Net Losses, Unused Credits, etc.
Schedule 4.13 - Questionable Payments
Schedule 4.14(a) - List of Benefit Plans
Schedule 4.15 - Undisclosed Liabilities
Schedule 4.16 - Permits
Schedule 4.19(a) - Sales Orders and Contracts
Schedule 4.19(b) - Purchase Orders and Commitments
Schedule 4.19(c) - Sales Agencies, Representatives, etc.
Schedule 4.19(d) - Noncompetition Agreements and Covenants
Schedule 4.19(e) - Agreements with Insiders
Schedule 4.19(f) - Material Contracts
Schedule 4.19(g) - Exceptions to Contracts and Agreements
Schedule 4.20 - Absence of Certain Changes
Schedule 4.21(a) - Employment and Compensation Agreements
Schedule 4.21(b) - Labor and Collective Bargaining
Agreements
Schedule 4.21(c) - Continued Employment Obligations
Schedule 4.22 - Affiliations
Schedule 4.23(a) - Principal Customers
Schedule 4.23(b) - Principal Suppliers
Schedule 4.25 - Product Returns
Schedule 4.26 - Product Liability and Product Warranty
Schedule 4.28 - Hazardous Materials
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<PAGE> 7
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is entered into as of
December 29, 1995, among M1 ACQUISITION CORP., a California corporation
("Acquisition"), PACIFIC SCIENTIFIC COMPANY, a California corporation ("PSC"),
MET ONE, INC., a California corporation ("M1"), and the shareholders of M1
(collectively, the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Board of Directors and all of the
shareholders of M1 desire that Acquisition be merged with and into M1 upon the
terms and subject to the conditions contained in this Agreement; and
WHEREAS, the Boards of Directors of PSC and Acquisition
desire that Acquisition be merged with and into M1 upon the terms and subject
to the conditions contained in this Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the
respective representations, warranties, covenants, agreements and conditions
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
ARTICLE 1
DEFINITIONS
Unless otherwise defined herein or the context otherwise
requires, the terms defined in this Article 1 shall have the meanings herein
specified for all purposes of this Agreement, applicable to both the singular
and plural forms of any of the terms herein defined. Unless otherwise
indicated, any reference herein to a "Section", "Article," "Annex" or
"Schedule" shall mean the applicable section, article, annex or schedule of or
to this Agreement. All accounting terms used in this Agreement not defined in
this Article 1 shall, except as otherwise provided for herein, be construed in
accordance with generally accepted accounting principles.
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<PAGE> 8
"Acquisition Secretary's Certificate" shall mean a
certificate of the corporate secretary of Acquisition dated as of the Closing
Date certifying (i) copies of the resolutions of Acquisition's Board of
Directors authorizing and approving the Merger, this Agreement and the other
transactions contemplated by this Agreement and all other documents and
instruments to be delivered by Acquisition hereby, (ii) the names, titles and
signatures of the officers of Acquisition authorized to execute the Agreement
of Merger, the Officers' Certificate of Acquisition, this Agreement and all
other documents or instruments delivered by Acquisition hereby, and (iii) such
additional supporting documents and other information as M1 or its legal
counsel may reasonably request.
"Action" shall mean any actual or threatened claim,
action, suit, arbitration, hearing, inquiry, proceeding, complaint, charge or
investigation by or before any Governmental Entity, mediator or arbitrator and
any appeal from any of the foregoing.
"Affiliate" of a Person shall mean any Person that
directly or indirectly controls, is controlled by, or is under common control
with, the indicated Person.
"Agreement" shall mean this Agreement and Plan of Merger.
"Agreement of Merger" shall mean an agreement of merger
substantially in the form of Annex A attached hereto and otherwise complying
with the requirements of Section 1101 of the CGCL.
"Balance Sheet" and "Balance Sheet Date" shall have the
meaning assigned to such terms in Section 4.4(a).
"CGCL" shall mean the General Corporation Law of the
State of California.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Closing" and "Closing Date" have the meaning assigned
to such terms in Section 2.5.
"Customer Lists" shall mean, collectively, any and all
documents or lists containing the names, addresses, telephone numbers or
representatives of any prior, current or potential customer of M1, which lists
or documents have
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<PAGE> 9
been developed by M1 or any of its current or former officers, directors,
employees or agents.
"DOL" shall mean the United States Department of Labor.
"Damages" shall mean any and all losses, liabilities,
obligations, costs, expenses, damages or judgments of any kind or nature
whatsoever (including reasonable attorneys', accountants' and experts' fees,
disbursements of counsel, and other costs and expenses incurred pursuing
indemnification claims under Article 7 hereof).
"Effective Time" shall have the meaning assigned to such
term in Section 2.5.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" shall mean any Person which is (or at
any relevant time was) a member of a controlled group of corporations within
the meaning of Code Section 414(b), all trades or businesses under common
control within the meaning of Code Section 414(c), and all affiliated service
groups within the meaning of Code Section 414(m), of which M1 is (or at any
relevant time was) a member.
"Environmental Laws" shall mean all Legal Requirements
pertaining to the protection of the environment, the treatment, emission and
discharge of gaseous, particulate and effluent pollutants and the use,
handling, storage, treatment, removal, transport, transloading, cleanup,
decontamination, discharge and disposal of Hazardous Materials, including,
without limitation, those statutes, laws, rules and regulations set forth below
in the definition of "Hazardous Material".
"Governmental Entity" shall mean any local, state, federal
or foreign (i) court, (ii) government or (iii) governmental department,
commission, instrumentality, board, agency or authority, including the IRS and
other taxing authorities.
"Grants Pass Lease" shall mean the Triple Net Lease by and
between Petralli and M1 dated October 1, 1982, as amended by the Addendums to
Triple Net Lease between Petralli and M1 dated August 1, 1984, March 1, 1987,
March 1, 1990, July 1, 1991 and July 1, 1993.
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"Grants Pass Property" shall mean the Owned Real Property
and the Petralli Real Property located in Grants Pass, Oregon and the
Structures located on the Owned Real Property and the Petralli Real Property.
"Hazardous Material" shall mean any flammable, ignitable,
corrosive, reactive, radioactive or explosive substance or material, hazardous
waste, toxic substance or related material and any other substance or material
defined or designated as a hazardous or toxic substance, material or waste by
any Environmental Law currently in effect or as amended or promulgated in the
future and shall include, without limitation:
(a) those substances included within the
definitions of "hazardous substances", "hazardous materials", "toxic
substances" or "solid waste" in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601 et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901 et
seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801
et seq., and in the regulations promulgated pursuant thereto and in any
applicable state laws, health and safety codes and in the regulations
promulgated pursuant thereto;
(b) those substances listed in the United
States Department of Transportation Table (49 CFR 172.101 and amendments
thereto) or by the Environmental Protection Agency (or any successor agency) as
hazardous substances (40 CFR Part 302 and amendments thereto);
(c) such other substances, materials and
wastes that are or become regulated under applicable local, state or Federal
laws or regulations, or which are or become classified as hazardous or toxic
under any Legal Requirement; and
(d) any material, waste or substance that is,
in whole or in part, (i) petroleum, asbestos, polychlorinated biphenyls,
methylene chloride, trichloroethylene, 1, 2-trans-dichloroethylene, dioxins or
dibenzofurans, (ii) designated as an "extremely hazardous substance" pursuant
to Section 302 of the Emergency Planning and Community Right-to-Know Act of
1986, as amended, or (iii) designated as a "hazardous substance" pursuant to
Section 311 of the Clean Water Act, 33 U.S.C. Sections 1251 et seq. (33 U.S.C.
Section 1321) or listed pursuant to Section 307 of the Clean Water
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<PAGE> 11
Act (33 U.S.C. Section 1317), or Section 112 or other Section of the Clean Air
Act, as amended.
"IRS" shall mean the United States Internal Revenue
Service.
"Indebtedness" shall mean, when used with reference to any
Person, without duplication, (i) any liability of such Person created or
assumed by such Person, or any Subsidiary thereof, (A) for borrowed money, (B)
evidenced by a bond, note, debenture or similar instrument (including a
purchase money obligation, deed of trust or mortgage) given in connection with
the acquisition of, or exchange for, any property or assets (other than
inventory or similar property acquired and consumed in the Ordinary Course),
including securities and other Indebtedness, (C) in respect of letters of
credit issued for such Person's account and "swaps" of interest and currency
exchange rates (and other interest and currency exchange rate hedging
agreements) to which such Person is a party or (D) for the payment of money as
lessee under leases that should be, in accordance with generally accepted
accounting principles, recorded as capital leases for financial reporting
purposes; (ii) any liability of others described in the preceding clause (i)
guaranteed as to payment of principal or interest by such Person or in effect
guaranteed by such Person through an agreement, contingent or otherwise, to
purchase, repurchase or pay the related Indebtedness or to acquire the security
therefor; (iii) all liabilities or obligations secured by a Lien upon property
owned by such Person and upon which liabilities or obligations such Person
customarily pays interest or principal, whether or not such Person has not
assumed or become liable for the payment of such liabilities or obligations;
and (iv) any amendment, renewal, extension, revision or refunding of any such
liability or obligation; provided, however, that Indebtedness shall not include
any liability for compensation of such Person's employees or for inventory or
similar property acquired and consumed in the Ordinary Course or for services.
"Indebtedness for Money Borrowed" shall mean, when used in
reference to any Person, without duplication, (i) any liability or Indebtedness
of such Person created or assumed by such Person or any Subsidiary thereof (A)
for borrowed money, (B) with respect to any letter of credit issued for such
Person's account or for the account of any Subsidiary, (C) all bank overdrafts
and cash overdrafts, (D) all Indebtedness under any lines of credit, loans,
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<PAGE> 12
advances or other credit agreements or mortgages, and (E) all outstanding
checks, money orders or wire transfers not yet presented for payment all as
reduced by the balance of cash or cash equivalents held by such person; and
(ii) any liability guaranteed as to payment of principal or interest by such
Person or in effect guaranteed by such Person through an agreement, contingent
or otherwise, to purchase or repay the related indebtedness or to acquire any
security therefore. Without limiting the foregoing, the term "Indebtedness for
Money Borrowed" shall include, without limitation, the Josephine County Notes,
M1's obligations to Western Bank (including the indebtedness under the three
equipment notes secured by M1's equipment), M1's obligations to First
Interstate Bank and M1's unpaid bills from its legal counsel arising out of the
transactions contemplated by this Agreement to the extent M1 is obligated
therefore.
"Josephine County Notes" shall mean (i) the promissory
note dated February 15, 1984 in the original principal amount of $8,563.33 with
Petralli as maker and Josephine County, of Grants Pass, Oregon, as the holder
thereof and (ii) the promissory note and agreement dated February 15, 1984 in
the principal amount of $37,336.67 as Petralli as maker and Josephine County,
of Grants Pass, Oregon, as holder thereof. The Josephine County Notes are due
August 15, 2004 and are included as indebtedness of M1 in Note 7 to the notes
to M1's Financial Statements for the year ended June 30, 1995.
"Large Building Addition" shall mean the addition of
approximately 13,950 square feet to the Original Building and owned by M1 which
is located primarily on the Owned Real Property and partially on the Petralli
Real Property.
"Leased Real Property" shall mean all real property,
including Structures, leased by M1 as a lessee, including the real property
subject to the Out-of-State Leases and the Grants Pass Lease.
"Legal Requirement" shall mean any statute, law,
ordinance, rule, regulation, permit, order, writ, judgment, injunction, decree
or award issued, enacted or promulgated by any Governmental Entity or any
arbitrator.
"Lien" shall mean all liens (including judgment and
mechanics' liens, regardless of whether liquidated), mortgages, assessments,
security interests, easements, claims, pledges, trusts (constructive or other),
deeds of
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trust, options or other charges, encumbrances or restrictions.
"M1's Accountants" shall mean KPMG Peat Marwick LLP.
"Material Adverse Effect" shall mean a material adverse
effect on the business, financial condition, properties, profitability,
prospects or operations of M1.
"Merger" shall mean the merger of Acquisition into M1 in
accordance with the terms and conditions of this Agreement and the relevant
provisions of the CGCL.
"M1 Secretary's Certificate" shall mean a certificate of
the corporate secretary of M1 dated as of the Closing Date certifying (i) the
copies of the resolutions of M1's Board of Directors and of the Shareholders
authorizing and approving the Merger, this Agreement and the other transactions
contemplated by this Agreement and all documents and instruments to be
delivered by M1 hereby, (ii) the articles of incorporation and bylaws of M1
delivered to PSC prior to the execution of this Agreement, (iii) the names,
titles and signatures of the officers authorized to execute the Agreement of
Merger, the Officers Certificate of M1, this Agreement and all other documents
or instruments delivered by M1 hereby and (iv) such additional supporting
documents and other information as PSC or its legal counsel may reasonably
request.
"M1 Stock" shall mean all of the issued and outstanding
common stock of M1.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Officers' Certificate" shall mean an officers'
certificate of Acquisition and M1 certifying approval of the Agreement of
Merger substantially in the form of Annexes B and C, respectively, and
otherwise complying with the requirements of Sections 173 and 1103 of the CGCL.
"Ordinary Course" shall mean, when used with reference to
M1, the ordinary course of M1's business, consistent with past practices;
provided, however, that transactions between M1, on the one hand, and any
officer, director, employee or shareholder of M1, on the other hand, shall be
deemed to be outside of the ordinary course of M1's business.
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"Original Building" shall mean the original building of an
aggregate of approximately 24,100 square feet located partly on both the
Petralli Real Property and the Owned Real Property.
"Out-of-State Leases" means the leases identified as such
on Schedule 4.5(d).
"Owned Real Property" shall mean the land owned by M1 in
Grants Pass, Oregon, more particularly described on Schedule 4.5(a)(iii)
hereto, the Large Building Addition and the Small Building Addition.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permit" shall have the meaning assigned to such term in
Section 4.16.
"Permitted Exceptions" shall mean (i) items 2-5, 7, 14,
18-22, 24, 26, 30, 32 and 36 identified in the Preliminary Title Report; (ii)
matters recorded after the date of the Preliminary Title Report which have been
approved by PSC; and (iii) matters revealed by the Survey which have been
approved by PSC.
"Permitted Liens" shall mean (a) Liens for ad valorem real
or personal property taxes or assessments not at the time due and (b) Liens in
respect of pledges or deposits under workers' compensation laws or similar
legislation, carriers', warehousemen's, mechanics', laborers' and materialmen's
and similar liens, if the obligations secured by such Liens are not then
delinquent.
"Person" shall mean all natural persons, corporations,
business trusts, associations, companies, partnerships, joint ventures,
Governmental Entities and any other entities.
"Petralli" shall mean Louis J. Petralli, Jr., the eighty
percent (80%) Shareholder of M1 and an officer and director of M1.
"Petralli Noncompetition Agreement" shall have the meaning
assigned to such term in Section 2.5(a)(iv).
"Petralli Real Property" shall mean the land owned by
Petralli in Grants Pass, Oregon, more particularly described on Schedule
4.5(a)(ii) and the Original Building.
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"Petralli Shares" shall mean the shares of PSC Stock
issued to Petralli in exchange for the sale by Petralli of the Petralli Real
Property to Acquisition or its assignee in accordance with Section 2.6.
"Plan" shall mean any "employee benefit plan" within the
meaning of Section 3(3) of ERISA and any other written or oral employee benefit
plan, arrangement, practice, contract, policy, or program (other than
arrangements merely involving the payment of wages) which are or at any time
have been established, maintained, or contributed to by M1 or any ERISA
Affiliate for the benefit of current or former employees, with respect to which
M1 or an ERISA Affiliate has or may in the future have any liability or
obligation to contribute or make payments of any kind.
"Preliminary Title Report" shall mean the Third
Supplemental Report no. 109636-K issued by Josephine County Title dated as of
December 4, 1995.
"PSC Secretary's Certificate" shall mean a certificate of
the corporate secretary of PSC dated as of the Closing Date certifying (i) the
copies of the resolutions of PSC's Board of Directors authorizing and approving
the Merger, this Agreement and the other transactions contemplated by this
Agreement and all other documents and instruments to be delivered by PSC
hereby, (ii) the names, titles and signatures of the officers of PSC authorized
to execute the Agreement of Merger, this Agreement and all other documents or
instruments delivered hereby by PSC, and (iii) such additional supporting
documents and other information as M1 or its legal counsel may reasonably
request.
"PSC Stock" shall have the meaning assigned to such term
in Section 2.4(a).
"Related Agreements" shall have the meaning assigned to
such term in Section 6.13.
"Released Parties" shall have the meaning assigned to such
term in Section 6.13.
"Purchase and Sale Agreement" shall have the meaning
assigned to such term in Section 2.6.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
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"Shareholder Noncompetition Agreement" shall have the
meaning assigned to such term in Section 2.5(a)(viii).
"Shares" shall mean the shares of Common Stock held by
the Shareholders.
"Small Building Addition" shall mean the addition of
approximately 6,000 square feet to the Original Building and owned by M1 which
is located on the Petralli Real Property.
"Stock Pledge Agreements" shall have the meaning assigned
to such term in Section 2.5(a)(x) and shall secure the outstanding indebtedness
owed by Mr. Wittkopp and Mr. Sommer to M1 with shares of PSC Stock. The shares
of PSC Stock subject to the Stock Pledge Agreement shall be retained by PSC in
accordance with the terms of such agreements.
"Structure" shall mean any facility, building, plant,
factory, office, warehouse structure or other improvement owned or leased by
M1, including but not limited to, the Original Building, the Small Building
Addition and the Large Building Addition.
"Subsidiary" of a Person shall mean any corporation,
partnership, association or other business entity at least 50% of the
outstanding voting power of which is at the time owned or controlled directly
or indirectly by such Person or by one or more of such subsidiary entities, or
both.
"Survey" shall mean the ALTA as-built survey of the Owned
Real Property to be obtained by PSC at its sole cost and expense.
"Surviving Corporation" shall have the meaning assigned
to such term in Section 2.1(a).
"Tax" shall mean any Federal, state, local or foreign
income, gross receipts, license, payroll, unemployment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including, without
limitation, taxes under Code Section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), employment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated tax or
other tax, assessment or charge of any kind whatsoever,
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including, without limitation, any interest, fine penalty or addition thereto,
whether disputed or not.
"Tax Return" shall mean any return, declaration, report,
claim for refund or information, or statement relating to Taxes, and any
exhibit, schedule, attachment or amendment thereto.
ARTICLE 2
THE MERGER
2.1 The Merger.
(a) At the Effective Time, in accordance
with the provisions of this Agreement and the CGCL, Acquisition shall be
merged with and into M1, and M1 shall be the surviving corporation of the
Merger (herein sometimes referred to as the "Surviving Corporation") and shall
continue its corporate existence under the laws of the State of California. At
the Effective Time, the separate existence of Acquisition shall cease.
(b) At the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, immunities, powers,
franchises, properties and assets of Acquisition and M1, and shall become
liable for all the debts, liabilities and duties of Acquisition and M1 to the
same extent as if said debts, liabilities and duties had been incurred or
contracted by it, all as provided in the CGCL. The name of the Surviving
Corporation shall be "Met One, Inc."
2.2 Articles of Incorporation; By-laws.
(a) The articles of incorporation of
Acquisition in effect immediately prior to the Effective Time shall be the
articles of incorporation of the Surviving Corporation until amended in
accordance with the provisions thereof and as provided by law, provided,
however, that the name of the Surviving Corporation shall be changed to "Met
One, Inc."
(b) The by-laws of Acquisition in effect
immediately prior to the Effective Time shall be the by-laws of the Surviving
Corporation until amended in accordance with the provisions thereof and as
provided by law.
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<PAGE> 18
2.3 Directors and Officers. The directors and
officers of Acquisition shall be the directors and officers of the Surviving
Corporation until their resignations or until their respective successors are
duly selected and qualified.
2.4 Exchange of Shares.
(a) At the Effective Time, each share of M1
Stock outstanding as of the Closing Date (excluding shares held by M1 as
treasury stock, which shares shall be cancelled and extinguished at the
Effective Time) shall, by virtue of the Merger and without any action on the
part of PSC, Acquisition, M1 or the holder thereof, be exchanged for fully paid
and nonassessable common shares, par value $1.00 per share, of PSC ("PSC
Stock"), at the exchange rate determined in accordance with Subparagraph (b)
below.
(b) At the Effective Time, each share of M1
Stock shall be converted into that number of shares of PSC Stock equal to the
quotient derived by (i) taking $25,000,000 and subtracting therefrom the amount
that M1's Indebtedness for Money Borrowed as of the Closing Date exceeds
$2,700,000, and then taking the result and dividing the result by the average
of the per share closing prices on the NYSE of PSC Stock (as reported in the
NYSE Composite Transaction) during the ten (10) consecutive trading days ending
on the second trading day prior to the Closing Date, and (ii) dividing such
result by the number of shares of M1 Stock outstanding on the Closing Date (500
shares); provided, however, that in no event will the aggregate amount of PSC
Stock issuable under the exchange ratio exceed 1,150,000 shares or be less than
800,000 shares of PSC Stock. No fractional shares of PSC Stock will be issued
and, in lieu thereof, PSC shall arrange to pay in cash the fair market value of
fractions of a share within a reasonable time after those Shareholders entitled
to receive such fractions are determined.
(c) The shares of PSC Stock issuable
pursuant to the exchange of securities contemplated by subparagraph (b) above
will not be registered under the Securities Act and will be subject to the
restrictive legends provided for in Section 3.5(b) and Section 6.8 hereof.
(d) At the Effective Time, each share of
capital stock of Acquisition outstanding as of the Closing Date shall,
thereupon be converted into and become one (1)
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<PAGE> 19
share of common stock of the Surviving Corporation. Each share of such common
stock issued pursuant to this section shall be fully paid and nonassessable.
2.5 The Closing. The closing of the Merger and the
other transactions contemplated by this Agreement (the "Closing") shall take
place at the offices of Paul, Hastings, Janofsky & Walker, 695 Town Center
Drive, 17th Floor, Costa Mesa, California 92626 at 10:00 a.m., Los Angeles time
on December 29, 1995 or at such other place, time and date as may be agreed by
the parties hereto in writing, such date being generally referred to herein as
the "Closing Date." At the time of the Closing, Acquisition and M1 shall cause
the Agreement of Merger, together with the Officers' Certificates and any other
documents required by law to effect the Merger, to be filed and recorded with
the Secretary of State of the State of California in accordance with the
provisions of Section 1103 of the CGCL and shall take any and all other lawful
actions and do any and all other lawful things necessary to cause the Merger to
become effective (the date and time of the filing of the Agreement of Merger,
together with any such other documents, being referred to as the "Effective
Time"). At the Closing:
(a) Each Shareholder shall deliver or cause to be
delivered to PSC or to Acquisition:
(i) a certificate or certificates
representing all of the issued and outstanding shares of M1 Stock which is
being exchanged by such Shareholder pursuant to Section 2.4 hereof;
(ii) a written opinion from the Law
Offices of Dixon R. Howell, counsel for the Shareholders and M1, dated the
Closing Date and addressed to PSC, substantially in the form attached as Annex
D hereto;
(iii) the M1 Secretary's Certificate
signed by the corporate secretary of M1 and dated the Closing Date;
(iv) the Noncompetition Agreement
substantially in the form attached as Annex E hereto duly executed by Petralli
(the "Petralli Noncompetition Agreement");
(v) the Registration Rights Agreement
substantially in the form of Annex F hereto (the "Registration Rights
Agreement") executed by each of the Shareholders;
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<PAGE> 20
(vi) a certificate executed by the chief
financial officer of M1 certifying (i) the total amount of M1's Indebtedness
for Money Borrowed as of the Closing Date together with written confirmation
from all banks and financial institutions with which M1 conducts business
confirming such outstanding amount of Indebtedness for Money Borrowed and (ii)
as of the Closing all accounts payable of M1 are current and within their
respective payment terms and are not past due;
(vii) a letter of resignation from Petralli
resigning as an officer and director of M1 along with the resignations of all
of the officers and directors of M1;
(viii) the Noncompetition Agreement
substantially in the form of Annex G hereto duly executed by each of the
Shareholders other than Petralli (the "Shareholder Noncompetition Agreements");
(ix) evidence of M1's qualification to do
business as a foreign corporation in every state where M1 has employees or
rents or owns real property, together with a certificate of officer verifying
such states;
(x) the Stock Pledge Agreements
substantially in the form of Annex H hereto duly executed by M1 and each of
Messrs. Sommer and Wittkopp (the "Stock Pledge Agreements"), together with
assignments separate from certificates (the shares of PSC Stock subject to such
agreements shall be retained by PSC);
(xi) evidence of the approval by the
California Department of Corporations of the transfer pursuant to the Merger of
the shares of M1 Stock which were issued pursuant to California Corporations
Code Section 25102(h);
(xii) the results from the Phase I
environmental audit conducted on M1's facility in Grants Pass, Oregon, which
audit has been previously delivered to PSC and which results are deemed
satisfactory to PSC;
(xiii) such other documents, certificates,
agreements and instruments reasonably requested or required to be delivered, or
caused to be delivered, by PSC or its legal counsel.
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<PAGE> 21
(b) PSC shall deliver or cause to be delivered to
each of the Shareholders:
(i) a copy of a letter containing
irrevocable instructions to PSC's stock transfer agent authorizing such
transfer agent to issue to the Shareholders the number of shares of PSC Stock
for which the M1 Stock previously held by such Shareholder shall be exchanged
pursuant to Section 2.4 hereof, free and clear of all Liens, except Liens
created by the Shareholders, the Stock Pledge Agreement or arising under
applicable securities laws and restrictions under this Agreement, which letter
PSC shall send to PSC's stock transfer agent at or prior to the Closing via
facsimile;
(ii) the Registration Rights Agreement
duly executed by PSC;
(iii) the Petralli Noncompetition Agreement
duly executed by PSC
(iv) each of the Shareholder
Noncompetition Agreements duly executed by PSC;
(v) the Stock Pledge Agreements duly
executed by PSC;
(vi) a copy of PSC's Supplemental
Listing Application duly approved by an authorized representative of the NYSE
approving for listing the PSC Stock to be issued in connection with the Merger
and the Petralli Shares upon official notice of issuance;
(vii) the Acquisition Secretary's
Certificate signed by the corporate secretary of Acquisition and dated the
Closing Date;
(viii) the PSC Secretary's Certificate
signed by the corporate secretary of PSC and dated the Closing Date;
(ix) a written opinion from the law firm
of Paul, Hastings, Janofsky & Walker, counsel for PSC, dated the Closing Date
and addressed to the Shareholders, substantially in the form attached hereto as
Annex J; and
(x) such other documents, certificates,
agreements and instruments reasonably requested or required
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<PAGE> 22
to be delivered, or caused to be delivered, by M1 or the Shareholders or their
legal counsel.
2.6 Real Estate Transactions. Simultaneously with
the Closing, (i) the parties to the Purchase and Sale Agreement and Joint
Escrow Instructions substantially in the form of Annex I hereto (the "Purchase
and Sale Agreement") shall close the sale of the Petralli Real Property to
Acquisition or its assignee, (ii) the transfer of the Owned Real Property to M1
shall be completed, and (iii) PSC shall receive a commitment from First
American Title Insurance Company of Oregon to issue an Extended Coverage ALTA
Owners Policy of Title Insurance concerning the Grants Pass Property.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
CONCERNING THE SHAREHOLDERS
Each of the Shareholders hereby individually represents
and warrants to, and covenants and agrees with, PSC and Acquisition that:
3.1 Ownership of Shares. Such Shareholder owns of
record and beneficially the number of shares of M1 Stock set forth opposite the
name of such Shareholder on Annex K hereto, and has good and marketable title
to such shares free and clear of all Liens. Except as set forth in Schedule
3.1, none of the M1 Stock is subject to any proxy, voting trust or other
agreement or arrangement with respect to the voting thereof. Neither the
voting stock structure of M1 nor the amount of shares of M1's capital stock
owned by any respective Shareholder has been altered or changed materially
within three (3) years preceding the date of this Agreement.
3.2 Execution and Delivery. All consents,
approvals, authorizations and orders necessary for the execution, delivery and
performance by such Shareholder of this Agreement (including, without
limitation, the transfer of the shares of M1 Stock to be exchanged by such
Shareholder hereunder) have been duly and lawfully obtained, and such
Shareholder has, and at the Closing will have, full right, power, authority and
capacity to execute, deliver and perform this Agreement. This Agreement has
been duly executed and delivered by such Shareholder and constitutes a
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<PAGE> 23
legal, valid and binding agreement of such Shareholder enforceable against such
Shareholder in accordance with its terms.
3.3 No Conflicts. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not conflict with or result in a breach or violation
of any term or provision of, or (with or without notice or passage of time, or
both) constitute a default under, any indenture, mortgage, deed of trust, trust
(constructive and other), loan agreement or other agreement or instrument to
which such Shareholder is a party or by which such Shareholder or such
Shareholder's Shares are bound, or violate any Legal Requirement applicable to
or binding upon such Shareholder.
3.4 No Brokers. No broker, finder or similar agent
has been employed by or on behalf of such Shareholder in connection with this
Agreement or the transactions contemplated hereby, and such Shareholder has not
entered into any agreement or understanding of any kind with any person or
entity for the payment of any brokerage commission, finder's fee or any similar
compensation in connection with this Agreement or the transactions contemplated
hereby.
3.5 Investment Representations.
(a) Each of the Shareholders is acquiring
the PSC Stock for its own account, not as nominee or agent, for investment and
not with a view to, or for resale in connection with any distribution or public
offering thereof within the meaning of the Securities Act, except pursuant to
an effective registration statement under the Securities Act.
(b) Each of the Shareholders understands
that (i) the PSC Stock has not been registered under the Securities Act by
reason of a specific exemption therefrom and may not be transferred or resold
except as set forth below; (ii) in addition to the legend required by Section
6.8 below, each certificate representing the PSC Stock will be endorsed with
the following legends:
A) THE SECURITIES EVIDENCED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT
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<PAGE> 24
COVERING SUCH SECURITIES OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF THE ACT.
B) Any legend required to be placed thereon by
applicable federal or state securities laws.
(c) Each of the Shareholders has been
furnished with such materials and has been given access to such information
relating to PSC as it or its qualified representative has requested and has
been afforded the opportunity to ask questions regarding PSC and the PSC Stock,
all as such Shareholder has found necessary to make an informed investment
decision. Each of the Shareholders has the knowledge and experience in
financial and business matters and investments in general that they are capable
of evaluating the merits and risks of ownership of the PSC Stock and each of
the Shareholders understands that the PSC Stock they will receive cannot be
readily sold without compliance with applicable state and federal securities
laws and the terms of this Agreement.
(d) Each of the Shareholders represents and
warrants that they have been provided with copies of PSC's Form 10-K for the
year ended December 31, 1994 and Form 10-Q for the quarter ended September 29,
1995. Each of the Shareholders has been given the opportunity to consult with
PSC regarding the merits and risks of the transactions contemplated by this
Agreement.
3.6 No Purchases of PSC's Securities. Such
Shareholder has not purchased any security of PSC during the forty-five (45)
day period prior to the date of this Agreement. No Shareholder is an officer,
director or equal to or greater than five percent (5%) shareholder of PSC.
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<PAGE> 25
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
CONCERNING M1
The Shareholders hereby jointly and severally represent
and warrant to, and covenant and agree with, PSC and Acquisition that:
4.1 Organization and Good Standing.
(a) M1 has been duly organized and is
existing as a corporation in good standing under the laws of the State of
California with full power and authority (corporate and other) to own and lease
its properties and to conduct its business as currently conducted. M1 has been
duly qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each jurisdiction set forth on Schedule
4.1(a), such jurisdictions comprising all jurisdictions in which M1 owns or
leases any property or has any employees. M1 is duly qualified as a foreign
corporation for the transaction of business and is in good standing under the
laws of every jurisdiction where its conduct of business so requires such
qualification, except where the failure to qualify would not have a Material
Adverse Effect.
(b) M1 has no Subsidiary nor owns or
controls, or has any other equity investment or other interest in, directly or
indirectly, any corporation, joint venture, partnership, association or other
entity.
(c) During the past three (3) year period
preceding the date of this Agreement, M1 has never been a subsidiary or
division of another corporation nor a party to a reorganization, acquisition or
merger transaction which transaction was later rescinded or a party to be
acquired in an acquisition which was later rescinded. During the three (3)
year period preceding the date of this Agreement, there has been no sale or
spin-off of significant assets of M1.
4.2 No Conflicts; Execution.
(a) Except as indicated in Schedule 4.2,
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby will not (a) conflict with or result in
a breach or violation of any term or provision of, or constitute a
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<PAGE> 26
default under (with or without notice or passage of time, or both), or
otherwise give any Person a basis for accelerated or increased rights or
termination or nonperformance under, any indenture, mortgage, deed of trust,
loan or credit agreement, lease, license or other agreement or instrument to
which M1 is a party or by which M1 is bound or affected or to which any of the
property or assets of M1 is bound or affected including, without limitation,
all arrangements in Section 4.19 hereof, (b) result in the violation of the
provisions of the Articles of Incorporation or Bylaws of M1 or any Legal
Requirement applicable to or binding upon it, (c) result in the creation or
imposition of any Lien upon any property or asset of M1 or (d) otherwise
adversely affect the contractual or other legal rights or privileges of M1.
Schedule 4.2 sets forth a list of all agreements requiring the consent of any
party thereto to any of the transactions contemplated hereby.
(b) All consents, approvals, authorizations
and orders necessary for the execution, delivery and performance by M1 of this
Agreement have been duly and lawfully obtained, and M1 has full right, power,
authority and capacity to execute, deliver and perform this Agreement. This
Agreement has been duly executed and delivered by M1 and constitutes a legal,
valid and binding agreement of M1 enforceable against M1 in accordance with its
terms. This Agreement and the transactions contemplated hereunder have been
duly approved and authorized by all of the directors and one hundred percent
(100%) of the outstanding securities of M1.
4.3 Capitalization. The authorized capital stock of
M1 consists solely of 75,000 shares of common stock, $1.00 par value per share,
of which only the 500 shares listed on Annex K are issued and outstanding. All
of such 500 shares have been duly authorized and validly issued and are fully
paid, nonassessable and outstanding and are held by the Shareholders, free and
clear of all Liens except as set forth on Schedule 4.3, in the amounts
reflected in Annex K hereto. There are (i) no existing options, warrants,
rights, calls or commitments of any character relating to any capital stock of
M1, and (ii) no outstanding securities or other instruments convertible into or
exchangeable for any capital stock of M1 and no commitments to issue such
securities or instruments; and no Person has any right of first refusal,
preemptive right, subscription right or similar right with respect to any
capital stock of M1. The offer, issuance and sale of the shares of M1 Stock
were (i) exempt from the registration and prospectus delivery requirements of
the Securities Act, (ii) registered or qualified (or exempt from registration
or
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<PAGE> 27
qualification) under the registration or qualification requirements of all
applicable state securities laws and (iii) accomplished in conformity with all
other Legal Requirements. M1 has not acquired any shares of its outstanding
capital stock during the three (3) year period preceding the date of this
Agreement.
4.4 Financial Statements; Personal Property;
Encumbrances.
(a) Schedule 4.4(a) hereto contains true
and complete copies of (i) the unaudited balance sheet signed by the chief
executive officer and chief financial officer of M1 (the "Balance Sheet") of M1
at September 30, 1995 (the "Balance Sheet Date"), and the unaudited related
statements of income, shareholders' equity and cash flows for the three month
period then ended, and (ii) the balance sheets of M1 at June 30, 1993, 1994,
1995, and the related statements of income, shareholders' equity and cash flow
for each of the fiscal years then ended, all as audited by M1's Accountants,
along with the unqualified opinion of such firm on the financial statements in
accordance with generally accepted accounting principles (the financial
statements described in clause (i) and (ii) above are collectively referred to
as the "Financial Statements").
(b) The Financial Statements present fairly
and accurately the financial condition of M1 as of the dates indicated therein
and the results of operations and cash flows of M1 for the periods specified
therein, have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis during the periods covered thereby
(except as otherwise noted therein), have been derived from the accounting
records of M1 and represent only actual, bona fide transactions, except that
the financial statements for the three months ended September 30, 1995 do not
contain all the footnote disclosures required by generally accepted accounting
principles and are subject to normal year-end audit adjustments. M1's
Financial Statements are true and correct in all material respects.
(c) The aggregate amount of Indebtedness
for Money Borrowed by M1 outstanding as of the Closing Date is $3,679,789.18.
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(d) Except as disclosed on Schedule 4.4(d)
there are no assets of M1 which are not reflected on the Balance Sheet. M1
has, and immediately prior to the Closing will have, good, valid and marketable
title in fee simple to all personal property reflected on Schedule 4.4(d) and
on the Balance Sheet as owned by M1 and all personal property acquired by M1
since the Balance Sheet Date, in each case free and clear of all Liens except
(i) as set forth on Schedule 4.4(d), (ii) Permitted Liens and (iii) for sales
and other dispositions of inventory in the Ordinary Course since the Balance
Sheet Date which, in the aggregate, have not been material.
(e) Schedule 4.4(e) contains a list of all
tangible personal property having a cost or fair market value in excess of
$1,000 and a useful life of three (3) years or more owned by M1 (other than
personal property held by M1 as lessee under a personal property lease).
(f) Schedule 4.4(f) contains a list of all
personal property leases and licenses under which M1 is the lessee or licensee,
together with (i) the location and nature of each of the leased or licensed
properties, (ii) termination date of each such lease or license, (iii) the name
of the lessor or licensor and (iv) all rental or other payments made or
required to be made thereunder. All leases and licenses pursuant to which M1
leases or licenses from others personal property are valid, existing in full
force and effect in accordance with their respective terms, and there is not,
under any personal property lease or license, any existing default or event of
default (or event that, with notice or passage of time, or both, would
constitute a default, or would constitute a basis of force majeure or other
claim of excusable delay or nonperformance). True and complete copies of all
personal property licenses and leases listed on Schedule 4.4(f) have been
delivered to PSC heretofore. Except as set forth on Schedule 4.4(f), no such
lease or license will require the consent of the lessor or licensor thereto as
a result of the consummation of the transactions contemplated by this
Agreement. All personal property owned by M1 and all personal property held by
M1 pursuant to personal property leases is in good operating condition and
repair, subject only to ordinary wear and tear, has been operated, serviced and
maintained properly within the recommendations and requirements of the
manufacturers thereof (if any) and is suitable and appropriate for the use
thereof made and proposed to be made by M1 in its business and operations. The
personal property described in Sections 4.4(d), 4.4(e) and 4.4(f) comprise all
of the
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personal property (other than personal property held by M1 pursuant to personal
property leases that are not material) used in the conduct of business of M1.
4.5 Title to Real Property; Encumbrances.
(a) Schedule 4.5(a)(i) sets forth a plot plan of
the Grants Pass Property and indicates the location of the Owned Real Property
and the Petralli Real Property and showing the location thereon of the Original
Building, the Large Building Addition and the Small Building Addition.
Schedule 4.5(a)(ii) contains the legal description of the land portion of the
Petralli Real Property, which property is owned by Petralli. Schedule
4.5(a)(iii) contains the legal description of the land portion of the Owned
Real Property.
(b) At the Closing, M1 will have good and
marketable fee simple title to the Owned Real Property, free and clear of all
Liens and encumbrances of any kind whatsoever, except for the Permitted
Exceptions. There are no agreements with any Governmental Entity or
quasi-governmental entity which affect the Grants Pass Property except for the
Permitted Exceptions. There are no outstanding rights of first refusal, rights
of reverter or options relating to the Owned Real Property or any interest
therein or relating to the Petralli Real Property or any interest therein
except for the rights of reverter in favor of Josephine County set forth in the
Josephine County Notes. To the knowledge of the Shareholders and M1, there are
no unrecorded or undisclosed documents or other matters which affect title to
the Owned Real Property or the Petralli Real Property. M1 has enjoyed the
continuous and uninterrupted quite possession, use and operation of the Grants
Pass Property, without material complaint or objection by any person.
(c) All necessary environmental impact
statements relating to the Structures located on the Grants Pass Property or
the construction thereof have been prepared and filed with and favorably and
finally acted upon by all Governmental Entities and/or officials having
jurisdiction thereover. The Structures located on the Grants Pass Property are
free from any latent or patent design, construction, physical or mechanical
defects and there is no actual or, to the knowledge of the Shareholders and M1,
threatened settlement, earth movement, termite infestation or damage affecting
any part of the Grants Pass Property. The parking spaces, including
handicapped spaces, on the Grants Pass
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Property are all of the parking spaces required by any Legal Requirement.
(d) Schedule 4.5(d) contains a list of all
real property leases and licenses under which M1 is the lessee or licensee,
together with (i) the location and nature of each of the leased or licensed
properties, (ii) the termination date of each such lease or license, (iii) the
name of the lessor or licensor and (iv) all rental and other payments made or
required to be made. Schedule 4.5(d) clearly identifies each real property
lease and license located outside of Oregon (the "Out-of-State Leases"). The
Out-of-State Leases constitute the only Leased Real Property other than the
Grants Pass Property. All leases and licenses pursuant to which M1 leases or
licenses from others real property are valid, subsisting in full force and
effect in accordance with their respective terms, and to the knowledge of M1
and the Shareholders there is not, under any real property lease or license,
any existing default or event of default (or event that, with notice or passage
of time, or both, would constitute a default, or would constitute a basis of
force majeure or other claim of excusable delay or nonperformance). True and
complete copies of all real property leases and licenses listed on Schedule
4.5(d) have been delivered to PSC heretofore, as well as copies of any title
reports, surveys or environmental reports or audits relating to any Leased Real
Property in the possession of M1. None of the leases pertaining to any Leased
Real Property has been modified, cancelled or amended nor has M1 waived any
rights thereunder. To the knowledge of the Shareholders and M1 (i) each of the
Out-of-State Leases is in full force and effect and is not subject to any
defense, set-off or counter claim for the benefit of the landlord thereunder
and (ii) M1 is in full compliance with all of its obligations under each of the
Out-of-State Leases. Except as set forth in Schedule 4.5(d), no such lease or
license will require the consent of the lessor or licensor thereto as a result
of the consummation of the transactions contemplated by this Agreement. For
the purposes of this Section 4.5(d), a "lease" shall include a sublease.
(e) All water, sewer, gas, electric,
telephone and drainage facilities, and all of the utilities required by law or
the normal operation of the Grants Pass Property are (a) installed to the
property lines of the Grants Pass Property, (b) connected to the Grants Pass
Property with valid permits, (c) adequate to service the Grants Pass Property
in its present use and as currently
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contemplated and to permit full compliance with all requirements of law and
normal usage of the Grants Pass Property and (d) in good working order and
repair. All such utilities and storm and sanitary sewers required for the
operation of the Grants Pass Property enter the Grants Pass Property through
adjoining public streets or through adjoining private land in accordance with
valid public or private easements.
(f) Except as set forth in Schedule 4.5(f):
(i) M1 is not in violation of, or
default under, any Legal Requirement pertaining to the Grants Pass Property,
and to the knowledge of the Shareholders and M1 with regards to any of the
Leased Real Property subject to the Out-of-State Leases. No notice of
violation of any Legal Requirement, or of any covenant, condition, restriction
or easement affecting any Leased Real Property or with respect to the use or
occupancy thereof, has been received by M1 or the Shareholders;
(ii) All of the Structures (A) are in
good operating condition and repair, (B) are adequate and suitable for the
purposes for which they are currently and proposed to be used, and (C) are
supplied with utilities and other services necessary for the operation of such
Structures, and the business conducted by M1 therein, including gas,
electricity, water, telephone, sanitary sewer and storm sewer. To the
knowledge of M1 and the Shareholders, such services are maintained in
accordance with all Legal Requirements, and with regards to the Grants Pass
Property, are provided via permanent, irrevocable, appurtenant easements in
favor of M1;
(iii) No condemnation proceeding is
pending against the Grants Pass Property and to the actual knowledge of the
Shareholders and M1 no such proceeding is pending against any other Leased Real
Property. To the knowledge of M1 and the Shareholders, no condemnation
proceeding is threatened which would impair the occupancy, use or value of any
Leased Real Property. There are no presently pending or, to the knowledge of
the Shareholders and M1, contemplated proceedings to declare the Grants Pass
Property or any part of it a nuisance;
(iv) With regards to the Grants Pass
Property, to the knowledge of M1 and the Shareholders and with regards to all
other Leased Real Property, to the actual knowledge of M1 and the Shareholders,
no Structure,
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nor the operations of M1 therein or thereon, (A) is located outside of the
boundary lines of the described parcel of land on which it is located (except
that part of the Original Building and the Large Building Addition located
primarily on the Owned Real Property cross over onto the Petralli Real Property
as shown on the Plot Plan attached as Schedule 4.5(a)(i)), (B) is in violation
of applicable setback requirements, zoning laws, or ordinances, (C) is subject
to "permitted non-conforming use" or "permitted non-conforming structure"
classifications or (D) encroaches on any property owned by, or easement granted
in favor of, any Person;
(v) With regards to the Grants Pass
Property, to the knowledge of M1 and the Shareholders and with regards to all
other Leased Real Property, to the actual knowledge of M1 and the Shareholders,
there are no (i) leases, subleases, licenses, concessions or other agreements,
written or oral, granting to any other Person the right to acquire, use or
occupy any portion of, any Leased Real Property, (ii) outstanding options or
rights of first refusal to purchase all or any portion of Leased Real Property
or interest therein, and (iii) Persons (other than M1) in possession of any
Leased Real Property; and
(vi) With regards to the Grants Pass
Property, to the knowledge of M1 and the Shareholders and with regards to all
other Leased Real Property, to the actual knowledge of M1 and the Shareholders,
with respect to each item of Leased Real Property the owner thereof has good
and marketable title thereto, free and clear of all Liens other than (I)
recorded easements, covenants and restrictions that do not impair the current
use, occupancy or value thereof and (II) the leasehold interest of M1, (B)
there is adequate ingress and egress (and a continuing right thereto), without
the need for an easement, between paved public rights-of-way and such Leased
Real Property and (C) M1 has not sold, transferred or subjected to a Lien such
Leased Real Property or any interest therein.
(g) The Grants Pass Lease has been duly
executed and delivered by Petralli and M1 and constitutes a legal, valid and
binding agreement of such parties enforceable against such parties in
accordance with its terms. The Grants Pass Lease is in full force and effect
and is subject to no defenses, set-offs or counterclaims for the benefit of the
landowner thereunder. Neither Petralli nor M1 has modified, cancelled or
amended any provision of the Grants Pass Lease and there are no uncured
defaults on
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the part of any party under the Grants Pass Lease nor is there any fact or
condition which with the notice, the lapse of time or both would ripen into a
default by any party under the Grants Pass Lease. Each of the parties to the
Grants Pass Lease is in full compliance with all of their respective
obligations thereunder including the payment of all taxes, rent and other
payments required by such lease.
(h) Schedule 4.5(h) accurately describes
and sets forth (a) all inspections of the Grants Pass Property by any
governmental agency or insurance company occurring within five (5) years prior
to the Closing Date, (b) all matters which were noted by such governmental
agency or insurance company as requiring correction, or requesting or
recommending modifications or termination of uses of the Grants Pass Property
and (c) the present status of each noted matter.
(i) The Grants Pass Property and the operation thereof
are in compliance with all Legal Requirements, including, without limitation,
the Americans With Disabilities Act. Neither M1 nor any Shareholder has
received any request, formal or informal, oral or written, to modify or
terminate any use of the Grants Pass Property. The zoning of the Grants Pass
Property permits the current Structures thereon and use of the Grants Pass
Property and, there is no pending, nor to the knowledge of M1 or any
Shareholder, contemplated rezoning of the Grants Pass Property. The Grants
Pass Property complies with all applicable subdivision laws and all local
ordinances. Neither M1 nor any Shareholder has any knowledge of any law or
regulation of any Governmental Entity having jurisdiction which might require
the Grants Pass Property to be improved beyond its present state or which might
restrict the use and enjoyment of the Grant Pass Property in the manner it is
presently being used and enjoyed.
(j) Petralli is not a "foreign person"
within the meaning of Section 1445(f) of the Code.
4.6 Accounts Receivable and Payable.
(a) All accounts receivable of M1 reflected
in the Balance Sheet and all accounts receivable of M1 that have arisen since
the Balance Sheet Date (except such accounts receivable as have been collected
since such dates) are valid and enforceable claims, and the goods and services
sold and delivered that gave rise to such accounts were sold and delivered in
conformity with all applicable express and
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implied warranties, purchase orders, agreements and specifications. Such
accounts receivable of M1 are subject to no valid defense, offset or
counterclaim and are fully collectible within one hundred twenty (120) days
after the Closing Date, except to the extent of the allowance for doubtful
accounts reflected on the Balance Sheet, and with regards to accounts
receivable which have arisen since the Balance Sheet Date, M1 has established
reserves for doubtful accounts consistent with the reserves shown on the
Balance Sheet. Since the Balance Sheet Date, M1 has not changed its policy
with regards to the granting of credit to any customer. Schedule 4.6(a)
contains a true and complete aging of M1's accounts receivable as of the
Balance Sheet Date.
(b) All accounts payable of M1 reflected on
the Balance Sheet and all accounts payable of M1 that have arisen since the
Balance Sheet Date are for goods and services purchased by and delivered to M1
in the Ordinary Course and were purchased and delivered in conformity with all
applicable purchase orders, agreements and specifications. Since the Balance
Sheet Date, M1 has not changed its policy of paying its accounts payable or
other obligations or liabilities and all such accounts payable of M1 are
current and within their respective payment terms and are not past due.
4.7 Inventories. Schedule 4.7 sets forth as of
October 31, 1995 a summary of the types and quantities of all inventory of raw
materials, work-in-process and finished goods of M1, and the production rate.
Since the Balance Sheet Date the level or nature of M1's inventories have not
significantly changed. Except as described in Schedule 4.7, all inventories of
raw materials, work-in-process and finished goods set forth or reflected in
the Balance Sheet or acquired by M1 since the Balance Sheet Date, consist of a
quality and quantity usable and saleable in the Ordinary Course within the next
24 months, except for slow-moving, damaged or obsolete items and materials of
below standard quality, all of which have been written down to net realizable
market value or in respect of which adequate reserves have been provided, in
each case as reflected, in the Balance Sheet. The value at which inventories
are carried on the Balance Sheet reflect the normal inventory valuation policy
of M1, as applicable, in accordance with generally accepted accounting
principles and on a basis consistent with that of preceding periods, of stating
inventory at the lower of average cost or market value. There is no reason to
believe that M1 will experience in the
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<PAGE> 35
foreseeable future any difficulty in obtaining, in the desired quantity and
quality, the raw materials, supplies or component products required for the
manufacture, assembly, production or sale of its products including, without
limitation, inventory which historically has been imported.
4.8 Trademarks, Patents, Etc.
(a) Schedule 4.8(a) contains a true and
complete list of all letters patent, patent applications (including
applications that have been denied), trade names, trademarks, service marks,
trademark and service mark registrations and applications, copyrights,
copyright registrations and applications, grants of a license or right to M1
with respect to the foregoing, both domestic and foreign, claimed by M1 or used
or proposed to be used by M1 in the conduct of its business, whether registered
or not, (collectively herein, "Registered Rights").
(b) Except as clearly identified and
described in Schedule 4.8(a), M1 owns and has the unrestricted right to use the
Registered Rights and every trade secret, know-how, process, discovery,
development, design, technique, customer and supplier list, promotional idea,
marketing and purchasing strategy, invention, process, confidential data and or
other information (collectively herein, "Proprietary Information") required for
or incident to the design, development, manufacture, operation, sale and use of
all products and services sold or rendered or proposed to be sold or rendered
by M1, free and clear of any right, equity or claim of others. M1 has taken
reasonable security measures to protect the secrecy, confidentiality and value
of all Proprietary Information, including, but not limited to, entering into
confidentiality agreements with all officers, the employees and consultants.
No director, officer, employee, consultant, agent or shareholder of M1 owns or
has any right in the Proprietary Information of M1 or any patents, trademarks,
service marks, trade names, copyrights, licenses or rights with respect to the
foregoing, or any inventions, developments or discoveries used in or necessary
for the conduct of M1's business as now conducted or as proposed to be
conducted.
(c) Schedule 4.8(c) contains a true and
complete list and description of all licenses of or rights to Proprietary
Information granted to M1 by others or to others by M1. Except as described in
Schedule 4.8(c), (i) M1 has not sold, transferred, assigned, licensed or
subjected to any Lien, any Registered Right or Proprietary
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Information or any interest therein, and (ii) M1 is not obligated or under any
liability whatever to make any payments by way of royalties, fees or otherwise
to any owner or licensor of, or other claimant to, any Registered Right or
Proprietary Information.
(d) All of the licenses and rights
described on Schedules 4.8(a) and 4.8(c) are in full force and effect and no
such license or right is subject to any defense, set-off or counter claim.
Except as set forth on Schedules 4.8(a) and 4.8(c), (i) no such license or
right has been amended, cancelled or modified, (ii) there are no uncured
defaults and there are no facts or conditions which, with or without notice,
the lapse of time or both, would ripen into a default by M1 to such licenses
and rights, (iii) to the knowledge of M1 and the Shareholders, there are no
uncured defaults and there are no facts or conditions which, with or without
notice, the lapse of time or both, would ripen into a default by any other
party to such licenses and rights and (iv) all of the parties to such licenses
and rights are in full compliance with all of their respective obligations
thereunder.
(e) M1 is not infringing upon or to the
knowledge of M1 and the Shareholders otherwise acting adversely to the right or
claimed right of any Person under or with respect to any patent, trade secret,
confidential information, copyright, license or proprietary rights. M1 has not
received any communication alleging or stating that M1 or any director,
employee or consultant of M1 has violated or infringed, or by conducting
business as proposed, would violate or infringe, any patent, trademark, service
mark, trade name, copyright, trade secret, proprietary right, process or other
intellectual property of any other Person. There are no claims or demands of
any Person pertaining to, or any Actions that are pending or to the knowledge
of M1 or the Shareholders threatened, which challenge the rights of M1 in
respect of any Registered Right or any Proprietary Information.
(f) Without limiting the generality of the
foregoing representations and warranties, M1 and the Shareholders further
represent and warrant that the license granted from Particle Measuring Systems
to M1 pursuant to the settlement agreement effective as of June 17, 1992 is a
valid and binding license agreement and M1 has not received any communication
alleging or stating that M1 is in default or violation of the terms of such
license. Neither M1 nor any of the Shareholders knows of any reason why such
license
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<PAGE> 37
is not a valid and binding obligation of the parties thereto or of any uncured
default or of any facts or conditions which, with or without notice, the lapse
of time or both, would ripen into a default by either party to such license and
settlement agreement.
4.9 Banking and Insurance.
(a) Schedule 4.9(a) contains a true and
complete list of the names and locations of all financial institutions at which
M1 maintains a checking account, deposit account, securities account, safety
deposit box or other deposit or safekeeping arrangement, the numbers or other
identification of all such accounts and arrangements and the names of all
persons authorized to draw against any funds therein.
(b) Schedule 4.9(b) contains a true and
complete list of all insurance policies and bonds and self insurance
arrangements currently in force that cover or purport to cover risks or losses
to or associated with M1's business, operations, premises, properties, assets,
employees, agents and directors and sets forth, with respect to each such
policy, bond and self insurance arrangement, a description of the insured loss
coverage, the expiration date and time of coverage, the dollar limitations of
coverage, a general description of each deductible feature and principal
exclusion and the premiums paid and to be paid prior to expiration. The
insurance policies, bonds and arrangements described on Schedule 4.9(b) (the
"Policies") provide such coverage against such risk of loss and in such amounts
as are customary for corporations of established reputation engaged in the same
or similar business and similarly situated. M1 has no obligation, liability or
other commitment relating to any contract of insurance containing a provision
for retrospective rating or adjustment of M1's premium obligation. To the
knowledge of M1 or the Shareholders, no facts or circumstances exist that would
cause M1 to be unable to renew its existing insurance coverage as and when the
same shall expire upon terms at least as favorable as those currently in
effect, other than possible increases in premiums that do not result from any
act or omission of M1 or any Shareholder.
4.10 Indebtedness.
(a) M1 has no liability or obligation for
Indebtedness other than as properly reflected on the Balance Sheet or as set
forth on Schedule 4.10(a), and true and
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complete copies of all instruments and documents evidencing, creating, securing
or otherwise relating to such Indebtedness have been delivered to PSC
heretofore. Except as described in Schedule 4.10(a), no event has occurred and
no condition has become known to M1 or any Shareholder (including the
transactions contemplated hereby) that constitutes or, with notice or passage
of time, or both, would constitute a default or a basis of force majeure or
other claim of accelerated or increased rights, termination, excusable delay or
nonperformance by M1 or any other Person under any instrument or document
relating to or evidencing Indebtedness that would entitle any Person to require
M1 to pay any portion of the principal amount of such Indebtedness prior to the
scheduled maturity thereof. Except as set forth in Schedule 4.10(a), no
instrument or document evidencing, creating, securing or otherwise relating to
Indebtedness will require the consent of any Person to or as a result of the
consummation of the transactions contemplated by this Agreement.
(b) Schedule 4.10(b) contains a list and
brief description of all agreements or instruments pursuant to which any of
M1's directors, employees or shareholders have guaranteed any Indebtedness of
M1 (the "Guaranties"). True and complete copies of all Guaranties have been
delivered to PSC.
4.11 Judgments; Litigation. Except as set forth on
Schedule 4.11:
(a) There is no (i) outstanding judgment,
order, decree, award, stipulation, injunction of any Governmental Entity or
arbitrator against or affecting M1 or its properties, assets or business or
(ii) Action pending against or affecting M1 or its properties, assets or
business.
(b) To the Shareholders' knowledge, there
is no (A) outstanding judgment, order, decree, award, stipulation, injunction
of any Governmental Entity or arbitrator against or affecting any officer,
director or employee of M1 relating to M1 or its business, (B) Action
threatened against or affecting M1 or its properties, assets or business, (C)
Action pending or threatened against M1's officers, directors or employees
relating to M1 or its business or (D) basis for the institution of any Action
against M1 or any of its officers, directors, employees, properties or assets
which, if decided adversely, would have a Material Adverse Effect.
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4.12 Income and Other Taxes. Except as set forth on
Schedule 4.12:
(a) All Tax Returns required to be filed
through and including the date hereof in connection with the operations of M1
are true, complete and correct in all material respects and have been properly
and timely filed. M1 has not requested any extension of time within which to
file any Tax Return, which Tax Return has not since been filed. PSC has
heretofore been furnished by M1 with true, correct and complete copies of each
Tax Return of M1 with respect to the past three taxable years, and of all
reports of, and communications from, any Governmental Entities relating to such
period. M1 has disclosed on its Federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of income Taxes
for federal income tax purposes within the meaning of Code Section 6662.
(b) All Taxes required to be paid or
withheld and deposited in connection with the operations of M1 have been
duly and timely paid or deposited by M1. M1 has properly withheld or collected
all amounts required by law for income Taxes and employment Taxes relating to
its employees, creditors, independent contractors and other third parties, and
for sales Taxes on sales, and has properly and timely remitted such withheld or
collected amounts to the appropriate Governmental Entity.
(c) M1 has made adequate provision on
its books of account for all Taxes with respect to its business, properties
and operations through the Balance Sheet Date, and the accruals for Taxes in
the Balance Sheet are adequate to cover all liabilities for Taxes of M1 through
the Balance Sheet Date and for all periods ending on or before the Closing
Date. All balance sheet reserves relating to all Taxes which may be owing in
any jurisdiction in which M1 does business include reserves for all interest
and penalties and all such reserves were adequate as of the Balance Sheet Date.
(d) Except as set forth in Schedule
4.12(d), M1 has never (i) had a tax deficiency proposed, asserted or assessed
against it (ii) executed any waiver of any statute of limitations on the
assessment or collection of any Taxes, or (iii) been delinquent in the payment
of any Taxes.
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(e) Except as set forth in Schedule
4.12(e), no Tax Return of M1 has been audited or is the subject of other
Action by any Governmental Entity. M1 has not received any notice from any
Governmental Entity of any pending examination or any proposed deficiency,
addition, assessment, demand for payment or adjustment relating to or affecting
M1 or its assets or properties and no Shareholder has reason to believe that any
Governmental Entity may assess (or threaten to assess) any Taxes for any
periods ending on or prior to the Closing Date.
(f) M1 (i) has not filed any consent or
agreement pursuant to Code Section 341(f), and no such consent or agreement
will be filed at any time on or before the Closing Date; (ii) has not made any
payments, is not obligated to make any payments and is not a party to any
agreement that under certain circumstances could obligate M1 to make any
payments that will not be deductible under Code Section 280G or, exclusive of
Section 280G considerations, which would not otherwise be deductible as
compensation by M1, (iii) is not a United States real property holding
corporation within the meaning of Code Section 897(c)(2); (iv) is not a party
to a tax allocation or sharing agreement; (v) has never been (or does not have
any liability for unpaid Taxes because it was) a member of an affiliated group
within the meaning of Code Section 1504(a); (vi) has never applied for a tax
ruling from a Governmental Entity and (vii) has never filed or been the subject
of an election under Code Section 338(g) or Code Section 338(h)(10) or caused
or been the subject of a deemed election under Code Section 338(e).
(g) Set forth on Schedule 4.12(g) is the
amount, as of the most recent practicable date, of any net operating loss, net
capital loss, unused investment or other credit, unused foreign tax or excess
charitable contribution.
4.13 Questionable Payments. Except as set forth in
Schedule 4.13, neither M1 nor any of its directors, officers, agents, employees
or other Person associated with or acting on behalf of M1 has (a) used any
corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (b) made any direct or
indirect unlawful payments to government officials or employees, or foreign
government officials or employees, from corporate funds, (c) established or
maintained any unlawful or unrecorded fund of corporate monies or other assets,
(d) made any false or fictitious
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entries on the books of account of M1, (e) made or received any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment, or (f) made any
other favor or gift not fully deductible for federal income tax purposes.
4.14 Employee Benefit Matters.
(a) Schedule 4.14(a) is a complete list of
all Plans. True and complete copies of each of the following documents (and
any amendments thereto), where applicable, have been delivered previously to
PSC: (i) the Plan documents; (ii) a written description of any Plan which is
not in writing; (iii) if the Plan is funded through a trust or any third-party
funding vehicle, the trust or other funding agreement; (iv) the Plan's most
recent financial statements; (v) the two most recent annual reports (including
all schedules and attachments thereto) required by ERISA; (vi) the most recent
actuarial report and valuation; (vii) the most recent determination letter
received from the IRS with respect to each Plan that is intended to be
qualified under Code Section 401 or to be recognized as tax-exempt under Code
Section 501(c); (viii) the most recent summary plan description and each
summary of material modifications required by ERISA; (ix) any agreement
providing for the provision of administrative or investment management services
with respect to the Plan; and (x) all documents and correspondence received
from or provided to the DOL, IRS, and PBGC during the past two years.
(b) Each Plan and related trust, annuity,
or other funding agreement complies and has been maintained in compliance with
all applicable material Legal Requirements. No non-exempt prohibited
transaction (as defined in Code Section 4975 and ERISA Sections 406 and 408)
has occurred and no "fiduciary" (as defined in ERISA Section 3(21)) has
committed any breach of duty which could subject M1, any ERISA Affiliate, or
any director, officer, or employee thereof to liability under Title I of ERISA
or to tax under Code Section 4975. All material obligations required to be
performed by M1 and any other Person under the terms of each Plan and
applicable Legal Requirement have been performed.
(c) All required reports and descriptions,
including, without limitation, annual reports (Form 5500), summary annual
reports, and summary plan descriptions, have been filed and distributed timely.
With respect to each Plan which is a welfare plan (as defined in ERISA Section
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3(1)), the requirements of Part 6 of Subtitle B of Title I of ERISA and of Code
Sections 162(k) and 4980B have been satisfied.
(d) All contributions, premiums, and other
payments, including, without limitation, employer contributions and employee
salary contributions, have been paid when due. No Plan that is subject to Part
3 of Subtitle B of Title IV of ERISA or to Code Section 412 has incurred any
accumulated funding deficiency, whether or not waived, and no other actual or
contingent liability for any other expenses or obligations of any Plan exists.
(e) There are no pending or to the
knowledge of the Shareholders or M1 threatened Actions (other than routine
claims for benefits) asserted or instituted against any Plan or the assets of
any Plan, or against M1, or any ERISA Affiliate, trustee, administrator, or
fiduciary of such Plan, and the Shareholders and M1 have no knowledge of any
facts that could form the basis of any such Action. There is no pending, or to
the knowledge of the Shareholders or M1 threatened or contemplated Action by
any Governmental Entity with respect to any Plan, and the Shareholders and M1
have no knowledge of any facts that could reasonably be expected to cause or
trigger such an Action.
(f) M1 (or, if applicable, an ERISA
Affiliate,) may terminate, suspend, or amend each Plan at any time, except to
the extent otherwise required by Code Section 4980B, without the consent of the
participants or employees covered by such Plan. Neither M1 nor any ERISA
Affiliate has announced any intention, made any amendment or binding
commitment, or given any written or oral notice providing that M1 or an ERISA
Affiliate (i) will create additional Plans covering employees of M1 or any
ERISA Affiliate, (ii) will increase benefits promised or provided pursuant to
any Plan, or (iii) will not exercise after the Closing Date any right or power
it may have to terminate, suspend, or amend any Plan.
(g) Neither M1 nor any ERISA Affiliate
maintains or has maintained any time, or contributes to or has contributed to
or is or was required to contribute to, any (i) Plan subject to Title IV of
ERISA, including, without limitation, any multi-employer plan (as defined in
ERISA Section 3(37)), within the past five years, or (ii) funded or unfunded
medical, health, accident, or life insurance plan or arrangement for current or
future retirees
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or terminated employees or their spouses or dependents (except to the extent
required by Code Sections 162(k) or 4980B).
(h) Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will constitute a termination of employment or other event entitling any Person
to any additional or other benefits, or that would otherwise modify benefits or
the vesting of benefits, provided under any Plan.
(i) To the knowledge of the Shareholders
and M1, no event has occurred which could subject M1 or any ERISA Affiliate to
any material liability (i) under any Legal Requirement relating to any Plan
other than current obligations or payments properly arising in accordance with
the terms of such Plan, or (ii) resulting from any obligation of M1 or an ERISA
Affiliate to indemnify any Person against liability incurred with respect to or
in connection with any Plan.
(j) Each Plan which is intended to be
qualified under Code Section 401 has received, within the last five years, a
favorable determination letter from the IRS. To the knowledge of the
Shareholders or M1, no event has occurred and no facts or circumstances exist
which may cause or result in the loss or revocation of such determination.
4.15 No Undisclosed Liabilities. To the knowledge of
M1 and the Shareholders, except (i) to the extent set forth or provided for in
the Balance Sheet or the notes thereto in accordance with generally accepted
accounting principles, (ii) as set forth on Schedule 4.15 or another Schedule
to this Agreement or (iii) for non-material current liabilities incurred since
the Balance Sheet Date in the Ordinary Course, M1 has no material liabilities,
whether accrued, absolute, contingent or otherwise, whether due or to become
due and whether the amounts thereof are readily ascertainable or not, or any
unrealized or anticipated losses from any commitments of a contractual nature,
including Taxes with respect to or based upon the transactions or events
occurring at or prior to the Closing.
4.16 Permits, Licenses, Etc. To the knowledge of M1
and the Shareholders, M1 possesses, and is operating in compliance with, all
franchises, licenses, permits, certificates, authorizations, rights and other
approvals of
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Governmental Entities necessary to (i) occupy, maintain, operate and use the
Leased Real Property as it is currently used and proposed to be used, (ii)
conduct its business as currently conducted and as proposed to be conducted,
and (iii) maintain and operate its Plans (the "Permits"). Schedule 4.16
contains a true and complete list of all Permits. To the knowledge of M1 or
the Shareholders, each Permit has been lawfully and validly issued, and no
proceeding is pending or threatened looking toward the revocation, suspension
or limitation of any Permit. The consummation of the transactions contemplated
by this Agreement will not result in the revocation, suspension or limitation
of any Permit and, except as set forth in Schedule 4.16, no Permit will require
the consent of its issuing authority to or as a result of the consummation of
the transactions contemplated hereby.
4.17 Regulatory Filings. To the knowledge of M1 and
the Shareholders, M1 has made all required material registrations and filings
with and submissions to all applicable Governmental Entities relating to the
general operations of M1 as currently conducted and as proposed to be
conducted. M1 has made all required registrations and filings to all
Governmental Entities having jurisdiction over any matters pertaining to
conservation or protection of the environment, and the treatment, discharge,
use, handling, storage or production, or disposal of Hazardous Materials. All
such registrations, filings and submissions (general as well as pertaining to
environmental matters) were in compliance with all Legal Requirements
(including all Environmental Laws) and other requirements when filed, no
material deficiencies have been asserted by any such applicable Governmental
Entities with respect to such registrations, filings or submissions and no
facts or circumstances exist which would indicate that a material deficiency
may be asserted by any such authority with respect to any such registration,
filing or submission.
4.18 Consents. All consents, authorizations and
approvals of any Person to or as a result of the consummation of the
transactions contemplated hereby that are necessary or advisable in connection
with the operations and business of M1 as currently conducted and as proposed
to be conducted, or for which the failure to obtain the same might have,
individually or in the aggregate, a Material Adverse Effect, have been lawfully
and validly obtained by M1, except as described in Schedules 4.4(f), 4.5(d),
4.10(a), 4.16 and 4.19(c) hereto. All consents, authorizations and approvals
described in Schedules 4.4(f),
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4.5(d), 4.10(a), 4.16 and 4.19(c) will have been lawfully and validly obtained
prior to the Closing.
4.19 Material Contracts; No Defaults.
(a) Schedule 4.19(a) contains a true and
complete list and description of each individual outstanding sales order and
sales contract of M1 as of November 15, 1995 having an indicated gross value in
excess of $5,000 or having a term or duration in excess of six months. Since
such date, there have been no material decreases in the outstanding number or
volume of such orders and contracts. All outstanding sales orders and sales
contracts of M1 have been entered into in the Ordinary Course. Except as
described in Schedule 4.19(a), M1 has not received any advance, progress
payment or deposit in respect of any sales order or sales contract, and M1 has
no sales order or sales contract that will result, upon completion or
performance thereof, in gross margins materially lower than those normally
experienced by M1 for the services or products covered by such sales order or
sales contract.
(b) Schedule 4.19(b) contains a true and
complete list and description of all outstanding purchase orders and purchase
commitments of M1 as of November 15, 1995 having a gross indicated value in
excess of $5,000 in the aggregate from any single supplier or other vendor.
Since such date, there have been no material changes in the outstanding number
or volume of such purchase orders and purchase commitments. All outstanding
purchase orders and purchase commitments of M1 have been incurred in the
Ordinary Course, and no purchase order or purchase commitment of M1 is in
excess of the normal, ordinary and usual requirements of the business of M1 or
at an excessive price. The principal raw materials used and inventory sold by
M1 are available from several sources at competitive prices and upon
competitive terms and no interruption in production or Material Adverse Effect
will result from the loss of any one of such sources.
(c) Schedule 4.19(c) contains a true and
complete list of all sales agency, sales representative, distributor,
wholesaler, dealer and similar contracts or agreements of M1, and true and
complete copies of the same have been delivered to PSC heretofore. Except as
described in Schedule 4.19(c), all of such contracts and agreements are
terminable at any time by M1 without penalty (including, without limitation,
any obligation to repurchase inventories on hand) upon not more than 30 days'
notice.
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(d) Schedule 4.19(d) contains a true and
complete list and description of all noncompetition agreements and covenants
under which M1 or any of its current and former officers, directors or
employees or any Shareholder is obligated, and true and complete copies of the
same have been delivered to PSC heretofore. Except as described in Schedule
4.19(d), M1 is not restricted by any agreement from carrying on its business or
engaging in any other activity anywhere in the world (including relocating,
closing, or terminating any of its operations or facilities), and no such
officer, director, key employee or Shareholder is a party to or otherwise bound
or affected by any agreement, covenant or other arrangement or understanding
that would restrict or impair his ability to perform diligently his duties to
M1. Schedule 4.19(d) also contains a true and complete list and description of
all noncompetition agreements or covenants in favor of M1, and true and
complete copies of the same have been delivered to PSC heretofore.
(e) Schedule 4.19(e) contains a true and
complete list and description of all contracts, agreements, understandings,
arrangements and commitments, written or oral, of M1 with any officer,
director, consultant, employee or Affiliate of M1 or with any associate,
Affiliate or employee of any Affiliate of M1, other than those disclosed in
Schedule 4.21(a) hereto; in each case a true and complete copy of such written
contract, agreement, understanding, arrangement or commitment or a true and
complete summary of such oral contract, agreement, understanding, arrangement
or commitment has been delivered to PSC heretofore.
(f) Schedule 4.19(f) contains a true and
complete list and description of all other material contracts, agreements,
understandings, arrangements and commitments, written or oral, of M1 by which
it or its properties, rights or assets are bound that are not otherwise
disclosed in this Agreement or the Schedules hereto. True and complete copies
of such written contracts, agreements, understandings, arrangements and
commitments and true and complete summaries of such oral contracts, agreements,
understandings, arrangements and commitments have been delivered to PSC
heretofore. For the purposes of this subsection (f), "material" means any
contract, agreement, understanding, arrangement or commitment that (i) involves
performance by any party more than 90 days from the date hereof, (ii) involves
payments or receipts by M1 in excess of $5,000, (iii) involves capital
expenditures in excess of $5,000 or (iv) otherwise materially affects M1.
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(g) Except as described in Schedule 4.19(g):
(i) each agreement, contract,
arrangement or commitment described above in this Section 4.19 is, and after
the Closing on identical terms will be, legal, valid, binding, enforceable and
in full force and effect in accordance with its terms and M1 is in full
compliance with all of its obligations under each such agreement, contract,
arrangement or commitment;
(ii) to the knowledge of M1 or any
Shareholder, no event or condition has occurred or is alleged to have occurred
that constitutes or, with notice or the passage of time, or both, would
constitute a default or a basis of force majeure or other claim of excusable
delay, termination, nonperformance or accelerated or increased rights by M1 or
any other Person under any contract, agreement, arrangement, commitment or
other understanding, written or oral, described above in this Section 4.19, or
described or otherwise disclosed pursuant to this Agreement; and
(iii) to the knowledge of M1 or any
Shareholder, no person with whom M1 has such a contract, agreement,
arrangement, commitment or other understanding is in default thereunder or has
failed to perform fully thereunder by reason of force majeure or other claim
of excusable delay, termination or nonperformance thereunder, the delay,
termination or nonperformance of which, or a default under which, has had or
may have a Material Adverse Effect.
4.20 Absence of Certain Changes. Since the Balance
Sheet Date, except as disclosed in Schedule 4.20, M1 has not: (i) incurred any
debts, obligations or liabilities (absolute, accrued, contingent or otherwise),
other than current liabilities incurred in the Ordinary Course which,
individually or in the aggregate, are not material; (ii) subjected to or
permitted a Lien (other than a Permitted Lien) upon or otherwise encumbered any
of its assets, tangible or intangible except in the Ordinary Course; (iii)
sold, transferred, licensed or leased any of its assets or properties except in
the Ordinary Course; (iv) discharged or satisfied any Lien other than a Lien
securing, or paid any obligation or liability other than, current liabilities
shown on the Balance Sheet and current liabilities incurred since the Balance
Sheet Date, in each case in the Ordinary Course; (v) cancelled or compromised
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any debt owed to or by or claim of or against it, or waived or released any
right of material value other than in the Ordinary Course; (vi) suffered any
physical damage, destruction or loss (whether or not covered by insurance)
causing a Material Adverse Effect; (vii) entered into any material transaction
in excess of $5,000 or otherwise committed or obligated itself to any capital
expenditure in excess of $1,000 other than in the Ordinary Course; (viii) to
the knowledge of M1 and the Shareholders, made or suffered any change in, or
condition affecting, its condition (financial or otherwise), properties,
profitability, prospects or operations other than changes, events or conditions
in the Ordinary Course, none of which (individually or in the aggregate) has
had or is reasonably expected to have a Material Adverse Effect; (ix) made any
change in the accounting principles, methods, records or practices followed by
it or depreciation or amortization policies or rates theretofore adopted; (x)
other than in the Ordinary Course, made or suffered any amendment or
termination of any material contract, agreement, lease or license to which it
is a party; (xi) paid, or made any accrual or arrangement for payment of, any
severance or termination pay to, or entered into any employment or loan or loan
guarantee agreement with, any current or former officer, director or employee
or consultant; (xii) paid, or made any accrual or arrangement for payment of,
any increase in compensation, bonuses or special compensation of any kind to
any employee, or paid, or made any accrual or arrangement for payment of, any
increase in compensation, bonuses or special compensation of any kind to any
officer or director of M1 or any consultant to M1; (xiii) made or agreed to
make any charitable contributions or incurred any nonbusiness expenses which in
the aggregate have not exceeded $2,000; (xiv) changed or suffered change in any
Plan or labor agreement affecting any employee of M1 otherwise than to conform
to Legal Requirements; or (xv) entered into any agreement or otherwise
obligated itself to do any of the foregoing.
4.21 Employees and Labor Matters.
(a) Schedule 4.21(a) contains a true and
complete list of all contracts, agreements, plans, arrangements, commitments
and understandings (formal and informal) pertaining to terms of employment,
compensation, bonuses, profit sharing, stock purchases, stock repurchases,
stock options, commissions, incentives, loans or loan guarantees, severance pay
or benefits, use of M1's property and related matters of M1 with any current or
former officer, director,
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employee or consultant, and true and complete copies of all such contracts,
agreements, plans, arrangements and understandings have been delivered to PSC
heretofore. Schedule 4.21(a) also contains a true and complete list of all
employees of M1 together with current salary levels and a description of all
benefits applicable to such employees.
(b) Schedule 4.21(b) contains a true and
complete list of all labor, collective bargaining, union and similar agreements
under or by which M1 is obligated, and true and complete copies of all such
agreements have been delivered to PSC heretofore.
(c) Except as set forth on Schedule
4.21(c), neither Surviving Corporation, PSC nor M1 will have any responsibility
for continuing any person in the employ (or retaining any person as a
consultant) of M1 from and after the Closing except as expressly contemplated
by Section 6.5 below or have any liability for any severance payments to or
similar arrangements with any such Person who shall cease to be an employee of
M1 at or prior to the Closing.
(d) There is not occurring or, to M1 or the
Shareholders' knowledge, threatened, any strike, slow down, picket, work
stoppage or other concerted action by any union or other group of employees or
other persons against M1 or its premises or products. Except for activities by
the unions that are parties to any of the agreements listed on Schedule 4.21(b)
with respect to the existing members of such unions, to the Shareholders'
knowledge, no union or other labor organization has attempted to organize any
of the employees of M1.
(e) M1 has complied with all material Legal
Requirements relating to employment and labor, and, to the best knowledge of
the Shareholders, no facts or circumstances exist that could provide a
reasonable basis for a claim of wrongful termination by any current or former
employee of M1 against M1.
4.22 Affiliations. Except as disclosed on Schedule
4.22, none of the Shareholders, any officer, director or key employee of M1 or
any associate or Affiliate of M1 or any of such Persons has, directly or
indirectly, (i) an interest in any Person that (A) furnishes or sells, or
proposes to furnish or sell, services or products that are furnished or sold by
M1 or (B) purchases from or sells or furnishes to, or proposes to purchase from
or sell or
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furnish to, M1 any goods or services or (ii) a beneficial interest in any
contract or agreement to which M1 is a party or by which M1 or any of the
assets of M1 are bound or affected.
4.23 Principal Customers and Suppliers.
(a) Schedule 4.23(a) contains a true and
complete list of the names of the top twenty customers that have purchased
goods or services from M1 during each of the last two fiscal years, and the
aggregate dollar amount of goods or services purchased by each such customer.
Since January 1, 1995, no such customer has terminated its relationship with or
adversely curtailed its purchases from M1 or indicated (for any reason) its
intention so to terminate its relationship or curtail its purchases. M1 has
taken reasonable efforts to protect the confidentiality of its Customer Lists.
(b) Schedule 4.23(b) contains a true and
complete list of the names of the top twenty suppliers from whom M1 purchased
goods or services during M1's last fiscal year and the aggregate dollar amount
of goods and services purchased from each such supplier. Since January 1,
1995, no such supplier has terminated its relationship with or adversely
curtailed its accommodations, sales or services to M1 or indicated (for any
reason) its intention to terminate such relationship or curtail its
accommodations, sales or services.
4.24 Compliance with Law. Except as disclosed
elsewhere in this Agreement or a disclosure schedule hereto, M1 (i) to the
knowledge of M1 or the Shareholders has conducted its business or operations in
compliance with, and has used or occupied its properties or assets in
compliance with all applicable material Legal Requirements, (ii) to M1 or the
Shareholders' knowledge has never been alleged to be in violation of any Legal
Requirement, and (iii) has not received any notice of any alleged violation of,
nor any citation for noncompliance with, any Legal Requirement.
4.25 Product Returns. Schedule 4.25 hereto contains
a true and complete description of the product return experience of M1 for the
last three fiscal years. Except for matters disclosed on Schedule 4.25 or
Schedule 4.26, the accrual for warranty expense and all product returns
reflected in M1's books of account is adequate. Since the Balance Sheet Date,
there has been no increase in the rate of product returns.
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4.26 Product Liability and Product Warranty.
Schedule 4.26 hereto contains a true and complete description of (i) all
warranties granted or made with respect to products sold, or services rendered,
by M1 and (ii) M1's product liability and product warranty experience for the
last three years. Schedule 4.26 discloses all product liability and product
warranty claims pending or, to the knowledge of the Shareholders, threatened as
to any products manufactured, sold or distributed by M1. Except as disclosed
in Schedule 4.26, there are no product warranties or guarantees applicable to
any products manufactured, distributed or sold by M1.
4.27 Corporate Records. The copies or originals of
the Articles of Incorporation and Bylaws and all amendments thereto, and minute
books and stock records of M1 previously delivered to, or made available for
inspection by, PSC are true, complete and correct.
4.28 Hazardous Materials. Except as set forth on
Schedule 4.28:
(a) No Hazardous Material (i) has been
deposited, spilled, discharged, released or disposed of on or under any real
property currently or previously owned or leased by M1 while M1 was in
possession of or occupation of such real property, and to the knowledge of M1
and the Shareholders as to any such real property before or after the
possession or occupation of the real property by M1 (or, to the Shareholders'
and M1's knowledge, any property adjoining any Leased Real Property or the
Grants Pass Property), (ii) has been placed, stored, generated, used,
manufactured, discharged, released, spilled or disposed of by M1 in violation
of any Legal Requirement or Environmental law, (iii) is presently maintained,
used, generated, or permitted to remain in place by M1 in violation of any
Environmental Law, (iv) is required by any Environmental Law to be eliminated,
removed, treated or mitigated by M1, given the nature of its present condition,
location, nature, material or maintenance, or (v) is of a type, location,
material, nature or condition which requires special notification to third
parties by M1 under Environmental Law or common law.
(b) No notice, citation, summons or order
has been received by M1 or any Shareholder, no notice has been given by M1 and
no complaint has been filed, no penalty has been assessed and no investigation
or review is pending or to the knowledge of M1 or the Shareholders threatened
by
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any Governmental Entity, with respect to (i) any alleged violation by M1 of any
Environmental Law or (ii) any alleged failure by M1 to have any environmental
permit, certificate, license, approval, registration or authorization required
in connection with its business or properties, or (iii) any use, possession,
generation, treatment, storage, recycling, transportation, release or disposal
by or on behalf of M1 of any Hazardous Material.
(c) M1 has not received any request for
information, notice of claim, demand or notification that it is or that
indicates that it may be a "potentially responsible party" with respect to any
investigation or remediation of any threatened or actual release of any
Hazardous Material.
(d) During such period of time as such
property was occupied, leased or owned by M1, and to the knowledge of M1 and
the Shareholders with regards to the period of time before such property was
occupied, leased or owned by M1, no above-ground or underground storage tanks,
whether or not in use, are or have ever been located at any property owned or
leased by M1.
(e) No notice has been received by M1 with
respect to the listing or proposed listing of any property currently or
previously owned, operated or leased by M1 on the National Priorities List
promulgated pursuant to CERCLA, CERCLIS or any similar state list of sites
requiring investigation or cleanup.
(f) There have been no environmental
inspections, investigations, studies, tests, reviews or other analyses
conducted in relation to any Leased Real Property other than the Phase I
environmental site investigation conducted by PSC on the Grants Pass Property.
M1 has made all required filings, submissions, reports and registrations to all
Governmental Entities relating to environmental matters.
(g) M1 has not released, transported, or
arranged for the transportation of any Hazardous Material from any property
currently or previously owned, operated or leased by M1 in violation of any
Environmental Law.
4.29 No Brokers. No broker, finder or similar agent
has been employed by or on behalf of M1 in connection with this Agreement or
the transactions contemplated hereby, and M1 has not entered into any agreement
or understanding
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of any kind with any person or entity for the payment of any brokerage
commission, finder's fee or any similar compensation in connection with this
Agreement or the transactions contemplated hereby.
4.30 Disclosure.
(a) No representation or warranty of M1 or
any Shareholder in this Agreement and no information contained in any Schedule
or other writing delivered by M1 or the Shareholders to PSC pursuant to this
Agreement or at the Closing contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact required to make
the statements herein or therein not misleading. To the knowledge of the
Shareholders or M1, there is no fact that the Shareholders have not disclosed
to PSC in writing that has had or insofar as any Shareholder can now foresee,
may have a Material Adverse Effect on M1.
(b) To the extent that any representation
or warranty in this Article 4 is qualified to the Shareholders' "knowledge,"
the Shareholders represent and warrant that they have made a reasonable
investigation sufficient to express an informed view concerning the matters to
which such representation or warranty relates, including diligent inquiries of
M1's officers, directors and employees and a review of M1's books, records and
files.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PSC
PSC hereby represents and warrants to, and covenants and
agrees with, each of the Shareholders that:
5.1 Organization and Good Standing of PSC. PSC has
been duly organized and is existing as a corporation in good standing under the
laws of the State of California with full corporate power and authority to (a)
enter into this Agreement and the Purchase and Sale Agreement, (b) consummate
the transactions contemplated hereby and by the Purchase and Sale Agreement and
(c) own and lease its properties and to conduct its business as currently
conducted.
5.2 Organization and Good Standing of Acquisition.
Acquisition has been duly organized and is
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existing as a corporation in good standing under the laws of the State of
California with full corporate power and authority to (a) enter into this
Agreement, (b) consummate the transactions contemplated hereby and (c) own and
lease its properties and to conduct its business as currently conducted.
5.3 Execution and Delivery. All consents,
approvals, authorizations and orders necessary for the execution, delivery and
performance by PSC and Acquisition of this Agreement and the Purchase and Sale
Agreement (including, without limitation, the issuance of the Petralli Shares
and the shares of PSC Stock to be exchanged hereunder) have been duly and
lawfully obtained, and PSC and Acquisition have, and at the Closing will have,
full right, power, authority and capacity to execute, deliver and perform this
Agreement and the Purchase and Sale Agreement. This Agreement and the Purchase
and Sale Agreement have been duly authorized by all necessary corporate action
on the part of PSC and Acquisition, respectively, have been duly executed and
delivered by, and constitute the legal, valid and binding agreements of, PSC
and Acquisition, respectively, enforceable against each of them in accordance
with its terms.
5.4 No Conflicts. The execution, delivery and
performance of this Agreement and the Purchase and Sale Agreement by PSC and
Acquisition, respectively, and the consummation thereby of the transactions
contemplated hereby and thereby will not (a) conflict with or result in a
breach or violation of any term or provision of, or constitute a default under
(with or without notice or passage of time, or both), or otherwise give any
Person a basis for accelerated or increased rights or termination for
non-performance under, any indenture, mortgage, deed of trust, loan or creditor
agreement, lease, license or other agreement or instrument to which PSC or
Acquisition is a party or by which PSC or Acquisition is bound or affected or
to which any of the property or assets of PSC or Acquisition is bound or
affected, or (b) result in the violation of the provisions of the Articles of
Incorporation or Bylaws of PSC or the Articles of Incorporation or Bylaws of
Acquisition, respectively, or any Legal Requirement applicable to or binding
upon PSC or Acquisition.
5.5 Form S-3. PSC meets the registrant requirements
specified in Instruction I.A of the General Instructions to the Registration
Statement on Form S-3.
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5.6 Absence of Changes. Since September 29, 1995,
PSC has not made or suffered any change in or condition affecting its condition
(financial or otherwise), properties, profitability, prospects or operations
other than changes, events or conditions in the ordinary course, none of which
(individually or in the aggregate) has had or is reasonably expected to have a
material adverse affect on PSC.
5.7 Capitalization. The authorized capital stock of
PSC consists of 30,000,000 shares of common stock and 2,000,000 shares of
preferred stock, of which 11,022,702 shares of common stock were issued and
outstanding as of September 29, 1995. All such shares have been duly
authorized and validly issued and are fully paid, nonassessable and
outstanding. From September 29, 1995 and until the Closing and excluding the
shares of PSC Stock to be issued pursuant to this Agreement and the Petralli
Shares, PSC has not undertaken any stock split, stock dividend or other stock
distribution or other stock recapitalization involving the PSC Common Stock and
there have been no issuances of PSC common stock except pursuant to various
stock plans, option plans, bonus or compensation arrangements or other employee
benefit plans. At the Effective Time, the shares of PSC Stock to be issued to
the Shareholders pursuant to this Agreement will be duly authorized, fully
paid, and nonassessable, and outstanding and of record in the names of the
Shareholders, and upon issuance of stock certificates, such shares will be duly
and validly issued. Upon closing of the Purchase and Sale Agreement, the
Petralli Shares will be duly authorized, fully paid and nonassessable, and
outstanding and of record in the name of Petralli, and upon issuance of stock
certificates, the Petralli Shares will be duly and validly issued.
5.8 No Brokers. No broker, finder or similar agent
has been employed by or on behalf of PSC in connection with this Agreement or
the transactions contemplated hereby, and PSC has not entered into any
agreement or understanding of any kind with any person or entity for the
payment of any brokerage commission, finder's fee or any similar compensation
in connection with this Agreement or the transactions contemplated hereby.
5.9 Financial Statements. The consolidated
financial statements of PSC included in PSC's Annual Report on Form 10-K for
the year ended December 31, 1994 and in PSC's Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1995, June 30, 1995 and September 29, 1995
were
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prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods covered thereby except as otherwise noted
therein and present fairly and accurately the consolidated financial position
of PSC as of their respective dates and the consolidated results of income and
cash flows, as the case may be, for the periods presented therein subject, in
the case of unaudited interim financial statements, to normal year-end audit
adjustments and except that the quarterly financial statements do not contain
all of the footnote disclosures required by generally accepted accounting
principles.
5.10 Litigation. To PSC's knowledge, PSC has
disclosed in its forms, reports and documents filed with the Securities and
Exchange Commission all material claims, actions or pending proceedings against
or relating to PSC or any of its subsidiaries required to be disclosed by the
rules and regulations of the Securities and Exchange Commission. To PSC's
knowledge, there is no material claim, action, suit, proceeding or hearing
which has been instituted against PSC since September 29, 1995 which, if
decided adversely, would have a material adverse effect on PSC.
5.11 Disclosure. No representation or warranty of
PSC in this Agreement and no information contained in any other writing
delivered by PSC to the Shareholders pursuant to this Agreement or at the
Closing contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact required to make the statements by
PSC herein or therein not misleading.
ARTICLE 6
ADDITIONAL COVENANTS
6.1 Information. Each of the Shareholders and M1
shall hold in confidence, and shall use reasonable efforts to insure that their
respective employees and representatives hold in confidence, all information
supplied to them by PSC concerning PSC and shall not disclose such information
to any third party except as may be required by any Legal Requirement and
except for information that (i) is or becomes generally available to the public
other than as a result of disclosure by the Shareholders, M1 or its
representatives, (ii) becomes available to the Shareholders, M1 or
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its representatives, from a third party other than PSC or any of its
representatives, (iii) is known to the shareholders, M1 or its representatives
on a nonconfidential basis prior to its disclosure by PSC, or (iv) is made
available by PSC to any other Person on a nonrestricted basis. The
Shareholders' obligations under the foregoing sentence shall survive the
Closing.
6.2 Expenses. All costs and expenses (including,
without limitation, all legal fees and expenses and fees and expenses of any
brokers, finders or similar agents) incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
the same; provided, however, that the costs and expenses incurred by M1 shall
not exceed $75,000. Without limiting the generality of the foregoing, the
Shareholders shall pay for all legal fees and other expenses which are incurred
in connection with their respective personal financial, legal or other matters
arising out of this Agreement and the transactions contemplated hereby, and
shall not pass such expenses on to M1.
6.3 Further Assurances.
(a) Subject to the terms and conditions of
this Agreement, the Shareholders and M1 on the one hand, and PSC and
Acquisition on the other hand, agree to use all reasonable efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Legal Requirements, to
consummate and make effective the transactions contemplated by this Agreement.
(b) If at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, the Shareholders and PSC, as the case may be, shall take or cause to
be taken all such necessary or convenient actions and execute, and deliver and
file, or cause to be executed, delivered and filed, all necessary or convenient
documentation.
6.4 Inconsistent Action. The Shareholders shall not
take or suffer to be taken, and shall not permit M1 to take or cause or suffer
to be taken, any action that would cause any of the representations or
warranties of any of the Shareholders or of M1 in this Agreement to be untrue,
incorrect, incomplete or misleading. PSC shall not take or suffer to be taken,
and shall not permit Acquisition to take or cause to suffer to be taken, any
action that would cause
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any of the representations or warranties of PSC or Acquisition to be untrue,
incorrect, incomplete or misleading.
6.5 General Employment Matters. After the Closing,
it is the current intention of PSC to cause Surviving Corporation to continue
to offer employment to the current employees of M1, other than Petralli, at
compensation rates and benefits similar to other employees of PSC similarly
situated. After the Closing, PSC agrees to provide vesting credit to the
employees of M1 who continue in the employment of PSC for purposes of PSC's
benefit plans for their years of employment with M1 prior to the Closing;
provided, however, that no service credit will be given for PSC's retirement
plan. Notwithstanding the foregoing, nothing contained in this Agreement shall
limit or restrict the right of PSC or Surviving Corporation to terminate the
employment of such employees or subsequently to modify the benefits or other
terms of employment of such employees, to the extent permitted by enforceable
Legal Requirements.
6.6 Petralli Resignation. Effective as of the
Closing, Petralli agrees by his execution of this Agreement to resign as an
employee and director of M1 and acknowledges and agrees that he has no right to
any offer of continued employment after the Closing and that he has no claims
against M1 arising out of his employment by M1 prior to the Closing. Without
limiting the foregoing, Petralli agrees and acknowledges that he is not
entitled to any severance pay or other benefit or compensation arising from his
resignation, except for accrued vacation pay which Petralli will be entitled to
receive to the extent such vacation pay has been properly accrued on M1's
Balance Sheet.
6.7 Employment Agreements. PSC agrees that
Surviving Corporation shall offer two-year employment agreements to Holger
Sommer, James R. Wittkopp, John Armstrong, Ronald Siebert, Frank Lawson, Buzz
Gunning and Bill Petralli in the forms of Annexes L, M, N, O, P, Q and Annex R,
respectively, and such other employment agreements to certain key employees of
M1 as determined by PSC in its discretion. The parties hereto expressly
acknowledge that obtaining such employment agreements is not a condition to the
closing of the transactions contemplated herein.
6.8 Pooling Restrictions on Transactions in PSC
Stock. To the extent reasonably requested by PSC, each of the Shareholders
will execute such additional documentation required by PSC's independent public
accountants, the
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Securities and Exchange Commission or the NYSE with respect to
pooling-of-interests accounting issues. PSC has informed the Shareholders that
it is a material factor to PSC in entering into this Agreement that the
transactions contemplated by this Agreement be treated as a pooling-of-
interests under generally accepted accounting principles. Therefore,
notwithstanding any other provision of this Agreement, prior to the publication
and dissemination by PSC of consolidated financial results which include
results of combined operations of M1 and PSC for at least thirty days on a
consolidated basis following the Closing Date, the Shareholders shall not sell
or otherwise transfer or dispose of any shares of the PSC Stock received by the
Shareholders (including, by way of example and not limitation, engaging in put,
call, short-sale, straddle or similar market transactions). The Shareholders
covenant and agree with PSC to hold their shares of PSC Stock until the
publication and dissemination of financial statements by PSC which include the
results of at least thirty (30) days of combined operations of PSC and M1 and
consent to the entry of stop transfer instructions with PSC's transfer agent to
prevent the transfer of the shares of PSC Stock and the Petralli Shares in
violation of this Section 6.8. Additionally, the certificates evidencing the
PSC Stock to be received by the Shareholders will bear a legend substantially
in the form set forth below:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED, AND PACIFIC SCIENTIFIC
COMPANY SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY
ATTEMPTED SALE, TRANSFER OR ASSIGNMENT PRIOR TO THE
PUBLICATION AND DISSEMINATION OF FINANCIAL STATEMENTS BY
PACIFIC SCIENTIFIC COMPANY WHICH INCLUDE THE RESULTS OF AT
LEAST THIRTY (30) DAYS OF COMBINED OPERATIONS OF PACIFIC
SCIENTIFIC COMPANY AND THE COMPANY ACQUIRED BY PACIFIC
SCIENTIFIC COMPANY FOR WHICH THESE SHARES ARE ISSUED.
UPON THE WRITTEN REQUEST OF THE STOCKHOLDERS DIRECTED TO
PACIFIC SCIENTIFIC COMPANY, AND SATISFACTION OF COVENANTS
SET FORTH IN SECTION 6.8 OF THAT CERTAIN AGREEMENT AND
PLAN OF MERGER DATED AS OF DECEMBER 29, 1995, PACIFIC
SCIENTIFIC COMPANY AGREES TO REMOVE THIS RESTRICTIVE
LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER
AGENTS).
PSC covenants and agrees to cause its transfer agent and
registrar to remove the foregoing legend from the PSC Stock received by the
Shareholders upon the request of
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the Shareholders following the publication and dissemination of PSC's financial
statements for the period described above.
PSC agrees in good faith to attempt to publicly release
the financial results of its consolidated operations for the month ended
January 31, 1996 on or before February 29, 1996; provided, however, that the
parties hereto agree and acknowledge that PSC shall not be obligated to release
such results by such date or incur any liability should it fail to do so by
that date. PSC further agrees (without the qualification set forth in the
previous sentence) to publicly release the financial results of its
consolidated operations for the month ended January 31, 1996 on or before March
30, 1996.
6.9 Automobile Leases. By execution of this
Agreement, Petralli and M1 agree and acknowledge that the automobile leases
previous entered into between M1 and Petralli are hereby cancelled effective as
of the Closing and that M1 has no further obligations (monetary or otherwise)
relating to such lease agreements.
6.10 Buy-Sell Agreement. By executing this
Agreement, M1, Petralli, Ronald R. Siebert and Bill Petralli hereby agree and
acknowledge effective as of the Closing that the Amended and Restated Buy-Sell
Agreement dated July 1, 1991 among such parties is hereby terminated. By
executing this Agreement, the parties agree that such agreement shall not in
any way restrict the exchange of securities contemplated by the Merger or the
transactions contemplated by this Agreement or cause the Shareholders to be in
breach of their representations and warranties in this Agreement.
6.11 Employee Stock Purchase Agreements. James R.
Wittkopp, Holger Sommer and M1 agree by executing this Agreement effective as
of the Closing, that (i) those certain Employee Stock Purchase Agreements dated
as of July 1, 1992 together with the related pledge agreements and proxies are
hereby cancelled, except that the obligations to pay the purchase price of the
M1 shares acquired thereunder and as evidenced by promissory notes shall
survive and remain outstanding, (ii) that the obligations under the promissory
notes shall be secured by the Stock Pledge Agreements executed by Messrs.
Wittkopp and Sommer at the Closing and the pledge of PSC stock thereunder, and
(iii) Messrs. Wittkopp and Sommer acknowledge their obligations under the
promissory notes and that such obligations are valid and outstanding and are
not subject to any rights of
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set-off or counterclaim. By executing this Agreement, the parties agree that
the Employee Stock Purchase Agreements and related documents will not in any
way restrict the exchange of securities contemplated by the Merger or the
transactions contemplated by this Agreement or cause the Shareholders to be in
breach of their representations and warranties in this Agreement.
6.12 Petralli Shares. By executing this Agreement,
Petralli agrees and affirms that each of the investment representations and
warranties contained in Section 3.5 of this Agreement shall apply to Petralli's
acquisition of the Petralli Shares as if each such representation and warranty
explicitly included Petralli's acquisition of the Petralli Shares. In
addition, Petralli agrees and acknowledges that the Petralli Shares shall be
subject to the restrictions contained in Section 6.8 and Petralli covenants and
agrees to hold the Petralli Shares in accordance with the restrictions
contained therein. In furtherance of the foregoing, Petralli expressly agrees
that the restrictive legends required by Section 3.5(b) and Section 6.8 shall
be placed upon the certificates evidencing the Petralli Shares.
6.13 Release of Claims. As a material inducement to
PSC and Acquisition to enter into this Agreement, each Shareholder individually
and for such Shareholder's heirs, successors and assigns, hereby releases,
acquits and forever discharges M1, PSC and Acquisition and their respective
officers, directors, shareholders, employees, representatives, agents, related
entities, successors and assigns (collectively, the "Released Parties"), of and
from any and all claims, actions, charges, complaints, causes of actions,
rights, demands, debts, or damages of whatever nature, known or unknown whether
based on statute, public policy, common law, contract, tort or otherwise, which
such Shareholder or such Shareholder's heirs, successors and assigns may have
against any of the Released Parties based on any actions, omissions or events
which occurred prior to the date of this Agreement and arising out of or
related to his employment or otherwise, including without limitation claims
relating to or arising out of the negotiation, structure and execution of this
Agreement and the various agreements and documents contemplated by this
Agreement (the "Related Agreements") and the transactions contemplated by this
Agreement or the Related Agreements. It is further understood and agreed that
all rights under Section 1542 of the Civil Code of the State of California are
hereby expressly waived by the Shareholders. Section 1542 reads as follows:
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"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him
must have materially affected his settlement with the
debtor."
For the purpose of implementing a full and complete
release, each Shareholder acknowledges and agrees that this Section 6.13
includes all claims which such Shareholder does not know or suspect to exist in
his favor at the time of execution hereof against any of the Released Parties.
Notwithstanding the foregoing, this Section 6.13 does not apply to accrued but
unpaid salary and vacation pay of those Shareholders who are employees of M1 as
of the date of this Agreement, which employees shall still be entitled to such
accrued salary and vacation pay. Nothing contained in this Section 6.13 shall
relieve any of the Released Parties from any of their obligations,
responsibilities or liabilities provided for in this Agreement or any of the
Related Agreements.
ARTICLE 7
INDEMNIFICATION
7.1 Survival of Representations and Warranties.
(a) The representations and warranties,
covenants and agreements of the parties hereto contained in this Agreement or
in any writing delivered pursuant hereto or at the Closing shall survive the
Closing and the consummation of the transactions contemplated hereby (and any
examination or investigation by or on behalf of any party hereto).
(b) No Action may be commenced with respect
to any representation, warranty, covenant or agreement in this Agreement, or in
any writing delivered pursuant hereto, unless written notice, setting forth in
reasonable detail the claimed breach thereof, shall be delivered pursuant to
Section 8.1 to the party or parties against whom liability for the claimed
breach is charged.
7.2 Indemnification.
(a) The Shareholders, jointly and severally,
covenant and agree to defend, indemnify and hold
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harmless PSC, Acquisition and each Person who controls PSC within the meaning
of the Securities Act from and against any Damages arising out of or resulting
from: (i) any inaccuracy in or breach of any representation or warranty made
by any Shareholder or M1 in this Agreement or in any writing delivered pursuant
to this Agreement or at the Closing; or (ii) the failure of any Shareholder or
M1 to perform or observe fully any covenant, agreement or provision to be
performed or observed by such Shareholder or M1 pursuant to this Agreement or
in any agreement or writing delivered pursuant to this Agreement. The
Shareholders' liability under this Article 7 (including, but not limited to the
payment of judgments, settlements, litigation costs and cure costs) shall be
limited to $25,000,000.
(b) PSC covenants and agrees to defend,
indemnify and hold harmless the Shareholders from and against any Damages
arising out of or resulting from: (i) any inaccuracy in or breach of any
representation or warranty, made by PSC in this Agreement or in any writing
delivered pursuant to this Agreement or at the Closing; or (ii) the failure by
PSC to perform or observe fully any covenant, agreement or condition to be
performed or observed by it pursuant to this Agreement. PSC's liability under
this Article 7 (including but not limited to the payment of judgments,
settlements, litigation costs and cure costs) shall be limited to $25,000,000.
7.3 Third Party Claims.
(a) If any party entitled to be indemnified
pursuant to Section 7.2 (an "Indemnified Party") receives notice of the
assertion by any third party of any claim or of the commencement by any such
third person of any Action (any such claim or Action being referred to herein
as an "Indemnifiable Claim") with respect to which another party hereto (an
"Indemnifying Party") is or may be obligated to provide indemnification, the
Indemnified Party shall promptly notify the Indemnifying Party in writing (the
"Claim Notice") of the Indemnifiable Claim; provided, that the failure to
provide such notice shall not relieve or otherwise affect the obligation of the
Indemnifying Party to provide indemnification hereunder, except to the extent
that any Damages directly resulted or were caused by such failure.
(b) The Indemnifying Party shall have
thirty days after receipt of the Claim Notice to undertake, conduct and
control, through counsel of its own choosing,
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and at its expense, the settlement or defense thereof, and the Indemnified
Party shall cooperate with the Indemnifying Party in connection therewith;
provided, that (i) the Indemnifying Party shall permit the Indemnified Party to
participate in such settlement or defense through counsel chosen by the
Indemnified Party (subject to the consent of the Indemnifying Party, which
consent shall not be unreasonably withheld), provided that the fees and
expenses of such counsel shall not be borne by the Indemnifying Party, and (ii)
the Indemnifying Party shall not settle any Indemnifiable Claim without the
Indemnified Party's consent (which consent shall not be unreasonably withheld).
So long as the Indemnifying Party is actively contesting any such Indemnifiable
Claim in good faith, the Indemnified Party shall not pay or settle such claim
without the Indemnifying Party's consent, which consent shall not be
unreasonably withheld.
(c) If the Indemnifying Party does not
notify the Indemnified Party within thirty days after receipt of the Claim
Notice that it elects to undertake the defense of the Indemnifiable Claim
described therein, the Indemnified Party shall have the right to contest,
settle or compromise the Indemnifiable Claim in the exercise of its reasonable
discretion; provided, that the Indemnified Party shall notify the Indemnifying
Party of any compromise or settlement of any such Indemnifiable Claim.
(d) Anything contained in this Section 7.3
to the contrary notwithstanding, the Shareholders shall not be entitled to
assume the defense for any Indemnifiable Claim (and shall be liable for the
reasonable fees and expenses incurred by the Indemnified Party in defending
such claim) if the Indemnifiable Claim seeks an order, injunction or other
equitable relief or relief for other than money damages against PSC which PSC
determines, after conferring with its counsel, cannot be separated from any
related claim for money damages and which, if successful, would adversely
affect the business, properties or prospects of M1; provided, however, if such
equitable relief portion of the Indemnifiable Claim can be so separated from
that for money damages, the Shareholders shall be entitled to assume the
defense of the portion relating to money damages.
7.4 Limitation on Indemnification. Notwithstanding
anything contained in this Section 7 to the contrary, neither PSC nor the
Shareholders shall be obligated to indemnify the other until the aggregate of
all amounts to be paid as a result of such indemnification
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equals or exceeds $100,000, in which event the full amount of such obligation
(relating back to the first dollar) and all additional obligations shall be due
and owing.
7.5 Indemnification Non-Exclusive. The foregoing
indemnification provisions are in addition to, and not in derogation of, any
statutory, equitable or common-law remedy any party may have for breach of
representation, warranty, covenant or agreement.
ARTICLE 8
GENERAL PROVISIONS
8.1 Notices. All notices and other communications
under or in connection with this Agreement shall be in writing and shall be
deemed given (a) if delivered personally, upon delivery, (b) if delivered by
registered or certified mail (return receipt requested), upon the earlier of
actual delivery or three days after being mailed, or (c) if given by telecopy,
upon confirmation of transmission by telecopy, in each case to the parties at
the following addresses:
(a) If to PSC or Acquisition, addressed to:
Pacific Scientific Company
620 Newport Center Drive
Newport Beach, CA 92660
Attention: Mr. Richard V. Plat
Telecopy: (714) 720-1083
With a copy to:
Paul, Hastings, Janofsky & Walker
Seventeenth Floor
695 Town Center Drive
Costa Mesa, California 92626
Attention: Stephen D. Cooke, Esq.
Telecopy: (714) 979-1921
(b) If to a Shareholder, to the address set
forth below such Shareholder's name on
Annex K hereto:
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With a copy to:
Law Offices of Dixon R. Howell
One Almaden Boulevard
Suite 620
San Jose, California 95113-2214
Attention: David C. Burgess, Esq.
Telecopy: (408) 283-6811
(c) If to M1, addressed to:
Met One, Inc.
481 California Avenue
Grants Pass, Oregon 97526
Attention: President
With a copy to:
Law Offices of Dixon R. Howell
One Almaden Boulevard
Suite 620
San Jose, California 95113-2214
Attention: David C. Burgess, Esq.
Telecopy: (408) 283-6811
8.2 Severability. If any term or provision of this
Agreement or the application thereof to any circumstance shall, in any
jurisdiction and to any extent, be invalid or unenforceable, such term or
provision shall be ineffective as to such jurisdiction to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
such term or provision in any other jurisdiction, the remaining terms and
provisions of this Agreement or the application of such terms and provisions to
circumstances other than those as to which it is held invalid or enforceable.
8.3 Entire Agreement. This Agreement, including the
annexes and schedules attached hereto and other documents referred to herein,
contains the entire understanding of the parties hereto in respect of its
subject matter and supersedes all prior and contemporaneous agreements and
understandings, oral and written, between the parties with respect to such
subject matter. Without limiting the generality of the foregoing, this
Agreement supersedes and replaces in their entirety the letter of intent dated
September 6, 1995, between M1 and PSC and that certain Amended Confidentiality
Agreement signed by M1 on
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September 27, 1995, between PSC and M1, which such letter of intent and
agreement are hereby null and void.
8.4 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of PSC and the Shareholders and their
respective successors, heirs and assigns; provided, however, that no
Shareholder shall directly or indirectly transfer or assign any of such
Shareholder's respective rights hereunder in whole or in part without the prior
written consent of PSC, which consent shall not be unreasonably withheld.
Subject to the immediately preceding sentence, this Agreement is not intended
to benefit, and shall not run to the benefit of or be enforceable by, any other
person or entity other than the parties hereto and their permitted successors
and assigns.
8.5 Amendment. This Agreement may be amended at any
time only by a written instrument executed by PSC and the Shareholders
(including an instrument signed by the Shareholders Representative in
accordance with Section 8.10 below). Any amendment effected pursuant to this
Section 8.5 shall be binding upon all parties hereto.
8.6 Waiver. Any term or provision of this Agreement
may be waived in writing at any time by the party or parties entitled to the
benefits thereof. Any waiver effected pursuant to this Section 8.6 shall be
binding upon all parties hereto. No failure to exercise and no delay in
exercising any right, power or privilege shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege preclude
the exercise of any other right, power or privilege. No waiver of any breach
of any covenant or agreement hereunder shall be deemed a waiver of any
preceding or subsequent breach of the same or any other covenant or agreement.
The rights and remedies of each party under this Agreement are in addition to
all other rights and remedies, at law or in equity, that such party may have
against the other parties.
8.7 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all
such counterparts together shall constitute but one and the same Agreement.
8.8 Recitals, Schedules and Annexes. The recitals,
schedules and annexes to this Agreement are incorporated herein and, by this
reference, made a part hereof as if fully set forth at length herein.
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8.9 Construction.
(a) The article, section and subsection
headings used herein are inserted for reference purposes only and shall not in
any way affect the meaning or interpretation of this Agreement.
(b) As used in this Agreement, the
masculine, feminine or neuter gender, and the singular or plural, shall be
deemed to include the others whenever and wherever the context so requires.
(c) For the purposes of this Agreement,
unless the context clearly requires, "or" is not exclusive.
8.10 Shareholders' Representative. By executing this
Agreement, each of the Shareholders (except for Dr. Holger Sommer, who shall
not be subject to this Section 8.10) hereby irrevocably appoints Petralli as
his or her agent and attorney-in-fact to take all such actions required,
permitted or otherwise necessary or advisable in connection with this Agreement
and in connection with any other agreement, document or certificate arising out
of or related to this Agreement or in connection with the transactions
contemplated hereby. In furtherance of the foregoing, each of the Shareholders
(except for Dr. Sommer) appoints Petralli as his or her true and lawful
attorney-in-fact to do any and all acts in such Shareholder's capacity and
execute any and all documents and instruments for such Shareholder in such
Shareholder's name, which Petralli may deem necessary or advisable in
connection with this Agreement, including specifically without limitation, the
power and authority to sign for such Shareholder, in such Shareholder's name,
any and all documents or other instruments requiring the signature of such
Shareholder, including waivers or amendments to this Agreement. Each of the
Shareholders (except Dr. Sommer) hereby ratifies and confirms all that Petralli
shall do or cause to be done by virtue of this section and acknowledges and
agrees that such Shareholder will be bound by such action. Delivery to
Petralli as the Shareholders' Representative shall constitute delivery to the
Shareholders (except Dr. Sommer). PSC is expressly authorized and empowered to
rely upon any action by Petralli in his capacity as the Shareholders'
Representative. Notwithstanding the foregoing, nothing contained in this
Section 8.10 shall prevent PSC from seeking the consent or signature of any
individual Shareholder to any changes or amendments to this Agreement
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or any other document delivered in connection with this transaction, in its
sole and absolute discretion.
8.11 Governing Law. This Agreement shall be governed by
and construed in accordance with the internal laws (and not the law of
conflicts) of the State of California.
[Signature Page Follows]
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AGREEMENT AND PLAN OF MERGER SIGNATURE PAGE
IN WITNESS WHEREOF, each of the parties hereto has
executed this Agreement, or has caused this Agreement to be executed on its
behalf by a representative duly authorized, all as of the date first above set
forth.
M1 ACQUISITION CORP.,
a California corporation
By: /s/ Richard V. Plat
---------------------------------------
Name: Richard V. Plat
Title: President
PACIFIC SCIENTIFIC COMPANY,
a California corporation
By: /s/ Richard V. Plat
---------------------------------------
Name: Richard V. Plat
Title: Executive Vice President
MET ONE, INC.,
a California corporation
By: /s/ Louis J. Petralli
---------------------------------------
Name: Louis J. Petralli
Title: President
By: /s/ James R. Wittkopp
---------------------------------------
Name: James R. Wittkopp
Title: Chief Financial Officer and
Secretary
[Signature Page Continues]
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<PAGE> 71
AGREEMENT AND PLAN OF MERGER SIGNATURE PAGE
(Continued)
SHAREHOLDERS:
/s/ Louis J. Petralli, Jr.
------------------------------------------
Name: Louis J. Petralli, Jr.
/s/ Holger Sommer
------------------------------------------
Name: Holger Sommer
/s/ Ronald R. Siebert
------------------------------------------
Name: Ronald R. Siebert
/s/ James R. Wittkopp
------------------------------------------
Name: James R. Wittkopp
/s/ Bill Petralli
------------------------------------------
Name: Bill Petralli
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<PAGE> 1
EXHIBIT 2.2
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into
as of December 29, 1995, by and between PACIFIC SCIENTIFIC COMPANY, a
California corporation ("PSC"), and each of the Persons who have executed this
Agreement and are named in Annex A to this Agreement (each sometimes referred
to herein individually as an "Investor" and sometimes collectively as the
"Investors").
RECITALS
A. Investors collectively own outstanding shares of common stock
of Met One, Inc., a California corporation ("M1").
B. Concurrently herewith, M1 Acquisition Corp., a California
corporation and wholly-owned subsidiary of PSC ("Acquisition") merged with and
into M1 (the "Merger") in accordance with the terms and conditions set forth in
that certain Agreement and Plan of Merger (the "Merger Agreement").
C. In connection with the Merger, Investors will receive shares
of newly issued common stock of PSC (the "Investor Shares") in exchange for all
of their stock in M1.
D. Also in connection with the Closing under the Merger
Agreement, Louis J. Petralli, one of the Investors, sold to M1 certain real
property and buildings pursuant to a Purchase and Sale Agreement and Joint
Escrow Instructions. In exchange for such real property and buildings,
additional shares of PSC common stock are to be issued to Mr. Petralli (the
"Petralli Shares"). The Investor Shares and the Petralli Shares are referred
to herein collectively as the "Shares."
E. The execution and delivery of this Agreement by the parties
hereto are a condition to consummation of the transactions contemplated in the
Merger Agreement. PSC agrees to enter into this Agreement in exchange for the
agreements, covenants and promises made by the Investors as parties to the
Merger Agreement.
Therefore, the parties hereto hereby agree as follows:
1. Definitions. Unless the context otherwise requires, the terms
defined in this Section 1 shall have the
<PAGE> 2
meanings herein specified for all purposes of this Agreement, applicable to
both the singular and plural forms of any of the terms herein defined.
"Agreement" means this Registration Rights Agreement.
"Board" means the Board of Directors of PSC.
"Closing Date" means the Closing Date as such term is defined in the
Merger Agreement.
"Common Stock" means the common stock of PSC.
"Commission" means the Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Investor" has the meaning assigned to it in the introductory
paragraph of this Agreement.
"Person" includes any natural person, corporation, trust, association,
company, partnership, joint venture and other entity and any government,
governmental agency, instrumentality or political subdivision.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement and all other amendments and supplements to the
prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such prospectus.
The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" means all reasonable expenses incurred by PSC
in complying with Section 2 and Section 4 hereof, including all registration
and filing fees, listing
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fees for the Shares, printing expenses, fees and disbursements of counsel for
PSC, and blue sky fees and expenses in all states; except as provided in
Section 4(f) which costs shall be paid by the Investors.
"Registrable Securities" means all Shares and any Common Stock issued
or issuable in respect of the Shares pursuant to any stock split, stock
dividend, recapitalization, or similar event; provided, however, that
Registrable Securities shall cease to be Registrable Securities when they may
be sold pursuant to Rule 144 under the Securities Act or are otherwise sold or
transferred by a Shareholder. Notwithstanding the foregoing, transfers by an
Investor to a revocable inter vivos trust for estate planning purposes or by
will or the laws of descent and distribution shall not prevent Shares which are
otherwise Registrable Securities from ceasing to qualify as such.
"Registration Statement" means any registration statement of PSC which
covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all materials incorporated by reference or deemed to be incorporated by
reference in such registration statement.
"Rule 144" means Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission (excluding Rule 144A).
"Securities Act" means the Securities Act of 1933, as amended.
2. Registration of Securities
(a) Registration Statement. PSC shall prepare a
Registration Statement pursuant to Rule 415 (or any appropriate similar rule
that may be adopted by the Commission) under the Securities Act covering the
Registrable Securities held by the Investors (the "Registration") and shall use
its best efforts to file the Registration with the Commission not later than 30
days after the Closing Date (the "Filing Date"). The Registration shall be on
Form S-3 or another appropriate abbreviated or short form of registration
statement permitting registration of such Registrable Securities for resale by
such holders from time to time in the manner or manners designated by them
consistent with the
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terms of this Agreement (including, without limitation, one or more
underwritten offerings).
(b) Effectiveness. PSC shall use its best efforts to
cause the Registration to become effective under the Securities Act as soon as
practicable following the Filing Date. Subject to the requirements of the
Securities Act including, without limitation, requirements relating to updating
through post-effective amendments or otherwise, PSC shall use its best efforts
to keep the Registration continuously effective until such time as any of the
Shares may first be eligible to be sold or traded pursuant to Rule 144 under
the Securities Act; provided however, that if so requested by a majority of the
then outstanding Registrable Securities PSC shall agree to extend the period by
which the Registration remains effective to the same extent that "Suspension
Periods" are imposed pursuant to subsection 2(c) below, but only so long as
the then outstanding Registrable Securities are too numerous to be sold under
the volume limitation of Rule 144 for an applicable three month period. PSC
shall use its best efforts to take such actions under the laws of various
states as may be required to cause the resale of the Shares pursuant to the
Registration to be lawful.
(c) Following the effectiveness of a Registration
Statement filed pursuant to this section, PSC may, at any time, suspend the
effectiveness of such Registration for up to 60 days, as appropriate (a
"Suspension Period"), by giving notice to each Investor, if PSC shall have
determined that PSC may be required to disclose any material corporate
development which disclosure (i) may have a material adverse affect on PSC,
(ii) may have a material adverse affect on the transaction or matter to be
disclosed, or (iii) would be detrimental to PSC or its shareholders.
Notwithstanding the foregoing, no more than two Suspension Periods (i.e., 120
days) may occur in immediate succession. PSC shall use its best efforts to
limit the duration and number of any Suspension Periods. Each Investor agrees
that, upon receipt of any notice from PSC of a Suspension Period, such Investor
shall forthwith discontinue disposition of shares covered by such Registration
Statement or prospectus until such Investor (i) is advised in writing by PSC
that the use of the applicable prospectus may be resumed, (ii) has received
copies of a supplemental or amended prospectus, if applicable, and (iii) has
received copies of any additional or supplemental filings which are
incorporated or deemed to be incorporated by reference in such prospectus.
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3. Expenses of Registration. All Registration Expenses shall be
borne by PSC; provided, however, that the term Registration Expenses shall not
include, and in no event will PSC be obligated to pay, expenses and fees of
counsel for the Investors, stock transfer taxes or underwriters' discounts or
commissions relating to Registrable Securities.
4. Obligations of PSC. To effect the registration of the
Registrable Securities, PSC shall, as expeditiously as reasonably possible.
(a) Prepare and file with the Commission such amendments
and supplements to a Registration Statement with respect to the Registrable
Securities and the prospectus used in connection with such Registration
Statement as may be necessary to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
Registration Statement.
(b) Furnish to the Investors such numbers of copies of
the Registration Statement, including all amendments or supplements thereto,
and of the Prospectus included in such Registration Statement, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(c) Use its best efforts to register and qualify the
securities covered by such Registration Statement under such other securities
or blue sky laws of such jurisdictions as shall be reasonably requested by the
Investors, provided that, unless required by the Securities Act, PSC shall not
be required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions in which PSC is not already qualified to do business or
subject to service of process.
(d) Notify the Investors, the sales or placement agent,
if any, and the underwriter, if any, and confirm such advice in writing (i)
when a Registration Statement, including without limitation any amendments or
supplements, has been filed, and when such Registration Statement or any
post-effective amendment has become effective, (ii) of any comments by the
Commission and by the blue sky or securities commissioner or regulator of any
state with respect thereto or any request by the Commission for amendments or
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supplements to a Registration Statement or Prospectus or for additional
information, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of a Registration Statement or the initiation or
threatening of any proceedings for that purpose or of any order preventing or
suspending the use of any preliminary prospectus, (iv) of the receipt by PSC of
any notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, or (v) at any time when a
Prospectus is required to be delivered under the Securities Act, that the
Registration Statement, Prospectus, Prospectus amendment or supplemental or
post-effective amendment, contains an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances
existing at that time.
(e) Use its best efforts to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement or any
post-effective amendment at the earliest practicable date.
(f) Furnish, at the request of any Investor requesting
registration of Registrable Securities pursuant to this Agreement, on the date
such Registrable Securities are delivered to the underwriters for sale in
connection with the Registration, if such securities are being sold through
underwriters, on the date the Registration Statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the counsel
representing PSC for the purposes of such registration, in form and substance
as is reasonably agreed to by such counsel and the underwriters in an
underwritten public offering regarding the due issuance and valid registration
of the Registrable Securities, addressed to the underwriters in an underwritten
public offering, if any, and (ii) a letter, dated such date, from the
independent accountants of PSC, in form and substance as reasonably agreed to
by independent accountants and the underwriters in an underwritten public
offering, addressed to the underwriters, if any. To the extent reasonably
requested, copies of such letters shall be delivered to the Investors. Upon
request by PSC, the Investors engaging such underwriter shall promptly
reimburse PSC for its costs and expenses of engaging such counsel and
accountants.
5. Indemnification.
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(a) PSC will, and does hereby undertake to, indemnify and
hold harmless each Investor, each underwriter participating in a public
distribution of the Registrable Securities, each of such Investor's officers,
directors, partners and agents, and each Person controlling such Investor, with
respect to any registration, qualification, or compliance effected pursuant to
this Agreement, against all claims, losses, damages, and liabilities (or
actions in respect thereto) to which they may become subject under the
Securities Act, the Exchange Act, or other federal or state law arising out of
or based on (i) any untrue statements (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular, or other similar
document (including any related Registration Statement, notification, or the
like) incident to any such registration, qualification, or compliance, or based
on any omission (or alleged omission ) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (ii) any violation or alleged violation by PSC of any federal,
state or common law rule or regulation applicable to PSC in connection with any
such registration, qualification, or compliance, and will reimburse, as
incurred, each such Investor, each such underwriter, and each such director,
officer, partner, agent and controlling person, for any legal and any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability, or action; provided that PSC will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense, arises out of or is based on any untrue statement or
omission based upon written information furnished to PSC by an instrument duly
executed by such Investor and stated to be specifically for use therein.
(b) Each Investor will, if Registrable Securities held by
or issuable to such Investor are included in such registration, qualification,
or compliance, indemnify PSC, each of its directors, and each officer who signs
a Registration Statement in connection therewith, and each person controlling
PSC, and each other Investor, each of such other Investor's officers, partners,
directors and agents and each person controlling such other Investor, against
all claims, losses, damages, and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement)
of a material fact contained in any such Registration Statement, prospectus,
offering circular, or other document, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to
make the
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statements therein not misleading, and will reimburse, as incurred, PSC, each
such other Investor, and each such director, officer, partner, and controlling
person, for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability, or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) was
made in such Registration Statement, prospectus, offering circular, or other
document, in reliance upon and in conformity with written information furnished
to PSC by an instrument duly executed by such Investor and stated to be
specifically for use therein.
(c) Each party entitled to indemnification under this
Section 5 (the "Indemnified Party") shall give notice to the party required to
provide such indemnification (the "Indemnifying Party") of any claim as to
which indemnification may be sought promptly after such Indemnified Party has
actual knowledge thereof, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom; provided that
counsel for the Indemnifying Party, who shall conduct the defense of such claim
or litigation, shall be subject to approval by the Indemnified Party (whose
approval shall not be unreasonably withheld) and the Indemnified Party may
participate in such defense at the Indemnifying Party's expense if
representation of such Indemnified Party would be inappropriate due to actual
or potential differing interests between such Indemnified Party and any other
party represented by such counsel in such proceeding; and provided further that
the failure of any Indemnified Party to give notice as provided herein shall
not relieve the Indemnifying Party of its obligations under this Section 5,
except to the extent that such failure to give notice shall materially
adversely affect the Indemnifying Party in the defense of any such claim or any
such litigation. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement that does not include as
an unconditional term thereof the giving by the claimant or plaintiff therein,
to such Indemnified Party, of a release from all liability in respect to such
claim or litigation.
6. Information by Investor. Each Investor shall furnish to PSC
such information regarding such Investor and the distribution proposed by such
Investor as PSC may reasonably request in writing and as shall be required in
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connection with any registration, qualification, or compliance referred to in
this Agreement. Failure by the Investors to timely supply such information
will delay the filing of the Registration and will act to postpone the Filing
Date.
7. Delay of Registration. No Investor shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Agreement.
8. Rule 144 Reporting. With a view to making available to the
Investors the benefits of certain rules and regulations of the Commission which
may permit the sale of the Registrable Securities to the public without
registration, PSC agrees, at its own costs, to use its best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144, as long as Registrable Securities
are outstanding;
(b) File with the Commission, in a timely manner, all
reports and other documents required of PSC under the Securities Act and the
Exchange Act; and
(c) So long as any Investor owns any Registrable
Securities, furnish to such Investor forthwith upon request: a copy of the
most recent annual or quarterly report of PSC; and such other reports and
documents as such Investor may reasonably request in availing itself of any
rule or regulation of the Commission allowing it to sell any such securities
without registration.
9. Miscellaneous.
9.1 Waivers and Amendments. With the written consent of
the Investors holding a majority of the Registrable Securities then
outstanding, the obligations of PSC and the rights of the Investors under this
Agreement may be waived (either generally or in a particular instance, either
retroactively or prospectively and either for a specified period of time or
indefinitely), and with the same consent PSC, when authorized by resolution of
its Board, may enter into a supplementary agreement for the purpose of adding
any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of any supplemental agreement or modifying in
any manner the
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rights and obligations hereunder of the Investors and PSC. Upon the
effectuation of each such waiver, consent or agreement of amendment or
modification, PSC agrees to give promptly written notice thereof to the
Investors who have not previously consented thereto in writing. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally or by course of dealing, but only by a statement in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought, except to the extent provided in this Section 9.1.
No waiver by any party of the breach of any term or provision contained in this
Agreement, in any one or more instances, shall be deemed to be, or construed
as, a further or continuing waiver of any such breach, or a waiver of the
breach of any other term or covenant contained in this Agreement.
9.2 Effect of Waiver or Amendment. Each Investor
acknowledges that by operation of Section 9.1 hereof Investors holding a
majority of the Registrable Securities will, subject to the limitations
contained in such Section 9.1, have the right and power to diminish or
eliminate certain rights of such Investor under this Agreement.
9.3 Rights of Investors Inter Se. Each Investor shall
have the absolute right to exercise or refrain from exercising any right or
rights which such Investor may have by reason of this Agreement including,
without limitation, the right to consent to the waiver of any obligation of PSC
under this Agreement and to enter into an agreement with PSC for the purpose of
modifying this Agreement or any agreement effecting any such modification, and
such Investor shall not incur any liability to any other Investor or Investors
with respect to exercising or refraining from exercising any such right or
rights.
9.4 Notices. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
delivered, or mailed first class postage prepaid, registered or certified mail,
(a) If to any Investor, addressed to such Investor at its
address shown on Annex A hereto, or at such other address as such Investor may
specify by written notice to PSC, or
(b) If to PSC, at PSC's corporate headquarters, 620 Newport
Center Drive, Newport Beach, CA 92660 Attention: Mr. Richard V. Plat,
Executive Vice President, or at such
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other address as PSC may specify by written notice to the Investors.
Each such notice, request, consent and other
communication shall for all purposes of the Agreement be treated as being
effective or having been given when delivered, if delivered personally, or, if
sent by mail, at the earlier of its actual receipt or three (3) days after the
same has been deposited in a regularly maintained receptacle for the deposit of
United States mail, addressed and postage prepaid as aforesaid.
9.5 Severability. Should any one or more of the
provisions of this Agreement or of any agreement entered into pursuant to this
Agreement be determined to be illegal or unenforceable, all other provisions of
this Agreement and of each other agreement entered into pursuant to this
Agreement, shall be given effect separately from the provision or provisions
determined to be illegal or unenforceable and shall not be affected thereby.
9.6 Parties in Interest. All the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto,
whether so expressed or not. Subject to the immediately preceding sentence,
this Agreement shall not run to the benefit of or be enforceable by any Person
other than a party to this Agreement and its successors and assigns.
9.7 Headings. The headings of the sections, subsections
and paragraphs of this Agreement have been inserted for convenience of
reference only and do not constitute a part of this Agreement.
9.8 Choice of Law. It is the intention of the parties
that the internal substantive laws, and not the laws of conflicts, of the State
of California should govern the enforceability and validity of this Agreement,
the construction of its terms and the interpretation of the rights and duties
of the parties.
9.9 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, with the same effect as if all parties had signed the same
document. All such counterparts shall be deemed an original, shall be
construed together and shall constitute one and the same instrument.
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[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed personally or by a duly authorized representative
thereof as of the day and year first above written.
"PSC"
PACIFIC SCIENTIFIC COMPANY,
a California corporation
By: /s/
------------------------------------
Name: Richard V. Plat
Title: Executive Vice President
"INVESTORS"
/s/
---------------------------------------
Name: Louis J. Petralli, Jr.
/s/
---------------------------------------
Name: Holger Sommer
/s/
---------------------------------------
Name: Ronald R. Siebert
/s/
---------------------------------------
Name: James R. Wittkopp
/s/
---------------------------------------
Name: Bill Petralli
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Met One, Inc.:
We consent to the inclusion of our report dated September 19, 1995 with respect
to the balance sheets of Met One, Inc. as of June 30, 1995, 1994, and 1993, and
the related statements of income, stockholders' equity, and cash flows for each
of the years in the three-year period ended June 30, 1995, which report appears
in the Form 8-K of Pacific Scientific Company, dated February 12, 1996.
KPMG PEAT MARWICK LLP
Portland, Oregon
February 12, 1996
