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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant To Section 13 Or 15(d)
Of The Securities Exchange Act Of 1934
Date of Report (Date of earliest event reported) May 31, 1996
ROPER INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-19818 51-0263969
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or organization) File Number) Identification No.)
160 Ben Burton Road, Bogart, Georgia 30622
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(Address of principal executive offices)
(706)369-7170
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(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Following the execution of a Stock Purchase Agreement on May 16, 1996, the
Company completed on May 31, 1996, the acquisition of all of the outstanding
capital stock of Gatan International, Inc. (collectively with its subsidiaries,
"Gatan"), a California corporation whose principal offices are located in
Pleasanton, California, and which is engaged in the business of manufacturing
and selling domestically and in international markets instruments and software
used to enhance and extend the operation and performance of electron and
scanning probe microscopes. The purchase price of $50,342,632 was determined as
a result of arms-length negotiations among the Company and the sellers of the
Gatan stock ("Gatan Sellers"). $16,681,334 and $3,875,043 of the purchase price
was paid at the closing, respectively, to (i)retire Gatan's long-term debt
(including redemption of the lender's associated capital appreciation rights as
a result of the acquisition) and (ii)extinguish certain Gatan obligations to two
of the Gatan Sellers and all unexcercised Gatan stock options held by its
employees. Approximately $5,000,000 of the purchase price was delivered by the
Gatan Sellers to an escrow agent pursuant to an escrow agreement entered into
for the purpose of securing certain of their indemnification obligations
contained in the Stock Purchase Agreement. The purchase price was financed
under a credit agreement dated May 8, 1996 between the Company and NationsBank,
N.A. (South), as initial lender and as agent.
The Gatan Sellers were as follows:
Morgenthaler Venture Partners III
G. Rex Swann
Peter R. Swann
Ondrej Krivanek
William E. Offenberg
Stuart M. Lindsey
Tianwei Jing
There were no material relationships between any of the Gatan Sellers and
the Company or any of its affiliates, directors, officers, or associates of any
such director or officer.
The Company intends that Gatan will continue in the business of
manufacturing and selling products which enhance and extend the operation and
performance of electron and scanning probe microscopes.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Financial statements of Gatan required to be reported because of its
acquisition by the Company are not presently available and will be provided
subsequently in an amendment to this Report on Form 8-K on or before August
12, 1996.
(B) PRO FORMA CONDENSED FINANCIAL INFORMATION
Pro forma financial information required to be reported because of
Gatan's acquisition by the Company are not presently available and will be
provided subsequently in an amendment to this Report on Form 8-K on or
before August 12, 1996.
(C) EXHIBITS:
2. Stock Purchase Agreement dated May 16, 1996, by and
among Roper Industries, Inc. and all the shareholders of Gatan
International, Inc.
*4 Second Amended and Restated Credit Agreement dated May 8, 1996 by
and between Roper Industries, Inc., and NationsBank, N.A. (South) as
initial lender and as agent.
*Incorporated herein by reference to Roper Industries, Inc.'s June 5,
1996 Report on Form 8-K filed on June 6, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
reporting person has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ROPER INDUSTRIES, INC.
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(Registrant)
Date June 13,1996 By /s/A. Donald O'Steen
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A. Donald O'Steen
Vice President and
Chief Financial Officer
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EXHIBIT INDEX
Number Exhibit *
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2 Stock Purchase Agreement dated May 16, 1996, by and among
Roper Industries, Inc. and the stockholders of Gatan
International, Inc.
4 Second and Amended and Restated Credit Agreement dated May 8,
1996, by and between Roper Industries, Inc. and NationsBank, N.A.
(South) as initial lender and as agent, included as Exhibit 4 in
the June 5, 1996 Roper Industries, Inc. Report on Form 8-K filed
June 6, 1996, and incorporated herein by this reference.
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* The following schedules or similar attachments to the above Exhibits have been
omitted and will be furnished supplementary to the Commission upon request.
STOCK PURCHASE AGREEMENT
Exhibits
A Form of Escrow Agreement
B-1 Opinion of BI re: the Company
B-2 Opinion of Arizona Counsel re: MI
B-3 Opinion of BI re: Sellers
C Opinion of PGFM re: Roper
D Form of Release
E Form of Non-Competition Agreement
Schedules
1 Sellers
2.2(a)(iii) Optionholders
2.2(a)(iv) Non-Selling Shareholders
2.3(d) Working Capital Allocation Schedule
3.1 Qualification to do Business
3.3 Outstanding Options, Etc.
3.4 Capitalization
3.5 Subsidiaries
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3.8 Financial Statements
3.9 Tax matters
3.10 Litigation
3.11 Owned Real Property
3.12 Leased Real Property
3.13 Liens and Encumbrances
3.13(a) Leased Personal Property
3.15 Material Contacts and Agreement
3.16 Banking and Personnel Matters
3.17 Employee Benefits Plans
3.18 Insurance
3.19 Environmental Matters
3.20 Intellectual Property
3.21 Compliance with laws
3.22 Consents and Approvals
3.23 Product Warranty
3.24 Absence of Changes
3.25 Transactions with Affiliates
4.7 Consents and Approvals
5.11 Required Consents
15.3 Allocable Portion of Liability
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STOCK PURCHASE AGREEMENT
THIS AGREEMENT (the "Agreement") is made as of this 16th day of May,
1996, by and among Roper Industries, Inc., a Delaware corporation ("Buyer"),
those persons and entities listed on Schedule 1 hereto (collectively, the
"Sellers") and Heller Financial, Inc., a Delaware corporation ("Heller").
WITNESSETH:
WHEREAS, the Sellers and the Non-Selling Shareholders (as defined
herein) own all of the issued and outstanding capital stock of Gatan
International, Inc., a Pennsylvania corporation ("Gatan International"); and
WHEREAS, Gatan, Inc., a Pennsylvania corporation ("Gatan") and
Molecular Imaging Corp., an Arizona corporation ("MIC") are wholly-owned
subsidiaries of Gatan International (Gatan and MIC are hereinafter collectively
referred to as the "Operating Subsidiaries"); and
WHEREAS, Gatan GmbH, a German corporation ("GmbH"), Gatan Service
Corporation, a Pennsylvania corporation ("GSC") and Gatan Limited, a United
Kingdom corporation ("Limited") are wholly-owned subsidiaries of Gatan (GmbH,
GSC and Limited are hereinafter collectively referred to as the "Second Tier
Subsidiaries"); and
WHEREAS, Gatan International, the Operating Subsidiaries and the
Second Tier Subsidiaries are hereinafter each referred to as a "Company" and
collectively as the "Companies"; and
WHEREAS, Sellers desire to sell and Buyer desires to purchase all of
the issued and outstanding stock of Gatan International upon the terms and
conditions as set forth herein; and
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WHEREAS, Heller has provided financing to the Companies and holds
certain capital appreciation rights which shall be redeemed upon closing of the
transactions contemplated hereby.
NOW THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements set forth in this Agreement and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. ACQUISITION
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Subject to the terms and conditions of this Agreement, at the Closing on
the Closing Date, as defined in Article 2 hereof, Sellers covenant and agree to
sell, assign, transfer and deliver to Buyer, and Buyer agrees to purchase and
accept, the GI Shares, as that term is defined in Section 3.3 hereof, for the
consideration set forth in Article 2 hereof.
2. CLOSING, CLOSING DATE, CONSIDERATION
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2.1 The Closing and Closing Date.
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The closing of the transactions contemplated hereby (the "Closing")
shall take place at 191 Peachtree Street, N.E., 16th Floor, Atlanta, Georgia,
at 10:00 a.m. local time on May 31, 1996, or on such other date and at such
other place as the parties may agree. The date of the Closing is hereinafter
referred to as the "Closing Date."
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2.2 Consideration.
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(a) At the Closing on the Closing Date, in exchange for the Total
Consideration (as defined below) and simultaneously with the payment thereof,
Sellers and Heller shall, and as appropriate shall cause Gatan International
to, take the following actions, using to the extent necessary, portions of the
Total Consideration:
(i) Gatan International shall pay in full all of its existing
long-term debt (including the short-term portion) of any kind or nature,
including principal, interest, fees, charges, or other amounts due and
owing thereunder and receive therefor evidence reasonably satisfactory to
Buyer of the termination of any loan agreement and the release of any
lien, security interest, mortgage, pledge, assignment or similar
encumbrance in connection therewith and specifically including any and
all amounts owed to Heller pursuant to that certain Credit Agreement
between Heller and Gatan International dated July 31, 1992, as amended
("Company Debt");
(ii) Gatan International shall redeem the capital appreciation
rights of Gatan International currently held by Heller pursuant to that
certain Capital Appreciation Rights Agreement dated July 31, 1992
("CARs") in full and final satisfaction of all amounts due or to become
due with respect to the CARs;
(iii) Gatan International shall pay to those option holders named
on Schedule 2.2(a)(iii) hereto (the "Option Holders") an amount to be
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determined as of the Closing in exchange for the termination of his or
her option to purchase shares of Gatan International;
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(iv) Gatan International shall redeem from all shareholders of
Gatan International who are not Sellers, which shareholders are set forth
on Schedule 2.2(a)(iv) hereto (the "Non-Selling Shareholders"), all
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of the Shares of Gatan International held by such Non-Selling
Shareholders for the redemption price to be established as of the Closing
Date;
(v) the Companies shall have a minimum positive Working Capital
of $8,200,000 ("Working Capital" shall mean the excess of cash, accounts
receivable, inventories and prepaid expenses over accounts payable and
accrued current liabilities of the Companies as of the Closing Date (but
excluding (A) any Transaction Expenses, as defined herein, paid by
Sellers or Buyer pursuant to Article 9 hereof, (B) other expenses related
to the transactions contemplated herein which Sellers have paid or will
pay, (C) amounts payable to William E. Offenberg under the terms of his
employment agreement with Gatan International due to the change of
control of Gatan International, (D) any tax benefit or deduction from
income that may result from the exercise of stock options and the
acceleration of stock bonuses, and (E) any purchase accounting
adjustments to the accounting books and records for financial accounting
purposes which may be recorded by the Companies as a result of the
transactions contemplated by this Agreement), determined on a
consolidated basis, in accordance with GAAP (and net of any reserves
required by GAAP) and in a manner consistent with the Financial
Statements described in Section 3.8 below; and shall be estimated and
finally determined as set forth in Section 2.3 below);
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(vi) cause the sum of $5,000,000 (the "Escrow Funds") to be placed
in escrow to cover any indemnification claims made by Buyer based on any
breach of the Operational Warranties (as defined herein) pursuant to an
Escrow Agreement between the Sellers, Buyer and an independent
third-party escrow agent (the "Escrow Agent") substantially in the form
of Exhibit A hereto (the "Escrow Agreement"); and
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(vii) deliver to Buyer good and sufficient certificates for the GI
Shares, accompanied by stock powers duly executed in blank, free and
clear of any claim, suit, proceeding, call, commitment, voting trust,
proxy, restriction, limitation, security interest, pledge, lien or
encumbrance of any kind or nature whatsoever.
(b) At the Closing and on the Closing Date, Buyer shall, in
consideration of the foregoing, pay the sum of Fifty Million Dollars
($50,000,000), subject to adjustment as described in Section 2.3 below (the
"Total Consideration"), as follows:
(i) Buyer shall pay to Gatan International that amount necessary
for Gatan International to pay in full the Company Debt;
(ii) Buyer shall pay to Gatan International that amount necessary
for Gatan International to redeem the CARs;
(iii) Buyer shall pay to Gatan International that amount
established pursuant to Section 2.2(a)(iii) in order for Gatan
International to purchase from the Option Holders all outstanding options
to purchase shares of Gatan International;
(iv) Buyer shall pay to Gatan International that amount
established pursuant to Section 2.2(a)(iv) in order for Gatan
International to redeem from the Non-Selling
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Shareholders all of the Shares of Gatan International held by such
Non-Selling Shareholders;
(v) Buyer shall contribute to the capital of Gatan International
that amount necessary to allow Gatan International to pay to Peter R.
Swann and G. Rex Swann (the "Swanns") all pay-off amounts due to the
Swanns by Gatan International under each of the Swanns' Non-Competition
and Non-Disclosure Agreements with the Company.
(vi) Buyer shall contribute to the capital of Gatan International
that amount necessary to cause the Working Capital to aggregate the
minimum balance described in Section 2.2(a)(v) above;
(vii) Buyer shall pay to the Escrow Agent, on behalf of the
Sellers, the Escrow Funds, to be held in escrow pursuant to the terms of
the Escrow Agreement; and
(viii)Buyer shall pay the balance of Total Consideration to the
Sellers by wire transfers of immediately available funds, to such bank
accounts located in the United States, as Sellers shall notify Buyer in
writing, to be allocated among each of the Sellers in accordance with
their respective ownership of GI Shares at Closing, which Sellers shall
certify as of the Closing.
2.3 Estimated and Final Purchase Price Adjustment.
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(a) No later than ten (10) days prior to the Closing Date,
Sellers shall deliver to Buyer (i) the regularly prepared monthly Financial
Statements of the Companies for the calendar period ending not more than
forty-five (45) days prior to the Closing Date, together with a separate
statement calculating Working Capital as of the date of such Financial
Statements. Buyer shall have five (5) days from the receipt to review such
statement and
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calculations and following such review, the amount of Working Capital set forth
therein shall be "Working Capital" for purposes of the payment to be made at
the Closing Date, but shall be subject to subsequent adjustment pursuant to
paragraphs (b), (c) and (d) below.
(b) Within sixty (60) days following the Closing Date, Buyer
shall prepare and deliver to Sellers' Representative (as defined herein) (i) an
unaudited consolidated balance sheet of the Companies as of the Closing Date,
(ii) a schedule setting forth the determination of Working Capital as of the
Closing Date, which shall be determined in accordance with the determination of
estimated Working Capital under paragraph (a) above, and (iii) a schedule
calculating any adjustment to the Total Consideration to be paid in accordance
with paragraph (d) below.
(c) Sellers' Representative shall, within thirty (30) days
following receipt of the balance sheet and schedules, accept or reject the
Working Capital adjustment and determination of Total Consideration reflected
therein. If Sellers' Representative accepts the calculation, payment shall be
made as provided in Section 2.3(d) hereof. If Sellers' Representative
disagrees with such calculation, it shall give written notice of such
disagreement and any reason therefor within such thirty (30) day period.
Should Sellers' Representative fail to notify Buyer of a disagreement within
such thirty (30) day period, Sellers' Representative shall be deemed to agree
with Buyer's calculation. Any disagreement with respect to the Working Capital
adjustment and the determination of Total Consideration reflected therein shall
be referred to one of the "Big 6" nationally recognized accounting firms that
has not been affiliated with the Sellers, Buyer or Gatan International and that
is mutually acceptable to Sellers' Representative and Buyer ("Arbitrator") and
in the event that the parties cannot agree,
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the Arbitrator shall be Arthur Andersen & Co. The Arbitrator shall act as an
arbitrator and shall issue its report as to the Working Capital adjustment and
the determination of Total Consideration reflected therein within sixty (60)
days after such dispute is referred to the Arbitrator. Each of the parties
hereto shall bear all costs and expenses incurred by it in connection with such
arbitration, except that the fees and expenses of the Arbitrator hereunder
shall be borne by Sellers and Buyer in such proportion as the Arbitrator shall
determine based on the relative merit of the position of the parties. This
provision for arbitration shall be specifically enforceable by the parties and
the decision of the Arbitrator in accordance with the provisions hereof shall
be final and binding with respect to the matters so arbitrated and there shall
be no right of appeal therefrom.
(d) If the Working Capital as of the Closing Date shall exceed
the sum of $8,700,000, Buyer shall pay to Sellers and Heller the amount of the
excess, adjusted for any amounts previously paid or withheld in the
determination of the estimated Working Capital adjustment pursuant to paragraph
(a) above, in accordance with the Allocation Schedule set forth as Schedule
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2.3(d) hereof. If the Working Capital as of the Closing Date shall be less
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than the sum of $8,200,000, Sellers and Heller, severally but not jointly,
shall pay to Buyer the amount of such shortfall, in accordance with the
Allocation Schedule set forth as Schedule 2.3(d) hereof, adjusted for any
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amounts previously paid or withheld in the determination of the estimated
Working Capital adjustment pursuant to paragraph (a) above. Final amounts due
hereunder shall be paid no later than five (5) business days following Sellers'
Representative's agreement with Buyer's calculation of the Working Capital
adjustment pursuant to paragraph (c) above or in the event of a disagreement,
following the resolution of such disagreement by written agreement of
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Sellers' Representative and Buyer or the determination of the Arbitrator
pursuant to Section 2.3(c) above. If Sellers or Heller shall fail to pay the
amount when due, then, without limiting Buyer's remedies, Buyer shall be
entitled to be reimbursed such amount from the Escrow Funds.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
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3A. Transactional Representations.
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With respect to the representations and warranties contained in
Sections 3.1 through 3.7 below (the "Transactional Representations") and
subject to the provisions of Article 15 hereof, each Seller represents and
warrants to Buyer severally and not jointly, as follows:
3.1 Organization, Qualification and Status.
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Each of the Companies is a corporation duly incorporated and
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each of the Companies has full corporate power
and authority to own, lease and use its properties and to carry on its business
as presently conducted. Each of the Companies is duly qualified or licensed to
do business and is in good standing as a foreign corporation in each of the
jurisdictions set forth on Schedule 3.1 hereto, which constitute the
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jurisdictions in which the character of the Companies' properties or the nature
of their business requires such qualification and authorization, except for
those jurisdictions where failure to be so qualified would not have a material
adverse effect on the business of any of the Companies.
3.2 Corporate Instruments and Records.
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The copies of each Company's Certificate of Incorporation or other
organizational charter or documents and By-laws (collectively, "Organizational
Documents"), heretofore furnished by Sellers to Buyer, are true, correct and
complete and each includes all amendments to the date hereof. The Companies'
minute books, as made available to Buyer, contain a materially true, complete
and correct record of all corporate action taken on or prior to the date hereof
at the meetings of the Companies' shareholders and directors and committees
thereof. The stock certificate books and ledgers of the Companies, as made
available to Buyer, are true, correct and complete and accurately reflect, at
the date hereof, the ownership of the outstanding capital stock of the
Companies.
3.3 Capitalization.
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The authorized capital stock of Gatan International consists of
19,900,000 shares of Class A Common Stock, $.0001 par value per share, of which
9,690,626 shares will be issued and outstanding on the Closing Date and 100,000
shares of Class B Common Stock, $.0001 par value per share, all of which are
issued and outstanding on the date hereof (all such issued and outstanding
Class A Common Stock and Class B Common Stock of Gatan International
hereinafter referred to collectively as the "GI Shares"). The GI Shares are
validly issued, fully paid and non-assessable. The authorized, issued and
outstanding capital stock of each of the Operating Subsidiaries and the Second
Tier Subsidiaries is as set forth on Schedule 3.3 and the shares indicated
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as outstanding on such schedule are validly issued, fully paid and
non-assessable. Except as set forth on Schedule 3.3, there are no
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authorized or outstanding options, warrants, convertible securities,
subscription rights, puts, calls, unsatisfied preemptive rights or other rights
of any nature to purchase or otherwise receive, or to require any of the
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Companies to purchase, redeem or acquire, any shares of the capital stock or
other securities of any of the Companies and there is no outstanding security
of any kind convertible into such capital stock.
3.4 Ownership of Shares.
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The GI Shares represent all of the shares of outstanding capital
stock of Gatan International. Such Seller owns and holds, beneficially and of
record, the entire right, title and interest in and to the GI Shares in the
amount set forth on Schedule 3.4; Gatan International owns and holds,
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beneficially and of record, the entire right, title and interest in and to all
of the capital stock of the Operating Subsidiaries; and Gatan owns and holds,
beneficially and of record, the entire right, title and interest in and to all
of the capital stock of the Second Tier Subsidiaries, in each case free and
clear of any claim, suit, proceeding, call, commitment, voting trust, proxy,
restriction, limitation, security interest, pledge, lien or encumbrance of any
kind or nature whatsoever.
3.5 No Subsidiary.
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Other than the Operating Subsidiaries, the Second Tier Subsidiaries
and as set forth on Schedule 3.5, the Companies do not have any subsidiary
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or any ownership interest in any other entity. The Companies are not party to
any joint venture, partnership or similar arrangement and do not have the right
to acquire any securities of, or ownership interests in, any other person or
entity. The subsidiary set forth on Schedule 3.5 currently has no assets
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or liabilities and conducts no business.
3.6 Authorization; Valid and Binding Obligation.
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Such Seller has the right, power and authority to execute and
deliver this Agreement and the agreements entered into pursuant to the terms
hereof and to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. This
Agreement has been duly executed and delivered by such Seller and the
agreements entered into pursuant to the terms hereof constitute the valid and
legally binding obligation of such Seller enforceable against it in accordance
with their terms.
3.7 No Violation.
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Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby, nor compliance with the
terms hereof, will, (i) conflict with or result in a breach of any of the
terms, conditions or provisions of the Organizational Documents of any such
Seller or Company, nor (ii) violate, conflict with or result in a breach of or
default under any other terms, conditions or provisions of any agreement,
understanding, arrangement, indenture, contract, lease, sublease, loan
agreement, note, restriction, obligation or liability to which such Seller or
any Company is a party or by which they are bound or to which they or their
assets are subject (individually, an "Instrument" and collectively, the
"Instruments"), nor (iii) accelerate or give to others any interests or rights,
including rights of acceleration, termination, modification or cancellation,
under any Instrument or in or with respect to the business or assets of any
Company, nor (iv) result in the creation of any lien, claim, charge or
encumbrance on the assets, capital stock or properties of such Seller or any
Company, nor (v) conflict with, violate or result in a breach of or constitute
a default under any law, statute, rule, judgment, order, decree, injunction,
ruling or regulation of any government, governmental agency, authority or
instrumentality, court or arbitration tribunal to which such
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Seller or any Company or any of the Companies' assets or properties are
subject, nor (vi) require such Seller or any Company to give notice to, or
obtain an authorization, approval, order, license, franchise, declaration or
consent of, or make a filing with, any third party, including any foreign,
federal, state, county, local or other governmental or regulatory body other
than such filings as are required under the Hart-Scott-Rodino Act, nor (vii)
give rise to any obligation to pay any investment banking fee, brokerage
commission, finder's fee or similar payment, except for amounts paid to Bowles,
Hollowell, Conner & Co., as contemplated by Article 9 hereof.
3B. Operational Representations.
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With respect to the representations and warranties contain in
Sections 3.8 through 3.29 below (the "Operational Representations") and subject
to the provisions of Article 15 hereof, each Seller represents to Buyer,
jointly and severally, as follows:
3.8 Financial Statements.
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Schedule 3.8 hereto contains true, correct and complete copies
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of the following financial statements of Gatan International at the dates and
for the periods specified (the "Financial Statements"):
(a) audited consolidated Financial Statements for the fiscal
years ending May 31, 1995, May 31, 1994, and May 31, 1993
(the "Audited Financial Statements"),
(b) unaudited consolidated Financial Statements for the 10 months
ended March 31, 1996 (the "Unaudited Financial Statements").
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Each of the Financial Statements is correct, complete and consistent with the
books and records of the Companies. Each of the Audited Financial Statements
and, to the knowledge of the Companies, the Unaudited Financial Statements, has
been prepared in conformity with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods covered thereby,
and presents fairly the financial condition and results of operations and cash
flows of the Companies at the dates and for the periods specified, subject, in
the case of the Unaudited Financial Statements, to the absence of notes and the
absence of normal recurring year-end adjustments and procedures (none of which
will be inconsistent with past practice). With respect to any inventory book
to physical variance, none of the normal year-end adjustments (i) will
materially effect the ability of the Companies to meet on a consolidated basis
Forecasted Earnings (as herein defined), or (ii) will be inconsistent with past
practice. "Forecasted Earnings" shall mean the forecasted earnings of the
Companies for the fiscal year ending May 31, 1996 as set forth in the Gatan
International Confidential Offering Memorandum dated November, 1995, prepared
by Bowles Hollowell Conner & Co.
3.9 Tax Matters.
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Except as set forth on Schedule 3.9 attached hereto:
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(a) Each of the Companies (i) has timely and properly filed or
caused to be filed all tax returns which are required to be filed on or prior
to the date hereof, with any jurisdiction to which it is or has been subject,
all such tax returns being true, correct and complete in all material respects,
(ii) has timely paid or caused to be paid in full all taxes which are or have
become due and payable to all taxing authorities, other than those for which
extensions have been properly granted or which are being contested in good
faith for which
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adequate reserves have been established, (iii) has made or caused to be made
all withholdings of taxes required to be made by it, and such withholdings have
either been paid to the appropriate governmental agency or set aside in
appropriate accounts for such purpose, and (iv) has otherwise satisfied, in all
material respects, all applicable laws and agreements with respect to the
filing of tax returns and the payment of taxes.
(b) Gatan International has properly accrued in accordance with
GAAP and reflected on the March 31, 1996 balance sheet included in the
Unaudited Financial Statements (the "Balance Sheet") and has thereafter to the
date hereof properly accrued all liabilities for taxes and assessments, all
such accruals being in the aggregate sufficient for payment of all taxes and
assessments.
(c) Each Company will timely and properly file or cause to be
filed all tax returns which it is or will be required to file on or before the
Closing Date (taking into account any extensions which have been properly
granted), all such tax returns to be true, correct and complete in all
respects, and will pay or cause to be paid in full when due all taxes, if any,
which become due and payable pursuant to such returns or assessments received
by it on or before the Closing Date.
(d) The federal income tax returns of the Companies have not been
audited by the Internal Revenue Service.
(e) There are no unassessed tax deficiencies proposed or, to the
Companies' knowledge, threatened against any Company, nor are there any
agreements, waivers, or other arrangements providing for extension of time with
respect to the assessment or collection of any tax against any Company or any
actions, suits, proceedings, investigations or claims now
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pending against any Company with respect to any tax, or any matter under
discussion with any federal, state, local or foreign authority relating to any
taxes.
(f) The Companies are not and have never been members of an
affiliated group of corporations (within the meaning of Section 1504 of the
Internal Revenue Code ("IRC")).
(g) No Company is a party to, or bound by, and no Company has any
obligation under, any tax sharing, tax indemnity, or similar agreement.
(h) The Companies have not made and will not make a change in
method of accounting for a taxable year beginning on or before the Closing
Date, which would require them to include any adjustment under Section 481(a)
of the IRC in taxable income for any taxable year beginning on or after the
Closing Date.
(i) No Company has filed a consent pursuant to Section 341(f) of
the IRC, or agreed to have Section 341(f)(2) of the IRC apply to any
disposition of any asset owned by it.
(j) No Company has been a target corporation or target affiliate
in a qualified stock purchase within the meaning of Section 338 of the IRC (or
any predecessor provision).
(k) None of the assets of any Company is property which such
Company is required to treat as being owned by any other person pursuant to the
so-called "safe harbor lease" provisions of former section 168(f)(8) of the
IRC.
For purposes of this Agreement, "tax" and "taxes" shall include,
but not be limited to, all federal, foreign, state, county, and local income,
sales, use, wage, payroll, franchise, gross receipts, real and personal,
tangible or intangible property or ad valorem taxes.
-16-
<PAGE>
For purposes of this Agreement, "tax return" or "tax returns" shall
mean all returns, reports, estimates, schedules, declarations, information
statements and documents relating to or required to be filed in connection with
any taxes pursuant to the statutes, rules or regulations of any federal, state,
local or foreign government taxing authority.
3.10 Litigation.
----------
Except as set forth on Schedule 3.10 attached hereto, there are
-------------
no actions, suits or proceedings at law or in equity, or arbitration
proceedings, or claims, demands or investigations pending against or involving
any Company or, to the Companies' knowledge, threatened against or involving
any Company. Sellers have delivered to Buyer copies of all pleadings listed on
Schedule 3.10, and made available as requested by Buyer all correspondence
- -------------
and other documents relating to each proceeding, and none of such proceedings,
singly or in the aggregate, will have a material adverse effect on the
business, operations, assets, condition or prospects of any Company.
3.11 Owned Real Estate.
-----------------
Except as set forth on Schedule 3.11, the Companies do not own
-------------
any real estate.
3.12 Leased Real Property.
--------------------
The Companies are the lessees of the real estate described on
Schedule 3.12 hereto (the "Leased Real Property"). A true and correct copy
- -------------
of each lease pursuant to which any Company leases the Leased Real Property and
any amendments, extensions or renewals thereof (the "Real Property Leases") has
previously been delivered to Buyer. Each Real Property Lease is in full force
and effect and there is no existing default or event of default by any of the
Companies, real or claimed, or event which with notice or the lapse of time or
both would
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<PAGE>
constitute a default by any Company. As of the Closing, the Companies'
interests in the Real Property Leases will be free and clear of any mortgages
or liens and will not be subject to any deeds of trust, assignments, subleases
or rights of any third parties other than the lessors thereof. The
transactions contemplated by this Agreement will not cause a breach, default or
event of default under any of the Real Property Leases. The Companies now
enjoy and on the Closing Date will enjoy quiet and undisturbed possession of
the Leased Real Property.
3.13 Owned and Leased Tangible Personal Property.
-------------------------------------------
Except (i) as reflected as a lien in the footnotes to the Financial
Statements, (ii) as set forth on Schedule 3.13 hereto, (iii) for liens for
-------------
taxes not yet delinquent, (iv) for mechanic's, materialmen's and similar liens
which have arisen in the Ordinary Course of Business (as defined herein), or
(v) purchase money security interests which have arisen in the Ordinary Course
of Business (the foregoing being collectively referred to as "Permitted
Liens"), the Companies have and will have on the Closing Date all right, title,
and interest in, and good and marketable title to, their respective owned
tangible personal property free and clear of any claim, lease, pledge,
mortgage, security interest, conditional sale agreement or other title
retention agreement, restriction, lien or encumbrance of any kind or nature
whatsoever. An action will be deemed to have been taken in the "Ordinary
Course of Business" only if such action is similar in nature, magnitude and
quality to actions customarily taken, without any authorization by the board of
directors, in the ordinary course of the normal day-to-day operations of the
business of the Companies consistent with past practice.
Schedule 3.13(a) contains a complete and accurate list of all
----------------
personal property leased by any of the Companies. True and correct copies of
all leases for personal property and any
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<PAGE>
amendments, extensions or renewal thereof have previously been delivered to
Buyer by Sellers. Each lease and license relating to any tangible personal
property is valid and binding against the Companies, is in full force and
effect, is not in default by the Companies as to the payment of rent or
otherwise and, to the Companies' or such Seller's knowledge, is not in default
by the other party thereto.
3.14 Condition of Buildings and Tangible Personal Property.
-----------------------------------------------------
All of the items of tangible personal property owned, leased or
used by each Company on the date hereof are, and on the Closing Date will be,
in reasonably good operating condition and repair and are suitable and
sufficient for the present conduct of such Company's business.
3.15 Contracts.
---------
Except as set forth on Schedule 3.15 attached hereto, all
-------------
Material Contracts (as herein defined) to which any Company is a party have
been duly and validly executed by the Companies, and to the Companies'
knowledge, are in full force and effect as of the date hereof. There exists no
breach or violation of or default by any Company under any Material Contract,
and no event has occurred or condition or state of facts exists which, after
notice or the passage of time or both, would constitute a default by the
Companies under any such contract, as to time or manner of performance, or as
to warranties thereunder, or otherwise. No Company has given or received any
written notice, or has knowledge of any oral notice, regarding the
cancellation, termination or limitation of, or any amendment, modification, or
change to any Material Contract, and the consummation of the transactions
contemplated by this Agreement would not constitute a breach, or result in a
termination or require consent under, any Material Contract.
-19-
<PAGE>
To the Companies' knowledge, nothing contained in any Material Contract
constitutes a violation of any applicable law, rule or regulation. The conduct
of the Companies under any Material Contract prior to Closing does not give
rise to any claim by any third party that such conduct constitutes a violation
of any applicable law, rule or regulation. Set forth on Schedule 3.15
-------------
hereto is a list of the following types of contracts to which any Company is a
party or by which they or their properties or assets are bound:
(a) purchase orders entered into in the Ordinary Course of Business
having a value in excess of $100,000, (b) except for purchase orders entered
into in the Ordinary Course of Business, contracts for the future purchase of,
or payment for, supplies, products or services requiring or reasonably
anticipated to require the payment by any Company of more than $25,000 in any
twelve-month period, (c) contracts to sell or supply products or to perform
services under which any Company is entitled to receive $25,000 or more in any
twelve month period, (d) note, debenture, bond, equipment trust agreement,
letter of credit agreement, or other contract for the borrowing or lending of
money, (e) agreement covering the employment of any present or former employee
or consultant of any Company who is or was an officer, director or shareholder
of Gatan International or where the annual salary of such employee or
consultant is or was $50,000 or more, under which such individual or any
Company has a continuing obligation, (f) agreement which obligates any Company
to act as a guarantor or surety, irrespective of the amount involved, (g)
noncompetition agreement with any present or former officer, director employee
or consultant of any Company under which such individual or any Company has a
continuing obligation, (h) distribution, dealer, representative, or sales
agency agreement, contract or commitment, (i) contract limiting or restraining
any of the
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<PAGE>
Companies, or any employee of any of the Companies from engaging or competing
in any manner in any business, (j) capital leases, loan agreements, indentures,
mortgages, pledges, hypothecations, deeds of trust, conditional sale or title
retention agreements, security agreements or equipment financing agreements,
and (k) contracts which are not of a nature otherwise described in the
preceding paragraphs of this Section 3.15 which is continuing over a period of
more than six (6) months from the Closing Date or involving the payment or
receipt by any of the Companies of an amount exceeding $75,000
(collectively, the "Material Contracts"). True, correct and complete copies of
the Material Contracts have heretofore been delivered by Sellers to Buyer.
Schedule 3.15 also contains a description of the existing arrangements
- -------------
between any Company and Digital Instruments.
3.16 Banking and Personnel Matters.
-----------------------------
Schedule 3.16 hereto contains a true, complete and correct list
-------------
of: (i) the names of all banks and other financial institutions (with account
numbers) in which any Company has an account or safe deposit box, and all
brokerage firms and other entities and persons holding funds or investments of
any Company, and the names of all persons authorized to draw thereon or have
access thereto; (ii) the names of all incumbent directors and officers of each
Company; (iii) the names of all persons holding powers of attorney from any
Company and a summary statement of the terms thereof.
3.17 Labor and Employment Matters.
----------------------------
(a) No corporation, trade, business or other entity, other than
the Companies, would, together with any Company, now or in the past constitute
a single employer within the meaning of IRC Section 414. No Company presently
maintains or is obligated to contribute to or has
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<PAGE>
ever maintained or been obligated to contribute to any employee benefit plan
(as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), or any employment contract, employee loan,
incentive compensation, profit sharing, retirement, pension, deferred
compensation, severance, termination pay, stock option or purchase plan,
guaranteed annual income plan, fund or arrangement, payroll incentive, policy,
fund, agreement or arrangement, non-competition or consulting agreement,
hospitalization, disability, life or other insurance plan, or other employee
fringe benefit program or plan, or any other plan, payroll practice, policy
fund agreement or arrangement similar to or in the nature of the foregoing,
oral or written ("Employee Benefit Plans" or "Plans"), except as set forth on
Schedule 3.17 hereto. True, correct and complete copies of all of the written
- -------------
Plans and labor agreements, and true, correct and complete written descriptions
of all of the oral Plans, described in Schedule 3.17 (together with all
-------------
documents relating to each such Plan required to have been filed prior to the
date hereof with governmental authorities for each of the three most recently
completed plan years, and attorney's responses to auditors requests and
financial statements and actuarial reports for the same period) have heretofore
been delivered by Sellers to Buyer.
(b) With respect to each Employee Benefit Plan:
(1) all disclosures to employees, participants and
beneficiaries relating to each such Plan and required to have been
made on or before the Closing Date have been or will be duly made
by that date;
(2) there is no litigation, disputed claim (other than
routine claims for benefits), governmental proceeding, inquiry or
investigation pending or threatened
-22-
<PAGE>
with respect to each such Plan, its related trust, or any
fiduciary, administrator or sponsor of such Plan;
(3) each such Plan has been established, maintained, funded
and administered in all material respects in accordance with its
governing documents, and any applicable provisions of ERISA, the
IRC, other applicable law, and all regulations promulgated
thereunder;
(4) neither any such Plan nor any fiduciary has engaged in
a prohibited transaction as defined in ERISA Section 406 or IRC
Section 4975 (for which no individual or class exemption exist
under ERISA Section 408 or IRC Section 4975, respectively);
(5) all filings and reports as to each such Plan required
to have been made on or before the Closing Date to the Internal
Revenue Service, or to the United States Department of Labor or to
the PBGC, have been or will be duly made by that date;
(6) each such Plan which is intended to qualify as a
tax-qualified retirement plan under IRC Section 401(a) has received
a favorable determination letter(s) from the Internal Revenue
Service as to qualification of such Plan for the period from its
adoption through the Closing Date; nothing has occurred, whether
by action or failure to act, which has resulted in or would cause
the loss of such qualification; and each trust thereunder is
exempt from tax pursuant to IRC Section 501(a);
(7) each such Plan which is required to satisfy IRC Section
Section 401(k)(3) or 401(m)(2) has been tested for compliance with,
and has satisfied the requirements
-23-
<PAGE>
of, IRC Section Section 401(k)(3) and 401(m)(2) for each plan year
ending prior to the Closing Date;
(8) no event has occurred and no condition exists relating
to any such Plan that would subject any Company to any tax or
liability under IRS Section Section 4971, 4972 or 4979, or to any
liability under ERISA Section Section 502 or 4071; and
(9) to the extent applicable, each such Plan has been
funded in accordance with its governing documents, ERISA and the
IRC, has not experienced any accumulated funding deficiency
(whether or not waived) and has not exceeded its full funding
limitation (within the meaning of IRC Section 412) at any time.
(c) With respect to any Plan which provides group health benefits
to employees of any Company and is subject to the requirements of IRC Section
4980B and ERISA Title I Part 6 ("COBRA"):
(1) such group health plan has been administered in every
material respect in accordance with its governing documents and
COBRA; and
(2) all filings, reports, premium payments (if any) and
notices as to each such group health plan required to have been
made on or before the Closing Date to government agencies,
participants and/or beneficiaries have been or will be duly made by
that date.
(d) With respect to employee benefit matters generally:
(1) no Company has any past, present or future obligation
or liability to contribute to any multiemployer plan as defined in
ERISA Section 3(37);
-24-
<PAGE>
(2) no Company (nor any person, firm or corporation which
is or has been under common control within the meaning of Section
4001(b) of ERISA with any Company) maintains or contributes to or
has ever maintained or contributed to any Plan subject to Title IV
of ERISA;
(3) no Company is obligated, contingently or otherwise,
under any agreement to pay any amount which would be treated as a
"parachute payment," as defined in IRC Section 280G(b) (determined
without regard to IRC Section 280G(b)(2)(A)(ii));
(4) except as set forth on Schedule 3.17 and other than
-------------
employee stock options to be terminated hereunder, the consummation
of the transactions contemplated hereby will not accelerate or
increase any liability under any Plan because of an acceleration or
increase of any of the rights or benefits to which Plan
participants or beneficiaries may be entitled thereunder;
(5) except as set forth on Schedule 3.17, no Company
-------------
has any obligation to any retired or former employee or any current
employee of the Company upon retirement or termination of
employment under any Plan, other than such obligations imposed by
COBRA; and
(6) except as set forth on Schedule 3.17, any Plan
-------------
which is an "employee welfare benefit plan," within the meaning of
ERISA Section 3(1), may be terminated prospectively without
liability to any Company or the Buyer, including, without
limitation, liability for unreported (e.g., run-off) benefit
claims, premium adjustments or termination charges of any kind.
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<PAGE>
(e) The Companies have not received any written notice or
communication that any executive, key employee, or group of employees has any
plans to terminate employment with any of the Companies. None of the Companies
is a party to or bound by any collective bargaining agreement, nor has any of
them experienced any strikes, grievances, claims of unfair labor practices, or
other collective bargaining disputes. None of the Companies has committed any
unfair labor practice. None of the Sellers and the directors and officers (and
employees with responsibility for employment matters) of the Companies has any
knowledge of any organizational effort presently being made or threatened by or
on behalf of any labor union with respect to employees of any of the Companies.
3.18 Insurance.
---------
Schedule 3.18 lists all policies of insurance and all surety
-------------
and other bonds to which any Company now is a party, or during the immediately
preceding twelve (12) months was a party, specifying for each policy or bond
the insurer, the amount of coverage, the type of insurance and any pending
claims thereunder. All of such policies and bonds which have expired were
valid and in full force and effect during their respective terms, and all other
of such policies and bonds are valid and in full force and effect at present,
and no claim has been made, or notice given, to cancel or avoid any of said
policies or bonds or to reduce the coverage provided thereby. There is no
existing default by any of the Companies or event which, with notice or the
lapse of time or both, would constitute a default by any of the Companies with
respect to any existing policies. All premiums due to date have been paid in
full.
-26-
<PAGE>
3.19 Environmental Matters.
---------------------
Except as disclosed on Schedule 3.19, (i) the Companies have
-------------
complied in all material respects with all then applicable Environmental Laws
and specifically, without limitation, have not violated in any material
respect, and the business of the Companies as currently being conducted does
not violate in any material respect any applicable law, ordinance, rule,
prohibition or regulation relating to air, water, or noise pollution, or the
production, generation, storage, labeling or disposition of solid, infectious
or radioactive wastes or other Hazardous Materials, or the health, safety or
environmental conditions on, beneath, or about any of the properties used,
owned, or leased by any Company, or relating to their business; (ii) each
Company has timely filed all required reports, obtained all required material
approvals and permits relating to its business, and generated and maintained in
all material respects all required data, documentation and records under any
applicable Environmental Laws; (iii) no Company nor, to the knowledge of any
Company, any other person has placed, stored, buried, spilled or released,
used, generated, manufactured, refined, processed, treated, dumped or disposed
of, or transported any Hazardous Materials produced by, or resulting from, any
business, operations, or processes on, beneath, or about any of the properties
used, owned, or leased by any Company or in connection with the business,
except for inventories for such Hazardous Materials to be used in the Ordinary
Course of Business of the Company (which inventories were and are stored and
disposed of in accordance in all material respects with applicable laws and
regulations and in a manner such that there was no release of any such
Hazardous Materials into the environment which would cause the incurrence of
clean-up or other response costs under Environmental Laws); (iv) there are no
Hazardous Materials presently stored or located on, in
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<PAGE>
or about any portion of the business, except for those stored and located at
the business in compliance in all material respects with applicable
Environmental Laws; (v) no Company has received any notice from any
governmental agency or private or public entity advising it that it is or may
be responsible, or potentially responsible, for response costs with respect to
a release, a threatened release or clean up of Hazardous Materials produced by,
or resulting from, its business, operations, or processes. The Companies, in
connection with their operations related to the business, have not transported,
or arranged for the transportation of, any Hazardous Material to a location
that is listed or, to the Companies' knowledge, nominated for listing on the
National Priorities List ("NPL"), Comprehensive Environmental Response
Compensation and Liability Information System ("CERCLIS") or state equivalents;
nor, to the Companies' knowledge is any such location the subject of federal,
state or local enforcement actions or other investigations or not licensed or
authorized to receive any such Hazardous Waste. None of the properties used,
owned or leased by the Companies is listed or, to the Companies' knowledge,
nominated for listing on the NPL, CERCLIS or state equivalents.
As used in this Agreement the terms (i) "Environmental Laws" shall mean
all federal, state, foreign or local statutes, ordinances, regulations,
guidance, policies, ordinances, licenses, authorizations, restrictions, orders,
and requirements of law pertaining to human health or safety, any Hazardous
Material, or relating to any environmental processes or condition, including,
without limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act ("CERCLA"), the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act ("RCRA"), the Endangered Species Act, the Federal
Insecticide, Fungicide and Rodenticide Act, the Hazardous Materials
Transportation Act, the Surface Mining Control
-28-
<PAGE>
and Reclamation Act, the Emergency Planning and Community Right to Know Act,
the Safe Drinking Water Act, the Toxic Substances Control Act, the Coastal Zone
Management Act, the National Environmental Policy Act, the Noise Control Act.
As used in this Agreement, Environmental Laws shall mean any of such laws or
regulations as the same exist now or at the Closing Date; and "Hazardous
Material" shall mean (a) hazardous wastes, hazardous substances, hazardous
materials, hazardous constituents, hazardous contents, pollutants,
contaminants, toxic substances or related substances, whether solids, liquids
or gases, regulated by, or otherwise subject to, any Environmental Laws; (b)
petroleum, refined petroleum products and any such substances in their virgin,
used or waste state; and (c) any substance presently listed in Subpart Z of the
regulations promulgated under the Occupational Safety and Health Act, as
amended.
3.20 Intellectual Property Matters.
-----------------------------
(a) Except for Permitted Liens and as set forth in Schedule
---------
3.20, each Company has all right, title and interest, free and clear of all
- ----
liens, charges, encumbrances, restrictions, royalties or any claims of
ownership by third parties whatsoever, to all world-wide intellectual property
assets of such Company, including, without limitation, all patents and
reissues, divisions, continuations and extensions of such patents, patents
pending and applications for patents, patent disclosures docketed, registered
and unregistered trademarks and service marks and applications for registration
of such marks, trade names, registered and unregistered copyrights and
applications for copyright registration, mask works and applications for mask
work registration, all trade secrets, know-how, and all rights under any
leases, licenses, franchises, permits, authorizations, agreements and
arrangements with respect to such intellectual property assets (hereinafter all
of the foregoing are collectively referred to as "Intellectual
-29-
<PAGE>
Property Assets"), whether owned by such Company or owned by others and used by
such Company.
(b) True, correct and complete copies of all such leases,
licenses, franchises, permits, authorizations, agreements and arrangements have
heretofore been delivered to the Buyer and are listed in Schedule 3.20.
-------------
(c) Schedule 3.20 hereto briefly describes all of such
-------------
Intellectual Property Assets of the Companies. All of the issued patents and
registered trademarks and registered service marks shown in Schedule 3.20
-------------
are subsisting and have been adequately maintained, including maintenance
payments therefor and renewals or extensions thereof, except as expressly
disclosed in Schedule 3.20. No holding, decision, or judgment in a matter
-------------
involving any of such issued patents and registered trademarks or service marks
has been rendered by any governmental or judicial authority which could limit,
cancel or question the validity of any of such issued patents or registered
trademarks or service marks.
(d) The manufacture or distribution of products currently
marketed or under development by the Companies does not violate any law,
statute, order, rule or regulation applicable thereto, or to the knowledge of
any Company infringe or violate any patent, trademark, copyright, or other
intellectual property right of any other person, either in the United States or
in any other country.
(e) Excluding matters set forth in Schedule 3.20, there exist
-------------
no pending, or to the best knowledge of the Companies, anticipated litigation,
action, lawsuits, claims or assessments, including without limitation the
filing or threatened filing, whether voluntary or involuntary, of insolvency or
bankruptcy proceedings or forfeiture proceedings, claims of
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<PAGE>
infringement, misappropriation or invalidity, or other claims adverse to the
ownership rights of the Companies with respect to the Intellectual Property
Assets.
(f) The Companies have disclosed the identity of, and to the
Companies' knowledge all intellectual properties held by, all third parties who
are actual or are believed to be competitors of the Companies, and who have
patents, trademarks, copyrights, or other intellectual property rights that
materially affect the Companies' ability to make, use, or sell its products
currently marketed or under development.
(g) The Companies have promulgated and used their best efforts to
enforce a trade secret protection program and, to the best knowledge of the
Company, there has been no material violation of such program by any person or
entity. All of the Intellectual Property Assets constituting trade secrets
have at all times been maintained in confidence and have been disclosed by the
Companies only to employees, consultants, and other third parties having "a
need to know" the contents thereof in connection with the performance of their
duties to the Companies.
(h) To the knowledge of the Companies, the Companies have
disclosed the identity of all third parties who are actual or are believed to
be infringers of any Intellectual Property Assets.
3.21 Compliance with Laws.
--------------------
Except as specifically disclosed in Schedule 3.21 of this
-------------
Agreement, each Company has complied in all material respects with all
applicable laws, statutes, rules and regulations of federal, state, local and
foreign governments and governmental agencies applicable
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<PAGE>
to it and its business, assets and properties, including, without limitation,
laws on exports and investment activities in foreign countries.
3.22 Consents and Approvals.
----------------------
Each Company has all material required licenses, permits, consents
and authorizations and has made all necessary filings with all necessary local,
state, Federal, or other foreign agencies, commissions, or governments, in
order to conduct their businesses as currently conducted. Except as set forth
on Schedule 3.22 hereto and except for the filings under the
-------------
Hart-Scott-Rodino Act, there are no authorizations, consents, approvals,
permits, licenses, filings, registrations or notices required to be obtained or
given by the Companies or any Seller or waiting periods required to expire in
order that this Agreement and the transactions provided for herein may be
consummated by Sellers.
3.23 Product Warranty.
----------------
To the knowledge of the Companies, each product manufactured, sold,
leased, or delivered by any of the Companies has been in material conformity
with all applicable contractual commitments and all express and implied
warranties, and, to the knowledge of the Companies, none of the Companies has
any liability (and there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any liability) for replacement or repair thereof or
other damages in connection therewith except pursuant to the terms of the
Companies' standard terms and conditions, a copy of which is attached as
Schedule 3.23.
- -------------
-32-
<PAGE>
3.24 Absence of Changes.
------------------
Except as described on Schedule 3.24, since the date of the
-------------
Unaudited Financial Statements, there has not been any transaction or
occurrence in which any Company has: (a) issued or delivered any stock or
other securities or granted any options or rights to purchase any securities,
except for the issuance of shares to Mr. Offenberg pursuant to that certain
agreement between Mr. Offenberg and Gatan International dated as of September
24, 1994, as amended (the "Offenberg Agreement"), which such shares shall
constitute GI Shares hereunder; (b) borrowed, loaned or guaranteed any amount,
except in the Ordinary Course of Business; (c) discharged or satisfied any lien
or incurred or paid any obligation or liability (absolute or contingent) other
than current liabilities shown on the Financial Statements or current
liabilities incurred since such date in the Ordinary Course of Business; (d)
declared or made any payment or distribution to Sellers or purchased or
redeemed any shares of its capital stock or other securities; (e) mortgaged,
pledged or subjected to lien any of its assets, tangible or intangible, other
than Permitted Liens; (f) sold, assigned or transferred any of its tangible
assets, except for sale of inventory in the Ordinary Course of Business; (g)
sold, assigned, transferred, licensed or sublicensed any patents, trademarks,
trade names, copyrights, or other intellectual property owned or licensed by
any Company; (h) suffered any material adverse change in its business or
financial position; (i) made any change in its accounting policies or
practices; (j) made any change in employee compensation or in any employee
benefit plan other than in the Ordinary Course of Business; (k) entered into
any employment contract or modified the terms of any such existing contract
other than in the Ordinary Course of Business; (l) entered into any transaction
with any officer or director of any of the Companies; (m) suffered any loss to
any of its
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<PAGE>
properties; (n) compromised, cancelled, waived or released any material claim
other than in the Ordinary Course of Business; (o) amended or authorized an
amendment to any Company's Organizational Documents; (p) delayed or postponed
the payment of accounts payable outside the Ordinary Course of Business; (q)
made any capital expenditure in excess of $25,000 outside the Ordinary Course
of Business; or (r) accelerated, terminated, modified or cancelled any
agreement, contract, lease, or license of any Company except in the Ordinary
Course of Business.
3.25 Transactions with Affiliates.
----------------------------
Except as set forth on Schedule 3.25 hereto, no Seller, nor any
-------------
officer or employee of any of the Companies, nor any member of any such party's
immediate family or any other affiliate of such party, owns or has a 5% or more
ownership interest in any corporation or other entity that is or was during the
last three years a party to, or in any property which is or was during the past
three years the subject of, any agreement, understanding, business arrangement
or relationship with any of the Companies.
3.26 Certain Payments.
----------------
No Company or to any Company's knowledge, any director, officer,
agent or employee of any Company, or any other person associated with or acting
for or on behalf of any Company, has, in connection with the business of the
Companies, directly or indirectly (a) made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other payment to any person,
private or public regardless of form, whether in money, property, or services
(i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special concessions
or for special concessions already obtained, for or in
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respect of any Company or any affiliate of any Company, or (iv) in violation of
any law applicable to any Company, or (b) established or maintained any fund or
asset that has not been recorded in the books and records of the Companies.
3.27 Liabilities. To the knowledge of the Companies, none of the
-----------
Companies has any material liabilities or obligations, individually or in the
aggregate, direct or indirect, matured or unmatured, absolute or contingent or
otherwise, except for (i) liabilities reflected on the Financial Statements and
not heretofore paid or discharged, (ii) liabilities incurred since the most
recent Financial Statement, consistent with past practice and in the Ordinary
Course of Business, or (iii) liabilities set forth on any Schedule hereto.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Sellers and covenants and agrees
with Sellers as follows:
4.1 Organization and Qualification.
------------------------------
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power
and authority to carry on its business as presently conducted. Buyer is duly
qualified or licensed to do business and is in good standing as a foreign
corporation in each of the jurisdictions in which the character of its
properties or the nature of its business requires such qualification and
authorization.
4.2 Authorization; Valid and Binding Obligation.
-------------------------------------------
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Subject to the approval of its Board of Directors, Buyer has full
corporate power and authority to execute and deliver this Agreement and the
agreements entered into pursuant to the terms hereof and to perform its
obligations hereunder and thereunder, and upon obtaining such approval, the
Agreement and the agreements entered into pursuant to the terms hereof will
constitute the legal, valid and binding obligation of Buyer, enforceable
against it in accordance with their terms.
4.3 Litigation.
----------
There are no actions, proceedings, suits or investigations pending
or threatened against Buyer which, if resolved unfavorably, would prohibit the
consummation of the transactions contemplated by this Agreement.
4.4 Investment.
----------
(a) Buyer acknowledges that no registration statement relating to
the GI Shares has been or shall be filed with the United States Securities and
Exchange Commission under the Federal Securities Act of 1933, as amended, or
the securities laws of any states.
(b) The GI Shares will be acquired solely by and for the account
of Buyer for investment purposes only and are not being purchased for
subdivision, fractionalization, resale or distribution; Buyer has no contract,
undertaking, agreement or arrangement with any person to sell, transfer or
pledge the GI Shares to such person or anyone else and Buyer has no present
plans or intentions to enter into any such contract, undertaking or
arrangement.
(c) Buyer has such knowledge and experience in financial and
business matters in general, and in investments of the type to be made by Buyer
hereunder in particular, to fairly evaluate the merits and risks of an
investment in the Companies. Buyer's financial condition
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is such that it has no need for liquidity with respect to its investment in the
Companies to satisfy any existing or contemplated undertaking or indebtedness
and is able to bear the economic risk of its investment in the Companies for an
indefinite period of time, including the risk of losing all of such investment,
and loss of such investment would not materially adversely affect it.
(d) Buyer expressly acknowledges that (i) no Federal or state
agency has reviewed or passed upon the adequacy of the information set forth in
the documents submitted to Buyer or made any finding or determination as to the
fairness for investment, or any recommendation or endorsement of an investment
in the Companies; and (ii) there will be no public market for the interest and,
accordingly, it may not be possible for Buyer to liquidate its investment in
the Companies.
4.5 Financing.
---------
Buyer will have the funds necessary (a) to pay at the Closing the
Purchase Price and all other amounts necessary to consummate the transactions
contemplated hereby, and (b) to provide sufficient working capital to operate
the business of the Companies from and after the Closing Date. Buyer is
currently negotiating and documenting the expansion of its existing loan
facilities and will have sufficient funds to consummate the transaction as of
the Closing Date.
4.6 Absence of Conflict or Breach.
-----------------------------
The execution, delivery and performance of this Agreement by Buyer
will not conflict with or result in a breach of any of the terms, conditions or
provisions of the Certificate of Incorporation or By-laws of Buyer, or of any
law, statute, rule or regulation of any governmental authority, or conflict
with or result in a breach of any of the terms, conditions or
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provisions of any judgment, order, injunction, decree or ruling of any court or
arbitration tribunal or governmental authority to which Buyer is subject, or of
any provision of any agreement or understanding or arrangement to which Buyer
is a party or by which it is bound, or constitute a default thereunder, or
given to others any interest or rights, including any rights of acceleration,
termination or cancellation, in or with respect to the business or arrangements
to which it is a party or by which it is bound.
4.7 Consents and Approvals.
----------------------
Except as set forth on Schedule 4.7 hereto and except pursuant
------------
to the Hart-Scott-Rodino Act, there are no authorizations, consents, approvals
or notices required to be obtained or given by Buyer or waiting periods
required to expire, in order that this Agreement and the transactions provided
for herein may be consummated by Buyer.
5. AFFIRMATIVE COVENANTS AND UNDERTAKINGS OF SELLERS
-------------------------------------------------
From and after the date of this Agreement to and including the Closing
Date, Sellers, severally and jointly, covenant and agree to comply with the
provisions of this Article 5, except as compliance may be waived in writing in
a particular instance by Buyer.
5.1 Satisfaction of Conditions.
--------------------------
Each Seller and Heller agrees to cooperate with Buyer and Buyer's
counsel, accountants and representatives in connection with any steps
reasonably required to be taken as a part of his or her obligations under this
Agreement. Sellers shall use their best efforts to cause the conditions
precedent to the obligations of Buyer under this Agreement to be satisfied as
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promptly as possible, and will not knowingly undertake a course of action
inconsistent with this Agreement or which would make any of its
representations, warranties, agreements or covenants in this Agreement untrue
in any material respect or any conditions precedent to its obligations under
this Agreement unable to be satisfied prior to the Closing.
5.2 Preservation of Business.
------------------------
Sellers shall cause each Company to (a) preserve its current
business organization, (b)use its best efforts to keep available the services
of its present employees, consultants and agents, (c) use its best efforts to
maintain its present business relationships with suppliers, customers, brokers,
sales representatives and such other persons or firms having business
relationships on the date hereof with such Company, (d) maintain all of its
properties in good order and condition, (e) take all steps necessary to
maintain its intangible assets, including without limitation, its patents,
trademarks, trade names, copyrights, licenses and any pending application
therefor, (f) pay its accounts payable and collect its accounts receivable in
accordance with past business practice, (g) operate the business of the
Companies in such a manner that the cash portion of the Working Capital
available on the Closing Date is not less than $500,000, and (h) not take any
action that would constitute a breach of Section 3.25 hereof.
------------
5.3 Conduct of Business.
-------------------
Sellers shall cause each Company to operate its business in the
Ordinary Course of Business consistent with past practice and to refrain from
introducing any unusual operations or entering into any new line of business.
5.4 Shareholders Agreements.
-----------------------
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<PAGE>
No Seller shall, or shall allow any Company to, take any action or
exercise any right under any Gatan International Shareholders' Agreement which
would hamper, impede or conflict with the transactions contemplated by this
Agreement; and each Seller shall, and shall cause each Company to, terminate
each of the Gatan International Shareholders' Agreements effective on or before
the Closing Date.
5.5 Company Options.
---------------
Each Seller shall cause each Company to terminate all of the
Company options set forth on Schedule 3.3 hereto effective on or before the
------------
Closing Date, and no Company shall have any further obligation thereunder
following the Closing.
5.6 Shareholder Notes.
-----------------
Each Seller shall cause each Company to pay in full all notes
payable to shareholders as set forth on the Financial Statements, on or before
the Closing Date, and no Company shall have any further obligation thereunder
following the Closing.
5.7 Books and Records.
-----------------
Sellers shall cause each Company to maintain its books, records and
accounts in its customary and usual manner, and shall refrain from introducing
methods of accounting inconsistent with those used in prior periods.
5.8 Insurance.
---------
Sellers shall cause each Company to maintain in full force and
effect all policies of insurance in effect on the date of this Agreement.
5.9 Tax Returns.
-----------
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<PAGE>
Sellers shall cause each Company to prepare and timely and properly
file all federal, state, local, foreign and other tax returns and reports and
amendments thereto required to be filed and pay all taxes which come due on or
prior to the Closing, other than those for which extensions have been properly
granted or which are being contested in good faith for which adequate reserves
have been established.
5.10 Other Transactions.
------------------
Through the Termination Date (as defined in Article 10 hereof),
Sellers shall deal exclusively and in good faith with Buyer with regard to the
transactions contemplated hereby and will not, and will direct each Company and
its officers, directors, financial advisors, accountants, agents, and counsel
not to, (i) solicit submission of proposals or offers from any person other
than Buyer relating to any acquisition of the Companies or all or any material
part of their stock or assets, or any merger, consolidation or business
combination with the Companies that would have the effect of preventing the
consummation of the transactions contemplated by this Agreement (an
"Acquisition Proposal"), (ii) participate in any negotiations regarding, or
furnish, in connection with an Acquisition Proposal, any information to any
other person regarding any Company other than Buyer and its representatives or
otherwise cooperate in any way or assist, facilitate or encourage any
Acquisition Proposal by any person other than Buyer, or (iii) enter into any
agreement or understanding, whether oral or in writing, that would have the
effect of preventing the consummation of the transactions contemplated by this
Agreement.
5.11 Consents.
--------
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<PAGE>
Sellers shall obtain, prior to the Closing, all consents and
estoppels necessary or appropriate for the consummation of the transactions
contemplated hereby and listed on Schedule 5.11 hereto (the "Required
-------------
Consents").
6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
------------------------------------------------
The obligations of Buyer hereunder shall be subject to the following
conditions, any or all of which may be waived in writing by Buyer:
6.1 Accuracy of Representations and Warranties.
------------------------------------------
Each of the representations and warranties of Sellers contained
herein shall be true and correct in all material respects on and as of the
Closing Date with the same effect as though made on and as of such date, and
Sellers shall have performed and complied in all material respects with each of
the agreements, covenants, stipulations, terms and conditions contained herein
and required to be performed or complied with by Sellers on or prior to the
Closing Date.
6.2 No Adverse Change.
-----------------
Since the date hereof, there shall have been no material adverse
change in the financial conditions, assets or liabilities of the Companies,
taken as a whole.
6.3 No Loss.
-------
Since the date hereof, no Company shall have suffered any loss on
accounts of fire, flood, accident, strike or other calamity which would have a
material adverse effect on the financial condition or any assets of the
Companies in excess of $250,000.
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6.4 Certificates.
------------
(a) Gatan International shall have executed and delivered to
Buyer on the Closing Date a Certificate, dated that date, in form and substance
reasonably satisfactory to Buyer and its legal counsel, to the effect that each
of the provisions of Section 6.1, 6.2 and 6.3 of this Article 6 is true and
correct as of the Closing Date.
(b) Gatan International shall have delivered to Buyer a
certificate of its Secretary certifying the status of record ownership of the
GI Shares as of the Closing Date.
6.5 No Litigation or Injunction.
---------------------------
No action, proceeding or investigation shall have been instituted
or threatened to set aside the transactions provided for herein or to enjoin or
prevent the consummation of the transactions contemplated hereby or which would
have a material adverse effect on the business or assets of the Companies as
presently conducted.
6.6 Good Standing.
-------------
Gatan International shall have delivered to Buyer a good standing
certificate and certified charter documents of each of the Companies, each of
recent date, from their respective jurisdictions of incorporation and good
standing certificates (or their equivalents) from each jurisdiction in which
any Company conducts business.
6.7 Opinion of Counsel.
------------------
Sellers shall have furnished to Buyer and to any of Buyer's lenders
designated by Buyer, on the Closing Date, opinions of one or more of its
counsel, substantially in the forms of Exhibits B1, B2 and B3 hereto.
----------------------
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<PAGE>
6.8 Consents and Proceedings.
------------------------
Sellers shall have obtained all of the Required Consents.
6.9 Payment of Company Debt.
-----------------------
The Company Debt shall be paid in full.
6.10 Redemption of CARs.
------------------
Gatan International shall redeem from Heller the CARs.
6.11 Shareholders' Agreements.
------------------------
Each Seller shall have, and shall have caused each Company to,
terminate all of the Gatan International Shareholders' Agreements on or before
the Closing Date.
6.12 Non-Competition Agreement. Each of the Sellers shall have
-------------------------
executed and delivered to Buyer and the Company a Non-Competition Agreement
substantially in the form of Exhibit C hereto.
---------
6.13 Landlord Estoppels and Consents. Each landlord of the Leased
-------------------------------
Real Property other than Germany shall have executed an estoppel and consent in
form and substance reasonably satisfactory to Buyer's lender.
6.14 Shareholder Notes.
-----------------
All notes payable to shareholders set forth on the Financial
Statements shall have been paid in full.
6.15 Termination of Options.
----------------------
Sellers shall have caused Gatan International to terminate all
outstanding options or other rights to receive additional shares, including
without limitation, options existing under
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<PAGE>
the Gatan International Option Plan and the Gatan International Shareholders'
Agreement, and no Company shall have any further obligations with respect
thereto.
6.16 Termination of Right to Receive Additional Shares.
-------------------------------------------------
Sellers shall have caused Gatan International to, and William E.
Offenberg shall, terminate Mr. Offenberg's right to receive any shares of Gatan
International pursuant to the Offenberg Agreement following the Closing Date.
6.17 Release.
-------
Each Seller and Arizona State Research Institute shall have entered
into a Release substantially in the form of Exhibit D hereto whereby each
---------
Seller shall release Buyer and the Companies from any claim, including any
right of indemnification or reimbursement, that it may have against any
Company.
6.18 Escrow Agreement.
----------------
Sellers shall have entered into the Escrow Agreement with Buyer and
an independent third-party escrow agent pursuant to which the Escrow Funds will
be held.
7. CONDITIONS TO THE OBLIGATIONS OF SELLERS
----------------------------------------
The obligations of Sellers shall be subject to the following
conditions, any or all of which may be waived in writing by Buyer:
7.1 Accuracy of Representations and Warranties.
------------------------------------------
Each of the representations and warranties of Buyer set forth in
Article 4 hereof shall be true and correct in all material respects on and as
of the Closing Date with the same effect as though made on and as of such date,
and Buyer shall have performed and complied in
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<PAGE>
all material respects with each of the agreements, covenants, stipulations,
terms and conditions contained herein and required to be performed or complied
with by Buyer on or prior to the Closing Date.
7.2 Officer's Certificate.
---------------------
An executive officer of Buyer shall have executed and delivered to
Sellers on the Closing Date a Certificate, dated that date, in form and
substance reasonably satisfactory to Sellers and their legal counsel, to the
effect that the provisions of Section 7.1 hereof are true and correct in every
respect as of the Closing Date.
7.3 No Injunction.
-------------
No action, proceeding or investigation shall have been instituted
or threatened to set aside the transactions provided for herein or to enjoin or
prevent the consummation of the transactions contemplated hereby.
7.4 Good Standing Certificate.
-------------------------
Buyer shall have delivered to Sellers a good standing certificate
of Buyer of recent date from the Secretary of the State of Delaware.
7.5 Opinion of Counsel.
------------------
Buyer shall have furnished to Sellers, on the Closing Date, an
opinion of their counsel, substantially in the form of Exhibit E hereto.
---------
7.6 Escrow Agreement.
----------------
Buyer shall have entered into the Escrow Agreement with Sellers and
an independent third-party escrow agent pursuant to which the Escrow Funds will
be held.
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8. MUTUAL COVENANTS
----------------
8.1 Access to and Use of Information.
--------------------------------
From the date hereof to the Closing Date, Buyer and its officers,
directors, agents, lenders, employees and representatives shall have the right
at any time during normal business hours (in a manner that does not
unreasonably interfere with the Companies' business operations) with reasonable
advance notice and (at Sellers' option) in the presence of Sellers or their
representatives, to visit and inspect the Companies' offices, plants and
properties and to examine and make excerpts from their books, contracts,
accounts and records, and to request and receive from the Companies information
concerning their business, operations and financial condition. Should the
transactions contemplated hereby not be consummated for any reason, all
information received from the Companies and/or Sellers (and all copies thereof)
shall be immediately returned to Sellers. All such information shall be held
in strict confidence by Buyer and Buyer shall not use any of such information
itself nor disclose any such information to others without Sellers' written
consent unless (i) the information in question is, or becomes, public knowledge
without fault of Buyer, or (ii) was known to Buyer at the time obtained from
any Company and/or Sellers, or (iii) is rightfully obtained from a third party
with no restriction on disclosure.
8.2 338 Election.
------------
Buyer shall not make an election under Section 338 of the IRC
relating to Buyer's purchase of the GI Shares.
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<PAGE>
8.3 Further Mutual Covenants.
------------------------
Buyer and Sellers shall refrain from taking any action which would
render any representations or warranties contained in Articles 3 or 4 of this
Agreement inaccurate as of the Closing Date and shall promptly notify the other
party upon the happening of any event or taking of any action which renders any
such representation or warranty inaccurate. Each party shall promptly notify
the other of any action, suit or proceeding that shall be instituted or
threatened against such party to restrain, prohibit, or otherwise challenge the
legality of any transaction contemplated by this Agreement.
9. EXPENSES
--------
Except as set forth in the following sentence of this Article 9,
the Sellers shall pay all fees and expenses incurred by them or the Companies
in connection with the transactions provided for hereunder (the "Transaction
Expenses"). Buyer shall pay, at Closing and on Sellers' behalf, the reasonable
documented fees and expenses of Bowles Hollowell Conner & Co. and of Sellers'
counsels and accountants, or Buyer shall reimburse Sellers for any payments
made to such parties prior to the Closing for fees incurred in connection with
this transaction; provided, however, that Buyer's payment or reimbursement of
such fees and expenses shall not exceed $1,000,000. In the event such fees and
expenses exceed $1,000,000, Sellers shall pay such excess amounts. Buyer shall
pay all expenses incurred by it in connection with the transactions provided
for hereunder, including the fees and expenses of its counsel and accountants,
and Buyer shall pay the filing fees under the Hart-Scott-Rodino Act.
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<PAGE>
10. TERMINATION
-----------
This Agreement may be terminated and the transactions contemplated
hereby abandoned prior to Closing:
(i) by the mutual consent of Sellers and Buyer;
(ii) by Buyer if any condition in Article 6 becomes impossible of
performance or has not been satisfied in full or previously
waived by Buyer in writing at or prior to June 7, 1996 (the
"Termination Date");
(iii) by Sellers if any condition in Article 7 becomes impossible
of performance or has not been satisfied in full or
previously waived by Sellers in writing at or prior to the
Termination Date;
(iv) by either Sellers or Buyer on or before May 15, 1996 in the
event Buyer has not obtained the approval of its board of
directors to enter into the Agreement and to consummate the
transactions contemplated hereby on or before May 15, 1996;
or
(v) by Buyer on or before 5:00 p.m. on May 17, 1996 in the event
Buyer has not entered into employment agreements, in form and
substance satisfactory to Buyer, with each of Gubbens, Meyer,
Limesand, Offenberg, Weigand, Evans, Nau, Lindsay, Jing, and
each other party currently party to a change of control
agreement with Gatan International on or before 5:00 p.m. on
May 17, 1996.
If this Agreement is terminated pursuant to clause (i) of this
Article 10, all obligations of the parties hereunder shall terminate without
any further liability or obligation of
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either party to the other, except that Section 8.1 (excluding the first two
sentences thereof) and Articles 9, 11 and 13 of this Agreement shall survive
and continue in full force and effect notwithstanding such termination.
11. ABSENCE OF BROKER OR FINDER
---------------------------
Sellers represent and warrant to Buyer that no person is acting or
has acted for them as broker or finder in connection with the transactions
provided for by this Agreement other than Bowles Hollowell Conner & Co., whose
fees and expenses shall be paid pursuant to Article 9 hereof. Buyer represents
and warrants to Sellers that no person is acting or has acted for it as broker
or finder in connection herewith.
12. SELLERS' REPRESENTATIVE
-----------------------
Each Seller hereby constitutes and appoints Morgenthaler Venture
Partners III ("Sellers' Representative") as his, hers or its true and lawful
attorney-in-fact, with full power and authority to act on behalf of such Seller
and in such Seller's name, place and stead for all matters arising in
connection with this Agreement and as the authorized representative of the
Sellers to give and accept notices on behalf of the Sellers. If Morgenthaler
Venture Partners III shall resign or refuse or become unable to serve, the
Sellers, acting by a majority, shall appoint a successor Sellers'
Representative with the same power and authority herein granted to Morgenthaler
Venture Partners III. Each Seller agrees to indemnify and to save and hold
harmless the Sellers' Representative of, from, against and in respect of any
claim, action, cause of action, cost, liability or expense suffered or incurred
by or asserted against the Sellers'
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<PAGE>
Representative based upon or arising out of the performance by the Sellers'
Representative of any act, matter or thing pursuant to the appointment herein
made, except that no Seller shall be held or required to indemnify or to save
or hold harmless the Sellers' Representative for the gross negligence or
willful misconduct of the Sellers' Representative in the performance of its
duties hereunder.
13. NEWS RELEASES
-------------
No notices to third parties or any publicity, including press
releases, concerning any of the transactions provided for herein shall be made
unless planned and coordinated jointly between Buyer and Sellers, provided that
this provision shall not restrict Buyer from making any press release or public
announcement which Buyer reasonably believes, based upon advice of counsel, is
required by law. Buyer shall give prior written notice, if possible, to
Sellers' Representative before issuing any required press release or public
announcement.
14. NOTICES
-------
Any notice, request, demand or other communication given by any
party under this Agreement (each a "notice") shall be in writing, may be given
by a party or its legal counsel, and shall be deemed to be duly given (i) when
personally delivered, or (ii) upon delivery by United States Express Mail or
similar overnight courier service which provides evidence of delivery, or (iii)
when five days have elapsed after its transmittal by registered or certified
mail, postage prepaid, return receipt requested, addressed to the party to whom
directed at that party's address as it appears below or another address of
which that party has given
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<PAGE>
notice, or (iv) when transmitted by telex (or equivalent service), the sender
having received the answer back of the addressee, or (v) when delivered by
facsimile transmission if a copy thereof is also delivered in person or by
overnight courier. Notices of address change shall be effective only upon
receipt notwithstanding the provisions of the foregoing sentence.
Notice to Buyer shall be sufficient if given to:
Roper Industries, Inc.
160 Ben Burton Road
Bogart, Georgia 30622
Attn: Shanler D. Cronk, Esq.
General Counsel
with copies to:
Powell, Goldstein, Frazer & Murphy
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Thomas R. McNeill, Esq.
Notice to Sellers shall be sufficient if given to Sellers' Representative
at:
Morgenthaler Venture Partners III
700 National City Bank Building
629 Euclid Avenue
Cleveland, Ohio 44114
Attn: John D. Lutsi
with copies to:
Buchanan Ingersoll
One Oxford Centre
301 Grant Street
Pittsburgh, Pennsylvania 15219-1410
Attn: Thomas G. Buchanan, Esq.
Notice to Heller shall be sufficient if given to:
Heller Financial, Inc.
500 West Monroe Street
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<PAGE>
Chicago, Illinois 60661
Attn: Daniel O'Donnell
15. INDEMNIFICATION AND SURVIVAL OF REPRESENTATION AND WARRANTIES
-------------------------------------------------------------
15.1 Indemnity by Sellers and Heller.
-------------------------------
(a) Subject to the limitations set forth herein, Sellers shall,
jointly and severally, indemnify Buyer, the Companies and their respective
affiliates, directors, officers, shareholders, employees, agents,
representatives, successors and assigns against any and all claims, losses,
liabilities, damages and expenses (including reasonable attorney's fees and
costs of suit) which may be asserted against, incurred or required to be paid
by Buyer, the Companies or their respective affiliates, directors, officers,
shareholders, employees, agents, representatives, successors and assigns by
reason or on account of any Operational Warranties made by Sellers or Heller
herein being untrue or incorrect.
(b) Subject to the limitations set forth herein, Sellers shall,
severally but not jointly, indemnify Buyer, the Companies and their respective
affiliates, directors, officers, shareholders, employees, agents,
representatives, successors and assigns against any and all claims, losses,
liabilities, damages and expenses (including reasonable attorney's fees and
costs of suit) which may be asserted against, incurred or required to be paid
by Buyer, the Companies or their respective affiliates, directors, officers,
shareholders, employees, agents, representatives, successor and assigns by
reason or on account of any failure by Sellers or Heller to observe or perform
their covenants and agreements set forth herein or in the Escrow Agreement.
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(c) Subject to the limitations set forth herein, Sellers shall,
severally but not jointly, and Heller shall severally, indemnify Buyer, the
Companies and their respective affiliates, directors, officers, shareholders,
employees, agents, representatives, successors and assigns against any and all
claims, losses, liabilities, damages and expenses (including reasonable
attorney's fees and costs of suit) which may be asserted against, incurred or
required to be paid by Buyer, the Companies and their respective affiliates,
directors, officers, shareholders, employees, agents, representatives,
successors and assigns by reason or on account of any Transaction
Representation made by Sellers or Heller herein being untrue or incorrect.
15.2 Indemnity by Buyer.
------------------
Buyer shall indemnify Sellers, Heller and their agents,
representatives, heirs and assigns against any and all claims, losses,
liabilities, damages and expenses (including reasonable attorney's fees and
costs of suit) which may be asserted against, incurred or required to be paid
by Sellers, Heller or their respective agents, representatives, heirs and
assigns by reason or on account of (a) any representation or warranty made by
Buyer herein being untrue or incorrect; or (b) any failure by Buyer to observe
or perform its covenants and agreements herein or in any agreement entered into
pursuant to this Agreement.
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15.3 Parameters of Indemnification Liability of Sellers and Heller.
-------------------------------------------------------------
(a) Sellers and Heller shall have no liability for
indemnification hereunder with respect to any claim resulting from a breach of
their representations and warranties set forth in this Agreement unless
Sellers' Representative and Heller have been notified of the claim, in the
manner provided under Article 14 hereof, within the survival period specified
in Section 15.5 hereof.
(b) Notwithstanding anything to the contrary set forth in this
Agreement, Sellers and Heller shall not be liable hereunder to Buyer except to
the extent that the losses, liabilities or damages incurred by Buyer shall
exceed in the aggregate $250,000, in which event Sellers and Heller shall be
liable only for such amounts in excess thereof, provided that the foregoing
deductible shall not be applicable to any indemnification obligation owed to
Buyer by Sellers or Heller due to a breach of a representation or warranty set
forth in Section 3.9 relating to tax matters or in Section 3.17 relating to tax
aspects of employee benefits matters ("Tax Indemnification").
(c) Sellers' and Heller's indemnification obligations for
breaches of Operational Representations or covenants contained in this
Agreement shall be limited to $5,000,000, and Buyer may only collect on claims
for breaches of Operational Representations or covenants contained in this
Agreement pursuant to Section 15.1(a) or Section 15.1(b) hereof from the Escrow
Funds. Sellers' and Heller's obligation for Tax Indemnification shall be
limited to $112,500 and Buyer may only collect on claims for Tax
Indemnification from the Tax Funds (as defined in the Escrow Agreement).
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(d) With respect to Tax Indemnification, the amount recoverable
by Buyer shall not be reduced as the result of the availability of net
operating loss to the Companies.
(e) Buyer shall not be entitled to Tax Indemnification if Buyer's
liability arises due to a voluntary disclosure to the IRS by Buyer or any
Company after the Closing which was not required to be disclosed by any
applicable law or regulation.
(f) Sellers and Heller shall be severally liable for breaches of
Transactional Representations in the percentages set forth on Schedule 15.3
-------------
hereof. Sellers' indemnification obligations for breaches of Transactional
Representations shall be limited to the amounts set forth on Schedule 15.3
-------------
hereof, less such Seller's and any such Seller's Family Transferees' (as herein
defined) allocable portion of amounts released to Buyer from, or currently
subject to a claim by Buyer against, the Escrow Funds (provided that if Sellers
prevail on any claim by Buyer against the Escrow, each Seller's (and such
Seller's Family Transferees') allocable portion of the amount no longer subject
to such claim shall again be subject to claims by Buyer for breaches of
Transactional Representations). Heller's indemnification obligation for
breaches of Transactional Representations shall be limited to $3,200,000. As
used herein, "Family Transferees" shall mean, in the case of Stuart Lindsay,
the Lindsay Family Partnership, and in the case of William Offenberg, Alex
Offenberg, Aaron Offenberg and Adam Offenberg.
15.4 Parameters of Indemnification Liability of Buyer.
------------------------------------------------
Buyer shall have no liability for indemnification hereunder with
respect to any claim resulting from a breach of its representations and
warranties set forth in this Agreement unless it has been notified of the
claim, in the manner provided under Article 14 hereof, within the survival
period specified in Section 15.5 hereof.
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15.5 Survival.
--------
All Operational Warranties contained in or made pursuant to this
Agreement or in any agreement, certificate, document or statement delivered
pursuant hereto shall survive the Closing for a period of 12 months; provided,
however, that, notwithstanding the foregoing, the representations and
warranties set forth in Section 3.9 relating to tax matters and in Section 3.17
relating to tax aspects of employee benefit matters shall survive the Closing
until July 31, 1996. All Transactional Warranties and all warranties in
Article 4 hereof shall survive for the applicable statute of limitations.
15.6 Sole and Exclusive Remedy.
-------------------------
Except as set forth in this Section and Section 2.3(d), the parties
acknowledge and agree that the indemnification provided under this Article 15
shall be the sole and exclusive remedy of the parties with respect to the
breach of any covenant, representation or warranty contained herein.
Notwithstanding the foregoing, any party hereto shall be entitled to pursue (a)
any injunctive relief, including specific performance, for a breach or default
hereunder in any court of competent jurisdiction, and (b) any remedy available
for a breach of any other agreement entered into pursuant to the terms hereof.
15.7 Indemnification Procedures.
--------------------------
Any party making a claim for indemnification under this Article 15
(the "Indemnitee") shall notify the indemnifying party or parties (the
"Indemnitor"), or, in the event one or more Sellers are the indemnifying party,
the Indemnitee shall notify Sellers' Representative, of the claim in writing
promptly after discovering the claim or receiving written notice of a claim
against (if by a third party), describing the claim, the amount thereof (if
known
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and quantifiable), and the basis thereof, provided that the failure to promptly
give notification shall not constitute a defense to a claim except to the
extent the Indemnitor can show that it was materially prejudiced by the delay
in notification. The obligations and liabilities of the Indemnitor with
respect to claims resulting from the assertion of liability by any third party
shall be subject to the following terms and conditions:
(a) In the event any action, suit or proceeding is brought
against the Indemnitee, with respect to which the Indemnitor may have liability
under the indemnity provisions contained herein, the action, suit or proceeding
shall be defended (including all proceedings on appeal or for review which
counsel for the Indemnitee shall deem appropriate) by the Indemnitor at its
expense. The Indemnitee shall have the right to employ its own counsel in any
such case, but the fees and expenses of such counsel shall be at the
Indemnitee's own expenses unless (i) the Indemnitor has failed or refused to
perform its obligations under the preceding sentence or (ii) the Indemnitor's
defense would result in a conflict of interest under which it would not be
appropriate for counsel for the Indemnitor to represent the Indemnitee, or
(iii) unless the employment of such counsel and the payment of such fees and
expenses both shall have been specifically authorized by the Indemnitor in
connection with the defense of such action, suit or proceeding. In any such
case only that portion of such fees and expenses reasonably related to matters
covered by the indemnity agreements contained herein shall be borne by the
Indemnitor. The Indemnitee shall be kept fully informed of such action, suit
or proceeding at all stages thereof whether or not it is so represented. The
Indemnitee shall make available to the Indemnitor and its attorneys and
accountants all books and records of the Indemnitee relating to such
proceedings or litigation and the parties hereto agree to render to
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each other such assistance as they may reasonably require of each other in
order to ensure the proper and adequate defense of any such action, suit or
proceeding.
(b) The Indemnitee shall not make any settlement of any claims
without the written consent of the Indemnitor. The Indemnitor shall have the
right at its own expense to settle any claim on such terms and conditions as
the Indemnitor may deem acceptable, provided that the settlement does not
impose any legal obligations upon the Indemnitee.
(c) Should Seller's Representative and/or Heller notify Buyer
that any claim in respect of which the Sellers and/or Heller are the Indemnitor
is covered in whole or in part by an occurrence policy of insurance (or a
claims-made policy of insurance which has been converted to an occurrence
policy through the purchase of so-called tail coverage or any other similar
arrangement) which was in effect on or prior to the Closing Date, Buyer shall
cause the Companies to reasonably cooperate with Sellers and Heller (including,
without limitation, by the filing and pursuit of lawful claims upon insurers).
Any amounts actually received by the Companies shall either (at Sellers' and
Heller's election) be retained by the Company and applied to reduce the
Sellers' and Heller's indemnification obligations or be paid to the Sellers and
Heller. If in respect of any claim the Buyer or the Companies shall have any
right of recourse to a third party, the Sellers and Heller shall be subrogated
to all such rights.
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16. FURTHER ASSURANCES
------------------
Each party shall, upon request of any of the other parties hereto,
at any time and from time to time execute, acknowledge, deliver and perform all
such further acts, deeds, assignments, transfers, conveyances, powers of
attorney and instruments of further assurances as may reasonably be necessary
or appropriate to carry out the provisions and intent of this Agreement.
17. DISPUTE RESOLUTION
------------------
17.1 Agreement to Arbitrate.
----------------------
Buyer, Sellers and Heller will attempt to resolve among themselves
all disagreements arising under this Agreement within thirty (30) days. If any
claim, other than a claim for which a party is seeking an equitable remedy, is
not resolved within thirty (30) days, such disagreement shall be decided by
arbitration. The arbitrator shall base his decision upon the laws of the
Commonwealth of Pennsylvania. The arbitration shall be conducted before a
retired judge selected from the panel of the Judicial Arbitration and Mediation
Service ("JAMS") and shall be held at the office of JAMS located in Pittsburgh,
Pennsylvania. This agreement to arbitrate shall be specifically enforceable
under applicable law in any court of competent jurisdiction. Notice of the
demand for arbitration shall be filed in writing with the other parties to this
Agreement and with JAMS. The parties shall select the identity of the
arbitrator by mutual agreement, but if they cannot agree within 10 days of the
service of a notice to arbitrate hereunder, JAMS shall appoint the arbitrator
from its panel. The demand for arbitration shall in no event be made after the
date when institution of legal or equitable proceedings based on
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such claim, dispute or other matter in question would be barred by the
applicable contractual, or other, statute of limitations. The parties hereto
elect to provide for pre-arbitration discovery pursuant to the provisions of
the Federal Rules of Civil Procedure. The provisions of the Federal Rules of
Civil Procedure are hereby incorporated into and made a part of this Agreement.
17.2 Arbitration Schedule.
--------------------
Unless modified by the arbitrator in his discretion, the
arbitration shall proceed upon the following schedule: (a) within 10 days from
the service of the notice of the demand for arbitration, the parties shall
select the arbitrator, (b) within 10 days after selection of the arbitrator,
the parties shall conduct a pre-arbitration conference at which a schedule of
pre-arbitration discovery shall be set, all pre-arbitration motions scheduled
and any other necessary pre-arbitration procedural matters decided; (c) all
discovery shall be completed within 20 days following the pre-arbitration
conference; (d) all pre-arbitration motions shall be filed and briefed so they
may be heard no later than 15 days following the discovery cut-off; (e) the
arbitration shall be scheduled to commence no later than 10 days after the
decision of all pre-arbitration motions but in any event no later than three
months following the service of the demand for arbitration; and (f) the
arbitrator shall agreed to hear the claim on successive days and shall render
his written decision within 15 days following the submission of the matter.
17.3 Arbitration Award.
-----------------
Any monetary award of an arbitrator shall include interest at the
rate of ten percent (10%) per annum, which interest shall accrue from and after
the 30th day after the initial claim is made until the date the award is paid
to the prevailing party. The award rendered by
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the arbitrator shall be final and binding upon the parties and judgment may be
entered in accordance with applicable law in any court having jurisdiction
thereof. The losing party shall bear the fees of its and the prevailing
party's attorneys, expenses of witnesses and all other expenses connected with
the presentation of the case. The cost of arbitration, including the cost of
the record or transcripts thereof, if any, administrative fees, and all other
fees involved, shall be borne by the losing party, unless the arbitrator
otherwise directs.
17.4 Submission to Jurisdiction.
--------------------------
Notwithstanding the foregoing provisions regarding arbitration and
in no way limiting the requirement that disagreements be resolved solely
pursuant thereto, each of the parties hereto hereby irrevocably consents and
submits to the exclusive personal jurisdiction of the courts of the
Commonwealth of Pennsylvania and the United States District Court for the
Western District of Pennsylvania over any suit, action or other proceeding
arising out of or relating to this Agreement and irrevocably agrees that all
claims with respect to such suit, action or other proceeding may be heard and
determined in either such court.
18. MISCELLANEOUS
-------------
18.1 Governing Law.
-------------
This Agreement shall be governed by the laws of the Commonwealth of
Pennsylvania without regard to any jurisdiction's conflicts of laws provisions.
18.2 Counterparts/Use of Facsimiles.
------------------------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute a
single agreement. The
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reproduction of signatures by means of a telecopying device shall be treated as
though such reproductions are executed originals and each party hereto
covenants and agrees to provide the other parties with a copy of this Agreement
bearing original signatures within 5 days following transmittal by facsimile.
18.3 Entire Agreement.
----------------
This Agreement constitutes the entire agreement of the parties
hereto respecting its subject matter and supersedes all negotiations,
preliminary agreements and prior or contemporaneous discussions and
understandings of the parties hereto in connection with the subject matter
hereof. This Agreement may be amended, modified, or supplemented only by a
writing signed by all parties by their duly authorized representatives. Any
party may waive the benefit of a term or condition of this Agreement and such
waiver will not be deemed to constitute the waiver of another breach of the
same, or any other, term or condition. The headings in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
any provision of this Agreement.
18.4 No Presumption Against Draftsman.
--------------------------------
There shall be no presumption against any party on the ground that
such party or its counsel was responsible for preparing this Agreement or any
part hereof.
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18.5 Successors and Assigns.
----------------------
This Agreement shall be binding upon and inure to the benefit of
the heirs, executors, administrators, successors and assigns of the parties
hereto, but shall not be assigned by any party hereto without the prior written
consent of the other parties.
18.6 Knowledge.
---------
The term "knowledge" as used in this Agreement shall mean with
respect to a Seller, the actual knowledge upon reasonable inquiry to
appropriate persons in the Company of such Seller or, with respect to the
Companies, the actual knowledge upon reasonable inquiry to appropriate persons
in the Company of any Seller or Paul D. Limesand, Vance Nau or, with respect to
manufacturing matters, L. Evans.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be executed by its dully authorized officer as of the date first above
written.
ROPER INDUSTRIES, INC.
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
MORGENTHALER VENTURE PARTNERS III
By: Morgenthaler Management Partners, III
it General Partner
By:
--------------------------------
John D. Lutsi, General Partner
--------------------------------------
G. Rex Swann
--------------------------------------
Peter R. Swann
--------------------------------------
Ondrej Krivanek
--------------------------------------
William E. Offenberg
--------------------------------------
Stuart M. Lindsey
<PAGE>
--------------------------------------
Tianwei Jing
HELLER FINANCIAL, INC.
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
<PAGE>
The execution and delivery of this Agreement by the signatories hereto,
and the performance by such signatories of their obligations hereunder, is
hereby consented to on this __ day of _______________, 1996.
--------------------------------------
Print Name:
---------------------------
