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EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
HERCO TECHNOLOGY CORP.,
THE STOCKHOLDERS LISTED ON THE SIGNATURE PAGES HERETO,
TERADYNE, INC., AND
T-H ACQUISITION CORPORATION
DATED AS OF AUGUST 1, 2000
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TABLE OF CONTENTS
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ARTICLE I -- DEFINITIONS.................................................... 1
1.01. DEFINITIONS....................................................... 1
ARTICLE II -- PURCHASE AND SALE............................................. 4
2.01. THE MERGER........................................................ 4
2.02. EFFECTS OF THE MERGER............................................. 5
2.03. THE CLOSING....................................................... 5
2.04. ESCROW SHARES..................................................... 6
2.05 CONVERSION OF THE SHARES.......................................... 6
ARTICLE III -- REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY....... 7
3.01. CORPORATE EXISTENCE AND POWER..................................... 7
3.02. CORPORATE AUTHORIZATION........................................... 7
3.03. GOVERNMENTAL AUTHORIZATION; CONSENTS.............................. 7
3.04. NON-CONTRAVENTION................................................. 8
3.05. CAPITALIZATION.................................................... 8
3.06. SUBSIDIARIES...................................................... 8
3.07. FINANCIAL STATEMENTS.............................................. 8
3.08. ABSENCE OF CERTAIN CHANGES........................................ 9
3.09. PROPERTY AND EQUIPMENT........................................... 10
3.10. NO UNDISCLOSED MATERIAL LIABILITIES.............................. 11
3.11. LITIGATION....................................................... 12
3.12. MATERIAL CONTRACTS............................................... 12
3.13. INSURANCE COVERAGE............................................... 13
3.14. COMPLIANCE WITH LAWS; NO DEFAULTS................................ 13
3.15. FINDER'S FEES.................................................... 13
3.16. INTELLECTUAL PROPERTY............................................ 14
3.17. TAXES............................................................ 15
3.18. EMPLOYEES........................................................ 17
3.19. ENVIRONMENTAL COMPLIANCE......................................... 17
3.20. CUSTOMERS AND SUPPLIERS.......................................... 20
3.21. TRANSACTIONS WITH AFFILIATES..................................... 20
3.22. OTHER INFORMATION................................................ 20
3.23. INTERCOMPANY ARRANGEMENTS........................................ 20
3.24. INVENTORIES...................................................... 20
3.25. RECEIVABLES...................................................... 21
3.26. PRODUCTS......................................................... 21
3.27. LABOR MATTERS.................................................... 21
3.28. AFFILIATE AGREEMENTS............................................. 21
3.29. APPROVALS........................................................ 21
3.30. RELIANCE......................................................... 21
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES RELATING TO THE SELLERS....... 22
4.01. TITLE TO AND VALIDITY OF SHARES.................................. 22
4.02. AUTHORITY........................................................ 22
4.03. POWER TO ACT AS TRUSTEE OR EXECUTOR.............................. 22
4.04. SECURITIES ACT REPRESENTATIONS................................... 22
ARTICLE V -- REPRESENTATIONS AND WARRANTIES OF BUYER....................... 23
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5.01. ORGANIZATION AND EXISTENCE....................................... 23
5.02. CORPORATE AUTHORIZATION.......................................... 24
5.03. GOVERNMENTAL AUTHORIZATION....................................... 24
5.04. NON-CONTRAVENTION................................................ 24
5.05. FINDERS' FEES.................................................... 25
5.06. PURCHASE FOR INVESTMENT.......................................... 25
5.07. LITIGATION....................................................... 25
5.08. BUYER STOCK...................................................... 25
5.09. CAPITALIZATION OF BUYER AND MERGER SUB........................... 25
5.10. REPORTS AND FINANCIAL STATEMENTS................................. 25
5.11. ABSENCE OF CERTAIN CHANGES AND EVENTS............................ 26
5.12. FORM S-3 ELIGIBILITY............................................. 26
5.13. DOCUMENTS NOT MISLEADING......................................... 26
5.14. TAX REPRESENTATION LETTER........................................ 26
5.15. RELIANCE......................................................... 26
ARTICLE VI -- COVENANTS OF THE COMPANY AND SELLERS......................... 27
6.01. CONDUCT OF THE COMPANY........................................... 27
6.02. ACCESS TO INFORMATION............................................ 28
6.03. NOTICES OF CERTAIN EVENTS........................................ 28
6.04. RESIGNATIONS..................................................... 29
6.05. NONCOMPETITION; NONSOLICITATION.................................. 29
6.06. CONFIDENTIALITY.................................................. 31
6.07. CONTINUING DISCLOSURE............................................ 31
6.08. STOCKHOLDER APPROVAL............................................. 31
6.09. EXCLUSIVITY; ACQUISITION PROPOSALS............................... 31
6.10. THE DISCLOSURE SCHEDULE.......................................... 32
ARTICLE VII -- COVENANTS OF BUYER.......................................... 33
7.01. CONFIDENTIALITY.................................................. 33
7.02. REGISTRATION ON AND EFFECTIVENESS OF FORM S-3.................... 33
7.03. NOTICES OF CERTAIN EVENTS........................................ 34
ARTICLE VIII -- COVENANTS OF ALL PARTIES................................... 34
8.01. BEST EFFORTS..................................................... 34
8.02. CERTAIN FILINGS.................................................. 34
8.03. PUBLIC ANNOUNCEMENTS............................................. 35
8.04. POOLING.......................................................... 35
8.05. TAX MATTERS...................................................... 35
ARTICLE IX -- EMPLOYEE BENEFITS............................................ 37
9.01. EMPLOYEE BENEFITS DEFINITIONS.................................... 37
9.02. ERISA REPRESENTATIONS............................................ 38
9.03. NO THIRD PARTY BENEFICIARIES..................................... 39
ARTICLE X -- CONDITIONS TO CLOSING......................................... 40
10.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY..................... 40
10.02. CONDITIONS TO OBLIGATION OF BUYER............................... 40
10.03. CONDITIONS TO OBLIGATION OF SELLERS............................. 42
ARTICLE XI -- SURVIVAL; INDEMNIFICATION.................................... 42
11.01. SURVIVAL........................................................ 42
11.02. INDEMNIFICATION................................................. 43
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11.03. PROCEDURES; NO WAIVER........................................... 45
ARTICLE XII -- TERMINATION................................................. 47
12.01. GROUNDS FOR TERMINATION......................................... 47
12.02. EFFECT OF TERMINATION........................................... 48
ARTICLE XII -- MISCELLANEOUS............................................... 48
13.01. NOTICES......................................................... 48
13.02. AMENDMENTS; NO WAIVERS.......................................... 49
13.03. EXPENSES........................................................ 49
13.04. SUCCESSORS AND ASSIGNS.......................................... 49
13.05. FURTHER ASSURANCES.............................................. 50
13.06. GOVERNING LAW................................................... 50
13.07. COUNTERPARTS; EFFECTIVENESS..................................... 50
13.08. ENTIRE AGREEMENT................................................ 50
13.09. CAPTIONS........................................................ 50
13.10. JURISDICTION.................................................... 50
13.11. TRANSFER, SALES DOCUMENTARY, STAMP AND OTHER SIMILAR TAXES...... 50
13.12. SEVERABILITY.................................................... 51
13.13. EXTENSION; WAIVER............................................... 51
SCHEDULES
Schedule 2.03 List of Stockholders
Schedule 3.17 Tax Representation Letter of Company and Sellers
Schedule 5.14 Tax Representation Letter of Buyer and Merger Sub
EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Affiliate Agreement
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AGREEMENT AND PLAN OR REORGANIZATION
AGREEMENT dated as of August 1, 2000 among Herco Technology Corp., a
California corporation (the "COMPANY"); the stockholders of the Company listed
on the signature pages hereto ("SELLERS"); Teradyne, Inc., a Massachusetts
corporation ("BUYER"); and T-H Acquisition Corporation, a Delaware corporation
and wholly owned subsidiary of Buyer ("MERGER SUB").
W I T N E S S E T H :
WHEREAS, Buyer desires to obtain from Sellers all of the outstanding
shares of capital stock of the Company (the "SHARES");
WHEREAS, each Seller desires to transfer to Buyer all of the Shares
owned by such Seller in exchange for Buyer Stock (as defined below); and
WHEREAS, the exchange of Shares for Buyer Stock is intended to qualify
as a reorganization within the meaning of Section 368(a) of the Internal Revenue
code of 1986, as amended (the "CODE").
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01. DEFINITIONS. (a) The following terms, as used herein, have the
following meanings:
"AFFILIATE" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such Person.
"ANCILLARY AGREEMENTS" means the Escrow Agreement and the Affiliate
Agreements.
"BALANCE SHEET" means the unaudited balance sheet of the Company as of
June 30, 2000 referred to in Section 3.07.
"BALANCE SHEET DATE" means June 30, 2000.
"BUYER STOCK" means the common stock of Buyer, $0.125 par value per
share.
"BUYER'S COUNSEL" means the law firm of Testa, Hurwitz & Thibeault,
LLP, Boston, Massachusetts.
"CLOSING DATE" means the date of the Closing.
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"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock, $10.00 par value, of the
Company.
"COMPANY'S PROPRIETARY RIGHTS" means all Proprietary Rights that are
owned or licensed by the Company or any Affiliate of the Company and used or
held for use by the Company or any Subsidiary.
"ESCROW AGENT" means the escrow agent that is a signatory to the Escrow
Agreement.
"ESCROW AGREEMENT" means the Escrow Agreement among Sellers, Buyer and
the Escrow Agent in the form set forth in EXHIBIT A.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"KNOWLEDGE" means the actual knowledge after reasonable inquiry of
Robert Herring, Sr., Charles Herring or Robert Herring, Jr.
"KNOWN" means actually known after reasonable inquiry by Robert
Herring, Sr., Charles Herring or Robert Herring, Jr.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, restriction or encumbrance of any kind in respect of
such asset.
"MATERIAL ADVERSE CHANGE" means a material adverse change in the
business, assets, condition (financial or otherwise), or results of operations
of the Company.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, assets, condition (financial or otherwise), or results or operations
of the Company.
"1934 ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"PERSON" means an individual, corporation, partnership, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"PROPRIETARY RIGHTS" means all (A) patents, patent applications, patent
disclosures and all related continuation, continuation-in-part, divisional,
reissue, re-examination, utility, model, certificate of invention and design
patents, patent applications, registrations and applications for registrations,
(B) trademarks, URL addresses and/or domain names, service marks, trade dress,
logos, tradenames, service names and corporate names and registrations and
applications for registration thereof, (C) copyrights and registrations and
applications for registration thereof, (D) mask works and registrations and
applications for registration thereof, (E) computer
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software, data and documentation, (F) trade secrets and confidential
business information, whether patentable or nonpatentable and whether or not
reduced to practice, know-how, manufacturing and product processes and
techniques, research and development information, copyrightable works,
financial, marketing and business data, pricing and cost information, business
and marketing plans and customer and supplier lists and information, (G) other
proprietary rights relating to any of the foregoing (including without
limitation associated goodwill and remedies against infringements thereof and
rights of protection of an interest therein under the laws of all jurisdictions)
and (H) copies and tangible embodiments thereof.
"S CORPORATION TAX LIABILITY" means the aggregate federal and state
income tax liability imposed on the Sellers as a result of their ownership of
Shares during the Stub Period determined without regard to any other item of
income, gain, loss deduction or credit.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLERS' COUNSEL" means the law firm of Luce, Forward, Hamilton &
Scripps, LLP, San Diego, CA.
"STUB PERIOD" shall mean the period from January 1, 2000 through the
date immediately preceding the Closing Date.
"SUBSIDIARY" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are owned directly or
indirectly by the Company.
"TAX DISTRIBUTION AMOUNT" means the excess, if any, of the S
Corporation Tax Liability over the aggregate amount previously distributed by
the Company to the Sellers during the Stub Period with respect to their Shares.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
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Acquisition Transaction 6.09
Affiliate Agreement 8.04
Benefit Arrangement 9.01
Buyer Audited Financial Statements 5.10
Cap 11.02
CERCLA 3.19
Closing 2.03
Code Recitals
Commission Filings 5.10
Company Affiliate 3.29
Company Securities 3.05
Customers 6.05
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Damages 11.02
Deductible 11.02
Effective Time 2.01
Engage in Competition 6.05
Employee Plans 9.01
Environment 3.19
Environmental Laws 3.19
Environmental Liabilities 3.19
Environmental Permits 3.19
ERISA 9.01
ERISA Affiliate 9.01
Escrow Shares 2.04
Financial Statements 3.07
Hazardous Substance 3.19
Indemnification 11.03
Indemnified Party 11.03
Indemnifying Party 11.03
Merger 2.01
Merger Documents 2.01
Multiemployer Plan 9.01
Permit 3.14
Registration Statement 7.02
Release 3.19
Reports 5.10
Required Consent 3.03
Surviving Corporation 2.01
Taxes 3.17
Tax Authority 3.17
Tax Return 3.17
Update 2.03
ARTICLE II
MERGER; CLOSING
2.01. THE MERGER. Upon the terms and subject to the conditions of this
Agreement, and in accordance with the General Corporation Law of the State of
Delaware and the California Corporations Code, Merger Sub will be merged with
and into the Company (the "MERGER"). A Certificate of Merger and any other
required documents (collectively, the "MERGER DOCUMENTS"), in such form as shall
be agreed to by the parties, will be duly prepared, executed and acknowledged by
the Company and Merger Sub and thereafter delivered to the Secretary of State of
California for filing in accordance with the California Corporations Code
contemporaneously with the Closing. The Merger will become effective at such
time as the Merger Documents have been filed with the Secretary of State of
California (the "EFFECTIVE TIME"). Following the
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Merger, the Company will continue as the surviving corporation (the
"SURVIVING CORPORATION") of the Merger under the laws of the State of California
and the separate corporate existence of Merger Sub will cease.
2.02. EFFECTS OF THE MERGER. At and after the Effective Time, (i) the
Merger will have all of the effects provided by the Certificate of Merger and
applicable law, (ii) the Articles of Incorporation of the Company will be
amended as provided in the Certificate of Merger until duly further amended,
(ii) the bylaws of the Company will be the bylaws of the Surviving Corporation
until duly amended, (iv) the directors of Merger Sub will be the directors of
the Surviving Corporation, to hold office in accordance with the bylaws of the
Surviving Corporation, (v) the officers of Merger Sub will be the officers of
the Surviving Corporation, to hold office in accordance with the bylaws of the
Surviving Corporation and (vi) the issued and outstanding certificates for
capital stock of Merger Sub will be the issued and outstanding certificates
initially representing all of the issued capital stock of the Surviving
Corporation. The Merger is intended to be a reorganization within the meaning of
Section 368(a) of the Code, and this Agreement is intended to constitute a "plan
of reorganization" within the meaning of the regulations promulgated under
Section 368 of the Code.
2.03 THE CLOSING. The closing (the "CLOSING") of the transactions
contemplated hereby shall take place at the offices of Testa, Hurwitz &
Thibeault, LLP in Boston, Massachusetts as soon as possible, but in no event
later than five (5) business days after satisfaction or waiver of the conditions
set forth in Article X, or at such other time or place as Buyer and Sellers may
agree. If all of the conditions set forth in Article X are determined to be
satisfied (or duly waived) at the Closing, concurrently with the Closing the
parties hereto will cause the Merger to be consummated by the filing of the
Merger Documents with the Secretary of State of California. The Closing will be
deemed to have concluded at the Effective Time. At the Closing,
(a) Buyer shall deliver to Sellers certificates for an aggregate of
1,385,399 shares of Buyer Stock, registered in the names of Sellers for the
number of shares shown in SCHEDULE 2.03.
(b) Buyer shall deliver to the Escrow Agent certificates for an
aggregate of 153,933 shares of Buyer Stock registered in the names of the
Sellers for the number of shares shown on SCHEDULE 2.03 under the heading
"ESCROW SHARES", accompanied by undated stock powers or other transfer documents
covering such certificates or instruments, duly executed by each Seller in
blank.
(c) Sellers shall deliver to Buyer certificates for the Shares duly
endorsed or accompanied by stock powers duly endorsed in blank, with any
required transfer stamps affixed thereto.
(d) The appropriate parties shall enter into the Ancillary Agreements.
(e) In accordance with Section 6.10, the Company and Sellers shall
deliver to Buyer a final revised Disclosure Schedule updating and supplementing
the information shown thereon to the Closing Date (the "UPDATE").
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(f) The parties shall execute and deliver any other instruments,
documents and certificates that are required to be delivered pursuant to this
Agreement or as may be reasonably requested by any party in order to consummate
the transactions contemplated by this Agreement.
2.04. ESCROW SHARES. Ten percent (10%) of the Buyer Stock, rounded down
to the nearest whole share (the "ESCROW SHARES") will be deposited and held in
escrow in accordance with the Escrow Agreement attached as EXHIBIT A as the
first source, but not the sole source, of indemnification payments that may
become due to Buyer or the Company pursuant to Article XI. The Escrow Shares
will be withheld on a pro rata basis among the Sellers based on the shares of
Company Common Stock owned by each Seller in accordance with SCHEDULE 2.03. The
delivery of the Escrow Shares will be made on behalf of the Sellers in
accordance with the provisions hereof, with the same force and effect as if such
shares had been delivered by Buyer directly to each Seller and subsequently
delivered by each Seller to the Escrow Agent.
2.05 CONVERSION OF THE SHARES.
(a) Subject to the provisions hereof, at the Effective Time, each Share
will automatically, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into 269.3494 shares of Buyer Stock or an
aggregate of 1,539,332 shares of Buyer Stock, to be allocated among the Sellers
as set forth in SCHEDULE 2.03.
(b) If, between the date of this Agreement and the Closing Date, the
outstanding shares of Buyer Stock shall have been changed into a different
number of shares or a different class by reason of any reclassification,
recapitalization, split-up, stock split, combination, exchange of shares or
similar adjustment, or a stock dividend thereon shall be declared with a record
date prior to the Closing Date, the number of shares or class of Buyer Stock to
be issued and delivered at the Closing to Sellers as provided in this Agreement
shall be appropriately adjusted.
(c) No certificates or scrip for fractional shares of Buyer Stock will
be issued (and any such fractional shares shall be rounded up to the nearest
whole share of Buyer Stock), no Buyer stock split or dividend will be paid in
respect of any fractional share interest, and no such fractional share interest
will entitle the owner thereof to vote or to any rights of or as a stockholder
of Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES RELATING TO
THE COMPANY
The Company and each Seller hereby jointly and severally represent and
warrant to Buyer and Merger Sub as of the date hereof and as of the Closing Date
that except as set forth on the Company's disclosure schedules or delivered
pursuant to Section 6.10 (the "DISCLOSURE
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SCHEDULE") and in the Update, which Disclosure Schedule and Update shall
make specific reference to the section to which exception is taken:
3.01. CORPORATE EXISTENCE AND POWER. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted. The Company is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except for those jurisdictions where failure
to be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect. The Company has heretofore delivered to Buyer true and complete
copies of the corporate charter and bylaws of the Company as currently in
effect.
3.02. CORPORATE AUTHORIZATION. The execution, delivery and performance
by the Company of this Agreement and the Ancillary Agreements to which it is a
party and the consummation by the Company of the transactions contemplated
hereby and thereby are within the Company's corporate powers and have been duly
authorized by all necessary corporate action on the part of the Company. The
Company's Board of Directors has approved the Company's execution of this
Agreement and consummation of the transactions contemplated hereby. This
Agreement and the Ancillary Agreements to which the Company is a party have been
duly executed and delivered by the Company and constitute valid and binding
agreements of the Company, enforceable in accordance with their terms.
3.03. GOVERNMENTAL AUTHORIZATION; CONSENTS.
(a) The execution, delivery and performance by the Company and Sellers
of this Agreement and the Ancillary Agreements require no action by or in
respect of, or filing with, any governmental body, agency, official or authority
other than compliance with any applicable requirements of the HSR Act.
(b) No consent, approval, waiver or other action (each, a "REQUIRED
CONSENT") by any Person (other than any governmental body, agency, official or
authority referred to in (a) above) under any contract, agreement, indenture,
lease, instrument or other document to which the Company is a party or by which
it is bound is required or necessary for the execution, delivery and performance
of this Agreement and the Ancillary Agreements by the Company or the
consummation of the transactions contemplated hereby.
3.04. NON-CONTRAVENTION. The execution, delivery and performance by the
Company of this Agreement and the Ancillary Agreements to which it is a party
and the consummation of the transactions contemplated hereby and thereby do not
and will not (i) contravene or conflict with the corporate charter or bylaws of
the Company, (ii) assuming compliance with the matters referred to in Section
3.03(a), contravene or conflict with any provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to the Company,
(iii) assuming the receipt of all Required Consents, constitute a default under
or give rise to any right of
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termination, cancellation or acceleration of any right or obligation of the
Company or to a loss of any benefit to which the Company is entitled under
any provision of any agreement, contract or other instrument binding upon the
Company or any permit held by the Company, or (iv) assuming the receipt of all
Required Consents, result in the creation or imposition of any Lien on any asset
of the Company.
3.05. CAPITALIZATION. THE DISCLOSURE SCHEDULE sets forth (i) the
designation of each class of capital stock of the Company, (ii) the number of
authorized shares of each class of capital stock of the Company, (iii) the
number of outstanding shares of each class of capital stock of the Company, (iv)
the number of outstanding employee stock options, (v) the number of outstanding
employee stock options that are currently exercisable and (vi) all relevant
information regarding any outstanding convertible securities and any other
outstanding options, warrants or other rights to acquire capital stock of, or
other equity interests in, the Company. All outstanding shares of capital stock
of the Company have been duly authorized and validly issued and are fully paid
and are owned by Sellers as shown on SCHEDULE 2.03. Except as set forth in this
Section, there are no outstanding (i) shares of capital stock, other securities
or phantom or other equity interests of the Company, (ii) securities of the
Company convertible into or exchangeable for shares of capital stock or other
securities of the Company or (iii) options or other rights to acquire from the
Company any capital stock, other securities or phantom or other equity interests
of the Company (the items in clauses (i), (ii) and (iii) being referred to
collectively as the "COMPANY SECURITIES"). There are no outstanding obligations
of the Company, actual or contingent, to issue or deliver or to repurchase,
redeem or otherwise acquire any Company Securities.
3.06. SUBSIDIARIES. The Company does not have and never has had any
Subsidiaries or any ownership or equity interest in or control of (direct or
indirect) any other Person.
3.07. FINANCIAL STATEMENTS. (a) Attached to the Disclosure Schedule are
true and complete copies of:
(i) the balance sheets of the Company as of December 31, 1999
and December 31, 1998 and the statements of operations, cash flows and
changes in stockholders' equity of the Company for the respective
fiscal years then ended, as audited by PricewaterhouseCoopers LLP; and
(ii) the unaudited statements of income, cash flows and
changes in stockholders' equity of the Company for the six months ended
June 30, 2000 (collectively, the "FINANCIAL STATEMENTS").
(b) Each of the balance sheets included in the Financial Statements
fairly presents in all material respects the financial position of the Company
as of its date, and the other statements included in the Financial Statements
fairly present in all material respects the results of operations, cash flows
and stockholders' equity, as the case may be, of the Company for the periods
therein set forth, in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved except as otherwise
stated therein and,
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with respect to the unaudited interim financial statements, for the
omission of footnote disclosures and, to the extent consistent with generally
accepted accounting principles, normally recurring year-end audit adjustments.
3.08. ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date, except
as reflected in the unaudited Financial Statements or in the Disclosure
Schedule, the Company has conducted its business in the ordinary course
consistent with past practices and there has not been:
(a) any Material Adverse Change;
(b) any declaration, setting aside or payment of any dividend
or other distribution with respect to any Company Securities or any
repurchase, redemption or other acquisition by the Company of any
outstanding shares of capital stock or other securities of, or other
ownership interests in, the Company other than distributions that do
not exceed, in the aggregate, the Tax Distribution Amount;
(c) any amendment of any outstanding security of the Company;
(d) any incurrence, assumption or guarantee by the Company of
any indebtedness for borrowed money;
(e) any creation or assumption by the Company of any Lien on
any asset;
(f) any making of any loan, advance or capital contributions
to or investment in any Person;
(g) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the business or assets of the
Company that, individually or in the aggregate, has had a Material
Adverse Effect;
(h) any transaction or commitment made, or any contract or
agreement entered into, by the Company relating to its assets or
business (including the acquisition or disposition of any assets) or
any relinquishment by the Company of any contract or other right, in
either case, material to the Company, other than transactions and
commitments in the ordinary course of business consistent with past
practices and those contemplated by this Agreement;
(i) any change in any method of accounting or accounting
practice by the Company;
(j) any (i) grant of any severance or termination pay to any
director, officer or employee of the Company, (ii) entering into of any
employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or
employee of the Company, (iii) change in benefits payable under
existing severance or termination pay policies of the Company or
employment
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agreements to which the Company is a party or (iv) change, other
than in the ordinary course of business, in compensation, bonus
or other benefits payable to directors, officers or employees of the
Company or (v) amendment of any Employee Plan or Benefit Arrangement;
or
(k) any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or
representation thereof to organize any employees of the Company, which
employees were not subject to a collective bargaining agreement at the
Balance Sheet Date, or any lockouts, strikes, slowdowns, work stoppages
or threats thereof known by the Company or Sellers by or with respect
to any employees of the Company.
3.09. PROPERTY AND EQUIPMENT.
(a) The Company has good and marketable indefeasible, fee simple title
to, or in the case of leased property has valid leasehold interests in, all real
and personal property and assets (whether tangible or intangible) reflected on
the Balance Sheet or acquired after the Balance Sheet Date. None of such
properties or assets is subject to any Liens, except:
(i) Liens disclosed on the Balance Sheet;
(ii) Liens for taxes not yet due or being contested in good faith
(and for which adequate accruals or reserves have been
established on the Balance Sheet); or
(iii) Liens which do not materially detract from the value of such
property or assets as now used, or materially interfere with
any present or intended use of such property or assets.
(iv) Such owned and leased real property includes all real
property, and only such real property, as is used or held for
use or to be used or held for use primarily in connection with
the conduct of the business and operations of the Company as
heretofore conducted.
(v) All such leases of real property are in good standing and are
valid, binding and enforceable in accordance with their
respective terms and there does not exist under any such lease
of real property any material default or any event which with
notice or lapse of time or both would constitute a material
default.
(vi) The plants, buildings and structures reflected on the Balance
Sheet are in good operating condition and repair and have been
reasonably maintained consistent with standards generally
followed in the industry (giving due account to the age and
length of the use of same, ordinary wear and tear excepted),
are suitable to the Company for their present uses and, in the
case of plants, buildings and other structures (including
without limitation, the roofs thereof), to the knowledge of
Company and Sellers, are structurally sound.
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(vii) The plants, buildings and structures referred to above
currently have access to (1) public roads or valid easements
over private streets or private property for such ingress to
and egress from all such real properties and (2) water supply,
storm and sanitary sewer facilities, telephone, gas and
electrical connections, fire protection, drainage and other
public utilities, in each case as is necessary for the present
conduct of the business of the Company by the Company.
(viii) None of the material structures on such owned or leased real
properties encroaches upon real property of another person,
and no structure of any other person substantially encroaches
upon any of such owned or leased real properties.
(b) There are no developments affecting any of such properties or
assets (exclusive of general economic, political or other similar developments
not unique to such properties or assets) pending or, to the knowledge of Seller,
threatened, that might materially detract from the value of such property or
assets, materially interfere with any present use of any such property or
assets.
(c) To the Company's and Seller's knowledge, the equipment owned by the
Company has no material defects, is in good operating condition and repair
(ordinary wear and tear excepted), and is substantially adequate for the uses to
which it is being put by the Company.
(d) The assets owned or leased by the Company, or which it otherwise
has the right to use, constitute all of the assets held for use or used in
connection with the business of the Company and are generally adequate to
conduct such business as currently conducted.
3.10. NO UNDISCLOSED MATERIAL LIABILITIES. Except as disclosed in the
Financial Statements or the Disclosure Schedule and the Update, there are no
liabilities of the Company of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, and there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a liability, other than liabilities incurred in the ordinary
course of business consistent with past practice since the Balance Sheet Date,
which in the aggregate are not material to the Company.
3.11. LITIGATION. There is no action, suit or proceeding (or any
reasonably known basis therefore) pending against, or, to the knowledge of
Sellers, any of the foregoing or any investigation commenced or threatened
against or affecting, the Company or any of its properties or the transactions
contemplated hereby before any court or arbitrator or any governmental body,
agency, official or authority.
3.12. MATERIAL CONTRACTS.
(a) Except for agreements, contracts, plans, leases, arrangements or
commitments disclosed in the Disclosure Schedule or any other schedule to this
Agreement, as of the date of this Agreement the Company is not a party to or
subject to:
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<PAGE> 16
(i) any lease providing for annual rentals of $100,000 or
more;
(ii) any contract relating to indebtedness for borrowed money
or the deferred purchase price of property (whether incurred, assumed,
guaranteed or secured by any asset), except contracts relating to
indebtedness incurred in the ordinary course of business in an amount
not exceeding $50,000;
(iii) any contract for the purchase of materials, supplies,
goods, services, equipment or other assets providing for annual
payments by the Company of $50,000 or more;
(iv) any sales, distribution or other similar agreement
providing for the sale by the Company of materials, supplies, goods,
services, equipment or other assets providing for annual payments to
the Company of $50,000 or more;
(v) any agency, dealer, sales representative or other similar
agreement;
(vi) any employment or consulting agreement;
(vii) any partnership, joint venture or other similar
contract, arrangement or agreement;
(viii) any license agreement, franchise agreement or agreement
in respect of similar rights granted to or held by the Company;
(ix) any contract or other document that limits the freedom of
the Company to compete in any line of business or with any Person or in
any area or which would so limit the freedom of the Company after the
Closing Date; or
(x) any other contract or commitment not made in the ordinary
course of business that is material to the Company.
(b) Each agreement, contract, plan, lease, arrangement and commitment
disclosed in any schedule to this Agreement or required to be disclosed pursuant
to Section 3.12(a) is a valid and binding agreement of the Company and is in
full force and effect, and the Company is not and to the knowledge of the
Company and Sellers, no other party thereto is in default in any material
respect under the terms of any such agreement, contract, plan, lease,
arrangement or commitment.
3.13. INSURANCE COVERAGE. The Company has furnished to Buyer a list of,
and true and complete copies of, all insurance policies and fidelity bonds
covering the assets, business, equipment, properties, operations, employees,
officers and directors of the Company, other than insurance policies which are
Employee Plans or Benefit Arrangements disclosed in the Disclosure Schedule.
There is no claim by the Company pending under any of such policies or bonds as
to which coverage has been questioned, denied or disputed by the underwriters of
such
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<PAGE> 17
policies or bonds. All premiums payable under all such policies and bonds
have been paid and the Company is in full compliance with the all terms
and conditions of all such policies and bonds, the failure to comply of which
could reasonably be expected to lead to the cancellation of such policies or
bonds. Such policies of insurance and bonds (or other policies and bonds
providing substantially similar insurance coverage) have been in effect since
January 1, 1997 and remain in full force and effect. The Company and Sellers
have not received any written threatened termination of, or premium increase
with respect to, any of such policies or bonds.
3.14. COMPLIANCE WITH LAWS; NO DEFAULTS.
(a) The Company is not in violation of, or since, January 1, 1997 has
not violated, any applicable provisions of any laws, statutes, ordinances or
regulations, except for violations that have not had and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
(b) The Disclosure Schedule identifies and correctly describes each
license and permit (a "PERMIT") material to the business of the Company,
together with the name of the governmental agency or entity issuing such license
or permit. To the best of the Company's and Sellers' knowledge, such licenses
and permits are valid and in full force and effect, and none of such licenses or
permits will be terminated or become terminable as a result of the consummation
of the transactions contemplated hereby.
(c) The Company is not in default under, and no condition exists that
with notice or lapse of time or both would constitute a default under, any
judgment, order or injunction of any court, arbitrator or governmental body,
agency, official or authority.
3.15. FINDERS' FEES. There is no investment banker, broker, finder or
other intermediary that has been retained by or is authorized to act on behalf
of Sellers or the Company who might be entitled to any fee or commission from
Buyer, Merger Sub, the Company or any of their respective Affiliates upon
consummation of the transactions contemplated by this Agreement.
3.16. INTELLECTUAL PROPERTY.
(a) Other than off-the-shelf, commercially available software, the
Disclosure Schedule includes a list of all of the Company's Proprietary Rights
specifying as to each, as applicable: (i) the nature of such right; (ii) the
owner of such right; (iii) the jurisdictions by or in which such right has been
issued or registered or in which an application for such issuance or
registration has been filed, including the respective registration or
application numbers; and (iv) licenses, sublicenses and other agreements as to
which the Company or any of its Affiliates is a party and pursuant to which any
Person is authorized to use any such right, including the identity of all
parties thereto, a description of the nature and subject matter thereof, the
applicable royalty and the term thereof.
(b)(i) Since January 1, 1997, and excluding any infringement by the
Company of which neither it nor Sellers have knowledge, the Company has not been
sued or charged in writing with
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<PAGE> 18
or been a defendant in any claim, suit, action or proceeding relating to
its business that has not been finally terminated prior to the date hereof
and that involves a claim of infringement of any patents, trademarks, service
marks or copyrights, and (ii) the Company and Sellers have no knowledge of any
other material claim of infringement by the Company, and no knowledge of any
continuing infringement by any other Person of any of the Company's Proprietary
Rights. No Company Proprietary Right is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting the use thereof by the
Company or restricting the licensing thereof by the Company to any Person. The
Company has not entered into any agreement to indemnify any other Person against
any charge of infringement of any patent, trademark, service mark or copyright.
(c) To the knowledge of the Company and Sellers, none of the processes
and formulae, research and development results and other know-how of the
Company, the value of which to the Company is contingent upon maintenance of the
confidentiality thereof, has been disclosed by the Company to any Person other
than Persons (i) that are parties to confidentiality agreements with the Company
or (ii) who are required as a matter of law to maintain the confidentiality of
the processes and formulae, research and development results and other know-how
of the Company.
(d) To the knowledge of the Company and Sellers, no third party has
asserted any claim, or has any reasonable basis to assert any valid claim,
against the Company, which claim the Company reasonably has concluded is likely
to be made, with respect to (i) the continued employment by, or association
with, the Company of any of the present officers, employees of or consultants to
the Company or (ii) the use by the Company or any of such Persons in connection
with their activities for or on behalf of the Company of any information which
the Company or any of such Persons would be prohibited from using under any
prior agreements or arrangements or any laws applicable to unfair competition,
trade secrets or proprietary information.
3.17. TAXES.
(a) The term "TAXES" as used herein means all federal, state, local,
foreign net income, alternative or add-on minimum tax, estimated, gross income,
gross receipts, sales, use, ad valorem, value added, transfer, franchise,
capital profits, lease, service, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property, environmental or
windfall profit taxes, customs, duties and other taxes, governmental fees and
other like assessments and charges of any kind whatsoever, together with all
interest, penalties, additions to tax and additional amounts with respect
thereto, and the term "Tax" means any one of the foregoing Taxes. The term "TAX
RETURNS" as used herein means all returns, declarations, reports, claims for
refund, information statements and other documents relating to Taxes, including
all schedules and attachments thereto, and including all amendments thereof, and
the term "Tax Return" means any one of the foregoing Tax Returns. "TAX
AUTHORITY" means any governmental authority responsible for the imposition of
any Tax.
(b) The Company has timely filed all Tax Returns required to be filed
and has paid all Taxes owed (whether or not shown as due on such returns),
including, without limitation, all
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<PAGE> 19
Taxes which the Company is obligated to withhold for amounts paid or owing
to employees, creditors and third parties. All Tax Returns filed by the
Company were complete and correct in all material respects, and such Tax Returns
correctly reflected the facts regarding the income, business, assets,
operations, activities, status and other matters of the Company and any other
information required to be shown thereon. None of the Tax Returns filed by the
Company or Taxes payable by the Company have been the subject of an audit,
action, suit, proceeding, claim, examination, deficiency or assessment by any
governmental authority, and, to the Knowledge of the Company and Sellers, no
such audit, action, suit, proceeding, claim, examination, deficiency or
assessment is currently pending or, to the knowledge of the Company, threatened.
The Company is not currently the beneficiary of any extension of time within
which to file any Tax Return, and the Company has not waived any statute of
limitation with respect to any Tax or agreed to any extension of time with
respect to a Tax assessment or deficiency. All material elections with respect
to Taxes affecting the Company, as of the date hereof, are set forth in the
Financial Statements or in the Disclosure Schedule. None of the Tax Returns
filed by the Company contain a disclosure statement under former Section 6661 of
the Code or Section 6662 of the Code (or any similar provision of state, local
or foreign Tax law).
(c) The Company is not a party to any agreement, contract, arrangement
or plan that has resulted or would result, separately or in the aggregate, in
the payment of (i) any "excess parachute payments" within the meaning of Section
280G of the Code (without regard to the exceptions set forth in Sections
280G(b)(4) and 280G(b)(5) of the Code) or (ii) any amount for which a deduction
would be disallowed or deferred under Section 162 or Section 404 of the Code.
The Company has not agreed to make any adjustment under Section 481(a) of the
Code (or any corresponding provision of state, local or foreign Tax law) by
reason of a change in accounting method or otherwise, and will not be required
to make such an adjustment as a result of the transactions contemplated by this
Agreement. The Company is not, and has not been, a U.S. real property holding
company (as defined in Section 897(c)(2) of the Code) during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code.
(d) No claim has ever been made by a Tax Authority in a jurisdiction
where the Company does not file Tax Returns that it is or may be subject to Tax
in that jurisdiction. No portion of the Purchase Price is subject to the Tax
withholding provisions of Section 3406 of the Code, or of Subchapter A of
Chapter 3 of the Code or of any other provision of law. The Company is not a
party to any joint venture, partnership, or other arrangement or contract which
could be treated as a partnership for federal income tax purposes. The Company
does not have, and has not had, a permanent establishment in any foreign
country, as defined in any applicable Tax treaty or convention between the
United States and such foreign country. None of the shares of outstanding
capital stock of the Company are subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code. The Company has never filed a
consent pursuant to Section 341(f) of the Code, relating to collapsible
corporations.
(e) The Company is not a party to any Tax sharing agreement or similar
arrangement. The Company has never been a member of a group filing a
consolidated federal income Tax Return (other than a group the common parent of
which was the Company), and the Company does not have any liability for the
Taxes of any Person (other than the Company) under Treasury
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<PAGE> 20
Regulation Section 1.1502-6 (or any corresponding provision of state, local
or foreign Tax law), as a transferee or successor, by contract, or
otherwise. The Company has no net operating losses or other tax attributes
presently subject to limitation under Sections 382, 383 or 384 of the Code, or
the federal consolidated return regulations (other than limitations imposed as a
result of the transactions contemplated pursuant to this Agreement).
(f) There are no liens for Taxes upon any of the assets, other than for
ad valorem Taxes not yet due and payable. The unpaid Taxes of the Company did
not, as of June 30, 2000, exceed the reserve for actual Taxes (as opposed to any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) as shown on the Financial Statements dated June 30, 2000,
and will not exceed such reserve as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of the Company in
filing their Tax Returns. The Company will not incur any liability for Taxes
from June 30, 2000 through the Closing Date other than in the ordinary course of
business and consistent with past practice.
(g) The Disclosure Schedule contains a list of all jurisdictions
(whether foreign or domestic) to which any Tax is properly payable by the
Company.
(h) The Company and its shareholders made (i) a valid election for the
Company to be treated as an "S corporation", as that term is defined in Section
1361(a) of the Code, for federal income tax purposes and (ii) a similar valid
election under the laws of California or any other applicable governmental
authority, and all of such elections will be in effect at the Effective Time. An
election under Section 1362(a) of the Code has been in effect with respect to
the Company and any predecessor corporation (within the meaning of Section
1374(c) of the Code) for each of its taxable years beginning December 1, 1984.
The Disclosure Schedule lists each such election and a true copy of each such
election is attached thereto; there are no grounds for the revocation of any
such election and no such election will be revoked retroactively or otherwise
except at the Effective Time by reason of the Merger. The Company has been an S
corporation at all times since December 1, 1984 through the date hereof. Neither
the Company nor any of its shareholders has taken any action that would cause,
or would result in, the termination of the S corporation status of the Company,
other than pursuant to this Agreement.
(i) The Company's shareholders have timely filed all Tax Returns
with respect to Taxes required to be paid attributable to
items of income, gain, deductions, losses and credits of the
Company, and have timely paid all such Taxes (whether or not
shown on such Tax Returns). There has not been any audit of
any Tax Return filed by a shareholder of the Company with
respect to, or which may relate to, items of income, gain,
deduction, loss or credit of the Company; and no such audit of
any shareholder of the Company is in progress and such
shareholders have not been notified by any taxing authority
that any such audit is contemplated or pending.
(j) The representations of the Company and Sellers set forth in the
representation letter set forth in SCHEDULE 3.17 to this Agreement will be true
and correct as of the Closing.
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<PAGE> 21
3.18. EMPLOYEES. The Disclosure Schedule sets forth a true and complete
list of (a) the names, titles, annual salaries and other compensation of all
salaried employees of the Company and (b) wage rates for non-salaried employees
of the Company (by classification). None of such employees has indicated to the
Company or a Seller that he or she intends to resign or retire as a result of
the transactions contemplated by this Agreement.
3.19. ENVIRONMENTAL COMPLIANCE.
(a) ENVIRONMENTAL DEFINITIONS. The following terms, as used herein,
have the following meanings:
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"ENVIRONMENT" means any and all environmental media, including without
limitation ambient air, surface water, ground water, drinking water supply, land
surface or subsurface strata, and also means any indoor location other than any
such location that is intended to contain Hazardous Substances and that is
constructed, maintained and operated in compliance with all applicable
Environmental Laws.
"ENVIRONMENTAL LAWS" means any and all existing federal, state, local
and foreign statutes, laws (including common or case law), regulations,
ordinances or rules, and any judgments, judicial decisions, orders, decrees,
plans, injunctions, Environmental Permits, or governmental restrictions, arising
thereunder, relating to the protection of human health or safety or the
Environment or to emissions, discharges or Releases of any Hazardous Substance
into the Environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of any
Hazardous Substance or the containment, removal or remediation thereof.
"ENVIRONMENTAL LIABILITIES" means any and all liabilities arising in
connection with or in any way relating to the Company's business, past or
present, whether contingent or fixed, actual or potential, known or unknown,
which (i) arise under or relate to matters governed by Environmental Laws or
arise in connection with or relate to any matter disclosed in the Disclosure
Schedule and (ii) to the extent they arise from or relate in any way to actions
occurring or conditions existing before the Closing Date.
"ENVIRONMENTAL PERMITS" means any and all governmental permits,
licenses, concessions, grants, franchises, agreements, authorizations,
registrations or other governmental approvals issued or required under any
Environmental Laws.
"HAZARDOUS SUBSTANCE" means any and all environmental pollutants and
contaminants, and any and all toxic, caustic, radioactive or otherwise hazardous
materials, substances or wastes that are regulated under any Environmental Laws,
and includes, without limitation, petroleum and its derivatives and by-products,
and any other hydrocarbons.
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<PAGE> 22
"RELEASE" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing into
the Environment (including, without limitation, the abandonment or discarding of
barrels, containers, and other closed receptacles containing any Hazardous
Substance).
(b) ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES.
(i) The Company has complied in all material respects with
all Environmental Laws.
(ii) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is
pending or, to the Company's and Sellers' knowledge, threatened, by any
governmental or other potential claimant with respect to (A) any
alleged violation by the Company of any Environmental Law, or any
liability thereunder, (B) any alleged failure by the Company to have
any Environmental Permit, or (C) the use, generation, treatment,
storage, recycling, release, transportation or disposal of any
Hazardous Substance.
(iii) During, or prior to, the Company's use, ownership or
lease of any property now or previously owned, used or leased, by the
Company there have been: (A) no urea formaldehyde or polychlorinated
biphenyls present;; (B) no asbestos or asbestos-containing materials
present; (C) no underground storage tanks or related piping for
Hazardous Substances, active or abandoned present and (D) no Hazardous
Substance, Released at, on or under any such property, in a reportable
or threshold planning quantity, where such a quantity has been
established by any Environmental Law.
(iv) The Company has not transported or arranged for the
transportation (directly or indirectly) of any Hazardous Substance to
any location which is (A) listed or proposed for listing on the
National Priorities List promulgated pursuant to CERCLA or on any
similar state list of sites requiring investigation or clean-up or (B)
the subject of federal, state or local enforcement actions or other
investigations which may lead to claims against the Company for any
Environmental Liabilities including, without limitation, clean-up
costs, remedial work, damages to natural resources or for personal
injury claims, and claims under CERCLA.
(v) No oral or written notification of a Release of a
Hazardous Substance has been filed by or on behalf of the Company and
no property now or previously owned or leased by the Company is listed
or, to the Company's knowledge, proposed for listing, on the National
Priorities List promulgated pursuant to CERCLA or on any similar state
list of sites requiring investigation or clean-up.
(vi) No notice, lien or other restriction relating to the
presence of Hazardous Substances or otherwise arising under and
Environmental Law has been placed on any
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<PAGE> 23
property or facility now or (to the best of the Company's and Seller's
knowledge) previously owned or leased by the Company, and no
governmental actions have been taken or are in process that could
subject any such property or facility to such a notice, lien or other
restriction. The Company is not required to place any such notice, lien
or other restriction relating to the presence of Hazardous Substances
or otherwise arising under any Environmental Law at any property used
in connection with the operation of its business or in any deed to such
property.
(vii) There have been no environmental investigations,
studies, audits, tests, reviews or other analyses conducted by or for
the Company, or which are or were in the Company's possession, in
relation to any property or facility now or previously owned or leased
by the Company, which have not been delivered to Buyer.
(viii) The Company has applied for and received all
Environmental Permits required in connection with its business. The
Disclosure Schedule sets forth a list of all such Environmental
Permits, each of which is in full force and effect. No suspension or
cancellation is threatened and there is no basis for believing that any
such Environmental Permit will not be renewable upon expiration. Each
such Environmental Permit will continue to be in full force and effect
immediately following the Closing in accordance with the terms thereof
as in effect immediately prior to the Closing, and the consummation of
the transactions contemplated herein will not conflict with, result in
a violation or breach of or constitute a default under (or would result
in a violation, breach or default with the giving of notice or the
passage of time or both) any such Environmental Permit.
(ix) The Company has not contracted, or otherwise agreed, to
indemnify any Person, in whole or in part, with respect to any
liability, claim, costs, fees, or demand, known or unknown, arising
under, or related to, any Environmental Law. The Company has not
contractually agreed to assume any liability, costs, expenses, claims
or fees arising under any Environmental Law, nor is it obligated under
any agreement to undertake any remediation, removal, response or site
assessment activities at any site, property or location.
3.20. CUSTOMERS AND SUPPLIERS. The Company has not received notice from
a customer , or group of customers that are under common ownership or control,
and that accounted for 10% or more of the aggregate products and services
furnished by the Company during the past 18 months that such customer or group
of customers has stopped or intends to stop purchasing the Company's products or
services, nor has the Company lost any supplier, or group of suppliers that are
under common ownership or control, the loss of which would be reasonably
expected to have a Material Adverse Effect.
3.21. TRANSACTIONS WITH AFFILIATES. Except as set forth in the
Disclosure Schedule, there are no loans, leases, royalty agreements or other
continuing transactions between the Company and any Seller, any Affiliate of any
Seller, or any member of any Seller's family. To the knowledge of the Company
and Sellers, none of the officers or directors of the Company or
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<PAGE> 24
Sellers (a) has any material direct or indirect interest in any entity that
does business with the Company; (b) has any direct or indirect interest in
any property, asset or right that is used by the Company in the conduct of its
business; or (c) has any contractual relationship with the Company other than
such relationships that results solely from being an officer, director, employee
or stockholder of the Company.
3.22. OTHER INFORMATION. None of this Agreement, including the
schedules and exhibits, the Ancillary Agreements, nor the Financial Statements
delivered to Buyer in connection with the transactions contemplated by this
Agreement, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained therein not
misleading.
3.23. INTERCOMPANY ARRANGEMENTS. The Company does not own any note,
bond, debenture or other indebtedness, and is not otherwise a creditor of any
Seller or any of its Affiliates. Since the Balance Sheet Date there has not been
any payment by the Company to any Seller or any of its Affiliates, charge by any
Seller or any of its Affiliates to the Company or other transaction between the
Company and a Seller or any of its Affiliates.
3.24. INVENTORIES. The inventories set forth in the Balance Sheet were
properly stated therein at the lesser of cost or net realizable value determined
in accordance with generally accepted accounting principles consistently applied
by the Company. Since the Balance Sheet Date, the inventories of the Company
have been maintained in the ordinary course of business. All such inventory is
owned free and clear of all Liens except as disclosed in the Financial
Statements. All of the inventory recorded on the Balance Sheet consists of, and
all inventory on the Closing Date will consist of, items of a quality usable or
saleable in the ordinary course of business consistent with past practices and
are and will be in quantities sufficient for the normal operation of the
business of the Company in accordance with past practice, except for obsolete
items and items of below standard quality, all of which have been written down
to net realizable value in the Financial Statements.
3.25. RECEIVABLES. All accounts, notes receivable and other receivables
(other than receivables collected since the Balance Sheet Date) reflected on the
Balance Sheet are, and all accounts and notes receivable of the Company at the
Closing Date arose in the ordinary course of business of the Company and in bona
fide transactions and are valid. All accounts, notes receivable and other
receivables of the Company at the Balance Sheet Date have been included in the
Balance Sheet.
3.26. PRODUCTS. Each of the products produced or sold by the Company
(i) is, and at all times has been, in compliance in all material respects with
all applicable federal, state, local and foreign laws and regulations and (ii)
is, and at all relevant times has been, fit for the ordinary purposes for which
it is intended to be used and conforms in all material respects to any promises
or affirmations of fact made on the container or label for such product or in
connection with its sale. There is no known design defect with respect to any of
such products and each of such products contains adequate warnings, presented in
a reasonably prominent manner, in accordance with applicable laws and current
industry practice with respect to its contents and use. The
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<PAGE> 25
Company has no products placed with its customers under an understanding
permitting their return to the Company other than pursuant to a breach of
warranty.
3.27 LABOR MATTERS. The Company is in compliance with all currently
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and is not engaged in any unfair
labor practice, failure to comply with which or engagement in which, as the case
may be, would reasonably be expected to have a Material Adverse Effect. There is
no unfair labor practice complaint pending or, to the knowledge of Seller,
threatened against the Company before the National Labor Relations Board.
3.28 AFFILIATE AGREEMENTS. The Company has consulted with its counsel
and has been advised that all persons who may be deemed "affiliates" of the
Company as such term is used in Rule 145 under the Securities Act, and
applicable accounting pronouncements of the Commission (each such Person, a
"COMPANY AFFILIATE") are listed on SCHEDULE 8.04(b).
3.29 APPROVALS. On or before the Closing, the Agreement and Certificate
of Merger have been duly approved and adopted by the affirmative vote of a
number of the outstanding shares of the Company's capital stock that equals or
exceeds the number of such shares required by law to approve the Agreement and
the Certificate of Merger.
3.30 RELIANCE. The representations and warranties of the Buyer and
Merger Sub set forth in this Agreement, and in any certificate or other writing
delivered by the Buyer or Merger Sub pursuant hereto, constitute all of the
representations and warranties of the Buyer and Merger Sub upon which The
Company and Sellers have relied in entering into and performing this Agreement.
ARTICLE IV
REPRESENTATIONS
AND WARRANTIES RELATING TO SELLERS
Each Seller, severally but not jointly, represents and warrants to, and
agrees with, Buyer and Merger Sub as follows:
4.01. TITLE TO AND VALIDITY OF SHARES. Seller now has, and on the
Closing Date will have, good and marketable title to and unrestricted power to
vote and transfer the Shares designated as owned by such Seller opposite such
Seller's name on SCHEDULE 2.03, free and clear of any Lien and, upon payment
therefor and delivery to Buyer thereof in accordance with the terms of this
Agreement, Buyer will obtain good and marketable title to such Shares free and
clear of any Lien. All Shares owned by such Seller have been duly authorized and
validly issued and are fully paid and non-assessable. All Shares to be sold by
such Seller are registered in the name of such Seller.
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4.02. AUTHORITY. Such Seller has the legal power, right and authority
to enter into and perform this Agreement and the Ancillary Agreements to which
he is a party, and to perform each of his obligations hereunder and thereunder.
The execution, delivery and performance of this Agreement and the Ancillary
Agreements to which he is a party by such Seller (a) require no action by or in
respect of, or filing with, or consent of, any governmental body, agency or
official or any other Person and (b) do not contravene, or constitute a default
under, any provision of applicable law or regulation or of any agreement,
judgment, injunction, order, decree or any other instrument binding upon such
Seller. This Agreement and the Ancillary Agreements to which he is a party have
been duly executed and delivered by such Seller and constitute valid and binding
obligations of such Seller, enforceable in accordance with their terms.
4.03. POWER TO ACT AS TRUSTEE OR EXECUTOR. If such Seller is serving as
trustee or executor with respect to its Shares, such Seller is duly authorized
and empowered by the instruments creating such trust or trusts or by the will of
which such Seller is acting as executor and under applicable law to enter into
this Agreement and the Ancillary Agreements to which he is a party with respect
to the Shares held by such Seller and to consummate the transactions
contemplated herein.
4.04. SECURITIES ACT REPRESENTATIONS.
(a) Seller has substantial experience in evaluating and investing in
private placement transactions of securities in companies similar to the Buyer
such that Seller is capable of evaluating the merits and risks of its investment
in the Buyer and has the capacity to protect its own interest. Seller is an
"accredited investor" as that term is defined in Rule 501 promulgated under the
Securities Act.
(b) Seller is acquiring the Buyer Stock for investment for Seller's own
account, not as a nominee or agent, and not with a view to, or for resale in
connection with, any distribution thereof. Seller understands that the Buyer
Stock has not been, and will not be when issued, registered under the Securities
Act and is being issued pursuant to a specific exemption from the registration
provisions of the Securities Act, the availability of which depends upon, among
other things, the bona fide nature of the investment intent and the accuracy of
the representations expressed herein.
(c) Seller acknowledges that the Buyer Stock must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from such registration is available. Seller is aware of the provisions of Rule
145 promulgated under the Securities Act which permit limited resale of shares
received in certain private placements subject to the satisfaction of certain
conditions.
(d) Seller acknowledges that the certificates representing Buyer Stock
will bear a legend substantially as follows:
"The securities represented hereby have not been
registered under the Securities Act of 1933, as amended, and may
not be sold, transferred
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or otherwise disposed of except in accordance with the terms
thereof and unless registered with the Securities and Exchange
Commission of the United States and the securities regulatory
authorities of certain states or unless an exemption from
registration is available."
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
Buyer and Merger Sub hereby jointly and severally represent and warrant
to the Company and Sellers that:
5.01. ORGANIZATION AND EXISTENCE. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted. Buyer is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except for those jurisdictions where failure
to be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect. Buyer has heretofore delivered to the Company true and complete
copies of the corporate charter and bylaws of Buyer as currently in effect.
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, is recently
organized and has conducted no business activities other than as contemplated by
this Agreement.
5.02. CORPORATE AUTHORIZATION. The execution, delivery and performance
by Buyer and Merger Sub of this Agreement and the Ancillary Agreements to which
they are party and the consummation by Buyer and Merger Sub of the transactions
contemplated hereby and thereby are within the corporate powers of Buyer and
Merger Sub, respectively and have been duly authorized by all necessary
corporate action on the part of such party. Buyer's Board of Directors has
approved Buyer's execution of this Agreement and consummation of the
transactions contemplated hereby. This Agreement and the Ancillary Agreements to
which they are party have been duly executed and delivered by Buyer and Merger
Sub and constitute valid and binding agreements of Buyer and Merger Sub,
respectively.
5.03. GOVERNMENTAL AUTHORIZATION.
(a) The execution, delivery and performance by Buyer and Merger Sub of
this Agreement and the Ancillary Agreements to which they are party require no
action by or in respect of, or filing with, any governmental body, agency,
official or authority other than (i) compliance with any applicable requirements
of the HSR Act; and (ii) compliance with any applicable requirements of the 1934
Act.
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(b) No consent, approval, waiver or other action by any Person (other
than any governmental body, agency, official or authority referred to in (a)
above) under any contract, agreement, indenture, lease, instrument or other
document to which Buyer or Merger Sub is a party or by which it is bound is
required or necessary for the execution, delivery and performance of this
Agreement of the Ancillary Agreements to which they are party by Buyer and
Merger Sub or the consummation of the transactions contemplated hereby or
thereby.
5.04. NON-CONTRAVENTION. The execution, delivery and performance by
Buyer and Merger Sub of this Agreement and the Ancillary Agreements to which
they are party and the consummation by Buyer and Merger Sub of the transactions
contemplated hereby and thereby do not and will not (i) contravene or conflict
with the corporate charter or bylaws of Buyer or Merger Sub, (ii) assuming
compliance with the matters referred to in Section 5.03, contravene or conflict
with any provision of any law, regulation, judgment, injunction, order or decree
binding upon or applicable to Buyer or Merger Sub, (iii) violate, conflict with
or constitute a default under any material contract to which Buyer or Merger Sub
is a party or by which Buyer's or Merger Sub's property is bound, or (iv)
require the consent of any party to any material contract to which Buyer or
Merger Sub is a party or by which Buyer's or Merger Sub's property is bound.
5.05. FINDERS' FEES. There is no investment banker, broker, finder or
other intermediary that has been retained by or is authorized to act on behalf
of Buyer or Merger Sub who might be entitled to any fee or commission from the
Company, Sellers or any Affiliate thereof upon consummation of the transactions
contemplated by this Agreement.
5.06. PURCHASE FOR INVESTMENT. Buyer is acquiring the Shares for
investment for its own account and not with a view to, or for sale in connection
with, any distribution thereof.
5.07. LITIGATION. There is no action, suit, investigation or proceeding
pending against, or to the knowledge of Buyer or Merger Sub threatened against
or affecting, Buyer or any of its subsidiaries or any of their properties or
rights before any court or arbitrator or any governmental body, agency or
official which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated hereby.
5.08. BUYER STOCK. The Buyer Stock has been duly authorized and, when
issued in accordance with this Agreement, will be validly issued, fully paid and
nonassessable shares of Buyer's common stock, $0.125 par value per share, with
no personal liability attaching to the ownership thereof and will be free and
clear of all liens, charges, restrictions, claims and encumbrances imposed by or
through Buyer, except as may arise in connection with or be imposed as a result
of the transactions contemplated hereby.
5.09. CAPITALIZATION OF BUYER AND MERGER SUB. As of July 29, 2000, the
authorized capital stock of Buyer consists of 1 billion shares of common stock.
As of such date, 196,957,131 shares of Buyer Stock are issued and outstanding,
of which 23,516,330 shares of Buyer Stock are held in the treasury of Buyer, and
29,979,859 shares of Buyer Stock have been reserved for issuance upon exercise
of options granted or reserved for grant under Buyer's
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various stock option and stock purchase plans for its employees and
directors. All of the shares of Buyer Stock have the same voting and other
rights.
5.10. REPORTS AND FINANCIAL STATEMENTS. Since January 1, 1998, Buyer
has filed all forms, reports and documents with the Commission required to be
filed by it pursuant to the federal securities laws and the Commission rules and
regulations thereunder, and all such forms, reports and documents filed with the
Commission have complied in all material respects with all applicable
requirements of the federal securities laws and the Commission rules and
regulations promulgated thereunder. Buyer has heretofore made available to the
Company and Sellers, true and complete copies of its Form 10-K for the period
ended December 31, 1999 and its Quarterly Report on Form 10-Q for the period
ended March 31, 2000, and Buyer shall forward to Sellers true and correct copies
of all forms, reports, documents and amendments thereto filed by it with the
Commission after the date hereof prior to Closing all in the form (including
exhibits) so filed (collectively, the "REPORTS"). All forms, reports, documents,
amendments thereto and other filings filed by Buyer with the Commission,
including the Reports, prior to the date hereof are collectively referred to
herein as the "COMMISSION FILINGS". As of their respective dates, the Commission
Filings did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited financial statements of Buyer for its fiscal year
ended December 31, 1999, included in the Commission Filings (the "BUYER AUDITED
FINANCIAL STATEMENTS"), were prepared in accordance with generally accepted
accounting principles consistently applied and fairly present the consolidated
financial position of Buyer as of the dates thereof and the results of its
operations, shareholders' equity and cash flows for the period then ended. The
unaudited financial statements of Buyer for the three-month period ended March
31, 2000 included in the Commission Filings, have been prepared in accordance
with generally accepted accounting principles consistently applied and fairly
present the consolidated financial position of Buyer as of March 31, 2000 and
the results of operations, shareholders' equity and cash flows for the three
month period then ended in accordance with generally accepted accounting
principles consistently applied (subject, in the case of unaudited statements,
to the absence of footnote disclosure and in the case of unaudited interim
statements to year-end adjustments, which will not be material either
individually or in the aggregate).
5.11. ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as expressly
disclosed in the Reports filed since December 31, 1999, there has not been any
Material Adverse Change in the business, assets, condition (financial or
otherwise), or results of operation of Buyer.
5.12. FORM S-3 ELIGIBILITY. Buyer meets the "Registrant Requirements"
set forth in Instruction I.A. of the General Instructions for the use of Form
S-3 (Registration Statement under the Securities Act).
5.13 DOCUMENTS NOT MISLEADING. Neither this Agreement, including all
schedules and exhibits, nor the Ancillary Agreements delivered by Buyer or
Merger Sub to Seller and the Company contains any untrue statement of any
material fact or omits to state any material fact required to be stated in order
to make such statement or document not misleading.
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5.14 TAX REPRESENTATION LETTER. The representations of Buyer and Merger
Sub set forth in the representation letter set forth in SCHEDULE 5.14 will be
true and correct as of the Closing.
5.15 RELIANCE. The representations and warranties of The Company and
Sellers set forth in this Agreement, in the Disclosure Schedule and the Update,
and in any certificate or other writing delivered by The Company or Sellers
pursuant hereto, constitute all of the representations and warranties of the
Company and Sellers upon which the Buyer and the Merger Sub have relied in
entering into and performing this Agreement.
ARTICLE VI
COVENANTS OF THE COMPANY AND SELLERS
The Company and each Seller agree that:
6.01. CONDUCT OF THE COMPANY. From the date hereof until the Closing
Date, the Company shall conduct its business in the ordinary course consistent
with past practices and use commercially reasonable efforts to preserve intact
its business organization and relationships with third parties and keep
available the services of its present officers and employees. If requested by
Buyer, the Company will confer on a regular and frequent basis with
representatives of Buyer to report operational matters of a material nature and
to report on the general status of the Company's ongoing operations. Without
limiting the generality of the foregoing, from the date hereof until the Closing
Date, the Company will not:
(a) adopt or propose any change in its corporate charter or
bylaws;
(b) merge or consolidate with any other Person or acquire
assets of the business of any other Person for a purchase price in
excess of $10,000;
(c) sell, lease, license, encumber or otherwise dispose of any
assets or property except (i) pursuant to existing contracts or
commitments and (ii) in the ordinary course consistent with past
practices;
(d) take any action that would adversely affect the parties'
ability to account for the transaction contemplated by this Agreement
as a "pooling of interests" in accordance with United States generally
accepted accounting principles, as acceptable to the Commission or pay
any dividend or make any other distribution of cash, shares or property
other than distributions that do not exceed, in the aggregate, the Tax
Distribution Amount;
(e) grant any bonus, severance or termination pay to any
officer, director or independent contractor or, except in the ordinary
course of business consistent with past practices, to any employee of
the Company;
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(f) other than in the ordinary course of business consistent
with prior practice, enter into or terminate any contracts,
arrangements, plans, agreements, leases, licenses, franchises, permits,
indentures, authorizations, instruments, or commitments, or amend or
otherwise change in any material respect the terms thereof in a manner
adverse to the Company;
(g) modify in any material respect existing discounts or other
terms and conditions with dealers, distributors and other resellers of
the Company's products or services in a manner adverse to the Company;
(h) incur any indebtedness for borrowed money by way of direct
loan, sale of debt securities, purchase money obligation, conditional
sale, guarantee or otherwise;
(i) adopt or amend, or modify in any material respect, any
Employee Plan or Benefit Arrangement or pay any pension, other
retirement benefit not required by any existing Employee Plan or
Benefit Arrangement; enter into or modify any employment or severance
contracts, increase the salaries, wage rates or fringe benefits of its
officers, directors or employees;
(j) make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into
any closing agreement, settle any claim or assessment in respect of
Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes; or
(k) agree or commit to do any of the foregoing.
The Company will not (i) take or agree or commit to take any action that would
make any representation and warranty of the Company or Sellers under this
Agreement on the date of its execution and delivery inaccurate in any material
respect at, or as of any time prior to, the Closing Date or (ii) omit or agree
or commit to omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any respect at any such
time.
6.02. ACCESS TO INFORMATION. From the date hereof until the Closing
Date, Sellers and the Company (a) will give Buyer, its counsel, financial
advisors, auditors and other authorized representatives full access to the
offices, properties, books and records of the Company, (b) will furnish Buyer's
counsel, financial advisors, auditors and other authorized representatives such
financial and operating data and other information relating to the Company as
such Persons may reasonably request, and (c) will instruct the employees,
counsel and financial advisors of the Company to cooperate with Buyer in its
investigation of the Company; PROVIDED that no investigation pursuant to this
Section shall affect any representation or warranty given by the Company or
Sellers hereunder.
6.03. NOTICES OF CERTAIN EVENTS. From the date hereof until the Closing
Date, the Company will promptly notify Buyer of:
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(i) any notice from any Person alleging that the consent of
such Person is or may be required in connection with the transactions
contemplated by this Agreement;
(ii) any notice from any governmental or regulatory agency or
authority in connection with the transactions contemplated by this
Agreement;
(iii) any actions, suits, claims or proceedings commenced or,
to its Knowledge, any of the foregoing threatened or any investigation
commenced against the Company or that relate to the consummation of the
transactions contemplated by this Agreement; and
(iv) any event which would or reasonably could be expected to
render any representation or warranty of Company or a Seller untrue or
inaccurate in any material respect or would or might cause Company or a
Seller to fail to comply with its obligations hereunder in any material
respect.
6.04. RESIGNATIONS. The Company will deliver to Buyer the resignations
of all officers and directors of the Company from their positions with the
Company at or prior to the Closing Date, unless otherwise specified by Buyer.
6.05. NONCOMPETITION; NONSOLICITATION.
(a) Sellers each, severally and not jointly, agree that for a period of
three (3) full years from the Closing Date, neither they nor any of their
Affiliates shall:
(i) own, manage, operate, join, control, be employed or
retained by or participate in (including permitting such Sellers' name
or business name to be associated with) any business that competes with
the business of the Company as it exists on the Closing Date ("Engage
in Competition"), directly or indirectly, or derive any financial
benefits whatsoever from, or be an officer, director, employee,
employer, partner, joint venturer, agent, consultant, member, managing
member, independent contractor or shareholder of, any business which
Engages in Competition, or renders assistance or advice for which
Sellers, or an Affiliate of Sellers, receives any financial
remuneration, directly or indirectly, to any person, firm or enterprise
which it so engages; provided, however, that no Seller shall be in
violation of this covenant solely by reason of his ownership of less
than five percent (5%) of the outstanding stock of a Person, so long as
such Seller has no active participation in the management or business
of such Person; or
(ii) approach, solicit or accept business from, or otherwise
do business or communicate in any way with any customer, supplier,
licensee, sales representative, distributor, dealer, manufacturer,
vendor, consultant or other business relation (collectively
"CUSTOMERS") of Buyer or its Affiliates thereof with respect to any
activity which constitutes Engaging in Competition or induce or attempt
to induce any Customers of Buyer or its Affiliates to cease doing
business with Buyer or its Affiliates.
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(b) For the purposes of Section 6.05(a) of this Agreement, a business
or other commercial entity "Engaging in Competition" shall mean a company,
business, or entity whose products or services are similar in function or
capability or otherwise directly competitive to the products or services being
designed, conceived, developed, marketed, manufactured, distributed, provided or
sold by the Company as of the Closing Date, including printed circuit boards and
back panels.
(c) Sellers each, severally and not jointly, further agree that for a
period of five (5) full years from the Closing Date, neither they nor any of
their Affiliates shall:
(i) solicit, induce or attempt to induce any person who is
then in the employ of or an independent contractor with Buyer or its
Affiliates to leave the employ of, or terminate his/her or its
contractual relationship with Buyer or its Affiliates, or in any way
interfere with the relationship between Buyer or its Affiliates and any
such employee or independent contractor, or employ or attempt to employ
directly or through another entity any such person or in an activity
which constitutes Engaging in Competition, or approach any such
employee or independent contractor for any of the foregoing purposes;
(ii) aid, assist or counsel any other Person to do any of
the above; or
(iii) engage in a course of conduct for the purpose of
circumventing the provisions of this Section.
(d) Sellers hereby agree that each provision and the subparts of each
provision herein shall be treated as separate and independent clauses, and the
unenforceability of any one clause shall in no way impair the enforceability of
any of the other clauses in this Section. Moreover, if one or more of the
provisions contained in this Section shall for any reason be held to be
excessively broad as to scope, activity, subject or otherwise so as to be
unenforceable at law, such provision or provisions shall be construed by the
appropriate judicial body by limiting or reducing it or them, so as to be
enforceable to the maximum extent compatible with the applicable law as it shall
then appear. Sellers hereby further agree that the language of all parts of this
Section shall in all cases be construed as a whole according to its fair meaning
and not strictly for or against either of the parties. Any waiver by the Buyer
of a breach of any provision of this Section shall not operate or be construed
as a waiver of any subsequent breach of such provision or any other provision
hereof.
(e) Sellers' obligations under this Section shall be binding upon their
heirs, executors, administrators and legal representatives.
(f) Sellers agree that any breach of this Section by them will cause
irreparable damage to the Buyer and that in the event of such breach the Buyer
shall have, in addition to any and all remedies of law, the right to an
injunction, specific performance or other equitable relief to prevent the
violation of Sellers obligations hereunder. The Buyer may apply for such
injunctive relief in any court of competent jurisdiction without the necessity
of posting any bond or other security. Buyer agrees that before pursuing any of
its remedies for breach by a Seller of this
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Section 6.05, it shall give such Seller written notice of such breach and
30 days to cure such breach to the reasonable satisfaction of Buyer.
6.06. CONFIDENTIALITY. The Company, and Sellers and their Affiliates,
will hold, and will use their best efforts to cause their respective officers,
directors, employees, accountants, counsel, consultants, advisors and agents to
hold, in confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law, all confidential documents and
information concerning Buyer or Merger Sub furnished to the Company, or to
Sellers or their Affiliates, in connection with the transactions contemplated by
this Agreement, and all confidential documents and information concerning the
Company, except to the extent that such information can be shown to have been
(i) previously known on a nonconfidential basis by Sellers, (ii) in the public
domain through no fault of Sellers or (iii) later lawfully acquired by Sellers
from sources other than the Company or Buyer; PROVIDED that the Company and
Sellers may disclose such information to their respective officers, directors,
employees, accountants, counsel, consultants, advisors and agents in connection
with the transactions contemplated by this Agreement so long as such persons are
informed by the Company and Sellers of the confidential nature of such
information and are directed by the Company and Sellers to treat such
information confidentially. The obligation of the Company, and Sellers and their
Affiliates, to hold any such information in confidence shall be satisfied if
they exercise the same care with respect to such information as they would take
to preserve the confidentiality of their own similar information. If this
Agreement is terminated, the Company, and Sellers and their Affiliates, will,
and will use their best efforts to cause their respective officers, directors,
employees, accountants, counsel, consultants, advisors and agents to, destroy or
deliver to Buyer, upon request, all documents and other materials, and all
copies thereof, obtained by the Company, or by Sellers or their Affiliates, or
on their behalf from Buyer in connection with this Agreement that are subject to
such confidence.
6.07. CONTINUING DISCLOSURE. From the date hereof until the Closing
Date, the Company and Sellers shall have the continuing obligation promptly to
advise Buyer with respect to any matter hereafter arising or discovered that, if
existing or known at the date of this Agreement, would have been required to be
set forth or described in a schedule to this Agreement, or that constitutes a
breach or prospective breach of this Agreement by the Company or a Seller;
provided, however that Buyer shall have no remedy to the extent Buyer is
notified of any such matter prior to Closing and subsequently waives such matter
in writing.
6.08. STOCKHOLDER APPROVAL. To the extent required, each Seller in his
capacity as a stockholder agrees to support and to vote all of such Seller's
shares of Company Common Stock for the approval of this Agreement and the
Ancillary Agreements.
6.09. EXCLUSIVITY; ACQUISITION PROPOSALS. Unless and until this
Agreement will have been terminated by either party pursuant to Article XII
hereof and thereafter subject to Section 12.02, neither the Company nor any
Seller will (and each will use its reasonable best efforts to ensure that none
of its officers, directors, agents, representatives or affiliates) take or cause
or permit any Person to take, directly or indirectly, any of the following
actions with any party other than Buyer and its designees: (i) solicit,
encourage, initiate or participate in any negotiations,
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inquiries, or discussions with respect to any offer or proposal to acquire
all or any significant part of the Company's business, assets or capital
stock, whether by merger, consolidation, other business combination, purchase of
assets, tender or exchange offer or otherwise (each of the foregoing, an
"ACQUISITION TRANSACTION"), (ii) disclose, in connection with an Acquisition
Transaction, any information not customarily disclosed to any Person other than
Buyer or its representatives concerning the Company's business or properties or
afford to any Person other than Buyer or its representatives access to its
properties, books, or records, except in the ordinary course of business and as
required by law or pursuant to a governmental request for information, (iii)
enter into or execute any binding or non-binding letter of intent, memorandum of
understanding or other document or agreement relating to an Acquisition
Transaction. In the event that the Company or a Seller is contacted by any third
party expressing an interest in discussing an Acquisition Transaction, the
Company or such Seller will promptly notify Buyer of such contact and the
identity of the party so contacting the Company or such Seller.
6.10. THE DISCLOSURE SCHEDULE. As soon as practicable, but in no event
later than 5:00 PM Eastern Time on August 4, 2000, the Company and Sellers shall
deliver to Buyer the Disclosure Schedule and all schedules and exhibits to be
attached thereto. The Disclosure Schedule shall: (a) contain accurate, true,
correct and complete information and data; (b) be executed by the Company and
Sellers and dated the date of this Agreement; (c) be deemed to modify the
representations, warranties and obligations of the Company and Sellers made
pursuant to Articles III ,IV and IX of this Agreement, or constitute
qualifications or exceptions thereto; and (d) be updated, amended and
supplemented, as appropriate through the final Update. Terms used and defined in
this Agreement shall have the same definition when used in the Disclosure
Schedule and the Update and the schedules and exhibits attached thereto.
The Update and all schedules and exhibits thereto shall include all
information relevant to the disclosures therein which relates to events which
have occurred after the date of the Disclosure Schedule until the Closing Date,
and Sellers shall deliver a draft of the Update to Buyer at least five (5) days
prior to the Closing Date and shall deliver the final Update to Buyer on the
Closing Date. The Update shall contain accurate, true, correct and complete
information and data and shall also be deemed to modify the representations,
warranties and obligations of the Company and Sellers made pursuant to Articles
III, IV and IX of this Agreement, or constitute qualifications or exceptions
thereto.
As soon as practicable and in any event within seven (7) business days
after its receipt of the Disclosure Schedule, Buyer shall give Company and
Sellers notice if, on the basis of any information contained in the Disclosure
Schedule or any schedules or exhibits thereto, or of any information obtained
during the course of Buyer's own investigation through that date, it has
determined that it wishes to terminate this Agreement. Such notice shall specify
the information contained in the Disclosure Schedule, or any schedules or
exhibits thereto, or obtained during such investigation which is the basis for
such decision. The Company and Sellers shall have three (3) business days to
review with Buyer such information, and if Buyer does not withdraw its notice by
the end of such three (3) business day period, then all further obligations of
Buyer and of the Company and Sellers shall terminate without further liability
of Buyer to Sellers or of Company and Sellers to Buyer, subject, however, to the
obligations of
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the parties under Section 12.02. If Buyer does not advise Company and Sellers
within seven (7) business days after its receipt of the Disclosure
Schedule that it wishes to terminate the Agreement, Buyer shall be deemed to
have been satisfied with the information relating to the Company and Sellers
contained in the Disclosure Schedule, any schedules or exhibits thereto and any
information obtained during the course of Buyer's investigation.
6.11. REPAYMENT OF LOAN. Following the Closing Date but prior to
January 31, 2001, each Seller shall repay to the Company, by certified check or
wire transfer, the loan to such Seller from the Company in the principal amount
set forth on SCHEDULE 6.11 hereto. If any Seller shall fail to repay such amount
on or before such date, the parties acknowledge that Buyer shall have the right
to proceed directly against such Seller to recover such amount.
ARTICLE VII
COVENANTS OF BUYER
Buyer agrees that:
7.01. CONFIDENTIALITY. Prior to the Closing Date and after any
termination of this Agreement, Buyer and its Affiliates will hold, and will use
their best efforts to cause their respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
Company and the Subsidiaries furnished to Buyer or its Affiliates in connection
with the transactions contemplated by this Agreement, except to the extent that
such information can be shown to have been (i) previously known on a
nonconfidential basis by Buyer, (ii) in the public domain through no fault of
Buyer or (iii) later lawfully acquired by Buyer from sources other than the
Company or its Subsidiaries; PROVIDED that Buyer may disclose such information
to its officers, directors, employees, accountants, counsel, consultants,
advisors and agents in connection with the transactions contemplated by this
Agreement so long as such Persons are informed by Buyer of the confidential
nature of such information and are directed by Buyer to treat such information
confidentially. The obligation of Buyer and its Affiliates to hold any such
information in confidence shall be satisfied if they exercise the same care with
respect to such information as they would take to preserve the confidentiality
of their own similar information. If this Agreement is terminated, Buyer and its
Affiliates will, and will cause their respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents to, destroy or deliver to
Seller, upon request, all documents and other materials, and all copies thereof,
obtained by Buyer or its Affiliates or on their behalf from a Seller, the
Company or the Subsidiaries in connection with this Agreement that are subject
to such confidence.
7.02. REGISTRATION ON AND EFFECTIVENESS OF FORM S-3. Promptly following
the Closing, at the expense of Buyer, Buyer shall file a registration statement
on Form S-3 (the "REGISTRATION STATEMENT") to register the Buyer Stock. Buyer
shall use commercially reasonable efforts to cause the Registration Statement to
become effective (but in no event prior to expiration of any
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lock-up period required in order for the transactions contemplated hereby
to be accounted for as a "pooling of interests") and to remain effective
until the earlier to occur of (i) two years from the date such Registration
Statement first becomes effective, and (ii) such time as all Buyer Stock has
been sold. Buyer shall use commercially reasonable efforts to take all
reasonable and customary actions in connection with the filing and effectiveness
of the Registration Statement (including but not limited to the delivery of
prospectuses, compliance with blue sky and notice of any suspension of the
Registration Statement) to enable Sellers to sell the Buyer Stock. The
Registration Statement shall comply in all material respects with all applicable
requirements of the federal securities laws and the Commission rules and
regulations promulgated thereunder.
7.03 NOTICES OF CERTAIN EVENTS. From the date hereof until the Closing
Date, Buyer will promptly notify the Company and Sellers of any event occurring
subsequent to the date of this Agreement which would or might render any
representation or warranty of Buyer or Merger Sub untrue or inaccurate in any
material respect or would or reasonably could be expected to cause Buyer or
Merger Sub to fail to comply with its obligations hereunder in any material
respect.
7.04 CONTINUITY OF BUSINESS ENTERPRISE. Buyer will cause the Company to
continue its historic business or use a significant portion of its historic
business assets in a business.
ARTICLE VIII
COVENANTS OF ALL PARTIES
The parties hereto agree that:
8.01. BEST EFFORTS. Subject to the terms and conditions of this
Agreement, each party will use its commercially reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary or desirable under applicable laws and regulations to consummate the
transactions contemplated by this Agreement; provided, however, that no party
shall be required to appeal in a court of law any denial of regulatory approval,
to commence any litigation, or to agree to conditions that may be burdensome to
such party in its reasonable discretion in order to obtain any such approval.
Merger Sub, Sellers and Buyer each agree, and Sellers, prior to the Closing, and
Buyer, after the Closing, agree to cause the Company, to execute and deliver
such other documents, certificates, agreements and other writings and to take
such other actions as may be necessary or desirable in order to consummate or
implement expeditiously the transactions contemplated by this Agreement.
8.02. CERTAIN FILINGS. The Company, Merger Sub, Sellers and Buyer shall
cooperate with each other (a) in determining whether any action by or in respect
of, or filing with, any governmental body, agency, official or authority is
required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement and (b) in
taking such
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actions or making any such filings, furnishing information required in
connection therewith and seeking timely to obtain any such actions, consents,
approvals or waivers.
8.03. PUBLIC ANNOUNCEMENTS. The parties agree to consult with each
other before issuing any press release or making any public statement with
respect to this Agreement or the transactions contemplated hereby and, except as
may be required by applicable law or any listing agreement with any national
securities exchange, will not issue any such press release or make any such
public statement prior to such consultation.
8.04. POOLING.
(a) Each party will use all reasonable best efforts, will cooperate
fully and will take all actions as are reasonably necessary to allow the
transaction contemplated by this Agreement to be accounted for as a "pooling of
interests" in accordance with United States generally accepted accounting
principles which will be acceptable to the Commission.
(b) Each SELLER has executed and delivered to Buyer a written agreement
(an "AFFILIATE AGREEMENT") in the form of EXHIBIT B hereto to the effect that
such Seller (i) has not made and will not make any disposition of any shares of
Company Common Stock or other securities of the Company in the 30-day period
prior to the Closing Date, and (ii) will not make any disposition of any of the
Buyer Stock to be received by such Person after the Closing Date until Buyer
shall have publicly released a report including the combined financial results
of Buyer and the Company for a period of at least 30 days of combined operations
of Buyer and the Company.
8.05. TAX MATTERS. (a) In the event that it is determined by a finding
or order in connection with any governmental or judicial audit or proceeding,
including any settlement of such a proceeding to which any of the parties hereto
are parties that the Company's S corporation election pursuant to Section 1362
of the Code was not validly in effect for any period after such election was
purportedly made, then the Sellers shall promptly remit to Buyer in cash any
federal, state and/or local Tax liability (including any penalties, additions to
Tax or interest assessed with respect thereto) of the Company in connection with
Taxes that are imposed on the Company or Buyer as a result of such invalid
election. Such payment shall be made within 15 days after the date such Tax
liability has been so determined. The obligations to remit such cash to Buyer as
described in this Section shall be treated as separate from the Sellers' other
indemnification obligations hereunder and in addition to amounts that may be
owed to Buyer under the Escrow Agreement. Notwithstanding anything to the
contrary contained in this Agreement or in the Escrow Agreement, the provisions
of this Section shall survive the termination of the Escrow Agreement and shall
remain in effect as personal obligations of the Sellers until the applicable
statutes of limitations shall have expired.
(b) Sellers and Buyer shall engage PricewaterhouseCoopers ("PWC") to
prepare for filing by the Company all S Corporation Tax Returns (for federal
income tax purposes and for comparable state or local income tax purposes) for
all periods ending prior to or on the Closing Date which are filed after the
Closing Date. Such Tax Returns shall be prepared on a basis
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consistent with reasonable past practice, subject to compliance with
applicable law including all Tax rules and regulations. Sellers and Buyer shall
each review drafts of such Tax Returns and may provide comments, which shall be
reflected in the final Tax Returns to be filed to the extent agreed upon by all
parties. Any disputes between Sellers and Buyer shall be resolved through
consultation with PWC or, in the absence of resolution through such process,
shall be resolved by an independent accounting firm chosen by mutual agreement
of Sellers and Buyer. Sellers and Buyer shall take all actions necessary and in
a timely fashion to ensure that the Company shall meet its obligations to file
such Tax Returns on a timely basis. Sellers shall include any income, gain,
loss, deduction, or other tax items for such periods on their Tax Returns in a
manner consistent with the Schedule K-1s (or comparable state or local
materials) furnished by the Company to Sellers for such periods in accordance
with the S Corporation Tax Returns.
(c) If it is determined, based upon the foregoing, that the Company's
distributions to Sellers with respect to their Shares during the Stub Period and
through the Closing Date are greater or lesser than the actual S Corporation Tax
Liability, then as the case may be: (i) Sellers shall promptly pay to Buyer, on
behalf of the Company, the amount of such distributions in excess of the S
Corporation Tax Liability, if any; and (ii) Buyer shall promptly cause the
Company to pay to Sellers the amount by which such distributions are less than
the S Corporation Tax Liability.
(d) Buyer shall not file or cause to be filed an amended Tax Return for
periods ending prior to or on the Closing Date except (i) with the approval of
the Sellers, which shall not be unreasonably withheld, (ii) if the previously
filed Tax Return for any such period or periods is contrary to law, including
applicable Tax rules and regulations, or (iii) if PWC (or an alternative
accounting firm selected in accordance with the procedure described in Section
8.05(b)) determines that such amendment is necessary to reasonably reflect the
interests of the parties in accordance with this Agreement.
(e) (i) Buyer, the Company, and Sellers shall cooperate fully, as and
to the extent reasonably requested by the other party, in connection with the
filing of Tax Returns pursuant to this Section and any audit, litigation, or
other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information and access to relevant personnel of the other party which are
reasonably relevant to any such audit, litigation or other proceeding. The
Company and Sellers agree to retain all books and records with respect to Tax
matters pertinent to the Company relating to any taxable period beginning before
the Closing Date until the expiration of the statute of limitations (and, to the
extent notified by Buyer or Sellers, any extensions thereof) of the respective
taxable periods, and to abide by all record retention agreements entered into
with any Tax Authority. (ii) Buyer will not take any action in connection with
any audit, litigation, or other proceeding encompassing a period covered by an S
Corporation Tax Return that would be inconsistent with the reasonable interests
of the Sellers in accordance with this Agreement. Any dispute between Buyer and
the Sellers in connection with matters subject to this subsection (d)(ii) shall
be resolved through consultation with PWC (or an alternative accounting firm
selected in accordance with the procedure described in Section 8.05(b)). In the
event the parties are unable to resolve any
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claim by or dispute with a Tax Authority in the manner described herein,
the parties will follow the procedures set forth in Section 11.03.
(f) Buyer, Sellers, and the Company agree to treat and report the
Merger as a reorganization within the meaning of Section 368(a) of the Code
("Reorganization"), subject to applicable law including all tax rules and
regulations. Each party agrees to use its reasonable best efforts to take such
actions as reasonably required to achieve treatment of the Merger as a
Reorganization and to refrain from taking such actions as would reasonably be
expected to jeopardize the status of the Merger as a Reorganization.
Notwithstanding these covenants, no party shall be viewed as providing any
assurances to any other party with respect to the Tax status or consequences of
the Merger or any related transaction.
ARTICLE IX
EMPLOYEE BENEFITS
AND EMPLOYEE MATTERS
9.01. EMPLOYEE BENEFITS DEFINITIONS. The following terms, as used
herein, having the following meanings:
"BENEFIT ARRANGEMENT" means each employment, severance or other similar
contract, arrangement or policy (written or oral) and each plan or arrangement
(written or oral) providing for severance benefits, insurance coverage
(including any self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, retirement
benefits or for deferred compensation, profit-sharing, bonuses, stock options,
stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (i) is not an Employee
Plan, (ii) is entered into, maintained or contributed to, as the case may be, by
the Company or any of its ERISA Affiliates and (iii) covers any employee or
former employee of the Company.
"EMPLOYEE PLANS" means each "employee benefit plan", as such term is
defined in Section 3(3) of ERISA, that (i) is subject to any provision of ERISA
and (ii) is maintained or contributed to by the Company or any of its ERISA
Affiliates, as the case may be.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" of any entity means any other entity that, together
with such entity, would be treated as a single employer under Section 414 of the
Code.
"MULTIEMPLOYER PLAN" means each Employee Plan that is a multiemployer
plan, as defined in Section 3(37) of ERISA.
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9.02. ERISA REPRESENTATIONS. The Company and each Seller, jointly and
severally, hereby represent and warrant to Buyer that:
(a) The Company has provided Buyer with complete salary, service and
related data as of the most recent practicable date for employees of the
Company.
(b) SCHEDULE 9.02 lists each Employee Plan that covers any employee of
the Company, copies of all of which have previously been furnished to Buyer.
With respect to each Employee Plan, the Company has provided the most recently
filed Form 5500 an accurate summary description of such plan; and if applicable,
each ERISA bond, excise tax returns, most recent actuarial and other financial
or testing reports, insurance documents, other funding and investment contracts,
form of COBRA notices and elections, and form of HIPAA notices.
(c) SCHEDULE 9.02 also includes a list of each Benefit Arrangement of
the Company, copies of which have been made furnished previously to Buyer.
(d) None of the Employee Plans or Benefit Arrangements listed on
SCHEDULE 9.02 covers any non-United States employee or former employee of the
Company.
(e) No non-exempt "prohibited transaction", as defined in Section 406
of ERISA or Section 4975 of the Code, has occurred with respect to any Employee
Plan.
(f) No Employee Plan is a Multiemployer Plan. With respect to any
Employee Plan that is subject to Title IV of ERISA, during the six-year period
prior to the date on which this representation is made or deemed made with
respect to any such Employee Plan, no "accumulated funding deficiency" (within
the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred, no
termination has occurred nor has any lien in favor of the PBGC or a Plan arisen,
during such six-year period and the present value of all accrued benefits under
each such Employer Plan (on a plan termination basis) did not, as of the last
annual valuation date prior to the date on which this representation is made or
deemed made, exceed the value of the assets of such Plan allocable to such
accrued benefits. The Company and its Affiliates have not incurred nor do they
reasonably expect to incur any liability under Title IV or ERISA arising in
connection with the termination of any plan covered or previously covered by
Title IV of ERISA.
(g) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the period
from its adoption to date, and each trust forming a part thereof is exempt from
tax pursuant to Section 501(a) of the Code. The Company has furnished to Buyer
copies of the most recent Internal Revenue Service determination letters with
respect to each such plan. Each Employee Plan has been maintained in compliance
with its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations, including but not limited to ERISA and the Code,
which are applicable to such plan.
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(h) Each Benefit Arrangement has been maintained in substantial
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations which are applicable to such Benefit
Arrangement.
(i) With respect to the employees and former employees of the Company,
there are no employee post-retirement medical or health plans in effect, except
as required by Section 4980B of the Code or similar state law.
(j) All contributions and payments required to be made by the Company
under each Employee Plan and Benefit Arrangement, determined in accordance with
prior funding and accrual practices, as adjusted to include proportional
accruals for the period ending on the Closing Date, will be discharged and paid
on or prior to the Closing Date except to the extent (i) reflected on the
Closing Balance Sheet. Except as disclosed in writing to Buyer prior to the date
hereof, there has been no amendment to, written interpretation of or
announcement (whether or not written) by Seller or any of its ERISA Affiliates
relating to, or change in employee participation or coverage under, any Employee
Plan or Benefit Arrangement that would increase materially the expense of
maintaining such Employee Plan or Benefit Arrangement above the level of the
expense incurred in respect thereof for the fiscal year ended prior to the date
hereof.
(k) There is no contract, agreement, plan or arrangement covering any
employee or former employee of the Company that, individually or collectively,
could give rise to the payment of any amount that would not be deductible
pursuant to the terms of Section 280G of the Code.
(l) No tax under Sections 4980B or 4980D of the Code has been incurred
in respect of any Employee Plan that is a group health plan, as defined in
Section 5000(b)(1) of the Code.
(m) No employee of the Company will become entitled to any bonus,
retirement, severance or similar benefit or enhanced benefit solely as a result
of the transactions contemplated hereby.
9.03. NO THIRD PARTY BENEFICIARIES. No provision of this Article IX
shall create any third party beneficiary or other rights in any employee or
former employee (including any beneficiary or dependent thereof) of the Company
in respect of continued employment (or resumed employment) with the Company and
no provision of this Article IX shall create any such rights in any such Persons
in respect of any benefits that may be provided, directly or indirectly, under
any Employee Plan or Benefit Arrangement or any plan or arrangement that may be
established by Buyer or any of its Affiliates. No provision of this Agreement
shall constitute a limitation on rights to amend, modify or terminate after the
Closing Date any Employee Plan or Benefit Arrangement. Buyer shall indemnify,
defend and hold the Company and Sellers harmless from any claims made by any
Person employed by the Company at the Closing Date arising from actions taken by
the Buyer subsequent to the Closing Date. The Buyer shall pay for and have
complete control of and discretion in prosecuting the defense and/or settlement
of any
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such claims. The limitations on Buyer's indemnification obligations set
forth in Section 11.02(c) shall be inapplicable to Buyer's indemnification
obligations under this Section 9.03.
ARTICLE X
CONDITIONS TO CLOSING
10.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of
Buyer, the Company and Sellers to consummate the Closing are subject to the
satisfaction of the following conditions:
(a) Any applicable waiting period under the HSR Act relating
to the transactions contemplated hereby shall have expired or been terminated.
(b) No proceeding challenging this Agreement or the
transactions contemplated hereby or seeking to prohibit, alter, prevent or
materially delay the Closing shall have been instituted by any Person before any
court, arbitrator or governmental body, agency or official and be pending.
(c) Each other party to this Agreement shall have executed and
delivered each of the Ancillary Agreements to be entered into by it at Closing,
in each case substantially in the form attached as an exhibit to this Agreement.
(d) All actions by or in respect of or filings with any governmental
body, agency, official or authority required to permit the consummation of the
Closing shall have been obtained.
10.02. CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to
consummate the Closing is subject to the satisfaction of the following further
conditions:
(a)(i) the Company and each Seller shall have performed in all material
respects all of his or its obligations hereunder required to be performed on or
prior to the Closing Date, (ii) the representations and warranties of the
Company and each Seller contained in this Agreement at the time of its execution
and delivery and in the Disclosure Schedule and the Update, and in any
certificate or other writing delivered by the Company or a Seller pursuant
hereto shall be true and correct in every material respect at and as of the
Closing Date as if made at and as of such date and (iii) Buyer shall have
received a certificate signed by the President of the Company and by each Seller
to the foregoing effect.
(b) No court, arbitrator or governmental body, agency or official shall
have issued any order, and there shall not be any statute, rule or regulation,
restraining the effective operation by Buyer of the business of the Company
after the Closing Date.
(c) Buyer shall have received an opinion of Sellers' Counsel, dated the
Closing Date, acceptable to Buyer and its counsel.
(d) Each Seller shall have executed and delivered an Affiliate
Agreement.
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(e) The Company shall have received all consents, authorizations or
approvals from the governmental agencies referred to in Section 3.03(a), in each
case in form and substance reasonably satisfactory to Buyer, and no such
consent, authorization or approval shall have been revoked.
(f) Buyer and the Company shall have each received an unqualified
written opinion from their respective independent accountants, to the effect
that such accountants concur that no condition exists that would preclude Buyer
from accounting for the transaction contemplated by this agreement as a "pooling
of interests" under applicable rules and regulations of the Commission.
(g) All stockholders of the Company shall have voted in favor of, or
consented to in writing, the consummation of the transactions contemplated
hereby.
(h) Buyer shall have received all other closing documents specified in
Section 2.03 of this Agreement and all other closing documents that it may
reasonably request, all in form and substance reasonably satisfactory to Buyer.
(i) The Company's Board of Directors will have passed and not rescinded
resolutions satisfactory to Buyer's counsel effectively terminating the
Company's 401(k) Plan immediately prior to the Closing.
(j) Buyer shall have received a written statement confirming the total
amount(s) distributed to Sellers with respect to their Shares during the Stub
Period through the Closing Date , itemized by Seller, amount of distribution and
distribution date, which amount shall not exceed the S Corporation Tax
Liability, determined to the Knowledge of Sellers. Such written statement shall
also set forth the basis for the determination of the S Corporation Tax
Liability.
(k) The Company shall have either (i) delivered to Buyer a properly
executed statement satisfying the requirements of Treasury Regulation Sections
1.897-2(h) and 1.1445-2(c)(3) in a form reasonably acceptable to Buyer or (ii)
caused each of the Sellers to have executed and delivered to Buyer certificates
of non-foreign status satisfying the requirements of Treasury Regulations
Section 1.1445-2(b).
(l) Simultaneously with the Closing, Buyer shall have purchased all of
the outstanding shares of Perception Laminates, Inc.
(m) Buyer shall have received from the Company and Sellers the Update,
and any material additions or changes to the Disclosure Schedules set forth in
the Update shall be in form and substance acceptable to Buyer in its sole
discretion.
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10.03. CONDITIONS TO OBLIGATION OF SELLERS. The obligation of Sellers
to consummate the Closing is subject to the satisfaction of the following
further conditions:
(a)(i) Each of Buyer and Merger Sub shall have performed in all
material respects all of its obligations hereunder required to be performed by
it at or prior to the Closing Date, (ii) the representations and warranties of
each of Buyer and Merger Sub contained in this Agreement at the time of its
execution and delivery and in any certificate or other writing delivered by such
party pursuant hereto shall be true and correct in every material respect at and
as of the Closing Date as if made at and as of such date and (iii) Sellers shall
have received a certificate signed by the Vice President and Treasurer of Buyer
to the foregoing effect.
(b) Sellers shall have received an opinion of Buyer's Counsel, dated
the Closing Date, satisfactory to Sellers and their counsel.
(c) Sellers shall have received all items specified in Section 2.02 of
this Agreement and all other closing documents that they may reasonably request,
all in form and substance reasonably satisfactory to them.
(d) Sellers shall have received an opinion of Luce, Forward, Hamilton &
Scripps, LLP to the effect, among other matters, that no gain or loss will be
recognized for federal income tax purposes by a Seller as a result of the
transfer of such Seller's shares in the Company in exchange for shares of Buyer
stock.
ARTICLE XI
SURVIVAL; INDEMNIFICATION
11.01. SURVIVAL. The covenants, agreements, representations and
warranties of the parties hereto contained in this Agreement or in any
certificate or other writing delivered pursuant hereto or in connection herewith
shall survive the Closing until the first anniversary of the Closing Date or (i)
in the case of Sections 6.05 and 7.02, for the period set forth therein, (ii) in
the case of Sections 6.06 and 7.01, indefinitely, (iii) in the case of the items
set forth in Section 11.02(f), for the periods set forth therein, and (iv) in
the case of the covenants, agreements, representations and warranties contained
in Sections 3.17 and 8.05, until the expiration of the applicable statutory
period of limitations (giving effect to any waiver, mitigation or extension
thereof), if later. No claim for indemnity under this Agreement with respect to
any breach of any representations, warranties and/or covenants of Company and/or
Sellers shall be made after the applicable period specified in the preceding
sentence and all such claims shall be made in accordance with the applicable
provisions of the Escrow Agreement.
11.02. INDEMNIFICATION.
(a) Each Seller, jointly and severally, hereby indemnifies Buyer and
Merger Sub and, effective at the Closing, without duplication, the Company
against and agrees to hold them
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harmless from any and all damage, loss, liability and expense (including
without limitation reasonable expenses of investigation and reasonable
attorneys' fees and expenses in connection with any action, suit or
proceeding) ("DAMAGES") incurred or suffered by Buyer, Merger Sub or the Company
arising out of any misrepresentation or breach of warranty, representation,
covenant or agreement made or to be performed by the Company or a Seller
pursuant to this Agreement (other than the Covenants and agreements of Sellers
contained in Articles II and IV and in sections 3.17 and 8.05 as to which each
Seller shall have several liability only as provided in Section 11.02(b)). With
the exception of those matters set forth in Sections 11.02(b) and 3.19, Sellers
shall not be liable under this Section 11.02(a) with respect to a breach of
representation, warranty or covenant unless the aggregate amount of Damages with
respect to all such breaches of representation or warranty (determined without
regard to any materiality qualification contained in any representations,
warranty or covenant giving rise to claim for indemnity hereunder) exceeds
$750,000 (the "DEDUCTIBLE") and then only to the extent of such excess; and each
Seller's maximum liability under this Section 11.02(a) shall not exceed 10% of
the amount paid to such Seller (or the Escrow Agent) with respect to the Shares
transferred by such Seller to Buyer (the "CAP"). Any individual claim or Damages
amounting to $2,500 or less shall be ignored and disregarded in aggregating
Damages for the Deductible or the Cap.
(b) Each Seller, severally but not jointly, hereby indemnifies Buyer,
Merger Sub and, effective at the Closing, without duplication, the Company and
agrees to hold them harmless from and against all Damages incurred or suffered
by Buyer, Merger Sub or the Company arising out of any breach of any covenant or
agreement of such Seller pursuant to Article II or the inaccuracy or breach of
any representation, warranty, covenant or agreement made by such Seller pursuant
to Article IV or Sections 3.17 and 8.05.
(c) Buyer hereby indemnifies Sellers against and agrees to defend and
hold them harmless from any and all Damages incurred or suffered by Sellers
arising out of any misrepresentation or breach of warranty, covenant or
agreement made or to be performed by Buyer pursuant to this Agreement; PROVIDED
that (i) Buyer shall not be liable under this Section 11.02(c) with respect to a
breach of representation or warranty unless the aggregate amount of Damages with
respect to all such breaches of representation or warranty (determined without
regard to any materiality qualification contained in any representations,
warranty or covenant giving rise to the claim for indemnity hereunder) exceeds
$750,000 and then only to the extent of such excess and (ii) Buyer's maximum
liability under this Section 11.02(c) shall not exceed 10% of the aggregate
purchase price paid by Buyer to Sellers for the Shares. Any individual claim or
Damages amounting to $2,500 or less shall be ignored and disregarded in
aggregating Damages for the Deductible or the Cap.
(d) Sellers shall have no right of indemnification, contribution or
subrogation against the Company with respect to any indemnification by any
Seller or Sellers under this Section 11.02 if the transactions contemplated by
this Agreement are consummated. Sellers shall have a right of contribution
against each other with respect to amounts actually paid pursuant to this
Section 11.02, but such right of contribution shall in no way limit or affect
Buyer's, Merger Sub's and the Company's rights contained in this Article XI.
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(e) Buyer's claims for indemnification pursuant to this Article XI
shall be satisfied first from the escrow established pursuant to the Escrow
Agreement and thereafter against one or more Sellers.
(f) Notwithstanding anything herein to the contrary, and without giving
effect to the limitations set forth in the last two sentences of Section
11.02(a), each Seller, jointly and severally, hereby indemnifies Buyer, Merger
Sub and, effective at the Closing, without duplication, the Company, and agrees
to hold them harmless from and against, all Damages or demands incurred, claimed
against, or suffered by Buyer, Merger Sub or the Company arising out of the
following:
(i) any inaccuracy or breach of any representation or warranty in
Section 3.19 (provided that Sellers' obligations to indemnify and hold
harmless Buyer and Company shall apply only with respect to claims
arising prior to the tenth anniversary of the Closing);
(ii) any Environmental Liabilities (provided that Sellers'
obligations to indemnify and hold harmless Buyer and Company shall
apply only with respect to claims arising prior to the tenth
anniversary of the Closing);
(iii) any litigation matters disclosed in the Disclosure Schedule
and/or Update;
(iv) fines, penalties, levies and assessments arising from the
failure of the Company to make any filings, reports or notices with
governmental agencies or participants in respect of the Company's
Employee Plans or Benefit Arrangements;
(v) any Tax liabilities arising pursuant to Section 8.05(a) or
8.05(c).
(g) Any amounts payable or paid to the Buyer or payable or paid to the
Sellers pursuant to Section 11.02, shall be reduced by any insurance recoveries
(net of any premium increases reasonably anticipated to be paid over the
following three years by the recipient of such insurance recovery as a result of
the incident giving rise to such recovery) of the indemnified party with respect
to the incident giving rise to such indemnification obligations. The parties
hereto agree that no indemnified party shall be required to pursue or exhaust
insurance recoveries prior to seeking and recovering indemnification hereunder,
but shall use reasonable efforts to pursue such recoveries and that any such
insurance recoveries received after the related indemnification has been paid
hereunder shall be paid over to the Indemnifying Party (to the extent of such
indemnification payments previously made hereunder) in reimbursement of such
portion of indemnification payments.
11.03. PROCEDURES.
(a) Promptly after receipt of notice of the commencement of any action
against any Person in respect of which indemnification ("INDEMNIFICATION") may
be sought hereunder, the
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Person receiving such notice (the "INDEMNIFIED PARTY") shall notify the
party from whom Indemnification is sought (the "INDEMNIFYING PARTY") in writing
of the commencement thereof and the basis hereunder upon which a claim for
Indemnification is asserted. In the event of the commencement of any such action
as to which the Indemnified Party notifies the Indemnifying Party as aforesaid,
the Indemnifying Party will be entitled to participate therein and to assume the
defense thereof at the Indemnifying Party's expense, provided that the
Indemnifying Party promptly notifies the Indemnified Party of such election to
assume the defense thereof and acknowledges the Indemnifying Party's
Indemnification obligations pursuant to this Agreement in writing to the
Indemnified Party, and provided further that the Indemnifying Party's interest
in such action does not conflict with the interests of the Indemnified Party,
without regard to the Deductible, the relief sought does not exceed the
Indemnifying Party's maximum Indemnification obligations under Section 11.02(a)
or 11.02(b), and that equitable relief is not being sought against Buyer, Merger
Sub or the Company. Nothing herein shall be construed to create any rights
enforceable by any Person not a party to this Agreement.
(b) The Indemnified Party shall be entitled to participate in the
defense of any action and to be represented at its expense by counsel of its own
selection. If, however, the Indemnifying Party's interest in such action
conflicts with the interests of the Indemnified Party, or the relief sought
exceeds the Indemnifying Party's maximum Indemnification obligations under
Section 11.02(a) or 11.02(b), or if equitable relief is being sought against
Buyer or the Company, then the Indemnified Party shall assume such defense at
the Indemnifying Party's expense. If the attorneys provided for the defense of
the Indemnified Party by the Indemnifying Party withdraw from or are removed by
court order from the Indemnified Party's representation, then the cost of
counsel selected by the Indemnified Party shall be part of the Indemnified
Party's Damages, and the Indemnified Party shall have the right in all respects
to conduct its own defense. If the Indemnified Party otherwise retains its own
counsel, the cost thereof shall be for the account of the Indemnified Party. The
Indemnified Party shall allow the Indemnifying Party reasonable access to its
personnel, books and records relevant to the claim upon reasonable advance
notice (and subject to the Indemnifying Party's agreement to maintain such books
and records in confidence) to the Indemnified Party, during normal business
hours, and at no cost to the Indemnifying Party.
(c) At to cases in which the Indemnifying Party has assumed and is
providing the defense for the Indemnified Party under Section 11.03(a), the
control of such defense and the right to reach settlement in such action shall
be vested in the Indemnifying Party; provided, that if the Indemnified Party
objects to a settlement which has otherwise been fully agreed to by the
Indemnifying Party, the Indemnified Party may nevertheless prohibit the
Indemnifying Party from making such settlement, in which case the Indemnifying
Party shall pay to the Indemnified Party the proposed cost to the Indemnifying
Party of such settlement (plus any other sum to satisfy the Indemnifying Party's
Indemnification obligations to the Indemnified Party as provided by and
contemplated in this Article XI) (together, the "SETTLEMENT COST"), in cash, and
the Indemnified Party shall thereafter be responsible for such matter and the
Indemnifying Party shall have no further Indemnification obligations with
respect to such matter and shall be indemnified by the Indemnified Party for any
loss or liability in excess of the Settlement Cost imposed on the Indemnifying
Party by any later settlement or adjudication; provided further, that if the
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<PAGE> 49
Indemnified Party objects to the continuation of any such action by the
Indemnifying Party, the Indemnified Party may direct the Indemnifying Party to
settle such case, the cost of which shall be paid by the Indemnified Party, and
the Indemnifying Party shall have no further Indemnification obligations for
such settled matter other than litigation costs and professional fees incurred
by the Indemnifying Party therein. As to any action, the party which is
controlling such action shall provide to the other party reasonable information
(including reasonable advance notice of all proceedings and depositions in
respect thereto) regarding the conduct of the action and the right to attend all
proceedings and depositions in respect thereto through its agents and attorneys,
and the right to discuss the action with counsel for the party controlling such
action.
(d) If within twenty (20) days after receipt by the Indemnifying Party
of notice from the Indemnified Party to the Indemnifying Party as to the
commencement of any action in respect of which Indemnification is sought
hereunder, the Indemnifying Party has not notified the Indemnified Party that
the Indemnifying Party assumes the defense of such action and has actually
assumed such defense, then the Indemnified Party shall have the right to defend
such action and to proceed immediately against the Indemnifying Party to enforce
all Indemnification obligations of the Indemnifying Party hereunder (including
but not limited to the costs of defense, as the same may be incurred). The
Indemnification obligations of the Indemnifying Party with respect to such
action shall, however, in no way be diminished by virtue of the forgoing, and
the fact that the Indemnified Party shall have defended, settled, compromised or
otherwise dealt with such action shall not, in any circumstances, be deemed to
constitute any waiver, release or exoneration of the Indemnifying Party from
their Indemnification obligations, regardless of the outcome of such action.
(e) Notwithstanding the foregoing provisions of this Section, and
subject to Section 8.05, in the event that (x) any third party suit, action or
proceeding may, in Buyer's good faith reasonable discretion, have a material
continuing adverse effect on the business and operations of the Buyer and/or the
Company (it being understood that any action relating to Environmental Laws,
Intellectual Property or Taxes shall be deemed to have a material continuing
adverse effect on the business and operations of the Buyer and/or the Company),
or (y) the Board of Directors of the Buyer determines in good faith that matters
of corporate or management policy or a conflict of interest make assumption and
control by the Buyer of the defense of such claim advisable, then Buyer (i)
shall have the right to assume and control the defense of the claim by
appropriate proceedings with its counsel, (ii) shall be entitled to
reimbursement for reasonable costs of such defense from the Escrow Fund, and
(iii) shall have the authority to negotiate, compromise and settle such claim
with the consent of the Sellers which shall not be unreasonably withheld,
conditioned or delayed, and Buyer shall have a right to indemnification with
respect to such claim in accordance with the provisions of this Article XI. The
Sellers may participate in the defense, at their sole expense, of any such claim
for which Buyer shall have assumed the defense pursuant to the preceding
sentence, provided that counsel for the Buyer shall act as lead counsel in all
matters pertaining to the defense or settlement of such claims or proceedings.
Buyer will cooperate with Sellers and will provide Sellers, or Sellers' counsel,
without cost, with copies of all notices, pleadings, material communications and
documents relating to the defense of any such claim and reasonable access to and
communication with Buyer's counsel and personnel involved therein.
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<PAGE> 50
ARTICLE XII
TERMINATION
12.01. GROUNDS FOR TERMINATION. This Agreement may be terminated at any
time prior to the Closing:
(i) by written agreement of Sellers and Buyer;
(ii) by either Sellers or Buyer if the Closing shall not have
been consummated on or before August 31, 2000;
(iii) by either Sellers or Buyer if there shall be any law or
regulation that makes consummation of the transactions contemplated
hereby illegal or otherwise prohibited or if consummation of the
transactions contemplated hereby would violate any nonappealable final
order, decree or judgment of any court or governmental body having
competent jurisdiction;
(iv) by Buyer (provided that it is not then in material breach
of any representation, warranty, covenant or agreement contained in
this Agreement) alone, by means of written notice to the Company, if
there has been a material breach by the Company or a Seller of any
representation, warranty, covenant or agreement set forth in this
Agreement or the Ancillary Agreements, which breach would result in a
failure to satisfy the closing conditions contained in Section 10.02
and has not been cured within ten (10) business days following receipt
by the Company of notice of such breach;
(v) by the Company (provided that it is not then in material
breach of any representation, warranty, covenant or agreement contained
in this Agreement) alone, by means of written notice to Buyer, if there
has been a material breach by Buyer of any representation, warranty,
covenant or agreement set forth in the Agreement or the Ancillary
Agreements, which breach would result in a failure to satisfy the
closing conditions contained in Section 10.03 and has not been cured
within ten (10) business days following receipt by Buyer of notice of
such breach;
(vi) by Buyer in accordance with Section 6.10.
The party desiring to terminate this Agreement shall give notice of
such termination to the other parties.
12.02. EFFECT OF TERMINATION. If this Agreement is terminated as
permitted by Section 12.01, such termination shall be without liability of
either party (or any shareholder, director,
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<PAGE> 51
officer, employee, agent, consultant or representative of such party) to
the other party to this Agreement; PROVIDED that if such termination shall
result from the willful failure of any party to fulfill a condition to the
performance of the obligations of another party or to perform a covenant of this
Agreement or from a willful breach by any party to this Agreement, such party
shall be fully liable for any and all Damages incurred or suffered by the other
parties as a result of such failure or breach. The provisions of Sections 6.06,
7.01, 8.03 and 13.03 (other than Buyer's obligation to pay Company and Seller's
costs thereunder) shall survive any termination hereof pursuant to Section 6.10
or Section 12.01.
ARTICLE XIII
MISCELLANEOUS
13.01. NOTICES. All notices, requests and other communications to
either party hereunder shall be in writing (including telecopy or similar
writing) and shall be given,
if to Buyer or Merger Sub, to:
Teradyne, Inc.
321 Harrison Avenue
Boston, MA 02118
Attn: President
Telecopy: (617) 422-2910
with a copy to:
William B. Asher, Jr., Esq.
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, MA 02110
Telecopy: (617) 248-7100
if to the Company, to:
Herco Technology Corp.
13330 Evening Creek Drive North
San Diego, CA 92128
Attn: President
Telecopy:
with a copy to:
Luce, Forward, Hamilton & Scripps, LLP
600 West Broadway, Suite 2600
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<PAGE> 52
San Diego, CA 92101
Attn: Robert Copeland
Telecopy: (619) 645-5332
if to a Seller:
at his address shown in
SCHEDULE 2.01
13.02. AMENDMENTS; NO WAIVERS.
(a) Any provision of this Agreement may be amended or waived prior to
the Closing Date if, and only if, such amendment or waiver is in writing and
signed by Buyer, the Company and Sellers.
(b) No failure or delay by either party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
13.03. EXPENSES. Buyer shall pay all expenses, and any and all federal,
state and local stamp, stock issuance or similar taxes and other charges, that
may be payable in connection with the preparation, issuance and delivery of
certificates for the Buyer Stock under Section 2.03(a) and any stock listing or
stock quotation application required to be filed by Buyer with respect to such
for the Buyer Stock. A registration effected under Section 7.02 shall be
effected at the Buyer's expense except for underwriting discounts and
commissions and the fees and the expenses of counsel to the Sellers. All costs
and expenses incurred in connection with this Agreement shall be paid by the
party incurring such cost or expense; provided, however, that if the Closing
shall occur, all such costs and expenses of the Company and Sellers not
exceeding $50,000 incurred by the Company and Sellers shall be paid by Buyer,
and Sellers shall bear all such costs in excess of $50,000.
13.04. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; PROVIDED that no party may assign, delegate
or otherwise transfer any of his or its rights or obligations under this
Agreement without the consent of the other parties hereto, except that Buyer may
transfer or assign, in whole or from time to time in part, to one or more of its
Affiliates, the right to purchase all or a portion of the Shares, but no such
transfer or assignment will relieve Buyer of its obligations hereunder.
13.05. FURTHER ASSURANCES. From time to time after the Closing, at the
request of Buyer and without further consideration, Sellers will execute and
deliver to Buyer such other documents, and take such other action, as Buyer may
reasonably request in order to consummate
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<PAGE> 53
more effectively the transactions contemplated hereby and to vest in Buyer
good, valid and marketable title to the Shares.
13.06. GOVERNING LAW. This Agreement and the Ancillary Agreements shall
be construed in accordance with and governed by the law of the State of
California without regard to the conflicts of law rules of such state.
13.07. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in any
number of counterparts, each of which shall be deemed an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
a counterpart hereof signed by the other parties hereto.
13.08. ENTIRE AGREEMENT. This Agreement and the Ancillary Agreements
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all prior agreements, understandings and
negotiations, both written and oral, between the parties with respect to the
subject matter hereof.
13.09. CAPTIONS. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
13.10. JURISDICTION. Any action or proceeding relating to or arising
out of, or based on this Agreement or arising from or in any manner related to
the relationship between the parties shall only be brought in the state or
federal courts in San Diego, California, and each of the parties hereto submits
to the personal jurisdiction of such court (and of the appropriate appellate
courts wherever located) in any such action or proceeding, and selects the
courts in San Diego, California for proper venue in any such or proceeding.
13.11. TRANSFER, SALES DOCUMENTARY, STAMP AND OTHER SIMILAR TAXES. Any
and all transfer, sales, documentary, stamp and other similar Taxes imposed in
connection with the transactions contemplated by this Agreement will be paid by
the Seller with respect to which such Tax relates.
13.12. SEVERABILITY. If any provision of this Agreement is held to be
unenforceable for any reason, it will be modified rather than voided, if
possible, in order to achieve the intent of the parties to this Agreement to the
extent possible. In any event, all other provisions of this Agreement will be
deemed valid and enforceable to the full extent.
13.13. EXTENSION; WAIVER. At any time prior to the Effective Time, any
party hereto may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto to
the party extending such time, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements, covenants or conditions for the benefit of such party contained
herein. any agreement on the part of a party hereto to any such extension or
waiver will be valid only if set forth in an instrument in writing signed on
behalf of such party.
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<PAGE> 54
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
TERADYNE, INC.
By: /s/ Stuart M. Osattin
---------------------------------------
Name: Stuart M. Osattin
Title: Vice President
T-H Acquisition Corporation
By: /s/ Stuart M. Osattin
---------------------------------------
Name: Stuart M. Osattin
Title: President
Herco Technology Corp.
By: /s/ Robert Herring, Sr.
---------------------------------------
Name: Robert Herring, Sr.
Title: President
/s/ Robert Herring, Sr.
------------------------------------------
Robert Herring, Sr.
/s/ Robert Herring, Jr.
------------------------------------------
Robert Herring, Jr.
/s/ Charles Herring
------------------------------------------
Charles Herring
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<PAGE> 55
SCHEDULE 2.03
--------------------------------------------------------------------------------
SHARES OF COMPANY SHARES OF BUYER
SELLER'S NAME AND ADDRESS COMMON STOCK STOCK ESCROW SHARES
--------------------------------------------------------------------------------
Robert Herring, Sr. 3,415 827,845 91,983
4951 Concannon Court
San Diego, CA 92130
----- --------- --------
Robert Herring, Jr. 1,150 278,777 30,975
3599 Corte Castillo
Carlsbad, CA 92009
----- --------- -------
Charles Herring 1,150 278,777 30,975
P.O. Box 675990
Rancho Santa Fe, CA 92067
----- --------- -------
TOTAL 5,715 1,385,399 153,933
===== ========= =======
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