EXHIBIT 2.1
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SHARE PURCHASE AGREEMENT
AMONG
PLASMA & MATERIALS TECHNOLOGIES, INC.,
ELECTROTECH LIMITED,
ELECTROTECH EQUIPMENTS LIMITED,
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
AND
THE OTHER SHAREHOLDERS OF ELECTROTECH LIMITED AND
ELECTROTECH EQUIPMENTS LIMITED
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DATED AS OF JULY 17, 1996
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TABLE OF CONTENTS
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ARTICLE I
PURCHASE AND SALE OF THE US SHARES AND ET SHARES........................... 1
1.1 Purchase and Sale of Stock.......................................... 1
1.2 Shareholder's Warranty and Waiver................................... 1
1.3 Consideration for US Shares......................................... 2
1.4 Consideration for ET Shares......................................... 2
1.5 Agreement of Shareholders........................................... 2
ARTICLE II
CLOSING.................................................................... 2
2.1 Closing Date........................................................ 2
2.2 Deliveries of the Shareholders and ETE.............................. 2
2.3 Deliveries of Buyer................................................. 2
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH OF THE SHAREHOLDERS................. 3
3.1 Title to Shares..................................................... 3
3.2 Authority........................................................... 3
3.3 No Violation........................................................ 3
3.4 Brokers............................................................. 3
3.5 No Agreements to Sell Shares........................................ 3
3.6 Regulation S Representations and Covenants.......................... 4
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE MAJORITY SHAREHOLDER................. 5
4.1 Corporate Organization.............................................. 5
4.2 Subsidiaries........................................................ 5
4.3 Share Capital; Title to ET Shares................................... 6
4.4 Authority........................................................... 6
4.5 No Violations or Consents........................................... 6
4.6 Litigation.......................................................... 7
4.7 Financial Statements................................................ 7
4.8 No Liabilities...................................................... 7
4.9 Absence of Certain Changes or Events................................ 8
4.10 Insurance........................................................... 8
4.11 Employee Benefits and Pension Scheme................................ 10
4.12 Material Contracts and Other Agreements............................. 10
4.13 Suppliers and Customers............................................. 10
4.14 Real Property....................................................... 10
4.15 Condition of the Real Property; Rights of Use; Liabilities.......... 10
4.16 Compliance with Laws................................................ 11
4.17 Licenses and Permits................................................ 11
4.18 Title to Assets..................................................... 11
4.19 Inventory........................................................... 11
4.20 Backlog............................................................. 12
4.21 Taxes............................................................... 12
4.22 Environmental Matters............................................... 13
4.23 Board of Directors and Shareholder Approval......................... 14
4.24 Brokers; Certain Expenses........................................... 14
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4.25 No Agreements to Sell Companies..................................... 14
4.26 Related-Party Transactions.......................................... 15
4.27 Employees; Labor Matters............................................ 15
4.28 Proprietary Rights.................................................. 16
4.29 Disclosure.......................................................... 16
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER.................................... 16
5.1 Corporate Organization.............................................. 16
5.2 Subsidiaries........................................................ 16
5.3 Capital Stock....................................................... 17
5.4 Buyer Shares........................................................ 17
5.5 Authority........................................................... 17
5.6 No Violations or Consents........................................... 17
5.7 Financial Statements and Reports.................................... 18
5.8 Litigation.......................................................... 18
5.9 Absence of Certain Changes or Events................................ 18
5.10 Insurance........................................................... 19
5.11 Employee Benefits................................................... 19
5.12 Employees; Labor Matters............................................ 19
5.13 Material Contracts and Other Agreements............................. 20
5.14 Suppliers and Customers............................................. 20
5.15 Compliance with Laws................................................ 20
5.16 Licenses and Permits................................................ 21
5.17 Title to Assets..................................................... 21
5.18 Inventory........................................................... 21
5.19 Backlog............................................................. 21
5.20 Tax Returns and Audits.............................................. 21
5.21 Environmental and Safety Laws....................................... 22
5.22 Board of Directors Approval......................................... 22
5.23 Related-Party Transactions.......................................... 22
5.24 Proprietary Rights.................................................. 23
5.25 Real Property....................................................... 23
5.26 Disclosure.......................................................... 23
5.27 Brokers............................................................. 23
ARTICLE VI
COVENANTS AND AGREEMENTS................................................... 23
6.1 Conduct of Business Prior to the Closing Date....................... 23
6.2 Access to Properties and Records.................................... 25
6.3 Acquisition Proposals............................................... 25
6.4 Proxy Statement and Meeting of Buyer's Shareholders................. 25
6.5 Indemnification by Buyer............................................ 26
6.6 Indemnification by the Shareholders................................. 27
6.7 General Indemnification Provisions.................................. 27
6.8 Best Efforts........................................................ 28
6.9 Consents............................................................ 28
6.10 No Transfer......................................................... 28
6.11 Environmental Investigations........................................ 28
6.12 Delivery of Financial Statements and Other Documents................ 28
6.13 Additional Payments at Closing...................................... 29
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6.14 Company Employee Benefits and Stock Options......................... 29
6.15 Use of Company Information.......................................... 30
ARTICLE VII
CONDITIONS PRECEDENT....................................................... 30
7.1 Conditions to Each Party's Obligations.............................. 30
7.2 Conditions to the Obligations of the Shareholders................... 30
7.3 Conditions to the Obligations of Buyer.............................. 31
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER.......................................... 32
8.1 Termination......................................................... 32
8.2 Termination Fee; Expenses........................................... 32
8.3 Effect of Termination............................................... 33
8.4 Amendment........................................................... 33
8.5 Waiver.............................................................. 33
8.6 Conduct Following Termination....................................... 33
ARTICLE IX
MISCELLANEOUS.............................................................. 33
9.1 Survival............................................................ 33
9.2 Meaning of "Best Knowledge"......................................... 33
9.3 Notices............................................................. 33
9.4 Headings; Agreement................................................. 34
9.5 Publicity........................................................... 34
9.6 Entire Agreement.................................................... 35
9.7 Conveyance Taxes.................................................... 35
9.8 Company Pre-Closing Dividends....................................... 35
9.9 Advance of Reimbursable Expenses.................................... 35
9.10 Assignment.......................................................... 35
9.11 Counterparts........................................................ 35
9.12 Governing Law....................................................... 36
9.13 Third Party Beneficiaries........................................... 36
EXHIBITS
Exhibit A Schedule of Consideration
Exhibit B ▇▇▇▇▇ ▇▇▇▇▇▇▇ Employment Agreement
Exhibit C Form of Opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Exhibit D Form of Registration Agreement
Exhibit E Form of Noncompetition Agreement
Exhibit F Form of Opinion of ▇▇▇▇▇ Wasbrough
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SHARE PURCHASE AGREEMENT
SHARE PURCHASE AGREEMENT ("Agreement") dated as of July 17, 1996, as
amended, among Plasma & Materials Technologies, Inc., a California corporation
("Buyer"), Electrotech Limited (registered no. 1373344), whose registered
office is at Thornbury Laboratories, Littleton-Upon-Severn, Thornbury,
Bristol, BS12-INP, United Kingdom ("ET"), Electrotech Equipments Limited
(registered no. 939289), whose registered office is at Thornbury Laboratories,
Littleton-Upon-Severn, Thornbury, Bristol, BS12-INP, United Kingdom ("ETE"
and, together with ET, individually, a "Company," and collectively, the
"Companies"), ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (the "Majority Shareholder") and the other
shareholders of the Companies listed on Exhibit A hereto (individually, an
"Other Shareholder" and collectively, the "Other Shareholders;" the Majority
Shareholder and the Other Shareholders are sometimes herein collectively
referred to as the "Shareholders").
R E C I T A L S :
A. The Shareholders collectively own all of the issued and outstanding share
capital of each of the Companies (collectively, the "ET Shares").
B. ETE owns all of the issued and outstanding share capital of Energy
Transfer Systems, Inc., a Delaware corporation ("ET-US").
C. Buyer wishes to directly purchase, and ETE wishes to sell, all of the
issued and outstanding share capital of ET-US (the "US Shares").
D. Buyer wishes to purchase and the Shareholders wish to sell the ET Shares.
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions contained
herein, the sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE US SHARES AND ET SHARES
1.1 Purchase and Sale of Stock.
(a) Purchase and Sale of US Shares. Subject to the terms and conditions
of this Agreement, immediately prior to the Closing (as defined below), ETE
agrees to sell, assign, transfer and deliver to Buyer ownership of, with
full title guarantee, the US Shares, together with all rights now or
hereafter attaching thereto, and Buyer hereby agrees to purchase the same
from ETE, for the consideration set forth in Section 1.3 below.
(b) Purchase and Sale of ET Shares. Subject to the terms and conditions
of this Agreement, at the Closing, each of the Shareholders agrees to sell,
assign, transfer and deliver to Buyer ownership of, with full title
guarantee, all ET Shares held of record or beneficially by each such
Shareholder, as set forth opposite each Shareholder's name on Exhibit A
hereto, together with all rights now or hereafter attaching thereto, and
Buyer agrees to purchase the same from each Shareholder for the
consideration set forth in Section 1.4 below.
1.2 Shareholder's Warranty and Waiver. Each of the Shareholders warrants to
Buyer that such Shareholder is entitled to sell and transfer to Buyer the full
legal and beneficial ownership of the ET Shares held by him subject to the
terms of this Agreement and that such shares are free and clear of any and all
Encumbrances, as defined below. Each of the Shareholders hereby waives and
agrees to procure the waiver of any restrictions on transfer, including
without limitation, pre-emption rights, which may exist in relation to the ET
Shares under the existing Articles of Association (the "Articles") of either
of the Companies.
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1.3 Consideration for US Shares. The consideration for the sale, assignment,
transfer and delivery of the US Shares to Buyer by ETE shall be Two Hundred
Fifty Thousand Dollars (US$250,000), payable in cash.
1.4 Consideration for ET Shares. The consideration for the sale, assignment,
transfer and delivery of the ET Shares to Buyer (the "Purchase Price") shall
be payable in cash and in shares of the Common Stock of Buyer, no par value
per share ("Buyer's Common Stock"), as follows:
(a) An aggregate of Seventy-Five Million Dollars (US$75,000,000), less
the sum of the Employee Bonus Amount, the ▇▇▇▇▇▇ Noncompetition Fee, the
▇▇▇▇▇▇▇ Bonus and the ▇▇▇▇▇▇ Negotiation Fee (all as defined in Section
6.13 below), shall be payable by Buyer in cash at the Closing to each of
the Shareholders in the respective individual amounts set forth opposite
each Shareholder's name on Exhibit A hereto; and
(b) Buyer shall deliver Five Million Six Hundred Thousand (5,600,000)
shares (the "Buyer Shares") of Buyer's Common Stock. Such shares shall be
delivered to each of the Shareholders in the respective individual amounts
set forth opposite each Shareholder's name on Exhibit A hereto.
1.5 Agreement of Shareholders. Each of the Shareholders hereby consents and
agrees with the Companies, the other Shareholders and the Buyer to the
allocation of the Purchase Price among the Shareholders in the manner set
forth in Exhibit A hereto and each Shareholder additionally consents and
agrees with the Companies, the other Shareholders and the Buyer to the
payments to be made by or at the direction of the Buyer and the Companies
pursuant to Section 6.13 hereof.
ARTICLE II
CLOSING
2.1 Closing Date. Subject to the fulfillment of the conditions precedent
specified in Article VII (any or all of which may be waived in writing by the
respective parties whose performance is conditioned upon satisfaction of such
conditions precedent), the purchase and sale of the ET Shares and the US
Shares shall be consummated at a closing (the "Closing") to be held at the
offices of ▇▇▇▇▇ Wasbrough, Solicitors, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as soon as practicable, but no later than five (5)
days, following the satisfaction or waiver of all conditions precedent
specified in Article VII, or at such other time as Buyer and the Shareholders
shall mutually agree after the satisfaction or waiver of all conditions
precedent specified in Article VII, provided that in no circumstance shall the
Closing occur on or after December 31, 1996 (such date and time being herein
referred to as the "Closing Date").
2.2 Deliveries of the Shareholders and ETE. At the Closing, each Shareholder
shall deliver to Buyer, in form reasonably satisfactory to counsel for Buyer,
(a) duly completed and signed transfers in respect of the ET Shares in favor
of Buyer or as Buyer shall direct, together with the relevant certificates for
the ET Shares, and (b) all of the agreements, documents and instruments
required to be delivered by such Shareholder. Additionally, at the Closing,
ETE shall deliver to Buyer duly completed and signed transfers in respect of
the US Shares in favor of Buyer or as Buyer shall direct, together with the
relevant certificates for the US Shares.
2.3 Deliveries of Buyer. At the Closing, Buyer shall deliver to ▇▇▇▇▇
Wasbrough, counsel for the Shareholders, on behalf of each Shareholder (whose
receipt shall be a good discharge for the same) (a) payment of the cash
portion of the Purchase Price with respect to each Shareholder in accordance
with Section 1.4(a) hereof by wire transfer of immediately available funds in
the amount thereof, (b) certificates evidencing the Buyer Shares, registered
in the name of each Shareholder in accordance with Section 1.4(b) hereof, and
(c) all of the agreements, documents and instruments required to be delivered
to them at the Closing pursuant to this Agreement. Additionally, at the
Closing, Buyer shall deliver to ETE payment of the cash amount set forth in
Section 1.3 hereof.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF EACH OF THE SHAREHOLDERS
Except as disclosed in the letter of disclosure (the "Shareholders
Disclosure Letter") delivered to Buyer in connection herewith and initialled
by the Buyer and each of the Shareholders for identification, each of the
Shareholders severally and not jointly represents and warrants to, and agrees
with, Buyer as follows:
3.1 Title to Shares. Such Shareholder has good and marketable title, and
full beneficial ownership, in and to the ET Shares shown as being held of
record by such Shareholder on Exhibit A hereto, and such ET Shares are, and on
the Closing Date will be, free and clear of any and all liens, security
interests, mortgages, deeds of trust, pledges, claims, rights of first
refusal, options, equities, encumbrances, restrictions, preemptive or
subscription rights or other rights of third parties ("Encumbrances"). There
are no voting trusts or other agreements, arrangements or understandings with
respect to the voting of any of the ET Shares to which such Shareholder is a
party. Upon the consummation of the transactions contemplated by this
Agreement, including delivery by Buyer of the consideration set forth in
Section 1.4 hereof, Buyer will acquire good and marketable title to such ET
Shares, free and clear of any and all Encumbrances.
3.2 Authority. This Agreement has been duly executed and delivered by such
Shareholder and constitutes the legal, valid and binding obligations of such
Shareholder, enforceable against such Shareholder in accordance with its
terms, subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting creditors' rights generally and
subject to general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
3.3 No Violation. The execution, delivery and performance of this Agreement
by such Shareholder and the consummation by such Shareholder of the
transactions contemplated hereby will not (a) violate any provision of law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award applicable to such Shareholder, (b) require the consent, waiver,
approval or authorization of or any filing by such Shareholder with any person
or governmental authority, or (c) violate, result (with or without notice or
the passage of time, or both) in a breach of, or give rise to the right to
terminate, accelerate or cancel any obligation under, or require the payment
of any fee, or constitute (with or without notice or the passage of time, or
both) a default under, any indenture, mortgage, lien, order, judgment,
ordinance, regulation, decree or other agreement or instrument to which such
Shareholder is subject or bound which, in any such case described in clauses
(a) through (c), could reasonably be expected to materially and adversely
affect or interfere in any way with such Shareholder's ability to consummate
the transactions contemplated by this Agreement, or (d) result in the creation
of any Encumbrance upon any of the ET Shares shown as being held of record by
such Shareholder on Exhibit A hereto. There are no actions, proceedings,
claims, complaints, grievances or investigations pending or, to the knowledge
of such Shareholder, threatened against such Shareholder that could be
reasonably expected to materially and adversely affect such Shareholder's
ability to consummate the transactions contemplated by this Agreement.
3.4 Brokers. Such Shareholder has not paid or become obligated to pay any
fee or commission to any broker, finder, investment banker or other
intermediary in connection with this Agreement.
3.5 No Agreements to Sell Shares. Except as contemplated by this Agreement,
such Shareholder has no legal obligation, absolute or contingent, to any other
person, firm or entity to sell, directly or indirectly, capital stock,
material assets or business of either Company or any Subsidiary or to effect
any merger, consolidation, liquidation, dissolution, recapitalization or other
reorganization of either Company or any Subsidiary or to enter into any
agreement with respect thereto.
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3.6 Regulation S Representations and Covenants.
(a) Such Shareholder understands and acknowledges that: (i) the Buyer
Shares have not been and will not be registered under the Securities Act of
1933, as amended (the "Securities Act"), or under any state securities or
blue sky laws, and may not be offered, sold, transferred, pledged or
otherwise disposed of in the United States or to, or for the account or
benefit of, any "U.S. person" (as defined in Regulation S), unless they are
registered under the Securities Act and any applicable state securities or
blue sky laws in exemptions from such laws are available; and (ii) the
Buyer Shares are being offered and sold in a manner intended to comply with
the conditions contained in Regulation S, which permits securities to be
sold in "offshore transactions" (as defined in Regulation S), subject to
certain terms and conditions. Such Shareholder represents and warrants that
he or she is not purchasing the Buyer Shares in any transaction or series
of transactions that, although in technical compliance with Regulation S,
is part of a plan or scheme to evade the registration provisions of the
Securities Act.
(b) Such Shareholder is not a "U.S. person" and is not acquiring the
Buyer Shares for the benefit of any "U.S. person." Such Shareholder is
knowledgeable, sophisticated and experienced in making, and qualified to
make, decisions with respect to investments in securities such as the Buyer
Shares and has requested, received, reviewed and considered all information
he or she deems relevant in making a decision to acquire the Buyer Shares.
(c) During the period of 40 days following the Closing (the "Restricted
Period"), such Shareholder will not engage in any activity for the purpose
of, or which may reasonably be expected to have the effect of, conditioning
the market in the United States for the Buyer Shares, or offer, sell,
transfer, pledge or otherwise dispose of the Buyer Shares in the United
States or to, or for the account or benefit of a "U.S. person." Any
proposed offer, sale, transfer, pledge or other disposition of any of the
Buyer Shares prior to the end of the Restricted Period will be subject to
the prior delivery by the Shareholder to the Buyer of: (i) a written
certification that the Buyer Shares have not been offered or sold in the
United States or to, or for the account or benefit of, any "U.S. person";
and (ii) a written certification of the proposed transferee, reasonably
acceptable to the Buyer, confirming that such transferee is outside the
United States, is not a "U.S. person," and that the transfer is otherwise
permissible under Regulation S. Such Shareholder will not, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or
solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) the Buyer Shares otherwise than in compliance with the Securities Act,
any applicable state securities or blue sky laws and any applicable
securities laws of jurisdictions outside the United States, and the rules
and regulations promulgated thereunder.
(d) Such Shareholder acknowledges that if he or she sells all or any part
of the Buyer Shares in the United States, he or she (and/or certain persons
who participate in any such sale) may be deemed, under certain
circumstances, to be an "underwriter," as defined in Section 2(11) of the
Securities Act. Such Shareholder understands that he or she should consult
with United States legal counsel prior to offering or selling all or any
part of the Buyer Shares in the United States.
(e) During the period that is five business days immediately prior to the
Closing, such Shareholder will not, and from the Closing and through the
expiration of the Restricted Period, such Shareholder will not, directly or
indirectly, execute or effect or cause to be executed or effected any short
sale, option or equity swap transaction in or with respect to the Common
Stock of Buyer or any other derivative security transaction, the purpose or
effect of which is to hedge or transfer to a third party all or any part of
the risk of loss associated with such Shareholder's ownership of the Buyer
Shares.
(f) Such Shareholder acknowledges and agrees that the certificates
evidencing the Buyer Shares shall have a legend substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CONTRACTUAL RESTRICTIONS PURSUANT TO WHICH, PRIOR TO [40 DAYS AFTER THE
CLOSING] (THE "TERMINATION DATE"), NO OFFER, SALE, TRANSFER, PLEDGE OR
OTHER DISPOSITION (COLLECTIVELY, A "DISPOSITION") OF THE SECURITIES
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REPRESENTED BY THIS CERTIFICATE MAY BE MADE UNLESS (A) THE DISPOSITION
IS MADE OUTSIDE THE UNITED STATES AND TO, OR FOR THE ACCOUNT OR BENEFIT
OF, ANY PERSON WHO IS NOT A "U.S. PERSON," AND (B) PRIOR TO SUCH
DISPOSITION, THE BENEFICIAL OWNER OF SUCH SHARES AND THE PROPOSED
TRANSFEREE SUBMIT A CERTIFICATION AS DESCRIBED IN THAT CERTAIN SHARE
PURCHASE AGREEMENT PURSUANT TO WHICH THESE SECURITIES WERE ISSUED. SUCH
CONTRACTUAL RESTRICTIONS TERMINATE ON, AND THIS LEGEND MAY BE REMOVED
UPON PRESENTATION OF THIS STOCK CERTIFICATE TO THE TRANSFER AGENT OR
THE ISSUER AT ANY TIME AFTER THE TERMINATION DATE."
(g) Such Shareholder will be entitled to obtain from the Buyer's transfer
agent (the "Transfer Agent") at any time from the first business day
following the Restricted Period one or more substitute stock certificates
without the restrictive legend described above upon surrender to the
Transfer Agent of the stock certificate or certificates delivered pursuant
to the preceding paragraph which, in the case of any holder subsequent to a
Shareholder must be duly endorsed for transfer or surrender and, in any
event, must be accompanied by payment of any amount necessary to be paid
pursuant to any transfer tax or similar governmental charge relating to
such transaction.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE MAJORITY SHAREHOLDER
Except as disclosed in the letter of disclosure (the "Company Disclosure
Letter") delivered to Buyer in connection herewith and initialled by the Buyer
and the Majority Shareholder for identification, the Majority Shareholder
represents and warrants to Buyer as follows:
4.1 Corporate Organization. Each of the Companies is a corporation duly
organized, validly existing and in good standing under the laws of England,
with all requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as it is now being conducted, and is
qualified or licensed to do business and is in good standing in each
jurisdiction in which the failure to be so qualified or licensed could
reasonably be expected, individually or in the aggregate, to have a material
adverse effect upon the financial condition, prospects or results of
operations of the Companies and the Subsidiaries considered as a whole (a
"Company Material Adverse Effect"). True and complete copies of the Memorandum
and Articles of each Company have been delivered to Buyer.
4.2 Subsidiaries. A true and complete list of all direct and indirect
subsidiaries other than the Dormant Subsidiaries (each, a "Subsidiary" and
collectively, the "Subsidiaries") of each of the Companies is set forth in the
Company Disclosure Letter. The Company Disclosure Letter also identifies the
inactive subsidiaries of the Companies (the "Dormant Subsidiaries"). None of
the Dormant Subsidiaries has any material assets or liabilities (contingent or
absolute) and none presently engages in any business activity. Since March 31,
1996 no Company or Subsidiary has paid any amounts to any of the Dormant
Subsidiaries, no amounts will be so paid at any time hereafter, and any net
intercompany payables of the Company and its Subsidiaries to the Dormant
Subsidiaries shall be forgiven or cancelled at the closing. As used in this
Article IV, references to a "Company" or the "Companies" shall, if appropriate
given the context of the representations being made, include each relevant
Subsidiary, even though no specific reference to any Subsidiary is so made.
Each Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, except that with
respect to the U.K. Subsidiaries, such Subsidiaries have been duly registered
in England and Wales under the Companies ▇▇▇ ▇▇▇▇. In each case such
Subsidiaries have all requisite corporate power and authority to own, operate
and lease its properties and to carry on its business as it is now being
conducted, and is qualified or licensed to do business and is in good standing
in each jurisdiction in which the failure to be so qualified or licensed could
reasonably be expected, individually or in the aggregate, to have a Company
Material Adverse
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Effect. All of the issued shares of capital stock of each such Subsidiary have
been duly and validly authorized and issued, are fully paid and non-
assessable, and are owned directly or indirectly by one of the Companies, free
and clear of any and all Encumbrances. Except with respect to the ownership of
the Subsidiaries by the Companies, neither Company nor any Subsidiary owns,
directly or indirectly, any stock, partnership interest, joint venture
interest or other security, investment or interest in any other corporation,
organization, partnership, limited liability company or entity.
4.3 Share Capital; Title to ET Shares.
(a) Capital Stock. As of the date hereof, the authorized share capital of
(i) ET consists in its entirety of five hundred seventy five (575) shares
of (Pounds)1 each, of which five hundred seventy (570) are issued and
outstanding, and (ii) ETE consists in its entirety of ten thousand (10,000)
shares of (Pounds)1 each, eighty-two (82) of which are Class A Shares and
nine thousand nine hundred and eighteen (9,918) of which are Class B
shares, all of which are issued and outstanding. All of the issued shares
of each of the Companies have been duly authorized and validly issued and
are fully paid and non-assessable and except as set forth in the Company
Disclosure Letter, free of preemptive rights with respect thereto and were
issued in compliance with all applicable securities laws and regulations.
There are no voting trusts or other agreements, arrangements or
understandings with respect to the voting of the shares of the Companies to
which either Company or, to the best knowledge (as defined in Section 9.2
hereof) of the Companies, any other person is a party. There are no
registration rights, subscriptions, options, warrants, rights, convertible
securities or other agreements or commitments of any character relating to
the issued or unissued share capital or other securities of either of the
Companies and there are no outstanding contractual obligations of either of
the Companies to repurchase, redeem or otherwise acquire or sell, issue or
otherwise transfer any of the share capital thereof.
(b) Title to Shares. Exhibit A hereto sets forth the record ownership of
the ET Shares. To the best knowledge of the Companies, (i) each Shareholder
has good and marketable title in and to the respective ET Shares set forth
opposite such Shareholder's name on Exhibit A hereto, (ii) the ET Shares
are, and on the Closing Date will be, free and clear of any and all
Encumbrances, and (iii) on the Closing, upon consummation of the
transactions contemplated by this Agreement, including delivery by Buyer of
the consideration set forth in Sections 1.3 and 1.4 hereof, Buyer will
acquire good and marketable title to all of the ET Shares and the US
Shares, free and clear of any and all Encumbrances.
4.4 Authority. Each Company has the full corporate power and authority to
execute and deliver this Agreement and each other agreement contemplated
hereby, to carry out its obligations hereunder and thereunder and to
consummate the transactions contemplated on its part hereby and thereby. The
execution, delivery and performance by each Company of this Agreement and the
consummation of the transactions contemplated on its part hereby have been
duly authorized by its Board of Directors and by the shareholders thereof, and
no other corporate proceedings on the part of either Company are necessary to
authorize the execution and delivery of this Agreement by such Company to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by each Company and constitutes the legal, valid and
binding obligations of each Company, enforceable against each Company in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting creditors' rights
generally and subject to general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law). Each
other agreement to be executed in connection with this Agreement on or prior
to the Closing Date will be duly executed and delivered by each Company, and
will constitute a legal, valid and binding obligation of each Company,
enforceable against each Company in accordance with its respective terms,
subject to applicable bankruptcy, insolvency, moratorium, reorganization, or
similar laws affecting creditors' rights generally and subject to general
equitable principles (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
4.5 No Violations or Consents. The execution, delivery and performance of
this Agreement by the Companies and the consummation by them of the
transactions contemplated hereby will not (a) violate or conflict
6
with any provision of any law specifically applicable to their business or by
which any property or asset of theirs is bound, (b) require the consent,
waiver, approval, license or authorization of or any filing by them with any
public authority (other than (i) if necessary, the filing of a pre-merger
notification report under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended (the "HSR Act") and applicable U.K./EEC antitrust statutes,
and (ii) any other filings and approvals expressly contemplated by this
Agreement), (c) violate, conflict with, result in a breach of or the
acceleration of any obligation under, or constitute a default (or an event
which with notice or the lapse of time or both would become a default) under,
or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of any Encumbrance on any property
or asset of theirs pursuant to any provision of any charter or by-law,
indenture, mortgage, lien, lease, agreement, contract, instrument, order,
judgment, ordinance, regulation or decree to which either of the Companies are
subject or by which either Company or its respective properties or assets are
bound, or (d) result in a loss or adverse modification of any license, permit,
certificate, franchise or contract granted to or otherwise held by either of
the Companies which, in any such case described in clauses (a) through (d),
could reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect.
4.6 Litigation. There are no actions, proceedings, claims, complaints,
grievances, investigations or unfair labor practice complaints or grievances
or investigations (collectively, "Actions") pending or, to the best knowledge
of the Companies, threatened against either Company, any Subsidiary or any of
their assets or properties before any court or governmental or regulatory
authority or body or arbitrator (an "Authority") which could reasonably be
expected to have a Company Material Adverse Effect. There are no Actions
pending or, to the knowledge of the Companies, threatened against either
Company or any Subsidiary that could be reasonably expected to materially and
adversely affect on their part the consummation of the transactions
contemplated by this Agreement. None of the assets or property of either
Company or any Subsidiary is subject to any order, judgment, injunction, writ
or decree, which could reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
4.7 Financial Statements. Each Company has previously delivered to Buyer its
financial statements for the years ended June 30, 1991, 1992, 1993, 1994 and
1995, as audited by ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, which financial statements
included (a) a consolidated profit and loss account for the year then ended,
(b) a consolidated balance sheet as at such date, (c) a company balance sheet
as at such date, (d) a consolidated cash flow statement for the year then
ended, (e) a consolidated schedule of tangible fixed assets as at such date,
(f) a company schedule of tangible fixed assets as at such date and (g) notes
to the accounts for the year then ended (collectively, the "Audited Financial
Statements"). Each Company has also previously delivered to Buyer its
unaudited management accounts at March 31, 1996 (the "Unaudited Financial
Statements," and collectively with the Audited Financial Statements, the
"Financial Statements"). The Audited Financial Statements give a true and fair
view of the Companies as at the date (the "Accounting Date") on which such
accounts were made up and of the profits of each of the Companies for the
accounting reference period ending on that date, comply with all current
SSAP's applicable to a United Kingdom company and with the requirements of the
Companies ▇▇▇ ▇▇▇▇ and with all other applicable legislation, and each of the
said Audited Financial Statements properly reflect the financial position of
each of the Companies as at the relevant Accounting Date and were prepared in
accordance with the historical cost convention. "SSAP" for this purpose means
a Statement of Standard Accounting Practice in force at the relevant
Accounting Date as issued by the Institute of Chartered Accountants in England
and Wales. The Unaudited Financial Statements have been prepared in accordance
with the books and records of the Companies, contain no material inaccuracies,
and follow the same principles as consistently applied to the Audited
Financial Statements.
4.8 No Liabilities. Neither Company nor any Subsidiary has any material
liabilities, obligations or commitments of any nature (whether absolute,
accrued, contingent or otherwise and whether matured or unmatured), including
without limitation, any liabilities due or to become due to any taxing
authority having jurisdiction over such entities, except (a) liabilities
reflected in, reserved against, or disclosed in the footnotes of, the balance
sheet of such Company or Subsidiary at March 31, 1996 included in the
Unaudited Financial
7
Statements, and (b) liabilities, obligations or commitments incurred since
March 31, 1996 in the ordinary course of such Company's or Subsidiary's
business or that are not material to the business of the Companies and the
Subsidiaries, taken as a whole.
4.9 Absence of Certain Changes or Events. Since March 31, 1996, each of the
Companies and the Subsidiaries have conducted their respective businesses in
the ordinary course and, except pursuant to this Agreement and the
transactions contemplated hereby, there has not been any:
(a) material adverse change in the financial condition, assets,
liabilities, business, operations, results of operations or prospects of
either Company or any Subsidiary or any other event or condition which in
any one case or in the aggregate has materially and adversely affected
either Company or any Subsidiary or any event or condition which it is
reasonable to expect will individually or in the aggregate materially
adversely affect the Companies and the Subsidiaries taken as a whole (any
such event being herein referred to as a "Company Material Adverse
Change");
(b) declaration, waiver or payment of any dividend or other distribution
or payment (whether in cash, shares or property) with respect to the share
capital of either Company or any Subsidiary, or any redemption, purchase or
other acquisition of any of the securities of any Company or Subsidiary, or
any other payment to any shareholder of any Company or Subsidiary in its
capacity as a shareholder;
(c) issuance by either Company or any Subsidiary of, or commitment by any
of them to issue, any share capital or obligations or any securities
convertible into or exchangeable or exercisable for shares or other
securities; or
(d) indebtedness for borrowed money incurred by either Company or any
Subsidiary or any commitment to incur indebtedness for borrowed money
entered into by such Company or Subsidiary, or any loans made or agreed to
be made to such Company or Subsidiary other than pursuant to commitments or
credit facilities existing on March 31, 1996 and described in the Unaudited
Financial Statements (or replacements thereof described in the Company
Disclosure Letter).
4.10 Insurance. Each Company and Subsidiary has in full force policies of
insurance issued by insurers of good repute insuring it and its properties and
business against such losses and risks, and in such amounts, as in its best
judgment, after advice from its insurance broker, are acceptable for the
nature and extent of such business and its resources. No Company or Subsidiary
is in default with respect to any material provision contained in any
insurance policy, and none has failed to give any notice or present any
existing claims it has under its insurance policies in a timely fashion.
4.11 Employee Benefits and Pension Scheme.
(a) Except as set forth in the Company Disclosure Letter, there are no
agreements, arrangements, customs or practice (whether legally enforceable
or not) in operation for the provision of, or payment or contributions
towards, and no Company or Subsidiary has any liability or obligation to
pay, any "relevant benefits" (as defined in Section 612 of the United
Kingdom Income and Corporation Taxes Act 1988 (the "Taxes Act of 1988")),
pensions, gratuities, allowances, lump sums or other like benefits on or
after retirement or death or during periods of sickness, accident,
incapacity or disablement for the benefit of any employee or former
employee of either Company or of any Subsidiary (each, an "Employee") or
such Employee's dependents, nor has any proposal been announced or promise
made to establish any such agreement, arrangement or practice.
(b) There have been disclosed to Buyer true and correct copies of (i) the
current trust deed and rules governing the Companies' Retirement Benefit
Scheme (the "Company's Scheme"), including deeds of alteration, (ii) the
current explanatory booklet issued to members of the Company's Scheme,
(iii) all announcements to members of the Company's Scheme (or to Employees
concerning the Company's Scheme) other than announcements to members of the
Company's Scheme generally which have been fully
8
incorporated into the documents referred to in paragraph (d)(i) and (ii),
(iv) the latest trustee's report and the latest financial statements of the
Company's Scheme (the "Accounts"), (v) the most recent schedule of member
benefits, indicating the number of Employees who are members of the
Company's Scheme, category of membership, pensionable salary, prospective
pension and death in service benefits and pension paid, (vi) schedules of
Employees, indicating name, sex, date of birth, date of joining the
Companies or a Subsidiary, and current salary and (vii) schedules of
benefit structures indicating the relevant benefits provided or to be
provided for Employees under the Company's Scheme in respect of all
different categories of membership.
(c) To the best knowledge of the Companies, the pension arrangements of
each Company and Subsidiary, including without limitation, the Company's
Scheme (collectively, the "Pension Arrangements"), have, at all times, been
administered in all material respects in accordance with all applicable
laws, rules and regulations.
(d) To the best knowledge of the Companies, no discretion or power has
been exercised under the Company's Scheme in respect of the Employees to at
any time provide benefits in excess of those specifically provided for in
the Company's Scheme.
(e) No undertaking or assurance (whether or not constituting a legal
binding commitment) has been given to any Employee about the continuation
of the Company's Scheme or any alteration to or exception from its terms or
the increase or improvement of benefits.
(f) There are not, at the date of this Agreement, any outstanding
contributions due to or under any Pension Arrangement, or that may become
due to or under any Pension Arrangement with respect to any period prior to
the Closing, from any Company or Subsidiary or any Employee or former
Employee, except with respect to any such outstanding contributions that
have been reserved against in the Financial Statements or that have
occurred in the ordinary course of business since April 1, 1996.
(g) The Company's Scheme is exempt approved (within the meaning of
Section 592(1) of the Taxes Act of 1988) and is contracted out (for the
purposes of the Pension Schemes Act 1993) and, to the best knowledge of the
Companies, there are not facts or circumstances which may cause the
withdrawal of approval by the Inland Revenue or cancellation of the
contracted out status by the Occupational Pensions Board.
(h) In respect of any of the Employees: there are no Actions in progress,
pending or, to the best knowledge of the Companies, threatened against the
Company's Scheme, any of the Companies or Subsidiaries or any of their
trustees; and, to the best knowledge of the Companies, there are no
investigations, inquiries, complaints or disciplinary proceedings by or
before any government body or the Pensions Ombudsman concerning the
Company's Scheme and none are pending or threatened.
(i) To the best knowledge of the Companies, the Company's Scheme has and
the Companies and Subsidiaries and the trustee to the Company's Scheme and
the Employees have in relation to the each Pension Arrangement in all
material respects performed, observed and complied with, and each such
Pension Arrangement has been administered in all material respects in
accordance with, all requirements of all applicable laws, including without
limitation, all relevant statutes and subordinate legislation of the United
Kingdom and all relevant provisions of the law of the European Union, all
applicable laws in relation to the trusts, powers and provisions of each
such Pension Arrangement and all regulations, orders, contracts,
agreements, licenses or obligations of whatsoever nature, including without
limitation, requirements of the United Kingdom Inland Revenue or the
Occupational Pensions Board and of trust law, which affect each such
Pension Arrangement or its operation; and all exercises or purported
exercises of powers or discretions in relation to each such Pension
Arrangement, including without limitation, the power of amendment, have
been in all material respects proper and valid exercises of those powers or
discretions.
9
4.12 Material Contracts and Other Agreements. The Company Disclosure Letter
discloses (a) all agreements or contracts whether or not fully performed
pursuant to which either Company or any Subsidiary has since July 1, 1995
acquired or disposed of any business or assets exceeding (Pounds)75,000 in
value, other than sales of inventory or contracts with suppliers, each in the
ordinary course of business; (b) all agreements containing covenants not to
compete on the part of either Company or any Subsidiary or otherwise
restricting the ability of such Company or Subsidiary in any material way to
engage in its business; (c) all material notes, mortgages, indentures, letters
of credit, guarantees, performance bonds and other obligations and agreements
and other instruments for or relating to any lending or borrowing (including
assumed debt) entered into by either Company or any Subsidiary or pursuant to
which any properties or assets of any Company or Subsidiary are pledged or
mortgaged as collateral; and (d) all agreements to which any of the Companies
or Subsidiaries is a party containing provisions restricting or providing
exclusive rights with respect to the development, manufacture or marketing of
products which, after the Closing, would be applicable to the business or
products of the Buyer or Buyer's Subsidiary (as defined in Section 5.2) by
reason of the transactions contemplated by this Agreement.
4.13 Suppliers and Customers. The Companies have delivered to Buyer a list
which accurately sets forth (a) the ten (10) largest suppliers of the
Companies and the Subsidiaries (considered as a whole) for the nine months
ended March 31, 1996 (the "Large Suppliers"), (b) the amount of all payments
made to each Large Supplier for such fiscal period, (c) the ten (10) largest
customers or groups of related customers of the Companies and the Subsidiaries
(considered as a whole) for the nine months ended March 31, 1996 (the "Large
Customers") and (d) the amount of all payments made by such Large Customers
for such fiscal period. No supplier is a sole source of supply of any good or
service used by the Companies or by any Subsidiary. None of the Large
Suppliers or Large Customers has canceled or otherwise terminated, or
threatened in writing, by notice to any Company or Subsidiary, to cancel or
otherwise terminate, its relationship with either Company or with any
Subsidiary or, since March 31, 1996, decreased materially, or threatened to
decrease or limit materially, its services, supplies or materials to either
Company or any Subsidiary or its usage or purchase of the products or services
of such Company or Subsidiary, which, in any case, would result in a Company
Material Adverse Change.
4.14 Real Property. The Company Disclosure Letter sets forth all freehold
and leasehold real property of the Companies. All such freehold and leasehold
real property is collectively referred to herein as the "Real Property." The
Real Property comprises all land and premises owned, occupied or used by, or
in the possession of, the Companies and Subsidiaries. The Companies have good
and marketable title to the freehold Real Property, and true and correct
copies of all leases concerning the leasehold Real Property have been
delivered to the Buyer. There is appurtenant to the Real Property each right
and easement necessary in all material respects for its existing and continued
use.
4.15 Condition of the Real Property; Rights of Use; Liabilities.
(a) Neither the Real Property nor any of its title deeds is subject to an
encumbrance, agreement, obligation, condition, right, easement, exception,
reservation, overriding interest (as defined in sub-section 70(1) of the
Land Registration Act 1925) or other interest. There is no person in
possession or occupation of, or who has or claims a right or interest of
any kind in, the Real Property adversely to any Company's or Subsidiary's
interest.
(b) No Action concerning any Real Property is pending or, to the best
knowledge of any Company or Subsidiary, threatened. To the best knowledge
of each Company and Subsidiary, no matter exists which may give rise to a
proceeding of that type. To the best knowledge of the Companies, there is
no outstanding notice affecting the Real Property.
(c) To the best knowledge of each Company and Subsidiary, there is no
resolution or proposal for compulsory acquisition of the Real Property by a
local or other authority.
(d) Subject to the terms and conditions of the applicable leasehold
agreements, where any Company or Subsidiary holds Real Property under a
lease, tenancy or license, no person, including without limitation, the
landlord or licensor, may bring the term to an end before the expiry of the
lease, tenancy or license by
10
effluxion of time (except by forfeiture). Subject to the terms and
conditions of the applicable leasehold agreements, to the best knowledge of
the Companies there is no matter which could (i) entitle or require a
person, including without limitation, a landlord or licensor, to forfeit or
enter on, or take possession of, or occupy, the Real Property, (ii)
restrict or terminate the Company's or Subsidiary's continued and
uninterrupted possession or occupation of the Real Property or (iii)
prevent or restrict the Real Property's development for which planning
permission has been or is expected to be obtained. No rent or fee payable
in respect of any of the Real Property is, as of the date hereof, being
reviewed except where such reviews could not reasonably be expected to
result in rent increases exceeding (Pounds)150,000 annually, in the
aggregate. No person, including without limitation, a landlord or licensor,
has elected to waive an exemption from payment by any Company or Subsidiary
of value added tax in respect of a payment made under the lease, tenancy or
license.
4.16 Compliance with Laws. The Companies and the Subsidiaries are in
compliance with applicable laws, statutes, ordinances, rules and regulations,
orders or other requirements, including without limitation, applicable
franchise, building, planning, health, environmental, sanitation, safety,
employment relations and other laws, ordinances or regulations, other than
violations, if any, which, individually or in the aggregate, could not
reasonably be expected to have a Company Material Adverse Effect. Neither
Company nor any Subsidiary has received any notice from any person asserting a
present or past failure by either Company or any Subsidiary to comply in any
material respect with such laws, statutes, ordinances, rules, regulations,
orders or other requirements.
4.17 Licenses and Permits. Each Company and Subsidiary has all material
governmental or regulatory licenses, permits and authorizations (all of which
are in full force and effect) reasonably necessary to conduct its business as
it is now being conducted, except for such governmental or regulatory
licenses, permits and authorizations the absence of which could not reasonably
be expected to have, individually or in the aggregate, a Company Material
Adverse Effect, and none of such governmental or regulatory licenses, permits
and authorizations will be impaired as a result of the transactions
contemplated by this Agreement, except in any case that could not reasonably
be expected to have, individually or in the aggregate, a Company Material
Adverse Effect. No Company or Subsidiary has received any notice to the effect
that, or otherwise been advised that, it is not in compliance with, or that it
is in violation of, any such governmental or regulatory licenses, permits and
authorizations in a manner that could reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, and, to
the best knowledge of each Company and Subsidiary, there are no currently
existing circumstances that are likely to result in a failure of any Company
or Subsidiary to comply with, or in a violation by any Company or Subsidiary
of, any such governmental or regulatory licenses, permits or authorizations
that could reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect.
4.18 Title to Assets. The Companies and the Subsidiaries have good and
marketable title to all of the owned tangible personal property used in the
conduct of their businesses, free and clear of all Encumbrances, except for
assets disposed of in the ordinary course of business. Each Company and each
Subsidiary has good and valid leasehold title to all leased tangible personal
property leased by it from third parties, free and clear of all Encumbrances,
except for imperfections which individually or in the aggregate could not
reasonably be expected to cause a Company Material Adverse Effect, and subject
to the rights of the lessor in and to such tangible personal property as is
subject to hire, leasing or rental agreements.
4.19 Inventory. The value at which the inventory of each Company and
Subsidiary is carried on each Company's consolidated balance sheet for the
fiscal year ended June 30, 1995 (the "Consolidated Balance Sheet") and each
Company's consolidated balance sheet for the quarter ended March 31, 1996 (the
"March Balance Sheet"), as included in the Financial Statements, reflects the
customary inventory valuation policy of each Company and its Subsidiaries and
is in accordance with SSAP and the Companies ▇▇▇ ▇▇▇▇. Since March 31, 1996,
the Companies and the Subsidiaries have in all material respects continued to
replenish their inventory in the ordinary course of business consistent with
past practice, and have not made any material change in their inventory
policies or procedures.
11
4.20 Backlog. The Companies have delivered to Buyer a description of each
Company's and, to the extent applicable, each Subsidiary's backlog of orders
believed firm at March 31, 1996, indicating each applicable customer, purchase
order, type of product(s), scheduled shipment date(s), dollar amount(s) of
scheduled shipment(s) and customer deposits or payments, if any, made with
respect thereto.
4.21 Taxes.
(a) The Audited Financial Statements and, based upon information then
available and reasonably believed to be adequate, the Unaudited Financial
Statements, make full provision for all taxation for which each Company and
Subsidiary was at each applicable Accounting Date or thereafter became or
may hereafter become liable or accountable in respect of or by reference to
any income, profit, receipt, gain, transaction, agreement, distribution or
event which was earned, accrued, received, realized, entered into, paid,
made or accrued on or occurred before such Accounting Date and proper
provision was made therein for deferred taxation in accordance with SSAP,
and each Company and Subsidiary has promptly paid or fully provided in its
books of account for all taxation for which it has or may hereafter become
liable or accountable in the period from the Accounting Date to closing.
(b) All returns, computations and payments which should be or should have
been made by each Company and Subsidiary for any taxation purpose have been
made within the requisite periods and are up-to-date, correct and on a
proper basis.
(c) Since the relevant Accounting Date no further liability or contingent
liability for taxation on any Company or Subsidiary has arisen or is likely
to or will arise otherwise than as a result of transactions (not including
distributions) entered into by such Company or Subsidiary in the ordinary
course of trading after the relevant Accounting Date.
(d) No Company or Subsidiary is aware of any circumstance which will or
may, whether by lapse of time or the issue of any notice of assessment or
otherwise, give rise to any dispute with any relevant taxation authority in
relation to its liability or accountability for taxation, any claim made by
it, any relief, deduction or allowance afforded to it, or in relation to
the status or character of each Company and Subsidiary (whether as to its
status as an unquoted trading private close company or as a member of any
group) under or for the purpose of any provision of any legislation
relating to taxation.
(e) Each Company and Subsidiary has in all material respects duly
deducted and accounted for all amounts which it has been obliged to deduct
or withhold in respect of taxation and, in particular, has properly
operated the PAYE system, by deducting tax, as required by applicable law,
from all payments made, or treated as made, to its employees or former
employees, and in all material respects accounted to the Inland Revenue for
all tax so deducted and for all tax chargeable on benefits provided for its
Employees or former Employees.
(f) Each Company and Subsidiary is not nor will it become liable in any
material respect to pay or make reimbursement or indemnity in respect of
any taxation (or amounts corresponding thereto) in consequence of the
failure by any person (other than either Company or any Subsidiary (the
"Group")) to discharge that taxation within any specified period or
otherwise, where such taxation relates to a profit, income or gain,
transaction, event, omission or circumstance arising, occurring or deemed
to arise or occur (whether wholly or party) prior to closing.
(g) Each Company and Subsidiary has not since the relevant Accounting
Date incurred nor has it become liable to incur after that date any
material expenditure which will not be wholly deductible in computing its
taxable profits, except for expenditure on the acquisition of an asset to
be held otherwise than as stock-in-trade.
(h) If any Company or Subsidiary is or any time during the six (6) years
ended on March 31, 1996 has been a close company within the meaning of
Sections 414 and 415 of the Taxes Act of 1988, no apportionment within
Sections 423-430 of the Taxes Act of 1988 and Schedule 19 to the Taxes Act
of 1988 has ever been made or threatened against any Company or Subsidiary
nor are there circumstances under
12
which any apportionment could be made; no loan or advance within Sections
419, 420 or 422 of the Taxes Act of 1988 has ever been made by any Company
or Subsidiary; and each Company and Subsidiary has at all times been a
"trading company" or a "member of a trading group" within paragraph 7 of
Schedule 19 to the Taxes Act of 1988.
(i) Each Company and Subsidiary has not since March 31, 1996 made or
received or agreed to make or receive any material surrender relating to
group relief or the benefit of advance corporation tax otherwise than to or
from another company in the Group.
(j) Except solely with respect to profit or gain accruing to ETE by
reason of the sale of the US Shares hereunder, the execution or completion
of this Agreement will not result in any profit or gain being deemed to
accrue to any Company or Subsidiary for taxation purposes.
(k) Each Company and Subsidiary has not in the six (6) years ended on the
date of this Agreement carried out or been engaged in any material
transaction or arrangement in respect of which there may be substituted for
the actual consideration given or received by any Company or Subsidiary a
different consideration for any taxation purposes.
(l) No Company or Subsidiary nor any other person has made any claim for
roll-over relief or any other claim which affects or could affect the
amount of the chargeable gains or allowable losses which would, but for
such claim, arise on a disposal by the relevant Company of any of its
assets.
(m) Each Company and Subsidiary has duly registered and is a taxable
person for the purposes of value added tax. Each Company and Subsidiary is
not and has not been, for such purposes, a member of any group of companies
(other than the Group), and no act or transaction has been effected in
consequence whereof the Company is or may be held liable for any material
value added tax chargeable against some other company except where that
other company is a company in the Group.
(n) No Company or Subsidiary has obtained any exemption or relief from
United Kingdom stamp duty or capital duty which has become liable to
forfeiture or obtained such exemption or relief in respect of a transaction
carried out within the period in which it may become liable to forfeiture.
(o) No Company or Subsidiary has given or been required to give any
security for taxation.
(p) No Company or Subsidiary has been or is now a party to any material
transaction or arrangement containing steps inserted without any commercial
or business purpose nor has it or any of its associates applied to the
United Kingdom Inland Revenue or any other taxation authority for any
clearance for taxation purposes in relation to any transaction or
arrangement involving the relevant Company or Subsidiary.
(q) In this subsection 4.21, "taxation" shall mean all forms of taxation,
dues, duties, imposts, levies and rates of the United Kingdom or any other
jurisdiction whenever and wheresoever charged, imposed or deducted together
with all costs, charges, interests, penalties, fines relating to or arising
in connection with any and all such taxes, dues, duties, imposts, levies
and rates or any actual claim in respect thereof, including without
limitation, income tax, PAYE, national insurance contributions, corporation
tax, advance corporation tax, capital gains tax, value added tax, customs
and other import duties, stamp duty, stamp duty reserve tax, withholding
tax, capital duty, capital transfer tax and inheritance tax and any
liability arising under Section 601 of the Taxes Act of 1988.
(r) Notwithstanding anything contained herein to the contrary, each of
the representations and warranties contained in this Section 4.21 shall
only relate to those events, facts, conditions or circumstances that have
or could reasonably be expected to have, either individually or in the
aggregate, a Company Material Adverse Effect.
4.22 Environmental Matters.
(a) To the best knowledge of each Company and Subsidiary, no land or
other asset owned occupied, possessed or used by any Company or Subsidiary
on or at any time before the date of this Agreement (i) contains or has
contained (in the case of land, above or below ground) a hazardous
substance or article,
13
waste or other pollutant or contaminant, (ii) is or has been used for the
deposit, storage, treatment or disposal or waste or sewage or (iii) is
referred to or listed in a register of polluted or contaminated land, and
no matter exists which might give rise to an entry in such a register.
(b) To the best knowledge of each Company and Subsidiary, each Company
and Subsidiary has obtained and received no notice of breach of the terms
and conditions of each governmental or regulatory license, permit or
authorization (collectively, the "Environmental Permits"), and all
applicable legal and administrative requirements, concerned with the
pollution or protection of the environment (including the disposal of
waste) or harm to or the protection of the health of humans, animals or
plants. No Company or Subsidiary is aware of any expenditure or work which
is or will be necessary to comply with, maintain or obtain any such
Environmental Permit. To the best knowledge of each Company and Subsidiary,
no release or discharge or a hazardous substance or article, waste, sewage
or other pollutant or contaminant has exceeded an allowed quota or limit
prescribed or specified under any applicable legal or administrative
requirement or in a condition to an Environmental Permit.
(c) No Company or Subsidiary and, to the best knowledge of each Company
and Subsidiary, no person for whose acts or defaults the relevant Company
or Subsidiary may be vicariously liable is involved, or has during the five
(5) years ending on the date of this Agreement been involved, in a civil,
criminal, arbitration, administrative or other proceeding concerned with
the pollution or protection of the environment, or harm to or the
protection of the health of humans, animals or plants in any relevant
jurisdiction. No civil, criminal, arbitration, administrative or other
proceeding of that type is pending or, to the best knowledge of any Company
or Subsidiary, threatened by or against any Company or Subsidiary or a
person for whose acts or defaults any Company or Subsidiary may be
vicariously liable. To the best knowledge of each Company and Subsidiary,
no matter exists which might reasonably be expected to give rise to a
proceeding of that type.
(d) There is and has been no governmental or other investigation, enquiry
or disciplinary proceeding relating to the pollution or protection of the
environment, or harm to or the production of the health of humans, animals
or plants, concerning any Company or Subsidiary and none is pending or, to
the best knowledge of any Company or Subsidiary, threatened. To the best
knowledge of each Company and Subsidiary, no matter exists which might give
rise to an investigation, enquiry or proceeding of that type.
(e) To the best knowledge of each Company and Subsidiary, no Company or
Subsidiary has a liability (actual or contingent, or which might hereafter
arise) to make good, repair, re-instate or clean up land or any other asset
on or before the date of this Agreement owned, occupied, possessed or used
by the relevant Company or Subsidiary.
(f) Notwithstanding the foregoing, each of the representations or
warranties contained in clauses (a) through (e) above shall only relate to
those events, facts, conditions or circumstances that have or could be
reasonably expected to have, either individually or in the aggregate, a
Company Material Adverse Effect.
4.23 Board of Directors and Shareholder Approval. The Board of Directors of
each Company has unanimously approved the transactions contemplated by this
Agreement. Such actions of the Board of Directors remain in full force and
effect and no other action on the part of the Board of Directors or
shareholders of any Company or Subsidiary shall be necessary to consummate the
transactions contemplated by this Agreement.
4.24 Brokers; Certain Expenses. Except with respect to investment banking
fees payable to ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ (in the amount previously disclosed to the
Buyer by the Companies which will be paid by Buyer at the Closing) and the
payment to be made by the Company referred to in Section 6.13(iii), no Company
or Subsidiary has paid or become obligated to pay any fee or commission to any
broker, finder, investment banker or other intermediary in connection with
this Agreement.
4.25 No Agreements to Sell Companies. Except as contemplated by this
Agreement, no Company or Subsidiary has any legal obligation, absolute or
contingent, to any other person, firm or entity to sell, directly or
indirectly, capital stock, material assets (other than inventory in the
ordinary course of business) or business of either Company or any Subsidiary
or to effect any merger, consolidation, liquidation, dissolution,
recapitalization or other reorganization of either Company or any Subsidiary
or to enter into any agreement with respect thereto.
14
4.26 Related-Party Transactions. Except as described in the Company
Disclosure Letter, since July 1, 1993 no director or executive officer of any
Company or Subsidiary, nor any security holder owning more than 5% of the
outstanding shares of either Company, nor any Associate or member of the
immediate family of the foregoing persons (a) has engaged in any transaction,
or series of similar transactions, to which either Company or any Subsidiary
was or is to be a party, in which the amount involved exceeded or exceeds
US$60,000, except in respect of compensation for services rendered as an
employee in the ordinary course of business, (b) has owned, of record or
beneficially, in excess of a 10% equity interest in, any business or
professional entity that has made payments to, or received payments from,
either Company or any Subsidiary in the aggregate exceeding US$60,000 in any
full fiscal year, or (c) is or has been indebted to either Company or any
Subsidiary at any time in an amount in excess of US$60,000. "Associate" shall
mean, in relation to any person, a person who is connected with that person.
Whether a person is so connected shall be determined in accordance with
Section 839 of the Taxes Act of 1988 save that in construing Section 839 the
term "control" shall have the meaning given by Section 840 or Section 416 of
the said Taxes Act of 1988 so that there shall be control wherever either of
the said sections would so require.
4.27 Employees; Labor Matters.
(a) There is no employment or other contract of engagement (written or
otherwise) between any Company or Subsidiary and any of its directors or
officers, other than at-will employment agreements equivalent in all
material respects (except only as to position and compensation) to the
forms previously delivered by the Companies to the Buyer. No Company or
Subsidiary is a party to a consultancy contract with any such persons.
(b) There is no employment contract between any Company or Subsidiary and
any of its Employees which cannot be terminated by three months' notice or
less without giving rise to a claim for damage or compensation (other than
a statutory redundancy payment or statutory compensation for unfair
dismissal).
(c) The Company Disclosure Letter includes true and complete copies of
the employment contract of each director, other officer and Employee of
each Company and Subsidiary entitled to remuneration at an annual rate, or
an average annual rate over the last three financial years, of more than
Forty Thousand Pounds Sterling ((Pounds)40,000).
(d) The basis of the remuneration payable to each Company's directors,
other officers and Employees is the same as that in force at March 31,
1996. No Company or Subsidiary is obligated to increase, nor has it made
provision to increase, the total annual remuneration payable to its
directors, other officers and Employees by more than five percent (5%) or
to increase the rate of remuneration of a director, other officer or
Employee entitled to annual remuneration of more than Forty Thousand Pounds
Sterling ((Pounds)40,000).
(e) No Company or Subsidiary owes any amount to a present or former
director, other officer or Employee (or his or her dependent) other than
for accrued remuneration or reimbursement of business expenses.
(f) Each Company and Subsidiary has in all material respects complied
with (i) each legally binding obligation imposed on it by, and each order
and award made under, statute, regulation, code or conduct and practice,
collective agreement, custom and practice relevant to the relations between
it and its Employees or a trade union or the terms of employment or its
employees and (ii) each recommendation made by the Advisory Conciliation
and Arbitration Service and each award and declaration made by the Central
Arbitration Committee.
(g) Within the year ending on the date of this Agreement no Company or
Subsidiary has (i) given notice or redundancies to the relevant Secretary
of State or started consultations with a trade union under Part IV of the
Employment Protection Act 1975 or failed to comply with its obligations
under Part IV of that Act or (ii) been a transferor or transferee in
respect of a relevant transfer (as defined in the Transfer of Undertakings
(Protection of Employment) Regulations 1981) or failed to comply with a
duty to inform and consult a trade union under those Regulations.
15
(h) No Company or Subsidiary has any agreement or arrangement with, and
does not recognize, a trade union, works council, staff association or
other body representing any of its Employees. No Company or Subsidiary is
involved in a dispute with a trade union, works council, staff association
or other body representing any of its Employees.
(i) No Company or Subsidiary has nor is proposing to introduce a share
incentive, share option, profit sharing, bonus or other incentive scheme
for any of its directors, officers or other Employees.
(j) There is and has been no training scheme, arrangement or proposal in
relation to any Company or Subsidiary in respect of which a levy may become
payable by it under the Industrial Training ▇▇▇ ▇▇▇▇.
4.28 Proprietary Rights. Each Company and Subsidiary (a) owns or has the
right to use, free and clear of all Encumbrances, all patents, patent
applications, trademarks, service marks, trade names, copyrights, trade
secrets, licenses and similar rights with respect to the foregoing, necessary
for and used in the conduct of its business as now conducted, to its best
knowledge, without infringing upon or otherwise acting adversely to the right
or claimed right of any person under or with respect to any of the foregoing,
(b) is not contractually or, to its best knowledge, otherwise obligated to
make any material payments by way of royalties, fees or otherwise to any owner
of, licensor of, or other claimant to, any patent, trade secret, trademark,
trade name, copyright or other intangible asset, with respect to the use
thereof or in connection with the conduct of its business or otherwise, (c)
has not received any notice of conflict with the asserted rights of others
with respect to such matters, (d) owns or has the unrestricted right to use
all trade secrets, including know-how, customer lists, inventions, designs,
processes, computer programs and technical data used by it in the development,
operation and sale of all products and services sold by it, to its best
knowledge free and clear of any rights, liens or claims of others, and (e) to
its best knowledge is not using any confidential information or trade secrets
of others. A list of all patent, patent applications, trademarks, trademark
applications, licenses and trade names which any Company or Subsidiary has
taken action to obtain, perfect or protect by filings with any governmental
agency are contained in the Company Disclosure Letter.
4.29 Disclosure. No representation or warranty by the Majority Shareholder
in this Agreement contains any untrue statement of a material fact or omits to
state any material fact necessary, in light of the circumstances under which
it was made, in order to make the statements herein not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as disclosed in the Letter of Disclosure delivered to the Companies
and the Shareholders in connection herewith and initialled by the Buyer and
the Majority Shareholder for identification (the "Buyer's Disclosure Letter"),
Buyer represents and warrants to the Shareholders as follows:
5.1 Corporate Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of California, with
all requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as it is now being conducted, and is
qualified or licensed to do business and is in good standing in each
jurisdiction in which the failure to be so qualified or licensed could
reasonably be expected, individually or in the aggregate, to have a material
and adverse effect upon the financial condition, prospects or results of
operations of Buyer or Buyer's Subsidiary (as defined below), considered as a
whole (a "Buyer Material Adverse Effect"). True and complete copies of the
Certificate of Incorporation and the By-Laws of Buyer have been delivered to
the Shareholders.
5.2 Subsidiaries. Buyer has one (1) wholly-owned subsidiary, PMT Korea, a
corporation organized under the laws of the Republic of South Korea ("Buyer's
Subsidiary"). Buyer's Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, with all
16
requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as it is now being conducted, and is
qualified or licensed to do business and is in good standing in each
jurisdiction in which the failure to be so qualified or licensed could
reasonably be expected to have, individually or in the aggregate, a Buyer
Material Adverse Effect. All of the issued shares of capital stock of such
Subsidiary have been duly and validly authorized and issued, are fully paid
and non-assessable, and are owned directly by Buyer, free and clear of any and
all Encumbrances. Except with respect to its ownership of Buyer's Subsidiary,
its ownership of the capital stock of PMT CVD Partners, Inc. and its limited
partnership interest in PMT CVD Partners, L.P., Buyer does not own, directly
or indirectly, any stock, partnership interest, joint venture interest or
other security, investment or interest in any other corporation, organization,
partnership, limited liability company or entity. As used in this Article V,
references to "Buyer" shall include Buyer's Subsidiary, except to the extent
the context requires otherwise.
5.3 Capital Stock. The authorized capital stock of Buyer consists in its
entirety of Fifty Million (50,000,000) shares of Buyer's Common Stock, of
which, as of the date hereof, 8,692,065 are issued and outstanding, and Twenty
Million (20,000,000) shares of Preferred Stock, no par value, of which, as of
the date hereof, no shares were outstanding. All of the outstanding shares of
Common Stock have been duly and validly authorized and issued, are fully paid
and nonassessable and were issued in compliance with all applicable federal
and state securities laws. To the best of Buyer's knowledge, there are no
voting trusts or other agreements, arrangements or understandings with respect
to the voting of the capital stock of Buyer. Except as set forth in the Buyer
Disclosure Letter, there are no preemptive rights, registration rights,
subscriptions, options, warrants, rights, convertible securities or other
agreements or commitments of any character relating to the issued or unissued
capital stock or other securities of Buyer and there are no outstanding
contractual obligations of Buyer to repurchase, redeem or otherwise acquire or
sell, issue or otherwise transfer any shares of capital stock thereof.
5.4 Buyer Shares. The Buyer Shares have been duly authorized and, when
issued as contemplated hereby at the Closing, will be validly issued, fully
paid and non-assessable, will not be subject to any preemptive or other
similar rights and will be delivered to each Shareholder free and clear of all
Encumbrances, and each Shareholder will acquire good and marketable title to
the Buyer Shares acquired by such Shareholder, subject to any transfer
restrictions pursuant to applicable securities laws. The Buyer Shares are
being issued pursuant to an available exemption from registration under the
Securities Act of 1933, as amended, provided by Regulation S promulgated
thereunder.
5.5 Authority. Buyer has the full corporate power and authority to execute
and deliver this Agreement and each other agreement contemplated hereby, to
carry out its obligations hereunder and thereunder and to consummate the
transactions contemplated on its part hereby and thereby. The execution,
delivery and performance by Buyer of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by its Board of
Directors. Upon approval by Buyer's shareholders of the issuance of the Buyer
Shares to the Shareholders pursuant hereto, no other action on the part of
Buyer will be necessary to authorize the execution and delivery of this
Agreement by Buyer or the performance by Buyer of its obligations hereunder.
This Agreement has been duly executed and delivered by Buyer, and is a legal,
valid and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms, except to the extent that its enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally or by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at
law). Each other agreement to be executed in connection with this Agreement on
or prior to the Closing Date will be duly executed and delivered by Buyer, and
will constitute a legal, valid and binding obligation of Buyer, enforceable
against it in accordance with its respective terms, subject to applicable
bankruptcy, insolvency, moratorium, reorganization, or similar laws affecting
creditors' rights generally and subject to general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
5.6 No Violations or Consents. The execution, delivery and performance of
this Agreement by Buyer and the consummation by it of the transactions
contemplated hereby will not (a) violate or conflict with any provision of any
law specifically applicable to Buyer or by which any property or asset of it
is bound, (b) require the
17
consent, waiver, approval, license or authorization of or any filing by Buyer
with any public authority (other than (i) if necessary, the filing of a pre-
merger notification report under the HSR Act and under applicable U.K./EEC
antitrust statutes, (ii) in connection with or in compliance with the
provisions of each of the Securities Act, and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), including without limitation, the
filing of the Proxy Statement (as defined in Section 6.4(b), and (iii) any
other filings and approvals expressly contemplated by this Agreement), (c)
violate, conflict with, result in a breach of or the acceleration of any
obligation under, or constitute a default (or an event which with notice or
the lapse of time or both would become a default) under, or give to others any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of any Encumbrance on any property or asset of Buyer pursuant to
any provision of any charter or by-law, indenture, mortgage, lien, lease,
agreement, contract, instrument, order, judgment, ordinance, regulation or
decree to which Buyer is subject or by which Buyer or any of its property or
assets is bound, or (d) result in a loss or adverse modification of any
license, permit, certificate, franchise or contract granted to or otherwise
held by Buyer which, in any such case described in clauses (a) through (d),
could reasonably be expected to have, individually or in the aggregate, a
Buyer Material Adverse Effect.
5.7 Financial Statements and Reports. Buyer heretofore has delivered to each
Company true and complete copies of (a) the Company's Registration Statement
on Form S-1 (the "Registration Statement") as declared effective by the
Commission on August 23, 1995, (b) its Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, as filed with the Commission, (c) its
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996, as filed
with the Commission, and (d) all other reports, statements and registration
statements (including Current Reports on Form 8-K) filed by it with the
Commission subsequent to the filing of the Registration Statement, if any. The
reports, statements and registration statements referred to in the immediately
preceding sentence, including without limitation, any financial statements or
schedules or other information incorporated by reference therein, are referred
to in this Agreement as the "SEC Filings." As of the respective times such
documents were filed with the Commission, the SEC Filings complied as to form
and content, in all material respects, with the requirements of the Securities
Act and the Exchange Act, as the case may be, and the rules and regulations
promulgated thereunder, and did not contain any untrue statement of a material
fact or omit to state any 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 financial statements of Buyer
included in the SEC Filings ("Buyer's Financial Statements") were prepared in
accordance with generally accepted accounting principles ("GAAP"),
consistently applied, and (except as may be indicated therein or in the notes
thereto) present fairly the consolidated financial position, results of
operations and cash flows of Buyer as of the dates and for the periods
indicated (subject, in the case of unaudited interim consolidated financial
statements, to normal recurring year-end adjustments and any other adjustments
described therein). Except as set forth in Buyer's Financial Statements, Buyer
has no liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇)
obligations under real and personal property leases disclosed in Buyer's
Financial Statements, and (iii) obligations incurred in the ordinary course of
business and not required under GAAP to be reflected in Buyer's Financial
Statements, which, individually or in the aggregate, are not material to the
financial condition or operating results of Buyer. Buyer is in full compliance
with the revenue recognition policies adopted and approved by its Board of
Directors on January 17, 1996.
5.8 Litigation. There are no Actions pending or, to the best knowledge of
Buyer, threatened against Buyer or any of the assets or properties thereof
before any Authority which could reasonably be expected to have a Buyer
Material Adverse Effect. There are no Actions pending or, to the knowledge of
Buyer, threatened against Buyer that could be reasonably expected to
materially and adversely affect Buyer's consummation of the transactions
contemplated by this Agreement. None of the assets or property of Buyer is
subject to any order, judgment, injunction, writ or decree, which could
reasonably be expected to have, individually or in the aggregate, a Buyer
Material Adverse Effect.
5.9 Absence of Certain Changes or Events. Since March 31, 1996, the Buyer
has conducted its business in the ordinary course and, except pursuant to this
Agreement and the transactions contemplated hereby, there has not been any:
18
(a) material adverse change in the financial condition, assets,
liabilities, business, operations, results of operations or prospects of
the Buyer or any other event or condition which in any one case or in the
aggregate has materially and adversely affected the Buyer or any event or
condition which it is reasonable to expect will individually or in the
aggregate materially adversely affect the Buyer (any such event being
herein referred to as a "Buyer Material Adverse Change");
(b) declaration, waiver or payment of any dividend or other distribution
or payment (whether in cash, shares or property) with respect to the share
capital of the Buyer, or any redemption, purchase or other acquisition of
any of the securities of the Buyer, or any other payment to any shareholder
of the Buyer in its capacity as a shareholder;
(c) issuance by the Buyer of, or commitment by it to issue, any share
capital or obligations or any securities convertible into or exchangeable
or exercisable for shares or other securities other than pursuant to its
1991 Stock Option Plan and as contemplated by Section 7.3(g) hereof; or
(d) indebtedness for borrowed money incurred by the Buyer or any
commitment to incur indebtedness for borrowed money entered into by the
Buyer, or any loans made or agreed to be made by the Buyer other than
pursuant to commitments or credit facilities existing on March 31, 1996 and
described in the Buyer Disclosure Letter.
5.10 Insurance. Buyer has in full force policies of insurance issued by
insurers of recognized responsibility insuring Buyer and its properties and
business against such losses and risks, and in such amounts, as in Buyer's
best judgment, after advice from its insurance broker, are acceptable for the
nature and extent of such business and its resources. Buyer is not in default
with respect to any material provision contained in any insurance policy, and
has not failed to give any notice or present any existing claims it has under
its insurance policies in a timely fashion.
5.11 Employee Benefits. Buyer does not have any agreements, arrangements,
customs or practice (whether legally enforceable or not) relating to or
providing for employee benefits, including pensions, gratuities, allowances,
lump sums or other like benefits on or after severance, retirement or death,
during periods of sickness, incapacity or disablement or otherwise for the
benefit of any present or former employee of Buyer (a "Buyer Employee") or
dependent or beneficiary of a Buyer Employee, including any retirement plan in
which any Buyer Employee participates that is subject to any provision of the
Employee Retirement Income Security Act of 1974, as amended, and the
regulations thereof, nor has any proposal been announced or promise made to
establish any such agreement, arrangement or practice.
5.12 Employees; Labor Matters.
(a) There is no employment or other contract of engagement (written or
otherwise) between the Buyer and any of its directors or officers, other
than at-will employment agreements equivalent in all material respects
(except only as to position and compensation) to the form previously
delivered by the Buyer to the Companies. The Buyer is not a party to a
consultancy contract with any such persons.
(b) There is no employment contract between the Buyer and any Buyer
Employee which cannot be terminated by three months' notice or less without
giving rise to a claim for damage or compensation (other than a statutory
redundancy payment or statutory compensation for unfair dismissal).
(c) The Buyer Disclosure Letter contains details of the terms of the
employment contract of each director, officer and Buyer Employee entitled
to remuneration at an annual rate, or an average annual rate over the last
three financial years, of more than US$60,000.
(d) The basis of the remuneration payable to the Buyer's directors,
officers and Buyer Employees is the same as that in force at March 31,
1996. The Buyer is not obligated to increase, nor has it made provision to
increase, the total annual remuneration payable to its directors, officers
and Buyer Employees by more than five percent (5%) or to increase the rate
of remuneration of a director other officer or employee entitled to annual
remuneration of more than US$60,000.
19
(e) The Buyer does not owe any amount to any present or former director
or officer of Buyer or Buyer Employee (or his or her dependent) other than
for accrued remuneration or reimbursement of business expenses.
(f) There is no agreement or arrangement between the Buyer and any Buyer
Employee with respect to his or her ceasing to be employed or his or her
retirement which is not included in the written terms of his or her
employment or previous employment. The Buyer has not provided, or agreed to
provide, a gratuitous payment or benefit to a director, officer or Buyer
Employee or to any of their dependents.
(g) The Buyer has not (i) incurred a liability for breach of termination
of an employment contract, including without limitation, a redundancy
payment, protective award and compensation or wrongful dismissal, unfair
dismissal and failure to comply with an order for the reinstatement or re-
engagement of an Employee, (ii) incurred a liability for breach or
termination of a consultancy agreement or (iii) made or agreed to make a
payment or provided or agreed to provide a benefit to a present or former
director, officer or Employee or to any of their dependents in connection
with the actual or proposed termination or suspension of employment or
variation of an employment contract.
(h) The Buyer has in all material respects complied with (i) each
obligation imposed on it by, and each order and award made under, any
statute, regulation, code or conduct and practice, custom and practice
relevant to the relations between it and its Employees.
(i) The Buyer has no agreement or arrangement with, and does not
recognize, a trade union, works council, staff association or other body
representing any of its Employees. The Buyer is not involved in, and to the
best knowledge of the Buyer, no matter exists which might give rise to, a
dispute with a trade union, works council, staff association or other body
representing any of its Employees.
5.13 Material Contracts and Other Agreements. The Buyer Disclosure Letter
discloses (a) all agreements or contracts whether or not fully performed
pursuant to which the Buyer has since December 31, 1990 acquired or disposed
of a material portion of its business or assets, other than sales of inventory
or contracts with suppliers, each in the ordinary course of business; (b) all
agreements containing covenants not to compete on the part of the Buyer or
otherwise restricting the ability of the Buyer in any material way to engage
in its business; (c) all material notes, mortgages, indentures, letters of
credit, guarantees, performance bonds and other obligations and agreements and
other instruments for or relating to any lending or borrowing (including
assumed debt) entered into by the Buyer or pursuant to which any properties or
assets of the Buyer are pledged or mortgaged as collateral; and (d) all
agreements to which either Buyer or Buyer's Subsidiary is a party containing
provisions restricting or providing exclusive rights with respect to the
development, manufacture or marketing of products which, after the Closing,
would be applicable to the business or products of any of the Companies or the
Subsidiaries by reason of the transactions contemplated by this Agreement.
5.14 Suppliers and Customers. The Buyer has delivered to the Company a list
which accurately sets forth (a) the ten largest suppliers of Buyer for the
fiscal year ended December 31, 1995 ("Buyer's Large Suppliers"), (b) the
amount of all payments made to each Buyer's Large Supplier for such fiscal
period, (c) the ten largest customers or groups of related customers for the
fiscal year ended December 31, 1995 (the "Buyer's Large Customers") and (d)
the amount of all payments made by Buyer's Large Customers for such fiscal
period. No supplier is a sole source of supply of any good or service used by
Buyer. None of Buyer's Large Suppliers or Buyer's Large Customers has canceled
or otherwise terminated, or threatened in writing, by notice to the Buyer, to
cancel or otherwise terminate, its relationship with Buyer or, since March 31,
1996, decreased materially, or threatened to decrease or limit materially, its
services, supplies or materials to Buyer or its usage or purchase of the
products or services of Buyer which, in any case, would result in a Buyer
Material Adverse Change.
5.15 Compliance with Laws. Buyer is in compliance with applicable laws,
statutes, ordinances, rules and regulations, orders or other requirements,
including without limitation, applicable franchise, building, zoning, health,
environmental, sanitation, safety, labor relations and other laws, ordinances
or regulations, other than
20
violations, if any, which, individually or in the aggregate, could not
reasonably be expected to have, a Buyer Material Adverse Effect. Buyer has not
received any notice from any person asserting a present or past failure by
Buyer to comply in any material respect with such laws, statutes, ordinances,
rules, regulations, orders or other requirements.
5.16 Licenses and Permits. Buyer has all material governmental or regulatory
licenses, permits and authorizations (all of which are in full force and
effect) reasonably necessary to conduct their business as it is now being
conducted, except for such governmental or regulatory licenses, permits and
authorizations the absence of which could not reasonably be expected to have,
individually or in the aggregate, a Buyer Material Adverse Effect, and none of
such governmental or regulatory licenses, permits and authorizations will be
impaired as a result of the transactions contemplated by this Agreement,
except in any case that could not reasonably be expected to have, individually
or in the aggregate, a Buyer Material Adverse Effect. Buyer has not received
any notice to the effect that, or otherwise been advised that, it is not in
compliance with, or that it is in violation of, any such governmental or
regulatory licenses, permits and authorizations in a manner that could
reasonably be expected to have, individually or in the aggregate, a Buyer
Material Adverse Effect, and there are not currently existing circumstances
that are likely to result in a failure of Buyer to comply with, or in a
violation by Buyer of, any such governmental or regulatory licenses, permits
or authorizations that could reasonably be expected to have, individually or
in the aggregate, a Buyer Material Adverse Effect.
5.17 Title to Assets. Buyer has good and marketable title to all of the
owned tangible personal property used in the conduct of its business free and
clear of all Encumbrances, except for assets disposed of in the ordinary
course of business. Buyer has good and valid leasehold title to all leased
tangible personal property leased by it from third parties, free and clear of
all Encumbrances, except for imperfections individually or in the aggregate as
could not reasonably be expected to cause a Buyer Material Adverse Effect, and
subject to the rights of the lessor in and to such leased tangible personal
property as is subject to hire, leasing or rental agreements.
5.18 Inventory. The value at which the inventory of Buyer is carried on the
Buyer's consolidated balance sheet for the fiscal year ended December 31, 1995
and Buyer's consolidated balance sheet for the quarter ended March 31, 1996
reflects the customary inventory valuation policy of Buyer and is in
accordance with GAAP. Since March 31, 1996, the Buyer has in all material
respects continued to replenish its inventory in the ordinary course of
business consistent with past practice, and has not made any material change
in its inventory policies or procedures.
5.19 Backlog. The Buyer has delivered to the Companies a description of the
Buyer's backlog of orders believed firm at March 31, 1996, indicating each
applicable customer, purchase order, type of product(s), scheduled shipment
date(s), dollar amount(s) of scheduled shipment(s) and customer deposits or
payments, if any, made with respect thereto.
5.20 Tax Returns and Audits.
(a) Buyer has prepared and timely filed all federal, state and other tax
returns required by law to be filed by it, has paid or made provision for
the payment of all taxes shown to be due and all additional assessments,
and adequate provisions have been made and are reflected in Buyer's
Financial Statements to the extent required by GAAP for all current taxes
and other charges to which Buyer is subject and which are not currently due
and payable. None of the federal income tax returns of Buyer have been
audited by the Internal Revenue Service in such a manner to bring such
audit to the attention of Buyer. There are no additional assessments or
adjustments pending or, to the best knowledge of Buyer, threatened against
Buyer for any period, nor is Buyer aware of any basis for any such
assessment or adjustment.
(b) Since March 31, 1996, no further material liability or contingent
material liability for taxation of Buyer has arisen or is likely to arise
otherwise than as a result of transactions entered into by Buyer in the
ordinary course of business.
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(c) Buyer is not aware of any circumstance which will or may, whether by
lapse of time or by notice of assessment or otherwise, give rise to any
material dispute with any relevant taxation authority in relation to its
liability or accountability for taxation, any material claim made by it,
material relief, deduction or allowance afforded to it, or in any material
respect in relation to the status or character of Buyer under or for the
purpose of any provision of any legislation relating to taxation.
5.21 Environmental and Safety Laws.
(a) To the best knowledge of Buyer, no land or other asset owned
occupied, possessed or used by Buyer on or at any time before the date of
this Agreement (i) contains or has contained (in the case of land, above or
below ground) a hazardous substance or article, waste or other pollutant or
contaminant, (ii) is or has been used for the deposit, storage, treatment
or disposal or waste or sewage or (iii) is referred to or listed in a
register of polluted or contaminated land, and no matter exists which might
give rise to an entry in such a register.
(b) To the best knowledge of Buyer, Buyer has obtained and complied with
the terms and conditions of each governmental or regulatory license, permit
or authorization (collectively, the "Environmental Permits"), and all
applicable legal and administrative requirements, concerned with the
pollution or protection of the environment (including the disposal of
waste) or harm to or the protection of the health of humans, animals or
plants. Buyer is not aware of any expenditure or work which is or will be
necessary to comply with, maintain or obtain any such Environmental Permit.
No release or discharge of a hazardous substance or article, waste, sewage
or other pollutant or contaminant has exceeded an allowed quota or limit
prescribed or specified under any applicable legal or administrative
requirement or in a condition to an Environmental Permit.
(c) Neither Buyer nor any person for whose acts or defaults Buyer may be
vicariously liable is involved, or has during the five (5) years ending on
the date of this Agreement been involved, in a civil, criminal,
arbitration, administrative or other proceeding concerned with the
pollution or protection of the environment, or harm to or the protection of
the health of humans, animals or plants in any jurisdiction. No civil,
criminal, arbitration, administrative or other proceeding of that type is
pending or, to the best knowledge of Buyer, threatened by or against Buyer
or a person for whose acts or defaults Buyer may be vicariously liable. To
the best knowledge of Buyer, no matter exists which might give rise to a
proceeding of that type.
(d) There is and has been no governmental or other investigation, enquiry
or disciplinary proceeding relating to the pollution or protection of the
environment, or harm to or the production of the health of humans, animals
or plants, concerning Buyer and none is pending or, to the best knowledge
of Buyer, threatened. To the best knowledge of Buyer, no matter exists
which might give rise to an investigation, enquiry or proceeding of that
type.
(e) To the best knowledge of Buyer, Buyer has no liability (actual or
contingent, or which might hereafter arise) to make good, repair, re-
instate or clean up land or any other asset on or before the date of this
Agreement owned, occupied, possessed or used by Buyer.
(f) Notwithstanding the foregoing, each of the representations or
warranties contained in clauses (a) through (e) above shall only relate to
those events, facts, conditions or circumstances that have or could be
reasonably expected to have, either individually or in the aggregate, a
Buyer Material Adverse Effect.
5.22 Board of Directors Approval. The Board of Directors of Buyer has
unanimously approved the transactions contemplated by this Agreement and has
unanimously determined that such transactions are fair to and in the best
interests of Buyer and its shareholders. Such action of the Board of Directors
remains in full force and effect.
5.23 Related-Party Transactions. Except as described in the Buyer's
Disclosure Letter, since December 31, 1992 no director or executive officer of
Buyer, nor any security holder owning more than 5% of
22
the outstanding shares of Buyer, nor any Associate or member of the immediate
family of the foregoing persons (a) has engaged in any transaction, or series
of similar transactions, to which the Buyer was or is to be a party, in which
the amount involved exceeded or exceeds US$60,000, except in respect of
compensation for services rendered as an employee in the ordinary course of
business, (b) has owned, of record or beneficially, in excess of a 10% equity
interest in, any business or professional entity that has made payments to, or
received payments from, the Buyer in the aggregate exceeding US$60,000 in any
full fiscal year, or (c) been indebted to the Buyer at any time in an amount
in excess of US$60,000.
5.24 Proprietary Rights. Buyer (a) owns or has the right to use, free and
clear of all Encumbrances, all patents, patent applications, trademarks,
service marks, trade names, copyrights, trade secrets, licenses and similar
rights with respect to the foregoing, necessary for and used in the conduct of
its business as now conducted, to Buyer's best knowledge, without infringing
upon or otherwise acting adversely to the right or claimed right of any person
under or with respect to any of the foregoing, (b) is not contractually or, to
Buyer's best knowledge, otherwise obligated to make any material payments by
way of royalties, fees or otherwise to any owner of, licensor of, or other
claimant to, any patent, trade secret, trademark, trade name, copyright or
other intangible asset, with respect to the use thereof or in connection with
the conduct of its business or otherwise, (c) has not received any notice of
conflict with the asserted rights of others with respect to such matters,
(d) owns or has the unrestricted right to use all trade secrets, including
know-how, customer lists, inventions, designs, processes, computer programs
and technical data used by Buyer in the development, operation and sale of all
products and services sold by it, to its best knowledge free and clear of any
rights, liens or claims of others, and (e) to its best knowledge, is not using
any confidential information or trade secrets of others. A list of all patent,
patent applications, trademarks and service marks, trademark and service ▇▇▇▇
applications, licenses and trade names which the Buyer has taken action to
obtain perfect or protect by filings with any governmental agency are
contained in the Buyer Disclosure Letter.
5.25 Real Property. All real property owned, occupied, used by or in the
possession of the Buyer is listed in the Buyer Disclosure Letter (the "Buyer
Real Property"). Except as set forth in the Buyer Disclosure Letter, Buyer has
good and marketable title to all Buyer Real Property owned by it in fee, and
Buyer leases free and clear of all Encumbrances all Buyer Real Property not
owned by it in fee.
5.26 Disclosure. No representation or warranty by Buyer in this Agreement
contains any untrue statement of a material fact or omits to state any
material fact necessary, in light of the circumstances under which it was
made, in order to make the statements herein not misleading.
5.27 Brokers. Except with respect to any investment banking fee due to
Salomon Brothers and Unterberg Harris, Buyer has not paid or become obligated
to pay any fee or commission to any broker, finder, investment banker or other
intermediary in connection with this Agreement.
ARTICLE VI
COVENANTS AND AGREEMENTS
6.1 Conduct of Business Prior to the Closing Date. Each Company and
Subsidiary, on the one hand, and Buyer and Buyer's Subsidiary, on the other
hand, agrees with the other that, from the date hereof, and prior to the
Closing Date, except as otherwise consented to or approved in writing by the
other or expressly permitted by this Agreement:
(a) its business shall be conducted only in the ordinary course and
consistent with past practice and it shall not take any action inconsistent
therewith or with the transactions contemplated hereby;
(b) it shall not (i) amend its Articles of Association or Articles or
Certificates of Incorporation, as the case may be, Memorandum or Bylaws, as
the case may be, or other charter documents, (ii) change the number of
issued or outstanding shares of its capital stock, or issue any debt or
equity securities, or any
23
options, warrants or other rights to acquire or subscribe for such
securities (except, in the case of the Buyer, for the grant of stock
options, not exceeding options covering 400,000 shares of Buyer's Common
Stock, plus the amount of options contemplated by Section 6.14(b), under
its Stock Option Plan, and the issuance of shares of Buyer's Common Stock
pursuant to the exercise of outstanding stock options and warrants and the
issuance of subordinate convertible debentures as contemplated by Section
7.3(g) hereof), (iii) declare, set aside or pay any dividend or other
distribution or payment in cash, stock or property in respect of shares of
its capital stock (except, in the case of the Companies, as contemplated by
and in accordance with Section 9.8 hereof), (iv) make any direct or
indirect redemption, retirement, purchase or other acquisition of any of
its capital stock, or (v) split, combine or reclassify its outstanding
shares of capital stock;
(c) it shall not, directly or indirectly, (i) other than in the ordinary
course of business and consistent with past practice, and except in the
case of Buyer for the subordinated debt financing referred to in Section
7.3(g), incur any indebtedness for borrowed money, except indebtedness for
borrowed money incurred under credit facilities existing as of the date
hereof (or replacements thereof), inter-group borrowings or which otherwise
does not exceed, at the date of each incurrence, the equivalent of
US$250,000 in principal amount, (ii) waive, release, grant or transfer any
rights of material value, except in the ordinary course of business, (iii)
sell, transfer, lease, license, sell, mortgage, pledge, dispose of or
encumber any of its assets with a value exceeding, as of the date of such
event, the equivalent of US$250,000 in the aggregate, other than inventory
sold in the ordinary course of business and consistent with past practice
or any pledge or other encumbrance pursuant to credit facilities in
existence on the date hereof (or replacements of facilities in existence on
the date hereof), (iv) purchase or acquire any business or any securities
or assets of a business, (v) enter into any joint venture or partnership,
(vi) settle any material litigation or waive or relinquish any material
right or benefit or (vii) accelerate payments on any indebtedness;
(d) it will use its reasonable best efforts to preserve intact its
business organization, to keep available the services of its operating
personnel and to preserve the goodwill of those having business
relationships with it, provided that the loss of any personnel as a result
of the announcement of the transactions contemplated by this Agreement
shall not be deemed to be a breach of this Section 6.1(d);
(e) it will not, directly or indirectly, (i) increase the compensation
payable or to become payable by it to any of its employees, officers or
directors, except in the ordinary course of business consistent with prior
practice, (ii) make any payment or provision to, or otherwise amend, other
than as required by the Company's Scheme or as permitted by the Buyer's
Stock Option Plan, in each case in the ordinary course of business and
consistent with prior practice, any stock option, bonus, profit sharing,
pension, group insurance, severance pay, deferred compensation or other
payment or employee compensation plan for the benefit of its employees,
(iii) grant any stock options or stock appreciation rights, except as
permitted by paragraph (b) above, (iv) enter into any new, or alter or
amend any, employment, severance, consulting or other compensation
agreement with any director, officer, Employee or Associate of it, except
in the ordinary course of business consistent with prior practice, (v) make
any loan or advance to, or enter into any written contract, lease or
commitment with, any officer, Employee or director of it except in the case
of travel, entertainment or other similar advances in the ordinary course
of business consistent with prior practice, or (vi) enter into any other
material transactions with any Associate of it or any of its shareholders,
directors or executive officers;
(f) it will not, directly or indirectly, assume, guarantee, endorse or
otherwise become responsible for the obligations of any other individual,
firm or corporation, or make any loans or advances to any other individual,
firm or corporation except in the ordinary course of business and
consistent with past practices;
(g) it will not incur capital expenditures (or commitments to make such
expenditures which are not terminable at its option) which in the aggregate
would exceed 110% of the amount forecasted therefor as of the date hereof
with respect to any calendar month including or following the date hereof,
nor shall it make any investment of a capital nature either by purchase of
stock or securities, contributions to capital, property transfers or
otherwise or by the purchase of any property or assets of any other
individual, firm or corporation;
24
(h) it will not alter any practice with respect to accounting policies or
procedures or make any reclassification of assets or liabilities, except,
with respect to the Companies, for changes required by changes in SSAP or
in the Companies ▇▇▇ ▇▇▇▇ or changes required to conform their financial
statements to U.S. GAAP;
(i) it will not close any office, plant, facility or warehouse, except as
required by applicable law or in the event of a material casualty;
(j) it will not enter into, with respect to any office, plant, facility
and warehouse, any new lease, lease termination agreement or amendment of
any agreement to lease real property, including without limitation, any
amendments to any such agreement with respect to rent or additional rent,
term assignment, subletting, "keep-open" clauses, non-competition clauses
and required trade name clause, except, in the case of the Companies and
the Subsidiaries, for lease modifications reflecting the resolution of
currently pending rent reviews which would not in the aggregate reasonably
be expected to result in rent increases exceeding (Pounds)150,000 annually;
(k) it will not sell, assign or sublease any office, plant, facility or
warehouse;
(l) it will not enter into an agreement to do any of the things described
in clauses (a) through (k) immediately above; and
(m) it will promptly advise the other in writing of any event or
occurrence that could be reasonably expected to have a Company Material
Adverse Effect (in the case of notices by the Company) or a Buyer Material
Adverse Effect (in the case of notices by the Buyer) or of any breach of
any of its representations or warranties contained in Article IV or Article
V, as applicable, or any breach by it of a covenant contained herein.
6.2 Access to Properties and Records. Each Company and Subsidiary, on the
one hand, and the Buyer, on the other hand, shall afford to the other and its
investment bankers, accountants, legal counsel and other representatives
(including without limitation the Buyer's environmental experts, for the
purpose of conducting the investigation referred to in Section 7.3(j) hereof),
on reasonable notice, full access during normal business hours from the date
hereof to the Closing Date to all of its properties, books, accounts,
agreements, personnel, facilities, proprietary information, contracts,
commitments and records and shall make reasonably available its officers,
employees and accounting professionals to answer fully and promptly questions
put to them thereby. No investigation pursuant to this Section 6.2 will affect
or be deemed to modify any representation or warranty made herein. All such
corporate books, accounts and records shall remain the property of the
Companies and the Subsidiaries on and after the Closing and shall not be
removed from the facilities where they are presently maintained prior to the
Closing.
6.3 Acquisition Proposals. Following the execution of this Agreement and
prior to the termination of this Agreement under Section 8.1, each Company and
each Shareholder agrees that it shall not, nor shall any of the Companies'
directors, officers, Employees or other representatives or agents, directly or
indirectly, communicate, solicit, initiate, encourage or participate
(including furnishing non-public information concerning the business,
properties or assets of any Company or Subsidiary) in any discussions or
negotiations with regard to any proposal to acquire, directly or indirectly,
any of the share capital of any Company or Subsidiary, to invest any funds in
any Company or Subsidiary, whether such proposal, acquisition, investment or
other transaction involves a stock sale, a tender offer, exchange offer,
merger, consolidation or other business combination, or for the acquisition of
a substantial portion of the assets of any Company or Subsidiary (an
"Acquisition Proposal"). The Company and each Shareholder agree to immediately
communicate to the Buyer the identity of such other party and the initial
terms of any proposal it may receive from any other person or entity in
respect of an Acquisition Proposal.
6.4 Proxy Statement and Meeting of Buyer's Shareholders.
(a) As soon as reasonably practicable following the date hereof, Buyer
shall prepare and file with the Commission, and, within ten (10) business
days following clearance with the Commission, mail to its shareholders the
Proxy Statement with respect to a meeting of Buyer's shareholders to
consider and vote,
25
among other things, upon this Agreement and the transactions contemplated
hereby, including without limitation, Buyer's purchase of the US Shares and
ET Shares and the issuance of the Buyer Shares in connection therewith.
Each Company, Subsidiary and Shareholder agrees to assist and cooperate
with the Buyer in the preparation of the Proxy Statement with respect to
information therein concerning any such Company, Subsidiary or Shareholder.
(b) The Buyer, on the one hand, and each Company and Subsidiary and the
Majority Shareholder, on the other hand, hereby represents, warrants and
agrees with the other that the Proxy Statement will not, at the time the
Proxy Statement is mailed, and at the date of the meeting of the
shareholders of the Buyer held to approve the matters described therein,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are
made, not misleading, or to correct any statement made in any earlier
communication with respect to the solicitation of any proxy or approval of
the transactions contemplated by this Agreement in connection with which
the Proxy Statement shall be mailed, except that no representation or
warranty is being made by either with respect to information supplied by
the other for inclusion in the Proxy Statement. The Buyer further
represents, warrants and agrees that the Proxy Statement will comply as to
form in all material respects with the provisions of the Exchange Act. The
letter to shareholders, notice of meeting, proxy statement and form of
proxy, or any information statement filed under the Exchange Act, as the
case may be, that may be provided to shareholders of the Buyer in
connection with the transactions contemplated by this Agreement (including
any supplements), and any schedules required to be filed with the
Commission in connection therewith, as from time to time amended or
supplemented, are collectively referred to as the "Proxy Statement."
(c) Buyer shall take all actions necessary in accordance with the
California Corporations Code and the bylaws of Buyer to duly call, give
notice of, convene and hold a meeting of its shareholders within forty-five
(45) calendar days after the mailing of the Proxy Statement to approve the
transactions contemplated by this Agreement.
6.5 Indemnification by Buyer.
(a) Buyer agrees, upon and subject to the occurrence of the Closing, to
indemnify the Companies and the Shareholders against and hold the Companies
and each Shareholder harmless from any and all claims, obligations, costs
and expenses, including without limitation, reasonable attorneys' fees and
expenses, and liabilities of and damages thereto arising out of the
material breach of any representation, warranty, covenant or agreement of
Buyer contained in Sections 5.3 (Capital Stock), 5.4 (Buyer Shares),
5.5 (Authority) and 6.4(b) (Proxy Statement matters) hereof (the "Surviving
Buyer Warranties"). Buyer agrees to similarly indemnify the Majority
Shareholder and ▇▇▇▇▇ ▇▇▇▇▇▇▇ against and hold them harmless from any such
claims, obligations, costs and expenses arising by reason that either such
person becomes an officer and/or director of Buyer upon or after the
Closing and based upon any alleged act, omission or misconduct of Buyer, or
its officers, directors or other agents, prior to the Closing to the same
extent as all other officers and directors of Buyer.
(b) The indemnified parties agree to give Buyer prompt written notice of
any claim, assertion, event or proceeding by or in respect of a third party
of which they have knowledge concerning any liability or damage as to which
they may request indemnification hereunder, provided that the failure to
give such notice shall not impair the rights of the indemnified parties
hereunder or otherwise if and to the extent that the Buyer is not
prejudiced thereby. Buyer shall have the right to direct, through counsel
of its own choosing, the defense or settlement of any such claim or
proceeding (provided that Buyer shall have first acknowledged its
indemnification obligations hereunder specifically in respect of such claim
or proceeding) at its own expense, which counsel shall be reasonably
satisfactory to the indemnified party or parties. If Buyer elects to assume
the defense of any such claim or proceeding, the indemnified party or
parties may participate in such defense, but in such case the expenses of
the indemnified party or parties incurred in connection with such
participation shall be paid by the indemnified party or parties, unless (i)
the indemnified party or parties have legal defenses available to them
which are different than those available
26
to the indemnifying party such that representation by counsel of Buyer's
choosing would be inappropriate, or (ii) the indemnifying party agrees to
pay such expenses, then in either such case such expenses shall be paid by
the indemnifying party. Such expenses shall be paid as and when incurred.
The indemnified party or parties shall cooperate with Buyer in the defense
or settlement of any such claim, assertion, event or proceeding. If Buyer
elects to direct the defense of any such claim or proceeding, the
indemnified party or parties shall not pay, or permit to be paid, any part
of any claim or demand arising from such asserted liability, unless Buyer
consents in writing to such payment or unless Buyer withdraws from the
defense of such asserted liability, or unless a final judgment from which
no appeal may be taken by or on behalf of Buyer is entered against such
indemnified party for such liability. If Buyer shall fail to defend, or if,
after commencing or undertaking any such defense, Buyer fails to prosecute
or withdraws from such defense, the indemnified party or parties shall have
the right to undertake the defense or settlement thereof at Buyer's
expense.
6.6 Indemnification by the Shareholders.
(a) Each Shareholder agrees, severally and not jointly, upon and subject to
the occurrence of the Closing, to indemnify Buyer against and hold Buyer
harmless from any and all claims, obligations, costs and expenses, including
without limitation, reasonable attorneys' fees and expenses and liabilities of
and damages thereto arising out of any material breach of any representation,
warranty, covenant or agreement of such Shareholder contained in Article III
hereof and, with respect solely to the Majority Shareholder, Sections 4.3
(Share Capital; Title to ET Shares), 4.4 (Authority), and 6.4(b) (Proxy
Statement matters) hereof (the "Shareholder Surviving Warranties").
(b) Buyer agrees to give the Shareholders prompt written notice of any
claim, assertion, event or proceeding by or in respect of a third party of
which it has knowledge concerning any Loss as to which it may request
indemnification hereunder, provided that the failure to give such notice shall
not impair the rights of the Buyer hereunder or otherwise to the extent that
the Shareholders are not prejudiced thereby. The Shareholders shall have the
right to direct, through counsel of their own choosing, the defense or
settlement of any such claim or proceeding (provided that the Shareholders
shall have first acknowledged their indemnification obligations hereunder
specifically in respect of such claim or proceeding) at their own expense,
which counsel shall be reasonably satisfactory to Buyer. If the Shareholders
elect to assume the defense of any such claim or proceeding, Buyer may
participate in such defense, but in such case the expenses of Buyer incurred
in connection with such participation shall be paid by Buyer, unless (i) the
indemnified party or parties have legal defenses available to them which are
different than those available to the indemnifying party such that
representation by counsel of Buyer's choosing would be inappropriate, or (ii)
the indemnifying party agrees to pay such expenses, then in either such case
such expenses shall be paid by the indemnifying party. Such expenses shall be
paid as and when incurred. Buyer shall cooperate with the Shareholders in the
defense or settlement of any such claim, assertion, event or proceeding. If
the Shareholders elect to direct the defense of any such claim or proceeding,
Buyer shall not pay, or permit to be paid, any part of any claim or demand
arising from such asserted Loss, unless the Shareholders consent in writing to
such payment or unless the Shareholders withdraw from the defense of such
asserted Loss, or unless a final judgment from which no appeal may be taken by
or on behalf of the Shareholders is entered against Buyer for such Loss. If
the Shareholders shall fail to defend, or if, after commencing or undertaking
any such defense, the Shareholders fail to prosecute or withdraws from such
defense, Buyer shall have the right to undertake the defense or settlement
thereof at the Shareholders' expense.
6.7 General Indemnification Provisions. If the indemnifying party is
controlling the defense of a claim, the indemnifying party will not, without
the prior written consent of the indemnified party or parties, enter into any
settlement of such claim which could reasonably be expected to lead to
liability or create any financial or other obligation on the part of the
indemnified party or parties. If the indemnified party or parties are
controlling the defense of a claim, the indemnified party or parties will not
enter into any settlement of such claim without the consent of the
indemnifying party, which consent shall not be unreasonably withheld. The
indemnifying party shall advance amounts to the indemnified party or parties
then payable by the indemnifying party upon notice to the indemnifying party
and upon the indemnified party or parties entering into an agreement to repay
amounts
27
advanced that it is ultimately determined not to be entitled to. The
controlling party shall deliver, or cause to be delivered, to the other party
or parties copies of all correspondence, pleadings, motions, briefs, appeals
or other written statements relating to or submitted in connection with the
defense of any such claim and timely notices of, and the right to participate
in (as observer), any hearing or other court proceeding relating to such
claim.
6.8 Best Efforts. Upon the terms and subject to the conditions herein
provided, Buyer, each Company and each Shareholder agrees to use its
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement including (a) to lift or rescind
any injunction or restraining order or other order adversely affecting the
ability of the parties to consummate the transactions contemplated hereby and
(b) to fulfill all conditions on its part to be fulfilled under this
Agreement. In case at any time after the Closing Date any further action is
reasonably necessary or desirable to carry out the purposes of this Agreement,
the proper officers or directors of each party or the proper persons to this
Agreement shall take all such reasonably necessary action, including without
limitation, the delivery by each Shareholder to Buyer of a proxy to vote the
ET Shares in favor of this Agreement and the transactions contemplated hereby,
if so requested by Buyer. No party hereto will take any action for the purpose
of delaying, impairing or impeding the receipt of any required consent,
authorization, order or approval or the making of any required filing. Each
Company and Shareholder, on the one hand, and the Buyer, on the other hand,
shall give prompt notice to the other of (i) the occurrence, or failure to
occur, of any event which occurrence or failure would be likely to cause any
of its representations or warranties contained in this Agreement to be untrue
or inaccurate in any material respect any time from the date hereof to the
Closing Date and (ii) any material failure by it to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder, and each shall use all reasonable efforts to remedy such failure.
In addition, each shall give prompt notice to the other of any material
developments involving its operations or activities.
6.9 Consents. The Buyer, each Company and each Shareholder will use its
reasonable best efforts to obtain all necessary waivers, consents and
approvals of all third parties and governmental authorities necessary to the
consummation of the transactions contemplated by this Agreement.
6.10 No Transfer. Each Shareholder agrees that such Shareholder will not,
directly or indirectly, transfer, sell, assign, pledge, hypothecate, encumber
or otherwise dispose of any shares of either Company's share capital which
such Shareholder owns on and after the date hereof; provided, however, that
any Shareholder may transfer a portion of such shares (subject to his rights
and obligations hereunder with respect to such shares) to one or more trusts
established for the benefit of members of his family or established for
charitable purposes, provided that such trusts become a party hereto and
become otherwise bound hereby with respect to such transferred shares. ETE
agrees that it will not, directly or indirectly, transfer, sell, assign,
pledge, hypothecate, encumber or otherwise dispose of any of the US Shares.
6.11 Environmental Investigations. Buyer shall conduct such environmental
investigations and reviews with respect to the Real Properties of the
Companies, including without limitation, Phase I investigations, as it shall
deem appropriate, in its sole discretion.
6.12 Delivery of Financial Statements and Other Documents. Until the Closing
Date, each Company, on the one hand, and the Buyer, on the other hand, shall
deliver to the other:
(a) as soon as practicable, but in any event within thirty (30) days
after the end of each month, and within forty-five (45) days after the end
of each quarter (with respect to the first three quarters of the applicable
fiscal year) and within 60 days after the end of the last fiscal quarter,
its unaudited consolidated profit and loss account, consolidated balance
sheet and consolidated cash flow statement for such month or quarter, as
the case may be, and for the fiscal year-to-date. Buyer's independent
accountants, Ernst & Young, shall have reviewed all quarterly financial
statements submitted by Buyer in compliance with the foregoing covenant;
(b) as soon as practicable, but in any event within five (5) days of its
receipt thereof, copies of any management letters and other correspondence
of its independent auditors;
28
(c) prompt notice of any material defaults under any material contracts
and of any litigation;
(d) monthly updates to the backlog descriptions described in Section 4.20
and 5.19, as applicable. Each such update shall serve to supersede and
replace in its entirety all previous backlog descriptions, provided that
such updated descriptions shall, thereafter, be subject to the
representations and warranties set forth in Sections 4.20 and 5.19, as
applicable;
(e) as soon as practicable, all other information requested by the other,
where such information is readily available and may be reduced to written
form.
6.13 Additional Payments at Closing. The Buyer agrees that, upon the Closing
and the purchase of the ET Shares and US Shares by Buyer hereunder, the Buyer
shall pay to ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ the cash amount of US$500,000 pursuant to
the Noncompetition Agreement (the "▇▇▇▇▇▇ Noncompetition Fee") and shall
deliver to the Companies (in such respective amounts as the Majority
Shareholder shall direct) the following aggregate amounts and property as
contributions to capital:
(a) at the discretion of the Board of Directors of ET and ETE, the cash
sum of approximately US$1,500,000, the precise amount of which shall be
specified by the Majority Shareholder prior to the Closing as the amount
which, when added to the cash amount paid by Buyer for the US Shares, as
specified in Section 1.3, represents the U.S. Dollar equivalent (the
"Employee Bonus Amount") of One Pound Sterling for each day that all
employees of the Companies and the Subsidiaries as of the Closing shall
have been continuously employed by such Company or Subsidiary, as
applicable, as of the Closing (such that the price paid for the US Shares,
together with the capital contribution pursuant to this clause (a), shall
be equal to the Employee Bonus Amount);
(b) a cash amount, the precise amount of which shall be specified by the
Majority Shareholder prior to the Closing, calculated to result in an
after-tax bonus payment (assuming the highest marginal income tax rates) to
▇▇▇▇▇ ▇▇▇▇▇▇▇ of approximately Six Hundred Thousand Dollars (US$600,000)
(such full pre-tax amount being referred to as the "▇▇▇▇▇▇▇ Bonus"), it
being understood and agreed that ▇▇. ▇▇▇▇▇▇▇ will take all appropriate
action to minimize his actual income tax obligations in respect of the
▇▇▇▇▇▇▇ Bonus and that the actual after-tax portion of such bonus may
accordingly exceed US$600,000; and
(c) the cash sum of US$7,000,000 (the "▇▇▇▇▇▇ Negotiation Fee").
The Companies agree to pay or deliver, or cause the Subsidiaries to pay
or deliver, the following aggregate sums or consideration (subject to any
applicable withholdings required by law) to the indicated persons at the
indicated times.
(i) to each employee of any Company or Subsidiary as of the Closing,
a bonus for past services rendered in an amount equal to One Pound
Sterling for each day that such employee shall have been continuously
employed by such Company or Subsidiary, as applicable, as of the
Closing, to be paid as soon as practicable after the Closing;
(ii) to ▇▇▇▇▇ ▇▇▇▇▇▇▇ for past services rendered, the ▇▇▇▇▇▇▇ Bonus,
to be paid at the Closing; and
(iii) to ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, the ▇▇▇▇▇▇ Negotiation Fee, to be
paid at the Closing.
6.14 Company Employee Benefits and Stock Options.
(a) At and following the Closing, the Buyer shall cause the Companies and
Subsidiaries to, from and after the Closing, honor in accordance with their
terms all existing employment arrangements with their respective directors,
other officers and Employees, provided that such arrangements have been
disclosed in accordance with the terms of this Agreement. Furthermore, the
Buyer represents and warrants that it presently intends to cause the
Companies and Subsidiaries to continue indefinitely to provide pension and
welfare benefits to their Employees (considered as a group) which benefits
are intended to be in the aggregate no less favorable than those currently
provided by the Companies and Subsidiaries in the aggregate to such
Employees. Nothing set forth above in this Section shall be deemed to
constitute an amendment of any existing employee benefit plan, program or
arrangement or to prevent the Buyer or any Company or any Subsidiary from
making any change in any plan, program or arrangement, including any change
required by law or deemed necessary or appropriate to comply with
applicable law or regulation.
29
(b) Sufficiently prior to the Closing to facilitate the satisfaction of
the condition to Closing set forth in Section 7.2(f), the Buyer shall
recommend to its Board of Directors and Compensation Committee thereof the
grant, under the Buyer's Stock Option Plan, of options covering an
aggregate of approximately 800,000 shares of Buyer's Common Stock to such
employees of the Companies and Subsidiaries, and in such respective
individual amounts, as shall be jointly determined by the Buyer and the
Majority Shareholder prior to the Closing. Such recommended option grants
shall otherwise be at prices and upon such terms as are customarily
contained in options generally granted under the Stock Option Plan.
6.15 Use of Company Information. Buyer agrees that it shall not file with
the Securities and Exchange Commission of the United States any disclosure
document, including but not limited to the Proxy Statement, any document
relating to the financing referred to in Section 7.3(g), any report or other
document filed by the Buyer under the Exchange Act or otherwise made public,
that includes the names of either of the Companies, the Shareholders or any
Affiliate or Associate thereof, without the prior written consent of the
Majority Shareholder, except solely as and to the extent that the Buyer is
advised by its legal counsel that the same is required by law to be so filed
(in which case the Buyer shall use its best efforts to provide to the Majority
Shareholder, as early as possible prior to such filing, a copy of the document
proposed to be so filed, and shall give the Majority Shareholder, as and to
the extent practicable, reasonable opportunity to review and reasonably modify
such proposed filing).
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligations. The respective obligations of
each party to effect the transactions contemplated by the Agreement shall be
subject to the conditions that (a) no governmental authority or other agency
or commission or court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, injunction or
other order (whether temporary, preliminary, or permanent) which is in effect
and has the effect of prohibiting consummation of the transactions
contemplated by this Agreement, (b) the sum of all cash and cash equivalent
assets plus amounts immediately available for additional borrowing under
credit arrangements, of Buyer and the Companies on a consolidated, proforma
basis immediately after and giving effect to the Closing, shall be not less
than US$35,000,000 and (c) holders of less than 5.0% of the outstanding shares
of Buyer's Common Stock shall have filed demands for payment or otherwise
become entitled to exercise any dissenters' or appraisal rights under Chapter
13 of the California Corporations Code.
7.2 Conditions to the Obligations of the Shareholders. The obligations of
each Shareholder to effect the transactions contemplated by this Agreement
shall be subject to the fulfillment at or prior to the Closing Date of the
following additional conditions:
(a) Buyer shall have performed in all material respects the obligations
under this Agreement required to be performed by it on or prior to the
Closing Date pursuant to the terms hereof.
(b) The representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects at and as of
the Closing Date as if made at and as of such date, except to the extent
that any such representation or warranty is made as of a specified date in
which case such representation or warranty shall have been true and correct
as of such date.
(c) Buyer shall have delivered to the Shareholders a certificate to the
effect set forth in paragraphs (a) and (b) above in this Section.
(d) ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall each have been elected
as members of the Board of Directors of the Buyer and additionally shall
have been elected as the Vice Chairman of the Board and the Chief Operating
Officer, respectively, of the Buyer.
(e) The Buyer and ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall have entered into an Employment
Agreement substantially in the form of Exhibit B hereto.
(f) The Buyer shall have granted the stock options referred to in Section
6.14(b).
30
(g) The Companies and the Majority Shareholder shall have received such
other duly and validly executed documents and instruments from the Buyer in
connection with the Closing as have been reasonably requested by them and
are customary for transactions of this type.
(h) All necessary waivers, consents and approvals to or of the
transactions contemplated by this Agreement of any third parties or
governmental entities with respect to the Buyer, shall have been obtained
and delivered to the Companies and the Majority Shareholder except where
the failure to obtain any such waiver, consent or approval could not be
reasonably expected to have, individually or in the aggregate, a Company
Material Adverse Effect or Buyer Material Adverse Effect.
(i) The Shareholders shall have received the favorable opinion of ▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇, counsel to Buyer, substantially in the form of Exhibit C
hereto, and otherwise in form and substance reasonably satisfactory to the
Shareholders.
(j) The Reimbursable Expenses (as defined in Section 8.2) shall have been
paid at the Closing by the Buyer.
(k) The Buyer and ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall have entered into a
Registration Agreement substantially in the form of Exhibit D hereto.
(l) The Shareholders shall have obtained tax clearance to confirm that
the exchange of securities pursuant to this Agreement is covered by
Sections 135-137 of the Taxation of Chargeable Gains Act of 1992, by way of
clearance under Section 38 of such Act.
7.3 Conditions to the Obligations of Buyer. The obligations of Buyer to
effect the transactions contemplated by this Agreement shall be subject to the
fulfillment at or prior to the Closing Date of the following additional
conditions:
(a) Each Company and each Shareholder shall have performed in all
material respects its obligations under this Agreement required to be
performed by it on or prior to the Closing Date pursuant to the terms
hereof.
(b) The representations and warranties of each Shareholder contained in
this Agreement shall be true and correct in all material respects at and as
of the Closing Date as if made at and as of such date, except to the extent
that any such representation or warranty is made as of a specified date in
which case such representation or warranty shall have been true and correct
as of such date.
(c) The Companies and the Majority Shareholder shall have delivered to
Buyer a certificate to the effect set forth in paragraphs (a) and (b) above
in this Section.
(d) Buyer shall have received a fully executed original of the
Noncompetition Agreement from the Majority Shareholder substantially in the
form of Exhibit E hereto.
(e) Buyer shall have received the favorable opinion of ▇▇▇▇▇ Wasbrough,
counsel to the Companies and each Shareholder, substantially in the form of
Exhibit F hereto and otherwise in form and substance reasonably
satisfactory to Buyer.
(f) Buyer shall have received such other duly and validly executed
documents and instruments from the Companies, the Subsidiaries and the
Shareholders in connection with the Closing as have been reasonably
requested by it and are customary for transactions of this type.
(g) Buyer shall have issued and sold to qualified institutional buyers
subordinate convertible debentures pursuant to Rule 144A (or other
available exemption) under the Securities Act in an amount at least equal
to Fifty Million Dollars (US$50,000,000), on terms and conditions
acceptable to Buyer, in its sole discretion, after consultation with the
Majority Shareholder, including the Majority Shareholder's participation in
the meeting of Buyer's pricing committee held to consider such terms and
conditions.
(h) All necessary waivers, consents and approvals to or of the
transactions contemplated by this Agreement of any third parties or
governmental entities with respect to any Company, Subsidiary or
31
Shareholder shall have been obtained and delivered to Buyer except where
the failure to obtain any such waiver, consent or approval could not be
reasonably expected to have, individually or in the aggregate, a Company
Material Adverse Effect or a Buyer Material Adverse Effect.
(i) A majority of the outstanding shares of Buyer's Common Stock shall
have been voted in favor of this Agreement and the transactions
contemplated hereby.
(j) Buyer shall have completed the environmental investigations and
reviews of the Real Properties referred to in Section 6.11, and shall not
have reasonably concluded that any environmental conditions at any of the
Real Properties could reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated and the transactions
contemplated herein may be abandoned at any time prior to the Closing Date:
(a) by the mutual written consent of Buyer and the Majority Shareholder;
(b) by any party, if by December 31, 1996 the Closing shall not have been
consummated, provided that no party may terminate this Agreement under this
Section 8.1(b) if such failure has been caused by that party's breach of
this Agreement;
(c) by Buyer, if there is a material breach of any of the representations
and warranties of any Company or Shareholder, or if any Company or
Shareholder fails to comply in any material respect with any of its
respective covenants or agreements contained herein; or
(d) by the Shareholders, if there is a material breach of any of the
representations and warranties of Buyer, or if Buyer fails to comply in any
material respect with any of its covenants or agreements contained herein.
8.2 Termination Fee; Expenses. Upon a termination of this Agreement (except
solely a No-Fee Termination, as defined below) the Buyer shall pay to the
Companies (in such respective amounts as they jointly instruct the Buyer) an
aggregate fee of US$1,000,000 (the "Termination Fee"), and the Buyer shall
additionally pay to them all reasonable fees and expenses actually incurred by
them in connection with the transactions contemplated hereby, including all
reasonable legal, investment banking, accounting and other fees and expenses
(the "Reimbursable Expenses"). The Termination Fee shall be payable in
immediately available funds on the second business day following any
termination giving rise to the obligation to pay such Termination Fee, and the
Reimbursable Expenses shall be payable within ten business days following the
submission to Buyer of a statement and accounting therefor.
"No-Fee Termination" shall mean the following:
(a) Any termination by Buyer or the Shareholders by reason of the non-
occurrence of the condition to Closing set forth in clause (a) of Section
7.1 (limited to United Kingdom matters in the case of a termination by
Buyer, and limited to United States matters in the case of a termination by
the Shareholders) or by the Shareholders by reason of the non-occurrence of
the condition to Closing set forth in Section 7.2(l);
(b) Any termination by Buyer by reason of the non-occurrence of any
condition to Closing set forth in clause (a), (b), (c), (d), (e), (f) or
(h) of Section 7.3; provided that any such termination by Buyer shall not
constitute a No-Fee Termination if such non-occurrence is the result of a
Company Material Adverse Change after the date of this Agreement; or
(c) Any termination by the Shareholders by reason of the non-occurrence
of any condition to Closing set forth in Section 7.2 if such non-occurrence
is the result of a Buyer Material Adverse Change after the date of this
Agreement.
32
8.3 Effect of Termination. Except as otherwise provided in Section 8.2, in
the event of the termination of this Agreement as provided in Section 8.1
above, this Agreement shall forthwith become void and there shall be no
liability on the part of any party hereto, provided that nothing in this
Section 8.3 shall relieve any party of liability for any intentional breach of
the purchase and sale covenants herein, or the covenant to use reasonable
efforts to satisfy all conditions to Closing, which breach results in a
termination of this Agreement. Notwithstanding the foregoing, the covenant set
forth in Section 8.6 shall survive any termination of this Agreement for a
period of one year.
8.4 Amendment. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
8.5 Waiver. At any time prior to the Closing Date, the parties hereto may
(a) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions herein, provided that any such waiver of or failure to insist on
strict compliance with any such representation, warranty, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
8.6 Conduct Following Termination. Following any termination of this
Agreement, neither Buyer nor its representatives, on the one hand, nor any
Company or Subsidiary nor any of their respective representatives nor the
Shareholders, on the other hand, shall publicly state any disparaging or
similar remark regarding the other.
ARTICLE IX
MISCELLANEOUS
9.1 Survival. The Surviving Shareholder Warranties and the Surviving Buyer
Warranties shall survive after the Closing until the applicable statute of
limitations provided by applicable law. All other representations and
warranties herein shall terminate and be extinguished upon the Closing.
9.2 Meaning of "Best Knowledge". Whenever the term "best knowledge" or "to
the best of its knowledge" or any substantially equivalent phrase is used in
this Agreement with respect to the representations and warranties of any
Company, Subsidiary or Shareholder, on the one hand, or the Buyer, on the
other hand, it shall mean both the actual knowledge of any such individual
person and, in the case of a corporation, the actual knowledge of each
executive officer thereof (including specifically the Majority Shareholder
with respect to each Company), and such knowledge as any such person, director
or officer could reasonably be expected to acquire in the course of reasonable
inquiry and investigation of the matters with respect to which such
representation and warranty is made.
9.3 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been given or made if
in writing and (a) delivered personally, as of the date of such delivery, (b)
sent by registered or certified mail (postage prepaid, return receipt
requested), three (3) days after the mailing thereof, (c) by prepaid overnight
carrier, one (1) day after delivery thereof, or (d) transmitted by facsimile,
as of the date of receipt of a confirmation of transmission, to the parties at
the following addresses and numbers:
(i) If to Buyer, to:
Plasma & Materials Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, Chief Financial Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
33
(ii) If to ET, to:
Electrotech Limited
Thornbury Laboratories
Littleton-Upon-Severn
Thornbury
Bristol, BS12-INP, U.K.
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, CEO
Facsimile No.: 011-44-1-454-411824
(iii) If to ETE, to:
Electrotech Equipments Limited
Thornbury Laboratories
Littleton-Upon-Severn
Thornbury
Bristol, BS12-INP, U.K.
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, CEO
Facsimile No.: 011-44-1-454-411824
(iv) If to the Shareholders, to:
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Elberton Manor
Elberton, Bristol
Avon B512-3AA, U.K.
Facsimile No.: 011-44-1-454-418655
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
Whistlers
Kingston Seymour, Clevedon
Avon B321-EXS, U.K.
Facsimile No.: 0033 4182 6322
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ Knight Willmott
6 Parc-y-Fro
Creigian, Cardiff, U.K.
Facsimile No.: 01222 345626
or at such other addresses as shall be furnished by the parties by like notice,
and such notice or communication shall be deemed to have been given or made as
of the date actually received.
9.4 Headings; Agreement. The headings contained in this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
The term "Agreement" for purposes of representations and warranties hereunder
shall be deemed to include the Schedules and Exhibits hereto to be executed and
delivered by a party.
9.5 Publicity. So long as this Agreement is in effect, the parties hereto
shall not, and shall cause their affiliates not to, issue or cause the
publication of any press release or other announcement with respect to the
transactions contemplated by this Agreement or this Agreement without the
consent of the other parties, which consent shall not be unreasonably withheld
or delayed.
34
9.6 Entire Agreement. This Agreement, the Letter Agreement dated May 2, 1996
and the Mutual Non-Disclosure Agreement dated December 19, 1995, as amended by
that certain letter dated May 22, 1996 to ET's counsel from counsel to the
Buyer, constitute the entire agreement among the parties and supersede all
other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof or thereof.
9.7 Conveyance Taxes. The Buyer agrees to assume liability for and to hold
the Shareholders harmless against any sales, use, transfer, stamp, stock
transfer, real property transfer or gains, and value added taxes, any
transfer, registration, recording or other fees (including without limitation,
any stamp duties), and any similar taxes incurred as a result of the
transactions contemplated hereby, other than capital gains taxes imposed upon
the Shareholders by virtue of the disposal of the ET Shares or with respect to
a higher rate of taxes due on any pre-Closing dividends due by reason of the
transactions permitted by Section 9.8 hereof, as to which the Shareholders
agree severally and not jointly to assume liability for and to hold Buyer and
the Companies harmless against.
9.8 Company Pre-Closing Dividends. The Companies may, prior to the Closing,
declare and pay cash dividends to the Shareholders up to an amount permitted
by law but not exceeding the net cash payment specified in Section 1.4(a)
hereof, in which case the parties agree that:
(a) Buyer shall, immediately prior to the Closing, loan to the Companies an
amount equal to the sum of such dividends, plus all taxes required to be paid
by the Companies in connection with the payment of such dividends (the
"Dividend Taxes"), in order to fund the payment of such dividends immediately
prior to the Closing and the payment of the Dividend Taxes;
(b) The cash portion of the Purchase Price payable to the Shareholders at
the Closing pursuant to Section 1.4 shall be reduced, prorata as to each
Shareholder, by an aggregate amount equal to such loan by the Buyer;
(c) Immediately after the Closing, the indebtedness of the Companies to the
Buyer in respect of the loan referred to in clause (a) shall be forgiven by
the Buyer as a contribution to the capital of the Companies but subject to the
contingent obligation of the Companies to make the payments described in
clause (d) below; and
(d) From time to time if and when the Companies are entitled to a credit for
the Dividend Taxes against other amounts due and payable for income taxes of
the Companies, then the Companies shall pay to the Shareholders (promptly
after such time as the Companies would have otherwise been required to pay to
the taxing authorities the amounts so reduced by such credit), prorata to each
Shareholder in the same proportion that the cash portion of the Purchase Price
was reduced under clause (b) above, the aggregate amount of such credit.
9.9 Advance of Reimbursable Expenses. Within seven (7) days after
presentation to the Buyer by the Companies of invoices or other reasonable
evidence thereof, the Buyer shall advance to the Companies a sum equal to all
Reimbursable Expenses incurred by the Companies prior to the execution of this
Agreement in respect of amounts payable to third parties other than ▇▇▇▇▇▇▇▇▇
& ▇▇▇▇▇, and excluding any internal charges or expenses of the Companies or
any Subsidiary. Such payments shall be considered an advance in respect of any
amounts ultimately owed by the Buyer to the Companies pursuant to Section 8.2
hereof and, if no amounts are ever owed by the Buyer to the Companies pursuant
to Section 8.2 hereof by reason of the occurrence of a No-Fee Termination of
this Agreement, the Companies shall, within seven (7) days following the
occurrence of such No-Fee Termination, refund to the Buyer all amounts
advanced to the Companies pursuant to this Section 9.9.
9.10 Hold-back Agreement. Each of the Shareholders severally agrees that
such Shareholder will not offer, sell or contract to sell, or otherwise
dispose of, directly or indirectly, or announce an offering of any shares of
Buyer Common Stock beneficially owned by such Shareholder or any securities
convertible into, or exchangeable for, shares of Buyer Common Stock for a
period of 90 days following the Closing Date, without the prior written
consent of Salomon Brothers Inc, the lead investment banker engaged by the
Buyer in connection with the transaction described in Section 7.3(g).
35
9.11 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefits of the parties hereto and their
respective successors and permitted assigns. Neither this Agreement nor any of
the rights, interests or obligations shall be assigned by any of the parties
hereto without the prior written consent of the other parties, except as
permitted by Section 6.10 hereof.
9.12 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
9.13 Governing Law. The validity and interpretation of this Agreement shall
be governed by English law, without reference to the conflict of laws
principles thereof.
9.14 Third Party Beneficiaries. This Agreement is not intended to confer
upon any other person any rights or remedies hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by an individual thereunto duly authorized, all as of the date first
written above.
BUYER: PLASMA & MATERIALS TECHNOLOGIES,
INC.
a California corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
_________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chief Executive Officer
ET: ELECTROTECH LIMITED
an English corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
_________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Chief Executive Officer
ETE: ELECTROTECH EQUIPMENTS LIMITED
an English corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
_________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Chief Executive Officer
SHAREHOLDERS:
/s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
____________________________________
Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
____________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇ Knight Willmott
____________________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇ Knight Willmott
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/s/ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
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/s/ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
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