AGREEMENT AND PLAN
OF REORGANIZATION AND
MERGER
BY AND AMONG
VENTANA MEDICAL SYSTEMS, INC.,
VENTANA ACQUISITION
CORPORATION,
AND
BIOTECHNOLOGY TOOLS, INC.
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS 1
ARTICLE II - THE MERGER 7
SECTION 2.1. - The Merger 7
SECTION 2.2. - Effective Time of the Merger 8
ARTICLE III - THE SURVIVING CORPORATION 8
SECTION 3.1. - Articles of Incorporation 8
SECTION 3.2. - By-Laws 8
SECTION 3.3. - Effect of the Merger 8
SECTION 3.4. - Directors 8
SECTION 3.5. - Officers 9
ARTICLE IV - CONVERSION OF SHARES 9
SECTION 4.1. - Conversion of Company Shares in the
Merger 9
SECTION 4.2. - Conversion of Subsidiary Shares in Merger 9
SECTION 4.3. - Total Company Value 10
SECTION 4.4. - Payment of Merger Consideration 12
SECTION 4.5. - Final Determination of Total Company
Value; Payment of Adjustment Retention 14
SECTION 4.6. - Payment of Indemnity Retention 14
SECTION 4.7. - Definitions 15
SECTION 4.8. - Lost Certificates 15
SECTION 4.9. - Closing 15
SECTION 4.10. - Closing of the Company's Transfer Books 16
SECTION 4.11. - Dissenting Shares 16
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PARENT
AND SUBSIDIARY 17
SECTION 5.1. - Organization and Qualifications 17
SECTION 5.2. - Authority; Non-Contravention; Approvals 17
SECTION 5.3. - Litigation 18
SECTION 5.4. - Brokers and Finders 19
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF THE
COMPANY 19
SECTION 6.1. - Organization and Qualification 19
SECTION 6.2. - Capitalization 19
SECTION 6.3. - Equity Interests 20
SECTION 6.4. - Authority; Non-Contravention; Approvals 20
SECTION 6.5. - Financial Statements 21
SECTION 6.6. - Absence of Undisclosed Liabilities 22
SECTION 6.7. - Absence of Certain Changes or Events 22
SECTION 6.8. - Absence of Litigation 22
SECTION 6.9. - No Violation of Law 23
SECTION 6.10. - Compliance with Agreements 23
SECTION 6.11. - Taxes 23
SECTION 6.12. - Employees 24
SECTION 6.13. - Labor Controversies 24
SECTION 6.14. - Title to and Condition of Assets 25
SECTION 6.15. - Real Estate 26
SECTION 6.16. - Products 27
SECTION 6.17. - Product Warranties 27
SECTION 6.18. - Compliance With Environmental Laws 27
SECTION 6.19. - Intellectual Property 28
SECTION 6.20 - Contracts and Other Agreements 29
SECTION 6.21. - Insurance 30
SECTION 6.22. - Customers; Suppliers 30
SECTION 6.23. - Accounts; Safe Deposit Boxes 30
SECTION 6.24. - Brokers and Finders 30
SECTION 6.25. - Warranties True and Correct 30
ARTICLE VII - MATTERS PENDING THE MERGER 31
SECTION 7.1. - Conduct of Business by the Company
Pending the Merger 31
SECTION 7.2. - Control of the Company's Operations 33
SECTION 7.3. - Acquisition Transactions 33
SECTION 7.4. - Parent Loan 34
ARTICLE VIII - ADDITIONAL AGREEMENTS 34
SECTION 8.1. - Access to Information 34
SECTION 8.2. - Stockholders' Approval 35
SECTION 8.3. - Expenses and Fees 35
SECTION 8.4. - Agreement to Cooperate 36
SECTION 8.5. - Public Statements 36
SECTION 8.6. - Directors' and Officers' Indemnification 36
SECTION 8.7. - Notification of Certain Matters 36
SECTION 8.8. - Execution of Additional Documents 37
SECTION 8.9. - Risk of Loss 37
ARTICLE IX - CONDITIONS 38
SECTION 9.1. - Conditions to Each Party's Obligation
to Effect the Merger 38
SECTION 9.2. - Additional Conditions to Obligation of
the Company to Effect the Merger 38
SECTION 9.3. - Additional Conditions to Obligations
of Parent and Subsidiary to Effect the Merger 40
ARTICLE X - INDEMNITY 43
SECTION 10.1. - Indemnification of Parent and
Subsidiary in the Event of Termination 43
SECTION 10.2. - Indemnification of Parent and
Subsidiary After Effective Time 43
SECTION 10.3. - Indemnification of the Company and
the Shareholders of the Company 46
SECTION 10.4. Set Off Against Indemnity Retention 46
SECTION 10.5. - Setoff 47
SECTION 10.6. - Limitations 47
ARTICLE XI - TERMINATION, AMENDMENT AND WAIVER 48
SECTION 11.1. - Termination 48
SECTION 11.2. - Effect of Termination 48
SECTION 11.3. - Amendment 49
SECTION 11.4. - Waiver 49
ARTICLE XII - GENERAL PROVISIONS 49
SECTION 12.1. - Shareholder Representative 49
SECTION 12.2. - Company Disclosure Letter 50
SECTION 12.3. - Notices 50
SECTION 12.4. - Interpretation 51
SECTION 12.5. - Miscellaneous 52
SECTION 12.6. - Counterparts 52
SECTION 12.7. - Parties In Interest 52
SECTION 12.8. - Exhibits and Schedules 52
SECTION 12.9. - Severability 52
LIST OF SCHEDULES AND EXHIBITS
Schedule 1.1 - Permitted Encumbrances
Schedule 1.2 - Real Estate
Schedule 6.5 - Financial Statements
Schedule 6.12 - Employee Matters
Schedule 6.14 - Title to and Condition of Assets
Schedule 6.15 - Real Estate Leases
Schedule 6.16 - Products
Schedule 6.17 - Product Warranties
Schedule 6.18 - Compliance with Environmental Laws
Schedule 6.19 - Intellectual Property
Schedule 6.20 - Contracts and Other Agreements
Schedule 6.21 - Insurance
Schedule 6.22 - Customers; Suppliers
Schedule 6.23 - Accounts; Safe Deposit Boxes
Exhibit A - Form of Shareholder Agreement
Exhibit 9.3(b) - Form of Noncompete Agreement
Exhibit 9.3
(g)(viii) - Form of Releases
AGREEMENT
AND
PLAN OF REORGANIZATION AND MERGER
THIS AGREEMENT AND PLAN OF REORGANIZATION AND
MERGER, is made as of this 18th day of August, 1998
(the "Agreement"), by and among VENTANA MEDICAL
SYSTEMS, INC., a Delaware corporation ("Parent"),
VENTANA ACQUISITION CORPORATION, a Delaware corporation
and a wholly-owned, direct subsidiary of Parent
("Subsidiary"), BIOTECHNOLOGY TOOLS, INC., a Delaware
corporation (the "Company"), and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (the "Principal Shareholders").
R E C I T A L S:
WHEREAS, the respective Boards of Directors of
Parent and the Company have each determined that the
merger of Subsidiary with and into the Company (the
"Merger") is consistent with and in furtherance of the
long-term business strategy of Parent and the Company
and is in the best interests of Parent and the Company
and their respective stockholders;
WHEREAS, the respective Boards of Directors of
Parent, Subsidiary and the Company have each approved
the Merger, upon the terms and subject to the
conditions set forth herein; and
WHEREAS, the Principal Shareholders are the
holders of shares of the $.001 par value common stock
of the Company (the "Company Common Stock")
representing approximately 65% of the issued and
outstanding Company Common Stock, will financially
benefit from the consummation of the Merger and are
entering into this Agreement to set forth their
agreement to vote their shares of Company Common Stock
in favor of the Merger and certain additional
agreements and covenants; and
WHEREAS, concurrently with the execution of this
Agreement, the Principal Shareholders are executing and
delivering to Parent a Shareholder Agreement
substantially in the form attached hereto as Exhibit A;
NOW, THEREFORE, in consideration of the
representations, warranties, covenants and agreements
contained herein, the parties hereto, intending to be
legally bound, agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms
shall have the following meanings, unless otherwise
expressly provided or unless the context clearly
requires otherwise:
"Acquisition Transactions" shall be defined as set
forth in Section 7.3.
"Adjustment Retention" shall be defined as set
forth in Section 4.4(b).
"Applicable Rate" shall be defined as set forth in
Section 4.5.
"Balance" shall be defined as set forth in
Schedule 4.7(c).
"Balance Sheet Date" means April 30, 1998.
"Business Day" means any day that is not a
Saturday, Sunday or other day on which banks are
required to be closed in the City of New York.
"Claim" shall be defined as set forth in Section
10.2(a).
"Closing" shall be defined as provided in Section
4.9.
"Closing Date" shall be defined as provided in
Section 4.9.
"Closing Date Balance Sheet" shall be defined as
provided in Section 4.3(b).
"Closing Net Worth" shall be defined as provided
in Section 4.3(a).
"Code" shall be defined as the Internal Revenue
Code of 1986, as amended.
"Company" means Biotechnology Tools, Inc., a
Delaware corporation.
"Company Accountants" shall mean the accounting
firm of ▇▇▇▇▇▇▇▇ & Company, or its successor.
"Company Certificates" shall have the meaning set
forth in Section 4.4(c).
"Company Common Stock" shall be defined as set
forth in the recitals to this Agreement.
"Company Disclosure Letter" shall have the meaning
set forth in the caption to Article VI, below.
"Company Material Adverse Effect" shall mean an
effect or effects which, individually or in the
aggregate, (i) after taking into consideration the
relative amount, the absolute amount and the nature of
the item, would cause a reasonably prudent buyer to
conclude that such effect adversely affects the
financial condition or operations of the Company in a
manner or amount which would be material, or (ii) (x)
for the purposes of Article X, below, has or will have
a direct financial consequence of Five Thousand Dollars
($5,000) or more, and (y) for the purposes of Sections
9.3 and 11.1, below, has or will have a direct
financial consequence of Twenty-Five Thousand Dollars
($25,000) or more.
"Company Plans" means the employee benefit plans,
programs, arrangements and practices maintained by the
Company.
"Company Required Statutory Approvals" means (i)
the filing of the Registration Statement with the SEC
pursuant to the Securities Act, and the declaration of
the effectiveness thereof by the SEC and filings with
various state blue sky authorities and any other
required filings in other jurisdictions to register or
exempt the shares of Parent Common Stock issuable
pursuant hereto, and (ii) the making of the Merger
Filing with the Secretary of State of Delaware in
connection with the Merger.
"Company Shareholders" shall be defined as set
forth in Section 4.1.
"Company's knowledge" for those warranties and
representations set forth in Article VI of this
Agreement and elsewhere which are subject to the
qualification "to the Company's knowledge" or "to the
knowledge of the Company," or otherwise limited to
matters "known" to the Company, the Company will be
deemed to have knowledge of a matter if (i) either
Principal Shareholder or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ has knowledge
of the matter, or (ii) such matter has come, or should
reasonably be expected to have come, to the attention
of any such individual if such individual had conducted
a reasonable due diligence review of the Company's
operations and business, including, without limitation,
reasonable inquiries to key personnel of the Company
regarding the business and operations of the Company
and a review of, and discussion with, key personnel
regarding pertinent books and records of the Company.
"Company Options" means options or warrants to
purchase Company Common Stock from the Company.
"Company Permits" shall be defined as set forth in
Section 6.9.
"Company Stockholder Approval" shall be defined as
set forth in Section 8.2.
"Contracts" shall be defined as set forth in
Section 6.24.
"Company Shares" shall be defined as set forth in
Section 4.1.
"DGCL" shall mean the Delaware General Corporation
Law.
"Effective Time" shall be defined as set forth in
Section 2.2.
"Environmental Audit" shall mean a review and
investigation for purposes of determining whether the
Company and the Real Estate are in compliance with
Environmental Laws and whether there exists any
condition or circumstance which requires or may require
a clean up, removal or other remedial action under
Environmental Laws on the part of the Company or any
owner of the Real Estate.
"Environmental Laws" shall mean all federal, state
and local laws including statutes, regulations,
ordinances, codes, rules and other governmental
restrictions and requirements relating to the
discharge, emission or release of air pollutants, water
pollutants or process waste water or otherwise relating
in any way, directly or indirectly, to the environment
or hazardous substances in general or to storage tanks,
petroleum products, PCBs or asbestos, including, but
not limited to, the Federal Solid Waste Disposal Act,
the Federal Clean Air Act, the Federal Clean Water Act,
the Federal Resource Conservation and Recovery Act of
1976, the Federal Comprehensive Environmental
Responsibility, Cleanup and Liability Act of 1980,
regulations of the Environmental Protection Agency,
regulations of the Nuclear Regulatory Agency, and
regulations of any state department of natural
resources, state environmental protection agency or any
governmental authority whatsoever, now or at any time
hereafter in effect.
"Estimated Merger Consideration" shall be defined
as set forth in Section 4.4(a).
"Exchange Act" means the Securities Exchange Act
of 1934, as amended.
"Financial Statements" shall be defined as
provided in Section 6.5.
"Former Debenture Holder" shall be defined as set
forth in Section 9.3(f).
"GAAP" shall mean generally accepted accounting
principles in the United States of America in effect
from time to time.
"Indemnity Retention" shall be defined as set
forth in Section 4.4(b).
"Intellectual Property" means (i) United States
and foreign issued design patents and utility patents,
and pending applications relating to any inventions,
and reissues, divisions, continuations-in-part and
extensions of them; (ii) registered trademarks,
registered service marks, trademark and service ▇▇▇▇
applications, unregistered trademarks and service
marks, trade names, trade dress, logos and designs, and
unique product configurations; and (iii) registered
copyrights and copyright applications and renewals and
extensions thereof.
"ISO" means an incentive stock option within the
meaning of Section 422(b) of the Code.
"Laws" means any federal, state, local or foreign
statute, law, ordinance, rule or regulation.
"Legal Proceedings" shall mean any action, suit,
litigation, arbitration, proceeding (including without
limitation, any civil, criminal, administrative,
investigative or appellate proceeding), hearing,
inquiry, audit, or investigation commenced, brought,
conducted or heard by or before, or otherwise
involving, any court or other governmental body or any
arbitrator or arbitration panel.
"License" means a license, franchise or permit
which creates rights in the Company or in any third
party regarding any of the Intellectual Property.
"Losses" shall be defined as set forth in Section
10.2.
"Merger" shall be defined as set forth in the
Recitals to this Agreement.
"Merger Consideration" shall be defined as set
forth in Section 4.1.
"Merger Filing" shall be defined as set forth in
Section 2.2.
"Merger Payment Fund" shall be defined as set
forth in Section 4.4(b).
"Non-Converting Share" shall be defined as set
forth in Section 4.1(b).
"Notice of Objection" shall be defined as set
forth in Section 4.3(e).
"Parent" means Ventana Medical Systems, Inc., a
Delaware corporation.
"Parent Financial Statements" means the audited
consolidated financial statements and unaudited interim
consolidated financial statements of Parent included in
the SEC Reports.
"Parent Material Adverse Effect" means a material
adverse effect on the business, operations, properties,
assets, condition (financial or other) or results of
operations of Parent, Subsidiary and Parent's other
subsidiary, taken as a whole.
"Parent's knowledge" for those warranties and
representations set forth in Article V of this
Agreement, or elsewhere, which are subject to the
qualification "to Parent's knowledge," Parent will be
deemed to have knowledge of a matter if (i) either
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ has
knowledge of the matter, or (ii) such matter has come,
or should reasonably be expected to have come, to the
attention of any of such individuals if such individual
had conducted a reasonable due diligence review of
Parent's operations and business, including, without
limitation, reasonable inquiries to key personnel of
Parent regarding the business and operations of Parent
and a review of, and discussion with key personnel
regarding, pertinent books and records of Parent.
"Participating Shareholder" means each shareholder
of the Company other than those who have effectively
exercised dissenter rights.
"Paying Agent" shall be defined as set forth in
Section 4.4.
"Permitted Encumbrances" shall mean (i) real
estate taxes for the year of the Closing, (ii)
municipal and zoning ordinances and recorded easements,
restrictions and encumbrances which do not render title
to the Real Estate unmerchantable or the Real Estate
unusable in a manner consistent with past practices,
and (iii) the items listed and described on attached
Schedule 1.1 and the other Schedules and Exhibits to
this Agreement.
"Principal Shareholders" shall be defined as set
forth in the initial Paragraph to this Agreement.
"Proportionate Share" of a Shareholder shall mean
the proportion based on the fraction, the numerator of
which is the number of Company Shares owned by such
Participating Shareholder and the denominator of which
is the total number of issued and outstanding shares of
Company Common Stock as of the Closing Date.
"Proxy Statement" means the proxy statement to be
distributed in connection with the Company's meeting of
stockholders to vote upon this Agreement and the
transactions contemplated hereby.
"Real Estate" means all real estate owned or
leased by the Company, all which real estate is listed
and described on attached Schedule 1.2.
"Resolution Date" shall be defined as set forth in
Section 4.7(b).
"Resolving Accounting Firm" shall mean the
Phoenix, Arizona office of the accounting firm of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP.
"Retention Period" shall be defined as set forth
in Section 10.2.
"SEC" means the Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933,
as amended.
"Set-Off Notice" shall be defined as set forth in
Section 10.4.
"Set-Off Objection Notice" shall be defined as set
forth in Section 10.4.
"Shareholder Representative" means ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ or, if he is unwilling or unable to act, ▇▇▇▇▇
▇. ▇▇▇▇▇▇. If neither ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ nor ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, nor any successor, is willing or able to act,
▇▇▇▇▇ ▇. ▇▇▇▇.
"Shortfall Amount" shall be defined as in Section
4.5.
"Subsidiary" means Ventana Acquisition
Corporation, a Delaware corporation.
"Subsidiary Common Stock" shall mean common stock,
$.01 par value, of the Subsidiary.
"Surviving Corporation" shall be defined as set
forth in Section 2.1, below.
"Target Net Worth" shall be defined as set forth
in Section 4.3.
"Tax" or "Taxes" means all federal, state, county,
local, foreign and other taxes or assessments,
including, without limitation, income, estimated
income, business, occupation, franchise, property (real
and personal), sales, employment, gross receipts, use,
transfer, ad valorem, profits, license, capital,
payroll, employee withholding, unemployment, excise,
goods and services, severance, stamp, and including
interest, penalties and additions in connection
therewith for which the Company is or may be liable.
"Total Company Value" shall be defined as set
forth in Section 4.3, below.
"Unused Indemnity Retention" shall be defined as
set forth in Section 4.7(a).
ARTICLE II
THE MERGER
SECTION 2.1. The Merger. Upon the terms and
subject to the conditions of this Agreement, at the
Effective Time in accordance with the DGCL, Subsidiary
shall be merged with and into the Company and the
separate corporate existence of Subsidiary shall
thereupon cease. The Company shall be the surviving
corporation in the Merger and is hereinafter sometimes
referred to as the "Surviving Corporation." The
Surviving Corporation will be governed by the laws of
the State of Delaware as a direct, wholly-owned,
subsidiary of Parent.
SECTION 2.2. Effective Time of the Merger. The
Merger shall become effective at such time (the
"Effective Time") as shall be stated in a Certificate
of Merger, consistent with the terms of this Agreement,
to be filed with the Secretary of State of Delaware in
accordance with the DGCL (the "Merger Filing"). The
Merger Filing shall be made simultaneously with or as
soon as practicable after the Closing (as defined in
Section 4.9, below) of the transactions contemplated by
this Agreement.
ARTICLE III
THE SURVIVING CORPORATION
SECTION 3.1. Articles of Incorporation. The
Articles of Incorporation of the Surviving Corporation
shall be amended and restated at and as of the
Effective Time to read as did the Articles of
Incorporation of the Subsidiary immediately prior to
the Effective Time (except that the name of the
Surviving Corporation shall be such name as Parent
shall specify), until duly amended further in
accordance with the terms thereof and the DGCL.
SECTION 3.2. By-Laws. The By-Laws of the
Surviving Corporation shall be amended and restated at
and as of the Effective Time to read as did the By-Laws
of the Subsidiary immediately prior to the Effective
Time (except that the name of the Surviving Corporation
shall be such name as Parent shall specify), until duly
amended further in accordance with the terms thereof,
the Articles of Incorporation of the Surviving
Corporation and the DGCL.
SECTION 3.3. Effect of the Merger. At the
Effective Time, the effect of the Merger shall be as
provided in this Agreement and the applicable
provisions of the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at
the Effective Time, except as otherwise provided
herein, all the property, rights, privileges, powers
and franchises of Subsidiary and the Company shall vest
in the Surviving Corporation, all debts, liabilities
and duties of Subsidiary and the Company shall become
the debts, liabilities and duties of the Surviving
Corporation in the same manner as if the Surviving
Corporation had itself incurred them, and the separate
corporate existence of the Company with all its rights,
privileges, immunities, powers and franchises shall
continue unaffected by the Merger, except as set forth
herein.
SECTION 3.4. Directors. From and after the
Effective Time, the directors of the Subsidiary shall
serve as the initial directors of the Surviving
Corporation to hold office in accordance with the
Articles of Incorporation and By-Laws of the Surviving
Corporation, until their successors are duly elected or
appointed.
SECTION 3.5. Officers. From and after the
Effective Time, the officers of the Subsidiary shall
serve as the initial officers of the Surviving
Corporation and in the same capacities as they served
the Subsidiary, in each case until their respective
successors are duly elected or appointed.
ARTICLE IV
CONVERSION OF SHARES
SECTION 4.1. Conversion of Company Shares in the
Merger. Subject to the conditions and limitations set
forth in this Agreement, at the Effective Time, by
virtue of the Merger and without any action on the part
of any holder of any shares of the Company Common
Stock:
(a) All of the shares of Company Common Stock
issued and outstanding immediately prior to the
Effective Time (the "Company Shares"), other than
Company Common Stock held in treasury by the Company,
shall be converted into the right to receive cash or
other immediately available funds, without interest
(the "Merger Consideration"), in the aggregate amount
of the Total Company Value. The Merger Consideration
shall be payable to holders of Company Shares (the
"Company Shareholders") in the manner set forth in
Section 4.4, below.
(b) Each share of Company Common Stock held in
treasury by the Company (each a "Non-Converting Share")
immediately prior to the Effective Time, if any, shall
be canceled and extinguished without conversion thereof
to Parent Common Stock or payment therefor.
(c) No share of Company Common Stock shall be
deemed to be outstanding or to have any rights other
than those set forth in this Section 4.1 after the
Effective Time. From and after the Effective Time, all
outstanding Company Common Stock shall no longer be
outstanding and shall automatically be canceled and
retired and shall cease to exist. Until surrendered to
the Parent, each outstanding certificate which prior to
the Effective Time represented Shares shall after the
Effective Date be deemed for all purposes to represent
the right only to receive the Merger Consideration in
the manner set forth herein, and shall not represent
any right as a shareholder in the Company.
SECTION 4.2. Conversion of Subsidiary Shares in
Merger. At the Effective Time, by virtue of the Merger
and without any action on the part of Parent as sole
stockholder of Subsidiary, each issued and outstanding
share of Subsidiary Common Stock shall be converted
into one (1) share of Common Stock, par value $0.01 per
share, of the Surviving Corporation.
SECTION 4.3. Total Company Value. For purposes of
this Agreement, "Total Company Value" means the amount
of $5,000,000; provided, however, that if the Closing
Net Worth (as defined below) is either greater than
$200,000 or less than ($200,000), Total Company Value
means an amount equal to $5,000,000, plus the amount by
which the Closing Net Worth exceeds $29,706.43 (the
"Target Net Worth"), or less the amount by which the
Closing Net Worth is less than $29,706.43. Solely for
purposes of calculating whether Closing Net Worth
exceeds the above $200,000 or ($200,000) thresholds,
Closing Net Worth shall be calculated without regard to
any increases therein resulting from capital
contributions to the Company occurring after April 30,
1998, or any similar adjustments to the net worth of
the Company. Closing Net Worth shall be defined and
determined as follows:
(a) "Closing Net Worth" shall equal the sum of
the Company's total assets, less the Company's total
liabilities as reflected on the Closing Date Balance
Sheet.
(b) Parent shall prepare a balance sheet of the
Company as of the Closing Date (the "Closing Date
Balance Sheet"). The Closing Date Balance Sheet shall
be prepared in accordance with GAAP, subject to the
following:
(i) The value of an item of inventory shall
be the lower of (A) cost (net of all discounts,
volume credits, rebates and freight charges) to
the Company of the item determined on the basis of
the first-in-first-out method of accounting for
inventory in accordance with GAAP, or (B) market
value; provided, however, that in valuing the
inventory, no value shall be given to any item of
inventory which is obsolete or which is not usable
and/or saleable in the ordinary course of business
within reasonable periods in accordance with
industry standards.
(ii) The Closing Date Balance Sheet shall
include as a liability an amount equal to all
holiday pay and sick pay earned prior to the
Closing Date (including employer payroll taxes
related thereto calculated at the applicable tax
rate thereon) and all vacation benefits due or to
become due to employees of the Company with
respect to periods prior to the Closing Date (A)
who will not, as of the Closing Date, have
received vacation benefits earned prior to the
Closing Date, or (B) who would have accrued
vacation benefits with respect to the period of
employment prior to the Closing Date if they had
continued with the Company after the Closing Date.
(iii) The Closing Date Balance Sheet shall
include as a liability all profit sharing
contributions, 401(k) employer matching
contributions, incentive pay and/or bonuses
payable to employees of the Company and any and
all other amounts payable by the Company with
respect to obligations due or to become due to
employees or former employees with respect to
periods ending on or prior to the Closing Date
under any fringe benefit plans maintained by the
Company.
(iv) The Closing Date Balance Sheet shall
include as a liability an amount equal to all
unpaid real estate taxes payable by the Company
and all unpaid personal property taxes with
respect to the period ending on the Closing Date
and all general and special real estate
assessments which are assessed prior to the
Closing Date. Real estate and personal property
taxes payable by the Company with respect to the
period from January 1, 1998 to the Closing Date
shall be prorated based on such taxes for 1997.
(v) The Closing Date Balance Sheet shall
include all adjustments and accruals which would
be reflected on such Closing Date Balance if the
date thereof represented the last day of the
Company's fiscal year.
(vi) The Closing Date Balance Sheet shall
include as a liability all costs which are the
responsibility of the Company as specified in
Section 8.5, below, which remain unpaid as of the
Closing Date.
(c) Parent shall use its best efforts to deliver
the Closing Date Balance Sheet to the Shareholder
Representative and to such independent certified public
accountants as the Shareholder Representative may
designate by notice to Parent (the "Company
Accountants") within forty-five (45) days after the
Closing Date. The Closing Date Balance Sheet shall be
accompanied by a report (i) setting forth the Closing
Net Worth and (ii) stating that the Closing Date
Balance Sheet has been prepared, and the determination
of the Closing Net Worth has been made, in accordance
with GAAP and this Section 4.3.
(d) Following the delivery of the Closing Date
Balance Sheet, the Shareholder Representative and the
Company Accountants may review the Closing Date Balance
Sheet. To facilitate such review of the Closing Date
Balance Sheet, Parent shall provide the Shareholder
Representative, the Company Accountants and their
respective representatives with copies of any work
papers, schedules and other documents prepared or
utilized by Parent in connection with its determination
of Closing Net Worth and the preparation of the Closing
Date Balance Sheet. Such work papers, schedules and
other documents shall be made available to the
Shareholder Representative and the Company Accountants
as soon as practicable following any request therefor.
(e) The determination by Parent of the Closing
Net Worth shall be final and binding on Parent, the
Shareholder Representative, the shareholders of the
Company and the Company Accountants unless, within
thirty (30) days after the date Parent has delivered
the Closing Date Balance Sheet and such work papers,
schedules and documents as the Shareholder
Representative or the Company Accountants may request
pursuant to Section 4.3(d), above, to the Shareholder
Representative and the Company Accountants, the
Shareholder Representative shall have given written
notice of objection (a "Notice of Objection") to
Parent. The Notice of Objection shall state in
reasonable detail the nature of the Shareholder
Representative's objection(s) and the Shareholder
Representative shall provide to Parent all of the work
papers, schedules and documents prepared or utilized by
the Shareholder Representative in connection with such
objections. The Shareholder Representative and Parent
shall thereafter promptly consult with each other and
their respective representatives with respect to the
objection(s). If the Shareholder Representative and
Parent are unable to reach agreement within fifteen
(15) days after the Notice of Objection has been given,
the objection(s) shall be resolved by the Resolving
Accounting Firm. The Parent and its representatives,
and the Shareholder Representative, the Company
Accountants and their representatives, shall cooperate
fully with the Resolving Accounting Firm. The
Shareholder Representative and Parent shall give, and
shall cause their respective representatives to give,
the Resolving Accounting Firm and its representatives
such assistance and access to the assets and books and
records of the Company, and any applicable work papers,
schedules and other documents as the Resolving
Accounting Firm shall reasonably request. The
resolution of the objection(s) by the Resolving
Accounting Firm shall be final and binding on Parent,
the Shareholder Representative and the shareholders of
the Company. The fees and expenses of the Resolving
Accounting Firm shall be borne equally by Parent and
the shareholders of the Company (with the shareholders'
portion being funded from the Adjustment Retention).
SECTION 4.4. Payment of Merger Consideration.
The Merger Consideration shall be payable to the
Company Shareholders as follows:
(a) Immediately prior to the Closing, the parties
shall estimate the Total Company Value and determine
the Merger Consideration based on that estimate (the
"Estimated Merger Consideration").
(b) At the Effective Time, Parent shall make
available to a bank or trust company, or such other
paying agent designated by Parent and reasonably
acceptable to the Company for the benefit of the
Company Shareholders (the "Paying Agent"), an amount in
cash equal to the sum of (i) the Estimated Merger
Consideration less (ii) (x) the amount of $500,000 to
be retained by Parent to satisfy any reduction of the
Merger Consideration pursuant to Section 4.3, above
(the "Adjustment Retention"); and (y) the amount of
$700,000 to be retained by Parent to satisfy any claims
for indemnification pursuant to Article X, below (the
"Indemnity Retention") (such amount being hereinafter
referred to as the "Merger Payment Fund"). The Merger
Payment Fund shall be invested by the Paying Agent, as
directed by the Surviving Corporation so long as such
directions do not impair the rights of the Company
Shareholders, in direct obligations of the United
States of America, obligations for which the full faith
and credit of the United States of America is pledged
to provide for the payment of principal and interest,
commercial paper rated the highest quality by ▇▇▇▇▇'▇
Investors' Services or Standard & Poor's Corporation,
or certificates of deposit issued by or a "money
market" account at a commercial bank having at least
$200,000,000 of positive net worth; and any net
earnings with respect thereto shall be paid to the
Surviving Corporation as and when requested by the
Surviving Corporation. The Paying Agent shall,
pursuant to irrevocable instructions, make the payments
provided for in Section 4.1 out of the Merger Payment
Fund. At any time after the Effective Time, upon
notice from the Surviving Corporation that a
shareholder has properly exercised and perfected his
dissenter's rights under the DGCL, the Paying Agent
shall promptly repay to the Surviving Corporation from
the Merger Payment Fund an amount equal to such Company
Shareholder's Proportionate Share of the Merger
Consideration. The Merger Payment Fund shall not be
used for any purpose other than as described herein.
The Adjustment Retention and Indemnity Retention shall
be paid to the Company Shareholders in accordance with
the provisions of Sections 4.5 and 4.6, below. The
right to receive the Adjustment Retention and Indemnity
Retention is an integral part of the consideration in
the Merger, and shall not be transferable or
assignable. The Indemnity Retention shall be subject
to a $200,000 reduction in the event the Principal
Shareholders and the Parent enter into a mutually
acceptable resolution of various matters discovered by
Parent during its initial due diligence investigation.
(c) Within five (5) days after the Effective
Time, the Paying Agent shall mail to each holder of
record as of the Effective Time of a certificate or
certificates that immediately prior to the Effective
Time represented outstanding shares of Company Common
Stock (the "Company Certificates") (i) a form of letter
of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Company
Certificates shall pass, only upon proper delivery of
the Company Certificates to the Paying Agent) and (ii)
instructions for use in effecting the surrender of the
Company Certificates for payment therefor. Upon
surrender of Company Certificates to the Paying Agent,
together with such letter of transmittal duly executed
and any other required documents, the holder of such
Company Certificates shall be entitled to receive such
Company Shareholder's Proportionate Share of the Merger
Consideration. Until so surrendered, such Company
Certificates shall represent solely the right to
receipt such Company Shareholder's Proportionate Share
of the Merger Consideration with respect to the Company
Shares represented thereby. No interest shall be paid
or accrue on the Merger Consideration payable upon
surrender of the Company Certificates. If any payment
of the Merger Consideration is to be made to a person
other than the one in whose name the Company
Certificate surrendered in exchange therefor is
registered, it shall be a condition of such payment
that the Company Certificate so surrendered shall be
properly endorsed and otherwise in proper form for
transfer and that the person requesting such payment
shall pay to the Paying Agent any applicable transfer
or other similar taxes, or shall establish to the
satisfaction of the Paying Agent that any such tax has
been paid or is not applicable. Notwithstanding the
foregoing, neither the Paying Agent nor any party
hereto shall be liable to a holder of Shares for any
Merger Consideration delivered to a public official
pursuant to applicable escheat law.
(d) Any portion of the Merger Payment Fund
(including any interest thereon or earnings or profits
with respect thereto) which remains unclaimed by the
former shareholders of the Company six months after the
Effective Time shall be delivered to the Surviving
Corporation, upon demand of the Surviving Corporation,
and any former shareholders of the Company shall
thereafter look only to the Surviving Corporation for
payment of their claim for the Merger Consideration for
the Company Shares.
SECTION 4.5. Final Determination of Total Company
Value; Payment of Adjustment Retention. Within two (2)
business days after the final determination of the
Total Company Value pursuant to Section 4.3, above, the
Parent shall deliver to the Paying Agent cash (or other
immediately available funds) for distribution to the
Company Shareholders in the manner set forth in Section
4.4, above, the amount of the Adjustment Retention
increased by the amount by which the final Merger
Consideration exceeds the Estimated Merger
Consideration or decreased by the amount by which the
Estimated Merger Consideration exceeds the final Merger
Consideration, together with interest accruing on such
amount from and after the Closing Date until the date
of payment at a per annum rate equal to five and one
half percent (5-1/2%) (the "Applicable Rate"). If the
final Merger Consideration is less than the Estimated
Merger Consideration by an amount exceeding the
Adjustment Retention, the Company Shareholders shall be
required to pay to the Parent upon demand such Company
Shareholder's Proportionate Share of the amount of such
shortfall together with interest accruing on such
amount from and after the Closing Date at the
Applicable Rate (the "Shortfall Amount"). In the
absence of such payment, the Parent shall be entitled
to deduct the Shortfall Amount from the Indemnity
Retention.
SECTION 4.6. Payment of Indemnity Retention.
Parent shall deliver to the Paying Agent cash (or other
immediately available funds) for distribution to the
Company Shareholders in the manner set forth in Section
4.4, above, the following amounts on the following
dates: (i) within ten (10) days after the expiration
of the Retention Period, the Unused Indemnity
Retention; and (ii) within ten (10) days after the
Resolution Date, the Balance. Interest shall accrue on
the amounts payable under this Section from the Closing
Date to the date of payment at the Applicable Rate, and
shall be payable together with such amounts. In the
event that any amounts were deducted against the
Indemnity Retention pursuant to Paragraph 4.5, above,
Parent shall instruct the Paying Agent to make such
adjustments to the payments due to Company Shareholders
as are necessary to ensure that each Company
Shareholder has paid its Proportionate Share of the
Shortfall Amount.
SECTION 4.7. Definitions. The capitalized terms
used in Section 4.6, above, shall be defined as
follows:
(a) The "Unused Indemnity Retention" means the
amount by which the Indemnity Retention exceeds the
aggregate dollar amount of Parent's claims under
Section 10.4, below, set off against the Indemnity
Retention prior to, and/or pending as of, the
expiration of the Retention Period.
(b) The "Resolution Date" means the date on which
all claims under Section 10.4, below, pending as of the
expiration of the Retention Period have been finally
resolved; and
(c) The "Balance" means an amount equal to the
Indemnity Retention less any claims set off against the
Indemnity Retention as of the Resolution Date in
accordance with Section 10.4, below, and less the
Unused Indemnity Retention.
SECTION 4.8. Lost Certificates. In the event any
Company Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact
by the person claiming such Company Certificate to be
lost, stolen or destroyed, and an agreement by such
person to indemnify the Surviving Corporation and the
Parent against any Claim that may be made against it
with respect to such Company Certificate, the Parent
shall deliver in exchange for such lost, stolen or
destroyed Company Certificate, payment of such Company
Shareholder's Proportionate Share of the Merger
Consideration in the manner set forth herein; provided,
however, that in the event the Parent determines in its
reasonable discretion that the person does not have the
financial wherewithal to satisfy the obligations under
such agreement to indemnify, the Parent may require the
posting of a bond by such person in the amount of such
person's share of the Merger Consideration as indemnity
against any potential claim.
SECTION 4.9. Closing. The closing (the "Closing")
of the transactions contemplated by this Agreement
shall take place at the offices of ▇▇▇▇▇▇▇ & ▇▇▇▇,
S.C., Milwaukee, Wisconsin, on the day of the Company's
Stockholders' Approval as such term is defined in
Section 8.2, below, or at such other time and place as
agreeable to Parent and the Company (the date on which
the Closing occurs is referred to in this Agreement as
the "Closing Date").
SECTION 4.10. Closing of the Company's Transfer
Books. At the Effective Time, the stock transfer books
of the Company shall be closed and no transfer of
shares of Company Common Stock which were outstanding
immediately prior to the Effective Time shall
thereafter be made. From and after the Effective Time,
the holders of Company Certificates evidencing
ownership of shares of Company Common Stock outstanding
immediately prior to the Effective Time shall cease to
have any rights as stockholders of the Company, except
as otherwise provided herein or by law. If, after the
Effective Time, subject to the terms and conditions of
this Agreement, Company Certificates formerly
representing Company Common Stock are presented to the
Exchange Agent, Parent or Surviving Corporation, as the
case may be, they shall be canceled and exchanged for
payment of the Merger Consideration in the manner set
forth herein.
SECTION 4.11. Dissenting Shares.
(a) Notwithstanding anything to the contrary
contained in this Agreement, any shares of the Company
Common Stock that, as of the Effective Time, are or may
become "dissenting shares" pursuant to applicable
provisions of the DGCL governing the Merger shall not
be converted into or represent the right to receive the
Merger Consideration in accordance with Section 4.4,
above, and the holder or holders of such shares be
entitled only to such rights as may be granted to such
holder or holders under the DGCL; provided, however,
that if the status of any such shares as "dissenting
shares" shall not be perfected, or if any such shares
shall lose their status as "dissenting shares," then,
as of the later of the Effective Time or the time of
failure to perfect such status or the loss of such
status, such shares shall automatically be converted
into and shall represent only the right to receive
(upon the surrender of the certificate or certificates
representing such shares) the Merger Consideration in
accordance with Section 4.4.
(b) The Company shall give Parent (i) prompt
notice of written demand received by the Company prior
to the Effective Time to require the Company to
purchase shares of Company Common Stock pursuant to the
dissenters' rights provisions of the DGCL, and (ii) the
opportunity to participate in all negotiations and
proceedings with respect to any such demand. The
Company shall not make any payment or settlement offer
prior to the Effective Time with respect to any such
demand, all of which payments shall be the obligation
of Parent payable at such time after the Effective Time
as required by applicable law.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBSIDIARY
Parent and Subsidiary each represent and warrant
to the Company as of the date hereof as follows:
SECTION 5.1. Organization and Qualifications.
Parent and Subsidiary are corporations duly organized,
validly existing and in good standing under the laws of
the State of Delaware and each has the requisite
corporate power and authority to own, lease and operate
its assets and properties and to carry on its business
as it is now being conducted. Each of Parent and
Subsidiary is qualified to do business and is in good
standing in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the
business conducted by it makes such qualification
necessary, except where the failure to be so qualified
and in good standing will not, when taken together with
all other such failures, have a Parent Material Adverse
Effect. True, accurate and complete copies of Parent's
Certificate of Incorporation and By-Laws, as in effect
on the date hereof, including all amendments thereto,
have heretofore been delivered to the Company. Neither
Parent nor Subsidiary is in violation of any of the
provisions of their respective Certificate of
Incorporation, By-Laws and/or other organizational
documents.
SECTION 5.2. Authority; Non-Contravention;
Approvals.
(a) Parent and Subsidiary each have full
corporate power and authority to enter into this
Agreement and, subject to the Parent Required Statutory
Approvals, to consummate the transactions contemplated
hereby. This Agreement has been approved by the Boards
of Directors of Parent and Subsidiary and by the sole
stockholder of Subsidiary, and no other corporate
proceedings on the part of Parent or Subsidiary are
necessary to authorize the execution and delivery of
this Agreement or the consummation by Parent and
Subsidiary of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by
each of Parent and Subsidiary, and, assuming the due
authorization, execution and delivery hereof by the
Company, constitutes the valid and legally binding
agreement of each of Parent and Subsidiary, enforceable
against each of them in accordance with its terms.
(b) The execution and delivery of this Agreement
by each of Parent and Subsidiary does not, and the
performance of this Agreement and the transactions
contemplated hereby by Parent and Subsidiary will not,
violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would
constitute a default) under, or result in the
termination of, or accelerate the performance required
by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the
properties or assets of Parent or any of its
subsidiaries, including Subsidiary, under, any of the
terms, conditions or provisions of (i) the respective
Certificate of Incorporation, By-Laws and/or other
organizational documents of Parent, Subsidiary or any
of Parent's other subsidiaries, (ii) any statute, law,
ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any court or
governmental authority, domestic or foreign, applicable
to Parent, Subsidiary or any of Parent's other
subsidiaries or any of their respective properties or
assets, or (iii) any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession,
contract, lease or other instrument, obligation or
agreement of any kind to which Parent, Subsidiary or
any of Parent's other subsidiaries is now a party or by
which Parent, Subsidiary or any of Parent's other
subsidiaries or any of their respective properties or
assets may be bound. Excluded from the foregoing
sentences of this paragraph (b) are such violations,
conflicts, breaches, defaults, terminations,
accelerations or creations of liens, security
interests, charges or encumbrances that would not, in
the aggregate, have a Parent Material Adverse Effect.
(c) Except for the Parent Required Statutory
Approvals, no declaration, filing or registration with,
or notice to, or authorization, consent or approval of,
any governmental or regulatory body or authority,
domestic or foreign, is necessary for the execution and
delivery of this Agreement by Parent or Subsidiary or
the consummation by Parent or Subsidiary of the
transactions contemplated hereby, other than such
declarations, filings, registrations, notices,
authorizations, consents or approvals which, if not
made or obtained, as the case may be, would not, in the
aggregate, have a Parent Material Adverse Effect, or
affect Subsidiary's ability to consummate the Merger.
SECTION 5.3. Litigation. There is no claim,
action, suit, inquiry, arbitration, litigation,
proceeding or investigation or other legal or
administrative proceeding pending, or, to the Parent's
knowledge, threatened, against or affecting the Parent
or any of its subsidiaries or, to Parent's knowledge,
any of their respective officers, directors or other
employees, that individually or in the aggregate could
reasonably be expected to have the effect of preventing
or delaying the Parent from performing its obligations
under this Agreement or the transactions contemplated
hereby.
SECTION 5.4. Brokers and Finders. Neither the
Parent nor any of its officers, directors or employees
has employed any investment banker, broker or finder or
incurred any liability for any investment banking fees,
financial advisory fees, brokerage fees, commissions or
finder's fees in connection with the transactions
contemplated hereby.
The warranties and representations of the Parent and
the Subsidiary herein contained shall be true and
correct on the Closing Date and shall survive the
Closing of the Merger for the applicable statute of
limitations.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure letter of
the Company attached hereto (the "Company Disclosure
Letter"), the Company represents and warrants to Parent
as of the date hereof as follows:
SECTION 6.1. Organization and Qualification. The
Company is a corporation duly organized, validly
existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power
and authority to own, lease and operate its assets and
properties and to carry on its business as it is now
being conducted. The Company is qualified to do
business and is in good standing, where applicable, in
each jurisdiction in which the properties owned, leased
or operated by it or the nature of the business
conducted by it makes such qualification necessary,
except where the failure to be so qualified and in good
standing will not, when taken together with all other
such failures, have a Company Material Adverse Effect.
True, accurate and complete copies of the Company's
Certificate of Incorporation and By-Laws, in each case
as in effect on the date hereof, including all
amendments thereto, have heretofore been delivered to
Parent. The Company is not in violation of any of the
provisions of its Certificate of Incorporation or By-
Laws.
SECTION 6.2. Capitalization.
(a) The authorized capital stock of the Company
consists of 20,000,000 shares of Company Common Stock
and 1,000,000 shares of $.01 per share par value
Preferred Stock. As of the date hereof, 3,789,100
shares of Company Common Stock were issued and
outstanding and no shares of its Preferred Stock were
outstanding. All of the issued and outstanding shares
of the Company's capital stock have been duly
authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights granted by
the Company or by applicable law. None of the shares
of the Company have been issued in violation of any
preemptive or subscription rights.
(b) Except as set forth in the Company Disclosure
Letter, there are (i) no outstanding subscriptions,
options, calls, contracts, commitments, understandings,
restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any
outstanding security, instrument or other agreement and
also including any rights plan or other anti-takeover
agreement, obligating the Company to issue, deliver or
sell, or cause to be issued, delivered or sold,
additional shares of the capital stock of the Company
or obligating the Company to grant, extend or enter
into any such agreement or commitment, (ii) no voting
trusts, proxies or other agreements or understandings
to which the Company is a party or is bound with
respect to the voting of any shares of capital stock of
the Company and, to the knowledge of the Company, there
are no such trusts, proxies, agreements or
understandings by, between or among any of the
Company's stockholders with respect to Company Common
Stock. The Company Disclosure Letter provides
information relating to all offers and sales of
securities by the Company at any time during the last
five (5) years. All of such offers and sales were made
in compliance with applicable state and federal
securities laws.
SECTION 6.3. Equity Interests. The Company does
not directly or indirectly own any capital stock of,
any equity interest in, or any other ownership or
investment interest in, any corporation, partnership,
limited liability company, joint venture or other
business entity.
SECTION 6.4. Authority; Non-Contravention;
Approvals.
(a) The Company has full corporate power and
authority to enter into this Agreement and, subject to
the Company Stockholder Approval and the Company
Required Statutory Approvals, to consummate the
transactions contemplated hereby. This Agreement has
been approved by the Board of Directors of the Company,
and no other corporate proceedings on the part of the
Company are necessary to authorize the execution and
delivery of this Agreement or, except for the Company
Stockholder Approval, the consummation by the Company
of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the
Company, and, assuming the due authorization, execution
and delivery hereof by Parent, constitutes a valid and
legally binding agreement of the Company, enforceable
against the Company in accordance with its terms;
provided, that the consummation of the Merger is
contingent upon obtaining Company Stockholder Approval.
The affirmative vote of a majority of the outstanding
shares of Company Common Stock is the only vote of the
holders of the Company Common Stock necessary to
approve the Merger; provided, however, that the Company
shall obtain the consent of the Former Shareholders
pursuant to Paragraph 9.3(f), below.
(b) The execution and delivery of this Agreement
by the Company does not, and the performance of this
Agreement and the transactions contemplated hereby by
the Company shall not, violate, conflict with or result
in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or
result in the termination of, or accelerate the
performance required by, or result in a right of
termination or acceleration under, or result in the
creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the
Company or any of its subsidiaries under any of the
terms, conditions or provisions of (i) the Certificate
of Incorporation or By-Laws of the Company, (ii) any
statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of
any court or governmental authority applicable to the
Company or any of its properties or assets, or (iii)
any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease
or other instrument, obligation or agreement of any
kind to which the Company is now a party or by which
the Company or any of their respective properties or
assets may be bound.
(c) Except for the Company Required Statutory
Approvals, no declaration, filing or registration with,
or notice to, or authorization, consent or approval of,
any governmental or regulatory body or authority is
necessary for the execution and delivery of this
Agreement by the Company or the consummation by the
Company of the transactions contemplated hereby, other
than such declarations, filings, registrations,
notices, authorizations, consents or approvals which,
if not made or obtained, as the case may be, would not,
in the aggregate, have a Company Material Adverse
Effect.
SECTION 6.5. Financial Statements. The financial
statements of the Company attached hereto as Schedule
6.5 (the "Financial Statements"), including, without
limitation, the financial statements of the Company for
the fiscal periods ended April 30, 1996 and April 30,
1997 and the audited financial statements for the
fiscal period ended April 30, 1998, are true, complete
and correct, fairly represent the financial condition
of the Company on such dates and the results of
operations for the periods designated therein and were
prepared in accordance with GAAP. There has been no
material adverse change in the capitalization, assets,
liabilities, business prospects, gross margin,
profitability or methods of doing business of the
Company since the Balance Sheet Date, other than
changes in the ordinary course of business (none of
which ordinary course changes have had or will have a
Company Material Adverse Effect on the business,
prospects or condition, financial or otherwise, of the
Company).
SECTION 6.6. Absence of Undisclosed Liabilities.
There are no commitments, liabilities or obligations
relating to the Company, whether accrued, absolute,
contingent or otherwise including, without limitation,
guaranties by the Company of the liabilities of third
parties, for which specific and adequate provisions
have not been made on the Financial Statements, except
those incurred in or as a result of the ordinary course
of business since the Balance Sheet Date (none of which
ordinary course obligations have had or will have a
Company Material Adverse Effect).
SECTION 6.7. Absence of Certain Changes or
Events. Except as disclosed in the Company Disclosure
Letter, since the Balance Sheet Date, the Company has
conducted its business only in the ordinary course and
in a manner consistent with past practice and since the
Balance Sheet Date, there has not been (a) any change
in the financial condition, results of operations or
business of the Company having, in the aggregate, a
Company Material Adverse Effect; (b) any damage,
destruction or loss (whether or not covered by
insurance) with respect to any assets of the Company
having, in the aggregate, a Company Material Adverse
Effect; (c) any change by the Company in its accounting
methods, principles or practices; (d) any revaluation
by the Company of any of its material assets in any
material respect; (e) any entry by the Company into any
commitment or transactions material to the Company
taken as a whole; or (f) any declaration, setting aside
or payment of any dividends or distributions in respect
of shares of Company Common Stock or any redemption,
purchase or other acquisition of any of its securities.
Furthermore, since the Balance Sheet Date, the Company
has not taken any action or omitted to take any action
which, if suffered, taken or omitted after the date
hereof but before the Closing, would have resulted in a
violation of the provisions of Section 7.1 hereof.
SECTION 6.8. Absence of Litigation. Except as
disclosed in the Company Disclosure Letter, (a) there
is no claim, action, suit, inquiry, arbitration,
litigation, proceeding or investigation or other legal
or administrative proceeding pending or, to the
Company's knowledge, threatened against the Company
before any federal, state, municipal or other court or
governmental or administrative body or agency, any
securities or commodities exchange, other regulatory
body or any private arbitration tribunal; and (b) the
Company is not subject to any continuing order of, or
written agreement or memorandum of understanding with,
or continuing material investigation by, any
governmental entity or authority, or any judgment,
decree, injunction, rule or order of any court,
governmental department, commission, agency,
instrumentality or authority, or any arbitrator.
SECTION 6.9. No Violation of Law. Except as
disclosed in the Company Disclosure Letter, the Company
is not in violation of or has been given notice or been
charged with any violation of, any Law, except for
violations which, in the aggregate, could not
reasonably be expected to have a Company Material
Adverse Effect. The Company has all permits, licenses,
franchises, variances, exemptions, orders and other
governmental authorizations, consents and approvals
necessary to conduct their businesses as presently
conducted (collectively, the "Company Permits"), except
for permits, licenses, franchises, variances,
exemptions, orders, authorizations, consents and
approvals the absence of which, alone or in the
aggregate, would not have a Company Material Adverse
Effect. The Company is not in violation of the terms
of any Company Permit, except for delays in filing
reports or violations which, alone or in the aggregate,
would not have a Company Material Adverse Effect.
SECTION 6.10. Compliance with Agreements. Except
as disclosed in the Company Disclosure Letter, the
Company is not in breach or violation of or in default
in the performance or observance of any term or
provision of, and no event has occurred which, with
notice or lapse of time or action by a third party,
could result in a default under (a) the Articles of
Incorporation or By-Laws of the Company; or (b) any
contract, commitment, agreement, indenture, mortgage,
loan agreement, note, lease, bond, license, approval or
other instrument to which the Company or any of its
subsidiaries is a party or by which any of them is
bound or to which any of their property is subject,
which breaches, violations and defaults, in the case of
this clause (b), would have, in the aggregate, a
Company Material Adverse Effect.
SECTION 6.11. Taxes. The Company has, or prior to
the Closing will have, accurately prepared and filed
all tax returns which it was required to file on or
before the Closing Date and has paid all taxes required
to paid with respect to the periods covered by such tax
returns, and all other Taxes whether properly reflected
as owing or otherwise, or there will be created a
reserve therefor on the Closing Date Balance Sheet. No
deficiencies for any Taxes have been asserted or
assessed, or to the knowledge of the Company and the
Principal Shareholders, proposed, with respect to the
Company which remain unpaid. The Company has properly
withheld and paid over to the appropriate taxing
authorities all Taxes required by it to be withheld.
The Company has not made any payments, is not obligated
to make any payments, and is not a party to any
agreements that under any circumstances could obligate
it to make any payments, which will not be deductible
under Section 280G of the Code. Neither the Internal
Revenue Service nor any other governmental entity or
taxing authority or agency is now asserting, either
through audits, administrative proceedings, court
proceedings or otherwise, or, to the Company's
knowledge, threatening to assert against the Company
any deficiency or Claim for additional Taxes. The
Company has not been granted any waiver of any statute
of limitations with respect to, or any extension of a
period for the assessment of, any Tax. There are no
tax liens on any assets of the Company. The Company
has not received a ruling or entered into an agreement
with the Internal Revenue Service or any other
governmental entity or taxing authority or agency that
would have a Company Material Adverse Effect, taken as
a whole, after the Effective Time. The accruals and
reserves for Taxes reflected in the Company's balance
sheets included with the Financial Statements are
adequate to cover all Taxes accruable through the date
thereof (including Taxes being contested) in accordance
with GAAP. The Company is not required to include in
income either (i) any material amount in respect of any
adjustment under Section 481 of the Code, or (ii) any
material installment sale gain. Neither the Company
nor any of its subsidiaries has made an election under
Section 341(f) of the Code.
SECTION 6.12. Employees. Attached hereto as
Schedule 6.12 is:
(a) a list of all employee handbooks and/or
manuals relating to the employees of the Company, true
and correct copies of which have been delivered to the
Parent; and
(b) a list of all employees of the Company,
together with their rates of salary or wages, vacation
benefits, and each bonus, deferred compensation, stock
option, incentive compensation, severance or
termination pay agreement or employment benefit
applicable to each such employee, whether formal or
informal and whether legally binding or not.
SECTION 6.13. Labor Controversies. With respect
to its employees:
(a) The Company is in compliance with the Federal
Fair Labor Standards Act and all applicable Laws
relating to employment discrimination, employee welfare
and labor standards except for matters which would not
in the aggregate have a Company Material Adverse
Effect. To the Company's knowledge, there is no basis
for any Claim by any past or present employee of the
Company that such employee was subject to a wrongful
discharge or any employment discrimination by the
Company or its management arising out of or relating to
such employee's race, sex, age, religion, national
origin, ethnicity, handicap or any other protected
characteristic under applicable Law.
(b) The Company is in compliance with the Federal
Occupational Safety and Health Act, the regulations
promulgated thereunder and all other applicable
Laws relating to the employment of labor, including,
without limitation, any provisions thereof relating to
wages, bonuses, collective bargaining, equal pay and
the payment of social security and similar payroll
taxes, except for matters which would not in the
aggregate have a Company Material Adverse Effect. No
proceedings are pending before any court, government
agency or instrumentality or arbitrator relating to
labor matters, and there is no pending investigation by
any governmental agency or, to the knowledge of the
Company, threatened Claim by any such agency or other
person relating to labor or employment matters.
(c) The Company is not a party to any
understanding (whether written or oral), agreement or
contract with any union, labor organization, employee
group or other entity or individual which affects the
employment of employees of the Company, including but
not limited to, any collective bargaining agreements or
labor contracts.
(d) To the knowledge of the Company, none of the
employees of the Company are in the process of being
organized by or into labor unions or associations. The
Company has not had any material adverse change in its
employee relations or has been subject to a strike,
slow-down, or other work stoppage during the three (3)
year period immediately preceding the date hereof and,
to the knowledge of the Company, there are no strikes,
slow-downs or work stoppages threatened against the
Company.
(e) The Company has made all required payments
to their respective unemployment compensation reserve
accounts with the appropriate governmental departments
and all such unemployment compensation accounts have
positive balances.
SECTION 6.14. Title to and Condition of Assets.
Except as set forth in Schedule 6.14 and in the
Financial Statements, the Company owns all of the
property and assets, personal and real, tangible or
intangible, used by the Company in connection with the
conduct of the Company's business. The Company has
good and marketable title to all of the property
included among its assets, tangible and intangible,
including, without limitation, those assets reflected
on the Financial Statements or thereafter acquired
(except inventory sold since April 30, 1998, for fair
value in the ordinary course of business consistent
with past practices), in each case free and clear of
all liens, claims, encumbrances and security interests
whatsoever. All of the tangible personal property of
the Company is (i) in good operating condition and
repair, ordinary wear and tear excepted and (ii)
maintained in accordance with customary maintenance
practices. The Company's assets are sufficient for the
operation of the Company's business in the ordinary
course and are suitable for the purpose for which they
are being used. The amount of the Company's inventory
on hand (i) except as set forth on attached
Schedule 6.14, is sufficient for the operation of the
Company in the ordinary course of business based on
current levels of operation adjusted for any increased
level of operations anticipated by the Company; (ii)
has been manufactured and/or purchased in the ordinary
course of business consistent in quality and quantity
with past practices of the Company; and (iii) is not
obsolete and is of a quality and quantity usable and
salable in the ordinary course of business. All
accounts receivable of the Company have arisen from
bona fide transactions in the ordinary course of
business and, to the Company's knowledge, are good and
collectible at the aggregate recorded amounts thereof,
net of any applicable reserves for doubtful accounts
reflected on the Closing Date Balance Sheet, within six
(6) months after the Closing Date. All property leased
by the Company is in the condition required of such
property by the terms of the lease applicable thereto
during the term of the lease and upon the expiration
thereof. No shareholder of the Company has any direct
or indirect interest in any right, property or asset
used or required by the Company in the conduct of its
business.
SECTION 6.15. Real Estate.
(a) True and correct copies of the lease(s)
pursuant to which the Company leases any parcel of the
Real Estate have been made available to Parent.
Attached hereto as Exhibit 6.15 is a list of all such
leases. No default by the Company, or to the knowledge
of the Company, any landlord has occurred and is
continuing under the terms of any such lease. All of
the Real Estate leased by the Company is in the
condition required by the terms of such leases.
(b) Neither the Real Estate nor the Company's use
thereof is in violation of any applicable Laws which
violation would have a Company Material Adverse Effect.
(c) None of the Real Estate is subject to any
lease, option to purchase or rights of first refusal,
except any such in favor of the Company.
(d) Except for liens for taxes not yet due and
payable and the Permitted Encumbrances, there are no
(i) actual, or to the knowledge of the Company,
proposed special assessments; (ii) pending or, to the
knowledge of the Company, threatened condemnation
proceedings; (iii) pending or, to the knowledge of the
Company, threatened litigation or administrative
actions; (iv) mechanics' or materialman's liens;
(v) structural or mechanical defects in any of the
buildings located on the Real Estate; (vi) planned or
commenced improvements which may result in an
assessment or otherwise affect the Real Estate; (vii)
governmental agency or court orders requiring the
repair, alteration or correction of any existing
condition with respect to the Real Estate; or (viii)
pending or, to the knowledge of the Company, threatened
changes in any zoning Laws or ordinances which may
affect the Real Estate.
(e) The buildings, fixtures and other
improvements located on the Real Estate have been
approved by all necessary governmental authorities and
are in good condition, working order and repair,
ordinary wear and tear excepted, and suitable for the
purpose for which they are being used by the Company.
SECTION 6.16. Products. Except as set forth on
Schedule 6.16, no claim for product liability has been
asserted against the Company during the five (5) year
period preceding the date hereof and no event has
occurred which would give rise to the assertion of any
such claim. There is no deficiency or inadequacy in
the manufacture, design or formulation of any of the
Company's products which may hereafter give rise to any
such failure or result in any such claim. All products
sold by the Company have been manufactured in
compliance with all applicable manufacturing and
quality control procedures.
SECTION 6.17. Product Warranties. All products
and services manufactured and/or sold by the Company
(and the delivery thereof) have been in conformity with
all applicable contractual commitments and all express
or implied warranties. To the Company's knowledge, no
liability for any warranty claims exist, except for any
such claims incurred in the ordinary course of business
consistent in amount and character with past experience
of the Company. To the Company's knowledge, all
product labeling of the Company is in conformity with
all applicable Laws except for matters which would not
have a Company Material Adverse Effect. Copies of the
standard terms and conditions of sale, delivery or
lease of the Company (including all warranty
provisions) are attached hereto as Schedule 6.17.
SECTION 6.18. Compliance With Environmental Laws.
Except as otherwise set forth on attached
Schedule 6.18:
(a) Neither the Company nor, to the Company's
knowledge, any other user or the owner of the Real
Estate has violated or been threatened with or received
a notice, directive, violation report or charge
asserting any violation of any Environmental Laws, as
the same may have been amended. No action has been
taken against the Company or, to the Company's
knowledge, the Real Estate or any other users or owner
of the Real Estate by any federal, state or local
department or agency concerning any Environmental Laws.
The Company and, to the Company's knowledge, the Real
Estate are, and at all times in the past have been, in
compliance with all Environmental Laws. To the
Company's knowledge, no asbestos, urea formaldehyde or
polychlorinated biphenyls are present in, on or under
any of the Real Estate where such presence would
constitute a violation of any Environmental Law. None
of the Company's assets are required to be upgraded,
modified or replaced to be in compliance with
Environmental Laws.
(b) Neither the Company nor, to the Company's
knowledge, any third party has generated, stored, used,
disposed of, spilled, discharged or released any
substance in any manner on the Real Estate and the
improvements thereon or on property adjacent to the
Real Estate or performed an environmental cleanup on
the Real Estate or adjacent property which may form the
basis for any present or future claim against the
Company based upon Environmental Laws, or any demand or
action seeking cleanup of any site, location or body of
water, surface or subsurface, under any Environmental
Laws, or otherwise, or which may subject the Company
and/or the Parent to claims for damages.
(c) Except for the storage of hazardous chemicals
in the ordinary course of business and in compliance
with all Environmental Laws, no hazardous or toxic
substances or waste (as defined under Environmental
Laws) which are in the control of the Company, are
located at, on or under any of the Real Estate, or, to
the Company's knowledge, have been used, generated,
treated, stored, disposed of, handled or removed from
any of the Real Estate.
(d) To the Company's knowledge, no above ground
or underground storage tanks have ever been located at,
on or under any of the Real Estate. To the Company's
knowledge, at no time prior to or during the Company's
use of the Real Estate have hazardous or toxic
substances or wastes, as defined under Environmental
Laws, been spilled, discharged, leaked, discarded,
released or otherwise deposited on any of the Real
Estate. To the Company's knowledge, none of the Real
Estate is contaminated by hazardous or toxic substances
or wastes, as defined under Environmental Laws,
originating from off-site sources.
(e) Attached hereto as Schedule 6.18 is a copy of
all environmental claims, reports, studies, compliance
actions or the like of the Company with respect to any
of the Company's assets or the Real Estate.
(f) To the Company's knowledge, no environmental
claims have been asserted or, are threatened or are
anticipated to be asserted against the Company with
respect to the Real Estate, any of its assets and/or
the operation of its business.
SECTION 6.19. Intellectual Property.
(a) Schedule 6.19 attached hereto sets forth
Intellectual Property owned or used by the Company or
in which the Company has an interest and the nature of
such interest; and a general identification of all
material trade secrets and know-how, including, without
limitation, invention disclosures, new product
development information, formulas, software and vendor
and customer lists, owned by the Company or used by the
Company or in which the Company has an interest and the
nature of such interest.
(b) Schedule 6.19 attached hereto also sets forth
all Licenses granted by the Company and or to which the
Company is a party.
(c) (i) Except as set forth on attached
Schedule 6.19, the Company is the owner, free and clear
of all liens, claims and encumbrances, of all right,
title and interest in and to the Intellectual Property
listed on Schedule 6.19 and the Company has the
absolute right to use and assign such Intellectual
Property without seeking the approval or consent of any
third party and without payments to any third party;
(ii) all registrations and applications for such
Intellectual Property are in full force and effect;
(iii) there are no other items of Intellectual Property
that are material to the Company's business; (iv) there
are no existing or, to the knowledge of the Company,
threatened claims or proceedings by any person relating
to the use by the Company of the Intellectual Property
listed on Schedule 6.19 or challenging its ownership of
the same; (v) none of the Intellectual Property listed
on Schedule 6.19 is subject to any outstanding order,
decree, judgment, stipulation, written restriction,
undertaking or agreement limiting the scope or use of
such Intellectual Property or declaring any of it
abandoned; (vi) to the knowledge of the Company, there
are no infringing or diluting uses of such Intellectual
Property, and no investigations are pending concerning
the possibility of such infringing or diluting use; and
(vii) except for the Licenses, the Company has not
granted any license, franchise, permit or other right
to any third party to use any of the Intellectual
Property listed on Schedule 6.19.
SECTION 6.20. Contracts and Other Agreements.
Schedule 6.20 attached hereto sets forth a true and
complete list of all of the following to which the
Company is a party or by which it is bound
(collectively, the "Contracts"): (i) all purchase
orders and sales orders not in the ordinary course of
business, all agreements or arrangements between the
Company and any shareholder thereof, loan agreements,
supply agreements, security agreements, notes,
guarantees, mortgages, licenses, technology agreements,
royalty agreements, licensing agreements,
authorizations, construction permits, leases,
employment agreements, compensation agreements,
covenants not to compete, confidentiality agreements,
commission agreements, sales representative,
distributorship or marketing agreements, collective
bargaining agreements, employee benefit plans, profit
sharing plans, pension plans, group hospitalization
insurance, life insurance, disability insurance, other
insurance plans, bonus plans, compensation plans or
other employee plans or other contracts or agreements
made in the ordinary course of business and involving
an amount greater than Twenty-Five Thousand Dollars
($25,000) over the term of such Contract, and (ii) all
other contracts or agreements not made in the ordinary
course of business. True and correct copies of each of
the Contracts, and all amendments and modifications
thereof, have been made available to Parent or will
have been made available to Parent prior to Closing.
Each Contract is valid, binding and in full force and
effect in accordance with its terms. Neither the
Company nor, to the knowledge of the Company, any other
party to any Contract is in breach or default under any
Contract (with or without the lapse of time, or the
giving of notice, or both).
SECTION 6.21. Insurance. The Company maintains
policies of fire and casualty, liability and other
forms of insurance and bonds in such amounts, with such
deductibles and against such risks and losses as are
reasonable for the business and assets of the Company.
A true and complete list of all such insurance and
bonds is attached hereto as Schedule 6.21. Each such
insurance policy and bond is in full force and effect
and neither the Company nor any of the Principal
Shareholders has received notice of and is not
otherwise aware of any cancellation or threat of
cancellation of such insurance or bond. Schedule 6.21
attached hereto also sets forth all property damage,
personal injury, products liability or other claims
that have been made against the Company in the last
three (3) years or which are pending against the
Company or, to the knowledge of the Company, threatened
against the Company.
SECTION 6.22. Customers; Suppliers. Schedule
6.22 attached hereto sets forth, with respect to the
last three (3) fiscal years of the Company: (i) the
seven (7) largest (based on dollar amounts purchased
from the Company) customers of the Company, and (ii)
the seven (7) largest (based on dollar amounts
purchased by the Company) suppliers of the Company.
The Company has no reason to believe or has received
any notice or indication of the intention of any of the
customers, suppliers or third parties to material
contracts of the Company to cease doing business or
reduce in any material respect the business transacted
with the Company or to terminate or modify any agree
ments with the Company (whether as a result of
consummation of the transactions contemplated hereby or
otherwise).
SECTION 6.23. Accounts; Safe Deposit Boxes.
Attached hereto as Schedule 6.23 is (i) a true and
correct list of the bank and savings accounts,
certificates of deposit and safe deposit boxes of the
Company and those persons authorized to sign thereon,
and (ii) true and correct copies of all corporate
borrowing, depository and transfer resolutions and
those persons entitled to act thereunder.
SECTION 6.24. Brokers and Finders. Neither the
Company nor any Principal Shareholder nor any of the
Company's officers, directors or employees has employed
any investment banker, broker or finder or incurred any
liability for any investment banking fees, financial
advisory fees, brokerage fees, commissions or finder's
fees in connection with the transactions contemplated
hereby.
SECTION 6.25. Warranties True and Correct. No
warranty or representation by the Company contained in
this Agreement, the Schedules and Exhibits attached
hereto or in any writing to be furnished pursuant
hereto contains or will contain any untrue statement of
material fact or omits or will omit to state any
material fact required to make the warranties or
representations herein or therein contained not
misleading. The Company and the Principal Shareholders
have disclosed to Parent all material adverse facts
known to the Company or the Principal Shareholders
relating to the Company, its assets or business, not
otherwise known to Parent.
The warranties and representations of the Company
herein contained shall be true and correct on the
Closing Date and shall survive the consummation of the
Merger for the following periods:
(a) The warranties and representations set
forth in Sections 6.1, 6.2, 6.3, 6.4, 6.13, 6.11,
the first two sentences of Section 6.14 and
Section 6.18 shall survive for the applicable
statute of limitations.
(b) All other warranties and representations
shall survive until completion of the Parent's
Financial Statements for the fiscal year ended
December 31, 1999 but in no event later than
April 30, 2000.
ARTICLE VII
MATTERS PENDING THE MERGER
SECTION 7.1. Conduct of Business by the Company
Pending the Merger. Except as otherwise contemplated by
this Agreement, after the date hereof and prior to the
Closing Date, unless Parent shall otherwise agree in
writing, the Company shall:
(a) conduct its business in the ordinary and
usual course of business and consistent with past
practice;
(b) not (i) amend or propose to amend its
Certificate of Incorporation or By-Laws, (ii) split,
combine or reclassify its outstanding capital stock, or
(iii) declare, set aside or pay any dividend or
distribution payable in cash, stock, property or
otherwise;
(c) not issue, sell, pledge or dispose of, or
agree to issue, sell, pledge or dispose of or otherwise
cause to become outstanding, any additional shares of,
or any options, warrants or rights of any kind to
acquire any shares of its capital stock of any class or
any debt or equity securities convertible into or
exchangeable for such capital stock; provided, however,
that the Company may be required to reissue shares of
Common Stock in connection with transfers of stock
between the Principal Shareholder and ▇▇▇▇▇ ▇. ▇▇▇▇
prior to Closing.
(d) not (i) incur or become contingently liable
with respect to any material indebtedness for borrowed
money other than (x) borrowings in the ordinary course
of business, (y) borrowings to refinance existing
indebtedness, in the ordinary course of business, or
(z) borrowings contemplated under Section 7.4, below,
(ii) redeem, purchase, acquire or offer to purchase or
acquire any shares of its capital stock or any options,
warrants or rights to acquire any of its capital stock
or any security convertible into or exchangeable for
its capital stock, (iii) make any acquisition of any
assets or businesses and expenditures for fixed or
capital assets, (iv) sell, pledge, dispose of or
encumber any assets, other than sales of inventory in
the ordinary course of business, or (v) enter into any
contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(e) use all commercially reasonable efforts to
preserve intact its business organization and goodwill,
keep available the services of its present officers and
key employees, and preserve the goodwill and business
relationships with customers, vendors and others having
business relationships with it and not engage in any
action, directly or indirectly, with the intent to
adversely impact the transactions contemplated by this
Agreement;
(f) not enter into or amend any employment,
severance, special pay arrangement with respect to
termination of employment or other similar arrangements
or agreements with any directors, officers or key
employees;
(g) not adopt, enter into or amend any bonus,
profit sharing, compensation, stock option, pension,
retirement, deferred compensation, health care,
employment or other employee benefit plan, agreement,
trust, fund or arrangement for the benefit or welfare
of any employee or retiree except as required to comply
with changes in applicable law or increases in wages in
the ordinary course and consistent with past practice
for non-executive employees;
(h) maintain with adequately capitalized
insurance companies insurance coverage for its assets
and its business in such amounts and against such risks
and losses as are consistent with past practice; and
(i) use, preserve and maintain the Company's
properties and assets on a basis consistent with past
practices;
(j) maintain its books, accounts and records
in the usual manner and on a basis consistent with past
practices;
(k) not sell, transfer, lease or otherwise
dispose of or agree to sell, transfer, lease or
otherwise dispose of any material assets or properties
of the Company (other than sales of inventory made in
the ordinary course of business) or cancel or
compromise, or agree to cancel or compromise, any
material debt or claim, or waive or release, or agree
to waive or release, any right of substantial value
relating to the Company or its assets;
(l) not commit any act or omit to do any act, or
permit any act or omission to act, which will or may
cause a material breach of any Contract or make or
agree to make any modification or amendment to any of
the Contracts or terminate or agree to terminate any
Contract;
(m) not incur any indebtedness other than
indebtedness for accounts payable to trade creditors
incurred in the ordinary course of business in
connection with obtaining materials or services other
than borrowings contemplated under Paragraph 7.4,
below.
(n) not mortgage, pledge or subject to, or agree
to mortgage, pledge or subject to, any lien, charge,
security interest or any other encumbrance or
restriction on any of the assets of the Company; and
(o) not transfer or grant, or agree to transfer
or grant, any rights under, or enter into or agree to
enter into, any settlement regarding the breach or
infringement of any Intellectual Property of the
Company or similar rights relating to the Company or
its assets or modify or agree to modify any existing
rights with respect thereto.
SECTION 7.2. Control of the Company's Operations.
Nothing contained in this Agreement shall give to
Parent, directly or indirectly, rights to control or
direct the Company's operations prior to the Effective
Time. Prior to the Effective Time, the Company shall
exercise, consistent with and subject to the terms and
conditions of this Agreement, complete control and
supervision of its operations.
SECTION 7.3. Acquisition Transactions. After the
date hereof and prior to the Effective Time or earlier
termination of this Agreement, the Company shall not
(and the Principal Shareholder shall not and shall
cause the Company not to), and the Company shall not
(and the Principal Shareholder shall not and shall
cause the Company not to) permit any of its advisors to
(i) initiate, solicit or seek, directly or indirectly,
any inquiries or the making or implementation of any
proposal or offer (including, without limitation, any
proposal or offer to its stockholders) to acquire all
or any substantial part of the business and properties
of the Company or more than fifty percent (50%) of the
capital stock of the Company, whether by merger,
purchase of assets, tender offer or otherwise, whether
for cash, securities or any other consideration or
combination thereof except for the transaction
contemplated herein (any such transactions being
referred to herein as "Acquisition Transactions"), (ii)
engage in any negotiations concerning, or provide any
confidential information or data to, or have any
discussions with, any person relating to an Acquisition
Transaction, or (iii) otherwise cooperate in any effort
or attempt to make, implement or accept an Acquisition
Transaction.
SECTION 7.4. Parent Loan. At such time as the
condition in Section 9.3(h), below, shall have been
satisfied, Parent agrees to loan to the Company, upon
the request of the Company, up to $200,000.00. The
Parent may from time to time, in its sole discretion,
advance funds to the Company prior to the satisfaction
of the condition set forth in Section 9.3(h), but shall
be under no obligation to make such advances. As a
condition to that loan, the Company will execute and
deliver to Parent a promissory note, a Security
Agreement, and all such UCC Financing Statements, and
such other instruments and documents in connection
therewith as Parent may reasonably request all in form
and content mutually acceptable to Parent and the
Company. The loan shall further be conditioned upon
Parent entering into an acceptable intercreditor
arrangement with the Company's existing lenders.
ARTICLE VIII
ADDITIONAL AGREEMENTS
SECTION 8.1. Access to Information.
(a) Prior to the Closing, the Company will (and
the Principal Shareholders will cause the Company to)
(i) give Parent and its representatives, employees,
counsel and accountants reasonable access to the
properties, books and records of the Company, and (ii)
cause its officers and advisors (including, without
limitation, its accountants, attorneys and financial
advisors) to furnish Parent and its designated
representatives with financial and operating data and
other information with respect to the Company for the
purpose of permitting Parent, among other things, to:
(a) conduct its due diligence review, (b) review the
financial statements of the Company, (c) verify the
accuracy of the representations and warranties of the
Company and the Principal Shareholders contained in
this Agreement, (d) confirm compliance by the Company
and the Principal Shareholders with the terms of this
Agreement, and (e) prepare for the consummation of the
transactions contemplated by this Agreement. Without
limiting the foregoing, the Company will permit Parent
and its accountants to have access during normal
business hours to examine and make copies of all work
papers and schedules of the Company and its
accountants. In addition, immediately prior to the
Closing, Parent shall be permitted to conduct a
physical count of the Company's inventory and such
other audit procedures as Parent deems necessary to
verify the existence and condition of the Company's
inventory, the other assets of the Company and the
liabilities, obligations and reserves of the Company.
(b) In addition to the foregoing, from and after
the date hereof, each party shall furnish promptly to
one another a copy of each report and other document
filed or received by any of them pursuant to the
requirements of federal or state securities laws or
which may have a material effect on their respective
businesses, properties or personnel, and work papers of
their respective accountants and other information or
copies of such documentation and access to senior
management personnel as reasonably deemed necessary by
the requesting party's respective accountants, legal
counsel or financial advisors to complete the
Prospectus and Registration Statement, or the opinions
or letters referred to in Sections 9.2 and 9.3, below.
(c) Parent and its subsidiaries shall hold and
shall use their commercially reasonable efforts to
cause the Parent's representatives to hold, and the
Company and its subsidiaries shall hold and shall use
their commercially reasonable efforts to cause the
Company's representatives to hold, in strict confidence
all non-public documents and information furnished to
Parent and Subsidiary or to the Company, as the case
may be, in connection with the transactions
contemplated by this Agreement. Notwithstanding the
foregoing (i) Parent and the Company may disclose such
information as may be necessary in connection with
seeking the Parent Required Statutory Approvals, the
Company Required Statutory Approvals and the Company
Stockholder Approval, and (ii) each of Parent,
Subsidiary and the Company may disclose any information
that it is required by law or judicial or
administrative order to disclose.
SECTION 8.2. Stockholders' Approval. The Company
shall, as promptly as practicable, submit the
transactions contemplated hereby for the approval of
its stockholders at a meeting of stockholders and shall
use its commercially reasonable efforts to obtain
stockholder approval and adoption (the "Company
Stockholder Approval") of this Agreement and the
transactions contemplated hereby. Such meeting of the
stockholders shall be held as soon as practicable
following the execution of this Agreement provided that
the meeting shall not take place until the Company has
obtained the consent of the Former Debenture Holders
pursuant to Paragraph 9.3(f), below. The Company
shall, through its Board of Directors, recommend to its
stockholders approval of the transactions contemplated
by this Agreement. The Company (i) acknowledges that a
breach of its covenant contained in this Section 8.2 to
convene a meeting of its stockholders and call for a
vote with respect to the approval of this Agreement and
the Merger will result in irreparable harm to Parent
which will not be compensable in money damages, and
(ii) agrees that such covenant shall be specifically
enforceable and that specific performance and
injunctive relief shall be a remedy properly available
to Parent for a breach of such covenant.
SECTION 8.3. Expenses and Fees. Each party hereto
agrees to bear its own expenses incurred in connection
with the consummation of the transactions contemplated
by this Agreement.
SECTION 8.4. Agreement to Cooperate.
(a) Subject to the terms and conditions herein
provided, each of the parties hereto shall use all
commercially 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 pursuant to all
agreements, contracts, indentures or other instruments
to which the parties hereto are a party, or under any
applicable laws and regulations to consummate and make
effective the transactions contemplated by this
Agreement, including using its commercially reasonable
efforts to (i) obtain all necessary or appropriate
waivers, consents and approvals from lenders,
landlords, security holders or other parties whose
waiver, consent or approval is required to consummate
the Merger, (ii) effect all necessary registrations,
filings and submissions, and (iii) lift any injunction
or other legal bar to the Merger (and, in such case, to
proceed with the Merger as expeditiously as possible).
(b) In the event any litigation is commenced by
any person or entity relating to the transactions
contemplated by this Agreement, including any
Acquisition Transaction, Parent shall have the right,
at its own expense, to participate therein, and the
Company will not settle any such litigation without the
consent of Parent, which consent will not be
unreasonably withheld.
SECTION 8.5. Public Statements. The parties (i)
shall consult with each other prior to issuing any
press release or any written public statement with
respect to this Agreement or the transactions
contemplated hereby, and (ii) shall not issue any such
press release or written public statement prior to such
consultation, except as may be required by law and
applicable listing requirements.
SECTION 8.6. Directors' and Officers'
Indemnification. The Surviving Corporation shall
observe any indemnification provisions now existing in
the Articles of Incorporation or By-Laws of the Company
or in the indemnification agreements set forth in the
Company Disclosure Letter for the benefit of any
individual who served as a director or officer of the
Company at any time prior to the Effective Time.
SECTION 8.7. Notification of Certain Matters.
Each of the Company, Parent and Subsidiary agrees to
give prompt notice to each other of, and to use their
respective commercially reasonable efforts to prevent
or promptly remedy (i) the occurrence or failure to
occur or the impending or threatened occurrence or
failure to occur, of any event which occurrence or
failure to occur would be likely to cause any of its
representations or warranties in this Agreement to be
untrue or inaccurate in any material respect at any
time from the date hereof to the Effective Time, and
(ii) any material failure on its part to comply with or
satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to
this Section 8.7 shall not limit or otherwise affect
the remedies available hereunder to the party receiving
such notice.
SECTION 8.8. Execution of Additional Documents.
From time to time, as and when requested by a party
hereto, each party hereto shall execute and deliver, or
cause to be executed and delivered, all such documents
and instruments and shall take, or cause to be taken,
all such further or other actions as such other party
may reasonably deem necessary or desirable to
consummate the transactions contemplated by this
Agreement.
SECTION 8.9. Risk of Loss. Risk of loss, damage
or destruction to any of the assets of the Company
shall be upon the Company and its shareholders until
the Closing Date and thereafter upon Parent. In the
event of any loss or damage to the assets of the
Company between the date hereof and the Closing, the
Company and the Principal Shareholders shall notify the
Parent of such event at the earlier of three (3) days
after such loss or at the Closing. The proceeds of any
claim for loss or damage under insurance policies or
otherwise shall be used to fully repair, replace or
restore the assets prior to the Closing to a condition
at least equivalent to their condition prior to such
loss or shall, at the Parent's option, be paid to the
Parent at the Closing. In the event the damage or loss
is of such a nature as to cause a Company to cease all
or any material portion of its operations for any
period, Parent may, at its option, terminate this
Agreement without liability. If such proceeds are not
sufficient for such repair, replacement or restoration,
Parent may, at or before the Closing, at its option (i)
terminate this Agreement without liability, or (ii)
consummate the transactions and reduce the
consideration to be paid hereunder by the amount in
excess of the amounts received necessary to so repair,
replace or restore such assets to the condition
required herein.
ARTICLE IX
CONDITIONS
SECTION 9.1. Conditions to Each Party's
Obligation to Effect the Merger. Unless waived by the
parties, the respective obligations of each party to
effect the Merger shall be subject to the fulfillment
at or prior to the Closing of the following conditions:
(a) this Agreement and the transactions
contemplated hereby, as appropriate, shall have been
approved and adopted by the requisite vote of the
stockholders of the Company under applicable law;
(b) no preliminary or permanent injunction or
other order or decree by any federal or state court
which prevents the consummation of the Merger shall
have been issued and remain in effect (each party
agreeing to use its commercially reasonable efforts to
have any such injunction, order or decree lifted);
(c) no action shall have been taken, and no
statute, rule or regulation shall have been enacted, by
any state or federal government or governmental agency
in the United States which would prevent the
consummation of the Merger or make the consummation of
the Merger illegal; and
(d) all material governmental waivers, consents,
orders and approvals, domestic or foreign, legally
required for the consummation of the Merger and the
transactions contemplated hereby shall have been
obtained and be in effect at the Effective Time.
SECTION 9.2. Additional Conditions to Obligation
of the Company to Effect the Merger. Unless waived by
the Company, the obligation of the Company to effect
the Merger shall be subject to the fulfillment at or
prior to the Closing of the following additional
conditions:
(a) Parent and Subsidiary shall have performed in
all material respects their agreements contained in
this Agreement required to be performed on or prior to
the Closing Date and the representations and warranties
of Parent and Subsidiary contained in this Agreement
shall be true and correct in all material respects on
and as of the date made and on and as of the Closing
Date, except for those representations and warranties
which address matters only as of a particular date
(which shall remain true and correct as of such date),
as if made at and as of such date, and the Company
shall have received a Certificate of the Chairman of
the Board and Chief Executive Officer and the President
or a Vice President of Parent, in form and substance
reasonably satisfactory to the Company, to that effect;
(b) since the date hereof, there shall have been
no changes that constitute, and no event or events
shall have occurred which have resulted in or
constitute, a Parent Material Adverse Effect, taken as
a whole;
(c) all waivers, consents, orders,
authorizations, and approvals required to be obtained,
and all filings required to be made by Parent and
Subsidiary for the authorization, execution and
delivery of this Agreement and the consummation by
Parent and Subsidiary of the transactions contemplated
hereby shall have been obtained and made by Parent and
Subsidiary, except where the failure to obtain the
waivers, consents, orders, authorizations or approvals
required to be obtained or any filings required to be
made would not have a Parent Material Adverse Effect,
taken as a whole;
(d) Parent shall have delivered to the Company
the following:
(i) The Merger Consideration as specified in
Section 4.1, above;
(ii) A certificate from the Secretary of
Parent, in a form satisfactory to the Company,
setting forth the resolutions of the Board of
Directors of Parent authorizing the execution of
this Agreement and all agreements, documents and
instruments to be executed in connection herewith
and the taking of any and all actions deemed
necessary or advisable to consummate the
transactions contemplated herein;
(iii) The certificate of Parent required to
be delivered pursuant to Section 9.2(a), above;
and
(iv) An opinion from the law firm ▇▇▇▇▇▇▇ &
▇▇▇▇, S.C., independent counsel to Parent and
Subsidiary, dated the Closing Date, covering such
matters as are customary for transactions of this
nature in form and content acceptable to the
Company and ▇▇▇▇▇▇▇ & ▇▇▇▇, S.C.
(e) no governmental authority, foreign or
domestic, shall have promulgated any statute, rule or
regulation which, when taken together with all such
promulgations, would materially impair the value of the
Merger to the Company's shareholders.
In the event that any of the foregoing conditions to
Closing shall not have been satisfied, the Company may
elect to (i) terminate this Agreement without liability
to the Company, or (ii) consummate the transactions
contemplated herein despite such failure. Regardless
of whether the Company elects to terminate this
Agreement or consummate the transactions described
herein, if such failure shall be as a result of a
breach of any provision of this Agreement by Parent,
including, without limitation, Parent's failure to
execute and/or deliver any item described pursuant to
Section 9.2(d), above, the Company (or its
shareholders) may seek appropriate remedies for any and
all damages, costs and expenses incurred by the Company
(or its shareholders) by reason of such breach
including, without limitation, indemnification pursuant
to Article X, below.
SECTION 9.3. Additional Conditions to Obligations
of Parent and Subsidiary to Effect the Merger. Unless
waived by Parent and Subsidiary, the obligations of
Parent and Subsidiary to effect the Merger shall be
subject to the fulfillment at or prior to the Effective
Time of the following additional conditions:
(a) the Company shall have performed in all
material respects its agreements contained in this
Agreement required to be performed on or prior to the
Closing Date and the representations and warranties of
the Company and the Principal Shareholders contained in
this Agreement shall be true and correct in all
material respects on and as of the date made and on and
as of the Closing Date, except for those
representations and warranties which address matters
only as of a particular date (which shall remain true
and correct as of such date), as if made at and as of
such date, and Parent shall have received a Certificate
of the Chairman of the Board and Chief Executive
Officer and the President and Chief Operating Officer
or a Vice President of the Company, in form and
substance reasonably satisfactory to Parent to that
effect;
(b) ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and the Principal
Shareholders shall each have executed and delivered to
Parent a Noncompete Agreement substantially in the form
attached hereto as Exhibit 9.3(b). The Principal
Shareholders shall use their good faith efforts to
arrange for the execution of that agreement by ▇▇.
▇▇▇▇▇▇▇ at the Closing and the Principal Shareholders
covenant and agree to execute and deliver such
agreements to Parent at the Closing;
(c) since the date hereof, there shall have been
no changes that constitute, and no event or events
shall have occurred, which have resulted in or
constitute, a Company Material Adverse Effect, taken as
a whole, other than (x) changes or events involving the
financial performance of the Company or (y) changes or
events involving the financial condition of the Company
resulting solely from changes in the financial
performance of the Company;
(d) all waivers, consents, orders,
authorizations, and approvals required to be obtained,
and all filings required to be made by the Company for
the authorization, execution and delivery of this
Agreement and the consummation by the Company of the
transactions contemplated hereby shall have been
obtained and made by the Company, except where the
failure to obtain the waivers, consents, orders,
authorizations, or approvals required to be obtained or
any filings required to be made would not have a
Company Material Adverse Effect, taken as a whole;
(e) no governmental authority shall have
promulgated any statute, rule or regulation which, when
taken together with all such promulgations, would
materially impair the value to Parent of the Merger;
(f) The Company shall have received from each
former holder of a Debenture issued by the Company
dated January 30, 1987 that was converted into Company
Shares (a "Former Debenture Holder"), a consent and
waiver to the transactions contemplated herein and to
the issuance of 2.5 million shares of Company Common
Stock to the Principal Shareholders in January of 1994,
in form and content acceptable to Parent;
(g) The Company and the Principal Shareholders
shall have delivered to Parent and the Subsidiary at or
prior to the Closing the following:
(i) The certificate of the Company and the
Principal Shareholders required to be delivered
pursuant to Section 9.3(a), above;
(ii) Constructive possession of all pass
books, keys and other data of the Company, or
articles required for access thereto, and the
combinations for all safes, vaults and other
places of safe keeping or storage of the Company;
(iii) Constructive possession of the
complete books and records relating to the
business of the Company;
(iv) A certificate from the Company and the
Principal Shareholders, in a form satisfactory to
Parent, setting forth true, complete and correct
copies of the Certificate of Incorporation and
By-Laws of the Company, and all amendments
thereto;
(v) Parent shall have received an opinion
from the law firm of ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, independent counsel to the Company,
effective as of the Closing Date, covering such
matters as are customary for transactions of this
nature in form and content acceptable to Parent
and ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇;
(vi) Company Certificates evidencing the
Company Shares held by the Principal Shareholders
duly endorsed in blank or accompanied by Stock
Powers duly endorsed in blank;
(vii) A certificate from the Secretary of
the Company, in a form satisfactory to Parent,
setting forth the resolutions of the Board of
Directors of the Company authorizing the execution
of this Agreement and all agreements, documents
and instruments to be executed in connection
herewith and the taking of any and all actions
deemed necessary or advisable to consummate the
transactions contemplated herein;
(viii) A release substantially in the form
of Exhibit 9.3(g)(viii), duly executed by each
Principal Shareholder;
(ix) A Consent and Waiver duly executed by
each of the Former Debenture Holders required to
be delivered pursuant to Section 9.3(f), above;
(x) A release duly executed by ▇▇▇▇ ▇▇▇▇▇▇
regarding the release of any rights he may have as
a former shareholder and/or employee of the
Company; and
(xi) The valid and effective termination as
of the Effective Time of provisions in Contracts
that provide any Person with rights of any nature
with respect to the board of directors of the
Company or of the Company's subsidiary, except as
provided generally by the Certificate of
Incorporation and Bylaws of the Company or its
subsidiary (or equivalent documents) or by
applicable law.
(h) Parent and its accountants, attorneys and
other representatives shall have completed an
appropriate and satisfactory due diligence review of
the books, records and operations of the Company and
shall be satisfied in their sole discretion as to the
results of such due diligence examination and review.
No such review shall be deemed to be a waiver by Parent
of or a release of the Company or the Principal
Shareholders from any representations, warranties,
covenants, conditions, liabilities or obligations set
forth in this Agreement. This condition shall be
deemed waived by Parent and Subsidiary, unless Parent
notifies the Company of any such dissatisfaction on or
prior to September 11, 1998. Nothing herein shall be
construed to limit the due diligence efforts of Parent
which may continue through Closing or effect Parent's
right to terminate this transaction pursuant to any
other condition set forth in this Section;
(i) Prior to the Closing, Parent shall have
received the results of an Environmental Audit and
shall be satisfied in its sole discretion as to the
results of such Environmental Audit; and
(j) The principal terms of the Merger shall have
been duly approved by the affirmative vote of no less
than a majority of the shares of Company Common Stock
entitled to vote with respect thereon. No more than
five percent (5%) of the shares of Company Common Stock
outstanding immediately prior to the Company
Shareholders' Meeting shall have delivered to the
Company notice of intent to exercise dissenters'
rights.
In the event that any of the foregoing conditions to
Closing shall not have been satisfied, Parent and the
Subsidiary may elect to (i) terminate this Agreement
without liability to Parent and Subsidiary, or
(ii) consummate the transactions contemplated herein
despite such failure. Regardless of whether Parent and
the Subsidiary elect to terminate this Agreement or
consummate the transactions described herein, if such
failure shall be as a result of a breach of any
provision of this Agreement by the Company or any of
the Principal Shareholders, including, without
limitation, the failure the Company or any of the
Principal Shareholders to execute and/or deliver any
item described pursuant to Section 9.3(g), above,
Parent and the Subsidiary may seek appropriate remedies
for any and all damages, costs and expenses incurred by
them by reason of such breach, including, without
limitation, indemnification pursuant to Article X,
below.
ARTICLE X
INDEMNITY
SECTION 10.1. Indemnification of Parent and
Subsidiary in the Event of Termination. If this
Agreement is terminated pursuant to Section
11.1(b)(ii), below, the Company agrees to indemnify
Parent and Subsidiary, and to hold them harmless, from
and against any and all damages incurred by Parent or
Subsidiary resulting from the breach of this Agreement
giving rise to such termination.
SECTION 10.2. Indemnification of Parent and
Subsidiary After Effective Time.
(a) From and after the Effective Time, the
Principal Shareholders and the other shareholders of
the Company shall indemnify and hold harmless Parent
and the Surviving Corporation from and against any and
all damages, losses, deficiencies, actions, demands,
judgments, costs and expenses (including attorneys' and
accountants' fees) (collectively, "Losses") of or
against Parent or the Surviving Corporation resulting
from:
(i) any misrepresentation or breach of
warranty on the part of the Company in this
Agreement or in any document or agreement executed
and/or delivered by the Company or any Principal
Shareholder pursuant hereto;
(ii) any breach or nonfulfillment of any
agreement or covenant contained herein or in any
certificate, document or instrument delivered
hereunder on the part of the Company or any
Principal Shareholder; and
(iii) in addition to the indemnification
available to Parent or the Surviving Corporation
under Section 10.2(a)(i), above, for a breach of
related warranties:
(A) any liability or obligation of the
Company for product liability claims for
goods or services manufactured or sold by the
Company on or before the Closing Date, net of
any insurance proceeds received by Parent or
the Company, and only to the extent not
disclosed in the Company Disclosure Letter;
(B) any liability or obligation of the
Company under any Company Plans relating to
events prior to the Closing Date (except to
the extent the amount thereof is set forth as
an accrual on the Closing Date Balance
Sheet);
(C) all Tax liabilities and obligations
of the Company (i) with respect to all
periods ending on or prior to the Closing
Date and (ii) with respect to any period
beginning before the Closing Date and ending
after the Closing Date, but only with respect
to the portion of such period up to and
including the Closing Date. Notwithstanding
the foregoing, Parent shall not be entitled
to indemnification for such Taxes to the
extent of any reserves or accruals therefor
set forth in the Closing Date Balance Sheet;
and
(D) any liability or obligation of the
Company with respect to environmental
matters.
Any Claim for indemnification hereunder (a "Claim")
shall be satisfied first from the Indemnity Retention
pursuant to Section 10.4, below, and the balance,
jointly and severally, from the Principal Shareholders;
provided, however, that neither Parent nor the
Surviving Corporation shall be entitled to pursue a
Claim against the Principal Shareholders under Section
10.2(a)(i) unless the Parent can demonstrate that
either Principal Shareholder had knowledge of the
matter giving rise to the Claim. The Principal
Shareholders shall be deemed to have knowledge of the
matter if said matter should reasonably be expected to
have come to the attention of a Principal Shareholder
if such Principal Shareholder had conducted a
reasonable due diligence review of the Company's
operation and business. No indemnification shall be
payable from the Indemnity Retention unless the
Shareholder Representative shall have received notice
of the Claim on or before the first (1st) anniversary
of the date hereof (the "Retention Period").
(b) If the Company suffers, incurs or otherwise
becomes subject to any Losses as a result of or in
connection with any inaccuracy in or breach of any
representation, warranty, covenant or obligation, then
(without limiting any of the rights of the Surviving
Corporation to indemnification hereunder) Parent shall
also be deemed, by virtue of its ownership of the stock
of the Surviving Corporation, to have incurred Losses
as a result of and in connection with such inaccuracy
or breach, but such Losses shall be limited to the
Losses suffered by the Company.
(c) After the Effective Time, the indemnification
provided in this Section 10.2, and the right to receive
the Indemnity Retention to satisfy such obligation,
shall be the exclusive remedy by Parent and Subsidiary
against the shareholders of the Company (other than the
Principal Shareholders) for any breach by the Company
of any representation, warranty or covenant contained
in this Agreement or any certificate or other writing
delivered by the Company pursuant hereto or in
connection herewith. In addition, in no event shall
the Principal Shareholders' aggregate liability with
respect to all Claims exceed an aggregate amount equal
to the Principal Shareholders' Proportionate Share of
the Merger Consideration. Notwithstanding the
foregoing, nothing contained herein shall limit a
party's rights or remedies with respect to claims
resulting from or arising out of willful misconduct or
fraud.
(d) Claims with respect to Legal Proceedings
shall be handled as follows:
(i) Promptly after receipt by Parent of
notice of the commencement of a Legal Proceeding
for which indemnification is available pursuant to
this Section 10.2, Parent will, if a Claim is to
be made pursuant to this Section 10.2, give notice
to the Shareholder Representative and the
Principal Shareholders of the commencement of such
Legal Proceeding.
(ii) In the event of the assertion or
commencement by any person, firm or entity of any
claim or Legal Proceeding with respect to which
Parent or the Surviving Corporation may be held
harmless, indemnified, compensated or reimbursed
out of the Indemnity Retention pursuant to this
Section 10.2, or indemnified by the Principal
Shareholders hereunder, Parent shall proceed with
the defense of such claim or Legal Proceeding on
its own, provided that:
(A) All reasonable expenses relating to
the defense of such claim or Legal Proceeding
shall be borne and paid first out of the
Indemnity Retention and the balance from the
Principal Shareholders.
(B) Legal counsel must be reasonably
acceptable to the Shareholder Representative
and the Principal Shareholders in order to be
reimbursed hereunder. The parties agree that
▇▇▇▇▇▇▇ & ▇▇▇▇, S.C. shall be deemed
reasonably acceptable for purposes of this
Section 10.2.
(C) Parent shall keep the the
Shareholder Representative and the Principal
Shareholders fully informed as to the status
of any such claim or Legal Proceeding,
including but not limited to any settlement
offer, and Shareholder Representative and the
Principal Shareholders shall have the right
to participate in, at their own expense (such
expense not to be reimbursed from the
Indemnity Retention), the defense and
settlement of any such claim or Legal
Proceeding, any and all negotiations with
respect thereto and the assertion of any
claim against an insurer with respect
thereto.
(iii) The Shareholder Representative and the
Principal Shareholders shall make available to
Parent any documents and materials in his
possession and control that may be necessary to
the defense of any claim or Legal Proceeding.
(iv) Notwithstanding anything to the
contrary in this Section 10.2, Parent shall not
negotiate, settle, adjust or compromise any claim
or action without providing the Shareholder
Representative and Principal Shareholders the
right to participate fully pursuant to Paragraph
10.2(d)(ii)(C). In addititon, Parent shall not
settle or compromise any claims or action without
the prior express written consent of the
Shareholder Representative and the Principal
Shareholders, which consent shall not be
unreasonably withheld, except that such consent
may be withheld for any reason or no reason, if
such settlement, adjustment or compromise involves
the issuance of injunctive or other forms of non-
monetary relief binding upon any Participating
Shareholder or a plea of guilty or nolo contendre
on the part of any Participating Shareholder in
any criminal or quasi-criminal proceeding or which
involves any admission or liability,
responsibility or culpability or guilt on the part
of any Participating Shareholder or which has any
collateral estoppel effect on any Participating
Shareholder.
SECTION 10.3. Indemnification of the Company and
the Shareholders of the Company. Parent agrees to
indemnify the Company and the shareholders of the
Company and to hold each of them harmless from and
against any and all Losses of or against them resulting
from (a) any misrepresentation or breach of warranty on
the part of Parent in this Agreement or in any document
or agreement executed and/or delivered by Parent
pursuant hereto; and (b) any nonfulfillment of any
agreement or covenant contained herein or in any
certificate, document or instrument delivered hereunder
on the part of Parent.
SECTION 10.4. Set Off Against Indemnity
Retention. From and after the Closing Date and prior
to the expiration of the Retention Period, in the event
Parent and/or the Surviving Corporation has a claim for
indemnification against the Principal Shareholders and
the other shareholders of the Company, Parent and/or
the Surviving Corporation shall be entitled to set off
the amount of such claim against the Indemnity
Retention. In no event shall the Participating
Shareholders (other than the Principal Shareholders) or
the Shareholder Representative have personal liability
for a claim for indemnification hereunder and Parent
and the Surviving Corporation shall have recourse
solely to the Indemnity Retention for the satisfaction
of indemnification obligations against the
Participating Shareholder (other than the Principal
Shareholders) hereunder. In order to facilitate
settlement discussions, prior to making any set off
pursuant ot this Section 10.4, Parent and/or the
Surviving Corporation shall first give the Shareholder
Representative a written notice of its intention to
make a set off (the "Set Off Notice"), which notice
shall specify the reasons for such set off and the
amount thereof. Such set off shall be final and
binding on the Shareholder Representative and the
Participating Sharesholders unless, within thirty (30)
days after the date of the Set Off Notice, the
Shareholder Representative shall have given written
notice of objection ("Set Off Objection Notice") to
Parent and/or the Surviving Corporation. The Set Off
Objection Notice shall state in reasonable detail the
nature of the Shareholder Representative's
objection(s). The parties shall thereafter negotiate
in good faith to resolve such objections for a period
of thirty (30) days. In the event the parties are
unable to reach agreement with respect to the proposed
set off during such thirty (30) day period, the dispute
shall be submitted to, and settled by, arbitration in
accordance with the rules of the American Arbitration
Association. The dispute shall be submitted to one
arbitrator agreed to by the Shareholder Representative
and Parent or, if the Shareholder's Representative and
Parent cannot agree on one arbitrator, by three
arbitrators selected in accordance with set rules and
shall be heard in Tucson, Arizona. All costs, fees and
expenses of any such proceedings shall be awarded to
the prevailing party as determined by the
arbitrator(s).
SECTION 10.5. Setoff. The Company and the
Principal Shareholders acknowledge and agree that
Parent and the Surviving Corporation shall be entitled,
in addition to any other remedies which may be
available to it, to setoff against any amounts due and
owing to either Principal Shareholder the amount of any
claim by Parent or the Surviving Corporation for which
Parent or the Surviving Corporation seeks
indemnification under Section 10.1 or 10.2, above.
Parent will only be entitled to indemnification from
the Principal Shareholders after the Indemnity
Retention shall have been exhausted or shall otherwise
no longer be available; provided, however, that such
limitation shall not apply to any claim by Parent or
the Surviving Corporation for indemnification from a
Principal Shareholder with respect to any breach of the
warranties, representations and covenants of the
Principal Shareholder set forth in the Shareholder
Agreement or in any other agreement (other than this
Agreement), instrument or document executed by the
Principal Shareholder.
SECTION 10.6. Limitations. Parent and the
Surviving Corporation shall only be entitled to
indemnification pursuant to Section 10.2, above, to the
extent the aggregate amount of their Losses exceeds One
Hundred Thousand Dollars ($100,000).
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
SECTION 11.1. Termination. This Agreement may be
terminated by the mutual consent of the parties, or at
any time prior to the Closing Date, whether before or
after approval of the matters presented in connection
with the Merger by the stockholders of the Company, as
follows:
(a) The Company shall have the right to terminate
this Agreement;
(i) if the Merger is not completed by
December 31, 1998, other than on account of delay
or default on the part of the Company or any
Principal Shareholder;
(ii) if the Merger is enjoined by a final,
nonappealable order of a U.S. court having
jurisdiction not entered at the request or with
the support of the Company or any of its
affiliates or associates;
(iii) if Parent (A) has breached any
representation, warranty or covenant in any
material respect, and (B) does not cure such
default in all material respects within 30 days
after written notice of such default is given to
Parent by the Company.
(b) Parent shall have the right to terminate this
Agreement;
(i) if the Merger is not completed by
December 31, 1998, other than on account of delay
or default on the part of Parent;
(ii) if the Merger is enjoined by a final,
nonappealable order of a U.S. court having
jurisdiction not entered at the request or with
the support of Parent or any of its affiliates or
associates; or
(iii) if the Company (A) has breached any
representation, warranty or covenant in any
material respect, and (B) does not cure such
default in all material respects within 30 days
after written notice of such default is given to
the Company by Parent.
SECTION 11.2. Effect of Termination. In the event
of termination of this Agreement by either Parent or
the Company as provided in Section 11.1, this Agreement
shall forthwith become void and there shall be no
further obligation on the part of the Company, Parent,
Subsidiary, or their respective officers or directors
(except as set forth in this Section 11.2 and in
Sections 8.1, 8.4 and 8.5, all of which shall survive
the termination); provided, however, that nothing in
this Section 11.2 shall relieve any party from
liability for any breach of this Agreement.
SECTION 11.3. Amendment. This Agreement may not
be amended except by action taken by the parties'
respective Boards of Directors or duly authorized
committees thereof and then only by an instrument in
writing signed on behalf of each of the parties hereto
and in compliance with applicable law.
SECTION 11.4. Waiver. At any time prior to the
Effective Time, any party 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
thereto, and (c) waive compliance with any of the
agreements or conditions contained herein. Any such
extension or waiver shall not be deemed to be
continuing or to apply to any future obligation or
requirement of any part hereto provided herein. Any
agreement on the part of a party hereto to any such
extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE XII
GENERAL PROVISIONS
SECTION 12.1. Shareholder Representative.
(a) In the event the Merger is approved,
effective upon such vote, and without further act of
any shareholder, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall be appointed as
agent and attorney-in-fact (the "Shareholder
Representative") for each Participating Shareholder of
the Company, for and on behalf of the Participating
Shareholders, to give and receive notices and
communications, to compromise, settle or defend any
Claims, to agree to, negotiate, enter into settlements
and comprises of, and commence litigation and comply
with orders of courts with respect to such Claims, and
to take all actions necessary or appropriate in the
judgment of the Shareholder Representative for the
accomplishment of the foregoing. A decision, act,
consent or instruction of the Shareholder
Representative shall constitute a decision of all of
the Participating Shareholders and shall be final,
binding and conclusive upon each of such shareholders
and the Escrow Agent and Parent may rely upon any such
decision, act, consent or instruction of the
Shareholder Representative as being the decision, act,
consent or instruction of each and every such
Participating Shareholder.
(b) The Shareholder Representative shall be
reimbursed out of the Indemnity Retention for its
reasonable out-of-pocket expenses incurred in
connection with serving as the Shareholder
Representative under this Agreement, not including,
however, those expenses (whether legal, out-of-pocket
or other) arising from resolution of rights with
respect to Claims. Each party making a Claim and the
Shareholder Representative shall be responsible for its
own expenses (whether legal, out-of-pocket or other)
arising from the resolution of rights with respect to
Claims. Notwithstanding the foregoing, the Shareholder
Representative may, immediately prior to distribution
to the Paying Agent of the Unused Indemnity Retention
request, reimbursement for such expenses from the
Unused Indemnity Retention to the extent such funds are
available. The Shareholder Representative may also
request reimbursement for any remaining expenses from
the Balance, if any, immediately prior to the
distribution of the Balance to the Paying Agent.
(c) The Shareholder Representative shall not be
held liable by the Participating Shareholders for
actions taken in its capacity as the Shareholder
Representative pursuant to this Agreement and the
Escrow Agreement, except in the case of the Shareholder
Representative's willful misfeasance or gross
negligence. The Shareholder Representative shall not
be required to incur any expenses in performing its
duties and exercising its rights under this Agreement
if the Shareholder Representative reasonably believes
that such expenses will not be reimbursed from the
Unused Indemnity Retention.
SECTION 12.2. Company Disclosure Letter. Any
information which is disclosed in the Company
Disclosure Letter, or any other Schedule or Exhibit
hereto shall be deemed to be disclosed for all Sections
of this Agreement to which such disclosure is relevant
and readily apparent. All capitalized terms used in
the Company Disclosure Letter and not otherwise defined
therein shall have the same meanings as are ascribed to
such terms in this Agreement. The Company Disclosure
Letter shall not vary, change or alter the literal
meaning of the representations and warranties of a
party contained in this Agreement, other than creating
specific, limited exceptions thereto which are directly
responsive to the language of the applicable warranties
and representations contained in this Agreement. The
Company shall be entitled to amend the Company
Disclosure Letter prior to Closing; provided, that,
Parent shall be afforded a reasonable opportunity to
review and approve any such amendments in advance of
Closing.
SECTION 12.3. Notices. All notices and other
communications hereunder shall be in writing and shall
be deemed given if delivered personally, mailed by
registered or certified mail (return receipt requested)
or sent via facsimile to the parties at the following
addresses (or at such other address for a party as
shall be specified by like notice):
(a) If to Parent or Subsidiary to:
Ventana Medical Systems, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇, Chief
Financial Officer
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇, S.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Esquire
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Company or a Principal Shareholder,
to:
Biotechnology Tools, Inc.
d/b/a RMC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief
Executive Officer
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
Suite 8000 Sears Tower
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile Number: (▇▇▇)-▇▇▇-▇▇▇▇
SECTION 12.4. Interpretation. The headings
contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or
interpretation of this Agreement. In this Agreement,
unless a contrary intention appears (i) the words
"herein," "hereof" and "hereunder" and other words of
similar impact refer to this Agreement as a whole and
not to any particular Article, Section or other
subdivision, and (ii) reference to any Article or
Section means such Article or Section hereof. No
provision of this Agreement shall be interpreted or
construed against any party hereto solely because such
party or its legal representative drafted such
provision.
SECTION 12.5. Miscellaneous. This Agreement
(including the documents and instruments referred to
herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and
understandings, both written and oral, among the
parties, or any of them, with respect to the subject
matter hereof, (b) is not intended to confer upon any
other person any rights or remedies hereunder except
for rights of indemnified parties under Section Article
X, and (c) shall not be assigned by operation of law or
otherwise. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND
EFFECT, BY THE LAWS OF THE STATE OF DELAWARE APPLICABLE
TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN
SUCH STATE.
SECTION 12.6. Counterparts. This Agreement may be
executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which
shall constitute one and the same agreement. Each of
the parties agrees to accept and be bound by facsimile
signatures hereto.
SECTION 12.7. Parties In Interest. This Agreement
shall be binding upon and inure solely to the benefit
of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any
other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
SECTION 12.8. Exhibits and Schedules. All
Exhibits and Schedules referred to in this Agreement
shall be attached hereto and are incorporated by
reference herein.
SECTION 12.9. Severability. If any term or other
provision of this Agreement in invalid, illegal or
incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of
this Agreement shall nevertheless remain in full force
and effect so long as the economic or legal substance
of the transactions contemplated hereby is not affected
in any manner adverse to any party. Upon such
determination that any term or other provision is
invalid, illegal or incapable of being enforced,
parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby
are fulfilled to the extent possible.
IN WITNESS WHEREOF, Parent, Subsidiary, the
Company and the Principal Shareholders have caused this
Agreement to be executed by their respective officers
thereunto duly authorized as of the date first written
above.
PARENT:
VENTANA MEDICAL SYSTEMS,
INC.
By:/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------
SUBSIDIARY:
VENTANA ACQUISITION
CORPORATION
By:/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------
COMPANY:
BIOTECHNOLOGY TOOLS, INC.
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Chief Executive Officer
PRINCIPAL SHAREHOLDERS:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇