EXHIBIT 2.1
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ASSET PURCHASE AGREEMENT
between
Pacific Aerospace & Electronics, Inc.
Skagit Engineering & Manufacturing, Inc.
NOVA-TECH Engineering, Inc.
and
the Shareholders of NOVA-TECH Engineering, Inc.
Dated as of March 22, 2000
TABLE OF CONTENTS
Page
ARTICLE 1. ASSET PURCHASE................................................................. 1
1.1 Certain Definitions............................................................ 1
1.1.1 Class A Common......................................................... 1
1.1.2 Class B Common......................................................... 1
1.1.3 Code................................................................... 2
1.1.4 Company Common Stock................................................... 2
1.1.5 Consideration.......................................................... 2
1.1.6 Current Balance Sheet.................................................. 2
1.1.7 ESOP Debt.............................................................. 2
1.1.8 ESOP Shares............................................................ 2
1.1.9 Excise Tax............................................................. 2
1.1.10 Knowledge............................................................. 2
1.1.11 Material Adverse Change............................................... 2
1.1.12 Material Adverse Effect............................................... 2
1.1.13 ML Debt............................................................... 2
1.1.14 Operating Agreement................................................... 2
1.2 Asset Purchase................................................................. 3
1.3 Excluded Assets................................................................ 4
1.4 Conveyance of Assets........................................................... 4
1.5 Transfer of Liabilities........................................................ 4
1.6 Excluded Liabilities........................................................... 4
1.7 Purchase Price................................................................. 5
1.8 Allocation of Purchase Price................................................... 5
1.9 Closing........................................................................ 5
1.10 Subsequent Actions............................................................. 5
ARTICLE 2. REPRESENTATIONS AND WARRANTIES................................................. 6
2.1 Representations and Warranties to PA&E and Buyer............................... 6
2.1.1 Incorporation; Articles and Bylaws..................................... 6
2.1.2 Capitalization and Outstanding Capital Stock........................... 6
2.1.3 No Subsidiaries........................................................ 7
2.1.4 Authority; Noncontravention............................................ 7
2.1.5 Financial Matters...................................................... 7
2.1.6 Litigation............................................................. 8
2.1.7 Absence of Changes..................................................... 8
2.1.8 Taxes.................................................................. 10
2.1.9 Compliance with Laws................................................... 11
2.1.10 Contracts.............................................................. 11
2.1.11 Intellectual Property.................................................. 12
2.1.12 Insurance.............................................................. 12
2.1.13 Environmental Matters.................................................. 13
2.1.14 Labor Matters.......................................................... 14
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2.1.15 Employee Benefit Matters.............................................. 14
2.1.16 Other Employee Matters................................................ 16
2.1.17 Property.............................................................. 16
2.1.18 Permits and Licenses.................................................. 17
2.1.19 Certain Interests..................................................... 17
2.1.20 Certain Payments...................................................... 17
2.1.21 Consents and Approvals................................................ 18
2.1.22 Records............................................................... 18
2.1.23 Warranties............................................................ 18
2.1.24 Brokers and Finders................................................... 18
2.1.25 Restrictive Covenants................................................. 18
2.1.26 Reliance.............................................................. 18
2.2 Representations and Warranties of PA&E and Buyer............................... 18
2.2.1 Incorporation; Articles and Bylaws..................................... 18
2.2.2 Authority; Authorization............................................... 19
2.2.3 Noncontravention....................................................... 19
2.2.4 Litigation............................................................. 19
2.2.5 Consents and Approvals................................................. 19
2.2.6 Brokers and Finders.................................................... 19
2.3 Representations and Warranties of the ESOP Trustee............................. 20
2.3.1 Authority.............................................................. 20
2.3.2 Noncontravention....................................................... 20
ARTICLE 3. PRE-CLOSING CONDUCT AND AGREEMENTS............................................. 20
3.1 Conduct of the Parties......................................................... 20
3.2 Access to Properties, Books and Records........................................ 21
3.2.1 PA&E................................................................... 21
3.2.2 The Company and the Shareholders....................................... 21
3.3 Confidentiality................................................................ 21
3.4 Conduct of the Company's Business.............................................. 21
3.4.1 Properties and Assets.................................................. 21
3.4.2 Compensation........................................................... 22
3.4.3 Indebtedness........................................................... 22
3.4.4 Leases................................................................. 22
3.4.5 Payments............................................................... 22
3.4.6 Contracts and Agreements............................................... 23
3.4.7 Shipments.............................................................. 23
3.4.8 Insurance.............................................................. 23
3.4.9 Governing Documents.................................................... 23
3.4.10 Capital Stock.......................................................... 23
3.5 Public Announcements........................................................... 23
3.6 Notice of Breach............................................................... 23
3.6.1 By the Company and the Shareholders.................................... 23
3.6.2 By PA&E................................................................ 24
3.7 Company Shareholder Approval........................................... 24
3.8 Consents............................................................... 24
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3.9 Payment of ML Debt............................................................ 24
3.10 Further Assurances............................................................ 24
3.11 No Solicitation............................................................... 24
ARTICLE 4. CONDITIONS TO CLOSING......................................................... 25
4.1 Conditions to the Obligations of PA&E and Buyer............................... 25
4.1.1 Corporate Actions..................................................... 25
4.1.2 Representations and Warranties........................................ 25
4.1.3 Performance of Obligations............................................ 25
4.1.4 No Material Adverse Change............................................ 25
4.1.5 Approvals; Consents................................................... 25
4.1.6 Certificate........................................................... 25
4.1.7 Audit................................................................. 26
4.1.8 Environmental Assessment.............................................. 26
4.1.9 Capital Stock......................................................... 26
4.1.10 Employment Agreements................................................ 26
4.1.11 Lease Amendments..................................................... 26
4.1.12 Shareholders' Accounts............................................... 26
4.1.13 Further Documents.................................................... 26
4.2 Conditions to the Obligations of the Company and the Shareholders............. 26
4.2.1 Corporate Actions..................................................... 26
4.2.2 Representations and Warranties........................................ 27
4.2.3 Performance of Obligations............................................ 27
4.2.4 Certificate........................................................... 27
4.2.5 Employment Agreements................................................. 27
4.2.6 Lease Amendments...................................................... 27
4.2.7 Shareholder Approval.................................................. 27
4.2.8 Further Documents..................................................... 27
ARTICLE 5. TERMINATION................................................................... 27
5.1 Right to Terminate............................................................ 27
5.1.1 Mutual Consent........................................................ 27
5.1.2 Delay................................................................. 27
5.1.3 Breach by PA&E or Buyer............................................... 28
5.1.4 Breach by the Company or the Individual Shareholders.................. 28
5.1.5 Failure of the Company Shareholders to Approve........................ 28
5.2 Certain Obligations to Cease.................................................. 28
ARTICLE 6. MISCELLANEOUS PROVISIONS...................................................... 28
6.1 Nonsurvival of Representations and Warranties................................. 28
6.2 Release from Guaranties....................................................... 28
6.3 Exhibits; Schedules........................................................... 28
6.4 Notices....................................................................... 28
6.5 No Assignment................................................................. 29
6.6 Titles and Captions........................................................... 29
6.7 Waiver........................................................................ 29
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6.8 Amendment............................................................. 30
6.9 Severability.......................................................... 30
6.10 Rights and Remedies................................................... 30
6.11 Attorney Fees......................................................... 30
6.12 Governing Law......................................................... 30
6.13 Counterparts.......................................................... 30
6.14 Entire Agreement; No Other Beneficiaries.............................. 30
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EXHIBITS:
Exhibit A - ▇▇▇▇ of Sale
Exhibit B - Assignment and Assumption Agreement
Exhibit C - Employment Agreements
SCHEDULES:
Schedule 1.3 Excluded Assets
Schedule 1.4 Permitted Liens
Schedule 2.1.2 Capitalization
Schedule 2.1.3 Interests in Other Entities
Schedule 2.1.5(b) Absence of Undisclosed Liabilities
Schedule 2.1.5(c) Accounts Receivable
Schedule 2.1.6 Litigation
Schedule 2.1.7 Absence of Changes
Schedule 2.1.8 Taxes
Schedule 2.1.9 Compliance With Laws
Schedule 2.1.10 Contracts
Schedule 2.1.11 Intellectual Property
Schedule 2.1.12 Insurance Policies
Schedule 2.1.13 Environmental Matters
Schedule 2.1.14 Labor Matters
Schedule 2.1.15 Employee Benefit Matters
Schedule 2.1.16 Employee Matters
Schedule 2.1.17(a) Real Property
Schedule 2.1.17(c) Tangible Personal Property
Schedule 2.1.18 Permits and Licenses
Schedule 2.1.19 Certain Interests
Schedule 2.1.21 Consents and Approvals (Company)
Schedule 2.1.23 Warranties
Schedule 2.2.5 Consents and Approvals (PA&E)
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of March 22, 2000, by and among Pacific Aerospace & Electronics, Inc., a
Washington corporation ("PA&E"), Skagit Engineering & Manufacturing, Inc., a
Washington corporation ("Buyer"), NOVA-TECH Engineering, Inc., a Washington
corporation (the "Company"), ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇ (together, the
"Individual Shareholders") and NOVA-TECH Engineering, Inc. Employee Stock
Ownership Plan and Trust (the "ESOP") (the Individual Shareholders and the ESOP
are collectively referred to herein as the "Shareholders").
RECITALS
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A. The Company is engaged in the business of professional engineering for
the design and manufacturing of highly specialized manufacturing equipment,
primarily for the aerospace industry (the "Business").
B. The Individual Shareholders and the ESOP constitute all of the
shareholders of the Company.
C. Buyer is a wholly-owned subsidiary of PA&E.
D. Buyer is willing to purchase, and the Company is willing to sell,
substantially all of the assets of the Company on the terms and conditions set
forth in this Agreement.
AGREEMENT
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For valuable consideration, the receipt and sufficiency of which the
parties acknowledge, the parties agree as follows:
ARTICLE 1.
ASSET PURCHASE
1.1 Certain Definitions. The following terms shall have the respective
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meanings set forth in this Section.
1.1.1 Class A Common. The term "Class A Common" shall mean the
shares of Class A Common Stock, $.01 par value per share, of the Company, all of
which are owned beneficially and of record by the Individual Shareholders.
1.1.2 Class B Common. The term "Class B Common" shall mean the
shares of Class B Super Common Stock, $.01 par value per share, of the Company.
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1.1.3 Code. The term "Code" shall mean the Internal Revenue Code
of 1986, as amended.
1.1.4 Company Common Stock. The term "Company Common Stock" shall
mean all shares of Class A Common and Class B Common.
1.1.5 Consideration. The term "Consideration" shall mean the amount
payable by PA&E pursuant to Section 1.7.
1.1.6 Current Balance Sheet. The term "Current Balance Sheet" shall
have the meaning set forth in Section 2.1.5.
1.1.7 ESOP Debt. The term "ESOP Debt" shall mean all indebtedness
owed by the ESOP to the Company as of any relevant date.
1.1.8 ESOP Shares. The term "ESOP Shares" shall mean the
outstanding shares of Class B Common, all of which are owned of record by the
ESOP.
1.1.9 Excise Tax. The term "Excise Tax" shall mean any excise tax
that may become payable by the Company to the Internal Revenue Service upon the
repayment or other satisfaction of the ESOP Debt.
1.1.10 Knowledge. The term "knowledge," whether or not such term is
capitalized, when used in reference to an Individual Shareholder or the ESOP
Trustee shall mean such person's actual awareness of a fact after reasonable
inquiry. Reasonable inquiry by the Individual Shareholders shall be deemed to
mean that the person has made inquiry of ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ (or such other persons who may replace them in the event
they leave the Company between the date of this Agreement and the Closing Date)
and nothing has come to the person's attention in the course of such inquiry or
otherwise that would cause such person to believe that a representation might
not be true.
1.1.11 Material Adverse Change. The term "Material Adverse Change"
shall mean a material adverse change in the business, results of operations,
financial condition, assets or prospects of the Company.
1.1.12 Material Adverse Effect. The term "Material Adverse Effect"
shall mean a material adverse effect upon the business, results of operations,
financial condition, assets or prospects of the Company.
1.1.13 ML Debt. The term "ML Debt" shall mean all indebtedness owed
by the Company to ▇▇▇▇▇▇▇ ▇▇▇▇▇ Business Financial Services, Inc., or its
affiliates (collectively, "▇▇▇▇▇▇▇ ▇▇▇▇▇"), as of any relevant date.
1.1.14 Operating Agreement. The term "Operating Agreement" shall
mean the Operating Agreement, dated as of April 23, 1999, between PA&E and the
Company, including any amendments thereto.
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1.2 Asset Purchase. At the Closing (as defined in Section 1.9), the
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Company will sell, transfer, assign, convey and deliver to Buyer, and Buyer will
purchase from the Company, all of the Company's assets, properties and rights
(except the Excluded Assets, as defined below), whether real or personal,
tangible or intangible, and wherever located (the "Assets"), which Assets
include without limitation:
1.2.1 cash, cash equivalents, and securities;
1.2.2 interests in real property, including but not limited to (i)
all leasehold interests and interests as a lessor or a lessee, (ii) all
improvements, easements, and appurtenances to or located on real property, and
(iii) all contractual and other rights pertaining to real property, such as road
and access rights, water rights, water delivery contracts, condemnation awards,
and insurance proceeds;
1.2.3 tangible personal property, including but not limited to
manufacturing and office equipment, vehicles, inventory (whether raw materials,
work in process, or finished goods), furniture, fixtures, drawings, designs and
blueprints, materials and supplies, and spare and replacement parts;
1.2.4 contracts, agreements, commitments, leases, licenses,
purchase orders, sales orders, insurance policies and documents;
1.2.5 governmental licenses, permits, approvals, authorizations,
consents, franchises, tariffs, orders and other registrations required for the
conduct of the Business, to the extent that they are assignable or otherwise
transferable;
1.2.6 patents, copyrights, trademarks, service marks and trade
names, including any and all rights the Company has to use the names "NOVA-
TECH", "NOVA-TECH Engineering" and all derivatives thereof, with the Company and
the Shareholders not retaining any right to use, and hereby agreeing not to use,
any such names or derivatives at any time after Closing to conduct any business;
all registrations therefor; all applications pending or allowed therefor; and
all other proprietary rights and intangible property, such as trade secrets,
technology, software, operating systems, customer and supplier lists, know-how,
formulae, slogans, processes and operating rights;
1.2.7 accounts receivable that are reflected in the most recent of
the Company Financial Statements, as defined in Section 2.1.5, or that have been
billed since the date of the most recent of the Company Financial Statements;
1.2.8 prepaid and deferred items, including but not limited to
prepaid rentals, insurance, taxes and unbilled charges and deposits, to the
extent they are assignable or otherwise transferable;
1.2.9 operating data and records, including but not limited to,
financial and accounting records, correspondence, budgets, and engineering and
manufacturing records ;
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1.2.10 goodwill; and
1.2.11 telephone lines and numbers.
The foregoing transaction is referred to herein as the "Asset Purchase."
1.3 Excluded Assets. The Assets shall not include: (i) the Company's
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corporate seal, minute books, charter documents and corporate stock record
books; (ii) the Company's right to receive any payments on the ESOP Debt; (iii)
any stock owned by the Company in SDS Technologies Corporation, a Washington
corporation; or (iv) the art works and the two motor vehicles described on
Schedule 1.3 (collectively, the "Excluded Assets").
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1.4 Conveyance of Assets. Subject to the terms and conditions of this
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Agreement, the sale, assignment, transfer and delivery of the Assets shall be
effected by the Company's execution and delivery to Buyer at Closing of a
Warranty ▇▇▇▇ of Sale in substantially the form attached as Exhibit A (the "▇▇▇▇
of Sale") and all titles to all vehicles included in the Assets, together with
any other instruments of transfer requested by Buyer, in form and substance
sufficient to vest in Buyer all right, title and interest in and to the Assets,
free and clear of any liens, claims or encumbrances of any kind, except as set
forth on Schedule 1.4 (the "Permitted Liens").
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1.5 Transfer of Liabilities. On the Closing Date, the Company will assign
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to Buyer, and (A) Buyer will assume and agree to pay in the ordinary course of
its business, (i) the liabilities of the Company set forth on the Current
Balance Sheet, other than any Excluded Liabilities (as defined below), and (ii)
the liabilities of the same type as those set forth on the Current Balance Sheet
that were incurred by the Company in the ordinary course of business after the
date of the Current Balance Sheet, other than any Excluded Liabilities
(collectively, the "Liabilities"), and (B) Buyer will agree to assume the
obligations of the Company under all contracts and agreements to which the
Company is a party, other than any such obligations that constitute Excluded
Liabilities (collectively, the "Obligations"). The Liabilities include
reasonable attorneys fees and costs of the Company for the Asset Purchase, to
the extent unpaid. Such assignment and assumption will be made pursuant to the
terms of an Assignment and Assumption Agreement in substantially the form
attached as Exhibit B (the "Assumption Agreement").
1.6 Excluded Liabilities. Except for the payment or assumption of the
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Liabilities and the performance of the Obligations as specifically set forth in
the Assumption Agreement, Buyer will not be obligated to pay or assume or
perform, and neither Buyer nor PA&E shall be liable for, any liabilities or
obligations of the Company, the Business or the Shareholders, known or unknown,
contingent or absolute, accrued or otherwise (the "Excluded Liabilities"). The
Excluded Liabilities include, but are not limited to, any liabilities or
obligations: (a) for the ML Debt; (b) for any Excise Tax; (c) relating in any
way to the ESOP, any of its present or former trustees, or any ESOP
participants, including without limitation any liabilities or obligations, now
existing or at any time hereafter arising, to make any contributions to the ESOP
or to purchase or repurchase any stock or other interest of any ESOP
participant; (d) of the Company to pay any dividends on or make any other
distributions with respect to any of the Company Common Stock; (e) for any Tax,
as defined in Section 2.1.8; (f) to any of the Shareholders, or any directors or
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officers of the Company; (g) to Seller's employees, except wages not yet payable
as of the Closing Date and any accrued vacation or accrued sick pay for such
employees; (h) relating to any issuances of securities; (i) incurred in
connection with any dissolution of the Company; (j) under any "Environmental
Law," as defined in Section 2.1.13; (k) that are undisclosed liabilities, except
the liabilities described in subsection (ii) of Section 1.5; (l) any payments
for obligations that constitute or relate to a violation of law or regulation;
(m) for any defaults of the Company for any payment or performance due before
the Closing; (n) for any Contract required to be disclosed on Schedule 2.1.10
and not so disclosed; or (o) that is associated with any Excluded Asset.
1.7 Purchase Price. At Closing PA&E shall pay the Company $50,000.00 by
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check in exchange for the Assets (the "Consideration").
1.8 Allocation of Purchase Price. The parties agree, for purposes of IRS
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Form 8594, to allocate the fair market value of the Assets among the classes of
assets set forth in Treasury Regulation Section 1.1060-IT(d), as amended. The
allocation prepared for Form 8594 purposes will be binding on Buyer and the
Company for all federal, state and local tax purposes. Buyer and the Company
agree to attach the Form 8594, with such allocation as mutually agreed, to their
applicable federal income tax returns.
1.9 Closing. The closing of this transaction (the "Closing") shall take
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place at the offices of Stoel Rives LLP, 3600 One Union Square, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ on a date to be mutually agreed by PA&E,
Buyer, the Company and the Shareholders that is promptly after the meeting or
written consent of the Shareholders to approve the Asset Purchase, and upon
satisfaction or waiver of each other condition to the Closing set forth in this
Agreement, or on such other date or at such other place and time as PA&E, Buyer,
the Company and the Shareholders may agree (the "Closing Date").
1.10 Subsequent Actions. If, at any time after the Closing, PA&E or Buyer
------------------
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Buyer its right, title or interest
in, to, or under any Assets or any of the rights of the Company or otherwise to
carry out this Agreement, the Company agrees, and the Shareholders agree to
cause the Company or its successors, to execute and deliver, all such deeds,
bills of sale, assignments and assurances, and to take and do, in the name and
on behalf of the Company, or otherwise, all such other actions and things as may
be necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under such Assets and rights in Buyer or otherwise to
carry out the purposes of this Agreement. If, at any time after the Closing,
the Company shall consider or be advised that any actions or things are
necessary or desirable to carry out this Agreement, Buyer agrees to take and do
all such actions and things as may be necessary or desirable to carry out the
purposes of this Agreement.
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ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties to PA&E and Buyer. The Company and the
------------------------------------------------
Individual Shareholders jointly and severally represent and warrant to PA&E and
Buyer that:
2.1.1 Incorporation; Articles and Bylaws. The Company is a
corporation duly organized and validly existing under the laws of the State of
Washington. The Company has all necessary corporate power and authority to own,
operate, and lease its assets and properties and to carry on its business as it
is now being conducted and as proposed to be conducted. The Company is
qualified and in good standing as a foreign corporation in each jurisdiction
where its properties (whether owned, leased or operated) are located or its
business is conducted and in which the failure to so qualify would have a
Material Adverse Effect. The Company has delivered to PA&E complete and
accurate copies of the Company's Articles of Incorporation and Bylaws, each as
amended to the date of this Agreement.
2.1.2 Capitalization and Outstanding Capital Stock. The Company has
authorized capital stock consisting of ten million (10,000,000) shares of Class
A Common, and four million (4,000,000) shares of Class B Common. On the date of
this Agreement, 2,850,000 shares of the Class A Common are outstanding, and
1,520,000 shares of the Class B Common are outstanding. All of the outstanding
shares of capital stock of the Company have been duly authorized and are validly
issued, fully paid and nonassessable. No shares of capital stock of the Company
have been issued in violation of or are subject to any preemptive or similar
rights granted to any former or existing shareholder pursuant to law, the
Company's Articles of Incorporation, Bylaws, contract, federal or state
securities laws, or otherwise. Other than pursuant to this Agreement or as
described in Schedule 2.1.2, (a) there is no subscription, option, warrant,
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call, right, agreement or commitment granted or issued by or binding upon the
Company or any shareholder of the Company or any participant in the ESOP (i)
relating to the issuance, sale, delivery, voting, transfer, ownership or other
rights to or affecting any shares of the Company's capital stock or any other
securities convertible into, exchangeable for, or evidencing the right to
subscribe for shares of the Company's capital stock, or (ii) relating to the
payment of amounts measured by changes in the value or price of any capital
stock of the Company, and (b) the Company has no obligation of any kind to issue
any additional securities. Except as described on Schedule 2.1.2, the Company
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has no outstanding obligations to repurchase, redeem or otherwise acquire any of
its outstanding shares of capital stock. Schedule 2.1.2 sets forth (i) a
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complete and accurate list of all of the shareholders of the Company as of the
date hereof, indicating the number of shares of the Company Common Stock held by
each, and such shareholders shall continue to be all of the shareholders of the
Company until the Closing Date, and (ii) a complete and accurate list of all
participants in the ESOP, and a complete and accurate summary of the account
balance of each participant in the ESOP, including the number of shares of Class
B Common allocable to each such account, such list and summary required by this
subsection (ii) to be as of the most recent date such information was prepared
by the ESOP. Except as set forth on Schedule 2.1.2, all of the outstanding
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shares of capital stock of the Company are owned beneficially and of record as
set forth on the Schedule 2.1.2, free and clear
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of all pledges, security interests, liens, charges, encumbrances, equities,
claims, options or limitations.
2.1.3 No Subsidiaries. The Company does not own and has never
owned, directly or indirectly, any outstanding capital stock or other ownership
interest (or securities, rights or other interests convertible into capital
stock or other ownership interest) in any other entity, except as set forth on
Schedule 2.1.3.
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2.1.4 Authority; Noncontravention.
a. Authority. The Company has full corporate power and
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corporate authority, and each Individual Shareholder has full power and
authority, to execute and deliver this Agreement, to consummate the transactions
contemplated in this Agreement, and to carry out its obligations under this
Agreement. This Agreement has been duly and validly executed and delivered by
the Company and the Individual Shareholders. This Agreement constitutes the
valid and binding obligation of the Shareholders, enforceable in accordance with
its terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general application
affecting the enforcement of creditors' rights, and except that the availability
of the equitable remedies of specific performance and injunctive relief may be
subject to the discretion of the court before which any proceeding may be
brought. To the best knowledge of the Company and the Individual Shareholders,
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 and
the Individual Shareholders or the consummation by the Company and the
Individual Shareholders of the transactions contemplated by this Agreement.
b. Noncontravention. The execution and delivery of this
----------------
Agreement by the Company and the Individual Shareholders, and the consummation
of the transactions contemplated by this Agreement (i) will not conflict with
the Articles of Incorporation or the Bylaws of the Company, and (ii) except for
consents required to be obtained as set forth in Section 2.1.21, will not
result in any violation of or a default or loss of a material benefit under, or
permit the acceleration of any obligation under any mortgage, indenture, lease,
agreement or other instrument, permit, concession, grant, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company or the Individual Shareholders or their respective properties
that would have a Material Adverse Effect.
2.1.5 Financial Matters.
a. Financial Statements. The Company has provided to PA&E
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true, correct and complete copies of the Company's (a) compiled balance sheet,
statement of income and statement of cash flow for the fiscal years ended
October 31, 1996, 1997, 1998 and 1999, including the related notes
(collectively, the "Historical Financial Statements"), and (b) balance sheet as
of January 31, 2000 (the "Current Balance Sheet") and the related statement of
income for the period then ended (collectively, the "Current Financial
Statements"). The Historical Financial Statements and the Current Financial
Statements are collectively referred to as the "the Company Financial
Statements." The Company Financial Statements are complete and accurate
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and present fairly the financial position, results of operations, and changes in
financial position of the Company as of the dates and for the periods indicated
therein in accordance with GAAP applied on a consistent basis throughout the
periods indicated, except as otherwise indicated therein or in the notes to the
Company Financial Statements.
b. Absence of Undisclosed Liabilities. Except as set forth on
----------------------------------
Schedule 2.1.5(b), and except for current liabilities incurred after the date of
-----------------
the Current Balance Sheet in the ordinary course of business and of a type and
in an amount consistent with past practices, the Company does not have any
material liability or obligation that is not accrued, reserved against, or
disclosed in the Company Financial Statements.
c. Accounts Receivable. Schedule 2.1.5(c) contains a
------------------- -----------------
complete and accurate list of all of the receivables of the Company (including
accounts receivable, notes receivable and advances) that are reflected in the
Current Balance Sheet or that have been billed since the date of the Current
Balance Sheet (collectively, the "Receivables"). Except as set forth on Schedule
--------
2.1.5(c), all of the Receivables reflect actual bona fide transactions and arose
-------
in the ordinary course of business. Each of the Receivables can be fully
collected when due and in any event within 120 days after Closing, without
resort to litigation and without offset, deduction or counterclaim, except to
the extent of the normal allowance for doubtful accounts with respect to
accounts receivable, consistent with the Company's prior practices, as reflected
in the Current Balance Sheet.
2.1.6 Litigation. Except as set forth on Schedule 2.1.6, there is
--------------
no claim, litigation, proceeding or investigation of any kind pending by the
Company or against the Company or the officers or directors of the Company in
their capacities as such, or against the properties or business of the Company,
and, to the knowledge of the Company and the Individual Shareholders, (i) no
such claim, litigation, proceeding or investigation has been threatened, and
(ii) there is no basis for any such claim, litigation, proceeding or
investigation. There are no actions, proceedings, suits, investigations, or
inquiries pending, or to the best knowledge of the Company and the Individual
Shareholders, threatened, that question the validity of this Agreement or any
actions taken or to be taken pursuant to this Agreement.
2.1.7 Absence of Changes. Except as set forth on Schedule 2.1.7,
--------------
since January 31, 2000, the Company has not:
a. Adverse Changes. Suffered or been threatened with any
---------------
Material Adverse Change;
b. Damage. Suffered any damage, destruction, requisition,
------
taking or casualty loss, whether or not covered by insurance, of or to any of
its assets or properties;
c. Dividends. Declared, set aside or paid any dividend or
---------
other distribution (whether in cash, stock, property or any combination thereof)
in respect of its capital stock, or directly or indirectly repurchased, redeemed
or otherwise acquired any shares of its capital stock, or made any other payment
to or for the account of its shareholders;
-8-
d. Compensation. Increased the rate or terms of compensation
------------
payable or to become payable to any director, officer or key employee; changed
the rate or terms of any bonus, insurance, pension or other employee benefit
plan, payment, severance or arrangement made to, for or with any employee; paid
any special bonus or remuneration; executed or amended any written employment
contract; or made any change in personnel policies;
e. Expenditures. Entered into any agreement, commitment or
------------
transaction (including without limitation any borrowing, capital expenditure or
capital financing; any purchase, acquisition, sale or other disposition of
assets; any lease or sublease; any guaranty, assumption or endorsement of
payment or performance of any loan or obligation of another; or any amendment,
modification or termination of any existing agreement, commitment or
transaction), except agreements, commitments or transactions in the ordinary
course of business or as contemplated by this Agreement that will be performed
in less than one year and do not involve the payment of, or obligation to pay,
an amount greater than $50,000 in respect of any such agreement, commitment or
transaction; or made any payment on or with respect to the ML Debt, except for
required payments that were made when due under the terms of the ML Debt.
f. Accounting Changes. Made any change in accounting
------------------
methods, principles or practices;
g. Sales of Stock. Issued or sold any capital stock or
--------------
issued or granted any option, warrant or right to purchase any capital stock or
any security exercisable for the purchase of or convertible into capital stock
or relating to the payment of amounts measured by changes in the value or price
of any capital stock, or made any commitment to do any of the foregoing;
h. Articles and Bylaws. Amended its Articles of
-------------------
Incorporation or Bylaws;
i. Business Not in the Ordinary Course. Conducted any
-----------------------------------
business which is outside the ordinary course of business or not in the manner
that it previously conducted its businesses to the extent such business has had
or reasonably could be expected to have a Material Adverse Effect;
j. Liabilities. Except as set forth on Schedules 2.1.5(b)
----------- ------------------
and 2.1.6, incurred any liability which, either individually or in the
-----
aggregate, is material to its business, results of operations, financial
condition, properties, assets or prospects.
k. Encumbrances. Encumbered or consented to the encumbrance
------------
of any of its property or assets, except in the ordinary course of business;
l. Labor. Experienced pending or threatened labor disputes,
-----
organizational activities or disturbances affecting in an adverse manner its
business, results of operations, financial condition, properties, assets or
prospects; or
-9-
m. Further Adverse Changes. Experienced or been threatened
-----------------------
with any change in its assets, liabilities, licenses, permits or franchises, or
any change in any agreement to which it is a party or is bound, which, either
individually or in the aggregate, has had or reasonably could be expected to
have a Material Adverse Effect.
2.1.8 Taxes.
a. Tax. "Tax" means any federal, state, local, or foreign
---
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
(S) 59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
b. Tax Return. "Tax Return" means any return, declaration,
----------
report, claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
c. Tax Matters.
-----------
(1) The Company has filed all Tax Returns that it was
required to file, and all such Tax Returns were correct and complete. All Taxes
owed by the Company (whether or not shown on any Tax Return) have been paid. The
Company is not currently a beneficiary of any extension of time within which to
file any Tax Return. No claim has ever been made by a governmental authority in
a jurisdiction where the Company does not file Tax Returns that the Company is
or may be subject to taxation by that jurisdiction. There are no security
interests on any of the assets of the Company that arose in connection with any
failure (or alleged failure) to pay any Tax.
(2) The Company has withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, shareholder, or other third party.
(3) No shareholder or director or officer (or employee
responsible for Tax matters) of the Company has any knowledge that any
governmental authority may assess, or has threatened to assess, any additional
Taxes for any period for which Tax Returns have been filed. There is no dispute
or claim concerning any Tax liability of the Company either (A) claimed or
raised by any governmental authority or (B) as to which any of the Individual
Shareholders or the directors and officers (or employees responsible for Tax
matters) of the Company has knowledge. Schedule 2.1.8 lists all federal, state,
--------------
local, and foreign income Tax Returns filed with respect to the Company for
taxable periods ended on or after November 1, 1995, indicates those Tax Returns
that have been audited, and indicates those Tax Returns that currently are the
subject of any audit. The Company has delivered to PA&E correct and complete
copies of all federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by any of the Company since November
1, 1995.
-10-
(4) The Company has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(5) The Company: has not filed a consent under Code (S) 341(f)
concerning collapsible corporations; has not made any payments, is not obligated
to make any payments, and is not a party to any agreement that could obligate it
to make any payments that will not be deductible under Code (S) 280G; has not
been a United States real property holding corporation within the meaning of
Code (S) 897(c)(2) during the applicable period specified in Code (S)
897(c)(1)(A)(ii). The Company is not a party to any Tax allocation or sharing
agreement. The Company (A) has not been a member of an Affiliated Group filing
a consolidated federal income Tax Return (other than a group the common parent
of which was the Company) and (B) has no liability for the Taxes of any person
under Reg. (S) 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, or by contract or otherwise.
(6) Schedule 2.1.8 sets forth the following information with respect
--------------
to the Company as of the most recent practicable date (as well as on an
estimated pro forma basis as of the Closing giving effect to the consummation of
the transactions contemplated by this Agreement): (A) the basis of the Company
in its assets; and (B) the amount of any net operating loss, net capital loss,
unused investment or other credit, unused foreign tax, or excess charitable
contribution allocable to the Company.
(7) The unpaid Taxes of the Company do not, as of the close of its
October 31, 1999, taxable year, exceed the reserve for tax liability set forth
on the balance sheet dated October 31, 1999. The Company has paid or has
established a sufficient reserve for any Tax liability in respect of any fiscal
period which includes or ends on the Closing Date.
2.1.9 Compliance with Laws. Except as set forth on Schedule 2.1.9,
--------------
the Company has at all relevant times conducted its business in compliance in
all respects with the provisions of its Articles of Incorporation, Bylaws, and
all applicable laws and regulations to the extent that the failure to so comply
reasonably could be expected to have a Material Adverse Effect. The Company is
not in violation of any applicable laws or regulations in any material respect.
The Company is not subject to any outstanding judgment, order, writ, injunction
or decree and has not been charged with, or, to its knowledge, threatened with a
charge of, a violation of any provision of any applicable law or regulation.
2.1.10 Contracts.
a. Contracts and Commitments. Schedule 2.1.10 contains a list
------------------------- ---------------
of all of the contracts or agreements to which the Company is a party or by
which it or any of its property is subject or bound in the following categories:
(i) notes, mortgages, deeds of trust, loan agreements, security agreements,
guaranties, debentures, indentures, credit agreements and other evidences of
indebtedness with respect to any indebtedness the principal amount of which
exceeds $50,000; (ii) contracts or agreements with any director, officer or
shareholder of the Company; (iii) leases of real property and leases of
equipment or other personal property under which the Company is the lessee; (iv)
letters of intent, commitments, option agreements, ▇▇▇▇▇▇▇ money agreements, or
other similar agreements pertaining to the lease, purchase or sale of any real
-11-
property; (v) licenses and sublicenses material to the Company; (vi) contracts
or agreements providing for payments to or by the Company in excess of $25,000
on an annual basis or any contract with a term exceeding one year; (vii)
contracts or agreements with agents, brokers, consignees, sales representatives
or distributors relating to the sale of products or services, and contracts or
agreements relating to the payment of any commission or finder's fee; (viii)
confidentiality or inventions assignment agreements with parties other than
employees of the Company; and (ix) any contract or agreement not falling within
any of the foregoing categories but nevertheless material to the Company
(collectively, the "Contracts").
b. Validity; Absence of Defaults. All of the Contracts are
-----------------------------
valid, binding and enforceable in accordance with their terms. The Company is
not in default under or in violation of any provision of any Contract. No third
party has asserted any claim or engaged in any dispute or controversy with the
Company or withheld payments from or performance to the Company with respect to
any Contract that has not been resolved. The Company has received no notice or
warning of alleged nonperformance or other noncompliance with respect to its
obligations under any Contract or any notice that any such Contract may be
totally or partially terminated or suspended by the other party or parties
thereto. Except for the consents and approvals specified in Schedule 2.1.21,
---------------
neither the execution and delivery of this Agreement by the Company nor the
consummation by it of the transactions contemplated by this Agreement will
conflict with, violate, result in a breach of, or constitute a default under any
of the Contracts or result in the creation of any lien or encumbrance upon the
assets of the Company. Complete and accurate copies of all Contracts have been
delivered to PA&E.
2.1.11 Intellectual Property. The Company owns, or has a valid and
binding license or licenses (as to which there are no defaults by any of the
parties thereto) to use, all patents, trademarks, service marks, trade names,
copyrights, trade secrets, technology, know-how and other intellectual property
(the "Intellectual Property") necessary to or used in the conduct of the
Company's business as now conducted and as proposed to be conducted. Schedule
--------
2.1.11 contains a complete and accurate list of all patents, patent
------
applications, trademarks and service marks and related applications, trade names
and copyrights owned by or licensed to the Company. There are no licenses or
other agreements under which the Company has sold or granted a right to use any
Intellectual Property. All Intellectual Property owned by the Company is owned
by it free and clear of all liens, claims, encumbrances or adverse claims of any
third party. The conduct of the business of the Company does not conflict with
or infringe upon any Intellectual Property rights of any other person, and no
claims of conflict or infringement are pending or threatened against the
Company. The Company has made all necessary filings and recordations and has
paid all required fees and Taxes to maintain its ownership of Intellectual
Property that is patented or registered in the United States Patent and
Trademark Office and has made all necessary filings and recordations and has
paid all required fees and Taxes to maintain its ownership of Intellectual
Property that is patented or registered with applicable foreign agencies.
2.1.12 Insurance. Schedule 2.1.12 contains a complete and accurate
---------------
list of all insurance policies maintained by the Company covering any property
or asset of, or otherwise insuring, the Company. All such policies are in full
force and effect, all premiums covering all periods up to and including the date
as of which this representation is being made have been paid, and no notice of
cancellation or termination has been received with respect to any such policy.
-12-
Such insurance policies are valid and currently in force. Such insurance
policies are sufficient for compliance with all requirements of law and
agreements to which the Company is a party. The Company has not been refused
any insurance with respect to its assets or operations or had its coverage
limited by any insurance carrier during the past three-year period. Complete
and accurate copies of all policies and endorsements thereto have been delivered
to PA&E.
2.1.13 Environmental Matters.
a. Definitions. "Environmental Law" means any federal, state
-----------
or local statute, regulation or ordinance pertaining to the protection of human
health or the environment and any applicable orders, judgments, decrees,
permits, licenses or other authorizations or mandates under such laws.
"Hazardous Substance" means any hazardous, toxic, radioactive or infectious
substance, material or waste as defined, listed or regulated under any
Environmental Law, and includes without limitation petroleum oil and its
fractions. "Asbestos-Containing Material" means any material containing more
than one percent by weight of asbestos. "Prior Property" means any real
property previously owned, leased, controlled, operated or occupied by the
Company.
b. Hazardous Substances. Except as specifically described in
--------------------
Schedule 2.1.13, no Hazardous Substance has been disposed of, spilled, leaked or
---------------
otherwise released in, on, under or from the Real Property (as defined in
Section 2.1.17(a) below) or the Prior Property by the Company, its employees or
agents, or to the knowledge of the Company, by any other party. Except as
described in Schedule 2.1.13, no Hazardous Substance (i) is or has been used,
---------------
treated, stored, generated, manufactured or otherwise handled on the Real
Property or the Prior Property, or (ii), to the knowledge of the Company and the
Individual Shareholders, has otherwise come to be located in, on or under the
Real Property or the Prior Property. To the knowledge of the Individual
Shareholders, no Hazardous Substance has been disposed of, spilled, leaked or
otherwise released in, on, under or from property adjacent to or in the
immediate vicinity of the Real Property or the Prior Property.
c. Asbestos; PCBs; Underground Storage Tanks. None of the
-----------------------------------------
buildings, structures, fixtures or equipment on the Real Property contains any
Asbestos-Containing Material, urea formaldehyde foam insulation, polychlorinated
biphenyls in concentrations greater than 50 parts per million (including in any
electrical equipment located on the Real Property), or any other Hazardous
Substance which is prohibited or regulated when present in buildings,
structures, fixtures or equipment. Except as set forth on Schedule 2.1.13,
---------------
there are no underground storage tanks (whether or not excluded from regulation
under any Environmental Law) on the Real Property, including any underground
storage tanks in use, out of service, closed or decommissioned in place. Except
as set forth on Schedule 2.1.13, all underground storage tanks previously on the
---------------
Real Property or previously owned or operated by the Company have been properly
decommissioned in compliance with all applicable Environmental Laws.
d. Waste Disposal. All wastes generated by the business of the
--------------
Company have been properly transported off site and disposed of in compliance
with all applicable Environmental Laws. Except as described on Schedule 2.1.13,
---------------
the Company has not arranged for the disposal or treatment of Hazardous
Substances at, and has not transported or arranged for
-13-
transportation on behalf of itself or any third party any Hazardous Substances
to, any facility listed or proposed for listing on the National Priority List
("NPL") or the Comprehensive Environmental Response, Compensation, Liability
Information System list ("CERCLIS") compiled by the Environmental Protection
Agency or any similar or comparable list compiled or maintained by any state or
local governmental authority.
e. Site Lists. No portion of the Real Property or the Prior
----------
Property is listed or proposed for listing on the CERCLIS or the NPL, or any
similar or comparable list compiled or maintained by any state or local
governmental authority. Except as described on Schedule 2.1.13, neither the
---------------
Company nor the Individual Shareholders have received notice, or have knowledge,
of any claim that the Company is a potentially responsible party under Section
107 of the Comprehensive Environmental Response, Compensation and Liability Act
or any similar or comparable state or local Environmental Law.
f. Environmental Reports. The Company has disclosed and made
---------------------
available to PA&E true, complete and correct copies or results of any reports,
studies, analyses, tests or monitoring in the possession of or initiated by the
Company pertaining to the existence of Hazardous Substances and any other
environmental concerns relating to any of the Real Property, the Prior Property
or the business of the Company.
2.1.14 Labor Matters. Except as set forth on Schedule 2.1.14, the
---------------
Company has no collective bargaining agreement with any labor union. There has
not been any strike, slowdown, picketing or work stoppage by employees of the
Company, and no unfair labor practice charge, complaint or proceeding has been
brought against the Company. To the knowledge of the Company and the Individual
Shareholders, the Company has complied with all laws relating to the employment
of labor, including, without limitation, any provisions thereof relating to
wages, hours, collective bargaining, employment termination, occupational
safety, equal opportunity and discrimination, plant closures and layoffs and
notice thereof, hiring of non-U.S. citizens and the payment of social security
and similar taxes, and no person has asserted, and to the knowledge of the
Individual Shareholders there is no basis for any person to assert, that the
Company is liable for any arrears of wages or any taxes or penalties for failure
to comply with any of the foregoing.
2.1.15 Employee Benefit Matters. With respect to the employees of the
Company:
a. Plans. Schedule 2.1.15 contains a true and complete list of
----- ---------------
each bonus, deferred compensation, incentive compensation, stock purchase, stock
option, severance or termination pay, hospitalization or other medical, life or
other insurance, supplemental unemployment benefit, profit-sharing, savings,
pension, or retirement plan, program, agreement or arrangement (collectively,
the "Plans"), sponsored, maintained or contributed to or required to be
contributed to by the Company or by any subsidiary of the Company or trade or
business (whether or not incorporated) that is a member of a "controlled group"
of which the Company is a member or under "common control" with the Company
(within the meaning of Section 414(b) and (c) of the Code) (an "ERISA"
Affiliate") for the benefit of any employee or former employee, including any
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) subject to
-14-
Title IV of ERISA (a "Multiemployer Plan") to which the Company or any ERISA
Affiliate contributes or is or was required to contribute;
b. Information Regarding Plans. With respect to each of the
---------------------------
Plans, the Company has heretofore delivered to PA&E true and complete copies of
each of the following documents: (i) a copy of such Plan (including all
amendments thereto); (ii) a copy of the annual report, if required under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), with
respect to such Plan for the last two years; (iii) a copy of the actuarial
report, if required under ERISA with respect to such Plan for the last two
years; (iv) a copy of the most recent Summary Plan Description, together with
each Summary of Material Modifications, if required under ERISA, with respect to
such Plan, and all material employee communications relating to such Plan; (v)
if such Plan is funded through a trust or any third party funding vehicle, a
copy of the trust or other funding agreement (including all amendments thereto)
and the latest financial statements thereof; (vi) all contracts relating to such
Plan, including without limitation service provider agreements, insurance
contracts, investment management agreements, subscription and participation
agreements and record keeping agreements; and (vii) the most recent
determination letter received from the IRS with respect to such Plan if it is
intended to be qualified under Section 401 of the Code.
c. New Plans; Modifications. The Company has no plan or
------------------------
commitment, whether legally binding or not, to create any additional employee
welfare benefit plan (as defined in Section 3(1) of ERISA) or employee pension
benefit plan (as defined in Section 3(2) of ERISA), and has no plan or
commitment to modify or change any existing pension plan or welfare benefit
plan, other than changes to comply with applicable law, that would affect any
employee of the Company;
d. Continuing Benefits. Except as may be required under COBRA,
-------------------
no Plan provides death, medical or health benefits (whether or not insured) with
respect to current or former employees of the Company after any such employee's
retirement or other termination of service (other than (i) benefit coverage
mandated by applicable law, including, without limitation, coverage provided
pursuant to COBRA, (ii) death benefits or retirement benefits under any pension
plan, (iii) deferred compensation benefits accrued as liabilities on the books
of the Company, or (iv) benefits the full cost of which is borne by the current
or former employee (or the employee's beneficiary). "COBRA" means the
continuation coverage requirements of Section 4980B of the Code and Part 6 of
Title I of ERISA.
e. Determinations. Each Plan of the Company and of any ERISA
--------------
Affiliates that is intended to be "qualified" within the meaning of Section
401(a) of the Code has been determined by the IRS to be so qualified, and there
is no fact or circumstance that would adversely affect such qualification or
result in the imposition of any federal income tax liability or penalty on any
member of the Company or any ERISA Affiliate.
f. Compliance. Each of the Plans has been and is maintained,
----------
operated and administered in compliance with its terms and any related documents
or agreements and in accordance with all applicable laws, including but not
limited to applicable provisions of ERISA and the Code. Neither the Company nor
any ERISA Affiliate has engaged in a "prohibited
-15-
transaction" (as such term is defined in Section 4975 of the Code and Section
406 of ERISA) in connection with any Plan that is subject to ERISA for which an
exemption is not available.
g. Claims. There are no claims (other than claims for
------
benefits in the normal course), actions or lawsuits asserted or instituted
against, and neither the Company nor the Shareholders are aware of any pending
or threatened assessment, complaint, proceeding, investigation, litigation or
claims against the assets of any Benefit Plan (other than a Multiemployer Plan)
or against any fiduciary of such Benefit Plan with respect to the operation of
such Benefit Plan, which, if adversely determined, could have a material adverse
effect on the business, results of operations, financial condition, assets or
prospects of the Company or any ERISA Affiliate taken as a whole.
h. Withdrawal Liability. Neither the Company nor any ERISA
--------------------
Affiliate has incurred any withdrawal liability (and no event has occurred
which, with the giving of notice under Section 4219 of ERISA, would result in
such liability) under Section 4201 of ERISA as a result of a "complete
withdrawal" or a "partial withdrawal" (within the meaning of Section 4203 or
4205 of ERISA) from a Multiemployer Plan.
2.1.16 Other Employee Matters. Except as described on Schedule
--------
2.1.16, the Company is not bound by or subject to (and none of its properties is
------
bound by or subject to) any written or oral, express or implied, employment
contract, commitment or arrangement with any employee, including, without
limitation any "golden parachute" agreement, and all employees of the Company
are employees at will. The Company has provided PA&E with copies of all relevant
information regarding (i) vacation, holiday or sick leave policies or
arrangements with employees, and (ii) compensation arrangements with employees
and consultants, including compensation in the form of benefits, allowances,
perquisites or otherwise.
2.1.17 Property.
a. Title to Real Property. Schedule 2.1.17(a) contains a
---------------------- ------------------
list of all real property owned or leased by the Company (the "Real Property"),
including the dates of and parties to all leases and any amendments thereof.
Except as described on Schedule 2.1.17(a), the Company has good and marketable
fee simple title to any Real Property listed as owned by it on Schedule
--------
2.1.17(a), free and clear of all liens, mortgages, pledges, covenants,
---------
easements, restrictions, leases, charges, and other claims and encumbrances of
any nature, except covenants, easements and restrictions of record.
b. Condition of Real Property. All Real Property (including
--------------------------
improvements thereon) is in satisfactory condition and repair consistent with
its present use, and is available for immediate use in the conduct of the
business of the Company. To the knowledge of the Company, neither the
operations of the Company on any Real Property nor any improvements on the Real
Property violate any applicable building or zoning code or regulation of any
governmental authority having jurisdiction.
c. Title to Tangible Personal Property. Schedule 2.1.17(c)
----------------------------------- ------------------
contains a complete and accurate list of all tangible personal property with a
value in excess of $5,000 owned
-16-
or leased by the Company (the "Tangible Personal Property"), including the dates
of and parties to all leases and any amendments thereof and the address at which
such Tangible Personal Property is currently located. The Company has good and
marketable title to all of the Tangible Personal Property listed as owned by it
on Schedule 2.1.17(c), free and clear of all liens, mortgages, pledges, leases,
------------------
restrictions and other claims and encumbrances of any nature, except as set
forth on Schedule 2.1.17(c).
------------------
d. Condition of Tangible Personal Property. Except as set
---------------------------------------
forth on Schedule 2.1.17(c), the Tangible Personal Property is in good operating
------------------
condition and repair (ordinary wear and tear excepted), is performing
satisfactorily, and is adequate for the conduct of the business of the Company.
To the knowledge of the Individual Shareholders, all Tangible Personal Property
and the state of maintenance thereof are in compliance with all applicable laws
and regulations.
2.1.18 Permits and Licenses. Schedule 2.1.18 contains a complete and
---------------
accurate list of all governmental licenses, permits and authorizations
(collectively, "Permits") held by the Company. Except as set forth on Schedule
--------
2.1.18, to the knowledge of the Individual Shareholders, the Company (i) holds
------
all Permits necessary for the lawful conduct of its business pursuant to all
applicable statutes, laws, ordinances, rules and regulations of all governmental
bodies, agencies and other authorities having jurisdiction over it or any part
of its operations; and (ii) is in compliance with each of the terms of each of
the Permits, and there are no claims of violation by the Company of any Permit.
Complete and accurate copies of all Permits held by the Company have been
delivered to PA&E.
2.1.19 Certain Interests. Except as set forth on Schedule 2.1.19, no
---------------
current or former shareholder of the Company and no entity owned or controlled
by any of them (a) has any interest in any property, real or personal, tangible
or intangible, used in or pertaining to the business of the Company, (b) is
indebted to the Company, or (c) has any financial interest, direct or indirect,
in any supplier or customer of, or other outside business which has any
transactions with, the Company. Except as set forth on Schedule 2.1.19, the
---------------
Company is not indebted to any shareholder, director or officer of the Company
(or any entity owned or controlled by one or more of such parties), except for
amounts due under normal salary arrangements and for reimbursement of ordinary
business expenses. The consummation of the transactions contemplated by this
Agreement will not (either alone or upon the occurrence of any act or event, or
with the lapse of time, or both) result in any payment (severance or other)
becoming due from the Company to any shareholder, officer, director or employee
of the Company (or any entity owned or controlled by one or more of such
parties).
2.1.20 Certain Payments. Neither the Company nor any shareholder,
officer or director of the Company, nor any other person or entity has, directly
or indirectly, on behalf of or with respect to the Company or the business or
operations of the Company (a) made any payment outside the ordinary course of
business to any purchasing or selling agent or person charged with similar
duties of any entity to which the Company sells or from which the Company buys
products or services for the purpose of influencing such agent or person to buy
products or services from or sell products or services to the Company; (b)
otherwise made or received any payment that was not legal to make or receive
under any applicable law or regulation of the United
-17-
States or any other country or territory; or (c) engaged in any transaction,
maintained any bank account, or used any corporate funds or assets except for
transactions, bank accounts, funds, and assets which have been and are reflected
in the normally maintained books and records of the Company.
2.1.21 Consents and Approvals. Except as set forth on Schedule
--------
2.1.21 (which includes a list of all consents, approvals, authorizations or
------
filings to be obtained or made), no consent, approval, or authorization of any
entity or person not a party to this Agreement is required for the consummation
of the transactions described in this Agreement by the Company or the
Shareholders except filings by PA&E pursuant to the applicable requirements of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated under such Act (the "1934 Act").
2.1.22 Records. The books of account of the Company are complete and
accurate in all material respects. Complete and accurate copies of the books and
records of the Company have been made available for PA&E's review.
2.1.23 Warranties. Schedule 2.1.23 contains any standard forms of
---------------
warranties provided by the Company. The Company has not made any warranties or
guarantees with respect to its services other than those disclosed on Schedule
--------
2.1.23.
------
2.1.24 Brokers and Finders. Neither the Company nor any Shareholder,
officer, director or employee of the Company has employed any broker, finder or
investment banker, or incurred any liability for any brokerage or investment
banking fees, commissions or finder's fees, in connection with the transactions
contemplated in this Agreement.
2.1.25 Restrictive Covenants. The Company is not a party to any
agreement, contract or covenant limiting the freedom of the Company to compete
in any line of business or with any person or other entity in any geographic
area.
2.1.26 Reliance. The Company and the Individual Shareholders
recognize and agree that, notwithstanding any investigation by PA&E or Buyer,
PA&E and Buyer are relying upon the representations and warranties made by the
Company and the Individual Shareholders in this Agreement.
2.2 Representations and Warranties of PA&E and Buyer. PA&E and Buyer
------------------------------------------------
jointly and severally represent and warrant to the Company and the Individual
Shareholders that:
2.2.1 Incorporation; Articles and Bylaws. Each of PA&E and Buyer is
a corporation duly organized and validly existing under the laws of the State of
Washington. Each of PA&E and Buyer has all necessary corporate power and
authority to own, operate, and lease its assets and properties and to carry on
its business, including its business as proposed to be conducted. True and
correct copies of the Articles of Incorporation and Bylaws of PA&E and Buyer
have been or prior to the Closing will be delivered to the Company.
-18-
2.2.2 Authority; Authorization. Each of PA&E and Buyer has full
corporate power and corporate authority to execute and deliver this Agreement,
to consummate the transactions contemplated in this Agreement, and to carry out
its obligations under this Agreement. This Agreement has been duly and validly
authorized, executed and delivered by PA&E and Buyer, and constitutes the valid
and binding obligation of PA&E and Buyer, enforceable in accordance with its
terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general application
affecting the enforcement of creditors' rights, and except that the availability
of the equitable remedies of specific performance and injunctive relief may be
subject to the discretion of the court before which any proceeding may be
brought. To the knowledge of PA&E and Buyer, assuming the accuracy of the
representations made by the Company and the Shareholders, other than reporting
obligations of PA&E under the 1934 Act, 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 PA&E or Buyer or the consummation by PA&E or Buyer of the
transactions contemplated in this Agreement.
2.2.3 Noncontravention. The execution and delivery of this
Agreement by PA&E and Buyer and the consummation of the transactions
contemplated by this Agreement (i) will not conflict with the Articles of
Incorporation or the Bylaws of PA&E or Buyer and (ii) except for consents
required to be obtained as set forth in Section 2.2.5, will not result in any
violation of or a default or loss of a material benefit under, or permit the
acceleration of any obligation under any mortgage, indenture, lease, agreement
or other instrument, permit, concession, grant, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to PA&E or
Buyer or their respective properties that would have a material adverse effect
on the business or financial condition of PA&E.
2.2.4 Litigation. There is no claim, litigation, proceeding or
investigation pending by PA&E or against PA&E or the officers or directors of
PA&E in their capacities as such, or against the properties or business of PA&E
that should have been reported on PA&E's annual report on Form 10-K for the
fiscal year ended May 31, 1999, and, to the best knowledge of PA&E, no such
claim, litigation, proceeding or investigation has been threatened and there is
no basis for any such claim, litigation, proceeding or investigation. There are
no actions, proceedings, suits, investigations, or inquiries pending, or to the
best knowledge of PA&E, threatened, that question the validity of this Agreement
or any actions taken or to be taken pursuant to this Agreement.
2.2.5 Consents and Approvals. Except as set forth on Schedule 2.2.5
--------------
(which includes a list of all consents, approvals, authorizations or filings to
be obtained or made), no consent, approval, or authorization of any entity or
person not a party to this Agreement is required for the consummation of the
transactions described in this Agreement by PA&E and Buyer.
2.2.6 Brokers and Finders. Neither PA&E nor Buyer, nor any
shareholder, officer, director or employee of PA&E or Buyer, has employed any
broker, finder or investment banker, or incurred any liability for any brokerage
or investment banking fees, commissions or finder's fees, in connection with the
transactions contemplated by this Agreement.
-19-
2.3 Representations and Warranties of the ESOP Trustee. The person or
--------------------------------------------------
entity executing this Agreement on behalf of the ESOP represents and warrants on
behalf of the ESOP to PA&E and Buyer that:
2.3.1 Authority. The ESOP Trustee has full power and authority to
execute and deliver this Agreement, to consummate the transactions contemplated
in this Agreement, and to carry out its obligations and the obligations of the
ESOP under this Agreement. This Agreement constitutes the valid and binding
obligation of the ESOP, enforceable in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or other laws of general application affecting the enforcement of
creditors' rights, and except that the availability of the equitable remedies of
specific performance and injunctive relief may be subject to the discretion of
the court before which any proceeding may be brought. To the best knowledge of
the ESOP Trustee, 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
ESOP Trustee or the consummation by the ESOP of the transactions contemplated by
this Agreement.
2.3.2 Noncontravention. The execution and delivery of this
Agreement by the ESOP Trustee, and the consummation of the transactions
contemplated by this Agreement (i) will not conflict with the documents
governing the ESOP, and (ii) except for consents required to be obtained as set
forth in Section 2.1.21, will not result in any violation of or a default or
loss of a material benefit under, or permit the acceleration of any obligation
under any indenture, agreements, or other instrument, permit, concession, grant,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the ESOP or the ESOP Trustee that would have a Material
Adverse Effect.
ARTICLE 3.
PRE-CLOSING CONDUCT AND AGREEMENTS
From the date of this Agreement until the Closing, except to the extent
expressly permitted by this Agreement or otherwise consented to by an instrument
in writing signed by PA&E and Buyer, the parties agree that:
3.1 Conduct of the Parties. Before Closing, each of the parties will
----------------------
fully cooperate with the other party and its counsel and accountants in
connection with any steps required to be taken as part of the obligations of the
parties under this Agreement. Each of the parties agrees not to take any
action, and the Shareholders agree not to cause the Company to take any action,
which would, as of the Closing Date, cause any warranties or representations
contained in this Agreement and applicable to them to be false or misleading.
Each of the parties agrees to use their best efforts, and the Shareholders agree
to cause the Company to use its best efforts, to (a) take all actions necessary
to render accurate as of the Closing Date their respective representations and
warranties contained in this Agreement, and (b) perform or cause to be
satisfied each covenant, obligation or condition to be performed or satisfied by
them prior to the Closing Date.
-20-
3.2 Access to Properties, Books and Records.
---------------------------------------
3.2.1 PA&E. To permit PA&E and Buyer to conduct their due diligence
investigation, the Company and the Shareholders will permit PA&E, Buyer and
their agents to have reasonable access to the premises in which the Company
conducts its business and to all of its books, records, and personnel files and
will furnish to PA&E and Buyer such financial data, operating data, and other
information as they shall reasonably request, and the Company and the
Shareholders will permit PA&E, Buyer and their agents to contact employees and
customers of the Company.
3.2.2 The Company and the Shareholders. To permit the Company and
the Shareholders to conduct their due diligence investigation, PA&E will provide
the Company and the Shareholders and their agents with access to any of its
public filings with the Securities and Exchange Commission and will furnish to
the Company and the Shareholders such financial data, operating data, and other
information as the Company or the Shareholders shall reasonably request.
3.3 Confidentiality. The parties each agree to comply with and be bound
---------------
by the terms of the confidentiality agreement between PA&E and the Company which
had been fully executed on August 10, 1998 (the "Confidentiality Agreement").
3.4 Conduct of the Company's Business. In addition to the provisions of
---------------------------------
this Agreement, the Company will, and the Shareholders will cause the Company
to, conduct its business in accordance with all of the provisions of the
Operating Agreement. The Company will, and the Shareholders will cause the
Company to: (i) conduct the Company's business in a reasonable and prudent
manner in accordance with past practices and keep the Company's business intact,
(ii) not take or permit to be taken or do or suffer to be done anything other
than in the ordinary course of the Company's business, and (iii) use
commercially reasonable efforts to preserve the Company's existing business and
relationships with its employees, customers, suppliers, directors, officers,
agents and others, to preserve and protect its properties, to conduct its
business in compliance with all applicable laws and regulations, and to maintain
the goodwill and reputation associated with its business. The parties
understand and agree that (a) PA&E and Buyer must be consulted on every material
issue and matter which may affect the business or operations of the Company
after the date of this Agreement, and (b) no such issue or matter shall be acted
on without the prior written consent of PA&E and Buyer. Subject to the
foregoing, the Company shall comply, and the Shareholders agree to cause the
Company to comply, with the following covenants (except to the extent that PA&E
and Buyer gives their prior written consent otherwise):
3.4.1 Properties and Assets.
a. Maintenance. The Company shall exercise commercially
-----------
reasonable efforts to maintain all of its properties and assets, tangible or
intangible, in good operating condition and repair, and take all steps necessary
to keep its operations functioning properly.
-21-
b. Liens and Encumbrances. The Company shall not further
----------------------
encumber or permit to be further encumbered any of its properties or assets.
c. Disposition. The Company shall not purchase, sell, lease
-----------
or dispose of or make any contract for the purchase, sale, lease or disposition
of or subject to lien or security interest any properties or assets other than
in the ordinary and usual course of its business consistent with the
representations and warranties contained in this Agreement and not in breach of
any of the provisions of this Agreement.
3.4.2 Compensation. The Company shall not grant any salary increase
to, or increase the draw of, any of its officers, directors, or employees, or
enter into any new, or amend or alter any existing, bonus, incentive
compensation, deferred compensation, profit sharing, retirement, pension, stock
option, group insurance, death benefit or other fringe benefit plan, trust
agreement or other similar or dissimilar arrangement, or any agreements or
documents relating to the ESOP, or any employment or consulting agreement.
3.4.3 Indebtedness. The Company shall not create, agree to or
incur: (a) any liabilities or obligations, contingent or otherwise, (i) in
respect of borrowed money (other than borrowings pursuant to the Company's
existing line of credit) or pursuant to the Operating Agreement, (ii) evidenced
by bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except those incurred in the ordinary course of its business that would
constitute ordinarily a trade payable to trade creditors, which are paid not
later than 60 days after their original due date, (iv) evidenced by bankers'
acceptances or similar instruments issued or accepted by banks, (v) relating to
any capitalized lease obligation, or (vi) evidenced by a letter of credit or a
reimbursement obligation of the Company with respect to any letter of credit;
(b) any interest swap or hedging obligations; (c) any guarantee by the Company
of, or any pledge by the Company of any of its assets to secure, any liabilities
or obligations of any other person or entity; (d) any obligation of the Company
to purchase, redeem or acquire any of its stock or other equity interests; or
(e) any deferrals, renewals, extensions, refinancing or refundings (whether
direct or indirect) of, or amendments, modifications or supplements to, any
liability of the kind described in any of the preceding clauses (a), (b), (c),
(d) or this clause (e) (all of the foregoing collectively referred to as the
"Designated Indebtedness"). At all times after the date of this Agreement and on
the Closing Date, the outstanding balance on the Company's existing line of
credit shall not exceed $500,000 without the prior written consent of PA&E, and
on the Closing Date the Company shall not have any Designated Indebtedness,
other than that line of credit and borrowings pursuant to the Operating
Agreement.
3.4.4 Leases. The Company shall not enter into any leases.
3.4.5 Payments. Except as otherwise specified in this Agreement,
the Company shall not pay any obligation or liability (fixed or contingent) or
discharge or satisfy any lien or encumbrance, or settle any claim, liability or
suit pending or threatened against it or any of its properties, except for
liabilities on the Current Balance Sheet or current liabilities incurred between
the date of the Current Balance Sheet and the Closing Date in the ordinary and
usual course of business consistent with the Company's representations and
warranties contained in this
-22-
Agreement and not in breach of any of the provisions of this Agreement. The
Company shall not make any payments of or with respect to the ML Debt.
3.4.6 Contracts and Agreements. The Company shall not enter into
any contract, agreement or commitment not in the ordinary course of business,
including without limiting the generality of the foregoing, any contract,
agreement or commitment for the purchase of any materials or supplies. The
Company shall not modify, amend, cancel or terminate any of the Contracts or
waive any rights under any of the Contracts or any other material contracts or
agreements. The Company and the ESOP shall not amend any agreement or documents
relating to the ESOP or the ESOP Debt.
3.4.7 Shipments. The Company shall not, other than in the ordinary
course of business, curtail purchases or accelerate shipments beyond customer
requirements.
3.4.8 Insurance. The Company shall maintain in full force and
effect its policies of insurance.
3.4.9 Governing Documents. The Company will not make any change in
its Articles of Incorporation or Bylaws.
3.4.10 Capital Stock. The Company will not (a) issue or cause to be
issued any additional shares of its capital stock, (b) effect any subdivision of
its outstanding capital stock, or purchase or redeem any capital stock, (c)
declare, make or pay any dividend, distribution or payment in respect of its
capital stock, or (d) grant or issue any options, warrants or other rights to
acquire any capital stock or other equity securities, whether by conversion or
otherwise, or make any commitment to do any of the above.
3.5 Public Announcements. Promptly after the execution of this Agreement,
--------------------
PA&E may at its option issue a press release in a form reasonably satisfactory
to the Company and the Shareholders. Thereafter, PA&E and the Shareholders will
consult with each other with respect to any news release or other announcement
to the public concerning the Asset Purchase, including without limitation
announcements to mutual customers or suppliers or potential customers or
suppliers or any statement to their employees generally concerning or relating
to the Asset Purchase. Neither the Shareholders, nor the Company nor PA&E nor
Buyer, nor any person affiliated with any of them, will issue or approve a news
release or other announcement concerning this transaction without the prior
written consent of the other party, except for announcements, reports or any
other information which PA&E believes on the advice of counsel to be required to
be disclosed by applicable securities laws. Except as otherwise required by
applicable securities laws or other applicable law or as agreed by the parties,
the terms of this Agreement will be confidential.
3.6 Notice of Breach.
----------------
3.6.1 By the Company and the Shareholders. The Company and the
Shareholders will immediately give written notice to PA&E and Buyer of the
occurrence of any event or the failure of any event to occur that results in a
breach of any representation or warranty
-23-
by the Company or the Shareholders, or a failure by the Company or the
Shareholders to comply with any covenant, condition or agreement contained in
this Agreement.
3.6.2 By PA&E. PA&E and Buyer will immediately give written notice
to the Company and the Shareholders of the occurrence of any event or the
failure of any event to occur that results in a breach of any representation or
warranty by PA&E or Buyer or a failure by PA&E or Buyer or to comply with any
covenant, condition or agreement contained in this Agreement.
3.7 Company Shareholder Approval. The Shareholders covenant and agree
----------------------------
that a meeting of the shareholders of the Company shall be held within 21 days
after the date of this Agreement, after proper notice to shareholders pursuant
to the Company's Articles of Incorporation, Bylaws and applicable law, or if
practical, a unanimous consent of the Shareholders shall be signed promptly
after the date of this Agreement, to consider and approve the Asset Purchase and
any other actions necessary to authorize the transactions contemplated by this
Agreement. The Individual Shareholders hereby agree to vote all of their shares
of Company Common Stock in favor of the Asset Purchase and any such other
actions.
3.8 Consents. The Company, the Individual Shareholders and PA&E and Buyer
--------
will cooperate and use their respective best efforts, between the date of this
Agreement and the Closing Date, to obtain all consents, approvals (including
shareholder approval), licenses or permits that may be required in connection
with this Agreement and the transactions contemplated hereby.
3.9 Payment of ML Debt. The Individual Shareholders agree to pay in full
------------------
the ML Debt at the time of the Closing.
3.10 Further Assurances. Subject to the terms and conditions of this
------------------
Agreement, each of the parties agrees to use their respective best efforts to
take, or cause to be taken all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate the Asset Purchase, subject,
in the case of the ESOP, to its fiduciary duty under ERISA.
3.11 No Solicitation. The Company and the Shareholders shall not, directly
---------------
or indirectly, take any of the following actions, and the Company and the
Shareholders shall not permit the Company or its officers, directors or
employees, or their respective investment bankers, attorneys, accountants, or
other agents or persons retained by any of them, directly or indirectly, to take
any of the following actions: encourage, initiate, or solicit any inquiries or
the making of any proposal with respect to, or engage in negotiations
concerning, or provide any confidential information or data to, or respond to
any inquiries or proposals by, or have any discussions with, any person or
entity other than PA&E and Buyer relating to any financing, merger, acquisition,
business combination, or purchase of all or substantially all or a substantial
part of the business or assets of the Company or the acquisition of any
outstanding equity securities or the issuance of any equity securities of the
Company, and they will immediately cease any existing activities, discussions or
negotiations with any parties with respect to any of the foregoing. The Company
and the Shareholders will notify PA&E and Buyer immediately if any such
inquiries or proposals are received by, any such information is required or
requested from or any negotiations or discussions are sought to be initiated or
continued with the Company or with any person on behalf of the Company, and the
Company and the Shareholders will inform PA&E and Buyer of the
-24-
identity of the offeror or party making any proposal and provide PA&E and Buyer
with a copy of all written material relating to any such offer or proposal.
ARTICLE 4
CONDITIONS TO CLOSING
4.1 Conditions to the Obligations of PA&E and Buyer. All obligations of
-----------------------------------------------
PA&E and Buyer under this Agreement are subject to the fulfillment and
satisfaction, prior to or at Closing, of each of the following conditions, any
one or more of which may be waived by PA&E and Buyer in writing:
4.1.1 Corporate Actions. All actions required to be taken by, or on
the part of, the Company or the Shareholders to authorize the execution,
delivery and performance of this Agreement by the Shareholders, and the
consummation of the transactions contemplated by this Agreement (including
without limitation approval by the Shareholders as required by the Washington
Act of the Asset Purchase), shall have been duly and validly taken by the
Company and the Shareholders.
4.1.2 Representations and Warranties. The representations and
warranties of the Company and the Shareholders contained in this Agreement shall
be true and correct at and as of the Closing Date, with the same effect as
though such representations and warranties had been made at and as of the
Closing Date.
4.1.3 Performance of Obligations. Each of the obligations of the
Company and the Shareholders required to be performed by them on or before the
Closing Date pursuant to the terms of this Agreement shall have been performed
as required.
4.1.4 No Material Adverse Change. There shall have been, between the
date of this Agreement and the Closing, no Material Adverse Change.
4.1.5 Approvals; Consents. All required approvals, consents,
authorizations and waivers with regard to the transactions contemplated by this
Agreement, including those required by state and federal regulatory authorities,
approval of the Boards of Directors of PA&E and Buyer and the Company, approval
by the shareholders of the Company, and, if PA&E shareholder approval is
required by law or PA&E elects to require such approval, by shareholders of
PA&E, shall have been obtained or waived, and all third-party consents and
waivers required by, or required to prevent a breach or default by the Company
under, any contract, lease, note or other document to which the Company is a
party or any permit, license or other governmental authorization held by the
Company shall have been obtained, and PA&E and Buyer shall have received copies
of such consents and waivers in a form acceptable to PA&E and Buyer.
4.1.6 Certificate. The Company and the Shareholders shall have
delivered to PA&E and Buyer a certificate to the effect of Sections 4.1.1
through 4.1.5, signed by the Company and the Shareholders.
-25-
4.1.7 Audit. If PA&E determines that it is necessary or
appropriate, the Company shall have permitted the audit of its financial
statements for the most recent three fiscal years, or for such shorter period as
PA&E may determine, by an independent accounting firm selected by PA&E.
4.1.8 Environmental Assessment. If PA&E elects to do so, PA&E
shall have obtained an environmental assessment of any real property leased by
the Company, and the results of the assessment shall be acceptable to PA&E in
its sole discretion.
4.1.9 Capital Stock. All of the outstanding capital stock of the
Company shall be owned beneficially and of record by the Individual Shareholders
and the ESOP, and there shall be no agreements or other rights, other than this
Agreement, pursuant to which any person or entity would have any right to
acquire any securities of the Company either from the Company or from the
Shareholders.
4.1.10 Employment Agreements. PA&E shall have received fully
executed employment agreements substantially as attached hereto as Exhibit C
between Buyer and each of ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇ (the "Employment
Agreements").
4.1.11 Lease Amendments. The Company and HHD Associates shall have
executed and delivered mutually agreeable lease amendments (the "Lease
Amendments").
4.1.12 Shareholders' Accounts. Any amounts owed by Shareholders to
the Company, as set forth on Schedule 2.1.19, shall have been paid to the
---------------
Company, and any amounts owed by the Company to its shareholders, as set forth
in Schedule 2.1.19, shall have been canceled, and there shall be no other
---------------
amounts receivable from or payable to the Shareholders by the Company, other
than for compensation for the current pay period coming due in the ordinary
course of business; provided, however, that (i) the $28,412 payable to the
Company from ▇▇▇▇ ▇▇▇▇▇▇▇▇ and the $14,674 payable to the Company from ▇▇▇▇
▇▇▇▇▇▇▇▇ arising from the Company's payment of the premium on life insurance
owned by each such Individual Shareholder on the life of the other Individual
Shareholder need not be repaid to the Company; and (ii) Buyer shall have no
obligation to make any further premium payments on such insurance policies or to
make any payments to the Individual Shareholders in respect of the federal
income tax payable by the Individual Shareholders arising from such premium
payments by the Company.
4.1.13 Further Documents. The Company and the Shareholders shall
have executed and delivered any other documents and rendered any other
performance necessary to consummate the transactions contemplated by this
Agreement.
4.2 Conditions to the Obligations of the Company and the Shareholders.
-----------------------------------------------------------------
All obligations of the Company and the Shareholders under this Agreement are
subject to the fulfillment and satisfaction, prior to or at Closing, of each of
the following conditions, any one or more of which may be waived by the Company
and the Shareholders in writing:
4.2.1 Corporate Actions. All actions required to be taken by, or on
the part of, PA&E or Buyer to authorize the execution, delivery and performance
of this Agreement and
-26-
the consummation of the transactions contemplated by this Agreement shall have
been duly and validly taken by PA&E and Buyer.
4.2.2 Representations and Warranties. The representations and
warranties of PA&E and Buyer contained in this Agreement shall be true and
correct at and as of the Closing Date, with the same effect as though such
representations and warranties had been made at and as of the Closing Date.
4.2.3 Performance of Obligations. Each of the obligations of PA&E or
Buyer required to be performed by PA&E or Buyer on or before the Closing Date
pursuant to the terms of this Agreement shall have been performed as required.
4.2.4 Certificate. PA&E and Buyer shall have delivered to the
Company and the Shareholders a certificate to the effect of Sections 4.2.1
through 4.2.3, signed by the President of PA&E and an officer of Buyer.
4.2.5 Employment Agreements. The Company shall have executed and
delivered the Employment Agreements with each of ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇.
4.2.6 Lease Amendments. The Company and HHD Associates shall have
executed and delivered the Lease Amendments.
4.2.7 Shareholder Approval. The Company shall have obtained the
approval of its shareholders required by Washington law for the Asset Purchase.
4.2.8 Further Documents. PA&E and Buyer shall have executed and
delivered any other documents and rendered any other performance necessary to
consummate the transactions contemplated by this Agreement.
ARTICLE 5.
TERMINATION
5.1 Right to Terminate. Notwithstanding anything to the contrary in this
------------------
Agreement, this Agreement may be terminated and the transactions contemplated in
this Agreement abandoned at any time prior to the Closing:
5.1.1 Mutual Consent. By mutual consent of PA&E, Buyer, the Company
and the Shareholders.
5.1.2 Delay. By either PA&E and Buyer or the Company and the
Shareholders, if the Closing shall not have occurred by April 30, 2000.
However, the right to terminate this Agreement under this Section 5.1.2 shall
not be available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Closing to
occur on or before such date.
-27-
5.1.3 Breach by PA&E or Buyer. By the Company and the Shareholders
(if they are not in breach of this Agreement), if PA&E or Buyer breaches any of
their representations and warranties in any material respect or fails to comply
in any material respect with any of their obligations or agreements contained in
this Agreement.
5.1.4 Breach by the Company or the Individual Shareholders. By PA&E
and Buyer (if they are not in breach of this Agreement), if the Company or any
of the Individual Shareholders breach any of their representations and
warranties in any material respect or fail to comply in any material respect
with any of their obligations or agreements contained in this Agreement.
5.1.5 Failure of the Company Shareholders to Approve. By PA&E and
Buyer, if a unanimous consent or a meeting of shareholders of the Company has
not occurred as required by Section 3.7, or a meeting having been duly held, if
the shareholders of the Company fail to approve the Asset Purchase and any other
action necessary to authorize the transactions contemplated by this Agreement,
within 21 days after the date of this Agreement.
5.2 Certain Obligations to Cease. If this Agreement is terminated
----------------------------
pursuant to Section 5.1, all obligations of the parties to this Agreement shall
terminate and there shall be no liability of any party to this Agreement to any
other party, except: (a) for breaches of Section 3.3 or 3.11, and (b) that
nothing in this Agreement will relieve any party from liability for any willful
breach of this Agreement.
ARTICLE 6.
MISCELLANEOUS PROVISIONS
6.1 Nonsurvival of Representations and Warranties. None of the
---------------------------------------------
representations and warranties in this Agreement shall survive the Closing.
This Section 6.1 shall not limit any covenant or agreement of the parties which
by its terms contemplates performance after the Closing.
6.2 Release from Guaranties. Promptly after the Closing, Buyer and PA&E
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will take the actions necessary to have Sterling Savings Bank release the
Individual Shareholders from their personal guaranties of indebtedness of the
Company to Sterling Savings Bank.
6.3 Exhibits; Schedules. Each Exhibit to this Agreement and each
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Schedule delivered pursuant to the terms of this Agreement is incorporated into
this Agreement by reference.
6.4 Notices. Any notice or other communications required or permitted
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under this Agreement shall be sufficiently given if in writing and shall be
deemed given or made when delivered personally, by facsimile, or by courier
(with signed receipt), or three days after sent by certified or registered mail,
return receipt requested, to the following addresses or to such other address as
a party may designate in writing to the others:
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To PA&E or Buyer: With a copy to:
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Pacific Aerospace & Electronics, Inc. Stoel Rives LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Attention: L. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Jr.
General Counsel
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To Company: With a copy to:
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NOVA-TECH Engineering, Inc. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇ III
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To the Individual Shareholders: With a copy to:
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Mr. ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇ Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇ III
7200 - 34th N.W.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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To the ESOP: With a copy to:
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NOVA-TECH Engineering, Inc. ▇▇▇▇▇▇ & ▇▇▇▇▇, ▇.▇.
Employee Stock Ownership Trust ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ Trust Company, Trustee Financial Center
▇▇▇▇ - ▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇ West ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
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6.5 No Assignment. Neither this Agreement nor any rights or obligations
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hereunder may be assigned by operation of law or otherwise.
6.6 Titles and Captions. The section titles, captions and headings in
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this Agreement are for convenience only and shall not be deemed part of this
Agreement or in any way intended to define, limit, extend or define the scope or
intent of any provisions of this Agreement.
6.7 Waiver. No failure by any party to this Agreement to insist upon the
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strict performance of any covenant, duty, agreement, or condition of this
Agreement or to exercise any right or remedy consequent upon a breach thereof
shall constitute a waiver of any such breach or
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of such or any other covenant, agreement, term or condition. Any party by notice
pursuant to this Agreement may, but shall be under no obligation to, waive any
of its rights or any conditions to its obligations under this Agreement, or any
duty, obligation or covenant of any other party. No waiver shall affect or alter
the remainder of this Agreement but each and every other covenant, agreement,
term and condition of this Agreement shall continue in full force and effect
with respect to any other then existing or subsequently occurring breach.
6.8 Amendment. This Agreement may be amended with respect to any
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provision contained in this Agreement by a written instrument duly executed on
behalf of each party to this Agreement.
6.9 Severability. If any condition, covenant or other provision in this
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Agreement is held to be invalid, void or unenforceable by a court of competent
jurisdiction, the same shall be deemed severable from the remainder of this
Agreement and shall in no way affect any other covenant, condition or provision
of this Agreement. If such condition, covenant or other provision shall be
deemed invalid due to its scope or breadth, such provision shall be deemed
reformed and valid to the extent of the scope or breadth permitted by law.
6.10 Rights and Remedies. The rights and remedies of the parties under
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this Agreement shall not be mutually exclusive and the exercise of one or more
of the provisions of this Agreement shall not preclude the exercise of any other
provision.
6.11 Attorney Fees. In the event of any legal action arising from or
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relating to this Agreement, the non-prevailing party shall reimburse the
prevailing party for all of the prevailing party's costs and expenses, including
reasonable attorney fees, incurred in legal action.
6.12 Governing Law. This Agreement and the Stock Purchase shall be
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governed by and construed in accordance with the laws of the State of
Washington, without giving effect to conflicts of laws principles.
6.13 Counterparts. This Agreement may be executed in one or more
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counterparts, all of which shall be considered one and the same agreement.
6.14 Entire Agreement; No Other Beneficiaries. This Agreement, including
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the attached Schedules and Exhibits, and the Confidentiality Agreement,
constitute the entire agreement between the parties and supersede all prior
agreements or understandings between parties, written or oral, as to the subject
matter of this Agreement. This Agreement is solely among the parties hereto and
is not intended, and shall not be construed, to benefit any person or entity
that is not a party to this Agreement.
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Executed as of the date first written above.
COMPANY:
NOVA-TECH ENGINEERING, INC.
By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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Its President
SHAREHOLDERS:
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇▇
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NOVA-TECH Engineering, Inc. Employee Stock
Ownership Trust
By: Alaska Trust Company
Its Trustee
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Its President and CEO
PA&E:
PACIFIC AEROSPACE & ELECTRONICS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its President
BUYER:
SKAGIT ENGINEERING & MANUFACTURING,
INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its Executive Vice President
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Consent of Spouse
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The undersigned spouse of ▇▇▇▇ ▇▇▇▇▇▇▇▇ hereby joins in, consents to and
agrees to be bound by the foregoing Asset Purchase Agreement, to the extent
necessary to bind the marital community.
Dated as of March 23, 2000.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------
Please Print Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Confirmation
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The undersigned ▇▇▇▇ ▇▇▇▇▇▇▇▇ hereby confirms, represents and warrants to
PA&E that he is not married.
Dated as of March 22, 2000.
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
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List of Exhibits and Schedules to the Asset Purchase Agreement
The following list briefly identifies the contents of all exhibits and schedules
to the Asset Purchase Agreement, dated as of March 22, 2000, between Pacific
Aerospace & Electronics, Inc., Skagit Engineering & Manufacturing, Inc., Nova-
Tech Engineering, Inc. and the Shareholders of Nova-Tech Engineering, Inc. (the
"Agreement"). All of the exhibits and schedules listed below are omitted from
the Agreement filed as Exhibit 2.1 to the foregoing quarterly report on Form 10-
Q, pursuant to Regulation S-K, item 601(b)(2). The Company agrees to furnish
supplementally a copy of any of the omitted exhibits and schedules to the
Securities and Exchange Commission upon request.
EXHIBITS:
Exhibit A - ▇▇▇▇ of Sale
Exhibit B - Assignment and Assumption Agreement
Exhibit C - Employment Agreements
SCHEDULES:
Schedule 1.3 Excluded Assets
Schedule 1.4 Permitted Liens
Schedule 2.1.2 Capitalization
Schedule 2.1.3 Interests in Other Entities
Schedule 2.1.5(b) Absence of Undisclosed Liabilities
Schedule 2.1.5(c) Accounts Receivable
Schedule 2.1.6 Litigation
Schedule 2.1.7 Absence of Changes
Schedule 2.1.8 Taxes
Schedule 2.1.9 Compliance With Laws
Schedule 2.1.10 Contracts
Schedule 2.1.11 Intellectual Property
Schedule 2.1.12 Insurance Policies
Schedule 2.1.13 Environmental Matters
Schedule 2.1.14 Labor Matters
Schedule 2.1.15 Employee Benefit Matters
Schedule 2.1.16 Employee Matters
Schedule 2.1.17(a) Real Property
Schedule 2.1.17(c) Tangible Personal Property
Schedule 2.1.18 Permits and Licenses
Schedule 2.1.19 Certain Interests
Schedule 2.1.21 Consents and Approvals (Company)
Schedule 2.1.23 Warranties
Schedule 2.2.5 Consents and Approvals (PA&E)
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