EXHIBIT 10.1
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into effective as of March 26, 1997, by and between CALNETICS
CORPORATION, a California corporation (together with any and all subsidiaries,
"Calnetics"), and SUMMA INDUSTRIES, a California corporation (together with any
and all subsidiaries, "Summa").
R E C I T A L S
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A. The authorized capital of Calnetics consists of 20,000,000 shares of
Common Stock, without par value, of which 3,023,799 shares are issued and
outstanding and held of record by a total of approximately 300 shareholders as
of the date hereof, and 2,000,000 shares of Preferred Stock, without par value,
of which no shares have been issued or are outstanding. The Common Stock of
Calnetics is registered under Section 12(g) of the Securities Exchange Act of
1934 (the "Exchange Act") and traded in The Nasdaq National Market under the
symbol "CALN."
B. The authorized capital of Summa consists of 10,000,000 shares of
Common Stock, $.001 par value, of which 4,070,250 shares are issued and
outstanding as of the date hereof and held of record by a total of approximately
600 shareholders as of the date hereof, and 5,000,000 shares of Preferred Stock,
$.001 par value, of which no shares have been issued or are outstanding. The
Common Stock of Summa is registered under Section 12(g) of the Exchange Act and
traded in The Nasdaq National Market under the symbol "SUMX."
C. The respective Boards of Directors of Calnetics and Summa deem it
advisable and generally to the advantage of each corporation, and in the best
interests of their respective shareholders, to cause Calnetics to be merged
with and into a newly-to-be-formed California corporation which will be a
wholly-owned subsidiary ("Subsidiary") of Summa, under and pursuant to the
provisions of the California Corporations Code (the "Merger"). Accordingly, the
respective Boards of Directors of Calnetics and Summa have approved, and will
recommend for approval of their respective shareholders, this Agreement and the
Merger contemplated hereby, and have directed their respective proper officers
to execute and deliver this Agreement and to cause the respective corporations
to perform each of their respective obligations hereunder.
D. It is the intention of the parties hereto that the acquisition by
Summa of all of the issued and outstanding capital stock of Calnetics will
qualify as a corporate "reorganization" within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"), such that receipt of
Summa Common Stock will not be a taxable transaction for federal income tax
purposes for the shareholders of Calnetics, who will recognize taxable gain only
on the cash and Debentures (as defined below) received by them as a consequence
of the Merger. This Agreement is intended to be and is adopted as a plan of
reorganization within the meaning of Section 368 of the Code.
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NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
agreements, representations, warranties and covenants herein contained, and
subject to the terms and conditions hereinafter set forth, the parties hereto
hereby agree in accordance with the California Corporations Code, the provisions
of the Agreement of Merger (as defined below), and the provisions of this
Agreement, that, at the Effective Time of the Agreement of Merger, Calnetics
shall be merged with and into Subsidiary, such that Subsidiary, as the
"Surviving Corporation" in the Merger, shall continue as a single corporation
existing under the laws of the State of California and as a wholly-owned
subsidiary of Summa, and the parties hereto hereby adopt and agree to the
following agreements, terms, and conditions relating to the Merger and the
manner of carrying the same into effect.
1. DEFINITIONS.
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1.1 "Agreement" means, and the words "herein", "hereof", "hereunder"
and words of similar import refer to this instrument and any and all exhibits,
schedules and other attachments hereto, and any amendment hereto.
1.2 "Agreement of Merger" refers to that certain document of even
date herewith, a copy of which is attached hereto as Exhibit A, the terms of
which are fully incorporated into, and the satisfaction of which is an express
condition of, this Agreement.
1.3 "Calnetics Balance Sheet" means the unaudited consolidated
balance sheet of Calnetics as of December 31, 1996 referred to in Section 6.6
hereof.
1.4 "Calnetics Common Stock" refers to any and all common stock,
without par value, of Calnetics.
1.5 "Calnetics Financial Statements" means the audited and unaudited
consolidated financial statements of Calnetics referred to in Section 6.6
hereof.
1.6 "Calnetics' Property" means any real property and improvements
owned, leased, used, operated or occupied by Calnetics.
1.7 "Calnetics Shareholders" refers collectively to any and all
holders of Calnetics Common Stock of record immediately prior to the Effective
Time.
1.8 "Commission" refers to the Securities and Exchange Commission.
1.9 "Debenture(s)" means the 5.5% Convertible Subordinated Debentures
to be issued to the Calnetics Shareholders as a consequence of the Merger as
provided in Section 3.1.1(a)(ii) below.
1.10 "Effective Date" means the date specified in Section 4.3 hereof.
1.11 "Effective Time" means that time specified in Section 4.3 hereof.
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1.12 "Environmental Law" means any federal, state, local or foreign
law, statute ordinance, rule, regulation, or treaty; all judicial
administrative, and regulatory orders, judgments, decrees, permits, and
authorizations; and common law relating to: (1) the protection, investigation,
remediation or restoration of the environment or natural resources, (2) the
handling, use, storage, treatment, disposal, release or threatened release of
any Hazardous Substance; or (3) noise, odor, pollution, contamination, land use,
or any injury or threat of injury to persons or property.
1.13 "Exchange Act" has the meaning set forth in Recital A hereto.
1.14 "Exchange Agent" means U. S. Stock Transfer Corporation, the
transfer agent and registrar for the Summa Common Stock.
1.15 "Hazardous Substance" means any substance, material, or waste
that is: (1) listed, classified or regulated in any concentration pursuant to
any Environmental Law; (2) any petroleum product or by-product, asbestos-
containing material, lead-containing paint or plumbing, polychlorinated
biphenyls, radioactive materials or radon; or (3) any other substance, material,
or waste which may be the subject of regulatory action by any governmental
entity pursuant to any Environmental Law.
1.16 "Joint Proxy Statement/Prospectus" means the joint proxy
statement of Summa and Calnetics and all supplements and amendments thereto,
mailed to shareholders of Summa and Calnetics in connection with the Merger.
1.17 "Knowledge" means, with respect to an entity, actual knowledge of
the Chief Executive Officer, the President, the Chief Financial Officer and/or
the Chief Administrative Officer of that entity and, with respect to an
individual, actual knowledge of that individual.
1.18 "Merger" has the meaning set forth in Recital C hereto.
1.19 "Options" means the outstanding options to purchase shares of
Calnetics Common Stock referred to in Section 6.2(a) hereof.
1.20 "Person" refers to any corporation, trust, partnership,
individual, association or other entity.
1.21 "Registration Statement" means the Registration Statement on Form
S-4 to be filed with the Commission by Summa under the Securities Act, and any
amendments thereto, for the purpose of registering the Summa Common Stock and
Debentures (including the Summa Common Stock issuable upon conversion of the
Debentures and upon exercise of options exchanged as provided in Section 10.6
below) to be issued in connection with the transactions contemplated by this
Agreement.
1.22 "Securities Act" refers to the Securities Act of 1933, as
amended.
1.23 "Subsidiary" has the meaning set forth in Recital C hereto.
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1.24 "Summa Balance Sheet" means the unaudited consolidated balance
sheet of Summa as of February 28, 1997 referred to in Section 7.6 hereof.
1.25 "Summa Common Stock" refers to any and all common stock, $.001
par value, of Summa.
1.26 "Summa Financial Statements" refers to the audited and unaudited
consolidated financial statements of Summa referred to in Section 7.6 hereof.
1.27 "Summa's Property" means any real property and improvements
owned, leased, used, operated or occupied by Summa.
1.28 "Summa Shareholders" refers to those holders of Summa Common
Stock of record immediately prior to the Effective Time.
1.29 "Surviving Corporation" refers to Subsidiary as the survivor of
the Merger.
2. THE SURVIVING CORPORATION.
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2.1 Surviving Corporation. The corporation which shall survive the
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Merger is Subsidiary (sometimes hereinafter referred to as the "Surviving
Corporation").
2.2 Articles of Incorporation. The Articles of Incorporation of
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Subsidiary, as in effect immediately before the Effective Time, shall be amended
upon consummation of the Merger to change the name of Subsidiary to "Calnetics
Corporation," and as so amended shall be the Articles of Incorporation of the
Surviving Corporation from and after the Effective Time until changed or amended
as provided by law or such Articles of Incorporation.
2.3 Authorized Capitalization of Surviving Corporation. The total
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number of shares of all classes of capital stock which the Surviving Corporation
shall have authority to issue shall be 1,000 shares of Common Stock, $.001 par
value per share.
2.4 Bylaws. The Bylaws of Subsidiary, as in effect immediately
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before the Effective Time, shall be the Bylaws of the Surviving Corporation
until changed or amended as provided in accordance with law, the Articles of
Incorporation of the Surviving Corporation, or such Bylaws.
2.5 Directors. There shall be (3) directors of the Surviving
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Corporation from and after the Effective Time (until changed in accordance with
applicable law and the Articles of Incorporation and Bylaws of the Surviving
Corporation), who shall be the three directors of Subsidiary in office
immediately before the Effective Time.
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3. CONVERSION OF SHARES, OPTIONS AND OTHER SECURITIES.
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3.1 Manner of Converting Shares. The manner and basis of converting
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securities of Calnetics into securities of Summa shall be as follows:
3.1.1 Calnetics Common Stock.
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(a) Subject in all events to the provisions of Sections 3.1.1(b) and
3.4 below, each share of Calnetics Common Stock outstanding on the Effective
Date shall, as a consequence of the Merger, be converted automatically into the
right to receive:
(i) The sum of $1.25 in cash;
(ii) The additional sum of $2.25, which shall be payable
pursuant to the terms and conditions of a Debenture in
the form of Exhibit A to the form of Indenture attached
as Exhibit B hereto; and
(iii) That portion of a share of Summa Common Stock as is
determined in accordance with the provisions of Section
3.1.1(c) below.
(b) Debentures will not be callable or otherwise redeemable at the
option of Summa during their term. Debentures will be issued in principal
denominations of $1,000 and integral multiples thereof, and holders of
Calnetics' Common Stock who would otherwise be entitled to receive a Debenture
in a principal amount of less than $1,000 will be entitled to receive such
amount, in lieu thereof and at their election to be made within 30 days
following the date of the Letter of Transmittal sent to each former shareholder
of Calnetics as provided in Section 3.2 below, either in cash or in additional
shares of Summa's Common Stock valued at the Average Trading Price (as defined
in Section 3.1.1(c) below), with cash in lieu of fractional shares as provided
in Section 3.3 below. Holders failing to make an election within this 30-day
period will be deemed to have elected to receive either additional shares of
Summa's Common Stock or cash, at the option of Summa.
(c) The portion of a share of Summa Common Stock which the former
Calnetics Shareholders shall be entitled to receive as a consequence of the
Merger for each share of Calnetics Common Stock held as of the Effective Time of
the Merger shall be determined by dividing $4.25 by the Average Trading Price of
a share of Summa Common Stock, but not less than .57 of a share nor more than
.77 of a share. For these purposes, the Average Trading Price will equal the
20-day average of the mean between the closing bid and asked prices for a share
of Summa's Common Stock on The Nasdaq National Market for each of the 20
consecutive trading days ending on the third trading day prior to the meeting of
Calnetics Shareholders to be held to consider and vote upon the Merger, as
provided in Section 8.6 below.
3.1.2 Options to Purchase Calnetics Common Stock. Each Option (as
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defined in Section 6.2(a) below) outstanding at the Effective Time shall be
canceled as of the Effective Time by agreements with the holder thereof to
accept, in the place thereof, an option to purchase
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1.167 shares of Summa Common Stock, at the same aggregate exercise price, all as
provided in Section 10.6 below.
3.1.3 Calnetics Common Stock Owned by Calnetics. Shares of Summa
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Common Stock shall not be issued as a consequence of the Merger in respect of
shares of Calnetics Common Stock owned by Calnetics immediately prior to the
Effective Time, if any, and as of the Effective Time any and all such shares of
Calnetics Common Stock owned by Calnetics shall be canceled and retired, and all
rights in respect thereof shall cease to exist.
3.2 Surrender and Exchange of Calnetics Common Stock.
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(a) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of Calnetics Common Stock
immediately prior to the Effective Time (excluding any shares of Calnetics
Common Stock which will be cancelled pursuant to Section 3.1.3 and any shares
which constitute Perfected Dissenting Shares pursuant to Section 3.4) a letter
of transmittal (the "Letter of Transmittal") stating that the Merger has been
consummated and setting forth instructions for use in effecting the surrender of
the shares of Calnetics Common Stock in exchange for the cash, Debenture and
shares of Summa Common Stock which all holders of shares of Calnetics Common
Stock are entitled to receive as a consequence of the Merger. An election form
shall accompany each Letter of Transmittal pursuant to which each holder may
elect within 30 days following the date of the Letter of Transmittal to receive
cash or additional shares of Summa Common Stock pursuant to the provisions of
Section 3.1.1(b) above.
(b) Upon surrender of a certificate formerly representing shares of
Calnetics Common Stock for cancellation to the Exchange Agent, together with a
Letter of Transmittal, duly executed, and such other documents as the Exchange
Agent shall reasonably request, the holder of such certificate shall be entitled
to receive in exchange therefor (i) a certified or bank cashier's check in the
amount equal to the cash which such holder has the right to receive pursuant to
the provisions of Sections 3.1.1(a)(i), 3.1.1(b) and 3.3, (ii) a Debenture in
the aggregate principal amount which such holder has a right to receive pursuant
to Section 3.1.1(a)(ii), and (iii) a certificate representing that number of
whole shares of Summa Common Stock which such holder has the right to receive
pursuant to Section 3.1.1(a)(iii) (in each case less the amount of any required
withholding taxes), and the certificate formerly representing shares of
Calnetics Common Stock so surrendered shall forthwith be cancelled. Until
surrendered as contemplated by this Section 3.2, each certificate formerly
representing shares of Calnetics Common Stock shall be deemed for all purposes
at any time after the Effective Time to evidence solely the right to receive the
cash, Debenture and number of whole shares of Summa Common Stock into which such
shares of Calnetics Common Stock have been converted under Section 3.1 hereof.
(c) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions declared after the Effective Time on Summa
Common Stock shall be paid with respect to any shares of Calnetics Common Stock
until the certificate formerly representing such shares is surrendered for
exchange as provided herein. Subject to the effect of applicable laws,
following surrender of any certificate formerly representing shares of Calnetics
Common Stock, there shall be paid to the holder of shares of Summa Common Stock
issued in exchange therefor, without interest, the amount of dividends or
other distributions with a record date after the Effective Time theretofore
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payable with respect to such whole shares of Summa Common stock and not paid,
less the amount of any withholding taxes which may be required thereon.
(d) From and after the Effective Time, there shall be no transfers on
the stock transfer books of Calnetics of the shares of Calnetics Common Stock
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing any such shares are presented to the
Surviving Corporation, they shall be cancelled and exchanged for certificates
for the consideration, if any, deliverable in respect thereof pursuant to this
Agreement and the Merger Agreement. Certificates formerly representing shares
of Calnetics Common Stock surrendered for exchange by any person constituting an
"affiliate" of Summa for purposes of Rule 145(c) under the Securities Act shall
not be exchanged until Summa has received an Affiliate Letter from such person
in the form set forth in Exhibit K attached hereto. In the event that any
certificate which formerly represented shares of Calnetics Common Stock shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such certificate to be lost, stolen or destroyed
and, if required by Summa, the posting by such person of a bond in such
reasonable amount as Summa may direct as indemnity against any claim that may be
made against it with respect to such certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed certificate the applicable Merger
consideration, cash in lieu of fractional shares, and unpaid dividends and
distributions on shares of Summa Common Stock as provided herein.
3.3 Fractional Shares. No fractional shares of Summa Common Stock
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and no scrip certificates therefor shall be issued to represent any fractional
share interests in shares of Summa Common Stock, and such fractional share
interest shall not entitle the owners thereof to vote, to receive dividends, or
to exercise any other right of shareholders of Summa. In lieu of a fractional
share or scrip certificate, each holder of a share of Calnetics Common Stock
otherwise entitled to a fractional interest in a share of Summa Common Stock
shall be entitled to receive a cash payment (without interest) in an amount
equal to the fraction of such share of Summa Common Stock to which such holder
otherwise would be entitled multiplied by the Average Trading Price determined
as provided in Section 3.1.1(c) above.
3.4 Dissenting Shares. Each Calnetics Shareholder, if any, and each
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Summa Shareholder, if any, who becomes entitled, pursuant to the provisions of
the California Corporations Code, to the payment in cash of the "fair market
value" of such Shareholder's shares of Calnetics Common Stock or Summa Common
Stock, as the case may be ("Perfected Dissenting Shares"), shall receive payment
therefor from Summa, but only after the value thereof shall have been agreed
upon or finally determined pursuant to such provisions. Perfected Dissenting
Shares acquired by Summa, if any, shall be canceled.
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4. SHAREHOLDER APPROVALS AND EFFECTIVE DATE.
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4.1 Approval by Calnetics Shareholders. As provided in Section 8.6
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below, a special meeting of the Calnetics Shareholders shall be called to be
held in accordance with the California Corporations Code on or before May 29,
1997, or as soon thereafter as is practicable, at a time, place and date to be
set by the Calnetics Board of Directors, for the purposes of considering and
voting upon a proposal to approve this Agreement and the Merger contemplated
hereby. The Board of Directors of Calnetics has recommended that the Calnetics
Shareholders approve this Agreement and the Merger.
By signing this Agreement where indicated on the signature page
hereof, each shareholder of Calnetics who owns or has voting control over 10% or
more of the Common Stock of Calnetics issued and outstanding as of the date
hereof has agreed, subject to the terms and conditions of this Agreement, to
vote all such shares in favor of this Agreement and the Merger at the special
meeting of Calnetics Shareholders .
4.2 Approval by Summa Shareholders and Summa. As provided in Section
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8.7 below, a special meeting of the Summa Shareholders shall be called to be
held in accordance with the California Corporations Code on or before May 29,
1997, or as soon thereafter as is practicable, at a time, place and date to be
set by the Summa Board of Directors, for the purposes of considering and voting
upon a proposal to approve the Agreement of Merger, the Merger and the other
transactions (including the issuance of Summa Common Stock) contemplated
thereby. The Summa Board of Directors has recommended that the Summa
shareholders approve the Agreement of Merger, the Merger and the other
transactions (including the issuance of Summa Common Stock) contemplated
thereby. Summa, as the sole shareholder of Subsidiary, shall approve the
Agreement of Merger, the Merger and the other transactions contemplated
thereby.
4.3 Effective Date and Time. Upon approval of this Agreement and the
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Merger contemplated hereby by the Calnetics Shareholders, the Summa
Shareholders, and Summa as the sole shareholder of Subsidiary, and provided that
the Merger is not thereafter terminated as provided in Section 13 hereof, the
Agreement of Merger, along with any and all other necessary documents, shall be
executed and delivered by each of Calnetics, Summa and Subsidiary and filed with
the California Secretary of State, in accordance with applicable provisions of
the California Corporations Code. The Merger shall become effective on the
date when the Agreement of Merger, along with any and all other necessary
documents, has been duly filed with the California Secretary of State. The date
of such effectiveness is referred to herein as the "Effective Date," and the
time of such effectiveness is referred to herein as the "Effective Time."
Calnetics and Summa shall agree upon the date on which the Agreement of Merger
shall be submitted for filing in the State of California.
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5. EFFECT OF MERGER.
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5.1 Cessation of Calnetics' Existence. When the Merger becomes
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effective, Calnetics shall be merged with and into Subsidiary, the separate
existence of Calnetics shall cease, and Subsidiary, as the Surviving Corporation
in the Merger, without further action, shall succeed to and shall possess and
enjoy all the rights, privileges, immunities, powers, purposes, and franchises,
both of a public and private nature, and be subject to all restrictions,
disabilities, and duties of Calnetics, and the Merger shall have the effects on
Calnetics and Subsidiary as provided under the California Corporations Code.
5.2 Property. All rights, franchises and interest of Calnetics in
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and to every type of property, whether real, personal or mixed, and all debts
due to Calnetics on whatever account, including stock subscriptions and causes
of action, and every other asset of Calnetics, shall be vested in the Surviving
Corporation. All such property, rights, privileges, powers and franchises shall
be thereafter the property of the Surviving Corporation. Title to any real
estate and to any other property, whether by deed or otherwise, under the laws
of the State of California or of any other jurisdiction, that is vested in
Calnetics shall not revert or be in any way impaired by reason of the Merger or
the statutes providing therefor.
5.3 Creditor Rights. All rights of creditors and all liens upon the
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property of Calnetics existing immediately prior to the Effective Time shall be
preserved unimpaired, and all debts, liabilities, obligations, penalties and
duties of Calnetics shall thenceforth attach to the Surviving Corporation, and
may be enforced against it to the same extent as if they had been incurred or
contracted by it. No liability or obligation due or to become due, nor any
claim or demand existing against either corporation or any shareholder, officer
or director thereof, shall be impaired by the Merger.
5.4 Legal Actions. No action or proceeding, whether civil or
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criminal, pending on the Effective Date by or against either corporation, or any
shareholder, officer, or director thereof, shall ▇▇▇▇▇ or be discontinued by the
Merger, but may be enforced, prosecuted, settled, or compromised as if the
Merger had not occurred, or the Surviving Corporation may be substituted in such
action or proceeding in place of Calnetics.
5.5 Delivery of Documents. At any time, or from time to time, after
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the Effective Date, the last acting officers of Calnetics, or the corresponding
officers of the Surviving Corporation, may, in the name of the Surviving
Corporation, execute and deliver all such proper deeds, assignments, and other
instruments and take or cause to be taken all such further or other action as
the Surviving Corporation may deem necessary or desirable in order to vest,
perfect or confirm in the Surviving Corporation title to and possession of all
of Calnetics' property, rights, privileges, immunities, powers, purposes and
franchises, and otherwise to carry out the purposes of this Agreement.
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6. REPRESENTATIONS AND WARRANTIES OF CALNETICS.
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Calnetics hereby represents and warrants to Summa and Subsidiary as
follows (it being acknowledged that Summa is entering into this Agreement in
material reliance upon each of the following representations and warranties):
6.1 Organization and Corporate Power. Calnetics is a corporation
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duly organized, validly existing and in good standing under the laws of the
State of California, and is duly qualified and in good standing to do business
as a foreign corporation in each jurisdiction in which such qualification is
required and where the failure to be so qualified would have a materially
adverse effect upon Calnetics. Calnetics has all requisite corporate power and
authority to conduct its business as now being conducted and to own and lease
the properties which it now owns and leases. The Articles of Incorporation, as
amended to date, certified by the California Secretary of State, the Bylaws of
Calnetics, as amended to date, and the resolutions of Calnetics' Board of
Directors authorizing the execution, delivery and performance of this Agreement,
all certified by the Secretary of Calnetics, which have previously been provided
to Summa by Calnetics, are true and complete copies thereof as currently in
effect.
6.2 Capitalization.
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(a) The authorized capital stock of Calnetics consists of 20,000,000
shares of Calnetics Common Stock and 2,000,000 shares of preferred stock,
without par value. As of the date hereof, there are 3,023,799 shares of
Calnetics Common Stock issued and outstanding. All of the issued and
outstanding shares of Calnetics Common Stock were validly issued and are fully
paid, nonassessable and free of preemptive rights. In addition, there are
currently outstanding options to purchase from Calnetics an aggregate of 240,000
additional shares of Calnetics Common Stock (the "Options"). Set forth on
Exhibit C attached hereto is a full and complete listing setting forth the name
and address of each holder of all Options that are outstanding as of the date
hereof, the number of shares subject to each such Option, and the exercise price
relating thereto.
(b) Except expressly set forth in Section 6.2(a) above and on Exhibit
C attached hereto, there are no warrants, options, calls, commitments or other
rights to subscribe for or to purchase from Calnetics any capital stock of
Calnetics or any securities convertible into or exchangeable for any shares of
capital stock of Calnetics, or any other securities or agreements pursuant to
which Calnetics is or may become obligated to issue any shares of its capital
stock, nor is there outstanding any commitment, obligation or agreement on the
part of Calnetics to repurchase, redeem or otherwise acquire any of the
outstanding shares of its capital stock.
6.3 Authorization; Government Approvals. Calnetics has full
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corporate power and authority to enter into, execute and deliver this Agreement,
to execute all attendant documents and instruments necessary to consummate the
transactions herein contemplated, and to perform its obligations hereunder,
subject to receipt of the requisite approval of the Calnetics Shareholders.
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This Agreement (and each and every other agreement, document and instrument to
be executed by Calnetics hereunder) has been effectively authorized by all
necessary action on the part of the Board of Directors of Calnetics, which
authorizations remain in full force and effect, has been duly executed and
delivered by Calnetics, and no other authorizations or proceedings on the part
of Calnetics are required to authorize this Agreement and/or the transactions
contemplated hereby, except for receipt of the requisite approval of the
Calnetics Shareholders. This Agreement constitutes the legal, valid and binding
obligation of Calnetics, subject to receipt of the requisite approval of the
Calnetics Shareholders, enforceable with respect to Calnetics in accordance with
its terms, except as enforcement hereof may be limited by bankruptcy,
insolvency, reorganization, priority or other laws or court decisions relating
to or affecting generally the enforcement of creditors' rights or affecting
generally the availability of equitable remedies. Other than in connection with
the filing of the Agreement of Merger with the California Secretary of State and
related assumption of tax liabilities, proceedings with the Commission, and the
proceedings contemplated by Section 8.6 hereof, no authorization, consent or
approval of any public body or authority is necessary for the consummation by
Calnetics of the transactions contemplated by this Agreement.
6.4 No Conflicts. Except as disclosed on the Calnetics Disclosure
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Schedule attached hereto as Exhibit D, neither the execution and delivery of
this Agreement, nor the consummation by Calnetics of any of the transactions
contemplated hereby, nor compliance by Calnetics with any of the provisions
hereof, will (i) conflict with or result in a breach of, violation of, or
default under any of the terms, conditions or provisions of any note, debenture,
bond, mortgage, indenture, license, lease, credit agreement or other agreement,
document, instrument or obligation (including, without limitation, any of
Calnetics' charter documents) to which Calnetics is a party or by which any of
its assets or properties may be bound, or (ii) violate any judgment, order,
injunction, decree, statute, rule or regulation applicable to Calnetics or any
of its officers, directors, employees, assets or properties, excluding from the
foregoing clauses (i) and (ii) any conflicts, breaches, violations or defaults
that would not have a materially adverse affect on Calnetics or materially
impair Calnetics' ability to consummate the transactions contemplated hereby, or
for which Calnetics shall have received before the Effective Time appropriate
consents or waivers.
6.5 Subsidiaries. Calnetics has no subsidiaries and no investments,
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directly or indirectly, or other financial interest in any other corporation or
business organization, joint venture or partnership of any kind whatsoever
except as reflected in the Calnetics Financial Statements (defined in Section
6.6 below) or as shown on the Calnetics Disclosure Schedule.
6.6 Financial Statements. Attached hereto as Exhibit E are (i) the
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audited consolidated financial statements of Calnetics for each of its fiscal
years ended June 30, 1994, 1995 and 1996, consisting of balance sheets as of
such dates, the related statements of income for the periods then ended, and the
notes thereto, certified by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, and (ii) unaudited consolidated
financial statements of Calnetics for the 6 months ended December 31, 1996,
consisting of the balance sheet as of such date (the "Calnetics Balance
Sheet"), the related
11
statement of income for the period then ended, and the notes thereto, certified
by the chief financial officer of Calnetics. Such financial statements (and the
notes related thereto) are herein sometimes collectively referred to as the
"Calnetics Financial Statements." The Calnetics Financial Statements (i) are
derived from the books and records of Calnetics, which books and records have
been consistently maintained in a manner which reflects, and such books and
records do fairly reflect in all material respects, the assets and liabilities
of Calnetics, (ii) fairly present in all material respects the financial
condition of Calnetics on the respective dates of such statements and the
results of its operations for the periods indicated, except as may be disclosed
in the notes thereto, and (iii) have been prepared in all material respects in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved (except for footnote disclosures to the
unaudited financial statements and as otherwise disclosed in the notes thereto).
6.7 Absence of Undisclosed Liabilities. Except as and to the extent
----------------------------------
reflected or reserved against in the Calnetics Balance Sheet, and as to matters
arising in the ordinary course of its business since the date of the Calnetics
Balance Sheet that are disclosed in the Calnetics Disclosure Schedule, Calnetics
has no liability or obligation (whether accrued, to become due, contingent or
otherwise) which individually or in the aggregate could have a materially
adverse effect on the business, assets or condition (financial or otherwise) of
Calnetics.
6.8 Absence of Certain Developments. Except as set forth in the
-------------------------------
Calnetics Disclosure Schedule, since the date of the Calnetics Balance Sheet
there has been (i) no declaration, setting aside or payment of any dividend or
other distribution with respect to any capital stock of Calnetics, no
redemption, purchase or other acquisition of any shares of Calnetics' capital
stock, and no split-up or other recapitalization relative to any of such capital
stock, nor any action authorizing or obligating Calnetics to do any of the
foregoing; (ii) no loss, destruction or damage to any material property or asset
of Calnetics, whether or not insured; (iii) no acquisition or disposition of
material assets (or any contract or arrangement therefor) or any other material
transaction by Calnetics, otherwise than for fair value and in the ordinary
course of business; (iv) no discharge or satisfaction by Calnetics of any lien
or encumbrance or payment of any material obligation or liability (absolute or
contingent) other than current liabilities shown on the Calnetics Balance Sheet,
or current liabilities incurred since the date thereof in the ordinary course of
business, (v) no sale, assignment or transfer by Calnetics of any of its
tangible or intangible assets including any security interest or other
encumbrance, or waiver by Calnetics of any rights of value which, in any such
case, is outside the ordinary course of business and material to the business of
Calnetics; (vi) no payment or accrual (except consistent with past practices) of
any bonus to or change in the compensation of any director, officer or employee,
whether directly or by means of any bonus, pension plan, contract or commitment;
(vii) no write-off or material reduction in the carrying value of any asset
which is material to the business of Calnetics; (viii) no disposition or lapse
of rights as to any intangible property which is material to the business of
Calnetics; (ix) except for ordinary travel advances, no loans or extensions of
credit to shareholders, officers, directors or employees of Calnetics; (x) no
loss of a customer of or supplier to Calnetics the loss of which could
reasonably be expected to materially adversely affect Calnetics; (xi) no
agreement
12
to do any of the things described in this Section 6.8, or (xii) no materially
adverse change in the condition (financial or otherwise) of Calnetics or in its
assets, liabilities, properties or business.
13
6.9 Real Property. Set forth in the Calnetics Disclosure Schedule is
-------------
a complete and accurate description of each parcel of real property owned by or
leased to and occupied by Calnetics, and Calnetics neither owns or leases, nor
occupies, any other real property. Except as would be disclosed in a reasonably
diligent inspection, to Calnetics' Knowledge, the buildings and all fixtures and
improvements located on such real property are in good operating condition,
ordinary wear and tear excepted. To Calnetics Knowledge, Calnetics is not in
violation of any zoning, building or safety ordinance, regulation or requirement
or other law or regulation applicable to the operation of owned or leased
properties, the violation of which could reasonably be expected to have a
material adverse affect upon Calnetics, its condition (financial or otherwise),
assets, liabilities, properties or business, and Calnetics has not received any
notice of violation with which it has not complied or is not taking steps to
comply. Calnetics has good and marketable title to all such real property owned
by Calnetics, free and clear of all liens, mortgages, encumbrances, easements,
leases, restrictions and claims of any kind whatsoever except for (i) those
matters shown on the Calnetics Disclosure Schedule, (ii) liens for taxes and tax
assessments not yet due and payable; and (iii) mechanics' or similar liens for
materials or services furnished or to be furnished after the date hereof. All
leases of real property to which Calnetics is a party are fully effective in
accordance with their respective terms and afford Calnetics peaceful and
undisturbed possession of the subject matter of the lease, and there exists no
material default on the part of Calnetics or termination thereof, except as may
be set forth in the Calnetics Disclosure Schedule.
6.10 Tangible Personal Property. Set forth in the Calnetics
--------------------------
Disclosure Schedule hereto is a complete list of all items of tangible personal
property (including without limitation all items of tooling) owned, leased or
otherwise used by Calnetics in the current conduct of its business, wherever
located, where the original cost was in excess of $50,000.00. Except as set
forth in the Calnetics Disclosure Schedule, Calnetics has, and at the Effective
Date will have, good and marketable title to, or in the case of leased equipment
a valid leasehold interest in, and is in the possession of, all such items of
personal property owned or leased by it, free and clear of all title defects,
mortgages, pledges, security interests, condition sales agreements, liens,
restrictions or encumbrances whatsoever. Included in the Calnetics Disclosure
Schedule is a list of all outstanding equipment leases and maintenance
agreements to which Calnetics is a party as lessee and which individually
provide for future lease payments in excess of $5,000 per month, with the
identities of the other parties to all such leases and agreements shown thereon.
All leases of tangible personal property to which Calnetics is a party and which
are material to the business of Calnetics are fully effective in accordance with
their respective terms, and there exists no material default on the part of
Calnetics or termination thereof, except as may be set forth in the Calnetics
Disclosure Schedule. Each item of capital equipment reflected in the Calnetics
Balance Sheet which is used in the current conduct of Calnetics' business is in
good operating and usable condition and repair, ordinary wear and tear excepted,
and is suitable for use in the ordinary course of Calnetics' business and fit
for its intended purposes, except as may be set forth in the Calnetics
Disclosure Schedule.
14
6.11 Tax Matters. Calnetics has, since its inception, duly filed and
-----------
timely all federal, state, county and local tax returns required to have been
filed by it in those jurisdictions where the nature or conduct of its business
required such filing and where the failure to so file would be materially
adverse to Calnetics. Copies of all tax returns for the past three years have
been made available for inspection by Summa prior to the execution hereof. All
federal, state, county and local taxes, including but not limited to those taxes
due with respect to Calnetics' properties, income, gross receipts, excise,
occupation, franchise, permit, licenses, sales, payroll, and inventory due and
payable as of the date of the Effective Date by Calnetics have been paid or
validly extended. The amount reflected in the Calnetics Balance Sheet as
liabilities or reserves for taxes which are due but not yet payable is
sufficient for the payment of all accrued and unpaid taxes of the types referred
to hereinabove. No consent to the application of Section 341(f)(2) of the
Internal Revenue Code of 1986, as amended, has been filed with respect to
Calnetics.
6.12 Accounts Receivable. The accounts receivable reflected in the
-------------------
Calnetics Balance Sheet constituted all accounts receivable of Calnetics as of
the date thereof, other than accounts receivable fully written off as
uncollectible as of such date in accordance with consistently applied prior
practice. All such accounts receivable arose from valid sales made (as opposed
to consignments) or services rendered in the ordinary course of business, and
are not subject to any return privileges, set-off or counter-claim, except as
disclosed on the Calnetics Disclosure Schedule. Except as disclosed on the
Calnetics Disclosure Schedule, such accounts receivable have been collected in
full since the date of the Calnetics Balance Sheet or, to Calnetics' Knowledge,
are collectible at their full respective amounts (net of allowance for doubtful
accounts established in accordance with consistently applied prior practice).
Based upon the prior experience of Calnetics, the "allowance for doubtful
accounts" shown on the Calnetics Balance Sheet is sufficient to cover all
doubtful accounts.
6.13 Inventories. Calnetics has good and marketable title to all of
-----------
its inventories of raw materials, work-in-process and finished goods, including
models and samples, free and clear of all security interests, liens, claims and
encumbrances, except as set forth in the Calnetics Disclosure Schedule. All
such inventories consist of items that are usable and salable in the ordinary
course of business of Calnetics for an amount at least equal to the book value
thereto, plus the costs of disposition thereof, and represent quantities,
individually and in the aggregate, not in excess of one year's requirements for
its business as currently conducted, except as may be set forth in the Calnetics
Disclosure Schedule.
6.14 Contracts and Commitments. Calnetics has no contract, agreement,
-------------------------
obligation or commitment, written or oral, expressed or implied, which involves
a commitment or liability in excess of $100,000 or for a term of more than one
year or whose terms do not permit cancellation without liability on 90 days'
notice or less (other than obligations which are included in accounts payable),
and no union contracts, employee or consultant contracts, loan, credit or other
financing agreements, inventory flooring arrangements, debtor or creditor
arrangements, security agreements, licenses, franchise, manufacturing,
distributorship or dealership agreements, leases, or bonus, health or stock
option plans, except for those described in the Calnetics
15
Disclosure Schedule, all of which have been made available to Summa prior to the
execution hereof. As of the date hereof, to Calnetics' Knowledge, there exists
no circumstances which would affect the validity or enforceability of any of
such contracts and other agreements in accordance with their respective terms.
Except as set forth in the Calnetics Disclosure Schedule, Calnetics has
performed and complied in all material respects with all obligations required to
be performed by it to date under, and is not in default (without giving effect
to any required notice or grace period) under, or in breach of, the terms,
conditions or provisions of any of such contracts and other agreements. Except
as set forth in the Calnetics Disclosure Schedule, the validity and
enforceability of any contract or other agreement described herein has not been
and shall not in any manner be affected by the execution and delivery of this
Agreement without any further action. Except as set forth in the Calnetics
Disclosure Schedule, Calnetics has no material contract, agreement, obligation
or commitment which requires or will require future expenditures (including
internal costs and overhead) in excess of reasonably anticipated receipts, nor
which is likely to be materially adverse to Calnetics' business, assets or
condition (financial and otherwise).
6.15 Patents, Trade Secrets and Customer Lists. Except as set forth
-----------------------------------------
in the Calnetics Disclosure Schedule, Calnetics does not have any patents,
applications for patents, trademarks, applications for trademarks, trade names,
brand names, licenses or service marks relating to the business of Calnetics,
nor does any present or former shareholder, officer, director or employee of
Calnetics own any patent rights relating to any products manufactured, rented or
sold by Calnetics. Except as set forth in the Calnetics Disclosure Schedule, to
the Knowledge of Calnetics, Calnetics has the unrestricted right to use, free
and clear of any claims or rights of others, all trade secrets, customer lists,
manufacturing and secret processes, trademarks, trade names, brand names,
licenses and service marks reasonably necessary to the manufacturing and
marketing of all products made or proposed to be made by Calnetics, and, to the
Knowledge of Calnetics, the continued use thereof by Calnetics following the
Effective Date will not conflict with, infringe upon, or otherwise violate any
rights of others. To Calnetics' Knowledge, Calnetics has not used and is not
making use of any confidential information or trade secrets of any present or
past employee of Calnetics that has not been assigned to Calnetics or that
Calnetics does not have the right to use.
6.16 No Pending Material Litigation or Proceedings. Except as set
---------------------------------------------
forth in the Calnetics Disclosure Schedule, there are no actions, suits or
proceedings pending or, to Calnetics' Knowledge, threatened against or directly
affecting Calnetics (including actions, suits or proceedings where liabilities
may be adequately covered by insurance) at law or in equity or before or by any
federal, state, municipal or other governmental department, commission, court,
board, bureau, agency or instrumentality, domestic or foreign, or affecting any
of the shareholders, officers or directors of Calnetics in connection with the
business, operations or affairs of Calnetics, which could reasonably be expected
to result in any material adverse change in the business, properties, assets or
condition (financial or otherwise) of Calnetics, or which question or challenge
the transaction contemplated hereby. Except as set forth in the Calnetics
Disclosure Schedule, to Calnetics' Knowledge, Calnetics has not, during the past
three years, been threatened with any action, suit, proceedings or claim
(including actions, suits, proceedings or claims where
16
its liabilities may be adequately covered by insurance) for personal injuries
allegedly attributable to products sold or services performed by Calnetics
asserting a particular defect or hazardous property in any of Calnetics'
products, services or business practices or methods, nor has Calnetics been a
party to or threatened with proceedings brought by or before any federal or
state agency; and Calnetics has no Knowledge of any defect or hazardous
property, claimed or actual, in any such product, service, business practice or
method. Calnetics is not subject to any voluntary or involuntary proceeding
under the United States Bankruptcy Code and has not made an assignment for the
benefit of creditors.
6.17 Insurance. Calnetics maintains insurance with reputable
---------
insurance companies on such of its equipment, tools, machinery, inventory and
properties as are usually insured by companies similarly situated in the same
geographic location and to the extent customarily insured, and maintains
products and personal liability insurance, and such other insurance against
hazards, risks and liability to persons and property as is customary for
companies similarly situated in the same geographic location. A true and
complete listing and general description of each of Calnetics' insurance
policies as currently in force, including all policies of group medical and/or
dental insurance, is set forth in the Calnetics Disclosure Schedule, copies of
all of which have previously been made available to Summa. All such insurance
policies currently are in full force and effect.
6.18 Arrangements with Personnel. Except as set forth in the
---------------------------
Calnetics Disclosure Schedule, no shareholder, director, officer or employee of
Calnetics is presently a party to any transaction with Calnetics, including
without limitation any contract, loan or other agreement or arrangements
providing for the furnishing of services by, the rental of real or personal
property from or to, or otherwise requiring loans or payments to, any such
shareholder, director, officer or employee, or to any member of the family of
any of the foregoing, or to Calnetics' Knowledge, to any corporation,
partnership, trust or other entity in which any shareholder, director, officer
or employee or any member of the family of any of them has a substantial
interest or is an officer, director, trustee, partner or employee. There is set
forth in the Calnetics Disclosure Schedule a list showing (i) the name, title,
date and amount of last compensation increase, and aggregate compensation,
including amounts paid or accrued pursuant to any bonus, pension, profit
sharing, commission, deferred compensation or other plans or arrangements in
effect as of the date of this Agreement, of each officer or employee of
Calnetics whose salary and other compensation, in the aggregate, received from
Calnetics or accrued is at an annual rate (or aggregated for the most recently
completed fiscal year) in excess of $100,000, as well as any employment and/or
severance agreements relating to any such persons; (ii) a description of any and
all bonus, pension, profit sharing, commission, deferred compensation or other
plans or arrangements in effect for any of Calnetics' employees as of the date
of this Agreement; (iii) a description of any noncompetition or similar
agreements to which Calnetics or any shareholder, director, officer or employee
of Calnetics is a party; (iv) all powers of attorney from Calnetics to any
person or entity; and (v) the name of each person or entity authorized to borrow
money or incur or guarantee indebtedness on behalf of Calnetics. Calnetics has
made available to Summa copies of all written personnel policies, including
without limitation vacation, severance, bonus, profit sharing and commission
17
policies, applicable to any of Calnetics' employees. Neither the execution and
delivery of this Agreement by Calnetics, nor the consummation by Calnetics of
any of the transactions contemplated hereby, or compliance by Calnetics with any
of the provisions hereof, shall create any obligation or liability on the part
of Calnetics under any bonus, profit sharing, deferred compensation of other
plan or arrangement in effect as of the date of this Agreement, other than the
vesting of certain outstanding options.
6.19 Labor Relations. Except as set forth in the Calnetics Disclosure
---------------
Schedule, Calnetics has never been a party to any collective bargaining
agreement or other contract with a labor union, nor, to Calnetics' Knowledge, is
any union, labor organization or group of employees of Calnetics presently
seeking the right to enter into collective bargaining with Calnetics on behalf
of any of its employees.
6.20 Bank Accounts. All bank and savings accounts, and other accounts
-------------
at similar financial institutions, of Calnetics are listed in the Calnetics
Disclosure Schedule, and copies of all signature cards or other documentation
reflecting all individuals who are authorized to withdraw funds from any such
accounts have been made available to Summa.
6.21 Absence of Questionable Payments. Neither Calnetics nor, to
--------------------------------
Calnetics' Knowledge, any shareholder, director, officer, agent, employee,
consultant or other person associated with or acting on behalf of any of them,
has (i) used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any direct or indirect unlawful payments to governmental officials or
others from corporate funds, engaged in any payments or activity which would be
deemed a violation of the Foreign Corrupt Practices Act or rules or regulations
promulgated thereunder, or (iii) established or maintained any unlawful or
unrecorded accounts.
6.22 Compliance with Laws. Calnetics holds all licenses, franchises,
--------------------
permits and authorizations necessary for the lawful conduct of its business as
presently conducted, has complied with all applicable statutes, laws,
ordinances, rules and regulations of all governmental bodies, agencies and
subdivisions having, asserting or claiming jurisdiction over it, with respect to
any part of the conduct of its business and corporate affairs, where the failure
to so hold or comply could reasonably be expected to have a material adverse
affect upon Calnetics' condition (financial or otherwise), business, assets or
properties.
6.23 Environmental Matters.
---------------------
(a) To the Knowledge of Calnetics, except as set forth on the
Calnetics Disclosure Schedule:
(i) Calnetics has complied with all applicable Environmental
Laws;
(ii) Calnetics' Property (including soils, groundwater, surface
water, buildings or other structures) is not contaminated with any Hazardous
Substances that may subject Summa to liability under any Environmental Law;
18
(iii) the properties formerly owned or operated by Calnetics
were not contaminated with Hazardous Substances during the period of ownership
or operation by Calnetics that may subject Calnetics to liability under any
Environmental Law;
(iv) Calnetics is not subject to liability under any
Environmental Law for any Hazardous Substance disposal or contamination on any
third party property;
(v) Calnetics has not been associated with any release or threat
of release of any Hazardous Substance that may subject Calnetics to liability
under any Environmental Law;
(vi) Calnetics has not received any notice, demand, letter,
claim or request for information alleging that Calnetics may be in violation of,
or liable under, any Environmental Law;
(vii) Calnetics is not subject to any orders, decrees,
injunctions or other arrangements with any governmental entity, nor is subject
to any indemnity or other agreement with any third party relating to liability
under any Environmental Law or relating to Hazardous Substances;
(viii) there are no circumstances or conditions involving
Calnetics that could reasonably be expected to result in any claims, liability,
investigations, costs or restrictions on the ownership, use or transfer of any
of Calnetics' Property pursuant to any Environmental Law; and
(ix) Calnetics' Property does not contain any underground
storage tanks, asbestos-containing material, lead-based products, or
polychlorinated biphenyls.
6.24 Relationships with Customers and Suppliers. Except as set forth
------------------------------------------
in the Calnetics Disclosure Schedule, no present customer or substantial
supplier to Calnetics has indicated an intention to terminate or materially and
adversely alter its existing business relationship therewith, and Calnetics has
no reason to believe that any of the present customers of or substantial
suppliers to Calnetics intends to do so, other than, in each such case, any
customer or substantial supplier the loss of which could not reasonably be
expected to materially adversely affect Calnetics.
6.25 Brokerage. Except as set forth in the Calnetics Disclosure
---------
Schedule, Calnetics has no obligation to any person or entity for brokerage
commissions, finder's fees or similar compensation in connection with the
transactions contemplated by this Agreement.
6.26 Reports Under the Exchange Act. The Calnetics Common Stock is
------------------------------
registered under Section 12(g) of the Exchange Act. Accordingly, Calnetics is
subject to the information requirements of the Exchange Act, and in accordance
therewith files reports and other information with the Commission. Since
January 1, 1992, Calnetics has filed with the Commission on a timely basis all
such reports which Calnetics has been required to file under the Exchange Act.
Calnetics has made available to Summa accurate and complete copies of each
registration statement, report, proxy statement, information statement or
schedule, together with all amendments thereto, that were required to be filed
with the SEC by Calnetics since January 1, 1992 (the "Calnetics SEC
19
Documents"). As of their respective dates, the Calnetics SEC Documents complied
in all material respects with the applicable requirements of the Securities Act
and the Exchange Act, as the case may be, and none of the Calnetics SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were or are
made, not misleading.
6.27 Disclosure. Neither this Agreement nor any certificate, exhibit,
----------
or other written document or statement, furnished to Summa by or on behalf of
Calnetics in connection with the transactions contemplated by this Agreement
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact necessary to be stated in order to make the
statements contained herein or therein, in the light of the circumstances in
which they were made, not misleading. Calnetics has no Knowledge of any fact
which has not been disclosed in writing to Summa which may reasonably be
expected to materially and adversely affect the business, operations,
properties, assets, condition (financial or other), and/or results of operations
of Calnetics or the ability of Calnetics to perform all of the obligations to be
performed by Calnetics under this Agreement and/or any other agreement between
Summa and Calnetics to be entered into pursuant to any provision of this
Agreement.
7. REPRESENTATIONS AND WARRANTIES OF SUMMA.
---------------------------------------
Summa represents and warrants to Calnetics as follows (it being
acknowledged and agreed that Calnetics is entering into this Agreement in
material reliance upon each of the following representations and warranties):
7.1 Organization and Corporate Power. Summa is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
California, and is duly qualified and in good standing to do business as a
foreign corporation in each jurisdiction in which such qualification is required
and where the failure to be so qualified would have a materially adverse effect
upon Summa. Summa has all requisite corporate power and authority to conduct
its business as now being conducted and to own and lease the properties which it
now owns and leases. The Articles of Incorporation, as amended to date,
certified by the Secretary of State of California, and the Bylaws of Summa, as
amended to date, and the resolutions of Summa's Board of Directors authorizing
the execution, delivery and performance of this Agreement, all certified by the
Secretary of Summa, which have previously been provided to Calnetics by Summa,
are true and complete copies thereof as currently in effect. Subsidiary will be
organized prior to the Effective Time as a duly organized and validly existing
California corporation in good standing under the laws of the State of
California, all of whose capital stock will be issued to and owned, beneficially
and of record, by Summa.
7.2 Capitalization. The authorized capital stock of Summa consists
--------------
of 10,000,000 shares of Summa Common Stock and 5,000,000 shares of preferred
stock, $.001 par value. As of the date hereof, there are 4,070,250 shares of
Summa Common Stock outstanding, and no
20
shares of preferred stock have been issued or are outstanding. In addition,
there are currently outstanding options and warrants to purchase from Summa an
aggregate of 470,721 additional shares of Summa Common Stock. Except expressly
set forth hereinabove, there are no warrants, options, calls, commitments or
other rights to subscribe for or to purchase from Summa any capital stock of
Summa or any securities convertible into or exchangeable for any shares of
capital stock of Summa, or any other securities or agreements pursuant to which
Summa is or may become obligated to issue any shares of its capital stock, nor
is there outstanding any commitment, obligation or agreement on the part of
Summa to repurchase, redeem or otherwise acquire any of the outstanding shares
of its capital stock.
7.3 Authorization; Government Approvals. Summa has full corporate
-----------------------------------
power and authority to enter into, execute and deliver this Agreement, to
execute all attendant documents and instruments necessary to consummate the
transactions herein contemplated, and to perform its obligations hereunder,
subject to receipt of the requisite approval of the Summa Shareholders. This
Agreement (and each and every other agreement, document and instrument to be
executed by Summa hereunder) has been effectively authorized by all necessary
action on the part of the Board of Directors of Summa, which authorizations
remain in full force and effect, has been duly executed and delivered by Summa,
and no other authorizations or proceedings on the part of Summa are required to
authorize this Agreement and/or the transactions contemplated hereby, except for
receipt of the requisite approval of the Summa Shareholders. This Agreement
constitutes the legal, valid and binding obligation of Summa, subject to receipt
of the requisite approval of the Summa Shareholders, enforceable with respect to
Summa in accordance with its terms, except as enforcement hereof may be limited
by bankruptcy, insolvency, reorganization, priority or other laws or court
decisions relating to or affecting generally the enforcement of creditors'
rights or affecting generally the availability of equitable remedies. Other
than in connection with the filing of the Agreement of Merger with the
California Secretary of State, proceedings with the Commission, and the
proceedings specified in Section 8.7 below, no authorization, consent or
approval of any public body or authority is necessary for the consummation by
Summa of the transactions contemplated by this Agreement.
7.4 No Conflicts. Except as disclosed on the Summa Disclosure
------------
Schedule attached hereto as Exhibit F, neither the execution and delivery of
this Agreement, nor the consummation by Summa of any of the transactions
contemplated hereby, or compliance with any of the provisions hereof, will (i)
conflict with or result in a breach of, violation of, or default under any of
the terms, conditions, or provisions of any note, debenture, bond, mortgage,
indenture, license, lease, credit agreement or other agreement, document,
instrument or obligation (including, without limitation, any of Summa's charter
documents) to which Summa is a party or by which any of its assets or properties
may be bound, or (ii) violate any judgment, order, injunction, decree, statute,
rule or regulation applicable to Summa or any of its officers, directors,
employees, assets or properties, excluding from the foregoing clauses (i) and
(ii) any conflicts, breaches, violations or defaults that would not have a
materially adverse affect on Summa or materially impair Summa's ability to
consummate the transactions contemplated hereby, or for which Summa shall have
received before the Effective Time appropriate consents or waivers.
21
7.5 Subsidiaries. Summa has no subsidiaries and no investments,
------------
directly or indirectly, or other financial interest in any other corporation or
business organization, joint venture or partnership of any kind whatsoever
except as reflected in the Summa Financial Statements (defined in Section 7.6
below) or as shown on the Summa Disclosure Schedule. Prior to the Effective
Time, Subsidiary will be organized as a California corporation whose capital
stock is wholly-owned by Summa.
7.6 Financial Statements. Attached hereto as Exhibit G are (i) the
--------------------
audited consolidated financial statements of Summa for each of its fiscal years
ended August 31, 1994, 1995 and 1996 consisting of balance sheets as of such
dates, the related statements of income for the periods then ended, and the
notes thereto, certified by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, and (ii) the unaudited
consolidated financial statements of Summa as of and for the six months ended
February 28, 1997, consisting of the balance sheet as of such date (the "Summa
Balance Sheet"), the related statement of income for the period then ended, and
the respective notes thereto, in each case certified by the chief financial
officer of Summa. Such financial statements (and the notes related thereto) are
herein sometimes collectively referred to as the "Summa Financial Statements."
The Summa Financial Statements (i) are derived from the books and records of
Summa, which books and records have been consistently maintained in a manner
which reflects, and such books and records do fairly reflect in all material
respects, the assets and liabilities of Summa, (ii) fairly present in all
material respects the financial condition of Summa on the respective dates of
such statements and the results of its operations for the periods indicated,
except as may be disclosed in the notes thereto, and (iii) have been prepared in
all material respects in accordance with generally accepted accounting
principles consistently applied throughout the periods involved (except as
otherwise disclosed in the notes thereto).
7.7 Absence of Undisclosed Liabilities. Except as and to the extent
----------------------------------
reflected or reserved against in the Summa Balance Sheet, and as to matters
arising in the ordinary course of its business since the date of the Summa
Balance Sheet that are disclosed in the Summa Disclosure Schedule, Summa has no
liability or obligation (whether accrued, to become due, contingent or
otherwise) which individually or in the aggregate could have a materially
adverse effect on the business, assets or condition (financial or otherwise) of
Summa.
7.8 Absence of Certain Developments. Except as set forth in the
-------------------------------
Summa Disclosure Schedule, since the date of the Summa Balance Sheet there has
been (i) no declaration, setting aside or payment of any dividend or other
distribution with respect to any capital stock of Summa, no redemption, purchase
or other acquisition of any shares of Summa's capital stock, and no split-up or
other recapitalization relative to any of such capital stock, nor any action
authorizing or obligating Summa to do any of the foregoing; (ii) no loss,
destruction or damage to any material property or asset of Summa, whether or not
insured; (iii) no acquisition or disposition of material assets (or any contract
or arrangement therefor) or any other material transaction by Summa, otherwise
than for fair value and in the ordinary course of business; (iv) no discharge or
satisfaction by Summa of any lien or encumbrance or payment of any material
obligation or liability (absolute or contingent) other than current liabilities
shown on the Summa Balance Sheet, or current liabilities incurred since the date
thereof in the ordinary course of business, (v) no sale,
22
assignment or transfer by Summa of any of its tangible or intangible assets
including any security interest or other encumbrance, or waiver by Summa of any
rights of value which, in any such case, is outside the ordinary course of
business and material to the business of Summa; (vi) no payment of any bonus to
or change in the compensation of any director, officer or employee, whether
directly or by means of any bonus, pension plan, contract or commitment; (vii)
no write-off or material reduction in the carrying value of any asset which is
material to the business of Summa; (viii) no disposition or lapse of rights as
to any intangible property which is material to the business of Summa; (ix)
except for ordinary travel advances, no loans or extensions of credit to
shareholders, officers, directors or employees of Summa; (x) no loss of a
customer of or supplier to Summa the loss of which could reasonably be expected
to materially adversely affect Summa; (xi) no agreement to do any of the things
described in this Section 7.8; or (xii) no materially adverse change in the
condition (financial or otherwise) of Summa or in its assets, liabilities,
properties or business.
7.9 Real Property. Set forth in the Summa Disclosure Schedule is a
-------------
complete and accurate description of each parcel of real property owned by or
leased to and occupied by Summa, and Summa neither owns or leases, nor occupies,
any other real property. Except as would be disclosed in a reasonably diligent
inspection, to Summa's Knowledge, the buildings and all fixtures and
improvements located on such real property are in good operating condition,
ordinary wear and tear excepted. To Summa's Knowledge, Summa is not in
violation of any zoning, building or safety ordinance, regulation or requirement
or other law or regulation applicable to the operation of owned or leased
properties, the violation of which could reasonably be expected to have a
material adverse affect upon Summa, its condition (financial or otherwise),
assets, liabilities, properties or business, and Summa has not received any
notice of violation with which it has not complied or is not taking steps to
comply. Summa has good and marketable title to all such real property owned by
Summa, free and clear of al liens, mortgages, encumbrances, easements, leases,
restrictions and claims of any kind whatsoever except for (i) those matters
shown on the Summa Disclosure Schedule; (ii) liens for taxes for the current
year and tax assessments not yet due and payable; and (iii) mechanics' or
similar liens for materials or services furnished or to be furnished after the
date hereof. All leases of real property to which Summa is a party are fully
effective in accordance with their respective terms and afford Summa peaceful
and undisturbed possession of the subject matter of the lease, and there exists
no material default on the part of Summa or termination thereof, except as may
be set forth in the Summa Disclosure Schedule.
7.10 Tangible Personal Property. Set forth in the Summa Disclosure
--------------------------
Schedule hereto is a complete list of all items of tangible personal property
(including without limitation all items of tooling) owned or leased and used by
Summa in the current conduct of its business, where the original cost was in
excess of $50,000. Except as set forth in the Summa Disclosure Schedule, Summa
has, and at the Effective Date will have, good and marketable title to, or in
the case of leased equipment a valid leasehold interest in, and is in possession
of, all such items of personal property owned or leased by it, free and clear of
all title defects, mortgages, pledges, security interests, conditional sales
agreements, liens, restrictions or encumbrances whatsoever. Included
23
in the Summa Disclosure Schedule is a list of all outstanding equipment leases
and maintenance agreements to which Summa is a party as lessee and which
individually provide for future lease payments in excess of $5,000 per month,
with the identities of the other parties to all such leases and agreements shown
thereon. All leases of tangible personal property to which Summa is a party and
which are material to the business of Summa are fully effective in accordance
with their respective terms, and there exists no material default on the part of
Summa or termination thereof, except as may be set forth in the Summa Disclosure
Schedule. Each item of capital equipment reflected in the Summa Balance Sheet
which is used in the current conduct of Summa's business is in good operating
and usable condition and repair, ordinary wear and tear excepted, and is
suitable for use in the ordinary course of Summa's business and fit for its
intended purposes, except as may be set forth in the Summa Disclosure Schedule.
7.11 Tax Matters. Summa has, since its inception, duly filed and
-----------
timely all federal, state, county and local tax returns required to have been
filed by it in those jurisdictions where the nature or conduct of its business
required such filing and where the failure to so file would be materially
adverse to Summa. Copies of all tax returns for the past 3 years have been made
available for inspection by Calnetics prior to the execution hereof. All
federal, state, county and local taxes, including but not limited to those taxes
due with respect to Summa's properties, income, gross receipts, excise,
occupation, franchise, permit, licenses, sales, payroll, and inventory due and
payable as of the date of the Effective Date by Summa have been paid or validly
extended. The amount reflected in the Summa Balance Sheet as liabilities or
reserves for taxes which are due but not yet payable is sufficient for the
payment of all accrued and unpaid taxes of the types referred to hereinabove.
No consent to the application of Section 341(f)(2) of the Internal Revenue Code
of 1986, as amended, has been filed with respect to Summa.
7.12 Accounts Receivable. The accounts receivable reflected in the
-------------------
Summa Balance Sheet constituted all accounts receivable of Summa as of the date
thereof, other than accounts receivable fully written off as uncollectible as of
such date in accordance with consistently applied prior practice. All such
accounts receivable arose from valid sales made (as opposed to consignments) or
services rendered in the ordinary course of business, and are not subject to any
return privileges, set-off or counter-claim, except as disclosed on the Summa
Disclosure Schedule. Except as disclosed in the Summa Disclosure Schedule, such
accounts receivable have been collected in full since the date of the Summa
Balance Sheet or, to Summa's Knowledge, are collectible at their full respective
amounts (net of allowance for doubtful accounts established in accordance with
consistently applied prior practice). Based upon the prior experience of Summa,
the "allowance for doubtful accounts" shown on the Summa Balance Sheet is
sufficient to cover all doubtful accounts.
7.13 Inventories. Summa has good and marketable title to all of its
-----------
inventories of raw materials, work-in-process and finished goods, including
models and samples, free and clear of all security interests, liens, claims and
encumbrances, except as set forth in the Summa Disclosure Schedule. All such
inventories consist of items that are usable and salable in the ordinary course
of business of Summa for an amount at least equal to the book value thereto,
plus the costs of disposition thereof, and represent quantities, individually
and in the aggregate, not in
24
excess of one year's requirements for its business as currently conducted,
except as may be set forth in the Summa Disclosure Schedule.
7.14 Contracts and Commitments. Summa has no contract, agreement,
-------------------------
obligation or commitment, written or oral, expressed or implied, which involves
a commitment or liability in excess of $100,000 or for a term of more than one
year or whose terms do not permit cancellation without liability on 90 days'
notice or less (other than obligations which are included in accounts payable),
and no union contracts, employee or consulting contracts, financing agreements,
debtor or creditor arrangements, licenses, franchise, manufacturing,
distributorship or dealership agreements, leases, or bonus, health or stock
option plans, except as described in the Summa Disclosure Schedule, all of which
have been made available to Calnetics prior to the execution hereof. As of the
date hereof, to Summa's Knowledge, there exists no circumstances which would
affect the validity or enforceability of any of such contracts and other
agreements in accordance with their respective terms. Except as set forth in the
Summa Disclosure Schedule, Summa has performed and complied in all material
respects with all obligations required to be performed by it to date under, and
is not in default (without giving effect to any required notice or grace period)
under, or in breach of, the terms, conditions or provisions of any of such
contracts and other agreements. Except as set forth in the Summa Disclosure
Schedule, the validity and enforceability of any contract or other agreement
described herein has not been and shall not in any manner be affected by the
execution and delivery of this Agreement without any further action. Except as
set forth in the Summa Disclosure Schedule, Summa has no material contract,
agreement, obligation or commitment which requires or will require future
expenditures (including internal costs and overhead) in excess of reasonably
anticipated receipts, nor which is likely to be materially adverse to Summa's
business, assets or condition (financial and otherwise).
7.15 Patents, Trade Secrets and Customer Lists. Except as set forth
-----------------------------------------
on the Summa Disclosure Schedule, Summa does not have any patents, applications
for patents, trademarks, applications for trademarks, trade names, licenses or
service marks relating to the business of Summa, nor does any present or former
shareholder, officer, director or employee of Summa own any patent rights
relating to any products manufactured, rented or sold by Summa. Except as set
forth in the Summa Disclosure Schedule, to the Knowledge of Summa, Summa has the
unrestricted right to use, free and clear of any claims or rights of others, all
trade secrets, customer lists, manufacturing and secret processes, trademarks,
tradenames, brand names, licenses and service marks reasonably necessary to the
manufacture and marketing of all products made or proposed to be made by Summa,
and, to the Knowledge of Summa, the continued use thereof by Summa following the
Effective Date will not conflict with, infringe upon, or otherwise violate any
rights of others. To Summa's Knowledge, Summa has not used and is not making
use of any confidential information or trade secrets of any present or past
employee of Summa that has not been assigned to Summa or that Summa does not
have the right to use.
7.16 No Pending Material Litigation or Proceedings. Except as set
---------------------------------------------
forth in the Summa Disclosure Schedule, there are no actions, suits or
proceedings pending or, to Summa's Knowledge, threatened against or directly
affecting Summa (including actions, suits or proceedings
25
where liabilities may be adequately covered by insurance) at law or in equity or
before or by any federal, state, municipal or other governmental department,
commission, court, board, bureau, agency or instrumentality, domestic or
foreign, or affecting any of the shareholders, officers or directors of Summa in
connection with the business, operations or affairs of Summa, which could
reasonably be expected to result in any material adverse change in the business,
properties or assets, or in the condition (financial or otherwise) of Summa, or
which question or challenge the transaction contemplated hereby. Except as set
forth in the Summa Disclosure Schedule, to Summa's Knowledge, Summa has not,
during the past three years, been threatened with any action, suit, proceedings
or claim (including actions, suits, proceedings or claims where its liabilities
may be adequately covered by insurance) for personal injuries allegedly
attributable to products sold or services performed by Summa asserting a
particular defect or hazardous property in any of Summa's products, services or
business practices or methods, nor has Summa been a party to or threatened with
proceedings brought by or before any federal or state agency; and Summa has no
Knowledge of any defect or hazardous property, claimed or actual, in any such
product, service, business practice or method. Summa is not subject to any
voluntary or involuntary proceeding under the United States Bankruptcy Code and
has not made an assignment for the benefit of creditors.
7.17 Insurance. Summa maintains insurance with reputable insurance
---------
companies on such of its equipment, tools, machinery, inventory and properties
as are usually insured by companies similarly situated in the same geographic
location and to the extent customarily insured, and maintains products and
personal liability insurance, and such other insurance against hazards, risks
and liability to persons and property as is customary for companies similarly
situated in the same geographic location. A true and complete listing and
general description of each of Summa's insurance policies as currently in force,
including all policies of group medical and/or dental insurance, is set forth in
the Summa Disclosure Schedule, copies of all of which have previously made
available to Calnetics. All such insurance policies are currently in full force
and effect.
7.18 Arrangements with Personnel. Except as set forth in the Summa
---------------------------
Disclosure Schedule, no shareholder, director, officer or employee of Summa is
presently a party to any transaction with Summa, including without limitation
any contract, loan or other agreement or arrangement providing for the
furnishing of services by, the rental of real or personal property from or to,
or otherwise requiring loans or payments to, any such shareholder, director,
officer or employee, or to any member of the family of any of the foregoing, or,
to Summa's Knowledge, to any corporation, partnership, trust or other entity in
which any shareholder, director, officer or employee, or any member of the
family of any of them has a substantial interest or is an officer, director,
trustee, partner or employee. There is set forth in the Summa Disclosure
Schedule a list showing (i) the name, title, date and amount of last
compensation increase, and aggregate compensation, including amounts paid or
accrued pursuant to any bonus, pension, profit sharing, commission, deferred
compensation or other plans or arrangements in effect as of the date of this
Agreement, of each officer or employee of Summa whose salary and other
compensation, in the aggregate, received from Summa or accrued is at an annual
rate (or aggregated for the most
26
recently completed fiscal year) in excess of $100,000, as well as any employment
and/or severance agreements relating to any such persons; (ii) a description of
any and all bonus, pension, profit sharing, commission, deferred compensation or
other plans or arrangements in effect for any of Summa's employees as of the
date of this Agreement; (iii) a description of any noncompetition or similar
agreements to which Summa or any shareholder, director, officer or employee of
Summa is a party; (iv) all powers of attorney from Summa to any person or
entity; and (v) the name of each person or entity authorized to borrow money or
incur or guarantee indebtedness on behalf of Summa. Summa has made available to
Calnetics copies of all written personnel policies, including without limitation
vacation, severance, bonus, pension, profit sharing and commission policies,
applicable to any of Summa's employees. Neither the execution and delivery of
this Agreement by Summa, nor the consummation by Summa of any of the
transactions contemplated hereby, or compliance by Summa with any of the
provisions hereof, shall create any obligation or liability on the part of Summa
under any bonus, profit sharing, deferred compensation of other plan or
arrangement in effect as of the date of this Agreement.
7.19 Labor Relations. Except as set forth in the Summa Disclosure
---------------
Schedule, Summa has never been a party to any collective bargaining agreement or
other contract with a labor union, nor, to Summa's Knowledge, is any union,
labor organization or group of employees of Summa presently seeking the right to
enter into collective bargaining with Summa on behalf of any of its employees.
7.20 Bank Accounts. All bank and savings accounts, and other accounts
-------------
at similar financial institutions, of Summa are listed in the Summa Disclosure
Schedule, and copies of all signature cards or other documentation reflecting
all individuals who are authorized to withdraw funds from any such accounts have
been made available to Calnetics.
7.21 Absence of Questionable Payments. Neither Summa nor, to Summa's
--------------------------------
Knowledge, any shareholder, director, officer, agent, employee, consultant or
other person associated with or acting on behalf of any of them, has (i) used
any corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (ii) made any direct or
indirect unlawful payments to governmental officials or others from corporate
funds, engaged in any payments or activity which would be deemed a violation of
the Foreign Corrupt Practices Act or rules or regulations promulgated
thereunder, or (iii) established or maintained any unlawful or unrecorded
accounts.
7.22 Compliance with Laws. Summa holds all licenses, franchises,
--------------------
permits and authorizations necessary for the lawful conduct of its business as
presently conducted, has complied with all applicable statutes, laws,
ordinances, rules and regulations of all governmental bodies, agencies and
subdivisions having, asserting or claiming jurisdiction over it, with respect to
any part of the conduct of its business and corporate affairs, where the failure
to so hold or comply could reasonably be expected to have a material adverse
affect upon Summa's condition (financial or otherwise), business, assets or
properties.
27
7.23 Environmental Matters.
---------------------
(a) To the Knowledge of Summa, except as set forth on the Summa
Disclosure Schedule:
(i) Summa has complied with all applicable Environmental
Laws;
(ii) Summa's Property (including soils, groundwater, surface
water, buildings or other structures) is not contaminated with any Hazardous
Substances that may subject Summa to liability under any Environmental Law;
(iii) the properties formerly owned or operated by Summa were
not contaminated with Hazardous Substances during the period of ownership or
operation by Summa that may subject Summa to liability under any Environmental
Law;
(iv) Summa is not subject to liability under any Environmental
Law for any Hazardous Substance disposal or contamination on any third party
property;
(v) Summa has not been associated with any release or threat
of release of any Hazardous Substance that may subject Summa to liability under
any Environmental Law;
(vi) Summa has not received any notice, demand, letter, claim
or request for information alleging that Summa may be in violation of, or liable
under, any Environmental Law;
(vii) Summa is not subject to any orders, decrees, injunctions
or other arrangements with any governmental entity, nor is subject to any
indemnity or other agreement with any third party relating to liability under
any Environmental Law or relating to Hazardous Substances;
(viii) there are no circumstances or conditions involving Summa
that could reasonably be expected to result in any claims, liability,
investigations, costs or restrictions on the ownership, use or transfer of any
of Summa's Property pursuant to any Environmental Law; and
(ix) Summa's Property does not contain any underground storage
tanks, asbestos-containing material, lead-based products, or polychlorinated
biphenyls.
7.24 Relationships with Customers and Suppliers. Except as may be set
------------------------------------------
forth on the Summa Disclosure Schedule, no present customer or substantial
supplier to Summa has indicated an intention to terminate or materially and
adversely alter its existing business relationship therewith, and Summa has no
reason to believe that any of the present customers of or substantial suppliers
to Summa intends to do so, other than, in each such case, any customer or
substantial supplier the loss of which could not reasonably be expected to
materially adversely affect Summa.
28
7.25 Brokerage. Except as set forth in the Summa Disclosure Schedule,
---------
Summa has no obligation to any person or entity for brokerage commissions,
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement.
7.26 Reports Under the Exchange Act. The Summa Common Stock is
------------------------------
registered under Section 12(g) of the Exchange Act. Accordingly, Summa is
subject to the information requirements of the Exchange Act, and in accordance
therewith files reports and other information with the Commission. Since
January 1, 1992, Summa has filed with the Commission on a timely basis all such
reports which Summa has been required to file under the Exchange Act. Summa has
made available to Calnetics accurate and complete copies of each registration
statement, report, proxy statement, information statement or schedule, together
with all amendments thereto, that were required to be filed with the SEC by
Summa since January 1, 1992 (the "Summa SEC Documents"). As of their respective
dates, the Summa SEC Documents complied in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, as the case
may be, and none of the Summa SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were or are made, not misleading.
7.27 Disclosure. Neither this Agreement, nor any certificate,
----------
exhibit, or other written document or statement, furnished to Calnetics by or on
behalf of Summa in connection with the transactions contemplated by this
Agreement contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact necessary to be stated in order to
make the statements contained herein or therein, in the light of the
circumstances in which they were made, not misleading. Summa has no Knowledge
of any fact which has not been disclosed in writing to Calnetics which may
reasonably be expected to materially and adversely affect the business,
properties, assets, condition (financial or other) and/or results of operations
of Summa or the ability of Summa to perform all of the obligations to be
performed by Summa under this Agreement and/or any other agreement between Summa
and Calnetics to be entered into pursuant to any provision of this Agreement.
7.28 Financing. Summa shall use its best efforts to obtain the funds
---------
required to make full payment of the cash portion of the Merger consideration as
contemplated herein.
8. COVENANTS OF THE PARTIES PRIOR TO THE EFFECTIVE DATE.
----------------------------------------------------
Each of Calnetics and Summa hereby covenants to and agrees with the other
that between the date hereof and the Effective Date:
8.1 Access to Properties and Records. Each party shall give to the
--------------------------------
other and its authorized representatives full access, during reasonable business
hours, in such a manner as not unduly to disrupt normal business activities, to
any and all of its premises, properties, contracts, books, records and affairs,
and will cause its senior officers to furnish any and all data and information
pertaining to its business that the other may from time to time reasonably
require. Unless and until the transactions contemplated by this Agreement have
been consummated, each party and its representatives shall hold in confidence
all information so obtained and will use such information solely for the
purposes intended by this Agreement. If the transactions contemplated
29
hereby are not consummated, each party will return all documents (and copies
thereof) hereinabove referred to and obtained therefrom. Such obligation of
confidentiality shall not extend to any information which is shown to have been
previously (i) known to the party receiving it, (ii) generally known to others
engaged in the trade or business of the disclosing party, (iii) part of public
knowledge or literature without breach of a duty of confidentiality, or (iv)
lawfully received from a third party. Without limiting the generality of the
foregoing, it is understood and agreed that certain information disclosed by
each party to the other, or their respective representatives, may constitute
"material inside information" that has not previously been disclosed to the
public generally. Each party acknowledges that it and its representatives are
aware of the restrictions on the use of such information imposed by federal and
state securities laws, agrees to comply and cause its representatives to comply
with such restrictions, and agrees to indemnify and hold the other party and
each of its directors, officers and employees free and harmless from any and all
liability, cost or expense that any of them may incur or suffer by reason of any
breach by the indemnifying party or any of its authorized representatives of any
of such restrictions. From and after the date hereof and until the Closing or
termination hereof, neither party, nor any of their respective officers,
directors, principal shareholders or other representatives, shall purchase or
sell, directly or indirectly, in the public marketplace or otherwise, any
securities of the other party.
8.2 Corporate Existence, Rights and Franchises. Each party shall
------------------------------------------
take all necessary actions to maintain in full force and effect its corporate
existence, rights, franchises and good standing. No change shall be made to the
Articles of Incorporation or Bylaws of either party.
8.3 Insurance. Each party shall take all necessary actions to
---------
maintain in force all of its existing insurance policies (or replacements
therefor), subject only to variations in amounts required by the ordinary
operation of its business.
8.4 Conduct of Business in the Ordinary Course. Except as otherwise
------------------------------------------
expressly provided in this Agreement, neither party shall permit to be done any
act which would result in a material breach of any of the covenants of such
party contained herein or which would cause the representations and warranties
of such party contained herein to become untrue or inaccurate in any material
respect as of any date subsequent to the date hereof. Without limiting the
generality of the foregoing, each party shall take all reasonably necessary
actions to (i) operate its business diligently in the ordinary course of
business as an ongoing concern, and will use its best business efforts to
preserve intact its organization and operations at current levels and to make
available to the Surviving Corporation the services of Calnetics' present
employees and to preserve for the Surviving Corporation the relationships of
Calnetics with its suppliers and customers and others having business
relationships with it; (ii) maintain in good operating condition, ordinary wear
and tear excepted, all of its assets and properties which are in such condition
as of the date hereof; (iii) maintain its books, accounts and records in the
usual, regular and ordinary manner, on a basis consistent with past practice in
recent periods; (iv) refrain from entering into any contract, agreement, lease,
acquisition, sale of assets, capital expenditure or other commitment of a value
in excess of $250,000 (other than purchases and sales of inventory, including
sales orders, in the ordinary course of business), or from modifying, amending,
canceling or terminating any of such
30
contracts, agreements, leases or other commitments presently in force, except as
expressly contemplated by this Agreement, without the prior approval of the
other party (which approval shall not be unreasonably withheld and which may be
verbal to be promptly followed by written confirmation); (v) refrain from paying
any bonus to any officer or director, other than pursuant to any contract,
agreement or arrangement existing on the date of this Agreement, or any employee
other than on a basis consistent with past practice, and from declaring or
paying any dividend, or making any other distribution in respect of, or from
redeeming, any of its capital stock; and (vi) refrain from issuing any capital
stock or other securities convertible into or exercisable to purchase capital
stock other than upon exercise of existing options .
8.5 Consents. Each of the parties shall use its best business
--------
efforts to obtain any and all necessary permits, approvals, qualifications,
consents or authorizations from third parties and governmental authorities which
are required to be obtained prior to the Effective Date, and shall use
its best efforts to make or complete all filings, proceedings and waiting
periods required to be made or completed prior to the Effective Date.
8.6 Approval of Calnetics Shareholders. A special meeting of the
----------------------------------
Calnetics Shareholders shall be called to be held in accordance with the
California Corporations Code on or before May 29, 1997, or as soon thereafter as
is practicable, at a time, place and date to be set by the Calnetics Board of
Directors, for the purposes of considering and voting upon a proposal to approve
this Agreement and the transactions contemplated hereby. The Calnetics Board of
Directors shall recommend that the Calnetics Shareholders approve this Agreement
and the transactions contemplated hereby. By signing this Agreement where
indicated on the signature page hereof, each shareholder of Calnetics who owns
or has voting control over 10% or more of the Common Stock of Calnetics issued
and outstanding as of the date hereof has agreed (subject to the terms and
conditions of this Agreement) to vote all such shares in favor of the
transactions contemplated hereby at the special meeting of Calnetics
Shareholders. Calnetics shall prepare and mail, or cause to be prepared and
mailed to the Calnetics Shareholders, at least 30 days prior to the special
meeting, appropriate notice of the meeting, together with a copy of the Joint
Proxy Statement/Prospectus prepared as provided in Section 8.8 below.
8.7 Approval of Summa Shareholders. A special meeting of the Summa
------------------------------
Shareholders shall be called to be held in accordance with the California
Corporations Code on or before May 29, 1997, or as soon thereafter as is
practicable, at a time, place and date to be set by the Summa Board of
Directors, for the purposes of considering and voting upon a proposal to approve
this Agreement and the transactions contemplated hereby. The Summa Board of
Directors shall recommend that the Summa Shareholders approve this Agreement and
the transactions contemplated hereby. Summa shall prepare and mail, or cause
to be prepared and mailed to the Summa Shareholders, at least 30 days prior to
the special meeting, an appropriate notice of the meeting, together with a copy
of the Joint Proxy Statement/Prospectus in Section 8.8 below.
8.8 Registration Statement and Proxy Statement.
------------------------------------------
(a) Summa and Calnetics shall cooperate in preparing the Registration
Statement (including any amendments or supplements thereto) and the Joint Proxy
Statement/Prospectus to
31
be included therein and each shall furnish to the other for inclusion therein
all such information relating to it as the other party or its counsel reasonably
requests. Summa shall file the Registration Statement with the Commission
promptly after completion, and Summa and Calnetics shall use all reasonable
efforts to respond to any comments of the Commission staff and to have the
Registration Statement declared effective as promptly as practicable and,
thereafter, to maintain such effectiveness through the Effective Time. Summa
agrees to provide to Calnetics the opportunity to review and comment on the
Registration Statement, each amendment or supplement to the Registration
Statement, each responsive correspondence to be sent to the Commission, and each
form of the Joint Proxy Statement/Prospectus within a reasonable time before
filing, and agrees not to file any such documents without Calnetics' consent.
Summa shall (i) include in the Registration Statement and each amendment and
supplement information relating to Calnetics, its business and financial
condition only as authorized by Calnetics, and (ii) promptly provide to
Calnetics copies of all correspondence received from the Commission with respect
to the Registration Statement and its amendments or supplements and copies of
all responsive correspondence to the Commission. Summa agrees to notify
Calnetics of any stop orders or threatened stop orders with respect to the
Registration Statement. The Joint Proxy Statement/Prospectus may be filed with
the Commission as confidential preliminary proxy material under Regulation 14A
of the Exchange Act.
(b) Calnetics and Summa shall not furnish to their respective
shareholders any proxy materials relating to this Agreement or the Merger until
the Registration Statement has become effective. Calnetics and Summa each shall
mail to its shareholders (i) as promptly as practicable after the Registration
Statement becomes effective, the Joint Proxy Statement/Prospectus (the date of
such mailing hereinafter being referred to as the "Mailing Date"), (ii) as
promptly as practicable after receipt thereof, any supplemental or amended Joint
Proxy Statement/Prospectus, and (iii) such other supplementary proxy materials
as may be necessary, in light of the circumstances arising after the mailing of
the Joint Proxy Statement/Prospectus, to make the Joint Proxy
Statement/Prospectus, as theretofore supplemented or amended, complete and
correct. The Joint Proxy Statement/Prospectus and all amendments and
supplements thereto shall comply with applicable law and shall be in form and
substance satisfactory to Summa and Calnetics.
(c) Summa and Calnetics each shall advise the other if, at any time
before the effective date of the Registration Statement, the date of the special
meeting of Calnetics Shareholders to be held pursuant to Section 8.6 hereof, the
date of the special meeting of Summa Shareholders to be held pursuant to Section
8.7 hereof, or the Effective Time, the Registration Statement or the Joint Proxy
Statement/Prospectus contains an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements contained therein, in the light of the circumstances under which they
were made, not misleading. In such event, Summa or Calnetics, as the case may
be, shall provide the other with the information needed to correct such
misstatement or omission.
32
8.9 Fairness Opinions. Each party hereto may, but shall not be
------------------
obligated to, obtain on or before March 31, 1997 (with a written update to be
received on or before the mailing date of the Joint Proxy Statement/Prospectus),
at its sole cost and expense, a third-party opinion as to the fairness of the
transactions contemplated hereby from a financial point of view to the
shareholders of the party obtaining such opinion. Should such opinion not be
reasonably acceptable to the party obtaining it, such party may terminate the
transactions contemplated hereby without further liability or obligation to the
other except as provided in Section 13.2 hereof.
8.10 Tax Opinion. Calnetics may, but shall not be obligated to, obtain
------------
on or before March 31, 1997 (with a written update to be received on or before
the Effective Date), at its sole cost and expense, a favorable tax opinion of
its counsel, ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP. Should such opinion not be reasonably
acceptable to Calnetics, Calnetics may terminate the transactions contemplated
hereby without further liability or obligation to Summa except as provided in
Section 13.2 hereof.
8.11 No Equitable Conversion. Prior to the Effective Time, neither
-----------------------
the execution of this Agreement nor the performance of any provision contained
herein shall cause either Summa, on the one hand, or Calnetics, on the other
hand, to be or become liable for or in respect of the operations or business of
the other, for the cost of any labor or materials furnished to or purchased by
the other, for compliance with any laws, requirements or regulations of, or
taxes, assessments or other charges now or hereafter due to, any governmental
authority, or for any other charges or expenses whatsoever pertaining to the
conduct of the business or the ownership, title, possession, use or occupancy of
the property of the other.
8.12 Standstill Agreements.
---------------------
(a) Prior to the Effective Time, unless this Agreement is sooner
terminated as expressly provided herein, neither party shall initiate, directly
or indirectly, any possible business combination, sale of assets or stock, or
other transaction which is inconsistent with the transactions contemplated
thereby. Notwithstanding the foregoing, either party may respond to third party
inquiries subject to the provisions set forth in Section 13.1.8 hereof.
(b) If this Agreement is terminated by either party, then for a period
of two (2) full years from the date of such termination, neither party shall,
directly or indirectly, except as may expressly be permitted in writing by the
other party: (i) acquire or agree, offer, seek or propose to acquire, or cause
to be acquired, ownership of any of the assets or businesses or voting
securities of the other party, or any other rights or options to acquire any
such ownership (including from a third party); (ii) seek or propose to influence
or control the management or policies of the other party; or (iii) enter into
any discussions, negotiations, arrangements or understandings with any third
party with respect to any of the foregoing.
33
9. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY.
-------------------------------------------
The respective obligations of the parties hereto to consummate the
transactions contemplated hereby shall be subject to the fulfillment, at or
prior to the Effective Date, of the following conditions:
9.1 Regulatory Approvals. There shall have been obtained any and all
--------------------
permits, approvals and qualifications of, and there shall have been made or
completed all filings, proceedings and waiting periods, required by any
governmental body, agency or regulatory authority which, in the reasonable
opinion of counsel to the parties, are required for the consummation of the
transactions contemplated hereby.
9.2 No Action or Proceeding. No claim, action, suit, investigation
-----------------------
or other proceeding shall be pending or threatened before any court or
governmental agency, and no statute, rule or regulation shall have enacted or
entered by a governmental body of competent jurisdiction, which presents a
substantial risk of the restraint or prohibition of the transactions
contemplated by this Agreement or the obtaining of material damages or other
relief in connection therewith.
9.3 Tax Matters. Nothing shall have come to the attention of either
------------
party which has led such party reasonably to believe that the Merger will not
qualify as a tax-free reorganization under Section 368 of the Code.
9.4 Dissenters' Rights. The number of shares of either Calnetics
------------------
Common Stock or Summa Common Stock which constitute "Perfected Dissenting
Shares" as defined in Section 3.4 hereof does not exceed five percent (5%) of
the total number of shares of Calnetics Common Stock or Summa Common Stock, as
the case may be, outstanding on the respective record dates of the meetings of
the Calnetics Shareholders and the Summa Shareholders referred to in Sections
4.1 and 4.2.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF SUMMA AND SUBSIDIARY.
-----------------------------------------------------------
The obligation of each of Summa and Subsidiary to consummate the
Merger is expressly subject to the satisfaction, on or before the Effective
Date, of each of the further conditions set forth below, any or all of which may
be waived by Summa in whole or in part without prior notice; provided, however,
-----------------
that no such waiver of a condition shall constitute a waiver by Summa or
Subsidiary of any other condition or of any of its rights or remedies, at law or
in equity, if Calnetics shall be in default or breach any of the
representations, warranties or covenants of Calnetics under this Agreement:
10.1 Shareholder Approvals. The Summa Shareholders and the Calnetics
---------------------
Shareholders shall have approved by the requisite vote the adoption of this
Agreement and the transactions contemplated hereby.
34
10.2 Proceedings. All corporate and other proceedings taken or to be
-----------
taken by Calnetics or any governmental authority in connection with the
transactions contemplated hereby to be consummated at the Effective Date and all
documents incident thereto or required to be delivered prior or at closing will
be reasonably satisfactory in form and substance to Summa and its counsel as may
be required to consummate the transactions contemplated hereby.
10.3 Performance of Agreement; Accuracy of Representations and
---------------------------------------------------------
Warranties. Calnetics shall have performed in all material respects the
----------
agreements and covenants required to be performed by Calnetics under this
Agreement prior to or on the Effective Date, there shall have been no material
adverse change in the condition (financial or otherwise), assets, liabilities,
earnings or business of Calnetics since the date hereof, and the representations
and warranties of Calnetics contained herein shall, except as contemplated or
permitted by this Agreement or as qualified in a writing dated as of the
Effective Date and delivered by Calnetics to Summa with the approval of Summa
indicated thereon (which writing is to be attached hereto as Exhibit H), be true
in all material respects on and as of the Effective Date as if made on and as of
such date, and Summa shall have received a certificate, dated as of the
Effective Date, signed by the President and Chief Financial Officer of
Calnetics, on behalf of Calnetics, reasonably satisfactory to Summa and its
counsel, to such effect.
10.4 Opinion of Counsel of Calnetics Summa and its counsel shall
-------------------------------
have received an opinion dated as of the Effective Date from ▇▇▇▇▇▇, ▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP, counsel to Calnetics, in form and substance reasonably
satisfactory to Summa and its counsel, substantially to the effect that:
35
10.4.1 Calnetics is a duly incorporated and validly existing
corporation in good standing under the laws of California, and has the corporate
power to enter into this Agreement and consummate the transactions herein;
10.4.2 This Agreement and the Agreement of Merger have been duly
authorized, executed and delivered by Calnetics and each constitutes the legal,
valid and binding obligation of Calnetics, except as the same may be limited by
bankruptcy, insolvency or other similar laws relating to or affecting the
enforcement of creditors' rights or by general principles of equity, whether
considered in a proceeding at law or in equity;
10.4.3 To the best of such counsel's Knowledge, to the extent that
the approval or consent of any governmental agency or body is required for the
legal and valid execution and delivery of this Agreement or the performance of
any obligation of Calnetics under any provision hereof, such consent has been
validly procured; and
10.4.4 Neither the execution of this Agreement nor the performance
by Calnetics of any of its obligations hereunder will violate the Certificate of
Incorporation or the Bylaws of Calnetics.
10.5 Accuracy of Information in Joint Proxy Statement/Prospectus.
-----------------------------------------------------------
None of the information which shall have been furnished by or on behalf of
Calnetics or its management for inclusion in the Joint Proxy
Statement/Prospectus shall contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading.
10.6 Exchange of Calnetics Options. Each holder of outstanding
-----------------------------
Options shall have entered into a written agreement with Calnetics to surrender
for cancellation all such Options owned beneficially and of record by such
holder effective as of the Effective Time on terms and conditions set forth
therein, in consideration of the execution by each such holder of a standard
Summa "incentive" or "nonstatutory" stock option agreement, as the case may be
(the form of each of which has been provided to Calnetics prior to the execution
and delivery hereof), with Summa effective as of the Effective Time, pursuant to
which such holders would be entitled to purchase shares of Summa Common Stock on
the basis set forth in Section 3.1.2 above.
10.7 Fairness Opinion. If a "fairness opinion" has been provided to
----------------
the Board of Directors of Summa as provided in Section 8.9 hereof, such opinion
subsequently shall not have been withdrawn.
10.8 Consents. Calnetics shall have been obtained any and all
--------
approvals, consents or authorizations of third parties which, in the opinion of
counsel Summa, are reasonably required for the consummation of the transactions
contemplated hereby.
36
11. CONDITIONS PRECEDENT TO CALNETICS' OBLIGATIONS.
----------------------------------------------
Calnetics' obligation to consummate the Merger is expressly subject to the
satisfaction, on or before the Effective Date, of each of the further conditions
set forth below, any or all of which may be waived by Calnetics in whole or in
part without prior notice; provided, however, that no such waiver of a condition
-----------------
shall constitute a waiver by Calnetics of any other condition or of any of its
rights or remedies, at law or in equity, if Summa shall be in default or breach
any of the representations, warranties or covenants of Summa under this
Agreement:
11.1 Shareholder Approval. The Calnetics Shareholders and the Summa
--------------------
Shareholders shall have approved by the requisite vote the adoption of this
Agreement and the transactions contemplated hereby.
11.2 Proceedings. All corporate and other proceedings taken or to be
-----------
taken by Summa or any governmental authority in connection with the transactions
contemplated hereby to be consummated at the Effective Date and all documents
incident thereto or required to be delivered prior or at closing will be
satisfactory in form and substance to Calnetics and its counsel (including but
not limited to, the recordation of the Agreement of Merger) as may be required
to consummate the transactions contemplated hereby.
11.3 Performance of Agreement; Accuracy of Representations and
---------------------------------------------------------
Warranties. Summa shall have performed the agreements and covenants required to
----------
be performed by Summa under this Agreement prior to or on the Effective Date,
there shall have been no material adverse change in the condition (financial or
otherwise), assets, liabilities, earnings or business of Summa since the date
hereof, and the representations and warranties of Summa contained herein shall,
except as contemplated or permitted by this Agreement or as qualified in a
writing dated as of the Effective Date and delivered by Summa to Calnetics with
the approval of Calnetics indicated thereon (which writing is to be attached
hereto as Exhibit J), be true in all material respects on and as of the
Effective Date as if made on and as of such date, and Calnetics shall have
received a certificate, dated as of the Effective Date, signed by the President
and Chief Financial Officer of Summa, on behalf of Summa, reasonably
satisfactory to Calnetics and its counsel, to such effect.
11.4 Opinion of Counsel for Summa. Calnetics and its counsel shall
----------------------------
have received an opinion, dated as of the Effective Date, from ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, counsel to Summa, in form and substance reasonably satisfactory to
Calnetics and its counsel, substantially to the effect that:
11.4.1 Each of Summa and Subsidiary is a duly incorporated and
validly existing corporation in good standing under the laws of California, and
has the corporate power to enter into this Agreement and consummate the
transactions herein;
11.4.2 This Agreement and the Agreement of Merger have been duly
authorized, executed and delivered by Summa and each constitutes the legal,
valid and binding obligation of each of Summa and Subsidiary, except as the same
may be limited by bankruptcy, insolvency or other similar laws relating to or
affecting the enforcement of creditors rights or by general principles of
equity, whether considered in a proceeding at law or in equity;
37
11.4.3 The issuance of Summa Common Stock and Debentures to be issued
as a consequence of the Merger (including all of the shares of Summa Common
Stock issuable upon conversion of the Debentures and exercise of stock options
exchanged as provided in Section 10.6 above) has been duly authorized by all
necessary corporate action on the part of Summa; and that all of such shares of
Summa Common Stock, when issued as a consequence of the Merger or upon
conversion of the Debentures or exercise of stock options, as the case may be,
as provided in this Agreement will be validly issued, fully paid and
nonassessable under the laws of the State of California;
11.4.4 To the best of such counsel's Knowledge, to the extent
that the approval or consent of any governmental agency or body is required for
the legal and valid execution and delivery by Summa of this Agreement, the
issuance of Summa Common Stock and Debentures, or the performance of any
obligation of Summa or Subsidiary under any provision hereof, such consent has
been validly procured;
11.4.5 Neither the execution of this Agreement or the performance
by either Summa or Subsidiary of any of its obligations hereunder, will violate
the Articles of Incorporation or the Bylaws of either Summa or Subsidiary; and
11.4.6 The Registration Statement has become effective under the
Act and, to counsel's Knowledge, no stop order suspending its effectiveness has
been issued and no proceedings for that purpose are pending before or are
contemplated by the Commission.
11.5 Registration of Shares and Debentures. All shares of Summa
-------------------------------------
Common Stock and Debentures issuable to Calnetics Shareholders as a consequence
of the Merger (including all shares of Summa Common Stock issuable upon
conversion of the Debentures and upon exercise of stock options exchanged as
provided in Section 10.6 above) shall have been duly registered under the
Securities Act pursuant to the provisions of Section 12 hereof, and such
registration shall be effective and no stop order shall have been issued.
11.6 Accuracy of Information in Joint Proxy Statement/Prospectus.
-----------------------------------------------------------
None of the information which shall have been furnished by or on behalf of Summa
or its management for inclusion in the Joint Proxy Statement/Prospectus shall
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
11.7 Composition of Summa's Board of Directors. Messrs. ▇▇▇▇▇▇▇ ▇.
-----------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall have been elected to the
Board of Directors of Summa (one of whom shall be elected to each of the three
classes of Summa directors), effective as of the Effective Time, to serve in
such capacity from and after the Effective Time, along with Messrs. ▇▇▇▇▇▇▇▇▇
and five other current members of Summa's Board of Directors to be designated in
the
38
Joint Proxy Statement/Prospectus, until changed in accordance with applicable
law and the Articles of Incorporation and Bylaws of Summa.
11.8 Nasdaq Listing. The shares of Summa Common Stock to be issued to
--------------
the Calnetics Shareholders in connection with the Merger shall have been listed
on The Nasdaq National Market.
11.9 Consents. Summa shall have been obtained any and all approvals,
--------
consents or authorizations of third parties which, in the opinion of counsel
Calnetics, are reasonably required for the consummation of the transactions
contemplated hereby.
11.10 Fairness Opinion; Tax Opinion. If a "fairness opinion" has
-----------------------------
been provided to the Board of Directors of Calnetics as provided in Section 8.9
hereof, such opinion subsequently shall not have been withdrawn. If a "tax
opinion" has been provided to the Board of Directors of Calnetics as provided in
Section 8.10 hereof, the updated written opinion effective as of the Effective
Date specified therein shall have been received.
11.11 Registration Rights Agreements. Summa shall have entered into
-------------------------------
a Registration Rights Agreement in the Form attached as Exhibit I hereto with
each former shareholder of Calnetics who will receive shares of Summa Common
Stock as a consequence of the Merger (including shares issuable upon conversion
of Debentures and upon exercise of stock options) which, in the aggregate, will
represent 10% or more of the number of shares of Summa's Common Stock
outstanding immediately following the Merger.
12. REGISTRATION OF SHARES AND DEBENTURES.
-------------------------------------
Summa shall use its best efforts, with the cooperation and
participation of Calnetics as provided in Section 8.8 hereof, to cause all of
the shares of Summa Common Stock and Debentures issuable to the Calnetics
Shareholders as a consequence of the Merger (including the shares of Summa
Common Stock issuable upon conversion of the Debentures and upon exercise of
options exchanged as provided in Section 10.6 above) to be duly registered
under the Securities Act, and qualified under the Blue Sky laws of each state
with jurisdiction over the transaction, as same may be required. Such
registration under the Securities Act shall be effected pursuant to the
Registration Statement which shall become and remain effective under the
Securities Act prior to or as of the Effective Date, and shall remain effective
thereafter as to the shares of Summa Common Stock issuable upon conversion of
the Debentures and upon exercise of options exchanged as provided in Section
10.6 above for not less than the respective terms of the Debentures and the
options. In the case of those Calnetics Shareholders who are not or do not
become "Affiliates," as that term is defined in Rule 405, the shares of Summa
Common Stock to be received by them as a consequence of the Merger will not
require further registration. As provided in Section 11.8 hereof, Summa shall
take all necessary actions to obtain the listing of the Summa Common Stock to be
issued in connection with the Merger (including the shares issuable upon
conversion of the Debentures and upon exercise of the options exchanged as
provided in Section 10.6 above) on The Nasdaq National Market.
39
13. TERMINATION, AMENDMENT AND WAIVER.
---------------------------------
13.1 Termination. This Agreement may be terminated at any time prior
-----------
to the Effective Date, whether before or after approval by either or both of the
Summa Shareholders or the Calnetics Shareholders:
13.1.1 By mutual written consent of Calnetics and Summa;
13.1.2 Unilaterally by either Calnetics or Summa at any time on
or before April 30, 1997, if as a result of its due diligence the terminating
party has determined, in its sole discretion, not to proceed with the
transactions contemplated hereby;
13.1.3 By either Calnetics or Summa, if the Merger shall not
have been consummated on or before August 31,1997 (the "Termination Date"),
except that the right to terminate under this Section 13.1.2 shall not be
available to any party whose failure to perform any covenant herein or satisfy
any condition hereof within the reasonable control of such party has been the
proximate cause of or resulted in the failure of the Merger to be consummated on
or before the Termination Date;
13.1.4 Unilaterally by either Calnetics or Summa (i) if the
other fails to perform any covenant in any material respect in this Agreement,
unless the failure is capable of being and has been cured in all material
respects within 30 business days after the terminating party has delivered
written notice of the alleged failure, or (ii) if any condition to the
obligations of that party is not satisfied (other than by reason of a breach by
that party of its obligations hereunder), and it reasonably appears that the
condition cannot be satisfied prior to the Termination Date, unless the party
has earlier waived such condition;
13.1.5 By either Calnetics or Summa if any of the conditions to
such party's performance remain unsatisfied for a period of 40 days after the
Commission shall have indicated its willingness to accelerate the effectiveness
of the Registration Statement to be filed by Summa as provided in Section 12
hereof;
13.1.6 By either party as provided in Section 8.9 hereof;
13.1.7 By Calnetics as provided in Section 8.10 hereof; and
13.1.8 By either party, upon the payment by the terminating
party to the other of the sum of $500,000 should the Board of Directors of such
party determine to enter into an inconsistent transaction with a third party.
13.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either Summa or Calnetics as provided in Section 13.1, this
Agreement shall forthwith become void and there shall be no further obligation
on the part of either Calnetics or Summa, or their respective
40
officers or directors (except as set forth in this Section 13.2 and in Sections
8.1, 8.9, 8.10, 12.3, 13.1.8, 14.8, 14.9 and 14.10 which shall survive the
termination); provided, however, that if either party hereto willfully fails to
-------- -------
perform its obligations hereunder or willfully neglects to perform acts that are
necessary to the fulfillment of conditions set forth herein or willfully
prevents the fulfillment of a condition set forth herein, the other party may
seek any available legal and equitable remedies in addition to those provided
herein.
13.3 Amendment. This Agreement may not be amended or modified except
---------
by an instrument in writing signed on behalf of each of the parties hereto and
in compliance with applicable law.
13.4 Waiver. At any time prior to the Effective Time, the parties
------
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant thereto, and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
14. MISCELLANEOUS.
-------------
14.1 Other Documents. Each of the parties hereto shall execute and
---------------
deliver such other and further documents and instruments, and take such other
and further actions, as may be reasonably requested of them for the
implementation and consummation of this Agreement and the transactions herein
contemplated.
14.2 Parties in Interest. This Agreement shall be binding upon and
-------------------
inure to the benefit of the parties hereto, and their respective successors and
permitted assigns, but shall not confer, expressly or by implication, any rights
or remedies upon any other party.
14.3 Governing Law. This Agreement is made and shall be governed in
-------------
all respects, including validity, interpretation and effect, by the laws of the
State of California.
14.4 Notices. All notices, requests or demands and other
-------
communications hereunder must be in writing and shall be deemed to have been
duly given if personally delivered or 48 hours after mailing, postage prepaid,
to the parties as follows:
(a) If to Calnetics, to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Calnetics Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With copies to: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
41
▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(b) If to Summa, to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Summa Industries
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With copies to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Any party hereto may change its address by written notice to the other party
given in accordance with this Section 14.4.
14.5 Entire Agreement. This Agreement, together with the Agreement of
----------------
Merger and each of the other exhibits and schedules attached hereto, contains
the entire agreement between the parties and supersedes all prior agreements,
understandings and writings between the parties with respect to the subject
matter hereof. Each party hereto acknowledges that no representations,
inducements, promises or agreements, oral or otherwise, have been made by any
party, or anyone acting with authority on behalf of any party, which are not
embodied herein or in the Agreement of Merger or in an exhibit or schedule
hereto, and that no other agreement, statement or promise may be relied upon or
shall be valid or binding.
14.6 Headings. The captions and headings used herein are for
--------
convenience only and shall not be construed as a part of this Agreement. In
this Agreement, the term "including" and terms of similar import shall mean
"including without limitation" unless the context requires otherwise.
14.7 Attorneys' Fees. In the event of any litigation between
---------------
Calnetics and Summa, the non-prevailing party shall pay the reasonable expenses,
including the attorneys' fees, of the prevailing party in connection therewith.
14.8 Expenses. Except as otherwise expressly provided hereunder, each
--------
party hereto agrees to pay all of its own expenses and to save the other party
harmless against liability for the payment of any such expenses arising in
connection with the negotiation, execution and consummation of the transactions
contemplated by this Agreement. Without limiting the generality of the
foregoing, all registration and filing fees, fees and disbursements of counsel
for Summa, expenses of any audits of Summa incident to or required by any such
registration and expenses of Summa's proxy solicitation and expenses of
complying with the securities or blue sky laws of any jurisdictions pursuant to
Section 12 hereof shall be borne and paid by Summa at Summa's sole cost and
expense. One-half of the expenses of printing the Joint Proxy
Statement/Prospectus, all expenses of distributing the Joint Proxy
Statement/Prospectus to and soliciting proxies from the
42
Calnetics Shareholders, all fees and disbursements of counsel for Calnetics, and
the expenses of any audits of Calnetics incident to or required by any such
registration, shall be borne and paid by Calnetics at Calnetics' sole cost and
expense.
14.9 Public Announcements. If any disclosure relating hereto is
--------------------
believed by either party to be required under applicable securities laws, the
other party shall be given advance notice of such disclosure. Both parties
shall review in advance any proposed public announcement with respect to the
transactions contemplated herein.
14.10 Survival. The representations and warranties of the parties
--------
contained herein and in any other document or instrument delivered pursuant
hereto shall survive any investigations made by or on behalf of any other party
made prior to the Effective Time, but shall not survive beyond the Effective
Time. Nothing contained in this Section 14.10 shall in any way affect any
obligations of any party under this Agreement that are to be performed, in whole
or in part, after the Effective Date, nor shall it prevent or preclude any party
from pursuing any and all available remedies at law or in equity for actual
fraud against any party or parties guilty of such fraud.
14.11 Counterparts. This Agreement may be executed in counterparts,
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each of which shall be deemed an original but all of which taken together shall
constitute but one and the same document.
14.12 Assignment. Neither this Agreement, the Agreement of Merger
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nor any of the rights, interests or obligations hereunder or thereunder may be
assigned by either party without the prior written consent of the other party.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day and year first above written.
SUMMA INDUSTRIES CALNETICS CORPORATION
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ By: /s/▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------ --------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Executive Officer Chief Executive Officer
By signing below, each shareholder who owns or has voting control over 10%
or more of the Common Stock of Calnetics outstanding as of the date hereof
agrees, subject to the terms and conditions of the foregoing Agreement, to
vote, or cause to be voted, in favor of this Agreement and the Merger, all of
such shares held of record or beneficially by such shareholder as of the record
date for the special meeting of Calnetics Shareholders referred to in Section
8.6 above:
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▇▇▇▇▇▇▇ HOLDING CORPORATION
By: /s/▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
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